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Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of [____ __], 2000 (this
"Agreement"), by and between Interstate Hotels Corporation, a Maryland
corporation (the "Company"), on the one hand, and CGLH Partners I LP, a Delaware
limited partnership and CGLH Partners II LP, a Delaware limited partnership
(CGLH Partners I LP and CGLH Partners II LP, together, the "Shareholder"), on
the other hand.
W I T N E S S E T H:
WHEREAS, concurrently herewith, the Company and the Shareholder are
entering into a Securities Purchase Agreement (the "Purchase Agreement")
pursuant to which, upon the terms and subject to the conditions set forth in the
Purchase Agreement, the Shareholder shall purchase a convertible subordinated
note having an aggregate principal amount of $25,000,000 (the "Note") and shares
of Series B Convertible Preferred Stock, par value $.01 per share, of the
Company ("Series B Preferred Stock"), having an aggregate liquidation preference
of $5,000,000 and each of which shall be convertible into shares of common
stock, par value $.01 per share, of the Company (the "Common Stock"), subject to
certain limitations;
WHEREAS, concurrently herewith, the Company and Shareholder are
entering into an Investor Agreement (the "Investor Agreement"), which shall
become effective at the time the Note and shares of Series B Preferred Stock are
purchased by the Shareholder (the "Effective Time"), granting Shareholder
certain rights to designate directors and setting forth certain restrictions on
the acquisition and distribution of securities of the Company by Shareholder and
the conduct of Shareholder with respect to the Company; and
WHEREAS, as part of establishing the relationship between Shareholder
and the Company, Shareholder and the Company have agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, the Purchase Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows, effective upon the closing of
the purchase of the Note and the Series B Preferred Stock pursuant to the
Purchase Agreement:
ARTICLE I
Definitions
1.1. Certain Definitions. In this Agreement:
"Additional Shares" has the meaning given to it in the definition of
Registrable Securities in this Agreement.
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"Agreement" has the meaning given to it in the preamble.
"Common Stock" has the meaning given to it in the recitals of this
Agreement
"Designated Jurisdictions" has the meaning given to it in Section
2.2(a) of this Agreement.
"Effective Time" has the meaning given to it in the recitals of this
Agreement.
"Elected Jurisdictions" has the meaning given to it in Section 2.1(a)
of this Agreement.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC promulgated under such Act.
"Inspectors" has the meaning given to it in Section 2.4(h) of this
Agreement.
"Investor Agreement" has the meaning given to it in the recitals of
this Agreement.
"Note" has the meaning given to it in the recitals of this Agreement.
"Other Securities" has the meaning given to it in Section 2.2(b) of
this Agreement.
"Purchase Agreement" has the meaning given to it in the recitals of
this Agreement.
"Registrable Securities" means the Note (and any notes into which the
Note may be divided, or which may be issued pursuant to the terms of the Note),
shares of Series B Preferred Stock, and any shares of Common Stock issued upon
conversion of the Note or Series B Preferred Stock (such shares, the "Additional
Shares", together with the Series B Preferred Stock, the "Shares"), and any
additional shares of Common Stock acquired by Shareholder in compliance with the
Investor Agreement, and any additional shares of Common Stock or Series B
Preferred Stock issued in connection with any stock dividend on, or any stock
split, reclassification or reorganization of any of the Shares or such
additional shares.
"SEC" means the United States Securities and Exchange Commission or any
successor agency.
"Securities Act" means the United States Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated under such Act.
"Series B Preferred Stock" has the meaning given to it in the recitals
of this Agreement.
"Shareholder" has the meaning given to it in the preamble of this
Agreement.
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"Shares" has the meaning given to it in the definition of Registrable
Securities in this Agreement.
"Specified Securities" has the meaning given to it in Section 2.1(a) of
this Agreement.
"Subject Securities" means shares of Series B Preferred Stock, Common
Stock or other debt or equity securities of the Company convertible into or
exchangeable for shares of Common Stock.
