Allstar Inns announces tentative settlement of dispute with Motel 6

Business Wire, March 6, 1995

SANTA BARBARA, Calif.--(BUSINESS WIRE)--March 6, 1995--Allstar Inns Inc. (OTC:ALST) Monday announced that it has entered into a letter of intent with Motel 6 Operating L.P. which would, if implemented, settle the pending litigation between Allstar and Motel 6 in California and Texas.

Under the letter of intent, which is non-binding, Motel 6 and Allstar would terminate the existing Management Contract under which Motel 6 operates the 72 motels owned or ground-leased by Allstar and instead Motel 6 would lease the properties on a "net, net, net" basis from Allstar for a 15-year term starting as of Jan. 1, 1995.

In addition, Motel 6 would have an option to purchase the motels from Allstar prior to the end of 1998 at a fixed price of $40 million (subject to a $3 million offset) plus the debt secured by the motels. Annual rent under the contemplated lease would cover debt service on the motels, plus $3.5 million from Allstar.

In the event Motel 6 did not exercise the option to purchase the properties, rent under the lease would increase, starting in 1999, to include debt service plus $5 million (adjusted for cost-of-living increases) plus satisfaction of Allstar's indebtedness to Motel 6 in the approximate amount of $32.5 million.

The letter of intent contemplates that the termination of the Management Contract and the execution of the lease would be implemented by July 1995. However, it is subject to numerous conditions, including the negotiation of definitive agreements between Motel 6 and Allstar, and the approval of Allstar's stockholders.

CONTACT: Allstar Inns Inc., Santa Barbara

Daniel R. Shaughnessy, 805/730-3383