<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
[ ] Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
</TABLE>
INTERSTATE HOTELS CORPORATION
(Name of Registrant as specified in its Charter
and Person Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[INTERSTATE HOTELS LOGO]
--------------------------------------------------------------------------------
October 6, 2000
Dear Stockholder:
You should have previously received a Proxy Statement and Proxy Card
requesting you to vote to approve a $30 million investment in Interstate by an
investor group led by Lehman Brothers. In connection with the investment, the
Lehman group has arranged for a line of credit for Interstate of at least $25
million and agreed to invest in a joint venture with Interstate. Interstate and
the Lehman group believe that the joint venture could acquire up to $300 million
in hotel assets to be managed by the Company.
The Lehman transaction results from an initiative announced by
Interstate last year to obtain the capital resources to pursue its business
plan. The proposal to approve the investment is to be voted on at the upcoming
Special Meeting to be held on Monday, October 16, 2000
We have provided with this letter a Supplemental Proxy Statement
discussing an unsolicited conditional proposal to purchase all of the shares of
common stock of Interstate that was received from a third party. Your Board of
Directors has considered this third-party conditional proposal and determined
that pursuing it is not in the best interest of the Company's stockholders.
The Board has also reaffirmed its recommendation that stockholders vote
"FOR" approval of the Lehman group investment at the upcoming meeting.
Your vote is very important. Please sign, date and mail back your proxy
card in the envelope provided.
Remember, every vote counts.
If you would like assistance in voting your shares, or if you have any
questions on the procedure for voting your shares, you may contact our proxy
solicitor, MacKenzie Partners, Inc. toll-free at (800) 322-2885 or collect at
(212) 929-5500.
Thank you for your continued support.
Sincerely,
/s/ Thomas F. Hewitt
Thomas F. Hewitt
Chairman of the Board
<PAGE> 3
INTERSTATE HOTELS CORPORATION
FOSTER PLAZA TEN
680 ANDERSEN DRIVE
PITTSBURGH, PENNSYLVANIA 15220
SUPPLEMENT TO PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
The following information amends and supplements the proxy materials
that were mailed to you in September in connection with Interstate's special
meeting of Stockholders (the "Special Meeting"). The Special Meeting is
scheduled to be held on October 16, 2000 at 10:00 a.m. Eastern Time, at the
Pittsburgh Marriott City Center Hotel located at 112 Washington Place, Chatham
Center, Pittsburgh, Pennsylvania.
At the Special Meeting, stockholders of record on September 12, 2000
will be asked to approve the issuance of $30 million of convertible securities
to an investment group led by Lehman Brothers and certain related matters. The
proposed Lehman transaction results from an initiative announced by Interstate
last year to obtain the capital resources to pursue its business plan.
Interstate entered into the transaction with the Lehman group only
after its management and Board of Directors conducted an extensive evaluation of
Interstate's strategic alternatives, including conversations with numerous third
parties involved in the hotel industry. The Board concluded that the Lehman
investment presented the best opportunity for Interstate's stockholders to
realize the long-term potential of their investment in Interstate
On October 3, 2000, Interstate received a letter from the Shaner Hotel
Group relating to a proposal to acquire Interstate at $4.125 per share in a
preliminary indication of value. Shaner, an owner and operator of hotels, was
one of the companies that Interstate contacted in connection with the process
that resulted in the Lehman group investment proposal. The letter indicated that
Shaner would be joined in the proposed transaction by Bruce S. Brickman &
Associates, a commercial real estate development company. However, the letter
included no specifics as to the availability of financing for the transaction,
was subject to Shaner's request for unspecified due diligence reviews (which the
letter indicated could be completed within 30 days but would be initiated only
after Interstate accepted the proposal) in business, legal, tax, accounting,
employee benefits, environmental and other areas and did not include a form of
proposed definitive documentation. The proposal stated that the required due
diligence period would necessarily entail a postponement of the October 16th
stockholders meeting to November 15th.
Interstate's Board of Directors considered the Shaner letter at
meetings on October 4th and 5th and determined that pursuing this proposal is
not in the best interests of Interstate's stockholders. In making that
determination, the Board considered various factors, including the following:
* The highly conditional nature of the Shaner proposal;
* The fact that the proposed Lehman transaction was fully negotiated
after a process of more than nine months and is scheduled to be
considered by stockholders next week;
* Likely obstacles to Interstate's ability to complete a transaction
of a type proposed by Shaner, including the consents that would be
required from third parties to Interstate's hotel management and
franchise agreements and the impact on the relationship with those
third parties; and
* The terms of Interstate's agreements with the Lehman investor group,
which, among other things, require Interstate to terminate the
Lehman agreement and pay a substantial termination fee and expense
reimbursement to the Lehman group in order to accept the conditional
Shaner proposal.
<PAGE> 4
ACCORDINGLY, THE BOARD OF DIRECTORS OF INTERSTATE HAS REAFFIRMED ITS
UNANIMOUS DECISION THAT THE LEHMAN PROPOSAL IS IN THE BEST INTERESTS OF
INTERSTATE AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE PROPOSAL.
Enclosed is an additional (blue) proxy card which you may use to vote,
or change your vote, at the special meeting. As described in the proxy statement
previously furnished to stockholders, a later dated proxy will automatically
supercede an earlier proxy card.
If you have already returned your proxy card and wish to change your
vote you may also do so by sending a written instrument revoking your proxy to
the Secretary of Interstate or by voting in person at the Special Meeting.
Attendance at the Special Meeting will not, in itself, constitute a revocation
of a proxy.
If you have not yet voted, please date, sign and return the enclosed
(blue) proxy card in the enclosed envelope.
Interstate has retained MacKenzie Partners, Inc. to aid in the
solicitation of proxies in the enclosed form and related duties and will pay
such firm a customary fee plus reasonable expenses for such services.
This Supplement should be read together with the original Proxy
Statement. Copies of the original Proxy Statement are available, without charge,
to any person, including any beneficial owner of shares of common stock of
Interstate, to whom this Supplement is delivered upon written or oral request to
Interstate Hotels Corporation, Investor Relations, Foster Plaza Ten, 680
Andersen Drive, Pittsburgh, Pennsylvania 15220, (Telephone Number:
412-937-0600).
October 6, 2000