ARTICLE II
REGISTRATION RIGHTS
2.1. Incidental Rights.
(a) If at any time or from time to time (but subject to the
limitations on sales of Registrable Securities in the Investor
Agreement) the Company proposes to file with the SEC a registration
statement (whether on Form S-1, S-2, or S-3, or any equivalent form
then in effect) for the registration under the Securities Act of any
Subject Securities for sale, for cash consideration, to the public by
the Company or on behalf of one or more securityholders of the Company
(excluding any sale of securities upon conversion into or exchange or
exercise for shares of Common Stock, and any shares of Common Stock
issuable by the Company upon the exercise of employee stock options, or
to any employee stock ownership plan, or in connection with any
acquisition made by the Company, any securities exchange offer,
dividend reinvestment plan, employee benefit plan, corporate
reorganization, or in connection with any amalgamation, merger or
consolidation of the Company or any direct or indirect subsidiary of
the Company with one or more other corporations if the Company is the
surviving corporation), the Company shall give Shareholder at least 20
days' prior written notice of the proposed filing (or if 20 days'
notice is not practicable, a reasonable shorter period to be not less
than 7 days), which notice shall outline the nature of the proposed
distribution and the jurisdictions in the United States in which the
Company proposes to qualify and offer such securities (the "Elected
Jurisdictions"). On the written request of Shareholder received by the
Company within 15 days after the date of the Company's delivery to
Shareholder of the notice of intended registration (which request shall
specify the Registrable Securities sought to be disposed by Shareholder
and the intended method or methods by which dispositions are intended
to be made), the Company shall, under the terms and subject to the
conditions of this Article II, at its own expense as provided in
Section 4.1, include in the coverage of such registration statement (or
in a separate registration statement concurrently filed) and qualify
for sale under the blue sky or securities laws of the various states in
the Elected Jurisdictions the number of Registrable Securities of the
kind being registered (the "Specified Securities") held by Shareholder
or into which the Registrable Securities are convertible, as the case
may be, and which Shareholder has so requested to be registered or
qualified for distribution, to the extent required to permit the
distribution (in accordance with the intended method or methods
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thereof as aforesaid) in the Elected Jurisdictions requested by
Shareholder of such Registrable Securities.
(b) If the distribution proposed to be effected by the Company
involves an underwritten offering of the securities being so
distributed by or through one or more underwriters, and if the managing
underwriter of such underwritten offering indicates in writing its
opinion that including all or part of the Specified Securities in the
coverage of such registration statement or in the distribution to be
effected by such prospectus will materially and adversely affect the
sale of securities proposed to be sold (which opinion of the managing
underwriter shall also state the maximum number of shares, if any,
which can be sold by Shareholder requesting registration under this
Section 2.1 without materially adversely affecting the sale of the
securities proposed to be sold), then the number of Specified
Securities which Shareholder shall have the right to include in such
registration statement shall be reduced to the maximum number of shares
or principal amount, in the case of debt, specified by the managing
underwriter. First priority, after the absolute priority afforded to
the Company, shall be afforded to the Specified Securities held by
Shareholder and no securities proposed to be sold by Shareholder shall
be so reduced until all securities proposed to be sold by all other
parties (other than the Company) have been entirely eliminated.
(c) The Company shall have the sole right to select any
underwriters, including the managing underwriter, of any public
offering of securities made other than as a result of the rights
granted in Section 2.2. Nothing in this Section 2.1 shall create any
liability on the part of the Company to Shareholder if the Company for
any reason decides not to file or to delay or withdraw a registration
statement (which the Company may do in its sole discretion).
(d) Shareholder shall have the right to withdraw its request
for inclusion of its Specified Securities in any registration statement
pursuant to this Section 2.1 by giving written notice to the Company of
its request to withdraw; provided, however, that (i) such request must
be made in writing prior to the execution of the underwriting agreement
(or such other similar agreement) with respect to such registration and
(ii) such withdrawal shall be irrevocable and, after making such
withdrawal, Shareholder shall no longer have any right to include
Registrable Securities in the registration as to which such withdrawal
was made.
(e) Shareholder may request to have Registrable Securities
included in an unlimited number of registrations under this Section
2.1.
2.2. Demand Rights.
(a) Upon written request of the Shareholder made at any time
(but subject to the limitations on sales of Registrable Securities in
the Investor Agreement), the Company shall, under the terms and subject
to the conditions set forth in this Section 2.2, and Sections 2.3 and
2.4, file (and use its reasonable efforts to cause to become effective)
a registration statement covering, and use its reasonable efforts to
qualify for
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sale under the blue sky or securities laws of the various states of the
United States as may be requested by the Shareholder (except any such
state in which, in the opinion of the managing underwriter of the
offering, the failure to so qualify would not materially and adversely
affect the proposed offering or in which the Company would be required
to submit to general jurisdiction to effect such registration), in
accordance with the intended method or methods of disposition set forth
in that notice, of such number of Registrable Securities, as may be
designated by the Shareholder in its request, or that portion thereof
designated in said request for registration in each of the Designated
Jurisdictions (as defined below). A request for registration under this
Section 2.2 shall specify the number of Registrable Securities to be
registered, the jurisdictions in the United States in which such
registration is to be effected (the "Designated Jurisdictions") and the
proposed manner of sale, including the name and address of any proposed
underwriter. The principal underwriter or underwriters for any such
offering shall be selected by the Shareholder, subject to the Company's
approval, which may not be unreasonably withheld or delayed.
Notwithstanding any other provision in this Section, the Shareholder
shall not be permitted to make a demand for registration pursuant to
this Section unless the number of Registrable Securities covered by
such demand is at least 500,000 shares of Common Stock (or securities
convertible into such number of shares of Common Stock) (as such number
may be appropriately adjusted to reflect stock splits, reverse stock
splits, dividends and any other recapitalization or reorganization of
the Company) or such lesser number of shares and Notes as would yield
gross proceeds of not less than $2 million based on the average closing
price of the Common Stock over the ten trading day period immediately
preceding the date of the written request hereunder (with the gross
proceeds of Series B Preferred Stock deemed to be the greater of its
liquidation preference on the date of such demand and the average
closing price of the Common Stock into which it is convertible and the
gross proceeds of debt shall be deemed to be the greater of its
principal amount and the average closing price of the Common Stock into
which it is convertible).
(b) If the distribution proposed to be effected pursuant to
this Section 2.2 involves an underwritten offering of Registrable
Securities and securities of the Company other than Registrable
Securities ("Other Securities"), and if the managing underwriter of
such underwritten offering indicates in writing its opinion that
including all or part of such securities in the coverage of such
registration statement will materially and adversely affect the sale of
the securities proposed to be sold, then the number of securities
proposed to be sold shall be reduced to the maximum number of
securities (or principal amount) specified by the managing underwriter.
In such a case, first priority shall be afforded to Registrable
Securities in accordance with Section 2.1(b) and (c).
(c) The Company may delay the filing of any registration
statement requested under this Section 2.2, or delay its effectiveness,
for a reasonable period (but not longer than 90 days) if, in the sole
judgment of the Company's Board of Directors, (i) a delay is necessary
in light of pending financing transactions, corporate reorganizations
or other major events involving the Company, or (ii) filing at the time
requested would materially and adversely affect the business or
prospects of the Company in view of
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disclosures that may be thereby required. Once the cause of the delay
is eliminated, the Company shall promptly notify the Shareholder and,
promptly after Shareholder notifies the Company to proceed, the Company
shall file a registration statement and begin performance of its
remaining obligations under this Section 2.2.
(d) The Shareholder shall be entitled to request not more than
seven registrations under this Section 2.2 (provided that the filing of
a registration statement in more than one Designated Jurisdiction in
connection with a concurrent or substantially concurrent distribution
shall be deemed for the purposes of this Agreement to be a single
registration). However, if the Shareholder requests a registration
under this Section 2.2, but no registration statement becomes effective
with respect to the Registrable Securities covered by such request, or
any registration statement is withdrawn or prematurely terminated
(whether pursuant to this Section 2.2 or as a result of any stop order,
injunction or other order or requirement of the SEC or any other
governmental agency or court), then such request shall not count as a
request for purposes of determining the number of requests for
registration the Shareholder may make under this Section 2.2.
(e) If there is an effective registration statement requested
by the Shareholder pursuant to this Section 2.2, the Shareholder may
require the Company to delay the filing of any registration statement
relating to convertible securities or shares of Common Stock or delay
its effectiveness, for a reasonable period (but not longer than 90
days) if, in the sole judgment of the Shareholder, a delay is necessary
in order to avoid materially and adversely affecting the disposition of
Registrable Securities pursuant to the offering by the Shareholder;
provided that the foregoing shall not limit the Company's right to file
and have declared effective registration statements for any other
offering.
2.3. Registration Conditions. Notwithstanding any other provision of
this Agreement, the Company shall not be required to effect a registration of
any securities under this Article II, or file any post-effective amendment to
such a registration statement relating to such a qualification:
(a) unless Shareholder agrees to (x) sell and distribute a
portion or all of their Registrable Securities in accordance with the
plan or plans of distribution adopted by and through underwriters, if
any, acting for the Company or any such other sellers of Notes, Common
Stock or Series B Preferred Stock, and (y) bear a pro rata share of
underwriter's discounts and commissions;
(b) if, in the case of a request for registration under
Section 2.2, the Company has given notice under Section 2.1 of its
intention to file a registration statement under the Securities Act and
has not completed or abandoned the proposed offering (for so long as
the Company continues in good faith to pursue the proposed offering);
and
(c) unless the Company has received from Shareholder all
information the Company has reasonably requested concerning Shareholder
and their method of
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distribution of Registrable Securities, so as to enable the Company to
include in the registration statement all facts required to be
disclosed in it.
2.4. Covenants and Procedures. If the Company becomes obligated under
this Article II to effect a registration of Registrable Securities on behalf of
Shareholder, then (as applicable to the jurisdictions for which such
registration is to be made):
(a) The Company, at its expense as provided in Section 4.2,
shall prepare and file with the SEC a registration statement covering
such securities and such other related documents as may be necessary or
appropriate relating to the proposed distribution, and shall use
reasonable efforts to cause the registration statement to become
effective. The Company will also, with respect to any registration
statement, file such post-effective amendments to the registration
statement (and use reasonable efforts to cause them to become
effective) and such supplements as are necessary so that current
prospectuses are at all times available for a period of at least 180
days after the effective date of the registration statement or for such
longer period, not to exceed 360 days, as may be required under the
plan or plans of distribution set forth in the registration statement.
Shareholder shall promptly provide the Company with such information
with respect to Shareholder' Registrable Securities to be so registered
and, if applicable, the proposed terms of their offering, as is
required for the registration. If the Registrable Securities to be
covered by the registration statement are not to be sold to or through
underwriters acting for the Company, the Company shall:
(i) deliver to Shareholder, as promptly as
practicable, as many copies of preliminary prospectuses as
Shareholder may reasonably request (in which case Shareholder
shall keep a written record of the distribution of the
preliminary prospectuses and shall refrain from delivery of
the preliminary prospectuses in any manner or under any
circumstances which would violate the Securities Act or the
securities laws of any other jurisdiction, including the
various states of the United States);
(ii) deliver to Shareholder, as soon as practicable
after the effective date of the registration statement, and
from time to time thereafter during the applicable period
described in Section 2.4, as many copies of the relevant
prospectus as Shareholder may reasonably request; and
(iii) in case of the happening, after the effective
date of the registration statement and during the applicable
180 or 360-day period described in the second sentence of
Section 2.4(a), of any event or occurrence as a result of
which the prospectus, as then in effect, would include an
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make any statement therein not misleading in the light of the
circumstances in which it was made, give Shareholder written
notice of the event or occurrence and prepare and furnish to
Shareholder, in such quantities as it may reasonably request,
copies of an amendment of or a supplement to such
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prospectus as may be necessary so that the prospectus, as so
amended or supplemented and thereafter delivered to purchasers
of the Registrable Securities covered by such prospectus, will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which it was made, not misleading.
(b) The Company will notify Shareholder of any action by the
SEC or any Commission to suspend the effectiveness of any registration
statement filed pursuant hereto or the initiation or threatened
initiation of any proceeding for such purpose or the receipt by the
Company of any notification with respect to the suspension of the
qualification of the securities for sale in any jurisdiction.
Immediately upon receipt of any such notice, Shareholder shall cease to
offer or sell any Registrable Securities pursuant to the registration
statement or prospectus in the jurisdiction to which such order or
suspension relates. The Company will also notify Shareholder promptly
of the occurrence of any event or the existence of any state of facts
that, in the judgment of the Company, should be set forth in such
registration statement or prospectus. Immediately upon receipt of such
notice, Shareholder shall cease to offer or sell any Registrable
Securities pursuant to such registration statement or prospectus, cease
to deliver or use such registration statement or prospectus and, if so
requested by the Company, return to the Company at the Company's
expense all copies of such registration statement or prospectus. The
Company will as promptly as practicable take such action as may be
necessary to amend or supplement such registration statement or
prospectus in order to set forth or reflect such event or state of
facts and provide copies of such proposed amendment or supplement to
Shareholder.
(c) On or before the date on which the registration statement
is declared effective, the Company shall use its reasonable efforts to:
(i) register or qualify (and cooperate with
Shareholder, the underwriter or underwriters, if any, and
their counsel, in connection with the registration or
qualification of) the securities covered by the registration
statement for offer and sale under the securities or blue sky
laws of each state and other jurisdiction as Shareholder or
any underwriter reasonably requests;
(ii) keep each such registration or qualification
effective, including through new filings, or amendments or
renewals, during the period the registration statement or
prospectus is required to be kept effective; and
(iii) do any and all other acts or things necessary
or advisable to enable the disposition in all such
jurisdictions of the Registrable Securities covered by the
applicable registration statement, provided that the Company
will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified.
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(d) The Company shall use its reasonable efforts to cause all
Registrable Securities of Shareholder included in the registration
statement to be listed, by the date of the first sale of such shares
pursuant to such registration statement, on the NASDAQ NMS or each
securities exchange on which the securities are then listed or proposed
to be listed, if any, as directed by the Shareholder (subject to the
Company's consent, which consent shall not be unreasonably withheld or
delayed).
(e) The Company shall make available to Shareholder and any
underwriter participating in the offering conducted pursuant to the
registration statement an earnings statement satisfying Section 11(a)
of the Securities Act no later than 45 days after the end of the
12-month period beginning with the first day of the Company's first
fiscal quarter commencing after the effective date of the registration
statement. The earnings statement shall cover such 12-month period.
This requirement will be deemed to be satisfied if the Company timely
files complete and accurate information on Forms 10-Q, 10-K, and 8-K
under the Exchange Act, and otherwise complies with Rule 158 under the
Securities Act as soon as feasible.
(f) The Company shall cooperate with Shareholder and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be sold under the
registration statement, and to enable such securities to be in such
denominations and registered in such names as the managing underwriter
or underwriters, if any, or Shareholder, may request, subject to the
underwriters' obligation to return any certificates representing unsold
securities.
(g) The Company shall use its reasonable efforts to cause
Registrable Securities covered by the registration statement to be
registered with or approved by such other governmental agencies or
authorities in the United States (including the registration of
Registrable Securities under the Exchange Act) as may be necessary to
enable Shareholder or the underwriter or underwriters, if any, to
consummate the disposition of such securities.
(h) The Company shall, during normal business hours and upon
reasonable notice, make available for inspection by Shareholder, any
underwriter participating in any offering pursuant to the registration
statement, and any attorney, accountant or other agent retained by
Shareholder or any such underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate documents, and
properties of the Company (including non-public information), as shall
be reasonably necessary to enable the Inspectors to exercise their due
diligence responsibilities; provided that any Inspector receiving
non-public information shall have previously entered into an
appropriate confidentiality agreement in mutually satisfactory form and
substance. The Company shall also cause its officers, directors, and
employees to supply all information reasonably requested by any
Inspector in connection with the registration statement.
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(i) The Company shall use its reasonable efforts to obtain a
"cold comfort" letter and, as applicable, a "long-form comfort letter"
from the Company's independent public accountants, and an opinion of
counsel for the Company, each in customary form and covering such
matters of the type customarily covered by cold comfort letters and
long form comfort letters and legal opinions in connection with public
offerings of securities, as Shareholder reasonably request.
(j) The Company shall enter into such customary agreements
(including an underwriting agreement containing such representations
and warranties by the Company and such other terms and provisions, as
are customarily contained in underwriting agreements for comparable
offerings and are reasonably satisfactory to the Company) and take all
such other actions as Shareholder or the underwriters participating in
such offering and sale may reasonably request in order to expedite or
facilitate such offering and sale (other than such actions which are
disruptive to the Company or require significant management
availability), including providing reasonable availability of
appropriate members of senior management of the Company to provide
customary due diligence assistance in connection with any offering and
to participate in customary "road show" presentations in connection
with any underwritten offerings in substantially the same manner as
they would in an underwritten primary registered public offering by the
Company of its Common Stock, after taking into account the reasonable
business requirements of the Company in determining the scheduling and
duration of any road show.
ARTICLE III
INDEMNIFICATION
3.1. Indemnification by the Company. In the event of any registration
under the Securities Act by any registration statement pursuant to rights
granted in this Agreement of Registrable Securities held by Shareholder, the
Company will hold harmless Shareholder and each underwriter of such securities
and each other person, if any, who controls any Shareholder or such underwriter
within the meaning of the Securities Act, against any losses, claims, damages,
or liabilities (including legal fees and costs of court), joint or several, to
which Shareholder or such underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or any actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact (i)
contained, on its effective date, in any registration statement under which such
securities were registered under the Securities Act or any amendment or
supplement to any of the foregoing, or which arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
contained in any preliminary prospectus, if used prior to the effective date of
such registration statement, or in the final prospectus (as amended or
supplemented if the Company shall have filed with the SEC any amendment or
supplement to the final prospectus) if used within the period which the Company
is required to keep the registration to which such registration statement or
prospectus relates current under Section 2.4, or which arise out of or are
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based upon the omission or alleged omission (if so used) to state a material
fact required to be stated in such prospectus or necessary to make the
statements in such prospectus not misleading; and will reimburse Shareholder and
each such underwriter and each such controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, or liability; provided, however, that
the Company shall not be liable to any Shareholder or its underwriters or
controlling persons in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company through a written
instrument duly executed by Shareholder or such underwriter specifically for use
in the preparation thereof.
3.2. Indemnification by Shareholder. It shall be a condition precedent
to the obligation of the Company to include in any registration statement any
Registrable Securities of Shareholder that the Company shall have received from
Shareholder an undertaking, reasonably satisfactory to the Company and its
counsel, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 3.1) the Company, each director of the Company,
each officer of the Company who shall sign the registration statement, and any
person who controls the Company within the meaning of the Securities Act, (i)
with respect to any statement or omission from such registration statement, or
any amendment or supplement to it, if such statement or omission was made in
reliance upon and in conformity with information furnished to the Company
through a written instrument duly executed by Shareholder specifically for use
in the preparation of such registration statement or amendment or supplement,
and (ii) with respect to compliance by Shareholder with applicable laws in
effecting the sale or other disposition of the securities covered by such
registration statement.
3.3 Indemnification Procedures. Promptly after receipt by an
indemnified party of notice of the commencement of any action involving a claim
referred to in the preceding Sections of this Article III, the indemnified party
will, if a resulting claim is to be made or may be made against an indemnifying
party, give written notice to the indemnifying party of the commencement of the
action. If any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
of the action with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume defense of the action, the indemnifying party will not be
liable to such indemnified party for any legal or other expenses incurred by the
latter in connection with the action's defense. An indemnified party shall have
the right to employ separate counsel in any action or proceeding and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
such indemnified party's expense unless (a) the employment of such counsel has
been specifically authorized in writing by the indemnifying party, which
authorization shall not be unreasonably withheld, (ii) the indemnifying party
has not assumed the defense and employed counsel reasonably satisfactory to the
indemnified party within 30 days after notice of any such action or proceeding,
or (iii) the named parties to any such action or proceeding (including any
impleaded parties) include the indemnified party and the indemnifying party and
the indemnified party shall have been advised by such counsel that there may be
one or more legal defenses available to the indemnified party that are different
from
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or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
or proceeding on behalf of the indemnified party), it being understood, however,
that the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to all local counsel which is necessary, in the good faith opinion of
both counsel for the indemnifying party and counsel for the indemnified party in
order to adequately represent the indemnified parties) for the indemnified party
and that all such fees and expenses shall be reimbursed as they are incurred
upon written request and presentation of invoices. Whether or not a defense is
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent. No indemnifying party
will consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term the giving by the claimant or plaintiff, to
the indemnified party, of a release from all liability in respect of such claim
or litigation.
3.4. Contribution. If the indemnification required by this Article III
from the indemnifying party is unavailable to or insufficient to hold harmless
an indemnified party in respect of any indemnifiable losses, claims, damages,
liabilities, or expenses, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities, or expenses in such proportion as is appropriate
to reflect (i) the relative benefit of the indemnifying and indemnified parties
and (ii) if the allocation in clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect the relative benefit referred to in
clause (i) and also the relative fault of the indemnified and indemnifying
parties, in connection with the actions which resulted in such losses, claims,
damages, liabilities, or expenses, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or parties, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damage,
liabilities, and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding. The Company and Shareholder agree that it would
not be just and equitable if contribution pursuant to this Section 3.4 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the prior
provisions of this Section 3.4.
Notwithstanding the provisions of this Section 3.4, no indemnifying
party shall be required to contribute any amount in excess of the amount by
which the total price at which the securities were offered to the public by the
indemnifying party exceeds the amount of any damages which the indemnifying
party has otherwise been required to pay by reason of an untrue statement or
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such a fraudulent misrepresentation.
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ARTICLE IV
OTHER AGREEMENTS
4.1. Other Registration Rights. The Company agrees that it will not
grant to any party registration rights which would allow such party to limit
Shareholder' priority for the sale or distribution of Registrable Securities
upon the exercise of a demand registration right pursuant to Section 2.2 or
incidental registration rights pursuant to Section 2.1.
4.2. Expenses. All expenses incurred by the Company in connection with
any registration statement covering Registrable Securities offered by
Shareholder, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, reasonable fees and disbursements
of counsel (except for the fees and disbursements of counsel for Shareholder)
and of the independent certified public accountants, underwriter's reasonable
legal, accounting and out-of-pocket expenses, and the expense of qualifying such
securities under state blue sky laws, shall be borne by the Company, including
such expenses of any registration delayed by the Company under the fourth
paragraph of Section 2.2; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 2.2 if the registration request is subsequently withdrawn at the
request of the Shareholder (in which case the Shareholder shall bear such
expenses, each such Shareholder to bear its pro rata share of the expense based
on the number of Registrable Securities such Shareholder intended to include in
such registration compared to the total number of Registrable Securities all of
such Shareholder intended to include in such registration), unless the
Shareholder agrees to forfeit its right to one demand registration under Section
2.2; provided further, however, that if at the time of such withdrawal, the
Shareholder have learned of a material adverse change in the condition,
business, or prospects of the Company from that known at the time of its
request, then the Shareholder shall not be required to pay any of such expenses
and shall retain their rights pursuant to Section 2.2. The Company's obligations
under this Section 4.2 shall apply to each registration under the Securities Act
or state blue sky legislation pursuant to Section 2.2. However, all
underwriter's discounts and commissions covering Registrable Securities offered
by Shareholder shall be borne by Shareholder.
4.3. Dispositions During Registration. Each Shareholder agrees that,
without the consent of the managing underwriter(s) in an underwritten offering
in respect of Common Stock or other Subject Securities, it will not effect any
sale or distribution of Common Stock or other Subject Securities (other than
Registrable Securities included in such offering), during the ten (10) day
period prior to, and during the ninety (90) day period beginning on, the
effective date of the registration statement filed by the Company in respect of
such underwritten offering, or any shorter period as may apply to the Company
and its affiliates.
4.4. Transfer of Rights. All rights of Shareholder under this Agreement
shall be transferable by Shareholder to any party who acquires Registrable
Securities in compliance with the Investor Agreement and who executes an
instrument in form and substance satisfactory to the Company in which it agrees
to be bound by the terms of this Agreement as if an original
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<PAGE> 14
signatory hereto, in which case such transferee shall thereafter be a
"Shareholder" for all purposes of this Agreement. In the case of any assignment,
the party or parties who have the rights and benefits of Shareholder under this
Agreement shall become parties to and be subject to this Agreement, and shall
not, as a group, have the right to request any greater number of registrations
than Shareholder would have had if no assignment had occurred. Upon any transfer
of the registration rights or benefits of this Agreement, Shareholder shall give
the Company written notice prior to or promptly following such transfer stating
the name and address of the transferee and identifying the securities with
respect to which such rights are being assigned. Such notice shall include or be
accompanied by a written undertaking by the transferee to comply with the
obligations imposed hereunder. Unless otherwise agreed by Shareholder and the
parties to whom registration rights have been transferred, in the event any
registration rights are transferred in accordance with the terms of this
Agreement, any actions required to be taken by Shareholder will be taken with
the approval of the holders of such registration rights who hold a majority of
the Registrable Securities, whose actions shall bind all such holders of such
registration rights.
4.5. Best Registration Rights. If the Company grants to any Person with
respect to any security issued by the Company or any of its Affiliates
registration rights (other than as to the number of demand registrations) that
provide for terms that are in any manner more favorable to the holder of such
registration rights than the terms granted to the Shareholder (or if the Company
amends or waives any provision of any agreement providing registration rights of
others or takes any other action whatsoever to provide for terms that are more
favorable to other holders than the terms provided to the Shareholder other than
the number of demand registrations or the minimum amount of shares required to
exercise demand registration rights), then this Agreement shall immediately be
deemed amended to provide the Shareholder with any (or all) of such more
favorable terms as Shareholder shall elect to include herein. The Company shall
promptly give notice to the Shareholder of the granting of any such registration
rights to another Person.
ARTICLE V
MISCELLANEOUS
5.1. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, fax or air courier guaranteeing delivery:
(a) If to the Company, to:
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
Pittsburgh, Pennsylvania 15220
Attn: General Counsel
Fax: (412) 920-5733
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<PAGE> 15
with copies to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 441144-1190
Attn: Zachary Paris, Esq.
Fax: (216) 759-0212
or to such other person or address as the Company shall furnish to Shareholder
in writing;
(b) If to Shareholder, to:
CGLH Partners I LP and CGLH Partners II LP
c/o Lehman Brothers Holdings Inc.
200 Vesey Street
12th Floor
New York, New York 10285
Attn: Joseph Flannery
Fax: (212) 526-7006
with a copy to:
Continental Gencom Holdings
c/o Mr. K. Alibhai and Mr. S. Weiser
3250 Mary Street
Suite 500
Miami, Florida 33133
Facsimile: (305) 445-4255
with a copy to:
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
150 West Flagler Street
Suite 2200
Miami, Florida 33130
Attn: Richard E. Schatz, Esq.
Fax: (305) 789-3395
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<PAGE> 16
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Attn: Jonathan Mechanic, Esq.
Fax: (212) 859-8582
or to such other person or address as the Shareholder shall furnish to the
Company in writing.
All such notices, requests, demands and other communications shall be
deemed to have been duly given: at the time of delivery by hand, if personally
delivered; five (5) Business Days after being deposited in the mail, postage
prepaid, if mailed domestically in the United States (and seven (7) Business
Days if mailed internationally); when answered back, if telexed; when receipt
acknowledged, if telecopied; and on the Business Day for which delivery is
guaranteed, if timely delivered to an air courier guaranteeing such delivery.
5.2. Section Headings. The article and section headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. References in this Agreement to a designated
"Article" or "Section" refer to an Article or Section of this Agreement unless
otherwise specifically indicated.
5.3. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the law of Maryland, without regard to its
conflict of laws principles.
5.4. Consent to Jurisdiction and Service of Process. Any legal action
or proceeding with respect to this Agreement or any matters arising out of or in
connection with this Agreement (other than the Investor Agreement, which shall
be governed solely by the analogous provisions thereof), and any action for
enforcement of any judgment in respect thereof shall be brought exclusively in
the state of federal courts located in the State of Maryland, and, by execution
and delivery of this Agreement, the Company and the Shareholder each irrevocably
consent to service of process out of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, or by recognized international express carrier
or delivery service, to the Company or the Shareholder at their respective
addresses referred to in this Agreement. The Company and the Shareholder each
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement (other than the Investor Agreement,
which shall be governed solely by the analogous provisions thereof) brought in
the courts referred to above and each hereby further irrevocably waives and
agrees, to the extent permitted by applicable law, not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing in this Agreement shall affect the
right of any party hereto to serve process in any other manner permitted by law.
5.5. Amendments. This Agreement may be amended only by an instrument in
writing executed by all of its parties.
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<PAGE> 17
5.6. Entire Agreement. This Agreement, the Purchase Agreement, and the
Investor Agreement constitute the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and thereby. This
Agreement may be amended only by a written instrument duly executed by the
parties or their respective successors or assigns; provided, however, that any
amendment or waiver by the Company shall be made only with the prior approval of
a majority of the entire Board of Directors of the Company other than Investor
Designees (as defined in the Investor Agreement).
5.7. Severability. The invalidity or unenforceability of any specific
provision of this Agreement shall not invalidate or render unenforceable any of
its other provisions. Any provision of this Agreement held invalid or
unenforceable shall be deemed reformed, if practicable, to the extent necessary
to render it valid and enforceable and to the extent permitted by law and
consistent with the intent of the parties to this Agreement.
5.8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERSTATE HOTELS CORPORATION
By:_____________________________________
Name:
Title:
CGLH PARTNERS I LP
By: MK/CG-GP LLC
General Partner
By: CG Interstate Associates, LLC
a Managing Member
By: Continental Gencom Holdings, LLC
its Sole Member
By: ________________________________
Name:
Title:
By: LB INTERSTATE GP LLC
General Partner
By: PAMI LLC
its Sole Member
By: _________________________________
Name:
Title:
<PAGE> 19
CGLH PARTNERS II LP
By: MK/CG-GP LLC
General Partner
By: CG Interstate Associates, LLC
a Managing Member
By: Continental Gencom Holdings, LLC
its Sole Member
By: _________________________________
Name:
Title:
By: LB INTERSTATE GP LLC
General Partner
By: PAMI LLC
its Sole Member
By: ______________________________
Name:
Title:
