<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Interstate Hotels Corporation
--------------------------------------------------------------------------------
(Name of Issuer)
Common Stock (Par Value $ 0.01 Per Share)
--------------------------------------------------------------------------------
(Title of Class of Securities)
46088R108
--------------------------------------------------------------------------------
(CUSIP Number)
<TABLE>
<S> <C>
Jonathan L. Mechanic, Esq. Richard E. Schatz, Esq.
Fried, Frank, Harris, Shriver & Jacobson Stearns Weaver Miller Weissler Alhadeff &
One New York Plaza Sitterson, P.A.
New York, NY 10004 150 West Flagler Street, Suite 2200
(212) 859-8000 Miami, Florida 33130
(305) 789-3570
</TABLE>
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications)
August 31, 2000
--------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
|_|.
<PAGE> 2
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CGLH PARTNERS I LP
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,250,000*
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
1,250,000*
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646**
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%***
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. See Item 5
** Represents the aggregate amount to be initially beneficially owned by both
CGLH I Partners I LP and CGLH Partners II LP, which together will hold all
the securities to be initially issued pursuant to the Securities Purchase
Agreement (defined herein). The terms of the securities prohibit any single
holder from exercising the right to convert any securities if the
conversion would cause such holder and its affiliates or any group of which
any of them is a member to have beneficial ownership of more than 49% of
the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities held by CGLH Partners I LP
and CGLH Partners II LP would, initially, be convertible into an aggregate
of 7,500,000 shares of Class A Common Stock. See Item 5.
*** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities held by
CGLH Partners I LP and CGLH Partners II LP would, initially, be convertible
into an aggregate of 7,500,000 shares of Class A Common Stock (55.2%).
-2-
<PAGE> 3
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CGLH PARTNERS II LP
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 5,778,646*
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
5,778,646*
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646**
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%***
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. See Item 5.
** Represents the aggregate amount to be initially beneficially owned by both
CGLH I Partners I LP and CGLH Partners II LP, which together will hold all
the securities to be initially issued pursuant to the Securities Purchase
Agreement (defined herein). The terms of the securities prohibit any single
holder from exercising the right to convert any securities if the
conversion would cause such holder and its affiliates or any group of which
any of them is a member to have beneficial ownership of more than 49% of
the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities held by CGLH Partners I LP
and CGLH Partners II LP would, initially, be convertible into an aggregate
of 7,500,000 shares of Class A Common Stock. See Item 5.
*** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities held by
CGLH Partners I LP and CGLH Partners II LP would, initially, be convertible
into an aggregate of 7,500,000 shares of Class A Common Stock (55.2%).
-3-
<PAGE> 4
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LB INTERSTATE GP LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-4-
<PAGE> 5
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LB INTERSTATE LP LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-5-
<PAGE> 6
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PAMI LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-6-
<PAGE> 7
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROPERTY ASSET MANAGEMENT INC.
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-7-
<PAGE> 8
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LEHMAN ALI INC.
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-8-
<PAGE> 9
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LEHMAN BROTHERS HOLDINGS INC.
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
HC/CO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-9-
<PAGE> 10
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MK/CG GP LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-10-
<PAGE> 11
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MK/CG LP LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-11-
<PAGE> 12
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CG INTERSTATE ASSOCIATES LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-12-
<PAGE> 13
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CONTINENTAL GENCOM HOLDINGS, LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-13-
<PAGE> 14
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KFP INTERSTATE, LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-14-
<PAGE> 15
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GROSVENOR, LLC
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-15-
<PAGE> 16
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KFP HOLDINGS, LTD.
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/AF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
0
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,778,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.4%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable. The terms of the securities prohibit
any single holder from exercising the right to convert any securities if
the conversion would cause such holder and its affiliates or any group of
which any of them is a member to have beneficial ownership of more than 49%
of the Company's Class A Common Stock after the conversion. If this
restriction was not applicable, the securities would be convertible into an
aggregate of 7,500,000 shares of Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-16-
<PAGE> 17
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SHERWOOD M. WEISER
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 22,757
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
22,757
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,801,403*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.6%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable together, in the case of line 11, with
the shares of Common Stock currently owned by the Reporting Person. The
terms of the securities prohibit any single holder from exercising the
right to convert any securities if the conversion would cause such holder
and its affiliates or any group of which any of them is a member to have
beneficial ownership of more than 49% of the Company's Class A Common Stock
after the conversion. If this restriction was not applicable, the
securities would be convertible into an aggregate of 7,500,000 shares of
Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-19-
<PAGE> 18
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DONALD E. LEFTON
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 21,505
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
21,505
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,800,151*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.6%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable together, in the case of line 11, with
the shares of Common Stock currently owned by the Reporting Person. The
terms of the securities prohibit any single holder from exercising the
right to convert any securities if the conversion would cause such holder
and its affiliates or any group of which any of them is a member to have
beneficial ownership of more than 49% of the Company's Class A Common Stock
after the conversion. If this restriction was not applicable, the
securities would be convertible into an aggregate of 7,500,000 shares of
Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-20-
<PAGE> 19
SCHEDULE 13D
---------------------------------
CUSIP No. 46088R108
---------------------------------
---------- ---------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KARIM ALIBHAI
---------- ---------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
---------- ---------------------------------------------------------------------
3 SEC USE ONLY
---------- ---------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
---------- ---------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
---------- ---------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
---------- ---------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 30,000
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 5,778,646*
EACH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
30,000
PERSON
-------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
5,778,646*
---------- ---------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,808,646*
---------- ---------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
|_|
---------- ---------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.6%**
---------- ---------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
---------- ---------------------------------------------------------------------
* Represents the number of shares of Common Stock into which the Series A
Preferred Stock and Notes beneficially owned by the Reporting Person are
initially convertible or exercisable together, in the case of line 11, with
the shares of Common Stock currently owned by the Reporting Person. The
terms of the securities prohibit any single holder from exercising the
right to convert any securities if the conversion would cause such holder
and its affiliates or any group of which any of them is a member to have
beneficial ownership of more than 49% of the Company's Class A Common Stock
after the conversion. If this restriction was not applicable, the
securities would be convertible into an aggregate of 7,500,000 shares of
Class A Common Stock. See Item 5.
** Represents percent of class outstanding, initially, based on 6,091,802
shares of Class A Common Stock issued and outstanding as represented by the
Issuer in the Securities Purchase Agreement (defined herein). The terms of
the securities prohibit any single holder from exercising the right to
convert any securities if the conversion would cause such holder and its
affiliates or any group of which any of them is a member to have beneficial
ownership of more than 49% of the Company's Class A Common Stock after the
conversion. If this restriction was not applicable, the securities would be
convertible into an aggregate of 7,500,000 shares of Class A Common Stock
(55.2%).
-21-
<PAGE> 20
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the common stock,
par value $.01 per share (the "Common Stock") of Interstate Hotels Corporation,
a Maryland corporation (the "Company"). All capitalized terms not otherwise
defined herein have the meaning given to them in the Securities Purchase
Agreement (as defined below). The principal executive offices of the Company are
at 680 Andersen Drive, Foster Plaza Ten, Pittsburgh, Pennsylvania 15220
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed jointly on behalf of the
following persons (collectively the "Reporting Persons")1
CGLH Partners I LP, a Delaware limited partnership;
CGLH Partners II LP, a Delaware limited partnership;
LB Interstate GP LLC, a Delaware limited liability company;
LB Interstate LP LLC, a Delaware limited liability company;
PAMI LLC, a Delaware limited liability company;
Property Asset Management Inc., a Delaware corporation;
Lehman ALI Inc., a Delaware corporation;
Lehman Brothers Holdings Inc., a Delaware corporation;
MK/CG GP LLC, a Delaware limited liability company;
MK/CG LP LLC, a Delaware limited liability company;
CG Interstate Associates LLC, a Delaware limited liability company;
Continental Gencom Holdings, LLC, a Delaware limited liability company;
KFP Interstate, LLC, a Delaware limited liability company;
Grosvenor, LLC, a Texas limited liability company;
KFP Holdings, Ltd., a Texas limited partnership;
Sherwood M. Weiser, an individual, and a citizen of the United States of
America;
Donald E. Lefton, an individual, and a citizen of the United States of America;
Karim Alibhai, an individual, and a citizen of the United States of America;
CGLH Partners I LP and CGLH Partners II LP are collectively
referred to as the "CGLH Partnerships". The CGLH Partnerships make investments
for long term appreciation. LB Interstate GP LLC and MK/CG GP LLC are both
General Partners of each of the CGLH Partnerships and together make all of the
investment decisions on behalf of the CGLH Partnerships. LB Interstate LP LLC
and MK/CG LP LLC are both Limited Partners of each of the CGLH Partnerships.
--------
1 Neither the present filing nor anything contained herein will be
construed as an admission that any Reporting Person constitutes a
"person" for any purpose other than for compliance with Section 13(d)
of the Securities Exchange Act of 1934, as amended.
-23-
<PAGE> 21
MK/CG GP LLC and MK/CG LP LLC each make investments for long
term appreciation. MK/CG GP LLC and MK/CG LP LLC are each owned 66.67% by CG
Interstate Associates LLC and 33.33% by KFP Interstate, LLC, which together make
all of the investment decisions on behalf of each of MK/CG GP LLC and MK/CG LP
LLC. The business address of each of MK/CG GP LLC and MK/CG LP LLC is 3250 Mary
Street, Suite 500, Miami, Florida 33133.
CG Interstate Associates LLC makes investments for long term
appreciation. CG Interstate Associates LLC participates in investment decisions
made on behalf of MK/CG GP LLC and MK/CG LP LLC as a Managing Member of those
entities. CG Interstate Associates LLC is a wholly owned subsidiary of
Continental Gencom Holdings, LLC, which makes all investment decisions on its
behalf as its Managing Member.
Continental Gencom Holdings, LLC makes investments for long
term appreciation. It is owned 30% by Sherwood M. Weiser, 30% by Donald E.
Lefton, and 40% by Karim Alibhai, who are each a Managing Member of Continental
Gencom Holdings, LLC, and who together make all of its investment decisions.
CG Interstate Associates LLC, Continental Gencom Holdings,
LLC, Sherwood M. Weiser, Donald E. Lefton, and Karim Alibhai are collectively
referred to herein as the "CG Investors". The business address of each of the CG
Investors is 3250 Mary Street, Suite 500, Miami, Florida 33133.
KFP Interstate, LLC makes investments for long term
appreciation. KFP Interstate, LLC participates in investment decisions made on
behalf of MK/CG GP LLC and MK/CG LP LLC. KFP Interstate, LLC is a wholly owned
subsidiary of KFP Holdings, Ltd.
KFP Holdings Ltd. makes investments for long term
appreciation. It is owned 1% by Grosvenor, LLC and 33% by each of Jaffer Khimji
Grantor Trust, St. Giles Trust and Mahmood Khimji. Grosvenor, LLC is its General
Partner and makes all investment decisions on its behalf.
Grosvenor, LLC's principal business is acting as general
partner for various investment partnerships. Its principal place of business is
545 E. John Carpenter Freeway, Suite 1400, Irving, Texas 75062.
KFP Interstate, LLC, KFP Holdings, Ltd., and Grosvenor, LLC,
are collectively referred to herein as the "KFP Investors".
LB Interstate GP LLC and LB Interstate LP LLC each make
investments for long term appreciation. Each is wholly owned by PAMI LLC, which
makes all investment decisions on its behalf.
-24-
<PAGE> 22
PAMI LLC makes investments for long term appreciation. It is
wholly owned by Property Asset Management Inc., which makes all investment
decisions on its behalf.
Property Asset Management Inc. makes investments for long term
appreciation. It is 99.75% owned by Lehman ALI Inc., which makes all investment
decisions on its behalf.
Lehman ALI Inc. makes investments for long term appreciation.
It is wholly owned by Lehman Brothers Holdings Inc., which makes all investment
decisions on its behalf.
Lehman Brothers Holdings Inc., through its domestic and
foreign subsidiaries, is a full line securities firm.
LB Interstate GP LLC, LB Interstate LP LLC, PAMI LLC, Property
Asset Management Inc., Lehman ALI Inc. and Lehman Brothers Holdings Inc. are
collectively referred to herein as the "Lehman Investors".
The business address of, and the name, business address,
present principal occupation or employment and citizenship of each executive
officer and director or limited partner of Reporting Persons Property Asset
Management Inc., Lehman ALI Inc., Lehman Brothers Holding Inc., and KFP Holdings
Inc. are set forth in Schedules A through D hereto which are incorporated herein
by reference.
During the last five years, none of the Reporting Persons nor,
to the knowledge of each of the Reporting Persons, the persons listed on
Schedules A through D hereto (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree, or final order enjoining future violations of, or prohibiting or
mandating activities subject to federal or state securities laws or finding any
violation with respect to such laws, with the potential exceptions described in
the next paragraph.
Lehman Brothers Inc., an affiliate of the Lehman Investors,
has been involved in a number of civil proceedings which concern matters arising
in connection with the conduct of its business. Certain of such proceedings have
resulted in findings of violation of federal or state securities laws. Each of
these proceedings was settled by Lehman Brothers Inc. consenting to the entry of
an order without admitting or denying the allegations in the complaint. All of
such proceedings are reported and summarized in the Schedule D to Lehman
Brothers Inc.'s Form BD filed with the Securities and Exchange Commission, which
descriptions are hereby incorporated by reference.
The Reporting Persons have entered into a Joint Filing
Agreement, dated as of September 11, 2000, a copy of which is attached hereto as
Exhibit 1. Neither the fact of this filing nor anything contained herein shall
be deemed an admission by the Reporting Persons that they constitute a "group"
as such term is used in Section 13(d)(1)(k) of the rules and regulations under
the Exchange Act.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The CGLH Partnerships will require $30,000,000 to purchase
securities pursuant to the Securities Purchase Agreement, as described in Item
4. Such securities will be purchased by the CGLH Partnerships only. These funds
will be obtained from capital contributions by their
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<PAGE> 23
partners, who in turn will obtain such funds from their available funds as
working capital or capital contributions by their direct or indirect owners,
funded from their available funds.
None of the individuals listed on Schedules A through D hereto
has contributed any funds or other consideration towards the purchase of the
Preferred Stock and Notes (as defined in Item 4) except insofar as they may have
partnership interests in any of the Reporting Persons and have made capital
contributions to any of the Reporting Persons, as the case may be.
ITEM 4. PURPOSE OF TRANSACTION.
1. General
On August 31, 2000, the CGLH Partnerships entered into a
Securities Purchase Agreement with the Company (the "Securities Purchase
Agreement"). The discussion of the Securities Purchase Agreement herein is
qualified entirely by reference to copy of the Securities Purchase Agreement
attached hereto as Exhibit 2. Pursuant to the Securities Purchase Agreement the
CGLH Partnerships agreed to purchase, for an aggregate purchase price (the
"Purchase Price") of $30,000,000, subject to approval by the stockholders of the
Company and other customary closing conditions, (i) an aggregate of 500,000
shares of the Company's Series B Convertible Preferred Stock, par value $0.01
per share (the "Preferred Stock") and (ii) 8.75% Convertible Subordinated Notes
(the "Notes") having an aggregate principal amount of $25,000,000. Each of the
Preferred Stock and the Notes are convertible at any time, subject to certain
restrictions, into shares of the Company's Class A Common Stock at a conversion
rate of $4.00 per share, subject to anti-dilution adjustments.
The issuance of the Preferred Stock and the Notes, together
with the execution of a Registration Rights Agreement, an Investor Agreement,
and the formation of a joint venture with the Company, all described herein, is
expected to occur promptly after receipt of approval by the Company's
stockholders of the issuance of the Preferred Stock, the Notes and the shares of
Class A Common Stock issuable upon conversion of the Preferred Stock and the
Notes, assuming the satisfaction of the other conditions set forth in the
Securities Purchase Agreement.
$25,000,000 of the proceeds raised by the sale of the Notes
and the Preferred Stock will be invested by the Company in a newly formed joint
venture (the "Joint Venture") with affiliates of the CGLH Partnerships for
acquisition of hotel properties that will be managed by the Company. Affiliates
of the CGLH Partnerships have committed to invest $20,000,000 of additional
capital to the Joint Venture. A copy of the Form of Joint Venture Agreement is
attached hereto as Exhibit 3.
The principal terms and conditions of the securities to be
acquired by the CGLH Partnerships are set forth in the Securities Purchase
Agreement, and in the Form of Articles Supplementary and Form of 8.75%
Subordinated Convertible Note which are Exhibits thereto, and which are
described in greater detail under Item 6, below. The Form of Articles
Supplementary is attached as Exhibit 5 hereto, and the Form of 8.75%
Subordinated Convertible Note is attached as Exhibit 6 hereto. Pursuant to an
Investor Agreement, there will be certain restrictions on the rights of the CGLH
Partnerships to transfer their securities and to take certain actions in respect
of the Company.
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<PAGE> 24
2. Payment-in-kind Dividends on the Preferred Stock
The Preferred Stock accrues cumulative dividends payable in
cash at the rate of 8.75% of the stated amount ($10 per share) on a quarterly
basis, with up to 25% of the dividends payable in additional shares of Preferred
Stock at the Company's option. Accordingly, for so long as any shares of
Preferred Stock are outstanding the Company may elect to issue additional shares
of Preferred Stock to the CGLH Partnerships or other holders of shares of
Preferred Stock.
3. Payment-in-kind Interest on the Notes
The Notes accrue interest on a daily basis at a rate of 8.75%
per annum, compounded quarterly. Interest on the Notes is payable in cash;
however, up to 25% of the interest owed on any interest payment date is payable
by a payment-in-kind Note at the Company's option. Accordingly, for so long as
any Note is outstanding the Company may elect to issue additional Notes to the
CGLH Partnerships or other holders of the Notes.
4. Right to appoint Directors
Pursuant to the Investor Agreement to be entered into at the
Closing between the Company and the CGLH Partnerships, a copy of which is
attached as Exhibit 4 hereto, the number of directors on the Board of Directors
of the Company will be increased to eleven. The CGLH Partnerships will have the
right to appoint up to five directors to the Board of Directors of the Company.
4. Intentions of Reporting Persons
The CGLH Partnerships intend to continually evaluate the
business, prospects and financial condition of the Company, the market for the
Common Stock, other opportunities available to the CGLH Partnerships, general
economic conditions, money and stock market conditions and other factors and
future developments which the CGLH Partnerships may deem relevant from time to
time. Depending on such factors, the CGLH Partnerships may decide to sell all or
part of the interests they hold. Any such acquisition or disposition of Common
Stock may be effected through open market or privately negotiated transactions,
or otherwise.
The Lehman Investors intend to continually evaluate the
business, prospects and financial condition of the Company, the market for the
Common Stock, other opportunities available to the Lehman Investors, general
economic conditions, money and stock market conditions and other factors and
future developments which the Lehman Investors may deem relevant from time to
time. Depending on such factors, the Lehman Investors may decide to sell all or
part of the interests they hold. Any such acquisition or disposition of Common
Stock may be effected through open market or privately negotiated transactions,
or otherwise.
The CG Investors intend to continually evaluate the business,
prospects and financial condition of the Company, the market for the Common
Stock, other opportunities available to the CG Investors, general economic
conditions, money and stock market conditions and other factors and future
developments which the CG Investors may deem relevant from time to time.
Depending on such factors, the CG Investors may decide to sell all or part of
the interests they hold. Any such acquisition or disposition of Common Stock may
be effected through open market or privately negotiated transactions, or
otherwise.
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<PAGE> 25
The shares of Common Stock of the Company beneficially owned
by each of Messrs. Weiser, Lefton and Alibhai immediately prior to August 31,
2000 were acquired by such individuals for long-term investment purposes.
The KFP Investors intend to continually evaluate the business,
prospects and financial condition of the Company, the market for the Common
Stock, other opportunities available to the KFP Investors, general economic
conditions, money and stock market conditions and other factors and future
developments which the KFP Investors may deem relevant from time to time.
Depending on such factors, the KFP Investors may decide to sell all or part of
the interests they hold. Any such acquisition or disposition of Common Stock may
be effected through open market or privately negotiated transactions, or
otherwise.
Except as set forth above in this Item 4, none of the CGLH
Partnerships, the Lehman Investors, the CG Investors, and the KFP Investors have
any specific plans or proposals that relate to or would result in any of the
actions specified in clauses (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTERESTS IN SECURITIES OF THE ISSUER.
(a) The information contained in Items 11 and 13 of each of
the cover pages to this Schedule 13D are incorporated herein by reference.
Based on the information disclosed by the Company in the
Securities Purchase Agreement, as of August 31, 2000, there were 6,091,802
shares of Common Stock issued and outstanding.
Pursuant to the Securities Purchase Agreement, at the closing
(the "Closing", which is to occur as promptly as practicable following the
satisfaction or waiver of all of the conditions to closing set forth in the
Securities Purchase Agreement) the GCLH Partnerships will acquire securities
which are initially convertible into shares of Common Stock at a conversion
price of $4.00 per share. The terms of the Notes and the Preferred Stock
prohibit any single holder from converting such securities if the conversion
would cause such holder and its affiliates or any group of which any of them is
a member to have beneficial ownership of more than 49% of the Company's Class A
Common Stock after the conversion. Accordingly, if the number of issued and
outstanding shares of Common Stock is otherwise unchanged at the Closing, and
affiliates of or any group of which the CGLH Partnerships are a member continue
to beneficially own the 74,262 shares of Common Stock directly owned such group
members at the date hereof, the CGLH Partnerships will not then have the right
to convert the Notes and the Preferred Stock into more than 5,778,646 shares of
Common Stock. Absent this restriction, the Notes and Preferred Stock would be
initially convertible into an aggregate of 7,500,000 shares of Common Stock,
representing approximately 55.2% of the outstanding shares of Common Stock after
giving effect to the conversion. In addition, if all or part of the Notes and
Preferred Stock are transferred to unaffiliated persons so that no single person
and its affiliates would, upon conversion, own more than 49%, then 7,500,000
shares of Common Stock would be issuable upon conversion of the Notes and the
Preferred Stock.
The Lehman Investors disclaim beneficial ownership of the
shares of Common Stock beneficially owned by the CGLH Partnerships to the extent
of the interests in the CGLH
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<PAGE> 26
Partnerships held by persons other than the Lehman Investors. Lehman Brothers
Inc., a wholly owned broker-dealer subsidiary of Lehman Brothers Holdings Inc.,
and other affiliates acting in the ordinary course of business as broker
dealers, may have purchased and sold shares of Common Stock on behalf of their
customers.
The CG Investors disclaim beneficial ownership of the shares
of Common Stock beneficially owned by the CGLH Partnerships to the extent of the
interests in the CGLH Partnerships held by persons other than the CG Investors.
The KFP Investors disclaim beneficial ownership of the shares
of Common Stock beneficially owned by the CGLH Partnerships to the extent of the
interests in the CGLH Partnerships held by persons other than the KFP Investors.
None of the Reporting Persons or, to the knowledge of the
Reporting Persons, the persons listed on Schedules A to D hereto beneficially
owns any shares of Common Stock other than as set forth herein.
(b) The information contained in Items 7, 8, 9 and 10 of each
of the cover pages to this Schedule 13D are incorporated herein by reference.
With respect to the Lehman Investors, neither the Lehman Investors nor to the
best knowledge of the Lehman Investors any of the persons listed in Schedules A
through C hereto know of any other person who has the right to receive or the
power to direct the receipt of, any shares of Common Stock beneficially owned by
the Lehman Investors, other than customers of Lehman Brothers over whose shares
Lehman Brothers may have investment discretion.
(c) Except as described in Item 4 of this Schedule 13D, no
transactions in the shares of Common Stock were effected by the Reporting
Persons, or, to their knowledge, any of the persons listed on SCHEDULES A
THROUGH D hereto, during the past sixty days.
(d) and (e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
The responses set forth in Items 3, 4 and 5 of this Schedule
13D are incorporated herein by reference.
1. Securities Purchase Agreement
The following is a summary of certain terms of the Securities
Purchase Agreement, and is qualified entirely by reference to the Securities
Purchase Agreement, which is attached hereto as Exhibit 2.
The Securities Purchase Agreement sets forth the terms on
which the CGLH Partnerships will make the $30,000,000 investment in the Company.
The Securities Purchase Agreement was executed by the Company and the CGLH
Partnerships on August 31, 2000. It is the document by which the Company agreed
to issue, and the CGLH Partnerships agreed to purchase, the Notes and the
Preferred Stock.
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<PAGE> 27
It contains certain representations and warranties of both the
Company and the CGLH Partnerships which are customary in transactions of this
nature. It also includes a number of conditions which must be satisfied or
waived before the Closing can occur, including:
o Approval by the Company's stockholders of the issuance of the Preferred
Stock, the Notes and the shares of Common Stock issuable upon
conversion of the Preferred Stock and the Notes;
o Approval by NASDAQ of the quotation, subject to official notice of
issuance, of the shares of Common Stock issuable upon conversion of the
Preferred Stock and the Notes
o Execution by the parties of the Investor Agreement, the Registration
Rights Agreement and the Joint Venture Agreement;
o Amendment of the Company's charter to designate the rights and
preferences of the Preferred Stock; and
o Receipt by the CGLH Partnerships of opinions of counsel to the Company,
a certificate of an officer of the Company and a Secretary's
certificate certifying certain matters.
The Securities Purchase Agreement provides for its termination
prior to the Closing by either the CGLH Partnerships or the Company in certain
circumstances, including material breach by the other party of such party's
representations or warranties which would result in a failure to satisfy the
conditions to Closing. Upon such a termination by the CGLH Partnerships, and
upon a termination in certain other limited circumstances, the Company will pay
to the CGLH Partnerships a termination fee of $2,250,000. In addition, upon a
termination the Company may be liable to pay to the CGLH Partnerships their
reasonable documented fees and expenses up to a maximum of $2,250,000. The
agreement will terminate automatically if the Closing does not occur on or
before October 16, 2000, subject to extension by the Company, by payment of a
fee, to either November 15, 2000 or November 30, 2000.
2. Investor Agreement
The following is a summary of certain terms of the Investor
Agreement, and is qualified entirely by reference to the Form of Investor
Agreement attached hereto as Exhibit 4.
Pursuant to the terms of the Investor Agreement, for a period
of either three of four years (depending on the type of transaction) following
the Closing (or until the holdings of the CGLH Partnerships or their affiliates
or related transferees decrease below a certain level, or the market price of
the Common Stock reaches a certain level), the security holders are prohibited
from engaging in certain transactions with respect to the voting securities of
the Company, including certain acquisitions or dispositions of stock of the
Company and certain actions with respect to the election of directors of the
Company.
For so long as the foregoing restrictions apply, the CGLH
Partnerships may not sell, transfer or dispose of its investment other than at a
date after 6 months following the purchase of the Notes and Preferred Stock:
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<PAGE> 28
o under the Registration Rights Agreement;
o under Rule 144, so long as the disposition is not made to any person
who would thereafter own 12.5% of the Total Voting Power (as defined in
the Investor Agreement) (or 20% in the case of institutional
investors); and
o to any person that would not thereafter own 12.5% of Total Voting Power
(or 20% in the case of certain institutional investors).
3. The Notes
The following is a summary of certain terms of the Notes, and
is qualified entirely by reference to the Form of 8.75% Subordinated Convertible
Notes attached hereto as Exhibit 6 and, as applicable, to the Form of Investor
Agreement attached hereto as Exhibit 4.
Principal Amount, Maturity and Interest. The principal amount
of the Notes is $25 million. The Notes mature seven years after the Closing and
accrue interest on a daily basis at a rate of 8.75% per annum, compounded
quarterly. Interest on the Notes is payable in cash; however, up to 25% of the
interest owed on any interest payment date is payable by a payment-in-kind Note
at the Company's option. The terms of the Notes provide that during the
continuance of an event of default, the Notes accrue interest at a default
interest rate per annum of 10.75%.
Conversion. The Notes and any paid-in-kind Notes issued
instead of interest on the Notes are convertible at any time into shares of the
Company's Class A Common Stock at a conversion rate of $4.00 per share, subject
to anti-dilution adjustment. The terms of the Notes prohibit any holder from
converting the Notes if the conversion would cause the holder and its affiliates
or any group of which any of them is a member to have beneficial ownership of
more than 49% of the Company's Class A Common Stock after the conversion.
Subject to that restriction, on the date of issuance, the Notes will be
convertible into 6,250,000 shares of the Company's Class A Common Stock.
Redemption. In addition, upon a Change in Control (as defined
in the Notes) the Company has an obligation to offer to the Holders, and the
Holders have the right to require the Company to redeem the Notes for cash equal
to the greater of:
o the principal amount of the Notes plus accrued interest through the
date of redemption; or
o the fair market value of the cash securities and other property that
the Holder could have received had it converted its Notes, plus accrued
interest payable in cash.
Holders of the Notes may elect not to have their Notes
redeemed.
Events of Default. The following events constitute defaults by
the Company which will accelerate the maturity of the Notes:
o principal or interest payment default on any of the Notes;
o a bankruptcy filing by the Company or the filing of a petition to
declare the Company bankrupt that has not been discharged within 60
days;
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<PAGE> 29
o acceleration of at least $1.5 million of the Company's indebtedness;
o material breach by the Company of its obligations under the Notes or of
its obligation to nominate to the Board of Directors any designee of
the CGLH Partnerships under the Investor Agreement, which remains
uncured for 15 days after notice to the company; or
o final judgement against the Company in excess of $1.5 million which
remains unsatisfied for 30 days after entry of such judgement.
Holders of more than 50% of the Notes may annul the
acceleration of the maturity of the Notes, if all interest due on the Notes is
duly paid and every event of default is cured or waived.
Subordination. Payments under the Notes are subordinated to
payments on all other senior indebtedness of the Company. Upon receipt by the
Company of a notice of default relating to senior indebtedness, for a period of
90 days after such notice (the "Payment Blockage Period"), the Company shall not
pay principal or interest on the Notes or redeem such Notes until the senior
indebtedness has been paid in full or the default is no longer continuing. The
Payment Blockage Period applies while any of the Notes are outstanding after
certain events described in the Investor Agreement have occurred, and shall not
restrict the holder's conversion rights. There are no limitations on the
issuance of additional senior indebtedness by the Company, other than the
obligation to obtain the consent of the Required Holders (as defined below) for
the incurrence of debt in general exceeding specified amounts.
Restrictions while Notes are Outstanding. For so long as the
Notes are outstanding, the Company agrees not to engage in the following
activities without the prior written consent of the holders of at least a
majority of the combined voting power of the Notes and the Preferred Stock
outstanding (the "Required Holders"):
o enter into a Change in Control transaction or merge with an entity
other than a wholly-owned subsidiary;
o enter into an agreement which materially restricts the Company's
performance of its obligations under its agreements with the CGLH
Partnerships;
o grant any registration rights regarding the Company's securities which
have an aggregate value in any year exceeding the lesser of certain
specified amounts and 5% of the Company's market capitalization;
o amend the Company's charter, the Notes or bylaws in a manner that
adversely affects the rights of the CGLH Partnerships; or
o redeem any securities of the Company without also offering to redeem
the Notes (except for redemptions of the Company's Class C Common Stock
or the Preferred Stock).
In addition, until certain conditions are met, the Company
must obtain the prior written consent of the Required Holders before taking
certain other actions described in the Investor Agreement.
Amendments. Amendments to the provisions of the Notes must be
approved by the Required Holders.
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<PAGE> 30
4. The Preferred Stock
The following is a summary of certain terms of the Preferred
Stock, and is qualified entirely by reference to the Form of Articles
Supplementary attached hereto as Exhibit 5 and, as applicable, to the Form of
Investor Agreement attached hereto as Exhibit 6.
Dividends. The terms of the Preferred Stock are substantially
the same as the Notes, except as noted below. The Preferred Stock accrues
cumulative dividends payable in cash at the rate of 8.75% of the stated amount
($10 per share) on a quarterly basis, with up to 25% of the dividends payable in
additional shares of Preferred Stock at the Company's option. If the dividends
are in arrears for a period of 60 days or more, then an additional cumulative
dividend accrues at an annual rate of 2% of the stated amount ($10 per share)
payable in shares of Preferred Stock. The Preferred Stock also receives any
dividends paid to holders of Class A Common Stock of the Company on an
as-converted basis. The Company is precluded from paying dividends on or
repurchasing capital stock that is on parity with the Preferred Stock and from
repurchasing capital stock that is not ranked senior to the Preferred Stock,
unless all dividends accrued on the Preferred Stock have been paid.
Voting Rights. The Preferred Stock has the right to elect up
to five members to the Company's Board of Directors as described above under the
Investor Agreement. In addition, if the Company fails to pay dividends on the
Preferred Stock or interest on the Notes for six quarterly periods, then the
size of the Company's Board increases to thirteen directors and the CGLH
Partnerships are entitled to elect seven of the thirteen directors until such
time as the payment default has been cured. Other than for these rights and the
rights described under the discussion of "Restrictions While Preferred Stock is
Outstanding" below, the Preferred Stock has no voting rights.
Conversion. Each share of Preferred Stock, including any
shares issued of Preferred Stock issued instead of dividends, is convertible at
any time at the option of the holder into Class A Common Stock of the Company,
whether or not the Company has given notice of redemption. The conversion price
is $4.00 per share of Class A Common Stock subject to anti-dilution adjustment.
Restrictions While Preferred Stock is Outstanding. For so long
as the Preferred Stock is outstanding, the Company agrees not to engage in the
following activities without the prior written consent of the Required Holders:
o authorize, create, reclassify or issue any senior stock or parity stock
or any stock convertible into senior or parity stock;
o amend any rights of the holders of the Preferred Stock or the Class B
or Class C Common Stock;
o amend the rights of the Class A Common Stock in a manner adverse to the
holders of the Preferred Stock;
o enter into a Change in Control transaction or merge with an entity
other than a subsidiary;
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<PAGE> 31
o enter into an agreement which materially restricts the Company's
performance of its obligations under its agreements with the CGLH
Partnerships;
o grant any registration rights regarding the Company's securities which
have a value in any year exceeding the lesser of certain specified
amounts and 5% of the Company's market capitalization;
o amend the Company's charter, bylaws or the Notes in a manner that
adversely affects the rights of the CGLH Partnerships; or
o redeem any securities of the Company without also offering to redeem
the Preferred Stock (except for redemptions of the Company's Class C
Common Stock or the Notes).
In addition, until certain conditions are met, the Company
must obtain the prior written consent of the Required Holders before taking
certain other actions described in the Investor Agreement.
Redemption Rights. The Company has an obligation to redeem the
Preferred Stock on the seventh anniversary of the issuance of the Preferred
Stock to the CGLH Partnerships. The redemption price will be $10 per share plus
all accrued dividends on the date of redemption. The Company is not required to
provide notice of such redemption to the holders of Preferred Stock. The holders
of the Preferred Stock may convert their shares of the Preferred Stock at any
time prior to the redemption date. There is no restriction on the redemption of
the Preferred Stock by the Company while the Company is in arrearage in the
payment of dividends. In addition, upon a Change in Control, the Company has an
obligation to offer to the holders of Preferred Stock, and the holders of
Preferred Stock may require from the Company to redeem the Preferred Stock on
the same basis as the Notes described above.
Liquidation Preference. Upon issuance, the Preferred Stock
will have an aggregate liquidation preference of $5,000,000. Upon a liquidation
of the Company the holders of Preferred Stock will be entitled to receive the
greater of (a) $10 per share plus any accrued dividends, and (b) the fair market
value of the cash, securities and other property that the holder of Preferred
Stock would have received had it converted, its Preferred Stock plus accrued
dividends.
Restriction on Conversion. The terms of the Preferred Stock
prohibit any single holder from exercising the right to convert any shares of
Preferred Stock if the conversion would cause the holder and its affiliates or
any group of which any of them is a member to have beneficial ownership of more
than 49% of the Company's Class A Common Stock after the conversion. Subject to
that restriction, on the date of issuance, the shares of Preferred Stock will be
convertible into, 1,250,000 shares of the Company's Class A Common Stock on the
date of issuance.
5. The Registration Rights Agreement
The Registration Rights Agreement, to be entered into between
the Company and the CGLH Partnerships at the Closing (the "Registration Rights
Agreement") is attached hereto as Exhibit 7 and is incorporated in and made a
part of this Schedule 13D in its entirety by reference.
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<PAGE> 32
The Registration Rights Agreement provides, subject to the
limitations described therein, (i) the CGLH Partnerships have an unlimited right
to include their Notes, Preferred Stock (and the shares of Class A Common Stock
of the Company into which they are convertible) in a registration by the
Company; (ii) subject to the limitations on sales described in the Investor
Agreement, the CGLH Partnerships may, on seven occasions, make a demand for
registration of their Notes, Preferred Stock (and the shares of Class A Common
Stock of the Company into which they are convertible), so long as such demand
includes at least 500,000 shares or such lesser number of shares as would yield
gross proceeds of at least $2 million; (iii) the Company shall not to grant
registration rights to any other party that would limit the CGLH Partnerships'
priority for the sale or distribution of securities in connection with a demand
registration; and (iv) the CGLH Partnerships have the right to receive the most
favorable registration rights the Company makes available to any person in
connection with the registration of securities and the Registration Rights
Agreement is automatically amended to reflect such favorable terms upon grant.
6. Stockholders Agreement
On August 31, 2000 the CGLH Partnerships entered into a
Stockholders Agreement with Thomas F. Hewitt, J. William Richardson and Kevin P.
Kilkeary (together the "Executives"). A copy of that agreement is annexed hereto
as Exhibit 8 and is incorporated in and made a part of this Schedule 13D in its
entirety by reference.
Pursuant to the Stockholders Agreement, the Executives granted
to the CGLH Partnerships an irrevocable proxy to vote certain shares of
Preferred Stock which will be granted to the Executives by the Company at the
time of Closing. The CGLH Partnerships do not have any rights in respect of the
shares of Common Stock issuable upon conversion of such shares of Preferred
Stock.
7. Other matters
Other than as set forth in this Item 6 and Items 3, 4, and 5
above, none of the Reporting Persons is a party to any contract, arrangement,
understanding or relationship with respect to any securities of the issuer, and
none of the securities as to which this Schedule 13D relates is pledged or is
otherwise subject to a contingency the occurrence of which would give another
person voting power or investment power over such securities.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Joint Filing Agreement
Exhibit 2 Securities Purchase Agreement between the Company and the
CGLH Partnerships dated as of August 31, 2000
Exhibit 3 Form of Joint Venture Agreement
Exhibit 4 Form of Investor Agreement
Exhibit 5 Form of Articles Supplementary
Exhibit 6 Form of 8.75% Convertible Subordinated Note
Exhibit 7 Form of Registration Rights Agreement
Exhibit 8 Stockholders Agreement by and among the CGLH Partnerships,
Thomas F. Hewitt, J. William Richardson and Kevin P. Kilkeary,
dated as of August 31, 2000
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<PAGE> 33
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
September 10, 2000
CGLH Partners I LP
By: /s/ Joseph J. Flannery
--------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
CGLH Partners II LP
By: /s/ Joseph J. Flannery
--------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
LB Interstate GP LLC
By: /s/ Joseph J. Flannery
--------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
LB Interstate LP LLC
By: /s/ Joseph J. Flannery
--------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
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<PAGE> 34
PAMI LLC
By: /s/ Chris McKenna
--------------------------------
Name: Chris McKenna
Title: Vice President
Property Asset Management Inc.
By: /s/ Joseph J. Flannery
--------------------------------
Name:
Title:
Lehman ALI Inc.
By: /s/ Xavier Sheild
--------------------------------
Name: Xavier Sheild
Title: Vice President
Lehman Brothers Holdings Inc.
By: /s/ Yon Cho
--------------------------------
Name: Yon Cho
Title: Authorized Signatory
MK/CG GP LLC
By: /s/ Sherwood M. Weiser
--------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
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<PAGE> 35
MK/CG LP LLC
By: /s/ Sherwood M. Weiser
--------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
CG Interstate Associates LLC
By: /s/ Sherwood M. Weiser
--------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
Continental Gencom Holdings, LLC
By: /s/ Sherwood M. Weiser
--------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
KFP Interstate, LLC
By:
--------------------------------
Name:
Title:
Grosvenor, LLC
By:
--------------------------------
Name:
Title:
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<PAGE> 36
KFP Holdings, Ltd.
By: /s/ MAHMOOD KHIMJI
--------------------------------
Name: Mahmood Khimji
Title: Authorized Signature
Sherwood M. Weiser
/s/ Sherwood M. Weiser
-----------------------------------
Donald E. Lefton
/s/ Donald E. Lefton
-----------------------------------
Karim Alibhai
/s/ Karim Alibhai
-----------------------------------
-39-
<PAGE> 37
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<PAGE> 38
Schedule A
Executive Officers and Directors
of
Property Asset Management Inc.
The names and principal occupations of the Directors of
Property Asset Management Inc. are as set forth below. Property Asset Management
Inc. has no Executive Officers. The business address for all such persons is
that of Property Asset Management Inc. at 3 World Financial Center, New York, NY
10285. Each listed individual is a United States citizen.
Name Present Principal Occupation
---- ----------------------------
Directors:
Yon K. Cho Employee of Lehman Brothers Inc.
Kenneth C. Cohen Employee of Lehman Brothers Inc.
Mark A. Walsh Employee of Lehman Brothers Inc.
<PAGE> 39
Schedule B
Executive Officers and Directors
of
Lehman ALI Inc.
The names and principal occupations of the Directors of Lehman
ALI Inc. are as set forth below. Lehman ALI Inc. has no Executive Officers. The
business address for all such persons is that of Lehman ALI Inc. at 3 World
Financial Center, New York, NY 10285. Each listed individual is a United States
citizen.
Name Present Principal Occupation
---- ----------------------------
Directors:
Kenneth C. Cohen Employee of Lehman Brothers Inc.
Neal B. Leonard Employee of Lehman Brothers Inc.
Mark A. Walsh Employee of Lehman Brothers Inc.
<PAGE> 40
Schedule C
Executive Officers and Directors
of
Lehman Brothers Holdings Inc.
The names and principal occupations of the Directors and the
names and titles of the Executive Officers of Lehman Brothers Holdings Inc. are
as set forth below. The business address for all such persons is that of Lehman
Brothers Holdings Inc. at 3 World Financial Center, New York, NY 10285. Each
listed individual is a United States citizen.
Name Present Principal Occupation
---- ----------------------------
Directors:
Michael L. Ainslie Private Investor and former President and
Chief Executive Officer of Sotheby's Holdings
John F. Akers Retired Chairman of International Business
Machines Corporation
Roger S. Berlind Theatrical Producer
Thomas H. Cruikshank Retired Chairman and Chief Executive
Officer of Halliburton Company
Richard S. Fuld, Jr. Chairman and Chief Executive Officer
of Lehman Brothers Holdings Inc.
Henry Kaufman President of Henry Kaufman & Company, Inc.
John D. Macomber Principal of JDM Investment Group Director
Dina Merrill and Vice Chairman of RKO Pictures, Inc. and
Actress
Officers:
Richard S. Fuld, Jr. Chairman and Chief Executive Officer
David Goldfarb Chief Financial Officer
Joseph M. Gregory Chief Administrative Officer
Thomas A. Russo Chief Legal Officer
<PAGE> 41
SCHEDULE D
MEMBERS
OF
KFP HOLDINGS LTD.
THE NAMES AND PRINCIPAL OCCUPATIONS OF THE MEMBERS OF KFP
HOLDINGS LTD. ARE AS SET FORTH BELOW. THE BUSINESS ADDRESS FOR ALL SUCH PERSONS
IS THAT OF KFP HOLDINGS LTD. AT 545 E. JOHN CARPENTER FREEWAY, SUITE 1400,
IRVING, TEXAS 75062. EACH LISTED INDIVIDUAL IS A UNITED STATES CITIZEN.
NAME PRESENT PRINCIPAL OCCUPATION
---- ----------------------------
MEMBERS:
MAHMOOD KHIMJI PRESIDENT, HIGHGATE HOLDINGS, INC.
JAFFER KHIMJI GRANTOR TRUST A TRUST FORMED UNDER TEXAS LAW
ST. GILES TRUST A TRUST FORMED UNDER TEXAS LAW
<PAGE> 42
EXHIBITS
Exhibit 1 Joint Filing Agreement
Exhibit 2 Securities Purchase Agreement between the Company and the
CGLH Partnerships dated as of August 31, 2000
Exhibit 3 Form of Joint Venture Agreement
Exhibit 4 Form of Investor Agreement
Exhibit 5 Form of Articles Supplementary
Exhibit 6 Form of 8.75% Convertible Subordinated Note
Exhibit 7 Form of Registration Rights Agreement
Exhibit 8 Stockholders Agreement by and among the CGLH Partnerships,
Thomas F. Hewitt, J. William Richardson and Kevin P.
Kilkeary, dated as of August 31, 2000
<PAGE> 43
EXHIBIT 1 - JOINT FILING AGREEMENT
Joint Filing Agreement
The undersigned hereby agree that the Statement on Schedule 13D filed
herewith (and any amendments thereto), relating to the common stock, par value
$0.01 per share, of Interstate Hotels Corporation., is being filed jointly with
the Securities and Exchange Commission pursuant to Rule 13d-1(k)(1) under the
Securities Exchange Act of 1934, as amended, on behalf of each such person.
Dated: September 11, 2000
<PAGE> 44
CGLH Partners I LP
By: /s/ JOSEPH J. FLANNERY
-------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
CGLH Partners II LP
By: /s/ JOSEPH J. FLANNERY
-------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
LB Interstate GP LLC
By: /s/ JOSEPH J. FLANNERY
-------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
LB Interstate LP LLC
By: /s/ JOSEPH J. FLANNERY
-------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
PAMI LLC
By: /s/ CHRIS MCKENNA
-------------------------------
Name: Chris McKenna
Title: Vice President
<PAGE> 45
Property Asset Management Inc.
By: /s/ JOSEPH J. FLANNERY
-------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
Lehman ALI Inc.
By: /s/ XAVIER SHEILD
-------------------------------
Name: Xavier Sheild
Title: Vice President
Lehman Brothers Holdings Inc.
By: /s/ YON CHO
-------------------------------
Name: Yon Cho
Title: Authorized Signatory
MK/CG GP LLC
By: /s/ SHERWOOD M. WEISER
-------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
MK/CG LP LLC
By: /s/ SHERWOOD M. WEISER
-------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
<PAGE> 46
CG Interstate Associates LLC
By: /s/ SHERWOOD M. WEISER
-------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
Continental Gencom Holdings, LLC
By: /s/ SHERWOOD M. WEISER
-------------------------------
Name: Sherwood M. Weiser
Title: Authorized Signatory
KFP Interstate, LLC
By: /s/ MAHMOOD KHIMJI
--------------------------------
Name: Mahmood Khimji
Title: Authorized Signature
Grosvenor, LLC
By: /s/ MAHMOOD KHIMJI
--------------------------------
Name: Mahmood Khimji
Title: Authorized Signature
KFP Holdings, Ltd.
By: /s/ MAHMOOD KHIMJI
--------------------------------
Name: Mahmood Khimji
Title: Authorized Signature
<PAGE> 47
Sherwood M. Weiser
/s/ SHERWOOD M. WEISER
---------------------------------
Donald E. Lefton
/s/ DONALD E. LEFTON
-----------------------------------
Karim Alibhai
/s/ KARIM ALIBHAI
-----------------------------------
Mahmood Khimji
/s/ MAHMOOD KHIMJI
-----------------------------------
<PAGE> 48
Exhibit 2
SECURITIES PURCHASE AGREEMENT
DATED AS OF AUGUST 31, 2000
AMONG
INTERSTATE HOTELS CORPORATION
AND
CGLH PARTNERS I LP
AND
CGLH PARTNERS II LP
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<S> <C>
TABLE OF CONTENTS........................................... i
INDEX OF EXHIBITS........................................... iii
INDEX OF ANNEXES............................................ iii
INDEX OF COMPANY DISCLOSURE SCHEDULES....................... iv
DEFINITIONS................................................. 1
SECTION 1. Issuance and Sale of Notes and Series B Preferred
Stock..................................................... 5
1.1. The Issuance and Purchase............................ 5
1.2. Escrow Agreement..................................... 5
1.3. The Closing.......................................... 5
1.4. Conditions to the Closing............................ 5
1.5. Closing Deliveries................................... 7
1.6. Payment of Purchase Price............................ 8
SECTION 2. Representations and Warranties of the Company.... 8
2.1. Organization and Good Standing; Power and Authority;
Qualifications......................................... 8
2.2. Authorization of the Documents; Board
Recommendation......................................... 8
2.3. No Conflict.......................................... 8
2.4. Capitalization; Distributions........................ 9
2.5. Authorization and Issuance of Securities............. 9
2.6. SEC Reports.......................................... 9
2.7. Financial Statements................................. 10
2.8. Absence of Material Changes.......................... 10
2.9. Contracts............................................ 11
2.10. Subsidiaries and Investments........................ 11
2.11. Properties.......................................... 12
2.12. Employee Benefit Plans.............................. 13
2.13. Labor Relations; Employees.......................... 14
2.14. Litigation; Orders.................................. 14
2.15. Compliance with Laws; Permits....................... 14
2.16. Environmental Matters............................... 14
2.17. Taxes............................................... 15
2.18. Insurance........................................... 16
2.19. Affiliated Transactions............................. 16
2.20. Opinion of Financial Advisor........................ 16
2.21. Actions Regarding the Stockholder Rights Plan....... 16
2.22. Consents............................................ 16
2.23. Brokers............................................. 16
2.24. Offering Exemption.................................. 17
2.25. Disclosure.......................................... 17
SECTION 3. Representations and Warranties of the
Purchaser................................................. 17
3.1. Organization and Good Standing; Power and Authority;
Qualifications; Capitalization......................... 17
3.2. Authorization of the Documents....................... 17
3.3. No Conflict.......................................... 17
3.4. Consents............................................. 18
3.5. Purchase for Investment.............................. 18
3.6. Accredited Investor.................................. 18
3.7. Restrictions on Transfer............................. 18
3.8. Current Ownership.................................... 18
3.9. Financial Capacity................................... 18
</TABLE>
i
<PAGE> 50
<TABLE>
<S> <C>
SECTION 4. Registration, Exchange and Transfer of Notes...................................................... 18
4.1. The Note Register; Persons Deemed Owners.............................................................. 18
4.2. Issuance of New Notes Upon Exchange or Transfer....................................................... 18
SECTION 5. Covenants......................................................................................... 19
5.1. Access to Records..................................................................................... 19
5.2. Notice of Breach...................................................................................... 19
5.3. No General Solicitation............................................................................... 19
5.4. Financial Reports..................................................................................... 19
5.5. Liquidity............................................................................................. 20
5.6. Conduct of Business Prior to Closing.................................................................. 20
5.7. No Solicitation of Competing Transactions............................................................. 21
5.8. Stockholder Approval; Proxy Statement................................................................. 22
5.9. Reasonable Best Efforts............................................................................... 22
SECTION 6. Additional Agreements............................................................................. 23
6.1. Indenture Relating to the Notes....................................................................... 23
6.2. Lost, Stolen, Damaged and Destroyed Securities........................................................ 23
6.3. Transactions with Affiliates.......................................................................... 23
6.4. Availability of Conversion Shares..................................................................... 23
6.5. Corporate Headquarters................................................................................ 24
6.6. HSR................................................................................................... 24
SECTION 7. Restrictive Legend................................................................................ 24
SECTION 8. Taxes............................................................................................. 24
SECTION 9. Expenses, Termination............................................................................. 24
9.1. Costs and Expenses.................................................................................... 24
9.2. Termination or Abandonment............................................................................ 25
9.3. Effect of Termination................................................................................. 26
9.4. Payments Upon Termination............................................................................. 26
SECTION 10. Indemnification.................................................................................. 27
10.1. Survival of Representations, Warranties, Agreements and Covenants, etc............................... 27
10.2. Indemnification by the Company....................................................................... 27
10.3. Indemnification by the Purchaser..................................................................... 28
10.4. Limitations.......................................................................................... 28
10.5. Procedure............................................................................................ 28
SECTION 11. Further Assurances............................................................................... 29
SECTION 12. Successors and Assigns........................................................................... 29
SECTION 13. Entire Agreement................................................................................. 29
SECTION 14. Notices.......................................................................................... 29
SECTION 15. Amendments....................................................................................... 30
SECTION 16. Counterparts..................................................................................... 31
SECTION 17. Headings......................................................................................... 31
SECTION 18. Nouns and Pronouns............................................................................... 31
SECTION 19. Governing Law.................................................................................... 31
SECTION 20. Enforcement Jurisdiction......................................................................... 31
SECTION 21. Waiver of Jury Trial............................................................................. 31
SECTION 22. Litigation; Prevailing Party..................................................................... 31
SECTION 23. Publicity........................................................................................ 31
SECTION 24. Severability..................................................................................... 31
</TABLE>
ii
<PAGE> 51
INDEX OF EXHIBITS
Exhibit A -- Form of Note
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Investor Agreement
Exhibit D -- Form of Registration Rights Agreement
Exhibit E -- Form of Joint Venture Partnership Agreement
Exhibit F -- Form of Articles Supplementary
Exhibit G-1 -- Form of Jones Day Opinion
Exhibit G-2 -- Form of Ballard Spahr Opinion
Exhibit G-3 -- Form of Opinion of Counsel to Interstate
Exhibit H -- Form of Officer's Certificate
Exhibit I -- Form of Articles of Amendment and Restatement
Exhibit J -- Information and Reports to be Provided to Purchaser
Exhibit K -- Amendment No. 1 to Rights Agreement
Exhibit L -- Side Letter No. 1
INDEX OF ANNEXES
1.0. Company Knowledge
1.4. Jurisdictions in which the Company is in Good Standing
3.1 Holders of Equity Interest in the Purchaser
3.4. Purchaser Consents
3.8. Current Ownership
iii
<PAGE> 52
INDEX OF COMPANY DISCLOSURE SCHEDULES
2.3. Conflicts
2.4. Capitalization; Distributions
2.7. Financial Statements
2.8. Material Changes
2.9. Contracts
2.10. Subsidiaries and Investments
2.11. Properties
2.12. Employee Benefit Plans
2.13. Labor Relations; Employees
2.14. Litigation; Orders
2.15. Compliance with Laws; Permits
2.16. Environmental Matters
2.17. Taxes
2.19. Affiliated Transactions
2.22. Consents
2.23. Brokers
iv
<PAGE> 53
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August
31, 2000 among INTERSTATE HOTELS CORPORATION, a Maryland corporation (the
"Company"), 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 "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing management,
leasing and related services for hotels owned by third parties in all market
segments (the "Business");
WHEREAS, the Company wishes to issue and sell to the Purchaser and the
Purchaser wishes to purchase from the Company (i) 8.75% Subordinated Convertible
Notes (the "Notes") in the aggregate principal amount of $25,000,000; and (ii)
an aggregate of 500,000 shares of the Company's Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"), each
convertible into shares (the "Conversion Shares") of the Company's Class A
Common Stock, par value $.01 per share (the "Common Stock");
WHEREAS, the Purchaser and the Company desire to provide for such purchase
and sale and to establish various rights and obligations in connection
therewith:
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties set forth herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree as follows:
DEFINITIONS. In addition to terms defined elsewhere in this Agreement, the
following terms when used in this Agreement shall have the meanings indicated
below:
"Affiliate" means, as to any Person, any Person which, directly or
indirectly through one or more intermediaries, is in control of, is controlled
by, or is under common control with, such Person, and any officer or director of
such Person.
"Agreement" has the meaning given to it in the preamble.
"Ancillary Documents" means the Registration Rights Agreement, the Investor
Agreement, the Articles Supplementary, the Notes and all other contracts,
agreements, schedules, certificates and other documents being delivered pursuant
to or in connection with this Agreement by any party hereto at or prior to the
Closing.
"Articles Supplementary" has the meaning given to it in Section 1.4(b) of
this Agreement.
"Bankruptcy Exception" has the meaning given to it in Section 2.2 of this
Agreement.
"Benefit Plan" has the meaning given to it in Section 2.12(a) of this
Agreement.
"Business" has the meaning given to it in the Recitals of this Agreement.
"Bylaws" has the meaning given to it in Section 1.4(b) of this Agreement.
"Charter" has the meaning given to it in Section 1.4(b) of this Agreement.
"Class B Common Stock" has the meaning given to it in Section 2.4(a) of
this Agreement.
"Class C Common Stock" has the meaning given to it in Section 2.4(a) of
this Agreement.
"Closing Date" has the meaning given to it in Section 1.3 of this
Agreement.
"Closing" has the meaning given to it in Section 1.3 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" has the meaning given to it in Section 2.6 of this Agreement.
"Common Stock" has the meaning given to it in the Recitals of this
Agreement.
-1-
<PAGE> 54
"Company Disclosure Schedule" has the meaning given to it in Section 2 of
this Agreement.
"Company Entity" has the meaning given to it in Section 10.3 of this
Agreement.
"Company" has the meaning given to it in the preamble.
"Competing Transaction" has the meaning given to it in Section 5.7 of this
Agreement
"Contract" means any options, warrants, subscription rights, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, shares of any class of capital stock of the Company, or any
indenture, mortgage, guaranty, lease, license, franchise, management agreement
or other contract, agreement or arrangement, whether written or oral, and any
and all amendments, additions, modifications, or supplements thereto.
"Conversion Shares" has the meaning given to it in the Recitals of this
Agreement.
"Employee Agreement" has the meaning given to it in Section 2.12(a) of this
Agreement.
"Employee" has the meaning given to it in Section 2.12(a) of this
Agreement.
"Encumbrances" has the meaning given to it in Section 1.1 of this
Agreement.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, orders, claims,
Encumbrances, investigations, proceedings or notices of noncompliance or
violations by any Person (including any Governmental Entity) alleging potential
liability (including, without limitation, potential responsibility for or
liability for enforcement, investigatory costs, cleanup costs, governmental
response costs, removal costs, remediation costs, natural resources damages,
property damages, personal injury, bodily injury, wrongful death or penalties)
arising out of, based on or resulting from (A) the presence, Release or
threatened Release of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the Company or any of its Subsidiaries; or
(B) circumstances that form the basis of any violation or alleged violation of
any Environmental Law.
"Environmental Laws" means all federal, state and local laws, rules and
regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or protection of human health and safety, including, without limitation,
laws and regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing, distributions,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
"ERISA" has the meaning given to it in Section 2.12(a) of this Agreement.
"Escrow Account" has the meaning given to it in Section 1.2 of this
Agreement.
"Escrow Agent" has the meaning given to it in Section 1.2 of this
Agreement.
"Exchange Act" has the meaning given to it in Section 2.6 of this
Agreement.
"GAAP" has the meaning given to it in Section 2.7 of this Agreement.
"Governmental Entity" means any supernational, national, foreign, federal,
state or local judicial, legislative, executive, administrative or regulatory or
self-regulatory body, institution, agency or authority.
"Hazardous Materials" means (A) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls, (B) any
chemicals, materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import under any Environmental Law and
(C) any other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a jurisdiction
in which the Company or any of its Subsidiaries operate.
"Holder" has the meaning given to it in Section 4.1 of this Agreement.
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<PAGE> 55
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and the rules and regulations thereunder.
"Indemnification Payment" has the meaning given to it in Section 10.2 of
this Agreement.
"Indemnified Party" has the meaning given to it in Section 10.5(a) of this
Agreement.
"Indemnifying Party" has the meaning given to it in Section 10.5(a) of this
Agreement.
"Indenture" has the meaning given to it in Section 6.1 of this Agreement.
"Intellectual Property" means all trademarks, trade names, patents,
copyrights, and applications therefor, or other similar rights (including,
without limitation, trade secrets, know-how or other confidential business
information).
"Investor Agreement" has the meaning given to it in Section 1.4(a) of this
Agreement.
"Investor Designee" has the meaning given to it in Section 1.4(b) of this
Agreement.
"Joint Venture" has the meaning given to it in Section 1.4(a) of this
Agreement.
"Joint Venture Partnership Agreement" has the meaning given to it in
Section 1.4(a) of this Agreement.
"Knowledge" or "Known" means, with respect to any representation or
warranty or other statement in this Agreement qualified by the knowledge of any
party, the actual knowledge of the directors, officers and executive level
employees of such party without independent investigation or verification by
such persons, provided, however, that where reference is made to the Knowledge
of the Company, such reference shall be deemed to include only Messrs. Hewitt,
Hudak, Killkeary and Richardson and the Controller of the Company, all of whom
shall be deemed to have conducted the investigation specified on Annex 1.0
hereto.
"Law" includes any foreign, federal, state, or local law, statute, rule,
regulation, judgment, order, injunction, ruling decree, stipulation, award or
other restriction of any court, private arbitration tribunal or other
Governmental Entity.
"Legal Opinions" has the meaning given to it in Section 1.4(b) of this
Agreement.
"Lehman Parent Entities" shall mean Lehman Brothers Holdings Inc., Lehman
Brothers Inc., and any Person that, directly or indirectly, Controls or is under
Common Control with Lehman Brothers Holdings Inc. or Lehman Brothers Inc. or is
managed by any such entity.
"Losses" has the meaning given to it in Section 10.2 of this Agreement.
"Material Adverse Effect" means a material adverse effect on the business,
results of operations, performance or the financial condition of the Company and
its Subsidiaries, taken as a whole.
"Note Register" has the meaning given to it in Section 4.1 of this
Agreement.
"Notes" has the meaning given to it in the Recitals of this Agreement.
"Permits" has the meaning given to it in Section 2.15(b) of this Agreement.
"Permitted Encumbrance" means (i) any Encumbrance consisting of zoning or
planning restrictions, easements, permits and other restrictions or limitations
on the use of such property or irregularities in title thereto that,
individually and in the aggregate, do not materially impair the use of such
property, (ii) warehousemen's, mechanics', carriers', landlords', repairmen's or
other similar Encumbrances arising in the ordinary course of business and
securing obligations not yet due and payable and (iii) other Encumbrances which
arise in the ordinary course of business and which, individually and in the
aggregate, do not materially impair its use of such property or its ability to
use such property as collateral to obtain financing or which would otherwise,
individually or in the aggregate, have a Material Adverse Effect.
"Person" means any natural person, corporation, unincorporated
organization, partnership, association, joint stock company, joint venture,
trust or government, or any agency or political subdivision of any government,
or any other entity.
-3-
<PAGE> 56
"Power" has the meaning given to it in Section 2.1 of this Agreement.
"Preferred Stock" has the meaning given to it in Section 2.4(a) of this
Agreement.
"Properties" has the meaning given to it in Section 2.11(a) of this
Agreement.
"Purchase Price" has the meaning given to it in Section 1.1 of this
Agreement.
"Purchaser Entity" has the meaning given to it in Section 10.2 of this
Agreement.
"Purchaser" has the meaning given to it in the preamble.
"Registration Rights Agreement" has the meaning given to it in Section
1.4(a) of this Agreement.
"Related Transferee" has the meaning given to it in the Investor Agreement.
"Release" means any spill, emission, leaking, injection, deposit, disposal,
discharge, dispersal or leaching into the atmosphere, soil, surface water or
groundwater.
"Required Holders" means the holders of Notes or shares of Series B
Preferred Stock representing a majority of the combined (i) aggregate principal
amount of the Notes outstanding and (ii) aggregate stated amount of the Series B
Preferred Stock outstanding, in each case excluding Notes or shares of Series B
Preferred Stock then owned by the Company or any of its Affiliates.
"Required Noteholders" has the meaning given to it in Section 6.1 of this
Agreement.
"Rights Agreement" has the meaning given to it in Section 2.21 of this
Agreement.
"Schedule" has the meaning given to it in Section 2 of this Agreement.
"SEC Reports" has the meaning given to it in Section 2.6 of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Series B Preferred Stock" has the meaning given to it in the Recitals of
this Agreement.
"Subsidiary" has the meaning given to it in Section 2.10 of this Agreement.
"Stockholder Proposal" has the meaning given to it in Section 5.8 of this
Agreement.
"Superior Proposal" has the meaning given to it in Section 5.7 of this
Agreement.
"Tax Return" means a report, return or other information required to be
supplied to a Governmental Entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that includes the Company or any of its Subsidiaries.
"Taxes" means any federal, state, county, local or foreign taxes, charges,
fees, levies or other assessments, including all net income, gross income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any Governmental
Entity, and includes any interest and penalties (civil or criminal) on or
additions to any such taxes.
"Third Party" has the meaning given to it in Section 5.7 of this Agreement.
"Third Party Leases" has the meaning given to it in Section 2.11(b) of this
Agreement.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is quoted, listed or admitted to trading is
open for the transaction of business or, if the Common Stock is not quoted,
listed or admitted to trading on any national securities exchange (including the
NASDAQ), any day other than a Saturday, Sunday, or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
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<PAGE> 57
SECTION 1. ISSUANCE AND SALE OF NOTES AND SERIES B PREFERRED STOCK.
1.1. The Issuance and Purchase.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Purchaser shall purchase from the Company, and
the Company shall issue and sell to the Purchaser, free and clear of any
mortgages, judgments, claims, liens, security interests, pledges, escrows,
charges or other encumbrances of any kind or character whatsoever
("Encumbrances") other than Encumbrances imposed by or through Purchaser or any
of its Affiliates, the Notes and 500,000 shares of Series B Preferred Stock in
accordance with this Section 1.1, for an aggregate purchase price of $30,000,000
(the "Purchase Price"). The Notes (including any PIK Note issued pursuant to
Section 1.3 of such Notes) shall be in the form of Exhibit A.
(b) The number of shares of Series B Preferred Stock to be issued to the
Purchaser shall be 500,000, each with a liquidation preference of $10.
(c) The parties agree that the fair market value of the Notes is
$25,000,000 and the fair market value of the Series B Preferred Stock is
$5,000,000. Each party agrees to file all Tax Returns consistent with such
allocation and to take no position inconsistent with such allocation, unless
required by Law.
1.2. Escrow Agreement. Simultaneously with the execution of this Agreement,
the Company and the Purchaser shall execute an escrow agreement (the "Escrow
Agreement"), substantially in the form set forth in Exhibit B hereto, with the
escrow agent identified therein (the "Escrow Agent"), and the Company shall
deposit, pursuant to the Escrow Agreement, with the Escrow Agent the sum of
$2,250,000, or at the Company's option provide a letter of credit reasonably
acceptable to the Escrow Agent securing payment of that amount, such amount
being on account of any Termination Fee or Purchaser's Expenses payable by the
Company pursuant to Section 9.4.
1.3. The Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Jones, Day, Reavis
& Pogue, 599 Lexington Avenue, New York, New York 10022, or at such other place
as shall be mutually agreed by the Company and the Purchaser as promptly as
practicable following the satisfaction or waiver of all of the conditions to the
parties' respective obligations set forth in Section 1.4 below, or on such other
date or at such other place as shall be mutually agreed by the Company and the
Purchaser. The date of the Closing is referred to herein as the "Closing Date."
1.4. Conditions to the Closing.
(a) The obligations of the Company and the Purchaser to consummate the
transactions contemplated hereby at the Closing are subject to the satisfaction
or waiver by both parties on or before the Closing Date of the following
conditions:
(i) no temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
transactions contemplated hereby shall have been issued and remain in
effect, and no statutes, rule or regulation shall have been enacted by any
governmental authority (of the United States or otherwise) which prevents
the consummation of the transactions contemplated hereby; provided,
however, that the parties shall use their reasonable best efforts to cause
any such decree, ruling, injunction or other order to be vacated or lifted;
(ii) the Company and the Purchaser shall have duly executed the
Investor Agreement (the "Investor Agreement") in the form of Exhibit C
attached hereto;
(iii) the Company and the Purchaser shall have duly executed the
Registration Rights Agreement (the "Registration Rights Agreement") in the
form of Exhibit D attached hereto;
(iv) Interstate Investment Corporation, a Delaware corporation, and
Interstate Property Partnership, L.P., a Delaware limited partnership, and
CGLH Partners III LP and CGLH Partners IV LP, each a Delaware limited
partnership, shall have duly executed the Agreement of Limited Partnership
of CGLH-IHC Fund I, L.P. (the "Joint Venture Partnership Agreement")
establishing the "Joint Venture" in the form of Exhibit E attached hereto;
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(b) The obligation of the Purchaser to consummate the transactions
contemplated hereby at the Closing is subject to the satisfaction or waiver by
the Purchaser, on or prior to the Closing Date of the following conditions:
(i) the representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material respects as of the
date when made and (unless made as of a specified date) as of the Closing
Date, other than representations and warranties which are by their terms
qualified by materiality which shall be true in all respects as of the date
when made and (unless made of as of a specified date) as of the Closing
Date;
(ii) the Company shall have performed in all material respects its
covenants set forth in this Agreement to be performed prior to the Closing
Date;
(iii) the Company shall have obtained all Permits, authorizations,
consents and approvals required to be obtained in connection with the
consummation of the transactions contemplated hereby which are (x) listed
on Schedule 2.15 hereto or (y) necessary to enable the Business and
operations of the Company, after consummation of the transactions
contemplated hereby, to continue to be conducted in substantially the same
manner as currently conducted, except for such Permits, authorizations,
consents and approvals, the failure of which to obtain would not result in
a Material Adverse Effect, and provided that none of which shall have been
obtained with the imposition of any adverse terms or conditions or with the
imposition of any material cost;
(iv) the Company shall have obtained all necessary approvals of its
stockholders to the Stockholder Proposal;
(v) the Charter of the Company (the "Charter") in the form of Exhibit
I hereto shall have been supplemented by the Articles Supplementary to the
Charter in the form of Exhibit F attached hereto setting forth the rights
and preferences of the Series B Preferred Stock (the "Articles
Supplementary") and the Articles Supplementary shall have been accepted for
record by the State Department of Assessments and Taxation of the State of
Maryland;
(vi) the bylaws of the Company shall have been amended to remove the
right of the Class B Director and the Class C Director (as such terms are
defined in the Charter) to approve appointments to committees of the board
of directors;
(vii) the Conversion Shares shall have been approved for quotation on
NASDAQ, subject to official notice of issuance;
(viii) the Company shall have delivered to the Purchaser an officer's
certificate satisfactory in form and substance to the Purchaser certifying
as to the Company's compliance with the conditions set forth in clauses (i)
through (vii) above;
(ix) the Company shall have delivered to the Purchaser certificates of
good standing from the jurisdictions set forth on Annex 1.4 with respect to
the Company dated as of a date no earlier than ten days prior to the
Closing Date;
(x) the Company shall have delivered to the Purchaser a certificate
duly executed by its Secretary, satisfactory in form and substance to the
Purchaser, certifying (A) a copy of its organizational documents including
the Charter and the Articles Supplementary and the bylaws of the Company
(the "Bylaws"), (B) resolutions authorizing the transactions contemplated
by this Agreement and the Ancillary Documents (including resolutions of
Interstate Investment Corporation authorizing the transactions to be
entered into by that entity and resolutions and consents of members of
Interstate Property Partnership, L.P. and authorizing the transactions to
be entered into by that entity) and (C) incumbency matters of the persons
executing this Agreement and the Ancillary Documents;
(xi) the Purchaser shall have received (A) from Jones Day, counsel for
the Company, an opinion addressed to the Purchaser, dated as of the Closing
Date (the "Jones Day Opinion"), which shall be in the form of Exhibit G-1
attached hereto, (B) from Ballard Spahr, Maryland counsel for the Company,
an opinion addressed to the Purchaser, dated as of the Closing Date (the
"Ballard Spahr Opinion"), which shall
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be in the form of Exhibit G-2 attached hereto and (C) from the General
Counsel of the Company, an opinion addressed to the Purchaser, dated as of
the Closing Date (the "Interstate Opinion", and together with the Jones Day
Opinion and the Ballard Spahr Opinion, the "Legal Opinions"), which shall
be in the form of Exhibit G-3 attached hereto;
(xii) Karim Alibhai, Joseph Flannery, Mahmood Khimji, Sherwood Weiser
and Alan Kanders (each such person, an "Investor Designee"), or any five
other persons that the Purchaser may select and who meet the criteria set
forth in the Investor Agreement for nomination to the Board of Directors of
the Company as Investor Designees, shall have been elected to the Board of
Directors of the Company by the unanimous vote of the whole Board of
Directors as the initial designees of the Purchaser pursuant to the
Articles Supplementary, effective, without any further action, as of the
Closing Date;
(xiii) without limiting the generality of clause (b)(i), no event that
could, individually or in the aggregate, have a Material Adverse Effect
shall have occurred since the date hereof nor shall any event or events
have occurred since the date hereof which could reasonably be expected to
have a Material Adverse Effect.
(c) The obligation of the Company to consummate the transactions
contemplated hereby at the Closing is subject to the satisfaction or waiver by
the Company, on or prior to the Closing Date of the following conditions:
(i) the representations and warranties of the Purchaser set forth in
this Agreement shall be true and correct in all material respects as of the
date when made and (unless made as of a specified date) as of the Closing
Date, other than representations and warranties which are by their terms
qualified by materiality which shall be true in all respects as of the date
when made and (unless made of as of a specified date) as of the Closing
Date; and
(ii) the Purchaser shall have performed in all material respects its
covenants set forth in this Agreement to be performed prior to the Closing
Date.
1.5. Closing Deliveries. At the Closing, the Company shall deliver to the
Purchaser, against receipt at the Closing by the Company from the Purchaser of
the Purchase Price in accordance with Section 1.6:
(a) a duly executed Note in the principal amount of $25,000,000 or duly
executed Notes in the aggregate principal amount of $25,000,000 in such names
and denominations as designated by the Purchaser prior to the Closing;
(b) a certificate or certificates representing the shares of Series B
Preferred Stock purchased by the Purchaser, registered in the name of the
Purchaser or its nominees;
(c) a duly executed copy of the Investor Agreement;
(d) a duly executed copy of the Registration Rights Agreement;
(e) a duly executed Joint Venture Partnership Agreement;
(f) a certificate duly executed by an officer of the Company, dated as of
the Closing Date, in the form of Exhibit H attached hereto;
(g) a certificate duly executed by its Secretary, satisfactory in form and
substance to the Purchaser, certifying the matters set forth in Section
1.4(b)(x);
(h) the Legal Opinions;
(i) evidence, satisfactory to the Purchaser, that the Company's Charter
have been amended and supplemented by the Articles Supplementary; and that the
Articles Supplementary has been accepted for record by the State Department of
Assessments and Taxation of the State of Maryland;
(j) evidence, satisfactory to the Purchaser, that the Common Stock to be
issued as the Conversion Shares has been approved for quotation on NASDAQ,
subject to official notice of issuance; and
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(k) evidence, satisfactory to the Purchaser that the provisions of Section
2.21 relating to the Rights Agreement have been complied with.
1.6. Payment of Purchase Price. The Purchase Price shall be paid by the
Purchaser in cash by wire transfer to an account designated at least two
business days prior to the Closing by the Company.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser that, except as described in an
SEC Report filed by the Company prior to the date hereof or in the disclosure
schedule furnished by the Company to the Purchaser simultaneously herewith (the
"Company Disclosure Schedule" and each separately numbered section thereof a
"Schedule" so numbered):
2.1. Organization and Good Standing; Power and Authority;
Qualifications. The Company and each of its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of its state of
incorporation or organization and (b) has the requisite corporate power and
authority ("Power") to own, lease and operate its properties and to carry on the
Business as presently conducted and as proposed by it to be conducted. The
Company has all requisite Power to enter into and carry out the transactions
contemplated by this Agreement and the Ancillary Documents to which it is a
party. The Company and each of its Subsidiaries is qualified to transact
business as a foreign corporation in, and is in good standing under the laws of
all of the jurisdictions wherein the character of the property owned or leased
or the nature of the activities conducted by it makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
The Company has made available to the Purchaser true, correct and complete
copies of its organizational documents, including the Charter, its Bylaws, and
any amendments or supplements thereto, and all minutes and resolutions of the
Board of Directors of the Company.
2.2. Authorization of the Documents; Board Recommendation. The execution,
delivery and performance by the Company of this Agreement, and each of the
Ancillary Documents to which it is a party has been duly authorized by all
requisite corporate action on the part of the Company. The affirmative vote of
the holders of a majority of the shares of Common Stock, Class B Common Stock
and Class C Common stock present in person or by proxy at the Company Meeting
(as defined in Section 5.8), voting as a single class, is required for the
approval of the Stockholder Proposal. No other approval or consent of the
stockholders of the Company is required by Law, the Charter or bylaws of the
Company or otherwise in order for the Company to consummate the transactions
contemplated hereby and by the Ancillary Documents. Each of this Agreement and
the Ancillary Documents constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except to
the extent that enforceability may be limited by bankruptcy, solvency or other
similar laws affecting creditors' rights generally and subject to limitations on
the availability of equitable remedies (the foregoing exception, the "Bankruptcy
Exception"). The Board of Directors of the Company, at a meeting duly called and
held at which a quorum was present throughout, has unanimously determined that
the transactions contemplated hereby and by the Ancillary Documents are in the
best interest of the Company and its stockholders and to recommend to such
stockholders that they vote in favor of the Stockholder Proposal (the "Board
Recommendation"). The Board Recommendation has not been revoked or modified.
2.3. No Conflict. Except as set forth on Schedule 2.3 hereto, the execution
and delivery by the Company of this Agreement and each of the Ancillary
Documents to which it is a party and the consummation by the Company of the
transactions contemplated hereby and thereby and its compliance with the
provisions hereof and thereof (including, without limitation, the issuance, sale
and delivery by the Company of the Notes and the Series B Preferred Stock and
the Conversion Shares) will not (a) violate any provision of any federal, state,
local or foreign law, statute, rule or regulation, or any ruling, writ,
injunction, order, judgment or decree of any court, administrative agency or
other governmental body applicable to it, or any of its Subsidiaries or any of
their respective properties or assets, (b) conflict with, or result in any
violation or breach of, or constitute (with due notice or lapse of time, or
both) a default or loss of a benefit under, or cause or permit the acceleration
or cancellation under, the terms, conditions or provisions of any Contract to
which it or any of its Subsidiaries is a party to which any of their respective
properties or assets is subject, (c) result in the creation or imposition of any
Encumbrance upon any of its or any of its Subsidiaries' properties or assets,
except for Permitted Encumbrances or (d) violate the Charter or the Bylaws,
other than, in the case of clauses (a), (b) and (c), any such violations,
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conflicts, breaches, defaults, losses of benefits or Encumbrances that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
2.4. Capitalization; Distributions.
(a) The authorized capitalization of the Company consists solely of: (i)
62,000,000 shares of Common Stock, of which 6,091,802 are issued and
outstanding, (ii) 1,500,000 shares of Class B Common Stock, par value $.01 per
share ("Class B Common Stock"), of which 242,555 are issued and outstanding,
(iii) 1,500,000 shares of Class C Common Stock, par value $.01 per share ("Class
C Common Stock"), of which 60,639 are issued and outstanding and (iv) 10,000,000
shares of preferred stock, par value $.01 per share ("Preferred Stock"), 70,000
of which have been designated the Series A Preferred Stock, and none of which
are issued and outstanding. All of the issued and outstanding shares of Common
Stock, Class B Common Stock and Class C Common Stock are validly issued, fully
paid and nonassessable and free and clear of all Encumbrances, other than
Encumbrances, if any, arising as a result of actions taken by the purchaser
thereof. No class of capital stock of the Company is entitled to preemptive
rights. The Company has duly, validly and irrevocably reserved 600,000 shares of
Preferred Stock for issuance as the Series B Preferred Stock and has duly,
validly and irrevocably reserved sufficient shares of Common Stock for issuance
as the Conversion Shares.
(b) Except as set forth on Schedule 2.4 hereto, there are no outstanding
Contracts by which the Company is or may become bound to issue additional shares
of its capital stock or options, warrants or other rights to purchase or acquire
any shares of its capital stock.
(c) Except as set forth on Schedule 2.4 hereto, since June 8, 1999, the
Company has not declared or paid any dividend or made any other distribution of
cash, stock or other property to its stockholders. Other than (i) the rights of
holders of Class B Common Stock and Class C Common Stock pursuant to the
existing Charter to each elect separately, as a class, one director, (ii) as
contemplated by this Agreement or the Ancillary Documents and (iii) the right of
each stockholder of the Company to vote its shares of Common Stock for the
election of directors and exercise other rights as stockholder of the Company
generally, no person has the right to elect one or more directors of the Company
or to cause the Company to include its nominee in any slate of directors
proposed by the Company.
2.5. Authorization and Issuance of Securities. The authorization, issuance,
sale and delivery of the Notes and the Series B Preferred Stock pursuant to this
Agreement and the authorization, reservation, issuance, sale and delivery of the
Conversion Shares have been duly authorized by all requisite corporate action on
the part of the Company, and when issued, sold and delivered in accordance with
this Agreement and/or any Ancillary Document against payment therefor as herein
or therein provided, the Notes will be validly issued, and the Series B
Preferred Stock and the Conversion Shares will be validly issued and
outstanding, fully paid and nonassessable, with no personal liability attaching
to the ownership thereof, free and clear of any Encumbrances other than
Encumbrances imposed by or through the Purchaser or any of its Affiliates. The
terms, designations, powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions,
of any series of Preferred Stock of the Company are as stated in the Charter.
The Company has reserved a sufficient number of shares of (i) Common Stock for
issuance upon conversion of the Series B Preferred Stock, (ii) Common Stock for
issuance upon conversion of any shares of Series B Preferred Stock that may be
issued as dividends on the Series B Preferred Stock pursuant to the Articles
Supplementary, (iii) Common Stock for issuance upon conversion of the Notes,
(iv) Common Stock for issuance upon conversion in connection with any interest
payment under the Notes and (v) Common Stock for issuance upon conversion or
exercise of all other common stock equivalents outstanding on the date hereof.
2.6. SEC Reports. The Company has filed all proxy statements, reports and
other documents required to be filed by it with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from and after December 31, 1999 and the Company
has furnished the Purchaser true and complete copies of all annual reports,
quarterly reports, proxy statements and other reports under the Exchange Act
filed by the Company from and after such date, each as filed with the Commission
(collectively, the "SEC Reports"). Each SEC Report complied as to form in all
material respects with the requirements of the applicable report form and did
not on the date of filing contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements
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therein, in the light of the circumstances under which they were made, not
misleading, and, as of the date hereof, there is no fact or facts not disclosed
in the SEC Reports which relate specifically to the Company and which
individually or in the aggregate could have a Material Adverse Effect.
2.7. Financial Statements. The financial statements (including any related
schedules and/or notes) included in the SEC Reports have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods presented and fairly present, in all material
respects, the consolidated financial condition, results of operations and
changes in stockholders' equity of the Company as of the respective dates
thereof and for the respective periods then ended (in each case subject, as to
interim statements, to changes resulting from normal year-end adjustments, none
of which will be material in amount or effect). Except as set forth on Schedule
2.7 hereto or arising under this Agreement or any Ancillary Agreement, the
Company has no liabilities or obligations (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not Known, whether due or to
become due and regardless of when asserted), except (i) liabilities and
obligations in the respective amounts reflected in or reserved against in the
Company's balance sheet or the footnotes thereto as of December 31, 1999
included in the SEC Reports or (ii) liabilities and obligations incurred after
December 31, 1999 in the ordinary course of business consistent (in amount and
kind) with past practice (none of which is a liability resulting from breach of
contract, breach of warranty, tort, infringement, claim or lawsuit) and that do
not exceed $100,000 in the aggregate or which are not otherwise insured or to
which the Company is otherwise entitled to indemnification from third parties.
2.8. Absence of Material Changes. Except as set forth on Schedule 2.8 or
otherwise disclosed in the SEC Reports, since December 31, 1999, the Business
has been conducted in all material respects in the ordinary course, consistent
with past practice and there has not occurred any:
(a) Material Adverse Effect;
(b) waiver or cancellation of any material right of the Business, the
Company or any of its Subsidiaries or the cancellation of any material debt or
claim held by the Business, the Company or any of its Subsidiaries;
(c) payment, discharge or satisfaction of any claim, liability or
obligation of the Business, the Company or any of its Subsidiaries other than in
the ordinary course of business;
(d) Encumbrance upon the assets of the Business, the Company or any
Subsidiary other than Permitted Encumbrances;
(e) declaration or payment of dividends on, or other distribution with
respect to, or any direct or indirect redemption or acquisition of, any
securities of the Company or any of its Subsidiaries;
(f) issuance of any stock, bonds or other securities of the Company or any
of its Subsidiaries;
(g) sale, assignment or transfer of any material tangible or intangible
assets of the Business, the Company or any of its Subsidiaries except in the
ordinary course of business;
(h) loan by the Company or any of its Subsidiaries to any officer,
director, employee, consultant or stockholder of the Company or any Subsidiary
(other than advances to such persons in the ordinary course of business in
connection with Business related expenses);
(i) damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the assets, property, condition (financial or
otherwise), results of operations or prospects of the Business, the Company or
any Subsidiary;
(j) increase, direct or indirect, in the compensation paid or payable to
any officer, director, employee, consultant or agent of the Company or any
Subsidiary, other than in the ordinary course of business, consistent with past
practices;
(k) except as required by a change in GAAP, change in the accounting
methods, practices or policies of the Business, the Company or any Subsidiary;
(l) indebtedness incurred for borrowed money by the Business, the Company
or any Subsidiary other than in the ordinary course of business;
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(m) termination, threatened termination, or material amendment of any
material Contract, lease or management agreement to which the Business, the
Company or any Subsidiary is a party, other than in the ordinary course of
business;
(n) material change in the laws or regulations governing the Business, the
Company or any Subsidiary;
(o) material change in the manner of business or operations of the
Business, the Company or any of its Subsidiaries (including, without limitation,
any material accelerations or deferral of the payment of accounts payable or
other current liabilities or material deferral of the collection of accounts or
notes receivable);
(p) capital expenditures or commitments therefor by the Business, the
Company or any Subsidiary that aggregate in excess of $150,000 more than those
already provided for in the annual budget of the Company, a copy of which has
been provided to the Purchaser;
(q) any amendment of the Charter, or Bylaws of the Company, or of the
organizational documents of any Subsidiary;
(r) any other material transactions entered into by the Business, the
Company or any Subsidiary whether or not in the ordinary course of business; or
(s) any agreement or commitment (contingent or otherwise) by the Business,
the Company or any Subsidiary to do any of the foregoing.
2.9. Contracts.
(a) Except as set forth on Schedule 2.9, neither the Company nor any
Subsidiary is a party to, and the Business is not bound or subject to, any
Contract other than any Contract that (i) pursuant to its terms, has expired,
been terminated or fully performed by the parties, and in each case, under which
neither the Company, nor any Subsidiary nor the Business have any liability,
contingent or otherwise, or (ii) does not involve a commitment by either the
Company or the other party thereto of more than $50,000 per year or $75,000 over
the term of such Contract or the performance of which by the Company or any of
its Subsidiaries does not exceed one year (unless it is cancelable by the
Company or the Subsidiary upon not more than 90 days notice without a penalty in
excess of $20,000). The Company has delivered to the Purchaser a true, correct
and complete copy of each of the Contracts set forth on Schedule 2.9, and each
of the Contracts heretofore provided by the Company to the Purchaser is a true,
correct and complete copy of such Contract. Neither the Company nor any
Subsidiary is a party to or otherwise subject to any Contract that was or is
required to be filed as exhibits to, or otherwise disclosed in, the SEC Reports
that have not been so filed or disclosed.
(b) Each of such Contracts is, as of the date hereof, and will continue
after the Closing to be, as to the Company or any Subsidiary, as the case may
be, legal, valid, binding and in full force and effect and enforceable in
accordance with its terms. There is no material breach, violation or default by
the Company or any Subsidiary (or, to the Knowledge of the Company, any other
party) under any such Contract and no event (including, without limitation, the
consummation of the transactions contemplated by this Agreement or the issuance
of the Conversion Shares) which, with notice or lapse of time or both, would (i)
constitute a material breach, violation or default by the Company or any
Subsidiary (or, to the best Knowledge of the Company, any other party) under any
such Contract or (ii) give rise to any Encumbrance, or right of termination,
right of first offer, right of first refusal or any other right of purchase,
modification, cancellation, prepayment, "put," suspension, limitation,
revocation or acceleration against the Company or any Subsidiary, or create
material additional obligations of, material restrictions on, or materially
reduce the benefits derived by, the Company (by reason of a "change of control"
or otherwise) under any such Contract. Except as set forth on Schedule 2.9,
neither the Company nor any Subsidiary nor, to the Knowledge of the Company, any
other party to any of such Contracts is materially in arrears in respect of the
performance or satisfaction of the terms and conditions on its part to be
performed or satisfied under any of such Contracts or has granted or has been
granted any waiver or indulgence under any of such Contracts or has repudiated
any provision thereof.
2.10. Subsidiaries and Investments. Set forth on Schedule 2.10 hereto is a
list of each subsidiary of the Company (each a "Subsidiary"). Except as set
forth on Schedule 2.10 hereto, the Company does not presently have any
subsidiaries nor does it presently own, directly or indirectly, any capital
stock or other equity interests,
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directly or indirectly, in any corporation, association, limited liability
company, trust, partnership, joint venture or other entity. Except as set forth
on Schedule 2.10 hereto, all of the outstanding shares of capital stock or other
equity interests of each class of each Subsidiary (a) are owned beneficially and
of record by the Company free and clear of any Encumbrances, (b) constitute 100%
of such Subsidiary's outstanding shares and (c) have been validly issued, are
fully paid and non-assessable. Neither the Company nor any of its Subsidiaries
has any material obligation or material liability in respect of any subsidiary
it previously owned, but which is no longer a subsidiary.
2.11. Properties. Except as set forth in Schedule 2.11 hereto, neither the
Company nor any of its Subsidiaries owns any real property or any interests
therein.
(a) Except as set forth on Schedule 2.11 hereto, the leases of any real
property (including all improvements thereon) held under lease, as lessee, by
the Company or any Subsidiary (the "Properties") are in full force and effect,
and neither the Company nor any Subsidiary is materially in default in respect
of any of the terms or provisions of such leases or has received notice of the
assertion of any claim adverse to its rights as lessee under such leases, or
affecting or questioning its right to the continued possession or use of the
real property and buildings held under such leases or of a default under such
leases. There is no material breach, violation or default by the Company or any
Subsidiary (or, to the Knowledge of the Company, any other party) under any such
lease and no event (including, without limitation, the consummation of the
transactions contemplated by this Agreement) which, with notice or lapse of time
or both, would (A) constitute a material breach, violation or default by the
Company or any Subsidiary (or, to the Knowledge of the Company, any other party)
under any such lease or (B) give rise to any Encumbrance, or right of
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration against the Company or any Subsidiary under any such
lease. The Properties are listed in Schedule 2.11 hereto and constitute all the
real estate properties leased by the Company and its Subsidiaries.
(b) Schedule 2.11 hereto lists all leases (excluding inter-company leases
and leases entered into in the ordinary course of business with third party
vendors for space at the Properties involving less than 10,000 square feet)
pursuant to which the Company or any Subsidiary, as lessor, leases its
Properties (the "Third Party Leases"). Neither the Company or any Subsidiary or,
to the Knowledge of the Company, any tenant of any of the Properties is in
material default under any of the Third Party Leases (and there exists no event
which, with the lapse of time or giving of notice, or both, would constitute a
material default under any of such Leases).
(c) Except as disclosed on Schedule 2.11 hereto, (i) no Person has an
option or right of first refusal to purchase all or part of any Properties or
any interest therein, (ii) as of the date hereof, neither the Company nor any
Subsidiary has any commitments to make, directly or indirectly, investments in,
or extend loans in connection with, any real estate properties and (iii) neither
the Company nor any Subsidiary nor any of their respective Affiliates are, nor
immediately following the Closing shall they be, subject to any non-competition,
geographical restriction or similar agreement.
(d) Except as disclosed on Schedule 2.11 hereto, each of the Properties
complies with all applicable codes, laws and regulations (including, without
limitation, building and zoning codes, laws and regulations and laws relating to
access to the Properties, including, without limitation, the Americans with
Disabilities Act), except for such of the foregoing as, individually and
together with any related matters, would not have a Material Adverse Effect.
(e) Except as disclosed on Schedule 2.11 hereto, there are no pending or,
to the Knowledge of the Company, threatened condemnation proceedings, zoning
changes or other proceedings or actions that will in any manner adversely affect
the size of, use of, improvements on, construction on or access to the
Properties.
(f) Except as disclosed on Schedule 2.11 hereto, to the Company's Knowledge
(i) there are no structural defects relating to any of the Properties, (ii) the
building systems for the Properties are in good working order and (iii) there is
no physical damage to the Properties, in each case with such exceptions as would
not have a material adverse impact on the operation of the affected Property or
otherwise be fully and completely covered by insurance.
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(g) Schedule 2.11 sets forth (i) a comprehensive list of all management,
franchise and similar Contracts wherein the Company or any Subsidiary has
contracted with a third party, (ii) the Properties subject to such agreements,
(iii) the term of each of such agreements, and (iv) any commitments by the
Company or any of its Subsidiaries thereunder to satisfy any shortfalls or
otherwise guarantee any payments. Except as set forth on Schedule 2.11, the
Company and each of its Subsidiaries has entered into valid, binding and
enforceable subordination and non-disturbance Contracts with respect to each of
the Properties with each lender that has extended financing with respect to any
of the Properties.
(h) Except as set forth on Schedule 2.11 hereto, neither the Company nor
any Subsidiary has entered into any binding Contract, letter of intent or other
instrument or listing arrangement to purchase, sell or invest in, or to lend or
borrow money in connection with, real property, whether or not such real
property is currently owned by the Company or any Subsidiary.
2.12. Employee Benefit Plans.
(a) Schedule 2.12 hereto contains a true and complete list of (i) each
plan, program, material policy, payroll practice, contract, agreement or other
arrangement, or commitment providing for compensation, severance, termination
pay, performance awards, stock or stock-related awards, fringe benefits or other
employee benefits of any kind, whether formal or informal, funded or unfunded,
written or oral, and whether or not legally binding, which is or pursuant to
which the Company or any Subsidiary has or may have any liability, contingent or
otherwise, including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (each, a "Benefit Plan"); and (ii) each management,
employment, bonus, option, equity (or equity related), severance, consulting, or
similar Contract (each, an "Employee Agreement"), pursuant to which the Company
or any Subsidiary has any liability, contingent or otherwise, between the
Company or any Subsidiary and any current, former or retired employee, officer,
consultant, independent contractor, agent or director of the Company or any
Subsidiary (an "Employee").
(b) With respect to each Benefit Plan, the Company has delivered or made
available to Purchaser current, accurate and complete copies of each Benefit
Plan and Employee Agreement (including all other instruments relating thereto)
and summary plan descriptions therefor and, to the extent applicable, copies of
the most recent (i) Internal Revenue Service determination letter and any
outstanding request for a determination letter, (ii) Form 5500 and attached
Schedule B (including any related actuarial valuation report) with respect to
the last three plan years for each plan, (iii) certified financial statements,
(iv) collective bargaining agreements or other such contracts and (v) Form S-8
(including any amendments thereto).
(c) With respect to each Benefit Plan and Employee Agreement: (i) each
Benefit Plan and Employee Agreement has been administered in all material
respects in compliance with its terms and all applicable law, (ii) each such
Plan which is an employee pension benefit plan (as such term is defined in ERISA
Section 3(2)) intended to qualify under Sections 401(a) and 501(a) of the Code
has received a favorable determination letter as to its qualification under the
Code and nothing has occurred, whether by action or failure to act, which may
cause the loss of such qualification, (iii) there are no actions, suits, claims,
investigations or governmental audits pending, or to the Knowledge of the
Company, threatened, and the Company has no Knowledge of any facts which could
give rise to any such actions, suits, claims, investigations or governmental
audits, and (iv) none of the Company nor any employee or director of the Company
or any fiduciary of any Plan has, with respect to any such Plan, engaged in a
prohibited transaction, as such term is defined in Code Section 4975 or ERISA
Section 406, which would subject the Company or other plan sponsor to any taxes,
penalties or other liabilities resulting from prohibited transactions under Code
Section 4975 or under ERISA Sections 409 or 502(i).
(d) Neither the Company nor any of its Subsidiaries has, or has ever had,
any obligation or liability (contingent or otherwise) with respect to an
employee benefit plan subject to Title IV of ERISA.
(e) Neither the Company nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any Benefit Plan or Employee Agreement
(other than those health benefit continuation rights mandated by COBRA or other
applicable law).
(f) The consummation of the transaction contemplated by this Agreement, in
and of itself or together with any subsequent event, will not (x) entitle any
Employee to severance pay, (y) accelerate the time of payment or
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vesting, or trigger any material payment or funding of compensation of benefits,
or materially increase the amount payable or trigger any other material
obligation pursuant to any Benefit Plan or Employee Agreement or (z) result in
payments under any Benefit Plan or Employee Agreement which may not be
deductible under Section 162(m) or Section 280G of the Code.
2.13. Labor Relations; Employees. Except as set forth on Schedule 2.13
hereto or as could not reasonably be expected to have a Material Adverse Effect,
(a) neither the Company nor any of its Subsidiaries is delinquent in payments to
any of its employees, for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by the date hereof or amounts
required to be reimbursed by them to the date hereof (except for items being
contested in good faith), (b) each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable federal, state and local
laws, rules and regulations respecting employment, employment practices, labor,
terms and conditions of employment and wages and hours, (c) neither the Company
nor any of its Subsidiaries is bound by or subject to (and none of its assets or
properties is bound by or subject to) any Contract with any labor union, and no
labor union has requested or, to the Knowledge of the Company, has sought to
represent any of the employees, representatives or agents of the Company or the
Subsidiaries, (d) there is no labor strike, dispute, slowdown or stoppage
actually pending, or, to the Knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries. Except as set forth on
Schedule 2.13, to the Knowledge of the Company, no salaried Employee at
management level or above has any plans to terminate his or her employment with
the Company or its Subsidiaries.
2.14. Litigation; Orders. Except as set forth on Schedule 2.14, there is no
civil, criminal or administrative action, suit, claim, notice, hearing, inquiry,
audit, proceeding or investigation at law or in equity by or before any court,
arbitrator or similar panel, Governmental Entity now pending or, to the
Knowledge of the Company, threatened against the Company or any Subsidiary,
except for such of the foregoing as, individually and together with any related
matters, would not have a Material Adverse Effect. Except as set forth on
Schedule 2.14, neither the Company nor any Subsidiary is subject to any order,
writ, injunction or decree of any court of any federal, state, municipal or
other domestic or foreign governmental department, commission, board, bureau,
agency or instrumentality, except for such of the foregoing as, individually and
together with any related matters, would not have a Material Adverse Effect.
2.15. Compliance with Laws; Permits.
(a) Except as provided in Schedule 2.15 or as could not reasonably be
expected to have a Material Adverse Effect, the Business, the Company and its
Subsidiaries are in compliance, and have been conducted in compliance with, in
all material respects, all applicable federal, state, local and foreign laws,
rules, ordinances, codes, consents, authorizations, registrations, regulations,
decrees, directives, judgments and orders.
(b) The Company and each Subsidiary has all federal, state, local and
foreign governmental licenses, permits, qualifications and authorizations
("Permits") necessary for the conduct of the Business as currently conducted,
except for such of the foregoing as, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. All such Permits are
in full force and effect, and no violations have been recorded in respect of any
such Permits; no proceeding is pending or, to the best Knowledge of the Company,
threatened to revoke or limit any such Permit; and no such Permit will be
suspended, canceled or adversely modified as a result of the execution and
delivery of this Agreement or the Ancillary Documents and the consummation of
the transactions contemplated hereby or thereby, except for such of the
foregoing as could not reasonably be expected to have a Material Adverse Effect
and which are set forth on Schedule 2.15, together with the expiration dates
thereof.
2.16. Environmental Matters. Except as set forth on Schedule 2.16 hereto:
(a) The Company and each Subsidiary has been and is in material compliance
with all applicable Environmental Laws except as could not reasonably be
expected to have a Material Adverse Effect. To the knowledge of the Company,
neither the Company nor any Subsidiary has received any written communication
from any Person that alleges that any of them has not been or is not in
compliance with applicable Environmental Laws.
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(b) To the knowledge of the Company, there is no Environmental Claim
pending (i) against the Company or any of its Subsidiaries, (ii) against any
Person whose liability for any Environmental Claim either the Company or any of
its Subsidiaries has retained or assumed either contractually or by operation of
law or (iii) against any real or personal property or operations which the
Company or any of its Subsidiaries own, lease or manage, in whole or in part.
(c) Except as would not have a Material Adverse Effect, there have been no
Releases of any Hazardous Material that could reasonably form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or against
any person or entity whose liability for any Environmental Claim any of them has
retained or assumed either contractually or by operation of law.
(d) Except as would not have a Material Adverse Effect, no remediation of
Releases has occurred on any property owned, leased or managed by the Company or
any of its Subsidiaries that could result in the assertion or creation of an
Encumbrance on such property by any governmental body pursuant to an applicable
Environmental Law, nor has any such assertion of an Encumbrance been made with
respect thereto.
(e) Except as would not have a Material Adverse Effect, to the Knowledge of
the Company, there are no past, present or anticipated future events,
conditions, circumstances, activities, practices, incidents, actions, or plans
relating to the Company or any of its Subsidiaries that may interfere with or
prevent compliance or continued compliance with applicable Environmental Laws or
which may give rise to any liability under the Environmental Laws, or otherwise
form the basis of any Environmental Claim.
(f) The Company has heretofore delivered to the Purchaser a list of all of
the environmental reports prepared, to its Knowledge, in the last five years
relating to any of the properties currently owned by the Company or any of its
Subsidiaries and have delivered or made available to the Purchaser for review
copies of said environmental reports.
2.17. Taxes. Except as set forth on Schedule 2.17 hereto:
(a) The Company and each Subsidiary has timely filed (or there has been
filed on its behalf) all Tax Returns required to be filed by it under applicable
law, and has (or had when filed) substantial authority within the meaning of the
Internal Revenue Code Section 6662(d)(2)(B)(i) for all positions taken on all
such Tax Returns. All Taxes shown to be due on such Tax Returns by the Company
or any Subsidiary have been timely paid in full.
(b) There are no Encumbrances in respect of Taxes upon any of the assets of
the Company or any Subsidiary except Encumbrances in respect of Taxes not yet
due or which are being contested by the Company in good faith.
(c) The Company and each Subsidiary has complied with the provisions of the
Code relating to the withholding of Taxes, as well as similar provisions under
any other laws, and have, within the time and in the manner prescribed by law,
withheld, collected and paid over to the proper Governmental Entities all
amounts required.
(d) To the knowledge of the Company, neither the Company nor any of its
Subsidiaries has received a written ruling of a taxing authority relating to
Taxes or entered into a written and legally binding agreement with a Taxing
authority relating to Taxes. There are no unresolved issues of law or fact
arising out of a notice of deficiency, proposed deficiency or assessment from
the Internal Revenue Service or any other governmental Taxing authority with
respect to Taxes of the Company or any of its Subsidiaries which could
reasonably be expected to have, singly or in the aggregate, a Material Adverse
Effect.
(e) Neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed, and that statute of limitations for the assessment of federal,
state, local and foreign income Taxes has expired for all applicable returns of
the Company and its Subsidiaries or those returns have been examined by the
appropriate taxing authorities for all periods.
(f) Neither the Company nor any Subsidiary is a party to any Contract
providing for the allocation or sharing of Taxes or indemnification by the
Company or any Subsidiary of any other person in respect of Taxes.
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(h) Neither the Company nor any Subsidiary is party to any Contract that
would result, individually or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
2.18. Insurance. The Company and each of its Subsidiaries maintains
primary, excess and umbrella insurance of types and amounts customary for the
business against general liability, fire, workers' compensation, products
liability, theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect
and with respect to property insurance for assets for which it is customary to
have replacement cost sufficient to provide for such coverage or to prevent the
application of the coinsurance provision.
2.19. Affiliated Transactions. Except as set forth on Schedule 2.19 hereto,
there is no transaction to which the Company or any of its Subsidiaries is or is
to be a party in which any Person (beneficially owning (as defined in Rule 13d-3
under the Exchange Act) (i) in excess of 5% of any of the Company's Class A
Common Stock or any securities convertible into or exchangeable for such
securities, or (ii) any Class B Common Stock or Class C Common Stock or any
securities convertible into or exchange for such securities), director or
executive officer of the Company or any of its Subsidiaries has a direct or
indirect interest that would be required to be disclosed pursuant to Item 404 of
Regulation S-K under the Securities Act that has not previously been disclosed
in a Company SEC Report.
2.20. Opinion of Financial Advisor. The Company has received the opinion of
Merrill Lynch & Co., Inc., dated the date hereof, to the effect that the
transactions contemplated hereby are fair, from a financial point of view, to
the Company.
2.21. Actions Regarding the Stockholder Rights Plan. The Company has taken
all actions necessary pursuant to its Shareholder Rights Agreement (the "Rights
Agreement") to ensure that this Agreement and the Ancillary Documents and the
consummation of the transactions contemplated hereby and thereby, including the
acquisition of Common Stock upon conversion of the Notes or Series B Preferred
Stock in accordance with the terms thereof and the transfers of securities
permitted by the Investors Agreement, will not result in a distribution of
separate rights certificates or the occurrence of a Distribution Date, as
defined in the Rights Agreement and has provided Purchaser with a true and
complete copy of the Rights Agreement and any amendments thereto, including
amendments entered into in relation to this Agreement and the Ancillary
Documents and the transactions contemplated hereby and thereby, in the form
attached hereto as Exhibit K.
2.22. Consents. Other than the approval by the stockholders of the Company
of the Stockholder Proposal and except as set forth on Schedule 2.22 and except
for such of the following, the failure to obtain of which would not result in a
Material Adverse Effect, no Permit, authorization, consent, waiver of
contractual right or obligation, or approval of or by, or any notification of or
filing with, any Person is required by the Company or any of its Subsidiaries in
connection with the execution, delivery and performance of this Agreement and
the Ancillary Documents to which it is a party, the consummation by the Company
of the transactions contemplated hereby or thereby, or the issuance, sale or
delivery of the Notes, the Series B Preferred Stock or the Conversion Shares
(other than such notifications or filings required under applicable federal or
state securities laws, if any, which shall be made on a timely basis). The
Company and each of its Subsidiaries shall use commercially reasonable efforts
to obtain all of the Permits, authorizations, consents and approvals listed on
Schedule 2.22 hereto and any of the foregoing necessary to enable the Business
and operations of the Company and its Subsidiaries, after consummation of the
transactions contemplated hereby, to continue to be conducted in the same manner
as currently conducted, each of which shall have been obtained without the
imposition of any adverse terms or conditions and without the imposition of any
significant cost. The Company has provided to the Purchaser true, correct and
complete copies of the consents to this Agreement and the transactions
contemplated hereby set forth on Schedule 2.22, each of which is in full force
and effect and has not been amended or supplemented.
2.23. Brokers. No agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement or any of the Ancillary Documents, except for the
firms identified on Schedule 2.23 hereto, complete and accurate copies of whose
engagement letters have been provided to the Purchaser and which will not be
amended without the consent of the Purchaser to (a) increase the fees and
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expenses payable thereunder or (b) extend the period for which services are to
be performed beyond the Closing Date.
2.24. Offering Exemption. Neither the Company nor any Person acting on its
behalf has offered any of the Notes or any of the Series B Preferred Stock or
any similar securities of the Company for sale to, solicited any offers to buy
any of the Notes or any of the Series B Preferred Stock or any similar
securities of the Company from or otherwise approached or negotiated with
respect to the Company with any Person other than the Purchaser and other
"accredited investors" (as defined in Rule 501(a) under the Securities Act).
Neither the Company nor any Person acting on its behalf has taken or, except as
contemplated by the Registration Rights Agreement will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of any of the Notes or any of the Series B Preferred Stock under
the Securities Act) which could reasonably be expected to subject the offering,
issuance or sale of the Securities to the registration requirements of Section 5
of the Securities Act or violate the provisions of any securities, "blue sky",
or similar law of any applicable jurisdiction.
2.25. Disclosure. To the Company's Knowledge, neither this Agreement nor
any certificate, instrument or written statement furnished or made to the
Purchaser by or on behalf of the Company in connection with this Agreement or
the Ancillary Documents contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. To the Company's Knowledge, there
is no fact which the Company has not disclosed to the Purchaser or their counsel
in writing and of which the Company is aware which materially affects or which
could reasonably be expected to materially affect the Business or the business,
financial condition, operations, property, affairs or prospects of the Company
or any of its Subsidiaries or the ability of the Company to perform its
obligations under the Agreement or any of the Ancillary Documents.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company as follows:
3.1. Organization and Good Standing; Power and Authority; Qualifications;
Capitalization. The Purchaser is duly organized, validly existing and in good
standing under the laws of its state of incorporation or organization. The
Purchaser has the Power to enter into and carry out the transactions
contemplated by this Agreement and the Ancillary Documents to which it is a
party. The Purchaser has been capitalized with cash or cash equivalents in the
amount of at least $3 million. The direct and indirect holders of equity
interests in the Purchaser and the percentage of their holdings and the voting
power of such holders is set forth on Schedule 3.1 hereto, provided that such
Schedule 3.1 shall exclude Lehman Parent Entities other than LB Interstate GP
LLC and LB Interstate LP LLC. Other than as disclosed to the Company in writing
or pursuant to agreements of Lehman Parent Entities (other than LB Interstate GP
LLC or LB Interstate LP LLC) or as permitted in the limited partnership
agreements of entities comprising the Purchaser, the Purchaser is not a party to
any options, subscription rights, calls, commitments of any character whatsoever
relating to, the equity interests in the Purchaser or any other contract
agreement or arrangement, whether oral or written (and any amendments,
modifications or supplements thereto), that permit any third parties to purchase
an equity interest in the Purchaser or to obtain voting control over such equity
interests. The Purchaser has made available to the Company for its review true,
correct and complete copies of the formation documents and operating agreements
of the Purchaser and any amendments or supplements thereto.
3.2. Authorization of the Documents. The execution, delivery and
performance by the Purchaser of this Agreement, and each of the Ancillary
Documents to which it is a party has been duly authorized by all requisite
corporate action on the part of the Purchaser and do not or will not require the
approval or consent of the partners of the Purchaser. Each of this Agreement and
the Ancillary Documents constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except to
the extent that enforceability may be limited by the Bankruptcy Exception.
3.3. No Conflict. The execution and delivery by the Purchaser of the
Agreement and each of the Ancillary Documents to which it is a party and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby and its compliance with the provisions hereof and thereof will not (a)
violate any provision of any federal, state, local or foreign law, statute, rule
or regulation, or any ruling, writ, injunction, order, judgment or
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decree of any court, administrative agency or other governmental body applicable
to it, or any of its subsidiaries or any of their respective properties or
assets or (b) violate its organizational documents.
3.4. Consents. Except for any filings required pursuant to Section 13(d) of
the Exchange Act, and otherwise except as set forth on Annex 3.4 hereto, no
Permit, authorization, consent or approval of or by, or any notification of or
filing with, any Person is required by the Purchaser in connection with the
execution, delivery and performance by the Purchaser of the Agreement and the
Ancillary Documents to which it is a party, or the consummation by the Purchaser
of the transactions contemplated hereby or thereby.
3.5. Purchase for Investment. The Purchaser is acquiring (or will acquire)
the Notes and the Series B Preferred Stock and the Conversion Shares for its own
account for investment purposes and not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of
applicable securities laws. The Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same other than as
permitted by applicable securities laws.
3.6. Accredited Investor. The Purchaser is an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act, as presently
in effect. The Purchaser has knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of Purchaser's
investment in the Company.
3.7 Restrictions on Transfer. The Purchaser understands that the Notes and
the Series B Preferred Stock and the Conversion Shares will be characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being or will be acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Act only in certain
limited circumstances. In this connection, the Purchaser represents that it is
familiar with Rule 144 under the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.8. Current Ownership. Except as set forth on Annex 3.8 hereto, as of the
date hereof, the Purchaser does not beneficially own and is not the member of
any "group" (as such term is used in Section 13(d)(3) of the Exchange Act) that
beneficially owns any capital stock of the Company.
3.9. Financial Capacity. The Purchaser has cash on hand or commitments from
its partners or other financially responsible third parties, or a combination
thereof, in an aggregate amount sufficient to enable the Purchaser to timely
perform its obligations hereunder, including to pay in full (i) the Purchase
Price and (ii) all fees and expenses payable by the Purchaser in connection with
this Agreement and the transactions contemplated thereby.
SECTION 4. REGISTRATION, EXCHANGE AND TRANSFER OF NOTES.
4.1. The Note Register; Persons Deemed Owners. The Company shall maintain,
at its office designated for notices in accordance with Section 14, a register
for the Notes (the "Note Register"), in which the Company shall record the name
and address of the Person in whose name each Note has been issued and the name
and address of each transferee and prior owner of each Note. The Company may
deem and treat the Person in whose name a Note is so registered as the holder
and owner thereof (the "Holder") for all purposes and shall not be affected by
any notice to the contrary, until due presentment of such Note for registration
of transfer as provided in this Section 4.
4.2. Issuance of New Notes Upon Exchange or Transfer. Upon surrender for
exchange or registration of transfer of any Note at the office of the Company
designated for notices in accordance with Section 14 of this Agreement, the
Company shall execute and deliver, at its expense, one or more new Notes
substantially in the form of Exhibit A as requested by the Holder of the
surrendered Note, each dated the date to which interest has been paid on the
Note so surrendered (or, if no interest has been paid, the date of such
surrendered Note), but in the same aggregate unpaid principal amount as such
surrendered Note, and registered in the name of such Person or Persons as shall
be designated in writing by such holder. Every Note surrendered for registration
of transfer shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the Holder of such Note or by his attorney duly
authorized in writing, and shall be accompanied by a signature guarantee from
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a bank or brokerage firm. The Company may also condition the issuance of any new
Note or Notes to a Person other than the Holder thereof on the payment of a sum
sufficient to cover any stamp tax or other governmental charge imposed in
respect of such transfer. Notes shall be transferred in denominations of $1,000
and integral multiples thereof; provided that if necessary to enable the
registration of transfer by a Holder of its entire holding of Notes, one Note
may be in a denomination of any amount.
SECTION 5. COVENANTS.
5.1. Access to Records. For so long as at least 10% of the Notes and shares
of Series B Preferred Stock issued on the date hereof remain outstanding
(calculated on an as-converted basis), the Company shall afford the Purchaser
and its employees, counsel and other authorized representatives reasonable
access, during normal business hours, upon reasonable advance notice, with due
regard to its ongoing operations, to the assets, properties, offices and other
facilities, Contracts and books and records of the Business and of the Company
and its Subsidiaries, and to the outside auditors of the Company and their work
papers relating thereto, in each case, as the Purchaser may from time to time
reasonably request, provided, however, that the Company shall not be required to
provide access to, or disclose, information where such access or disclosure
would contravene applicable laws, rules, regulations, orders or decrees or
result in the waiver of the attorney-client privilege or the protection afforded
attorney work product. Each of the Company and the Purchaser will hold and will
cause its respective officers, employees, accountants, counsel, financial
advisors and other representatives and Affiliates to hold, any nonpublic
information in confidence in accordance with Section 3.5 of the Investor
Agreement between the Company and the Purchaser, Annexed hereto as Exhibit C.
The parties hereto agree that no investigation by the Purchaser or its
representatives shall affect or limit the scope of the representations and
warranties of the Company contained herein or in any Ancillary Document
delivered pursuant hereto or limit liability for breach of any such
representation or warranty.
5.2. Notice of Breach. For so long after the Closing Date as any Note or
any shares of the Series B Preferred Stock are issued and outstanding, as
promptly as practicable, and in any event not later than five business days
after the Company becomes aware thereof, the Company shall provide the Purchaser
with written notice of any breach by the Company of any provision of this
Agreement, including, without limitation, this Section 5, specifying the nature
of such breach and any actions proposed to be taken by the Company to cure such
breach.
5.3. No General Solicitation, etc. None of the Company, the Purchaser, nor
any of their respective Affiliates or any person acting on their behalf will (i)
offer to sell or solicit any offer to buy any of the Notes or any shares of
Series B Preferred Stock by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act that would require the registration of any Note or the
Series B Preferred Stock under the Securities Act unless the Note or the Series
B Preferred Stock, as applicable, is so registered or (ii) take any other action
which could reasonably be expected to require the registration under any
securities Laws of the issuance of the Notes, the shares of Series B Preferred
Stock provided for herein or the sale of any such Notes or shares of Series B
Preferred Stock or any of the Conversion Shares.
5.4. Financial Reports. The Company agrees that, so long as any of the
Notes, any of the shares of Series B Preferred Stock, or any of the Conversion
Shares are issued and outstanding, until the end of the Investor Designee Period
(as defined in the Investor Agreement):
(a) Promptly after such documents are prepared, the Company shall furnish
the Purchaser with a copy of such information and reports as are set forth on
Exhibit J hereto, together with a copy of any letter or memorandum of the
Company discussing such information or report.
(b) The Company shall furnish the Purchaser with all information which it
provides or has an obligation to provide to any other stockholder of the Company
in such Person's capacity as a stockholder, pursuant to any agreement with such
stockholder or otherwise.
(c) The Company shall make available adequate current public information
regarding itself so that the requirements of Rule 144(c)(1) of the Securities
Act are satisfied for so long as any of the Notes, Series B Preferred Stock or
Conversion Shares are not freely saleable under the federal securities laws.
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(d) Any other information that the Purchaser may reasonably request.
The Purchaser hereby acknowledges that it is aware, and that the officers,
partners, directors, employees, representatives and agents of the Purchaser have
been, or will be prior to receiving any information furnished to the Purchaser
pursuant to this Section 5.4, advised by the Purchaser that applicable
securities laws may prohibit any person who has material, non-public information
from purchasing or selling securities of the Company or from communicating the
information to any other person or entity.
5.5. Liquidity. The Company shall maintain sufficient liquidity so that
$25,000,000 of the Purchase Price shall be available to meet the Company's
obligations to contribute capital to the Joint Venture pursuant to Section 4.2
of the Joint Venture Partnership Agreement.
5.6. Conduct of Business Prior to Closing. During the period from the date
of this Agreement to the Closing Date, the Company shall, and shall cause its
Subsidiaries to, operate their respective businesses only in the ordinary and
usual course consistent with past practices and the Company shall not, and shall
cause each of its Subsidiaries not to, without the consent of the Purchaser:
(a) take any action which, if taken following the execution and delivery of
all of the Ancillary Documents at the Closing, would require the consent or
approval of the Purchaser, any holders of Notes or any holders of shares of
Series B Preferred Stock;
(b) take any action which, if taken following the execution and delivery of
all of the Ancillary Documents at the Closing, would violate any provision of
the Company's Charter (including the Articles Supplementary), the Notes, the
Investor Agreement, or this Agreement
(c) waive or cancel any material right of the Business, the Company or any
of its Subsidiaries or cancel any material debt or claim held by the Business,
the Company or any of its Subsidiaries;
(d) pay, discharge or satisfy any material claim, liability or obligation
of the Business, the Company or any of its Subsidiaries other than in the
ordinary course of business;
(e) create, incur or suffer to exist any Encumbrance upon the assets of the
Business, the Company or any Subsidiary other than Permitted Encumbrances;
(f) increase, directly or indirectly, the compensation paid or payable to
any officer, director, employee, consultant or agent of the Company or any
Subsidiary, other than in the ordinary course of business, consistent with past
practices;
(g) enter into any employment agreement providing for annual compensation
in excess of $150,000, or providing for any right or benefit in the event of
severance or a change in control of the Company, or amend any of the employment
agreements between the Company and Messrs. Hewitt, Killkeary and Richardson;
(h) change the accounting methods, practices or policies of the Business,
the Company or any Subsidiary except for any such change which is not material
or which is required by reason of a concurrent change in GAAP;
(i) amend, terminate or fail to prevent the expiration without renewal
(other than following good faith efforts to effect such renewal) of any material
Contract to which the Business, the Company or any Subsidiary is a party,
including any of the Contracts set forth on Schedule 2.22;
(j) make any material change in the manner of business or operations of the
Business, the Company or any of its Subsidiaries (including, without limitation,
any accelerations or deferral of the payment of accounts payable or other
current liabilities or deferral of the collection of accounts or notes
receivable);
(k) make any capital expenditures or commitments therefor by the Business,
the Company or any Subsidiary that aggregate in excess of $500,000;
(l) enter into any other material transaction other than in the ordinary
course of business; or
(m) enter into any agreement or commitment (contingent or otherwise) to do
any of the foregoing.
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5.7. No Solicitation of Competing Transactions.
(a) Except as expressly permitted in writing by the Purchaser, the Company
shall not, nor shall it authorize or permit any of its Subsidiaries or any of
the Company's or any Subsidiary's directors, officers, employees,
representatives, agents and advisors (including any investment banker, financial
advisor, attorney, accountant or other representative retained by any of them),
directly or indirectly, to (i) solicit, initiate, encourage (including by way of
furnishing nonpublic information), respond to (other than by bare statement,
without any further detail or explanation, that they are not permitted to
respond), or take any other action designed to facilitate, any inquiries or the
making of any proposal by a third party (a "Third Party") with respect to any
merger, consolidation, transfer of material assets, sale or exchange of
securities or similar transaction (collectively, a "Competing Transaction"),
(ii) participate in any substantive discussions or negotiations regarding any
Competing Transaction or (iii) enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Competing Transaction. Upon execution of this Agreement, the Company and its
Subsidiaries shall immediately cease any existing activities, discussions or
negotiations with any parties heretofore conducted with respect to any of the
foregoing.
(b) Notwithstanding anything to the contrary in this Agreement, (i) the
Company may, in response to an unsolicited written offer or proposal with
respect to a potential or proposed Competing Transaction engage in negotiations
or discussions with, or provide information or data to, any Third Party relating
to any Competing Transaction if the Competing Transaction is a Superior
Proposal. Any information furnished to any Third Party in connection with any
Competing Transaction shall be provided pursuant to a confidentiality and
standstill agreement on customary terms (including without limitation
prohibitions on unsolicited tender offers, acquisitions of equity interests in
the Company, proposals to acquire stock or assets, formation of Section 13(d)
groups, public request for release from the standstill, actions that would
require the Company to make a public announcement, engaging in proxy contests,
etc.).
(c) The Company shall promptly (but in any event by the next business day)
advise the Purchaser in writing of any inquiries, discussions, negotiations,
proposals or requests for information received on or after the date of this
Agreement relating to any Competing Transaction, the material terms and
conditions thereof and the identity of the person making such request or
proposing such Competing Transaction. The Company shall promptly advise the
Purchaser of any development on or after the date hereof relating to any
inquiries, discussions, negotiations, proposals or requests for information
relating to a Competing Transaction, whether the original inquiries,
discussions, negotiations, proposals or requests for information occurred
before, on or after the date of this Agreement.
(d) In the event the Board of Directors of the Company has determined that
a potential or proposed Competing Transaction constitutes a Superior Proposal
that the Company intends to accept, the Company shall promptly deliver to the
Purchaser notice thereof and of its intention to terminate this Agreement not
fewer than five business days after delivery of such notice. After such five
business day period, the Board of Directors of the Company may then (and only
then) terminate this Agreement and enter into an agreement with respect the
Superior Proposal.
(e) "Superior Proposal" means any bona fide written offer made by a Third
Party to acquire, directly or indirectly, for consideration consisting of cash
and/or securities, all of the shares of Common Stock, Class B Common Stock and
Class C Common Stock then outstanding (i) at a price greater than $4.00 per
share and (ii) that constitutes a transaction that, in the judgment of the Board
of Directors of the Company, is reasonably likely to be consummated on the terms
set forth, taking into account all legal, financial, regulatory and other
aspects of such proposal.
(f) Nothing contained in this Agreement shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Securities Exchange Act of 1934 or from making
any disclosure to the Company's stockholders (including with respect to the
delivery by the Company to the Purchaser of a Notice of Superior Proposal) if,
in the judgment of the Board of Directors of the Company, after consultation
with outside counsel, failure so to disclosure would be inconsistent with its
obligations under applicable law.
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5.8. Stockholder Approval; Proxy Statement. (a) Subject to the terms and
conditions contained herein, the Company shall submit the proposed issuance of
Common Stock in the transactions contemplated hereby (the matter submitted, the
"Stockholder Proposal") for approval to the holders of shares of Common Stock,
Class B Common Stock and Class C Common Stock, voting together as a single
class, at a meeting to be duly held for this purpose by the Company (the
"Company Meeting"). The Company shall take all action in accordance with the
federal securities Laws, the Maryland General Corporations Law, its Charter and
Bylaws necessary to duly convene the Company Meeting, and shall use its
reasonable best efforts to hold such meeting as soon as reasonably practicable
after the date hereof.
(b) The Company shall, as soon as practicable, prepare and file a
preliminary Proxy Statement (such proxy statement, and any amendments or
supplements thereto, the "Proxy Statement") with the SEC with respect to the
Company Meeting and shall use its reasonable efforts to respond to any comments
of the SEC or its staff and to cause the Proxy Statement to be cleared by the
SEC as soon as practicable. The Proxy Statement shall include the Board
Recommendation. The Company shall notify the Purchaser of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement or for additional
information and shall supply the Purchaser with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement of the
transactions contemplated hereby. The Company shall give the Purchaser and its
counsel (who shall provide any comments thereon as soon as practicable, and the
Company shall incorporate any such comments that are reasonable into the Proxy
Statement) the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give the Purchaser and its counsel (who shall
provide any comments thereon as soon as practicable, and the Company shall
incorporate any such comments that are reasonable into the Proxy Statement) the
opportunity to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of the Company and
the Purchaser agrees to use its reasonable efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC. As promptly as practicable after the Proxy Statement has been
cleared by the SEC, the Company shall mail the Proxy Statement to the
stockholders of the Company. If at any time prior to the approval of the
Stockholder Proposal by the Company's stockholders there shall occur any event
that should be set forth in an amendment or supplement to the Proxy Statement,
the Company shall prepare and mail to its stockholders such an amendment or
supplement.
(c) The Company represents and warrants that the Proxy Statement will
comply as to form in all material respects with the Exchange Act and, at the
respective times filed with the SEC and distributed to stockholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representation or
warranty as to any information included in the Proxy Statement which was
provided by the Purchaser. The Purchaser represents and warrants that none of
the information supplied by the Purchaser for inclusion in the Proxy Statement
will, at the respective times filed with the SEC and distributed to stockholders
of the Company, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
5.9 Reasonable Best Efforts. Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties agrees to use its reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Closing and the other transactions
contemplated by this Agreement and the Ancillary Documents, including using
reasonable efforts to accomplish the following: (i) the taking of all reasonable
acts necessary to cause the conditions to Closing to be satisfied as promptly as
practicable, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the Ancillary Documents or the
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consummation of the Closing, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated or
reversed and (v) the execution and delivery of any additional instruments
necessary to consummate the Closing and the other transactions contemplated by,
and to fully carry out the purposes of, this Agreement and the Ancillary
Documents. This Section 5.9 shall be deemed not to have been breached by the
Company as a result of any action taken by the Company with respect to a
Superior Proposal that is expressly permitted under Section 5.7.
SECTION 6. ADDITIONAL AGREEMENTS.
6.1 Indenture Relating to the Notes. Upon the written request of the
Holders of at least 51% of the outstanding principal amount of the Notes at the
time outstanding (exclusive of Notes then owned by the Company or any of its
Affiliates) (the "Required Noteholders") in connection with a sale or offering
of the Notes pursuant to the Registration Rights Agreement, the Company, at its
expense, shall cause to be prepared, executed and delivered within 30 days after
such request an indenture (including a new form of note, any necessary related
documentation and, from time to time thereafter, any necessary supplements
thereto) (the "Indenture") with respect to the Notes, which Indenture shall
contain terms and provisions substantially the same as those set forth in
Sections 5, 6 and 7 hereof, and the substantive provisions of the Note,
including but not limited to, redemption, conversion, subordination, and
interest payment, in form and substance no less favorable to the Holders of the
Notes than as set forth in this Agreement and the Note, and such other terms and
provisions as are required under the Trust Indenture Act of 1939 and such other
items and provisions as are customary in indentures relating to publicly traded
senior secured debt securities having such terms. In such event, the Company
shall also appoint as trustee under the Indenture a national banking association
reasonably acceptable to the Required Noteholders having its principal offices
in New York, New York, and having capital, surplus, and undivided profits of at
least $50,000,000. In connection with the execution of the Indenture, the
Holders shall exchange all outstanding Notes for new notes in the form
contemplated by the Indenture, and upon such exchange such new notes shall be
deemed to be "Notes" for purposes hereof.
6.2. Lost, Stolen, Damaged and Destroyed Securities. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate representing shares of Common Stock, Series B
Preferred Stock or a Note and in the case of loss, theft or destruction, upon
delivery of an indemnity satisfactory to the Company (which, in the case of the
Purchaser, may be an undertaking by the Purchaser to so indemnify the Company
and which, in the case of any Person other than the Purchaser, shall be delivery
of an indemnity bond), or, in the case of mutilation, upon surrender and
cancellation thereof, the Company will issue a new share certificate of like
tenor for a number of shares of Common Stock or Series B Preferred Stock, as
applicable, equal to the number of shares of such stock represented by the
certificate lost, stolen, destroyed or mutilated, or a new Note of like tenor in
an amount equal to the amount of such Note lost, stolen, destroyed or mutilated.
6.3. Transactions with Affiliates. The Company agrees that, so long as any
of the Notes or any shares of Series B Preferred Stock are issued and
outstanding, without the consent of the Required Holders the Company will not,
and will not permit any of its Subsidiaries to, engage in any transaction or
group of related transactions (including, without limitation, the purchase,
lease, sale or exchange of any Properties, Personal Property or Intellectual
Property of any kind or the rendering of any service) involving an expected
payment by or to the Company or any Subsidiary in excess of $60,000 with any
Affiliate, except (i) compensation and employee benefit matters by the
Compensation Committee of the Board or (ii) any transaction approved by the
Board or any committee of the Board.
6.4. Availability of Conversion Shares. The Company shall at all times that
any of the Notes or any shares of Series B Preferred Stock are issued and
outstanding reserve and keep available out of its authorized but unissued Common
Stock, for the purpose of effecting the conversion of Notes and the Series B
Preferred Stock, the full number of shares of Common Stock then issuable upon
the conversion of the Notes and the Series B Preferred Stock. The Company will
from time to time in accordance with the Maryland General Corporation Law
increase the authorized amount of Common Stock if at any time the number of
shares of Common Stock remaining unissued and available for issuance shall be
insufficient to permit full conversion of Notes and the Series B Preferred
Stock.
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6.5. Corporate Headquarters. For a period of not less than one year after
the Closing Date, the Company shall not relocate its corporate headquarters
outside of Pittsburgh, Pennsylvania.
6.6. HSR. If at any time after the date hereof, the Purchaser or any
Related Transferee reasonably determines that the filing of a notification under
the HSR Act is required in connection with the conversion or possible conversion
of all or any portion of the Notes and/or Series B Preferred Stock, then the
Company shall as soon as reasonably practicable reimburse such person for the
costs of filing such notification. The Company agrees to make any filing
required under the HSR Act reasonably promptly after the filing of such person's
notification. Each of the Company and the Purchaser agree to provide the other
with such information as is reasonably required to make such filings.
SECTION 7. RESTRICTIVE LEGEND.
(a) It is understood that each of the Notes and each certificate
representing any (i) shares of Series B Preferred Stock, (ii) Conversion Shares
or (iii) any other securities issued in respect of the Notes, the Series B
Preferred Stock or the Conversion Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event shall bear the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF A REGISTRATION STATEMENT
THEREUNDER AND REGISTRATION OR QUALIFICATION UNDER APPLICABLE SECURITIES
LAWS OR AN EXEMPTION THEREFROM.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN
INVESTOR AGREEMENT BETWEEN INTERSTATE HOTELS CORPORATION AND CERTAIN
INVESTORS NAMED THEREIN AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SAID AGREEMENT IS ON FILE AT THE OFFICE OF THE
CORPORATE SECRETARY OF THE COMPANY.
The Company will promptly, upon request, remove the foregoing legend,
provided the securities represented by the certificate may, in the Company's
discretion upon the advice of legal counsel, be sold without registration under
the Securities Act, or pursuant to an exemption therefrom.
(b) The Purchaser acknowledges that the Notes, the Series B Preferred Stock
and the Conversion Shares are transferable only pursuant to (i) offerings
registered under the Securities Act, (ii) Rule 144 or Rule 144A under the
Securities Act (or any similar rule or rules then in force) if such rule is
available and (iii) pursuant to any other exemption from the registration
requirements of the Securities Act. Except as described in this Section 7(b),
the Purchaser agrees not to transfer any of the Notes or any shares of Series B
Preferred Stock to any other Person without the prior written consent of the
Company.
SECTION 8. TAXES. The Company agrees that it will pay, and will hold the
Purchaser harmless from any and all liability with respect to any stamp or
similar Taxes which may be determined to be payable in connection with the
execution and delivery and performance of this Agreement, and that it will
similarly pay and hold the Purchaser harmless from all Taxes in respect of the
issuance of the Notes, the Series B Preferred Stock, any Exchange Notes issued
pursuant to the terms of the Series B Preferred Stock, and the Conversion Shares
(including any shares issuable upon conversion of any Exchange Note) to the
Purchaser.
SECTION 9. EXPENSES, TERMINATION.
9.1. Costs and Expenses. Except as set forth in this Section 9, each of the
Company and the Purchaser shall pay all the costs and expenses incurred by it or
on its behalf in connection with this Agreement and the consummation of the
transactions contemplated hereby.
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9.2. Termination or Abandonment. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing (notwithstanding any approval of the Stockholder Proposal by the
stockholders of the Company):
(a) by mutual written consent of the Purchaser and the Company;
(b) by the Company, if the Closing shall not have occurred before November
1, 2000; provided, however, that the right to terminate this Agreement under
this Section 9.2(b) shall not be available if the Company's breach of any
representation or warranty or the Company's failure to perform any covenant or
agreement under this Agreement has been the cause of or resulted in the failure
of the transactions contemplated hereby to occur on or before such date;
(c) by the Purchaser, if the Closing shall not have occurred on or before
October 16, 2000 (the "Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 9.2(c) shall not be available if the
Purchaser's breach of any representation or warranty or the Purchaser's failure
to perform any covenant or agreement under this Agreement has been the cause of
or resulted in the failure of the transactions contemplated hereby to occur on
or before such date, provided, however:
(i) the Company may, in its sole discretion, elect to extend the
Termination Date to November 15, 2000 by both (x) delivering written notice
to the Purchaser prior to October 13, 2000 of its intent to do so and (y)
paying to the Purchaser, on or before October 13, 2000, $250,000 by wire
transfer of immediately available funds to an account designated by the
Purchaser (which account will be designated by the Purchaser within one
business day of the Company's request for such designation), and
(ii) following such extension pursuant to Section 9.2(c)(i), the
Company may, in its sole discretion, elect to further extend the
Termination Date by up to 15 days (to any specified date on or prior to
November 30, 2000) by both (x) delivering written notice to the Purchaser
prior to November 13, 2000 of its intent to do so and (y) paying to the
Purchaser, on or before November 14, 2000, an amount equal to $16,667 for
each day the Termination Date is so extended, such payment to be made by
wire transfer of immediately available funds to an account designated by
the Purchaser (which account will be designated by the Purchaser within one
business day of the Company's request for such designation).
The Company acknowledges that time is of the essence for compliance with any
requirement of this Section 9.2(c).
(d) by the Purchaser, if (i) the Board of Directors of the Company shall or
shall resolve to (A) either not recommend that the Company's stockholders vote
in favor of the Stockholder Proposal or withdraw the Board Recommendation, (B)
modify the Board Recommendation in a manner adverse to the Purchaser, or (C)
approve, recommend or fail to take a position that is adverse to any proposed
Competing Transaction involving the Company or any of its Subsidiaries within
five days after a request from the Purchaser that it do so, or (ii) the Board of
Directors of the Company shall have refused to affirm the Board Recommendation
as promptly as practicable (but in any case within five days) after receipt of
any reasonable written request for such affirmation from the Purchaser or (iii)
the Company shall have failed to call the Company Meeting, failed to mail the
Proxy Statement to its stockholders, failed to include the Board Recommendation
in the Proxy Statement or failed to hold the Company Meeting, in each case prior
to the Termination Date (including any extensions thereof by exercise of the
Company's options granted in Sections 9.2(c)(i) and (ii)), unless in each case,
the failure to take such action is caused by a temporary restraining order,
preliminary or permanent injunction or other order or decree or regulatory or
legal action or the enactment of any statutes, rules or regulations which
prevent the consummation of the transactions contemplated hereby;
(e) by either the Purchaser or the Company, if at the Company Meeting
(including any adjournment or postponement thereof) the requisite vote of the
stockholders of the Company to approve the Stockholder Proposal shall not have
been obtained;
(f) by either the Purchaser or the Company, if there shall be any Law that
prohibits or makes illegal the consummation of the transactions contemplated
hereby, or if any Law enjoining the Purchaser or the Company
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from consummating the transactions contemplated hereby shall have been entered
and become final and nonappealable;
(g) by either the Purchaser or the Company, if there shall have been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach would result
in the failure to satisfy one or more of the conditions set forth in Section
1.4(a) (in the case of a breach by either the Company or the Purchaser) or
Section 1.4(b) (in the case of a breach by the Company) or Section 1.4(c) (in
the case of a breach by the Purchaser), and such breach shall be incapable of
being cured or, if capable of being cured, shall not have been cured within 20
days after written notice thereof shall have been received by the party alleged
to be in breach; and
(h) by the Company pursuant to, but only in compliance with Section 5.7.
Notwithstanding anything herein to the contrary, no termination by the Company
pursuant to this Section 9.2 under circumstances requiring payment of a
Termination Fee and/or Purchaser's Expenses (as defined below) shall be
effective unless, concurrently with such termination, such amount is paid in
full by the Company in accordance with Section 9.3.
9.3. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.2, this Agreement, except for the provisions of
the second sentence of Section 5.1, this Section 9.3 and Sections 9.4, and 19,
shall become void and have no effect, without any liability on the part of any
party or any of its affiliates. Notwithstanding the foregoing, nothing in this
Section 9.3 shall relieve any party to this Agreement of liability for any
willful breach of any provision of this Agreement.
9.4. Payments Upon Termination. (a) Upon a termination of this Agreement
pursuant to Section 9.2, the Company shall pay to the Purchaser (or to any
Subsidiary of the Purchaser designated in writing by the Purchaser to the
Company) from the Escrow Account the amount of the Termination Fee and
Purchaser's Expenses, set forth below:
(i) in the event of a termination of this Agreement by the Purchaser
and the Company pursuant to Section 9.2(a) no Termination Fee or Expenses
shall be payable, unless otherwise agreed in writing;
(ii) in the event of a termination of this Agreement by the Purchaser
pursuant to Section 9.2(d), 9.2(g) or 9.2(h), or pursuant to Section 9.2(e)
if both (A) any Competing Transaction is publicly proposed or announced on
or after the date hereof and prior to the Company Meeting being held and
(B) within 12 months of a termination pursuant to Section 9.2(e) the
Company enters into a definitive agreement with respect to, or consummates,
a Competing Transaction, the Termination Fee shall be the amount of
$2,250,000 plus the amount of the Purchaser's Expenses (as defined below);
and
(iii) in the event of a termination of this Agreement pursuant to any
other provision of Section 9.2 (other than a termination by the Company
pursuant to Section 9.2(g)), no Termination Fee shall be payable, but the
Company shall pay to the Purchaser the Purchaser's Expenses.
(b) The parties agree that the "Purchaser's Expenses" shall be the amount
of the Purchaser's reasonable, documented costs and expenses incurred in
connection with this transaction (including, without limitation, the fees and
expenses of counsel retained by the Purchaser in connection with the negotiation
and preparation of this Agreement and the Ancillary Documents and the
consummation of the transactions contemplated hereby and thereby); provided,
however, that the Purchaser's Expenses shall not exceed the sum of $2,250,000.
(c) Payment of the Termination Fee and the Purchaser's Expenses shall, to
the extent of the funds in the Escrow Account, be made by the Escrow Agent in
accordance with the terms of the Escrow Agreement. In no event shall more than
one Termination Fee or more than one amount in payment of the Purchaser's
Expenses be payable under this Agreement.
(d) The Company acknowledges that the agreements contained in paragraph (a)
of this Section 9.4 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, the Purchaser would not
enter into this Agreement; accordingly, if the Company fails to pay promptly any
Termination Fee or Purchaser's Expenses payable by it pursuant to this Section
9.4, then the Company shall pay
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<PAGE> 79
to the Purchaser its costs and expenses (including attorneys' fees) in
connection with any litigation brought by the Purchaser to obtain payment of
such Termination Fee or Purchaser's Expenses, together with interest on such
amounts at the prime or base rate of The Chase Manhattan Bank from the date such
payment was due under this Agreement until the date of payment.
(e) The payment of a Termination Fee and/or Purchaser's Expenses hereunder
will constitute the sole and exclusive remedy of the Purchaser prior to the
Closing or the termination of this Agreement in accordance with its terms
regardless of any breach or alleged breach of this Agreement by the Company. In
no event will a Termination Fee or Purchaser's Expenses be payable pursuant to
this Section 9.4 if, prior to the termination of this Agreement, the Purchaser
shall have materially breached any of its representations, warranties, covenants
or agreements contained in this Agreement, which breach would result in a
failure to satisfy one or more of the conditions set forth in Section 1.4(a) or
1.4(c) and such breach shall be incapable of being cured or, if capable of being
cured, shall not have been cured within 20 days after written notice thereof
shall have been received by the Purchaser.
(f) In the event that the Closing occurs, the Purchaser agrees to instruct
the Escrow Agent in writing to release to the Company as soon as practicable all
funds held by the Escrow Agent pursuant to the Escrow Agreement.
SECTION 10. INDEMNIFICATION.
10.1. Survival of Representations, Warranties, Agreements and Covenants,
etc. All representations and warranties in this Agreement and in the Ancillary
Documents shall survive the execution and delivery of this Agreement and the
Closing for a period of 18 months and shall in no way be affected by any
investigation or knowledge of the subject matter thereof made by or on behalf of
any Purchaser; provided, however, that the representations and warranties set
forth in Sections 2.1 through 2.4, 2.19, 3.1 and 3.2 and 3.6 shall survive
indefinitely. All agreements and covenants contained herein shall survive the
Closing until, by their respective terms, they are no longer operative. The
Closing shall not be deemed in any way to constitute a waiver by any party of
any powers, rights or remedies that it may have with respect to any obligations
of the other parties hereunder, including, without limitation with respect to
any misrepresentation or breach of warranty Known to such party at the time of
Closing. No claim shall be made with respect to any representation, warranty,
covenant or agreement after it ceases to survive except that in the event that
any Purchaser Entity receives notice or identifies a matter which provides a
reasonable basis for indemnification hereunder and provides notice to the
Company within the applicable period provided for in this Section 10.1 of the
receipt of such notice or of the matter so identified and such claim shall not
have been finally resolved before the expiration of the applicable period
referred to in this Section 10.1 any representation, warranty, covenant or
agreement that is the basis for such claim shall continue to survive with
respect to such claim and shall remain a basis for indemnity as to such claim
until such claim is finally resolved.
10.2. Indemnification by the Company.
(a) From and after the Closing, the Company shall indemnify, defend and
hold the Purchaser, its Affiliates, their respective officers, directors,
partners, employees, attorneys, agents, representatives, successors and assigns
(each a "Purchaser Entity") harmless from and against all claims, losses
(including, without limitation, losses of earnings), liabilities, obligations,
payments, damages (actual, punitive or consequential), charges, judgments,
fines, penalties, amounts paid in settlement, costs and expenses (including,
without limitation, interest which may be imposed in connection therewith, costs
and expenses of investigation, actions, suits, proceedings, demands, assessments
and fees, expenses and disbursements of counsel, consultants and other experts)
("Losses") incurred or suffered by a Purchaser Entity (whether incurred or
suffered directly or indirectly through ownership of capital stock of the
Company) based upon, arising out of, or in connection with (i) the breach of any
of the representations, warranties or covenants of the Company in this Agreement
or in any Ancillary Document or (ii) claims by third parties relating to the
Agreement or any Ancillary Document or any of the transactions contemplated
hereby or thereby, the use of the proceeds thereof or any related transaction or
claim, litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether the Purchaser Entity is a party thereto. Any
indemnification payment (the "Indemnification Payment") by the Company to a
Purchaser in connection with a (x) breach of the representations, warranties and
covenants of the Company or (y) claims by
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<PAGE> 80
third parties shall include an additional amount such that the Purchaser suffers
no loss as a result of any diminution in the as-converted value of the
Purchaser's equity related to its investment in the Company as a result of such
Indemnification Payment.
(b) If the Purchaser in its sole discretion determines that any
Indemnification Payment need not be paid in cash, then such Indemnification
Payment shall, at the option of the Purchaser, be effected by decreasing the
Conversion Price (as defined in the Articles Supplementary) of Purchaser's
shares of the Series B Preferred Stock by an amount equal to the Indemnification
Payment divided by the number of Conversion Shares into which such shares of
Series B Preferred Stock are then convertible; provided, however, that Purchaser
shall not have the right to decrease the Conversion Price below $3.00 and any
Indemnification Payment shall be paid in cash to the extent it would result in a
decrease of the Conversion Price below $3.00.
10.3. Indemnification by the Purchaser. From and after the Closing, the
Purchaser and any Related Transferee shall jointly and severally indemnify,
defend and hold the Company, its Affiliates, their respective officers,
directors, employees, attorneys, agents, representatives, successors and assigns
(each a "Company Entity") harmless against all Losses incurred or suffered by a
Company Entity (whether incurred or suffered directly or indirectly through the
Purchaser's investment in the Company) arising from the breach of any of its
representations, warranties or covenants in this Agreement or in any Ancillary
Documents.
10.4. Limitations. Notwithstanding anything to the contrary in this
Agreement, no Indemnification Payment by the Company pursuant to this Section 10
with respect to any Losses otherwise payable hereunder pursuant to clause (i) of
Section 10.2 as a result of a breach of the Company's representations,
warranties and covenants (other than any Losses resulting from breaches of the
representation and warranty in Sections 2.1 through 2.4 and 2.19) and no
Indemnification Payment by the Purchaser pursuant to Section 10.3, in each case,
shall be payable until the time as such Losses shall aggregate to more than
$100,000 at which point the Indemnifying Party (as hereinafter defined) shall be
obligated to indemnify the Indemnified Party (as hereinafter defined) from and
against all Losses. In no event shall the Company's obligations in respect of
indemnification exceed the Purchase Price. Except as provided in Section 9, this
Section 10 constitutes the exclusive remedy for the breach of covenants,
agreements, representations or warranties set forth in this Agreement; provided,
however, that the provisions of this Section 10 will not prevent the parties
hereto from seeking specific performance or injunctive relief in connection with
the breach of a covenant or an agreement of any party hereto; provided, further,
that any breach of covenants, agreements, representations or warranties set
forth in this Agreement by either party hereto shall not excuse performance
under the Ancillary Documents or the Joint Venture Partnership Agreement.
10.5. Procedure.
(a) A party or parties responsible for indemnifying another party against
any matter pursuant to this Agreement is referred to herein as the "Indemnifying
Party," and a party or parties entitled to indemnity is referred to as the
"Indemnified Party."
(b) An Indemnified Party under this Agreement shall, with respect to claims
asserted against such party by any third party, give written notice to each
Indemnifying Party of any liability which might give rise to a claim for
indemnity under this Agreement within 60 business days of the receipt of any
written claim from any such third party, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written notice
to each Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however, that any failure to give such notice will not
result in a waiver of any rights of the Indemnified Party except to the extent
Indemnifying Party was deprived of its rights to recover any payment under its
applicable insurance coverage or was otherwise materially prejudiced as a result
of such failure by the Indemnified Party.
(c) As to any claim, action, suit or proceeding by a third party, the
Indemnifying Party shall be entitled to assume the defense, compromise or
settlement of any such matter through the Indemnifying Party's own attorney (who
shall be reasonably satisfactory to the Indemnified Party); provided, however,
that if the Indemnifying Party reasonably determines that an adequate and proper
defense is not being provided by the Indemnified Party or if the Indemnified
Party elects not to assume such defense, then the Indemnifying Party shall
assume such defense.
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The Indemnified Party shall provide such cooperation and such access to its
books, records and properties as the Indemnifying Party shall reasonably request
with respect to such matter; and the parties hereto agree to cooperate with each
other in order to ensure the proper and adequate defense thereof, it being
understood that the Indemnified Party shall control any such defense unless the
Indemnifying Party has assumed such defense in accordance with the terms hereof.
(d) Neither an Indemnified Party nor an Indemnifying Party shall make any
settlement of any claims without the written consent of the other party, which
consent shall not be unreasonably withheld. Without limiting the generality of
the foregoing, it shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other equitable relief against the other
party or its assets, employees or business.
(e) With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
upon the earliest to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five days prior to the date that the judgment creditor has the right to
execute the judgment or if earlier the date that the Indemnified Party must post
any bond with respect to any judgment or other judicial ruling, (ii) the date
payment is due in respect of the entry of an unappealable judgment or final
appellate decision against the Indemnified Party, (iii) the date payment is due
in respect of a settlement of the claim or (iv) with respect to indemnities for
Tax liabilities, upon the issuance of any resolution by a taxation authority.
Notwithstanding the foregoing, expenses of counsel to the Indemnified Party
shall be reimbursed on a current basis by the Indemnifying Party if such
expenses are a liability of the Indemnifying Party. With regard to other claims
for which indemnification is payable hereunder, such indemnification shall be
paid promptly by the Indemnifying Party upon demand by the Indemnified Party.
SECTION 11. FURTHER ASSURANCES. At any time or from time to time after the
Closing, the Company, on the one hand, and the Purchaser, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the Company and the Purchaser and the respective successors,
permitted assigns, heirs and personal representatives of the Company and the
Purchaser except that the Company may not assign its rights and obligations
under this Agreement to any person without the prior written consent of the
Purchaser. The parties hereby agree that, upon a transfer of any interest in
this Agreement to a permitted assign, such transferring party will, at or prior
to such transfer, ensure that such permitted assign becomes a party to the
Investor Agreement. In addition, and whether or not any express assignment has
been made, the provisions of this Agreement which are for the Purchaser's
benefit as a purchaser or holder of the Notes and the Series B Preferred Stock
are also for the benefit of, and enforceable by, any subsequent holder of any of
such Notes or any of the Series B Preferred Stock and/or the Conversion Shares.
SECTION 13. ENTIRE AGREEMENT. This Agreement, the side letter between the
Company and the Purchaser attached hereto as Schedule 13 and the irrevocable
undertaking to capitalize the Purchaser attached hereto as Schedule 13, and the
other writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto, including the
confidentiality agreements between the parties dated November 8, 1999 and
December 17, 1999.
SECTION 14. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by facsimile,
nationally recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(i) if to the Company, to:
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
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<PAGE> 82
Pittsburgh, Pennsylvania 15220
Facsimile: (412) 920-5733
Attention: General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
North Point,
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Facsimile: (216) 759-0212
Attention: Zachary Paris, Esq.
(ii) if to the Purchaser, 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
Facsimile: (212) 526-7006
Attention: Joseph Flannery
with a copy to:
Continental Gencom Holdings
3250 Mary Street
Suite 500
Miami, Florida 33133
Facsimile: (305) 445-4255
Attention: Mr. K. Alibhai and Mr. S. Weiser
with a copy to:
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Facsimile: (305) 789-3395
Attention: Richard E. Schatz, Esq.
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Facsimile: (212) 859-8582
Attention: Jonathan Mechanic, Esq.
All such notices, requests, consents and other communications shall be
deemed to have been given: at the time delivered if delivered in person, when
receipt is confirmed if sent by facsimile, on the next business day if timely
delivered to a nationally recognized overnight courier and five days after being
deposited in the mail, postage prepaid.
SECTION 15. AMENDMENTS. The terms and provisions of this Agreement may be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, pursuant to the written consent of the Company and the Required
Holders. No waiver of any of the provisions of this Agreement shall be deemed to
or shall constitute a waiver of any other provision hereof (whether or not
similar). No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
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<PAGE> 83
SECTION 16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 17. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 18. NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
SECTION 19. GOVERNING LAW. This Agreement has been entered into and shall
be construed and enforced in accordance with the laws of the State of Maryland
without reference to the conflict of law principles thereof.
SECTION 20. ENFORCEMENT JURISDICTION. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Maryland or in Maryland state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Federal court located in the State of Maryland or any Maryland state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting in the State of
Maryland or a Maryland state court.
SECTION 21. WAIVER OF JURY TRIAL. Each of the parties hereto hereby waives
any right it may have to a trial by jury in respect of any action, proceeding or
litigation directly or indirectly arising out of, under or in connection with,
this Agreement or any of the other Ancillary Documents.
SECTION 22. LITIGATION; PREVAILING PARTY. In the event of any litigation
with regard to this Agreement, the prevailing party shall be entitled to receive
from the non-prevailing party (as determined by the court) and the
non-prevailing party shall pay upon demand all reasonable fees and expenses of
counsel for the prevailing party.
SECTION 23. PUBLICITY. Each of the parties hereto agrees that the initial
public statement regarding the transactions contemplated hereby will be in the
form previously agreed by the parties. Notwithstanding the foregoing, each of
the parties hereto may, in documents required to be filed by it with the
Commission or other regulatory bodies, make such statements with respect to the
transactions contemplated hereby as each may be advised is legally necessary
upon advice of its counsel; provided, however, that the party making such
determination shall immediately notify the other party that it intends to make a
public announcement and the parties hereto shall, in good faith, attempt to
agree on any public announcements or publicity statements with respect thereto.
SECTION 24. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have duly executed this Securities
Purchase Agreement as of the date first above written.
THE COMPANY:
INTERSTATE HOTELS CORPORATION
By: /s/ THOMAS F. HEWITT
------------------------------------------------------------
Name: Thomas F. Hewitt
Title: Chief Executive Officer
PURCHASER:
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: /s/ SHERWOOD WEISER
---------------------------------------------------------------------
Name: Sherwood Weiser
Title: Authorized Signatory
By: LB INTERSTATE GP LLC
General Partner
By: PAMI LLC
its Sole Member
By: /s/ JOSEPH J. FLANNERY
------------------------------------------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
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: /s/ SHERWOOD WEISER
---------------------------------------------------------------------
Name: Sherwood Weiser
Title: Authorized Signatory
<PAGE> 85
By: LB INTERSTATE GP LLC
General Partner
By: PAMI LLC
its Sole Member
By: /s/ JOSEPH J. FLANNERY
------------------------------------------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
<PAGE> 86
Exhibit 3
AGREEMENT OF LIMITED PARTNERSHIP
OF
CGLH-IHC FUND I, L.P.
<PAGE> 87
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1.1 Formation................................................................................................1
1.2 Name.....................................................................................................1
1.3 Term.....................................................................................................2
1.4 Registered Office and Principal Office of Partnership; Addresses of Partners.............................2
1.5 Ownership................................................................................................2
1.6 Title to Partnership Property............................................................................2
1.7 Limits of Partnership....................................................................................3
2.1 Definitions..............................................................................................3
3.1 Purposes and Scope......................................................................................12
4.1 Capital Contributions; Initial Capital Contributions....................................................13
4.2 Tier 1 Capital Contributions............................................................................13
4.3 Additional Capital Contributions........................................................................15
4.4 Capital Accounts........................................................................................17
4.5 Negative Capital Accounts...............................................................................20
4.6 Interest................................................................................................20
4.7 No Withdrawal...........................................................................................20
4.8 Loans from Partners.....................................................................................20
5.1 Allocations of Profits and Losses.......................................................................20
5.2 Special Allocations of Profits and Losses...............................................................21
5.3 Curative Allocations....................................................................................22
5.4 Tax Allocations: Code Section 704(c)...................................................................22
5.5 Other Allocation Rules..................................................................................23
5.6 Depreciation Recapture..................................................................................23
6.1 Distributions...........................................................................................23
6.2 Payments Not Deemed Distributions.......................................................................25
6.3 Withheld Amounts........................................................................................25
7.1 Designation and Authority of Managing General Partner and General Partner...............................26
7.2 Major Decisions.........................................................................................27
7.3 Certificate of Limited Partnership......................................................................28
7.4 Compensation and Reimbursement of Managing General Partner and General Partner..........................28
7.5 Partnership Funds.......................................................................................28
7.6 Return of Capital.......................................................................................28
7.7 Duties..................................................................................................29
7.8 Transactions with Affiliates............................................................................29
7.9 Outside Activities......................................................................................29
7.10 Resolution of Conflicts of Interest.....................................................................29
7.11 Indemnification.........................................................................................29
7.12 Liability of Managing General Partner and the General Partner...........................................30
7.13 Reliance by Managing General Partner and the General Partner............................................30
7.14 Insurance...............................................................................................31
7.15 Acquisition of Real Property; Investment Banking; Financing.............................................31
7.16 Management of the Real Property.........................................................................32
8.1 Limitation of Liability.................................................................................33
8.2 Management of Business..................................................................................33
8.3 Outside Activities......................................................................................33
8.4 Return of Capital.......................................................................................34
</TABLE>
i
<PAGE> 88
<TABLE>
<S> <C> <C>
9.1 Records and Accounting..................................................................................34
9.2 Fiscal Year.............................................................................................34
9.3 Reports.................................................................................................34
10.1 Preparation of Tax Returns..............................................................................35
10.2 Tax Elections...........................................................................................35
10.3 Tax Controversies.......................................................................................35
10.4 Organizational Expenses.................................................................................36
10.5 Taxation as a Partnership...............................................................................36
11.1 Transfer Restrictions...................................................................................36
11.2 Transfers by Managing General Partner...................................................................36
11.3 Transfers by General Partner............................................................................37
11.4 Transfer of Interests of Limited Partner................................................................37
11.5 Additional Limitations on Transfers of Limited Partnership Interests....................................37
11.6 Distributions and Allocations in Respect of Transferred Partnership Interests...........................37
11.7 Admission of Substitute or Successor Partners...........................................................38
11.8 Buy-Sell Provision......................................................................................39
11.9 Right to Require Sale...................................................................................40
11.10 Tag-Along Right.........................................................................................40
11.11 Reduction of Undistributed Class B Capital..............................................................42
11.12 Optional Redemption.....................................................................................42
12.1 Events of Withdrawal....................................................................................44
12.2 Removal.................................................................................................45
13.1 Dissolution.............................................................................................46
13.2 Continuation of the Partnership.........................................................................46
13.3 Liquidation.............................................................................................47
13.4 Distribution in Kind....................................................................................48
13.5 Cancellation of Certificate of Limited Partnership......................................................48
13.6 Return of Capital.......................................................................................48
13.7 Certain Terminations....................................................................................48
14.1 Amendment Procedures....................................................................................49
14.2 Action without a Meeting................................................................................49
15.1 Addresses and Notices...................................................................................49
15.2 Titles and Captions.....................................................................................50
15.3 Pronouns and Plurals....................................................................................50
15.4 Further Action..........................................................................................50
15.5 Binding Effect..........................................................................................50
15.6 Integration.............................................................................................50
15.7 Creditors...............................................................................................50
15.8 Waiver..................................................................................................50
15.9 Counterparts............................................................................................50
15.10 Applicable Law..........................................................................................50
15.11 Invalidity of Provisions................................................................................51
15.12 Confidentiality.........................................................................................51
15.13 Representations and Warranties of IHC...................................................................52
15.14 Representations and Warranties of CGLH..................................................................52
15.15 Conditions to Effectiveness of this Agreement...........................................................53
15.16 Third Party Beneficiaries...............................................................................53
</TABLE>
ii
<PAGE> 89
EXHIBITS
Exhibit A - Partners and Percentage Interests
Exhibit B - Description of Property to be Contributed by the Partners
Exhibit C - Market Rate Fees
Exhibit D - Form of Property Management Agreement
Exhibit E - Form of Asset Management Agreement
Exhibit F - Joint Venture Required (Consolidated) Reporting and Analysis
Exhibit G - Executives' Percentage Interests Upon Termination For Cause
iii
<PAGE> 90
S&B DRAFT 8/31/00
THE PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP AGREEMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE
SECURITIES ACTS IN RELIANCE UPON EXEMPTIONS UNDER THOSE ACTS. THE SALE OR OTHER
DISPOSITION OF THE PARTNERSHIP INTERESTS IS PROHIBITED UNLESS SUCH SALE OR
DISPOSITION IS MADE IN COMPLIANCE WITH ALL SUCH APPLICABLE ACTS. ADDITIONAL
RESTRICTIONS ON TRANSFER OF THE PARTNERSHIP INTERESTS ARE SET FORTH IN THIS
AGREEMENT.
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
CGLH-IHC FUND I, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP is entered into as of
_________ ___, 2000 (the "Effective Date"), by and between CGLH PARTNERS III LP,
a Delaware limited partnership ("CGLH GP"), as the Managing General Partner, and
INTERSTATE INVESTMENT CORPORATION, a Delaware corporation ("IHC GP"), as the
General Partner, and CGLH PARTNERS IV LP, a Delaware limited partnership ("CGLH
LP"), INTERSTATE PROPERTY PARTNERSHIP, L.P., a Delaware limited partnership
("IHC LP"), J. William Richardson, an individual ("Richardson") and Thomas F.
Hewitt, an individual ("Hewitt") as the Limited Partners.
Certain terms used in this Agreement are defined in Article II
hereof.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 FORMATION.
The Partners hereby form the Partnership as a limited
partnership pursuant to the Delaware Act, and subject to the provisions of this
Agreement. The rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Delaware Act, except as
expressly provided herein.
1.2 NAME.
The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, CGLH-IHC Fund I, L.P. The
Managing General Partner in its sole discretion may change the name of the
Partnership at any time and from time to time and shall provide the other
Partners with written notice of such name change within 20 days after such name
change.
<PAGE> 91
1.3 TERM.
The Partnership shall commence on the Commencement Date and
shall continue in existence until the close of Partnership business on the
seventh anniversary of the Effective Date, or until the earlier termination of
the Partnership in accordance with the provisions of Section 13.1(b) of this
Agreement or unless extended by a vote or consent of Partners holding at least
51% of the Partnership Interests at the time such extension is sought; provided,
however, that after the occurrence of an event of dissolution pursuant to
Section 13.1(b), the continuation or wind-up of the Partnership shall be
governed by Article XIII hereof and the Partnership shall not have the ability
to extend the term of the Partnership pursuant to this sentence of Section 1.3.
Any and all actions taken by the Managing General Partner prior to the
Commencement Date in connection with the formation of the Partnership or that
are consistent with, or in furtherance of, the purpose of the Partnership are
hereby approved, confirmed and ratified as acts of the Company.
1.4 REGISTERED OFFICE AND PRINCIPAL OFFICE OF PARTNERSHIP; ADDRESSES OF
PARTNERS.
(a) Partnership Offices. The registered office of the
Partnership in the State of Delaware shall be 1013 Centre Road,
Wilmington, New Castle County, Delaware 19805-1297, and its registered
agent for service of process on the Partnership at such registered
office shall be Corporation Service Company, or such other registered
office or registered agent as the Managing General Partner may from
time to time designate, on notice to the other Partners. The
Partnership shall direct its registered agent to provide copies of any
process served on it as registered agent of the Partnership to both the
Managing General Partner and the General Partner at their respective
addresses provided pursuant to Section 1.4(b) hereof. The principal
office of the Partnership shall be 3 World Financial Center, New York,
New York 10285, New York or such other place as the Managing General
Partner may from time to time designate, on notice to the other
Partners. The Partnership may maintain offices at such other place or
places as the Managing General Partner deems advisable.
(b) Addresses of Partners. The address of each of the Partners
shall be the address of such Partner appearing on the signature pages
to this Agreement. A Partner may change its address at any time by
giving all of the other Partners ten-(10) days' prior written notice of
such change in address.
1.5 OWNERSHIP.
The interest of each Partner in the Partnership shall be
personal property for all purposes. All property and interests in property, real
or personal, owned by the Partnership shall be deemed owned by the Partnership
as an entity, and no Partner, individually, shall have any ownership of such
property or interest except by having an ownership interest in the Partnership
as a Partner. Each of the Partners irrevocably waives, during the term of the
Partnership and during any period of its liquidation following any dissolution,
any right that it may have to maintain any action for partition with respect to
any of the assets of the Partnership. No interest of any Partner in the
Partnership shall be evidenced by a certificate.
1.6 TITLE TO PARTNERSHIP PROPERTY.
It is the desire and intention that legal title to all
property of the Partnership shall be held and conveyed in the name of the
Partnership.
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1.7 LIMITS OF PARTNERSHIP.
The relationship between the parties hereto shall be limited
to the business of the Partnership in accordance with the terms of this
Agreement. Such relationship shall be construed and deemed to be a limited
partnership for the sole and limited purpose of such business. Except as
otherwise provided for or contemplated in this Agreement, nothing herein shall
be construed to create a partnership between the Partners or to authorize any
Partner to act as general agent for the other Partner.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS.
Unless otherwise clearly indicated to the contrary in this
Agreement, the following definitions shall apply to the terms used in this
Agreement, which definitions shall be applicable equally to the singular and
plural of the terms defined:
"Acceptance" has the meaning set forth in Section 11.10 of this
Agreement.
"Adjusted Capital Account" means, with respect to any Partner, a
special account maintained for such Partner, the balance of which shall equal
such Partner's Capital Account balance, increased by the amount (if any) of: (i)
such Partner's share of the Partnership Minimum Gain and Partner Minimum Gain,
plus (ii) all other amounts such Partner is unconditionally obligated to
contribute to the capital of the Partnership.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account.
"Affiliate" means, as to any Person, a Person that directly or
indirectly Controls, is Controlled by, or is under common Control with, such
Person.
"Aggregate Net Profit Allocation" means with respect to any Partner for
any Fiscal Year or other fiscal period, an amount, which in no event shall be
below zero, equal to the excess of (i) the cumulative amount of Profits
allocated to such Partner with respect to all prior Fiscal Years or fiscal
periods and the current Fiscal Year or fiscal period, over (ii) the sum of (a)
the cumulative amount of Losses allocated to such Partner with respect to all
prior Fiscal Years or fiscal periods and the current Fiscal Year or fiscal
period, plus (b) the cumulative amount of Nonrecourse Deductions allocated to
such Partner with respect to all prior Fiscal Years and fiscal periods.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented, or restated from time to time.
"Available Cash" means, as of any date, all cash funds of the
Partnership on hand after: (a) payment of all Partnership costs and expenses
that are due and payable (including, without limitation, debt service payments
and any reserve requirements under property management agreements) as of such
date; (b) provision for payment of all Partnership costs and expenses that are
anticipated to become due and payable (including, without limitation, debt
service payments and any reserve requirements under property management
agreements) within 30 days following the date on which Available Cash is being
determined; and (c) provision for adequate reserves (including, without
limitation, working capital,
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capital and other reserves), which reserves (and the amounts thereof) shall be
established by the Managing General Partner in its sole and absolute discretion.
"Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
"Book Depreciation" has the meaning set forth in Section 4.4(b)(v) of
this Agreement.
"Book Value" has the meaning set forth in Section 4.4(c) of this
Agreement.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States or the
State of New York shall not be regarded as a Business Day.
"Buying Partner" has the meaning set forth in Section 11.8 of this
Agreement.
"Buy-Sell Date" means (i) the second anniversary of the Effective Date,
if the Partnership, at any one time prior to such date, had assets with an
aggregate Value of at least $200,000,000.00 or (ii) the third anniversary of the
Effective Date, if the Partnership, at any one time prior to such date, had
assets with an aggregate Value of at least $150,000,000.00.
"Buy-Sell Notice" has the meaning set forth in Section 11.8 of this
Agreement.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 4.4(a) of this Agreement.
"Capital Contribution" means any cash or other property contributed by
a Partner to the Partnership pursuant to the provisions of this Agreement.
"Capital Event" means: (i) the sale or other disposition of a Hotel and
its other, related assets held by the Partnership, a Controlled Entity or a
non-Controlled Entity, (ii) the refinancing of any indebtedness of the
Partnership, a Controlled Entity or a non-Controlled Entity or (iii) any sale or
other disposition (other than in the ordinary course of business) of an interest
in a Controlled or Non-Controlled Entity.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing person.
"Certificate" means the Certificate of Limited Partnership filed with
the Secretary of State of Delaware pursuant to Section 7.3 of this Agreement, as
such Certificate may be amended or restated from time to time.
"CGLH" means, collectively, CGLH GP and CGLH LP.
"CGLH GP" has the meaning set forth in the Preamble of this Agreement.
"CGLH LP" has the meaning set forth in the Preamble of this Agreement.
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"Change in Control" means, with respect to the Corporation and for the
purposes of Section 11.9 only, any of the following:
(a) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, a
"Group"), other than the Corporation, or any of its wholly owned
Subsidiaries or any Investor or Excluded Group, of Beneficial Ownership
of 35% or more of the combined voting power or economic interests of
the then-outstanding Voting Securities (a "Control Interest");
provided, however, that (i) any transfer of Notes or shares of Series B
Preferred Stock or other securities from any Investor or Excluded Group
will not result in a Change in Control unless such transfer is pursuant
to a Reorganization Transaction, merger proposal or tender offer in
respect of the Corporation which has been approved by (or participated
in by) the Board of Directors of the Corporation or by a majority of
the Voting Securities, and (ii) in no event shall the conversion of any
or all of the Notes in accordance with the terms of this Note
constitute a Change in Control; or
(b) there is a change in a majority of the members of the
Board within 12 months of an "election contest" (as defined in Rule 14a
pursuant to the Exchange Act) relating to the election of persons not
recommended by the Board of Directors at the time of the first public
announcements of such election contest and in which a Person not an
Affiliate of the Investor or any Related Person obtained valid proxies
or consents to effect such change; or
(c) the approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the respective beneficial owners of the Voting Securities immediately
prior to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, Beneficially Own more
than 50% of the combined voting power of the then-outstanding Voting
Securities resulting from such reorganization, merger or consolidation;
(d) the sale or other disposition of assets representing 50%
or more of the assets of the Corporation in one transaction or series
of related transactions; or
(e) except as otherwise permitted under this Agreement, the
disposition by the Corporation of any of its interest in the
Partnership to a third party that is not a Subsidiary of the
Corporation (other than a disposition to CGLH Partners I LP, a Delaware
limited partnership, and CGLH Partners II LP, a Delaware limited
partnership, or their Affiliates);
provided, that the occurrence of any event identified in subparagraphs
(a) through (e) above that would otherwise be treated as a Change in Control
shall not constitute a Change in Control hereunder if the Required Holders, by
vote duly taken, shall so determine. "Required Holders" means the holders of
Notes or shares of Series B Preferred Stock representing a majority of the
combined (i) aggregate principal amount of the Notes Outstanding and (ii)
aggregate stated amount of the Series B Preferred Stock outstanding, on the
record date for such vote or, if no such record date is established, on the date
any written consent of such holders is solicited, in each case excluding Notes
or shares of Series B Preferred Stock then owned by the Corporation or any of
its Affiliates. For the purposes of this definition, "Affiliate" shall have the
meaning set forth in Rule 12b-2 promulgated by the Securities and Exchange
Commission under the Exchange Act. "Excluded Group" means any Group in which (A)
the Voting Securities either Beneficially Owned by such Group after the
applicable acquisition or Beneficially Owned by such Group and being transferred
by such Group, as the case may be, multiplied by (B) the percentage of the
Investor's interest in the Beneficial Ownership of such Group, represent a
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Control Interest. "Outstanding" means when used with reference to the Notes at a
particular time, all Notes theretofore issued as provided in the Securities
Purchase Agreement dated as of August [___], 2000 between the Corporation and
the Investors, except (i) Notes theretofore reported as lost, stolen, damaged or
destroyed, or surrendered for transfer, exchange or replacement, in respect to
which replacement Notes have been issued, (ii) Notes theretofore paid in full,
and (iii) Notes theretofore canceled by the Corporation, except that, for the
purpose of determining whether Holders of the requisite principal amount of
Notes have made or concurred in any waiver, consent, approval, notice or other
communication under this Agreement, Notes registered in the name of, or
Beneficially Owned by, the Company or any Subsidiary of any thereof, shall not
be deemed to be outstanding. "Holder" means, at any time of reference, a Person
in whose name a Note is registered in the Note Register at such time.
"Class A Capital Contributions" means those Capital Contributions
designated as "Class A" on Exhibit B to this Agreement, as such Exhibit may be
amended from time to time in accordance with this Agreement.
"Class A Preference Amount" means, beginning on the Effective Date, for
each Fiscal Year of the Partnership, with respect to a Partner, an aggregate
amount equal to fifteen (15%) percent per annum multiplied by the average
weighted daily outstanding balance of such Partner's Undistributed Class A
Capital during such period, which Class A Preference Amount shall be cumulative,
compounded annually and prorated for any partial Fiscal Year or Fiscal Year
shorter than a calendar year.
"Class B Capital Contributions" means those Capital Contributions
designated as "Class B" on Exhibit B to this Agreement, as such Exhibit may be
amended from time to time in accordance with this Agreement.
"Class B Preference Amount" means, beginning on the Effective Date, for
each Fiscal Year of the Partnership, with respect to a Partner, an aggregate
amount equal to fifteen (15%) percent per annum multiplied by the average
weighted daily outstanding balance of such Partner's Undistributed Class B
Capital during such period, which Class B Preference Amount shall be cumulative,
compounded annually and prorated for any partial Fiscal Year or Fiscal Year
shorter than a calendar year.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
"Commencement Date" means the date of the filing of the Certificate by
the Managing General Partner.
"Control" shall be used for the purposes of the definition of
"Affiliate," "Controlled Entity," and Section 11.1 hereof only, and shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities or interests, by contract or otherwise.
"Controlled Entity" means a Person Controlled by the Partnership.
"Corporation" means Interstate Hotels Corporation, a Maryland
corporation.
"CPI" has the meaning set forth in Section 7.1 of this Agreement.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, Chapter 17 of Title 6 of the Delaware Code, as it may be amended from time
to time, and any successor to such Delaware Act.
"Distribution Date" means, (i) with respect to each of the first three
Fiscal Year quarters in a Fiscal Year, the date that is 30 days following the
General Partner's delivery to the Managing General
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Partner of the monthly financial statements pursuant to Section 9.3 of this
Agreement for the last month in such Fiscal Year quarter, and (ii) with respect
to last Fiscal Year quarter in a Fiscal Year, the date that is 30 days following
the General Partner's delivery to the Managing General Partner of the annual
financial statements pursuant to Section 9.3 of this Agreement for such Fiscal
Year.
"Effective Date" has the meaning set forth in the Preamble of this
Agreement.
"Event of Bankruptcy" means, with respect to any Partner or the
Partnership, any of the following acts or events:
(a) making an assignment for the benefit of creditors;
(b) filing a voluntary petition in bankruptcy;
(c) becoming the subject of an order for relief or being
declared insolvent or bankrupt in any federal or state bankruptcy or
insolvency proceeding;
(d) filing a petition or answer seeking a reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any statute, law or regulation;
(e) filing an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in a
proceeding of the type described in parts (a) through (d) of this
definition;
(f) making an admission in writing of an inability to pay
debts as they mature;
(g) giving notice to any governmental body that insolvency has
occurred, that insolvency is pending, or that operations have been
suspended;
(h) seeking, consenting to, or acquiescing in the appointment
of a trustee, receiver, or liquidator of all or any substantial part of
its properties; or
(i) the expiration of 90 days after the date of the
commencement of a proceeding against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law, or regulation if
the proceeding has not been previously dismissed, or the expiration of
60 days after the date of the appointment, without such Person's
consent or acquiescence, of a trustee, receiver, or liquidator of such
Person or of all or any substantial part of such Person's properties,
if the appointment has not previously been vacated or stayed, or the
expiration of 60 days after the date of expiration of a stay, if the
appointment has not been previously vacated.
"Event of Withdrawal" has the meaning set forth in Section 12.1 of the
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Tag-Along Interest" has the meaning set forth in Section
11.10 of this Agreement.
"Executive Employment Agreements" means the Amended and Restated
Agreement between Hewitt and the Corporation dated as of August [31], 2000 and
the Amended and Restated Agreement between Richardson and the Corporation dated
as of August [31], 2000, in each case as in effect on the Effective Date, and
"Executive Employment Agreement" means one of the foregoing agreements.
"Executives" means Richardson and Hewitt and "Executive" means
Richardson or Hewitt.
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"Financial Institution" has the meaning set forth in Section 7.15 of
this Agreement.
"Fiscal Year" has the meaning set forth in Section 9.2 of this
Agreement.
"General Partner" means IHC GP, in its capacity as the general partner
of the Partnership, and/or its permitted successors or assigns in accordance
with the terms of this Agreement.
"Grace Period" has the meaning set forth in Section 4.3 of this
Agreement.
"Hotel" means a hotel, motel, inn or other lodging facility and, if
applicable, the real property on which it is located.
"IHC" means, collectively, IHC GP and IHC LP.
"IHC GP" has the meaning set forth in the Preamble of this Agreement.
"IHC LP" has the meaning set forth in the Preamble of this Agreement.
"IHC Tag-Along Interest" has the meaning set forth in Section 11.10 of
this Agreement.
"Investment Banking Firm" has the meaning set forth in Section 11.9 of
this Agreement.
"Investment Banking Services" has the meaning set forth in Section 7.15
of this Agreement.
"Investors" means the following investors in the Corporation: CGLH
Partners I LP and CGLH Partners II LP, and all of their respective successors
and assigns, by operation of law or otherwise.
"Lehman Brothers" has the meaning set forth in Section 7.15 of this
Agreement.
"Limited Partner" means CGLH LP, IHC LP, Richardson, Hewitt and any
other Person who has been admitted as a limited partner of the Partnership in
accordance with the terms of this Agreement.
"Liquidator" has the meaning set forth in Section 13.3(a) of this
Agreement.
"Losses" has the meaning set forth in Section 4.4(b) of this Agreement.
"Major Decision" has the meaning set forth in Section 7.2 of this
Agreement.
"Majority Interest" means the owners of more than 51% of the Percentage
Interests of the Limited Partners.
"Managing General Partner" means CGLH GP in its capacity as the
managing general partner of the Partnership, and/or its permitted successors or
assigns in accordance with the terms of this Agreement.
"Manager" has the meaning set forth in Section 7.16 of this Agreement.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"Note" means the subordinated convertible note or notes having an
aggregate principal amount of $25,000,000, convertible into shares of Class A
Common Stock, par value $.01, of the Corporation, subject to certain
limitations.
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"Notice" has the meaning set forth in Section 7.15 of this Agreement.
"Notice Period" has the meaning set forth in Section 11.10 of this
Agreement.
"Offering Partner" has the meaning set forth in Section 11.8 of this
Agreement.
"Partner" means a Managing General Partner, a General Partner or a
Limited Partner.
"Partner Minimum Gain" means partner nonrecourse debt minimum gain as
determined under the rules of Section 1.704-2(i) of the Regulations.
"Partner Nonrecourse Deduction" has the meaning set forth in Section
1.704-2(i)(1) and (2) of the Regulations.
"Partnership" means the limited partnership formed by the filing of the
Certificate with the Secretary of State of Delaware and established pursuant to
this Agreement.
"Partnership Interest" means the interest acquired by a Partner in the
Partnership including, without limitation, such Partner's right: (a) to an
allocable share of the Profits, Losses, and other income, gains, losses,
deductions, and credits of the Partnership; (b) to a distributive share of the
assets of the Partnership; (c) if a Limited Partner (other than an Executive),
to vote on those matters described in this Agreement; and (d) (i) if the
Managing General Partner, to manage and operate the business of the Partnership,
(ii) if the General Partner, to manage and operate the business of the
Partnership as and to the extent such power and authority are expressly granted
herein or by the Managing General Partner in writing.
"Partnership Minimum Gain" has the meaning set forth in Section
1.704-2(d) of the Regulations.
"Percentage Interest" means, as to a Partner, the ratio, expressed as a
percentage, of Class A Capital Contributions and Tier 2 Capital Contributions
actually contributed to the Partnership by such Partner to all Class A Capital
Contributions and Tier 2 Capital Contributions actually contributed to the
Partnership by all Partners; provided, however, that, subject to the provisions
of this Agreement, including, without limitation, Sections 4.3, 11.12 and 11.13
and Exhibit G hereof, the Percentage Interest of an Executive shall be the
applicable percentage interest stated on Exhibit A hereto for such Executive.
Exhibit A shall be amended from time to time in accordance with this Agreement;
provided, that, in conjunction with Class A Capital Contributions made by the
Partners (other than the Executives) as of a given date, the Executives shall be
deemed to have made, as of such date, Class A Capital Contributions pro rata in
proportion to their respective Percentage Interests set forth in Exhibit A
hereto, subject to the provisions of Section 11.13 and Exhibit G hereof.
"Preference Amount" means a Class A Preference Amount, or a Class B
Preference Amount or both.
"Person" means an individual, corporation, general or limited
partnership, limited liability company, government entity, joint venture,
estate, trust, association or organization or other entity of any kind or
nature.
"Profits" has the meaning set forth in Section 4.4(b) of this
Agreement.
"Purchase Price" has the meaning set forth in Section 11.9 of this
Agreement.
"Put Date" has the meaning set forth in Section 11.9 of this Agreement.
"Receiving Partner" has the meaning set forth in Section 11.8 of this
Agreement.
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"Redemption Closing Date" has the meaning ascribed to it in Section
11.12 hereof
"Redemption Interest" has the meaning ascribed to it in Section 11.12
hereof.
"Redemption Notice" has the meaning ascribed to it in Section 11.12
hereof.
"Redemption Price" has the meaning ascribed to it in Section 11.12
hereof.
"Regulations" means the Department of Treasury Regulations promulgated
under the Code, as amended and in effect (including corresponding provisions of
succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 5.3 of
this Agreement.
"Related Person" means, with respect to any Person, (A) any Affiliate
of such Person, (B) any investment manager, investment advisor or partner of
such Person or an Affiliate of such Person, and (C) any investment fund,
investment account or investment entity whose investment manager, investment
advisor or general partner is such Person or a Related Person of such Person.
For purposes of this definition, Person shall also include "Group" as such term
is defined in the definition of "Change in Control".
"Response Period" has the meaning set forth in Section 11.8 of this
Agreement.
"Sale" has the meaning set forth in Section 11.10 of this Agreement.
"Sale Notice" has the meaning set forth in Section 11.10 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor to such statute.
"Selling Partner" has the meaning set forth in Section 11.8 of this
Agreement.
"Series B Preferred Stock" means Series B Convertible Preferred Stock,
par value $.01 per share, of the Corporation having an aggregate stated amount
of $5,000,000.00, convertible into shares of Class A Common Stock, par value
$.01, of the Corporation, subject to certain limitations.
"Stated Value" has the meaning set forth in Section 11.8 of this
Agreement.
"Subsidiary" of any Person means any corporation, partnership, limited
liability company or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person.
"Tier 1 Capital Contributions" has the meaning set forth in Section 4.1
of this Agreement.
"Tier 2 Capital Contributions" has the meaning set forth in Section 4.3
of this Agreement.
"Total Voting Power" means the total combined Voting Power, on a fully
diluted basis, of all the Voting Securities then outstanding.
"Tier 1 Capital Call Notice Period" has the meaning set forth in
Section 4.2 of this Agreement.
"Tier 2 Capital Call Notice Period" has the meaning set forth in
Section 4.3 of this Agreement.
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"Transfer" has the meaning set forth in Section 11.1 of this Agreement.
"Undistributed Class A Capital" means, with respect to the Class A
Capital Contributions of a Partner and as of a given date, the aggregate amount
of such Partner's Class A Capital Contributions actually made as of such date,
reduced by all prior distributions to such Partner pursuant to Section
6.1(b)(ii)(C)(2). With respect to an Executive, his Undistributed Class A
Capital, as of a given date, shall be an amount equal to the product of: (i)
such Executive's then Percentage Interest (determined without regard to any
dilution in such Percentage Interest on account of such Executive's failure to
make a Tier 2 Capital Contribution); multiplied by (ii) the total amount of
Undistributed Class A Capital of all of the Partners other than Executives at
such time.
"Undistributed Class A Preference Amount" means, with respect to the
Class A Preference Amount of a Partner and as of a given date, the aggregate
amount of such Partner's Class A Preference Amount as of such date, reduced by
all prior distributions to such Partner pursuant to Section 6.1(b)(i)(B) and
Section 6.1(b)(ii)(B). The calculation and recalculation of the Undistributed
Class A Preference Amount for each Partner shall be made (a) prior to the time
any distributions are made pursuant to Section 6.1 if such distributions are
made at a time other than on the last day of a Fiscal Year of the Partnership,
(b) as of the last day of each Fiscal Year of the Partnership and (c) prior to
any Sale pursuant to Section 11.10. With respect to an Executive, his
Undistributed Class A Preference Amount, as of a given date, shall be an amount
equal to the product of: (i) such Executive's then Percentage Interest
(determined without regard to any dilution in such Percentage Interest on
account of such Executive's failure to make a Tier 2 Capital Contribution);
multiplied by (ii) the total amount of Undistributed Class A Preference Amounts
of all of the Partners other than Executives at such time.
"Undistributed Class B Capital" means, with respect to the Class B
Capital Contributions of a Partner and as of a given date, the aggregate amount
of such Partner's Class B Capital Contributions actually made as of such date,
reduced by all prior distributions to such Partner pursuant to Section
6.1(b)(ii)(C)(1) and Section 11.10.
"Undistributed Class B Preference Amount" means, with respect to the
Class B Preference Amount of a Partner and as of a given date, the aggregate
amount of such Partner's Class B Preference Amount as of such date, reduced by
all prior distributions to such Partner pursuant to Section 6.1(b)(i)(A) and
Section 6.1(b)(ii)(A). The calculation and recalculation of the Undistributed
Class B Preference Amount for each Partner shall be made (a) prior to the time
any distributions are made pursuant to Section 6.1 if such distributions are
made at a time other than on the last day of a Fiscal Year of the Partnership
and (b) as of the last day of each Fiscal Year of the Partnership.
"Undistributed Tier 2 Capital" means, with respect to the Tier 2
Capital Contributions of a Partner and as of a given date, the aggregate amount
of such Partner's Tier 2 Capital Contributions actually made as of such date,
reduced by all prior distributions to such Partner pursuant to Section
6.1(b)(ii)(D).
"Value" means, for purposes of Section 7.15(a) and (d) and the
definition of "Buy-Sell Date", with respect to the value of the assets of the
Partnership, the sum of: (i) the aggregate gross purchase prices paid by the
Partnership (including, without limitation, through Partnership capital, debt
and equity financing or otherwise) for interests in Hotels and other, related
assets and the Partnership's aggregate gross capital contributions to Controlled
Entities and non-Controlled Entities for the acquisition of interests in Hotels
and other, related assets (or for interests in other Controlled Entities and
non-Controlled Entities for the acquisition of interests in Hotels and other,
related assets); and (ii) the aggregate gross capital expenditures in respect of
such Hotels and other, related assets.
"Vesting Date" means any of Vesting Date 1, Vesting Date 2 or Vesting
Date 3.
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"Vesting Date 1" means the first anniversary of the "Commencement
Date", as such term is defined in each of the Executive Employment Agreements;
provided, however, that with respect to Richardson's Executive Employment
Agreement, if Richardson terminates his employment with the Corporation without
Good Reason (as such term is defined in such Executive's Executive Employment
Agreement), Vesting Date 1 with respect to his Percentage Interests shall be the
date that is nine calendar months following the "Commencement Date" as such term
is defined in Richardson's Executive Employment Agreement.
"Vesting Date 2" means the second anniversary of the "Commencement
Date", as such term is defined in each of the Executive Employment Agreements.
"Vesting Date 3" means the third anniversary of the "Commencement
Date", as such term is defined in each of the Executive Employment Agreements.
"Voting Securities" means (i) any securities entitled, or which may be
entitled, to vote generally in the election of directors of the Corporation,
(ii) any securities, including the Note and the Series B Preferred Stock,
convertible or exercisable into or exchangeable for such securities (whether or
not the right to convert, exercise or exchange is subject to the passage of time
or contingencies or both), or (iii) any direct or indirect rights or options to
acquire any such securities; provided, that unexercised options granted pursuant
to any employment benefit or similar plan and rights issued pursuant to any
shareholder rights plan shall be deemed not to be Voting Securities.
ARTICLE III
PURPOSE
3.1 PURPOSES AND SCOPE.
The purposes of the Partnership are expressly limited to: (a)
the acquisition, holding, ownership, operation, maintenance, improvement,
development, sale, exchange, lease, and other uses and dispositions of Hotels
and other, related assets, and the incurring of indebtedness or similar
obligations, including, without limitation, under secured or unsecured credit
facilities of every kind and nature, in connection therewith; (b) forming, and
owning equity securities or interests in, and/or acting as a general partner,
limited partner, managing member, member and/or equity holder of, Controlled
Entities or non-Controlled Entities that acquire, hold, own, operate, maintain,
improve, develop, sell, exchange, lease, and otherwise use or dispose of Hotels
and other, related assets, and the incurring of indebtedness or similar
obligations including, without limitation, under secured or unsecured credit
facilities of every kind and nature, in connection with the ownership of such
equity securities or interests; (c) forming, and owning equity securities or
interests in, and/or acting as a general partner, limited partner, managing
member, member and/or equity holder of, Controlled Entities or non-Controlled
Entities that own the equity securities or interests in, and/or act as a general
partner, limited partner, managing member, member and/or equity holder of,
Persons that acquire, hold, own, operate, maintain, improve, develop, sell,
exchange, lease, and otherwise use or dispose of Hotels and other, related
assets, and the incurring of indebtedness or similar obligations including,
without limitation, under secured or unsecured credit facilities of every kind
and nature, in connection with the ownership of such equity securities or
interests; and (d) the transacting of any and all lawful business for which the
Partnership may be organized under Delaware law that is incident, necessary and
appropriate to accomplish any of the foregoing.
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ARTICLE IV
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; PARTNERSHIP INTERESTS
4.1 CAPITAL CONTRIBUTIONS; INITIAL CAPITAL CONTRIBUTIONS.
(a) Each Partner shall be required to contribute to the
Partnership in cash, payable from time to time in accordance with
Section 4.2 hereof, an amount equal to the sum of the amounts of Class
A Capital Contributions and Class B Capital Contributions listed on
Exhibit B hereto opposite such Partner's name under the headings,
"Class A Capital Contribution" and "Class B Capital Contribution". All
such capital contributions by all of the Partners are hereinafter
sometimes collectively referred to as "Tier 1 Capital Contributions".
To the extent that a Partner receives a return of capital in respect of
any Class A Capital Contribution or Class B Capital Contribution on or
before the fifth anniversary of the Effective Date, such returned
capital shall be subject to subsequent capital call with respect to
such class of capital, on the terms provided in Section 4.2, provided,
that the Partners or their Affiliates shall not be obligated to
maintain liquid reserves in amounts equal to such returned capital for
subsequent re-contribution. Nothing herein shall require the
Partnership to make such subsequent capital call before electing to
make a capital call for Tier 2 Capital Contributions, as provided in
Section 4.3 below.
(b) On the Effective Date, the Partners shall make initial
capital contributions to the Partnership, in cash, pro rata in
proportion to their Tier 1 Capital Contributions obligations, as
determined by the Managing General Partner and a Majority Interest, but
not to exceed amounts reasonably necessary for the initial
capitalization of the Partnership. Such initial capital contributions
shall be credited against the Partners' respective Tier 1 Capital
Contributions obligations.
4.2 TIER 1 CAPITAL CONTRIBUTIONS.
(a) The Managing General Partner and a Majority Interest shall
determine, from time to time, the capital needs of the Partnership.
Upon such determination, the Managing General Partner shall give
written notice to each Partner (a "Tier 1 Capital Call Notice"). The
Partners shall make Tier 1 Capital Contributions to the Partnership,
pro rata in proportion to their respective Tier 1 Capital Contributions
obligations. Capital constituting all or a portion of IHC LP's Tier 1
Capital Contributions shall be allocated as follows: (i) 53.02% as a
Class A Capital Contribution and (ii) 46.98% as a Class B Capital
Contribution, consistent with Exhibit B attached hereto. Each Partner
shall have five (5) days from the date such Tier 1 Capital Call Notice
is given to contribute to the Partnership its required amount of
additional capital constituting all or a portion of its respective Tier
1 Capital Contributions obligations. Each Partner shall receive a
credit to its Capital Account in the amount of any such capital that it
contributes to the Partnership.
(b) If a Partner does not timely contribute its required
portion of the Tier 1 Capital Contributions when and in such amounts as
required pursuant to subsection (a) hereof, that Partner shall be in
default under this Agreement. The Managing General Partner or those
non-defaulting Partners that hold a majority of the Percentage
Interests held by all non-defaulting Partners may exercise any one or
more of the following remedies, all of which are cumulative, and may be
exercised concurrently (provided, however, that if more than one remedy
is exercised, the non-defaulting Partners may not be compensated or
obtain relief in the aggregate in excess of the actual portion of the
Tier 1 Capital Contribution that the defaulting Partner has
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failed to contribute, together with reimbursement for related expenses
as and to the extent expressly permitted hereunder):
(i) One or more of the non-defaulting Partners may
advance funds to the Partnership to cover those amounts which
the defaulting Partner fails to contribute. Amounts that a
non-defaulting Partner(s) so advances on behalf of the
defaulting Partner shall become a fully-recourse loan due and
owing from the defaulting Partner to such non-defaulting
Partner(s) and shall bear interest at the lesser of the
maximum lawful rate and the rate of fifteen percent (15%) per
annum, payable monthly. All cash distributions otherwise
distributable to the defaulting Partner under this Agreement
shall instead be paid to the non-defaulting Partner(s) making
such advances until such advances and interest thereon are
paid in full. Any such advances shall be due and payable by
the defaulting Partner one (1) year from the date that such
advance was made, with any amounts repaid applied first to
interest and thereafter to principal. Effective upon a
Partner's becoming a defaulting Partner, such defaulting
Partner grants to the non-defaulting Partner(s) that advances
funds under this Section a security interest in such
defaulting Partner's right to its allocable share of Profits
and Losses, and its distributive share of the assets, of the
Partnership, to secure its obligation to repay such advances
and agrees to execute and deliver a promissory note evidencing
such obligations in form and substance as provided in this
clause (i) and reasonably acceptable to the Managing General
Partner, together with a security agreement in a form
reasonably acceptable to the Managing General Partner and such
UCC-1 financing statements and other documents as such
non-defaulting Partner(s) may reasonably request. If the
defaulting Partner shall fail to make its monthly payments of
interest or pay the loan in full when due, the defaulting
Partner shall lose, until such time as the default Partner
cures the default: (i) its voting and approval rights under
the Delaware Act, the Certificate and this Agreement and (ii)
its ability, if any, to participate in the management and
operations of the Partnership. In addition, the defaulting
Partner shall have no right to receive any distributions from
the Partnership until the non-defaulting Partners have first
received distributions in an amount equal to the additional
capital contributed by each non-defaulting Partner to the
Partnership (pursuant to the capital call as to which the
defaulting Partner defaulted) plus a cumulative,
non-compounded return thereon at the lesser of the maximum
lawful rate and the rate of fifteen percent (15%) per annum.
(ii) The then existing Percentage Interests of the
Partners (other than the Executives) shall be proportionately
adjusted to reflect the failure of the defaulting Partner to
contribute its required capital to the Partnership.
(iii) One or more of the non-defaulting Partners that
hold a majority of the Percentage Interests held by all
non-defaulting Partners may with the consent of the Managing
General Partner dissolve the Partnership, in which event the
Partnership shall be wound-up, liquidated and terminated
pursuant to Article XIII hereof.
(iv) The Partnership or one or more of the
non-defaulting Partners (other than the Executives) may
purchase the defaulting Partner's entire Partnership Interest
in accordance with the same terms and conditions as those set
forth in Section 11.8 hereof except that the purchase price
shall be an amount equal to eighty percent (80%) of the
amounts the Selling Partner would have received under Section
11.8(a)(iii) hereof based upon a Stated Value determined in
good faith; provided, that, the defaulting Partner shall not
have the rights of a Receiving Partner under Section
11.8(a)(ii) and shall be deemed to have accepted the offer of
purchase.
(v) One or more of the non-defaulting Partners may
contribute the capital that the defaulting Partner failed to
so contribute and such defaulting Partner shall have
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no right to receive any distributions from the Partnership
until the non-defaulting Partners have first received
distributions in an amount equal to the additional capital
contributed by each non-defaulting Partner to the Partnership,
in addition to any preferred return (and the priority of such
return) that may have been earned or payable with respect
thereto as if such contribution had been made by the
defaulting Partner.
(c) Each Partner acknowledges and agrees that (i) a default by
any Partner in making Tier 1 Capital Contributions will result in the
Partnership's and the non-defaulting Partners' incurring certain costs
and other damages in an amount that would be extremely difficult or
impractical to ascertain, and (ii) the remedies described herein bear a
reasonable relationship to the damages which the Partners estimate may
be suffered by the Partnership and the non-defaulting Partners by
reason of the failure of a defaulting Partner to make any such required
capital contribution and the exercise of any or all of the above
described remedies is not unreasonable under the circumstances existing
as of the date hereof.
(d) The exercise by the Managing General Partner or
non-defaulting Partners, as applicable, of one or more remedies
provided in this Section shall not be a waiver or limitation of the
right to pursue any one or more remedies available hereunder or at law
or equity with respect to any subsequent default.
(e) For the period commencing when a Partner does not timely
contribute its required portion of Tier 1 Capital Contributions until
such time as such loan is paid in full, any Preferences otherwise
accruing to the defaulting Partner under this Agreement shall not be
compounded (but shall accrue as aforesaid).
4.3 ADDITIONAL CAPITAL CONTRIBUTIONS.
This Section relates only to required capital contributions IN
ADDITION TO Tier 1 Capital Contributions. The sole purpose of the Tier 2 Capital
Contributions is to provide the Partnership with additional capital necessary to
operate the Hotels and other, related assets (and any other property) acquired
by the Partnership (using Tier 1 Capital Contributions) and Tier 2 Capital
Contributions are expressly not intended for the acquisition of interests in
Hotels and other, related assets (and any other property). The consent of all
Partners shall be required for the Partnership to make a Tier 2 Capital
Contribution capital call to pay for capital expenditures with respect to a
Hotel and its other, related assets to the extent that such capital expenditure
exceed those required by the licensor or franchisor under such Hotel's license
agreement or franchise agreement. This Section is not intended, and shall not be
construed, as having any effect on the Partnership's use of Tier 1 Capital
Contributions, the Partners' obligations to make Tier 1 Capital Contributions
and the Partnership's and the Partners' remedies with respect to any failure to
make the Tier 1 Capital Contributions. To the extent that a Partner receives a
return of capital in respect of any Tier 2 Capital Contribution on or before the
fifth anniversary of the Effective Date, such returned capital shall be subject
to subsequent capital call, on the terms provided in this Section 4.3, provided,
that the Partners or their Affiliates shall not be obligated to maintain liquid
reserves in amounts equal to such returned capital for subsequent
re-contribution. For the avoidance of doubt, the Executives shall be required to
make Tier 2 Capital Contributions in accordance with the provision of this
Section 4.3.
(a) The Partners shall contribute additional capital to the
Partnership as described in the first paragraph of this Section 4.3, in
proportion to their respective Percentage Interests ("Tier 2 Capital
Contributions") and in such amounts and at such times as required by
the Managing General Partner with the consent of a Majority Interest.
Upon such determination, the Managing General Partner shall give
written notice thereof to each Partner (the "Tier 2 Capital Call
Notice"). Each Partner shall have twenty (20) days from the date the
Tier 2 Capital Call Notice is given (the "Tier 2 Capital Call Notice
Period") to contribute its required Tier 2 Capital
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Contribution to the Partnership; provided, however, if the stated
reason for the capital call is to cure a default under any obligation
of the Partnership, the Tier 2 Capital Call Notice Period may be such
lesser time as indicated in the Tier 2 Capital Call Notice. Each
Partner shall receive a credit to its Capital Account in the amount of
the Tier 2 Capital Contribution that it contributes to the Partnership.
(b) If a Partner does not timely contribute additional capital
when and in such amounts as required pursuant to subsection (a) hereof,
that Partner shall be in default under this Agreement. In such event,
the Managing General Partner shall send the defaulting Partner written
notice of such default, giving the defaulting Partner twenty (20) days
from the date such notice is given (the "Grace Period") to contribute
the entire amount of its required Tier 2 Capital Contribution;
provided, however, that if the stated reason for the capital call is to
cure a default under any obligation of the Partnership, there shall be
no Grace Period. If the defaulting Partner does not contribute its
required Tier 2 Capital Contribution to the Partnership within the Tier
2 Capital Call Notice Period or within the Grace Period, if applicable,
the Managing General Partner or those non-defaulting Partners that hold
a majority of the Percentage Interests held by all non-defaulting
Partners may exercise any one or more of the following remedies, all of
which are cumulative, and may be exercised concurrently (provided,
however, that if more than one remedy is exercised, the non-defaulting
Partners may not be compensated or obtain relief in the aggregate in
excess of the actual portion of the Tier 2 Capital Contribution that
the defaulting Partner has failed to contribute, together with
reimbursement for related expenses as and to the extent expressly
permitted hereunder):
(i) One or more of the non-defaulting Partners (other
than the Executives) may advance funds to the Partnership to
cover those amounts which the defaulting Partner fails to
contribute. Amounts that a non-defaulting Partner(s) so
advances on behalf of the defaulting Partner shall become a
loan due and owing from the defaulting Partner to such
non-defaulting Partner(s) and shall bear interest at the
lesser of the maximum lawful rate and the rate of fifteen
percent (15%) per annum, payable monthly. Such loan shall be
recourse only to the Partnership Interests of the defaulting
Partner. All cash distributions otherwise distributable to the
defaulting Partner under this Agreement shall instead be paid
to the non-defaulting Partner(s) making such advances until
such advances and interest thereon are paid in full. Any such
advances shall be due and payable by the defaulting Partner
one (1) year from the date that such advance was made, with
any amounts repaid applied first to interest and thereafter to
principal. Effective upon a Partner's becoming a defaulting
Partner, such defaulting Partner grants to the non-defaulting
Partner(s) that advance funds under this Section a security
interest in such defaulting Partner's right to its allocable
share of Profits and Losses, and its distributive share of the
assets, of the Partnership, to secure its obligation to repay
such advances and agrees to execute and deliver a promissory
note evidencing such obligations in form and substance as
provided in this clause (i) and reasonably acceptable to the
Managing General Partner, together with a security agreement
in a form reasonably acceptable to the Managing General
Partner and such UCC-1 financing statements and other
documents as such non-defaulting Partner(s) may reasonably
request. If the defaulting Partner shall fail to make its
monthly payments of interest or pay the loan in full when due,
the defaulting Partner shall lose, until such time as the
default Partner cures the default: (i) its voting and approval
rights under the Delaware Act, the Certificate and this
Agreement and (ii) its ability, if any, to participate in the
management and operations of the Partnership. In addition, the
defaulting Partner shall have no right to receive any
distributions from the Partnership until the non-defaulting
Partner(s) have first received distributions in an amount
equal to the additional capital contributed by each
non-defaulting Partner(s) to the Partnership (pursuant to the
capital call as to which the defaulting Partner defaulted)
plus a cumulative, non-compounded
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return thereon at the lesser of the maximum lawful rate and
the rate of fifteen percent (15%) per annum.
(ii) The then existing Percentage Interests shall be
proportionately adjusted to reflect the failure of the
defaulting Partner to contribute its required additional
capital to the Partnership.
(iii) One or more of the non-defaulting Partners
(other than the Executives) may contribute the capital that
the defaulting Partner failed to so contribute and the
defaulting Partner shall have no right to receive any
distributions from the Partnership until the non-defaulting
Partners have first received distributions in an amount equal
to the additional capital contributed by each non-defaulting
Partner to the Partnership plus a cumulative, non-compounded
return thereon at the lesser of the maximum lawful rate and
the rate of fifteen percent (15%) per annum as if such
contribution had been made by the defaulting Partner.
(c) In addition to any of the remedies set forth in Section
4.3(b) hereof, if IHC GP or IHC LP defaults on its obligation to make a
Tier 2 Capital Contribution pursuant to a Tier 2 Capital Call Notice,
then the Partnership shall have the right to terminate the property
management agreement(s) covering the Hotel or Hotels for which the
additional Tier 2 Capital Contribution was required. The defaulting IHC
GP or IHC LP, and not the Partnership, shall be liable for termination
payments in connection with such termination and the defaulting IHC GP
or IHC LP shall indemnify and hold harmless the Partnership and the
non-IHC Partners against any liability or obligation with respect to
such payments.
(d) Each Partner acknowledges and agrees that (i) a default by
any Partner in making a required capital contribution will result in
the Partnership's and the non-defaulting Partners' incurring certain
costs and other damages in an amount that would be extremely difficult
or impractical to ascertain, and (ii) the remedies described herein
bear a reasonable relationship to the damages which the Partners
estimate may be suffered by the Partnership and the non-defaulting
Partners by reason of the failure of a defaulting Partner to make any
required additional capital contribution and the exercise of any or all
of the above described remedies is not unreasonable under the
circumstances existing as of the date hereof.
(e) The exercise by the Managing General Partner or
non-defaulting Partners, as applicable, of one or more remedies
provided in this Section shall not be a waiver or limitation of the
right to pursue any one or more remedies available hereunder or at law
or equity with respect to any subsequent default.
(f) For the period commencing when a Partner does not timely
contribute its required portion of the Tier 2 Capital Contributions
until such time as such loan is paid in full, any Preferences otherwise
accruing to the defaulting Partner under this Agreement shall not be
compounded (but shall accrue as aforesaid).
4.4 CAPITAL ACCOUNTS.
(a) Maintenance Rules. The Partnership shall maintain for each
Partner a separate Capital Account in accordance with this Section 4.4.
Each Capital Account shall be maintained in accordance with the
following provisions:
(i) Such Capital Account shall be increased by the
cash amount or Book Value of any property contributed by such
Partner to the Partnership pursuant to this Agreement, such
Partner's allocable share of Profits and any items in the
nature of income or gains which are specially allocated to
such Partner pursuant to Section 5.2 and
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Section 5.3 hereof, and the amount of any Partnership
liabilities assumed by such Partner or which are secured by
any property distributed to such Partner.
(ii) Such Capital Account shall be decreased by the
cash amount or Book Value of any property distributed to such
Partner pursuant to this Agreement (except as payment with
respect to a loan), such Partner's allocable share of Losses
and any items in the nature of deductions or losses which are
specially allocated to such Partner pursuant to Section 5.2
and Section 5.3 hereof, and the amount of any liabilities of
the Partner assumed by the Partnership or which are secured by
any property contributed by such Partner to the Partnership.
(iii) In the event any interest in the Partnership is
transferred in accordance with the terms of this Agreement,
the transferee shall succeed to the Capital Account of the
transferor to the extent that it relates to the transferred
interest.
(iv) In determining the amount of any liability for
purposes of Sections 4.4(a)(i) and (ii) hereof, there shall be
taken into account Code Section 752(c) and any other
applicable provisions of the Code and Regulations.
(v) The Capital Accounts of each Partner shall be
adjusted as provided in Regulations Section
1.704-1(b)(2)(iv)(j) to take into account any required basis
adjustments with respect to Code Section 38 property.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply
with Section 1.704-1(b) of the Regulations and shall be interpreted and
applied in a manner consistent with such Regulations. If the Managing
General Partner determines that it is prudent to modify the manner in
which the Capital Accounts, or any increases or decreases to the
Capital Accounts, are computed in order to comply with such
Regulations, the Managing General Partner may authorize such
modifications, provided that it is not likely to have a material effect
on the amounts otherwise distributable to any Person.
(b) Definition of Profits and Losses. "Profits" and "Losses"
mean, for each fiscal year or other period, an amount equal to the
Partnership's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in
computing Profits and Losses pursuant to this Section 4.4(b)
shall be added to such taxable income or loss.
(ii) Any expenditures of the Partnership described in
Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise
taken into account in computing Profits and Losses pursuant to
this Section 4.4(b), shall be subtracted from such taxable
income or loss.
(iii) If the Book Value of any partnership asset is
adjusted pursuant to Sections 4.4(c)(ii) through (c)(iv), the
amount of such adjustment shall be taken into account as gain
or loss from the disposition of such asset for purposes of
computing Profits and Losses.
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(iv) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to
the Book Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Book Value.
(v) In lieu of the deduction for depreciation, cost
recovery or amortization taken into account in computing such
taxable income or loss, there shall be taken into account Book
Depreciation as defined in this Section 4.4(b)(v). Except as
may otherwise be provided in the Regulations, "Book
Depreciation" for any asset means for any fiscal year or other
period an amount that bears the same ratio to the Book Value
of that asset at the beginning of such fiscal year or other
period as the federal income tax depreciation, amortization or
other cost recovery deduction allowable for that asset for
such year or other period bears to the adjusted tax basis of
that asset at the beginning of such year or other period. If
the federal income tax depreciation, amortization or other
cost recovery deduction allowable for any asset for such year
or other period is zero, then Book Depreciation for that asset
shall be determined with reference to such beginning Book
Value using any reasonable method selected by the Managing
General Partner.
(vi) Notwithstanding any other provision of this
Section 4.4(b), any items that are specially allocated
pursuant to Section 5.2 or Section 5.3 shall not be taken into
account in computing Profits and Losses.
(c) Definition of Book Value. "Book Value" means for any asset
the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Book Value of any asset contributed
by a Partner to the Partnership shall be the gross fair market
value of such asset, as determined by the Managing General
Partner in its reasonable discretion.
(ii) The Book Values of all Partnership assets shall
be adjusted to equal their respective gross fair market
values, as determined by the Managing General Partner in its
reasonable discretion, as of the following times: (A) on the
acquisition of an additional interest in the Partnership by
any new or existing Partner in exchange for more than a de
minimis capital contribution if the Managing General Partner
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the
Partners in the Partnership; (B) on the distribution by the
Partnership to a Partner of more than a de minimis amount of
Partnership property as consideration for an interest in the
Partnership if the Managing General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership; and (C) on the liquidation of the Partnership
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations.
(iii) The Book Value of any Partnership asset
distributed to any Partner shall be the gross fair market
value of such asset on the date of distribution.
(iv) The Book Values of Partnership assets shall be
increased (or decreased) to reflect any adjustment to the
adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations and Section 5.2(d) hereof; provided, however, that
Book Values shall not be adjusted pursuant to this Section
4.4(c)(iv) to the extent the Managing General Partner
determines that an adjustment pursuant to Section 4.4(c)(ii)
is necessary or
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appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this Section
4.4(c)(iv).
(v) If the Book Value of an asset has been determined
or adjusted pursuant to Section 4.4(c)(i), 4.4(c)(ii), or
4.4(c)(iv) hereof, such Book Value shall thereafter be
adjusted by the Book Depreciation taken into account with
respect to such asset for purposes of computing Profits and
Losses.
4.5 NEGATIVE CAPITAL ACCOUNTS.
If any Partner has a deficit balance in its Capital Account,
such Partner shall have no obligation to restore such negative balance or to
make any Capital Contribution to the Partnership by reason thereof, and such
negative balance shall not be considered an asset of the Partnership or of any
Partner.
4.6 INTEREST.
No interest shall be paid by the Partnership on Capital
Contributions or on balances in Capital Accounts. Nothing in this Section 4.6 is
intended to limit payments of Class A Preference Amounts and Class B Preference
Amounts to Partners as provided hereunder or on payments or contributions made
by non-defaulting Partners pursuant to Sections 4.2 and 4.3 hereof.
4.7 NO WITHDRAWAL.
No Partner shall be entitled to withdraw any part of its
Capital Contributions or its Capital Account or to receive any distribution from
the Partnership, except as provided in Section 6.1, Section 11.10 and Article
XIII of this Agreement.
4.8 LOANS FROM PARTNERS.
A Partner may advance funds to the Partnership upon the
request of the Partnership with the consent of all of the Partners as to the
terms thereof. Nothing in this Section 4.8 shall require the consent of all of
the Partners to the Partnership's incurring indebtedness or similar obligations,
including, without limitation, under secured and unsecured credit facilities of
every kind or nature, with an Affiliate of a Partner, or otherwise, where such
consent is not required under Section 7.2(a)(vi).
ARTICLE V
ALLOCATIONS
5.1 ALLOCATIONS OF PROFITS AND LOSSES.
Profits, Losses and items thereof of the Partnership for each
Fiscal Year (or other fiscal period) shall be allocated to the Partners in such
manner that:
(a) the Adjusted Capital Account balances of all Partners with
positive Adjusted Capital Account balances (after crediting or debiting
Capital Accounts for Profits, Losses, items thereof, and allocations to
Capital Accounts pursuant to all other provisions of this Article V for
such Fiscal Year or other fiscal period) will correspond as closely as
possible to the distributions that would result if an amount equal to
the sum of (X) plus (Y) were distributed in accordance with Section
13.3(d)(iii) at the end of such Fiscal Year or other fiscal period
where (X) equals the aggregate of the Adjusted Capital Account balances
of all Partners with positive Adjusted
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Capital Account balances and (Y) equals the aggregate amount that would
be required to be contributed by the Partners with negative Adjusted
Capital Account balances (as determined pursuant to Section (b) below
and without duplication for amounts taken into account under clause
(ii) of the definition of Adjusted Capital Account). Allocations shall
be made as if the Executives' respective interests in the Partnership
were not subject to forfeiture pursuant to Section 11.13 hereof.
Notwithstanding the foregoing, an Executive shall only be allocated
Profits that are not attributable to a Capital Event only to the extent
that such Profits reflect such Executive's entitlement to greater
current or future distribution of Available Cash; and
(b) the Adjusted Capital Account balances of all Partners with
negative Adjusted Capital Account balances (after crediting or debiting
Capital Accounts for Profits, Losses, items thereof, and allocations
pursuant to all other provisions of this Article V for such Fiscal Year
or other fiscal period) will correspond as closely as possible to the
manner in which economic responsibility for any such negative balances
in connection with a liquidation of the Partnership at the end of such
Fiscal Year or other fiscal period would be borne by the Partners under
the terms of the Agreement or any collateral agreement.
(c) Limitation on Loss Allocations. The Losses allocated
pursuant to Section 5.1(b) hereof and the next sentence of this Section
5.1(c) to any Partner for any Fiscal Year shall not exceed the maximum
amount of Losses that may be allocated to such Partner without causing
such Partner to have an Adjusted Capital Account Deficit at the end of
such Fiscal Year. All Losses in excess of the limitation in this
Section 5.1(c) shall be allocated solely to the other Partners in
proportion to their respective Percentage Interests. If no other
Partner may receive an additional allocation of Losses pursuant to the
preceding sentence of this Section 5.1(c), such additional Losses not
allocated pursuant to Section 5.1(b) of this Agreement or the preceding
sentence shall be allocated solely to the Managing General Partner.
5.2 SPECIAL ALLOCATIONS OF PROFITS AND LOSSES.
(a) Minimum Gain Chargeback--Partnership Nonrecourse
Liabilities. If there is a net decrease in Partnership Minimum Gain
during any Partnership taxable year, certain items of income and gain
shall be allocated (on a gross basis) to the Partners in the amounts
and manner described in Section 1.704-2(f) and (j)(2)(i) and (iii) of
the Regulations, subject to the exemptions set forth in Section
1.704-2(f)(2), (3), (4) and (5) of the Regulations. This Section 5.2(a)
is intended to comply with the minimum gain chargeback requirement (set
forth in Section 1.704-2(f) of the Regulations) relating to Partnership
nonrecourse liabilities (as defined in Section 1.704-2(b)(3) of the
Regulations) and shall be so interpreted.
(b) Minimum Gain Chargeback--Partner Nonrecourse Debt. If
there is a net decrease in Partner Minimum Gain during any Partnership
taxable year, certain items of income and gain shall be allocated (on a
gross basis) as quickly as possible to those Partners that had a share
of the Partner Minimum Gain (determined pursuant to Section
1.704-2(i)(5) of the Regulations) in the amounts and manner described
in Section 1.704-2(i)(4), (j)(2)(ii) and (iii) of the Regulations. This
Section 5.2(b) is intended to comply with the minimum gain chargeback
requirement (set forth in Section 1.704-2(i)(4) of the Regulations)
relating to partner nonrecourse debt (as defined in Section
1.704-2(b)(4) of the Regulations) and shall be so interpreted.
(c) Qualified Income Offset. If, after applying Section 5.2(a)
and Section 5.2(b), any Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain shall be specially
allocated (on a gross basis) to each such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit of
such Partner as quickly as possible. This Section 5.2(c) is intended to
comply with the "qualified income offset" requirement set forth in
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be so
interpreted.
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(d) Basis Adjustments. To the extent an adjustment to the tax
basis of any Partnership asset pursuant to Section 734(b) or 743(b) of
the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations, to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such gain or loss
shall be specially allocated to the Partners in a manner consistent
with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year or other fiscal period shall be allocated: (i) first, among
the Partners up to an amount equal to the sum of the Aggregate Net
Profit Allocations for all of the Partners in proportion to their
respective Aggregate Net Profit Allocations, and (ii) thereafter, among
the Partners in proportion to their Percentage Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions shall be allocated pursuant to Section 1.704-2(b)(4) and
(i)(1) of the Regulations to the Partner who bears the economic risk of
loss with respect to the deductions.
5.3 CURATIVE ALLOCATIONS.
The allocations set forth in Section 5.1(c) and Section 5.2(a)
through Section 5.2(f) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss, or deduction pursuant to this
Section 5.3. Therefore, notwithstanding any other provisions of this Article V
(other than the Regulatory Allocations), the Managing General Partner shall make
such offsetting special allocations of Partnership income, gain, loss, or
deduction in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Partner's Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Partner would
have had if the Regulatory Allocations were not part of the Agreement and all
Partnership items were allocated pursuant to Section 5.1(a) and (b) hereof. In
exercising its discretion under this Section 5.3, the Managing General Partner
shall take into account future Regulatory Allocations under Sections 5.2(a) and
5.2(b) that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Sections 5.2(e) and 5.2(f).
5.4 TAX ALLOCATIONS: CODE SECTION 704(C).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Partnership shall, solely
for tax purposes, be allocated among the Partners so as to take account
of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial Book Value
(computed in accordance with Section 4.4(c)(i) hereof).
(b) If the Book Value of any Partnership asset is adjusted
pursuant to Section 4.4(c)(ii) hereof, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall,
solely for tax purposes, take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its
Book Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.
(c) Any elections or other decisions relating to allocations
made pursuant to this Section 5.4 shall be made by the Managing General
Partner in any manner that reasonably
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reflects the purpose and intention of the Agreement. Allocations
pursuant to this Section 5.4 are solely for purposes of federal, state,
and local taxes and shall not affect or in any way be taken into
account in computing any Partner's Capital Account, or share of
Profits, Losses, and other items or distributions pursuant to any
provision of this Agreement.
5.5 OTHER ALLOCATION RULES.
(a) For purposes of determining the Profits, Losses, or any
other item allocable to any period, Profits, Losses, and any such other
item shall be determined on a daily, monthly, or other basis, as
determined by the Managing General Partner using any permissible method
under Section 706 of the Code and the Regulations thereunder.
(b) For federal income tax purposes, every item of income,
gain, loss, and deduction shall be allocated among the Partners in
accordance with the allocations under Sections 5.1, 5.2, 5.3 and 5.4 of
this Agreement.
(c) The Partners are aware of the income tax consequences of
the allocations made by this Article V and hereby agree to be bound by
the provisions of this Article V in reporting their shares of
Partnership income and loss for income tax purposes.
(d) It is intended that the allocations in Sections 5.1, 5.2,
5.3 and 5.4 of this Agreement effect an allocation for federal income
tax purposes consistent with Section 704 of the Code and comply with
any limitations or restrictions therein.
(e) The Partners agree that their Percentage Interests
represent their respective interests in Partnership profits for
purposes of allocating excess nonrecourse liabilities (as defined in
Section 1.752-3(a)(3) of the Regulations) pursuant to Section
1.752-3(a)(3) of the Regulations.
5.6 DEPRECIATION RECAPTURE.
Pursuant to Regulations Section 1.1245-1(e), to the extent the
Partnership recognizes gain as a result of sale, exchange or other disposition
of Partnership assets which is taxable as ordinary income under Code Section
1245 or Code Section 1250, such ordinary income shall be allocated among the
Partners in the same proportion as the depreciation giving rise to such ordinary
income was allocable among the Partners. In no event, however, shall any Partner
be allocated to ordinary income hereunder in excess of the amount of gain
allocated to the Partner under this Agreement. Any ordinary income that is not
allocated to a Partner due to the gain limitation described in the previous
sentence shall be allocated among those Partners whose shares of total gain on
the sale, exchange or other disposition of the property exceed their respective
shares of depreciation from those Partnership assets being disposed of, in
proportion to their relative shares of the total allocable gain.
ARTICLE VI
DISTRIBUTIONS
6.1 DISTRIBUTIONS.
(a) The Managing General Partner shall review the
Partnership's accounts at the end of each calendar quarter to determine
whether distributions are appropriate. On each Distribution Date
(commencing with the second Fiscal Year quarter following the Effective
Date hereof or, in the Managing General Partner's sole discretion, the
first Fiscal Year quarter
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following the Effective Date hereof), the Managing General Partner
shall make such distributions of, and to the extent of, Available Cash
calculated as of the end of such Fiscal Year quarter, in accordance
with Section 6.1(b) hereof.
(b) The distributions under this Section 6.1 are subject,
first, to any and all of the Partnership's obligations to lenders,
indebtedness or other obligations, including, without limitation, under
secured or unsecured credit facilities of every kind and nature (which
may include, among other things, additional interest obligations, exit
fees, equity kickers and similar obligations or payments) and, second,
to the applicability of Sections 4.2(b), 4.2(c), 4.3(b), 4.3(c), 13.3
or 13.4. Subject to the immediately preceding sentence, distributions
of Available Cash shall be made to the Partners in the manner set forth
below:
(i) With respect to Available Cash that does not
constitute net proceeds from a Capital Event:
(A) First, to Partners entitled to receive
Class B Preference Amounts, any Undistributed Class B
Preference Amounts, pro rata in proportion to their
respective Undistributed Class B Preference Amounts;
(B) Second, to Partners entitled to receive
Class A Preference Amounts, any Undistributed Class A
Preference Amounts, pro rata in proportion to their
respective Undistributed Class A Preference Amounts;
and
(C) Third, to Partners pro rata in
proportion to their respective Percentage Interests;
(ii) With respect to Available Cash constituting net
proceeds from a Capital Event:
(A) First, to Partners entitled to receive
Class B Preference Amounts, any Undistributed Class B
Preference Amounts, pro rata in proportion to their
respective Undistributed Class B Preference Amounts;
(B) Second, to Partners entitled to receive
Class A Preference Amounts, any Undistributed Class A
Preference Amounts, pro rata in proportion to their
respective Undistributed Class A Preference Amounts;
(C) Third, (1) first, to Partners to the
extent of their respective Undistributed Class B
Capital, pro rata in proportion to the Undistributed
Class B Capital, if any, of all Partners, until such
Undistributed Class B Capital is reduced to zero, (2)
second, to Partners (other than the Executives) to
the extent of their respective Undistributed Class A
Capital, pro rata in proportion to the Undistributed
Class A Capital, if any, of all Partners (other than
the Executives), until such Undistributed Class A
Capital is reduced to zero, and (3) third, to the
Executives, to the extent of their respective
Undistributed Class A Capital, pro rata in proportion
to the Undistributed Class A Capital, if any, of all
Executives, until such Undistributed Class A Capital
is reduced to zero; provided, that, (x) the amount
available to Partners under clause (1) hereof shall
be equal to the lesser of (I) the amount available
for distribution to Partners under this subsection
(C) and (II) Undistributed Class B Capital as of the
date of the distribution (but before giving effect to
a such distribution) invested in the Partnership's
asset that is the subject of the Capital Event for
which the proceeds are being distributed, and (y) the
amount available to Partners under clauses (2)
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and (3) hereof shall be the difference between the
amount available for distribution under this
subsection (C) and the amounts paid to Partners under
clause (1) hereof, but such amount shall not be less
than zero;
(D) Fourth, to the Partners, to the extent
of their respective Undistributed Tier 2 Capital, pro
rata in proportion to their respective Undistributed
Tier 2 Capital until the Undistributed Tier 2 Capital
is reduced to zero; and
(E) Fifth, to the Partners, pro rata in
proportion to their respective Percentage Interests.
(iii) Any incentive-based management fees payable
under property management agreements as described in Section
7.16 of this Agreement (i) shall be calculated based upon
Available Cash prior to any distributions pursuant to Section
6.1(b) and (ii) shall be paid in the first Fiscal Year quarter
of the following Fiscal Year (or such later date as the
financial statements are available for the prior Fiscal Year
pursuant to Article IX hereof) after any distributions
pursuant to Sections 6.1(b)(i)(A) and (B), or Sections
6.1(b)(ii)(A) and (B), as applicable, and prior to any
distributions pursuant to Sections 6.1(b)(i)(C), or Sections
6.1(b)(ii)(C), (D) or (E), as applicable; provided, however,
that upon a Capital Event which results in the termination of
a property management agreement described in Section 7.16 of
this Agreement, any outstanding incentive-based management
fees under such terminated property management agreement shall
be payable upon distribution of proceeds of such Capital Event
pursuant to Section 6.1(b)(ii) hereof.
(c) Class A Preference Amounts and Class B Preference Amounts
are, by their terms, calculated on a Fiscal Year basis. Accordingly,
Fiscal Year quarter distributions in any Fiscal Year shall be made
based upon the Managing General Partner's reasonable calculation of
such Preference Amounts on a quarterly basis. In the first Fiscal Year
quarter of the following Fiscal Year (or such later date as the
financial statements are available for the prior Fiscal Year pursuant
to Article IX hereof) distributions for such prior Fiscal Year shall be
adjusted as necessary in order for the Partners to receive their
respective Preference Amounts in accordance with the terms hereof.
6.2 PAYMENTS NOT DEEMED DISTRIBUTIONS.
Any amounts paid pursuant to Section 7.4, Section 7.11 or
Section 7.16(a) of this Agreement shall not be considered distributions for
purposes of this Agreement and shall be treated as deductible items for tax
purposes and for purposes of determining Profit or Loss of the Partnership.
6.3 WITHHELD AMOUNTS.
(a) Notwithstanding any other provision of this Article VI to
the contrary, each Partner hereby authorizes the Partnership to
withhold and to pay over, or otherwise pay, any withholding or other
taxes payable by the Partnership with respect to such Partner as a
result of such Partner's participation in the Partnership. If and to
the extent that the Partnership shall be required to withhold or pay
any such taxes, such Partner shall be deemed for all purposes of this
Agreement to have received a payment from the Partnership as of the
time such withholding or tax is paid, which payment shall be deemed to
be a distribution with respect to such Partner's Partnership Interest
to the extent that the Partner (or any successor to such Partner's
Partnership Interest) is then entitled to receive a distribution.
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(b) To the extent that the aggregate of such payments to a
Partner for any period exceeds the distributions to which such Partner
is entitled for such period, the amount of such excess shall be
considered a loan from the Partnership to such Partner. Such loan shall
bear interest (which interest shall be treated as an item of income to
the Partnership) at the lesser of the maximum rate permitted by law or
the rate of interest per annum most recently established by Citibank,
N.A., in New York, New York, as such bank's general reference rate of
interest (which rate may or may not be the lowest rate of interest then
charged by such bank), as determined hereunder from time to time, until
discharged by such Partner by repayment, which may be made in the sole
discretion of the Managing General Partner out of distributions to
which such Partner would otherwise be subsequently entitled.
(c) Any withholdings authorized by this Section 6.3 shall be
made at the maximum applicable statutory rate under the applicable tax
law unless the Managing General Partner shall have received an opinion
of counsel or other evidence satisfactory to the Managing General
Partner to the effect that a lower rate is applicable, or that no
withholding is applicable.
ARTICLE VII
MANAGEMENT OF THE PARTNERSHIP
7.1 DESIGNATION AND AUTHORITY OF MANAGING GENERAL PARTNER AND GENERAL
PARTNER.
(a) The Partners hereby designate CGLH GP as the managing
general partner of the Partnership. The Partners hereby designate IHC
GP as the general partner of the Partnership.
(b) The overall management and control of the business and
affairs of the Partnership shall be vested in the Managing General
Partner and the Managing General Partner shall have all of the power
and authority of a general partner of the Partnership granted under the
Act and pursuant to this Agreement. Except as otherwise provided in
this Agreement and subject specifically to Section 7.2, all decisions
concerning the management of the business and affairs of the
Partnership and its assets shall be made exclusively by the Managing
General Partner, in accordance with the objectives and purposes of the
Partnership set forth in Section 3.1 hereof. The Managing General
Partner shall be authorized to execute documents and take actions on
behalf of the Partnership, in accordance with its power and authority
granted under the Delaware Act and pursuant to this Agreement, which
shall be binding on the Partnership and on which third parties shall be
entitled to rely. The General Partner shall not take part in the
control (within the meaning of the Delaware Act) of the Partnership's
business, transact any business in the Partnership's name, or have the
power to sign documents for or otherwise bind the Partnership other
than as expressly set forth in this Agreement or as directed by the
Managing General Partner in writing, and the General Partner shall have
only the power and authority expressly granted it pursuant to this
Agreement or by the Managing General Partner in writing. Without
limiting the foregoing, the General Partner hereby disclaims any power
or authority that may be granted to a general partner of a partnership
pursuant to the Delaware Act that is not also granted to the General
Partner under this Agreement or by the Managing General Partner in
writing. Any grant of power or authority to the General Partner
pursuant to this Agreement or by the Managing General Partner is
non-exclusive and shall not divest the Managing General Partner of any
such power or authority. Each of the Managing General Partner and the
General Partner shall amend or otherwise modify its organizational and
charter documents or take such other action to satisfy or comply with
bankruptcy-remote, special purpose entity requirements of lenders, or
other entities extending credit, to the Partnership or its Controlled
or Non-Controlled Entities. The Partners agree that this Agreement and
the Certificate may be amended or otherwise modified or such other
action taken, as necessary to satisfy or otherwise comply with
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bankruptcy-remote, special purpose entity requirements of lenders, or
other entities extending credit, to the Partnership or its Controlled
or Non-Controlled Entities.
(c) Without in any way limiting the provisions of Section
7.1(b), the General Partner shall submit for approval by the Managing
General Partner: (i) a proposed business plan within 60 days of the
effective date of this Agreement for the current Fiscal Year; and (ii)
thereafter, on or before November 1 of each year that this Agreement
shall be in effect, a proposed business plan for the next succeeding
Fiscal Year. If the General Partner shall fail timely to submit any
such proposed business plan when due, the Managing General Partner may
submit a business plan for the applicable Fiscal Year, and any costs
incurred by the Managing General Partner in connection therewith shall
be deducted from distributions to the General Partner under Section 6.1
hereof. Simultaneously with the submission of a proposed business plan
to the Managing General Partner, the General Partner shall distribute
copies of the proposed business plan (marked "proposed") to the other
Partners for informational purposes. Each such business plan shall
contain a proposed operating budget and a proposed capital budget for
the Hotels and other, related assets, or interests in Hotels and other,
related assets, presently owned and managed by the Partnership, a
strategic plan for new acquisitions of Hotels and other, related
assets, or interests in Hotels and other, related assets, and potential
funding sources therefor. Each such business plan shall specify
material assumptions contained therein. Each shall be sufficiently
detailed so as to allow for the reasonable review thereof. The General
Partner shall not be deemed to have made any guarantee, warranty or
representation whatsoever, other than that the General Partner used
good faith efforts in preparing such proposed plans and diligently
reviewed and assessed the information provided by Hotel managers, in
connection with such plans since the Partners acknowledge that such
plans are intended to set forth reasonable performance objectives and
goals based upon facts and circumstances known by the General Partner
at the time of such plans' preparation. If an annual business plan is
not approved prior to December 31 of the immediately preceding Fiscal
Year, the Partnership shall be managed and operated in accordance with
the approved annual business plan for such immediately preceding Fiscal
Year with each expense item increased (but not decreased) by the
average Consumer Price Index for all Urban Consumers for the
immediately preceding calendar year as reported by the U.S. Department
of Labor Bureau of Labor Statistics ("CPI") and each revenue item
increased (but not decreased) by Market Tract RevPAR growth percentage
for the immediately previous 12-month period, as published by Smith
Travel Research, but in no event less than CPI.
7.2 MAJOR DECISIONS.
(a) All Major Decisions with respect to the Partnership's
business shall require the prior written approval of all the Partners
other than the Executives. The term "Major Decision," as used in this
Agreement, means any decision with respect to the following matters at
any time:
(i) to do any act which would make it impossible to carry on
the ordinary business of the Partnership;
(ii) to possess Partnership property for other than a
Partnership purpose or assign any rights in specific Partnership
property for other than a Partnership purpose;
(iii) to change or reorganize the Partnership into any other
legal form or materially change the purpose of the Partnership set
forth in Section 3.1 hereof;
(iv) to require any Limited Partner to make any contribution
to the capital of the Partnership not provided for hereunder (it being
understood that additional capital contributions (including, without
limitation, those described in Sections 4.2 and 4.3 hereof) are
expressly provided for hereunder);
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(v) except as otherwise permitted herein, to admit any Person
as a partner of the Partnership or transfer the obligation to make
Class B Capital Contributions or the right to receive Class B
Preference Amounts and Undistributed Class B Preference Amounts;
(vi) to permit the Partnership to incur any indebtedness,
direct or indirect, absolute or contingent; provided, however, the
Partners agree that: (A) the incurrence by the Partnership of any
single indebtedness to any lender (an affiliate of a Partner or
otherwise), on market terms, and secured by an interest in property of
the Partnership, with a loan to value ratio of not greater than
0.85:1.00 shall not be a Major Decision, if the Partnership exercises
commercially reasonable efforts to seek such indebtedness from more
than one unaffiliated institution regularly engaged in the business of
making loans secured by interests in real property; and (B) the
incurrence by the Partnership of unsecured debt shall not be a Major
Decision; or
(vii) to approve any acquisition by the Partnership of a Hotel
or a direct or indirect interest in a Hotel.
7.3 CERTIFICATE OF LIMITED PARTNERSHIP.
The Managing General Partner shall cause the Certificate to be
filed with the Secretary of State of Delaware as required by the Delaware Act
and shall cause to be filed such other certificates or documents (including,
without limitation, copies, amendments, or restatements of this Agreement) as
may be determined by the Managing General Partner to be reasonable and necessary
or appropriate for the formation, qualification, or registration and operation
of a limited partnership (or a partnership in which Limited Partners have
limited liability) in the State of Delaware and in any other state where the
Partnership may elect to do business.
7.4 COMPENSATION AND REIMBURSEMENT OF MANAGING GENERAL PARTNER AND
GENERAL PARTNER.
Neither the Managing General Partner nor the General Partner
shall be compensated for services rendered to the Partnership as managing
general partner or as general partner, as applicable, unless such compensation
has previously been approved by all of the Partners. The Managing General
Partner shall, however, be reimbursed by the Partnership for all reasonable
expenditures incurred by the Managing General Partner on the Partnership's
behalf. The General Partner shall be reimbursed by the Partnership for all
reasonable expenditures incurred by the General Partner on the Partnership's
behalf that have been approved in advance by the Managing General Partner.
7.5 PARTNERSHIP FUNDS.
Subject to the terms and provisions of the management
agreements entered into by the Partnership for the management of the Hotels and
other, related assets, the funds of the Partnership shall be deposited in such
interest-bearing Partnership account or Partnership accounts as are designated
by the Managing General Partner. All withdrawals from or charges against such
accounts shall be made by the Managing General Partner or by its representative.
Funds of the Partnership may be invested as determined by the Managing General
Partner in accordance with the terms and provisions of this Agreement.
7.6 RETURN OF CAPITAL.
Neither the Managing General Partner nor the General Partner
shall be entitled to the withdrawal or return of its Capital Contribution except
to the extent, if any, that distributions made
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pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law, and then only to the extent provided for in this
Agreement.
7.7 DUTIES.
The Managing General Partner shall manage the Partnership and
its business and affairs in accordance with the terms of this Agreement to the
best of its ability, and shall use its good faith efforts to carry out the
business of the Partnership in the best interest of the Partnership. The
Managing General Partner shall devote itself to the business of the Partnership
to the extent that it determines is necessary for the efficient discharge of its
obligations hereunder. To the extent that the General Partner acts for and on
behalf of the partnership as expressly granted herein or by the Manager General
Partner, the General Partner shall act to the best of its ability, and shall use
its good faith efforts to carry out the business of the Partnership in the best
interest of the Partnership. The General Partner shall devote itself to its
duties to the extent that the General Partner determines is necessary for the
efficient discharge of its duties.
7.8 TRANSACTIONS WITH AFFILIATES.
Subject to the provisions of Section 7.2 hereof, the terms to
the Partnership of any transaction, agreement or contract involving the
Partnership with any Affiliate of a Partner shall be competitive with the terms
of similar transactions, agreements or contracts obtained by persons in the same
business as the Partnership in arms-length agreements with unrelated parties.
7.9 OUTSIDE ACTIVITIES.
The provisions regarding outside activities of the Managing
General Partner and the General Partner are set forth in Section 8.3 of this
Agreement.
7.10 RESOLUTION OF CONFLICTS OF INTEREST.
Unless otherwise expressly provided in this Agreement or any
other agreement contemplated herein, whenever a conflict of interest exists or
arises between the General Partner, or any of its Affiliates, or the Managing
General Partner, or any of its Affiliates, on the one hand, and the Partnership
or any Limited Partner, on the other hand, any action taken by the Managing
General Partner or the General Partner, as the case may be, in the absence of
bad faith by such entity, and in the case of the General Partner, pursuant to an
express grant of authority under this Agreement or by the Managing General
Partner in writing, shall not constitute a breach of this Agreement or any other
agreement contemplated herein or a breach of any standard of care or duty
imposed herein or therein or under the Delaware Act or any other applicable law,
rule, or regulation unless such action would have constituted a breach of the
Agreement in the absence of such conflict of interest.
7.11 INDEMNIFICATION.
(a) The Partnership shall indemnify and hold harmless the
Managing General Partner and General Partner and any director, officer,
employee, agent, or representative of the Managing General Partner or
the General Partner, against all liabilities, losses, and damages
incurred by any of them by reason of any act performed or omitted to be
performed in the name of or on behalf of the Partnership, or in
connection with the Partnership's business, including attorneys' fees
and any amounts expended in the settlement of any claims or
liabilities, losses, or damages, to the fullest extent permitted by the
Delaware Act, provided, that in the case of the General Partner, the
General Partner has not exceeded its power and authority granted under
this Agreement or by the Managing General Partner in writing. The
negative disposition of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo
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contendere, or its equivalent, shall not, of itself, create a
presumption that the indemnified Person has engaged in gross
negligence, fraud, willful misconduct, or a material breach of this
Agreement.
(b) The Partnership shall indemnify and hold harmless the
Limited Partners, employee, agent, or representative of the
Partnership, any Person who is or was serving at the request of the
Partnership or the Managing General Partner as a director, officer,
partner, trustee, employee, agent, or representative of another
corporation, partnership, joint venture, trust, or other enterprise, to
the fullest extent permitted by the Delaware Act. The negative
disposition of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that the
indemnified Person has engaged in gross negligence, fraud, willful
misconduct, or a material breach of this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Section 7.11, an indemnified Person shall not be entitled to
indemnification under Section 7.11 with respect to any claim, issue or
matter in which it has engaged in gross negligence, fraud, willful
misconduct, or a material breach of this Agreement.
(d) Notwithstanding any of the provisions to this Section 7.11
to the contrary, no amount shall be paid to any indemnitee under this
Section 7.11 until the obligations of the Partnership with respect to
any indebtedness of the Partnership are paid or satisfied in full.
However, if such indemnitee would otherwise be entitled to be paid
pursuant to this Section 7.11 but for the preceding sentence, an amount
of cash equal to the amount which would otherwise be paid to such
indemnitee shall be held by the Partnership in an escrow account until
such amounts may be paid to such indemnitee pursuant to this Section
7.11 or as otherwise required to be paid to satisfy claims against the
Partnership if there are no other available Partnership assets to pay
such claims.
7.12 LIABILITY OF MANAGING GENERAL PARTNER AND THE GENERAL PARTNER.
The Managing General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
under the Delaware Act and/or hereunder either directly or by or through its
directors, officers, employees, agents, or representatives. The General Partner
may exercise any of the powers expressly granted to it, and perform any of the
duties expressly imposed upon it, under this Agreement or by the Managing
General Partner in writing either directly or by or through its directors,
officers, employees, agents, or representatives. Neither the Managing General
Partner nor its directors, officers, employees, agents, or representatives shall
be liable to the Partnership or the Limited Partners for errors in judgment or
for any acts or omissions that do not constitute gross negligence, fraud, or
willful or wanton misconduct. Neither the General Partner nor its directors,
officers, employees, agents, or representatives shall be liable to the
Partnership or the Limited Partners for errors in judgment or for any acts or
omissions with respect to matters within its power and authority expressly
granted under this Agreement or by the Managing General Partner in writing, that
do not constitute gross negligence, fraud, or willful or wanton misconduct.
7.13 RELIANCE BY MANAGING GENERAL PARTNER AND THE GENERAL PARTNER.
(a) Each of the General Partner and the Managing General
Partner may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
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(b) Each of the Managing General Partner and the General
Partner may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers, and other consultants and
advisers selected by it, and any opinion of any such Person as to
matters which the Managing General Partner or the General Partner, as
the case may be, believes to be within such Person's professional or
expert competence shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by the
Managing General Partner or the General Partner, as the case may be,
hereunder in good faith and in accordance with such opinion.
7.14 INSURANCE.
The General Partner, on behalf of the Partnership and at the
Partnership's cost and expense, shall, during the entire term hereof, obtain,
maintain and keep in full force and effect, such insurance coverage as the
Managing General Partner reasonably deems advisable.
7.15 ACQUISITION OF REAL PROPERTY; INVESTMENT BANKING; FINANCING.
(a) The Partnership intends to acquire, directly or through
Controlled Entities and non-Controlled Entities, Hotels and other,
related assets or interests in Hotels and other, related assets with an
aggregate Value of $300,000,000.00. The Partnership shall not fail in
its purposes if the aggregate Value of such Hotels and other, related
assets or interests in Hotels and other, related assets is less than,
greater than or equal to, $300,000,000.00, and the power and authority
of the Partnership and the Managing General Partner hereunder shall in
no way be diminished or otherwise affected thereby.
(b) Notwithstanding any provision in this Agreement to the
contrary, the Managing General Partner is hereby authorized, on behalf
of the Partnership and at the Partnership's cost and expense, to enter
into negotiations for acquisitions of Hotels and other, related assets
and interests in Hotels and other, related assets, investigate
potential funding sources for such acquisitions and retain an
investment bank or similar financial institution (a "Financial
Institution") to provide investment banking, advisory, underwriting or
other services in connection with the acquisition or disposition of
Hotels and/or other, related assets and interests in Hotels and other,
related assets, and any public offering of securities of the
Partnership or its Controlled Entities (and non-Controlled Entities) or
any secondary offering of securities of the Partnership or its
Controlled Entities (and non-Controlled Entities) (collectively, the
"Investment Banking Services"). The Managing General Partner, in its
discretion, may direct the General Partner to enter into negotiations
for the acquisitions of Hotels and other, related assets and to
investigate potential funding sources for such acquisitions. For the
purposes of Section 7.2, the right to negotiate pursuant to this
Section shall not be deemed an implied consent to the consummation of
any proposed transaction that may be the subject of such negotiation.
(c) If the Partnership seeks to retain a Financial Institution
other than Lehman Brothers Holdings Inc., or any of its affiliates or
its subsidiaries (collectively, "Lehman Brothers"), the Partnership
shall deliver written notice of such intended retention of another
Financial Institution (the "Notice") to a Senior Vice President of the
Principal Transactions Group of Lehman Brothers, setting forth the
identity of such other Financial Institution, the nature of the
engagement or Investment Banking Services sought and offered, a
description (including timing) of the contemplated transaction(s), and
the fees charged by, or payable to, such Financial Institution. For a
period of fifteen days after the date that Lehman Brothers shall have
received such notice, Lehman Brothers shall have the right to advise
the Partnership that Lehman Brothers will perform such Investment
Banking Services on the terms set forth in the Notice; provided,
however, that if the fees to be paid such Financial Institution are
less than the market rate fees charged for the contemplated
transaction, the fees payable to Lehman Brothers
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shall be the market rate fees. The Partners agree, for the purposes of
this Agreement, that listed on Exhibit C annexed hereto and made a part
hereof are market rate fees for the types of transactions described
thereon. If Lehman Brothers declines the engagement set forth in the
Notice, the Partnership may engage (i) the Financial Institution set
forth in the Notice on the terms set forth therein or (ii) such other
Financial Institution to provide the Investment Banking Services set
forth in the Notice in connection with the contemplated transaction(s)
described therein for fees not in excess of market rate fees. Lehman
Brothers shall be a third party beneficiary of this Section and shall
have the right to enforce the terms of this Section to their fullest
extent.
(d) For so long as CGLH GP is the Managing General Partner,
CGLH GP shall use its good faith efforts to obtain, on behalf of the
Partnership, equity and/or debt financing for the acquisition of Hotels
and other, related assets, on market terms.
7.16 MANAGEMENT OF THE REAL PROPERTY.
(a) The Corporation shall have the option to manage, or have
one or more of its Affiliates manage, the Hotels and other, related
assets owned by the Partnership or its Controlled Entities pursuant to
one or more property management agreements, which management agreements
shall be substantially in the form annexed hereto as Exhibit D (the
Corporation, or one or more Affiliates in its capacity as manager, the
"Manager"). The Partners agree that the terms of such form property
management agreement are subject to modification in connection with the
specific requirements and financial performance of a particular Hotel
and its other, related assets, which modifications shall be agreed upon
before the acquisition of such Hotel and its other, related assets. For
the management of a Hotel and its other, related assets, Manager shall
be entitled to receive an annual base management fee and an incentive
based management fee, on terms and conditions provided in the property
management agreement covering such Hotel and other, related assets. In
addition to any other terms and conditions set forth in any such
management agreement, any incentive based management fee shall be
payable only after the Partners have been paid their respective Class A
Preference Amounts and Class B Preference Amounts in accordance with
Section 6.1(b) hereof. Each property management agreement shall provide
that the Manager shall not have the right to receive termination
payments or fees for the termination of a property management agreement
upon the sale, transfer or other disposition of the subject Hotel (and
its other, related assets) if the original acquisition of such Hotel
(and its other, related assets) was identified by the Partnership, a
Controlled Entity or a non-Controlled Entity, prior to the acquisition
thereof as a short-term acquisition. In addition, each property
management agreement shall provide that the payment of termination
payments or fees, if any, for the termination of a property management
agreement upon the sale, transfer or other disposition of the subject
Hotel (and its other, related assets) may be deferred (without
interest, premium or penalty) for one year from the termination of such
property management agreement and, no termination payments or fees
shall be due under the terminated property management agreement if, at
or before the end of such one-year period, the Partnership, a
Controlled Entity or a non-Controlled Entity enters into another
property management agreement, in substantially the same form of
property management agreement as the agreement being terminated, with
such Manager or such Manager's Affiliate covering a Hotel (and its
other, related assets), and the ratio of management fees payable under
such other property management agreement to the Class B Capital
Contributions invested in such Hotel (and its other, related assets) is
equal to or greater than such ratio with respect to the terminated
property management agreement and the related Hotel (and other, related
assets). In addition, each property management agreement with a Manager
shall provide that, upon the occurrence of an event described in
Section 4.3(c), the Manager shall look to the defaulting IHC Partner
for payment of the applicable termination payments or fees, if any.
Nothing set forth in this Section 7.16 shall affect the rights of IHC
GP and IHC LP under Section 7.2 of this Agreement.
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(b) For so long as CGLH LP, or its affiliate, shall remain a
partner of the Partnership, the Partnership shall retain CG Asset
Management Company LLC as the asset manager of the Hotels and other,
related assets pursuant to an Asset Management Agreement substantially
in the form annexed hereto as Exhibit E.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 LIMITATION OF LIABILITY.
The Limited Partner shall have no liability under this
Agreement except as provided herein or under the Delaware Act.
8.2 MANAGEMENT OF BUSINESS.
The Limited Partner shall not take part in the control (within
the meaning of the Delaware Act) of the Partnership's business, transact any
business in the Partnership's name, or have the power to sign documents for or
otherwise bind the Partnership other than as specifically set forth in this
Agreement. Notwithstanding anything stated or implied to the contrary in this
Agreement, neither of the Executives shall have any voting, consent or approval
rights as a limited partner of this Partnership or otherwise under this
Agreement, the Delaware Act or otherwise, and each of the Executives hereby
disclaims any such rights to the fullest extent permitted by law. If an
Executive shall nevertheless have voting, consent or approval rights with
respect to Partnership affairs under this Agreement, the Delaware Act or
otherwise, such Executive shall, in consideration of the rights and interests
granted hereunder, be deemed to have irrevocably appointed the Managing General
Partner, as his true and lawful proxy and attorney-in-fact, with full power of
substitution and re-substitution, to exercise any and all such rights, effective
for the term of the Partnership (including any extensions thereof and the term
of any wind-up following dissolution). Nothing herein shall preclude an
Executive from requesting an audit pursuant to Section 9.3 hereof or reviewing
the books and records of the Partnership in accordance with the terms hereof.
The Executives shall execute such further documentation as the Managing General
Partner may reasonably deem necessary to evidence such irrevocable proxies.
Notwithstanding anything contained in the Agreement to the contrary, this
Agreement shall not be amended without the consent of each Person materially and
adversely affected if such amendment would (i) convert a Limited Partner's
Partnership Interest into a General Partner's Partnership Interest, (ii) modify
the limited liability of a Limited Partner, or (iii) alter the interest of a
Partner in Profits, Losses, other items of income, gain, loss and deduction, or
any Partnership distributions, but only to the extent that such amendment has a
disproportionately larger adverse effect on such Person as compared with the
other Partners.
8.3 OUTSIDE ACTIVITIES.
A Partner (including the Managing General Partner and the
General Partner) or any Affiliate thereof, and any director, officer, employee,
agent, or representative of such Partner or any Affiliate thereof, shall be
entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and
activities in direct competition with the Partnership. Neither the Partnership
nor any of the other Partners (including the Managing General Partner and the
General Partner) shall have any rights by virtue of this Agreement in any
business ventures of a Partner, any Affiliate thereof, or any director, officer,
employee, agent, or representative of such Partner or any Affiliate thereof.
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8.4 RETURN OF CAPITAL.
The Limited Partner shall not be entitled to the withdrawal or
return of its Capital Contribution except to the extent, if any, that
distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 RECORDS AND ACCOUNTING.
The Managing General Partner shall keep or cause to be kept
appropriate books and records with respect to the Partnership's business, which
shall at all times be kept at the principal office of the Partnership or such
other office as the Managing General Partner may designate for such purposes.
Any books and records maintained by the Partnership in the regular course of its
business, including books of account and records of Partnership proceedings, may
be kept on any information storage device, provided that the books and records
so kept are convertible into clearly legible written form within a reasonable
period of time. The General Partner shall at no cost to the Partnership provide
day-to-day accounting services to the Partnership and its Controlled Entities,
and shall prepare financial and other reports reasonably requested by the
Managing General Partner. The books of the Partnership shall be maintained for
financial reporting purposes on the method of accounting approved by the
Managing General Partner in its reasonable discretion.
9.2 FISCAL YEAR.
The fiscal year of the Partnership shall be the calendar year
(or relevant portion thereof with respect to the first and last years of the
Partnership) (the "Fiscal Year") for tax, accounting and other purposes.
9.3 REPORTS.
The General Partner shall deliver to each Partner, at the
Partnership's expense, not later than 90 days following the end of each Fiscal
Year, a balance sheet, an income statement, and an annual statement of source
and application of funds of the Partnership for such Fiscal Year. In addition to
any and all other reports and business plans required hereunder, the General
Partner shall deliver to the Managing General Partner such reports as set forth
on Exhibit F hereof. The General Partner shall deliver to the Managing General
Partner: (i) weekly reports listed on Exhibit F hereof within seven days
following the end of such weekly period; (ii) monthly reports listed on Exhibit
F hereof within 30 days following the end of such monthly period; and (iii)
annual reports listed on Exhibit F hereof within 90 days following the end of
such annual period. Such reports shall be available to Partners upon request.
Upon the request of a Majority Interest, such financial statements shall be
audited at Partnership expense by a firm of independent public accountants
selected by the Managing General Partner.
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ARTICLE X
TAX MATTERS
10.1 PREPARATION OF TAX RETURNS.
The General Partner, under the supervision of the Managing
General Partner, shall arrange for the preparation and timely filing of all
returns of Partnership income, gains, deductions, losses and other items
necessary for federal, state and local income tax purposes and, in connection
therewith, the Managing General Partner shall make available to the General
Partner Partnership records necessary therefor. A copy of the Partnership's
federal income tax return will be furnished to all Partners at least 15 days
before such tax return is actually filed for their review and comment (the
Managing General Partner shall consider and may incorporate reasonable comments
made by the Partners), but in no event later than 120 days after the end of each
Fiscal Year. The classification, realization and recognition of income, gains,
losses and deductions and other items shall be on the accrual method of
accounting for federal income tax purposes, as the Managing General Partner
shall determine in accordance with applicable law. The Managing General Partner
in its sole discretion may pay state and local income taxes attributable to
operations of the Partnership and treat such taxes as an expense of the
Partnership. The Managing General Partner shall promptly (i) send to each
Partner on a quarterly basis an estimate of the taxable income of such Partner,
(ii) send to each Limited Partner copies of all notices and other written
documents sent to or received from any taxing authority, (iii) consult with each
Limited Partner before making or implementing any material tax election or other
material tax decision affecting the Partnership or any Partner or the defense,
resolution or settlement of any material tax controversy described in Section
10.3 and (iv) furnish to each Limited Partner copies of each of the federal,
state and local income tax returns at least 15 days prior to the filing thereof,
and such other tax and related information it may reasonably request from time
to time.
10.2 TAX ELECTIONS.
(a) Except as otherwise provided herein, the Managing General
Partner shall determine whether to make any election available to the
Partnership under the Code. In connection with any transfer of a
Partnership Interest permitted under Article XI hereof, the Managing
General Partner shall cause the Partnership at the written request of
the transferor or transferee, on behalf of a Partnership and at the
time and in the manner provided in Regulations Section 1.754-1(b), to
make an election to adjust the basis of the Partnership's property in
the manner provided in Sections 734(b) and 743(b) of the Code, and such
transferee shall pay all costs incurred by the Partnership in
connection therewith, including reasonable attorney's and accountant's
fees.
(b) Each of the Executives shall make a timely election under
Section 83(b) of the Code with respect to income from the Partnership.
10.3 TAX CONTROVERSIES.
Subject to the provisions hereof, CGLH GP is designated the
"tax matters partner" (as defined in Section 6231 of the Code), and is
authorized and required to represent the Partnership, at the Partnership's
expense, in connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with CGLH GP in connection with such
proceedings. Notwithstanding the above, CGLH GP shall not extend the statute of
limitations with respect to any taxable years of the Partnership without the
consent of all the Partners.
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10.4 ORGANIZATIONAL EXPENSES.
The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a 60-month period as provided in Section
709 of the Code.
10.5 TAXATION AS A PARTNERSHIP.
No election shall be made by the Partnership or any Partner
for the Partnership to be excluded from the application of any of the provisions
of Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar
provisions of any state tax laws.
ARTICLE XI
TRANSFERS OF PARTNERSHIP INTERESTS
11.1 TRANSFER RESTRICTIONS.
(a) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth
in Sections 11.2, 11.3, 11.4, 11.5, 11.6, 11.7, 11.8, 11.9 and 11.10.
(b) Any transfer or purported transfer of any Partnership
Interest not made in accordance with this Article XI shall be null and
void. An alleged transferee shall have no right to require any
information or account of the Partnership's transactions or to inspect
the Partnership's books. The Partnership shall be entitled to treat the
alleged transferor of a Partnership Interest as the absolute owner
thereof in all respects, and shall incur no liability to any alleged
transferee for distributions to the Partner owning such Partnership
Interest of record or for allocations of income, gain, losses,
deductions or credits or for transmittal of reports and notices
required to be given to holders of Partnership Interests. The term
"transfer," when used in this Article XI with respect to a Partnership
Interest, includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange, or any other disposition or
transfer, whether voluntarily or by operation of law, at judicial sale
or otherwise. Neither the Partnership nor the Managing General Partner
shall keep a register of transfers of interests in the Partnership. A
transfer of a Controlling interest in IHC GP and/or IHC LP, or any of
its successors or assigns, shall be deemed a transfer by such Partner,
or such successor or assign, of a Partnership Interest in the
Partnership and subject to the restrictions hereof.
11.2 TRANSFERS OF INTERESTS BY MANAGING GENERAL PARTNER.
The Managing General Partner may transfer all or a portion of
its Partnership Interest to any Person only after first obtaining the approval
of all of the Limited Partners other than the Executives (which approval may be
withheld in each such Limited Partner's sole and absolute discretion); provided,
however, that the consent of such Limited Partners shall not be required for a
transfer of the Managing General Partner's Partnership Interest: (a) as
collateral security for the indebtedness of an Affiliate of such Managing
General Partner; (b) to an Affiliate of the Managing General Partner, an
Affiliate of Sherwood M. Weiser, Karim Alibhai, Mahmood Khimji or an Affiliate
of, or investment fund or other vehicle sponsored by, Lehman Brothers; or (c)
pursuant to Sections 11.8, 11.9 and 11.10 of this Agreement. Any permitted
transfer by the Managing General Partner of its Partnership Interest under this
Section 11.2 shall not constitute a withdrawal of the Managing General Partner
under Article XII, Section 13.1(b), or any other provision of this Agreement. If
any such transfer is deemed to constitute a withdrawal under such provisions or
otherwise and results in the dissolution of the Partnership under this Agreement
or the laws of any jurisdiction to which the Partnership or this Agreement is
subject, the
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Partners hereby unanimously consent to the reconstitution and continuation of
the Partnership immediately following such dissolution, pursuant to Section 13.2
of this Agreement.
11.3 TRANSFERS OF INTERESTS BY GENERAL PARTNER.
The General Partner may transfer all, but not less than all,
of its Partnership Interest to any Person only after first obtaining the
approval of the Managing General Partner (which approval may be withheld in the
Managing General Partner's sole and absolute discretion); provided, however,
that the consent of the Managing General Partner shall not be required for a
transfer pursuant to Sections 11.8 and 11.10 of this Agreement. Any permitted
transfer by the General Partner of its Partnership Interest under this Section
11.2 shall not constitute a withdrawal of the General Partner under Article XII,
Section 13.1(b), or any other provision of this Agreement. If any such transfer
is deemed to constitute a withdrawal under such provisions or otherwise and
results in the dissolution of the Partnership under this Agreement or the laws
of any jurisdiction to which the Partnership or this Agreement is subject, the
Partners hereby unanimously consent to the reconstitution and continuation of
the Partnership immediately following such dissolution, pursuant to Section 13.2
of this Agreement.
11.4 TRANSFER OF INTERESTS OF LIMITED PARTNER.
The Partnership Interests of IHC LP or the Executives, and any
of its successors or assigns, may not be transferred except: (a) if such
Partner, and any of its successors or assigns, is a natural person, by act of
law to his estate (for the benefit of an individual or other successor in
interest) or to the heir or legatee of such deceased individual; (b) if such
Partner, and any of its successors or assigns, is not an individual, upon the
adjudication of bankruptcy, dissolution or other cessation of its existence, to
the authorized representative thereof for the purpose of effecting the winding
up and disposition of the business of such entity; (c) to any other Person with
the prior written consent of the Managing General Partner and all of the Limited
Partners other than the Executives, which consent may be withheld in the sole
and absolute discretion of such Partners; (d) pursuant to the provisions of
Sections 11.8 and 11.10; and (e) in the case of the Executives, pursuant to
Section 11.12. Subject to the provisions of Sections 11.8, and 11.10, the
Partnership Interests of CGLH LP, and any of its successors or assigns, may be
transferred, in whole or in part, at the discretion of CGLH LP, or such
successor or assign.
11.5 ADDITIONAL LIMITATIONS ON TRANSFERS OF LIMITED PARTNERSHIP
INTERESTS.
The Managing General Partner may require, as a condition to
any transfer of a Partnership Interest of a Partner, that, in the Managing
General Partner's reasonable determination: (a) the transfer will not jeopardize
the treatment of the Partnership as a partnership not treated as a corporation
for federal income tax purposes; (b) the transfer will not result in or cause a
termination of the Partnership for federal income tax purposes; and (c) the
transfer will not violate the registration requirements of applicable securities
laws or cause any prior offer and sale of Partnership Interests to violate such
requirements. The Managing General Partner may also require the proposed
transferee to deliver to the Partnership acceptable representations and
warranties respecting its status under applicable securities laws and its
investment intent with respect to the Partnership Interest, and may require the
transferor and transferee to supply such other documentation as the Managing
General Partner may deem advisable in its sole discretion.
11.6 DISTRIBUTIONS AND ALLOCATIONS IN RESPECT OF TRANSFERRED
PARTNERSHIP INTERESTS.
If any Partnership Interest is transferred during any Fiscal
Year in compliance with the provisions of this Article XI, Profits, Losses, and
all other items attributable to the transferred interest for such period shall
be divided and allocated between the transferor and the transferee by taking
into account their varying interests during the period in accordance with Code
Section 706(d), using any
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conventions permitted by law, selected by the Managing General Partner in its
reasonable discretion. All distributions on or before the date of such transfer
shall be made to the transferor. Solely for purposes of making such allocations
and distributions, the Partnership shall recognize such transfer not later than
the end of the calendar month during which it is given notice of such transfer,
provided that if the Partnership does not receive a notice stating the date such
Partnership Interest was transferred and such other information as the Managing
General Partner may reasonably require within 30 days after the end of the
Fiscal Year during which the transfer occurs, then all of such items shall be
allocated, and all distributions shall be made, to the person who, according to
the books and records of the Partnership, on the last day of the Fiscal Year
during which the transfer occurs, was the owner of the Partnership Interest.
Neither the Partnership nor any Partner shall incur any liability for making
allocations and distributions in accordance with the provisions of this Section
11.6, whether or not any Partner or the Partnership has knowledge of any
transfer of ownership of any Partnership Interest.
11.7 ADMISSION OF SUBSTITUTE OR SUCCESSOR PARTNERS.
(a) Admission of Substitute Limited Partners. A transferee
(which may be the heir or legatee of the Limited Partner) or assignee
of the Limited Partner's Partnership Interest, or Person acquiring a
Partnership Interest pursuant to any foreclosure made upon any
permitted pledge or hypothecation of such Partnership Interest, shall
be entitled to receive the distributive share of the Partnership's
Profits, Losses, income, gains, losses, deductions, and credits
attributable to such Partnership Interest. To become a substitute
Limited Partner, such transferee, assignee, heir, or legatee must be
acceptable to the Managing General Partner in the Managing General
Partner's sole and absolute discretion. If acceptable to the Managing
General Partner, such transferee, assignee, heir, or legatee shall
execute a counterpart of this Agreement, thereby agreeing to be bound
by the terms hereof as a Limited Partner with respect to the
Partnership Interest so transferred. Upon admission of a substitute
Limited Partner, such Limited Partner shall be subject to all of the
restrictions applicable to, shall assume all of the obligations of, and
shall attain the status of a Limited Partner under and pursuant to this
Agreement with respect to the Partnership Interest held by such Limited
Partner.
(b) Admission of Successor Managing General Partner. A
successor Managing General Partner selected pursuant to Section 13.2 of
this Agreement or the permitted transferee of or successor to the
Partnership Interest of the Managing General Partner pursuant to
Section 11.2 of this Agreement shall be admitted to the Partnership as
the Managing General Partner, effective as of the date of the
withdrawal or removal of the predecessor Managing General Partner or
the date of transfer of such predecessor's Partnership Interest.
(c) Admission of Successor General Partner. A successor
General Partner selected pursuant to Section 13.2 of this Agreement or
the permitted transferee of or successor to all of the Partnership
Interest of the General Partner pursuant to Section 11.3 of this
Agreement shall be admitted to the Partnership as the General Partner,
effective as of the date of the withdrawal or removal of the
predecessor General Partner or the date of transfer of such
predecessor's Partnership Interest.
(d) Action by Managing General Partner. In connection with the
admission of any substitute Limited Partner, successor General Partner
or successor Managing General Partner, the Managing General Partner
shall have the authority to take all such actions as it deems necessary
or advisable in connection therewith, including the amendment of
Exhibit A to this Agreement and the execution and filing with
appropriate authorities of any necessary documentation.
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11.8 BUY-SELL PROVISION.
(a) If a Partner wishes at any time after the Buy-Sell Date,
for any reason or for no reason, to purchase the Partnership Interests
of another Partner or other Partners (for the purposes of this Section
11.8, the "Offering Partner"), the following procedure shall apply to
such proposed purchase:
(i) The Offering Partner shall give notice (the
"Buy-Sell Notice") to the Partner or Partners whose
Partnership Interests the Offering Partner seeks to purchase
(individually or collectively, the "Receiving Partner")
specifying a gross value (i.e., without taking into account
liabilities) (the "Stated Value") attributable to all of the
assets of the Partnership. The Buy-Sell Notice must be
delivered with the words "Confidential/Urgent" clearly visible
from the exterior of the container in which the Buy-Sell
Notice is contained and must expressly alert the Receiving
Partner to the duration of the Response Period (as defined
below). Delivery shall be in accordance with the notice
provisions of this Agreement.
(ii) The Receiving Partner shall have the options (A)
to require that the Offering Partner purchase all of the
Partnership Interests of the Receiving Partner and the
Partnership Interests of its Affiliates; or (B) to elect to
purchase the Offering Partner's Partnership Interest and those
of its Affiliates. If the Receiving Partner elects to purchase
the Offering Partner's Partnership Interest and those of the
Offering Partner's Affiliates or require the purchase of all
of its Partnership Interests and its Affiliate's Partnership
Interests, the Receiving Partner shall so notify the Offering
Partner in writing within 30 days from the receipt of the
Buy-Sell Notice (the "Response Period") and, in the case of
the election to acquire the Offering Partner's Partnership
Interests and those of its Affiliates, the Partnership
Interests being acquired shall be those of the Offering
Partner and its Affiliates. The Partner purchasing the
Partnership Interests of other Partner(s) pursuant to this
Section 11.8 shall be the "Buying Partner" and the Partner(s)
selling Partnership Interests pursuant to this Section 11.8
shall be the "Selling Partner". Unless the Receiving Partner
responds within the Response Period that it will be the Buying
Partner or requiring the purchase of the Partnership Interests
of its Affiliates, (A) the Offering Partner will be the Buying
Partner, (B) the Receiving Partner will be the Selling Partner
and (C) the Partnership Interests being acquired shall be only
those set forth in the Buy-Sell Notice.
(iii) Within 75 days after the Buy-Sell Notice has
been given, the Buying Partner shall pay to the Selling
Partner (and, if applicable, the Selling Partner's Affiliates
in this Partnership), in full payment for its (and, if
applicable, their) interest(s) in this Partnership, the
amounts that such Selling Partner (and, if applicable, the
Selling Partner's Affiliates in this Partnership) would have
received if the assets of the Partnership had been sold for an
amount equal to the Stated Value on the date of such payment,
Profit, Loss, and other items of income, gain, loss or
deduction were allocated among the Partners in accordance with
this Agreement and the proceeds of such sale (net of
liabilities that would have been paid out of such proceeds,
including without limitation any amounts due to a Partner
(and, if applicable, the Selling Partner's Affiliates in this
Partnership), if such sale had actually occurred) were
distributed in accordance with the provisions of this
Agreement.
(v) If the Receiving Partner elects to be the Buying
Partner but fails to complete the transaction as described
above, the Offering Partner shall be entitled to be the Buying
Partner as described above.
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(vi) The purchase price to be paid under this Section
11.8 shall be payable entirely in cash at the closing of the
sale of interests. The Selling Partner shall represent to the
Buying Partner that the Partnership Interests being sold are
free and clear of liens other than those liens in connection
with guaranties of the Partnership's indebtedness or otherwise
pursuant to Article XI hereof. Upon the Buying Partner's
tender of payment of the purchase price, including, without
limitation, by wire transfer or delivery of a certified check
to the Selling Member's address on the records of the
Partnership, the Selling Partner (and, if applicable, the
Selling Partner's Affiliates in this Partnership) shall be
deemed to have transferred its (or, if applicable, their)
Partnership Interest(s) and shall cease to be a Partner (or,
if applicable, Partners) of this Partnership (or to have any
economic or other interest therein).
(vii) Notwithstanding anything to the contrary
herein, an Executive may only be a Buying Partner with the
consent of all of the other Partners.
11.9 RIGHT TO REQUIRE SALE.
(a) Upon, and for the two-year period after, the occurrence of
a Change in Control, CGLH LP and CGLH GP shall have the right to
require IHC to purchase all, but not less than all, of the Partnership
Interests held by such entity(ies) for cash at the purchase price
determined pursuant to Section 11.9(b) hereof. Such right shall be
exercised by delivery of a written notice by CGLH LP and CGLH GP to IHC
GP and IHC LP, respectively, that CGLH LP and CGLH GP elects to
exercise their right under this Section 11.9. The date of such notice
shall be the "Put Date".
(b) The purchase price to be paid shall be equal to the total
amount, determined as of the Put Date, that a willing buyer would pay
to a willing seller for CGLH LP's and CGLH GP's Partnership Interests,
taking into account assumed liabilities, determined as a whole and in
the context of the Partnership as a going concern in an arm's length,
negotiated transaction without undue time constraints (the "Purchase
Price"). In determining the Purchase Price, no discounts for lack of
control or lack of marketability shall be applied. The Purchase Price
shall be determined jointly by CGLH GP and CGLH LP, on the one hand,
and IHC, on the other hand. If there is a dispute between these parties
as to the Purchase Price (which dispute remains unresolved for 10
Business Days), such dispute shall be submitted for final determination
to a mutually acceptable investment banking firm of national reputation
familiar with the valuation of companies in the hospitality and lodging
industry ("Investment Banking Firm"). In the event that these parties
cannot agree on a mutually acceptable Investment Banking Firm within 10
Business Days, CGLH GP and CGLH LP, on the one hand, and IHC GP and IHC
LP, on the other hand, shall each select one Investment Banking Firm,
and shall cause such firms to promptly select a third Investment
Banking Firm within five Business Days. The three Investment Banking
Firms so selected shall, by majority vote, render their final
determination as promptly as practicable and in any event within 20
Business Days, which determination shall be final and binding on the
parties. The fees and expenses of any such determination shall be borne
by equally by CGLH GP and CGLH LP, on the one hand, and IHC GP and IHC
LP, on the other hand.
(c) Upon the closing of the sale under this Section 11.9, CGLH
LP and CGLH GP shall thereupon cease to be Partners of the Partnership
(or to have any economic or other interest therein).
11.10 TAG-ALONG RIGHT.
(a) In connection with the sale or syndication of any of CGLH
GP's and/or CGLH LP's Partnership Interests to an unrelated third party
(a "Sale"), IHC LP, IHC GP and the
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Executives shall be afforded the opportunity to participate in such
Sale as and to the extent provided in this Agreement. At least twenty
(20) days prior to the consummation of the Sale, CGLH shall send a
written notice (a "Sale Notice") to IHC LP, IHC GP and the Executives
setting forth the terms of the Sale, including the percentage of
Partnership Interests being transferred and the purchase price offered
by such unrelated third party. IHC LP, IHC GP and the Executives shall
have twenty days from the date of the Sale Notice (the "Notice Period")
within which to exercise the right to participate in the Sale. Each of
IHC GP and IHC LP shall have the right to transfer such portion of its
Partnership Interests as relates to its Class A Capital Contributions
equal to the same percentage as being transferred by CGLH GP and/or
CGLH LP (the "IHC Tag-Along Interest"). Each Executive shall have the
right to transfer such portion of such Executive's Partnership Interest
equal to the same percentage as being transferred by CGLH GP and/or
CGLH LP(an "Executive Tag-Along Interest"). Neither the IHC Tag-Along
Interest nor an Executive Tag-Along Interest shall include any
interests or amounts related to Class B Capital Contributions,
Undistributed Class B Capital, Class B Preference Amounts or
Undistributed Class B Preference Amounts and no such interests or
amounts shall be included in the consideration paid (or the calculation
thereof) in respect of the IHC Tag-Along Interest or an Executive
Tag-Along Interest. If IHC LP, IHC GP shall elect to participate in the
Sale, it (or they) shall receive, as consideration therefor, the
product of: (i) the purchase price set forth in the Sale Notice and
(ii) the fraction, (A) the numerator of which is the IHC Tag-Along
Interest, and (B) the denominator of which is the sum of (1) CGLH GP's
and/or CGLH LP's Partnership Interests being transferred pursuant to
the Sale and (2) the IHC Tag-Along Interest. If an Executive shall
elect to participate in the Sale, he shall receive, as consideration
therefor, the product of: (i) the purchase price set forth in the Sale
Notice and (ii) the fraction, (A) the numerator of which is his
Executive Tag-Along Interest, and (B) the denominator of which is the
sum of (1) CGLH GP's and/or CGLH LP's Partnership Interests being
transferred pursuant to the Sale and (2) such Executive Tag-Along
Interest.
(b) If: (i) IHC GP and IHC LP elect to participate in the
proposed Sale, (ii) the Sale would result in the transfer of all of IHC
GP's and IHC LP's Partnership Interests and (iii) the termination of
one or more property management agreements between the Manager and the
Partnership or a Controlled Entity covering a Hotel (and its other,
related assets) arises therefrom, CGLH GP and/or CGLH LP shall, upon
consummation of the Sale, pay to the Partnership an amount equal to IHC
LP's Undistributed Class B Capital invested in the Hotel, and other
related assets as to which a property management agreement has been
terminated as a result of the Sale. The Partnership shall distribute
such amount to IHC LP in reduction of its Undistributed Class B
Capital. The Partners and the Partnership acknowledge and agree that
each of CGLH GP and CGLH LP has the right to consummate a Sale or other
transfer, notwithstanding any termination of, or penalty with respect
to, property management agreements or other agreements that may arise
therefrom and without any liability with respect to any such
termination or penalty.
(c) If IHC GP, IHC LP and/or the Executives elect to
participate in the proposed Sale (to the extent of the IHC Tag-Along
Interest or Executive Tag-Along Interest(s), as applicable), then IHC
GP and/or IHC LP or an Executive, as applicable, shall give notice of
such election by a signed writing by such electing party (the
"Acceptance"). Any Acceptance shall be received by CGLH GP and/or CGLH
LP prior to the end of the Notice Period. After the lapse of the Notice
Period within which CGLH GP and/or CGLH LP shall not have received an
Acceptance from IHC LP, IHC GP and/or the Executives, CGLH may
consummate, without the participation of such party, a Sale to one or
more purchasers, for consideration equal to or less than the purchase
price specified in the Sale and on terms no more favorable to CGLH GP
and/or CGLH LP than those specified in the Sale Notice. In the event
CGLH GP's and/or CGLH LP's Partnership Interests covered by the Sale
Notice are not disposed of within ninety (90) days following the lapse
of the Notice Period, then they shall once again be subject to the
tag-along rights set forth in this section.
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(d) In connection with a Sale pursuant to which IHC GP and/or
IHC LP exercises its right to "tag along" pursuant to this Section
11.10 (and notwithstanding that an Executive did not exercise his right
to "tag-along" pursuant to this Section 11.10), CGLH LP and/or CGLH GP
may elect to require that the Executives, or either of them,
participate in such Sale, as if such Executive(s) elected to
"tag-along" pursuant to the other subsections of this Section 11.10.
11.11 REDUCTION OF UNDISTRIBUTED CLASS B CAPITAL.
Except as otherwise provided in Section 11.10 of this
Agreement, if a property management agreement with a Manager is terminated for
any reason (including without limitation the failure by the Manager to meet
performance standards contained in such property management agreement), the
Partnership shall distribute to the holders of the Undistributed Class B Capital
an amount equal to such holders' Undistributed Class B Capital invested in the
Hotel and its other, related assets with respect to which the property
management agreement was terminated by the Partnership.
11.12 OPTIONAL REDEMPTION.
Upon the termination of an Executive's employment with the
Corporation for any reason (including, without limitation, death, Cause, without
Cause, without Good Reason, with Good Reason or Disability, as such terms are
defined in such Executive's Executive Employment Agreement), the Partnership
shall have the right (but not the obligation) to acquire such Executive's
Percentage Interest in the Partnership as of the date immediately following the
date of such termination (i.e., after giving effect to the reduction in
Percentage Interest, if any, resulting from such termination) (such interest,
the "Redemption Interest"), for a purchase price (and subject to the amount of
such purchase price) determined pursuant to Section 11.12(a) and (h) hereof (the
"Redemption Price") as of the Redemption Closing Date. The following procedure
shall apply to such proposed acquisition:
(a) Upon the termination of an Executive's employment
with the Corporation as a result of such Executive's death or
Disability, without Cause or with Good Reason (as such terms are
defined in such Executive's Executive Employment Agreement), the
Redemption Price shall equal the greater of: (i) such Executive's
Undistributed Tier 2 Capital allocable to his Redemption Interest and
(ii) the fair market value of such Executive's Redemption Interest
determined in accordance with Section 11.12(h) hereof. Upon the
termination of an Executive's employment with the Corporation for Cause
or without Good Reason (as such terms are defined in such Executive's
Executive Employment Agreement), the Redemption Price shall equal the
fair market value of such Executive's Redemption Interest determined in
accordance with Section 11.12(h) hereof.
(b) The Partnership shall give notice (the
"Redemption Notice") to such Executive of the Partnership's intent to
acquire such Executive's Redemption Interest, subject to the
determination of the fair market value thereof determined pursuant to
Section 11.12(h). Delivery of the Redemption Notice shall be in
accordance with the notice provisions of this Agreement.
(c) Within 75 days after the Redemption Notice has
been given (or within 75 days after the delivery of a certified
appraisal to the Partnership of the fair market value of the
Executive's Redemption Interest as of the Redemption Date, if, after
receipt of the appraisal, the Partnership elects to continue with the
acquisition of the Redemption Interest), the Partnership shall pay to
such Executive the Redemption Price, in full payment for his Redemption
Interest
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and the Redemption Interest shall be assigned to the Partnership (such
date, the "Redemption Closing Date"). The Redemption Price shall be
payable entirely in cash. Such Executive shall represent to the
Partnership that the Redemption Interests being sold are free and clear
of liens other than those liens in connection with guaranties of the
Partnership's indebtedness or otherwise pursuant to Article XI hereof.
(d) Upon the Partnership's tender of payment of the
Redemption Price, including, without limitation, by wire transfer or
delivery of a certified check to such Executive's address on the
records of the Partnership, such Executive shall be deemed to have
transferred his entire Partnership Interest and shall cease to be a
Partner or to have any economic or other interest herein.
(e) Such Executive's only remedy in connection with a
dispute arising under this Section (including, without limitation, any
dispute over the Redemption Price) shall be for damages. The Partners
agree that the remedy described herein bears a reasonable relationship
to the damages which the Partners estimate may be suffered by an
Executive for a breach by the Partnership under this Section and the
limitation of remedy is not unreasonable under the circumstances
existing as of the date hereof.
(f) The then existing Percentage Interests of the
remaining Partners (other than an Executive) shall be proportionately
increased to reflect the redemption of such Redemption Interest.
(g) For the purposes of this Section 11.12,
"Executive's Percentage Interest" shall include any transferee of an
Executive who is a spouse, natural or adopted child, grandchild,
parent, sibling or natural or adopted child of any sibling of
Executive, or trust for the benefit of any one of the foregoing
persons, or his estate or designated beneficiary, heir or legatee.
Nothing in this Section shall create a right of transfer contrary to
the other provisions of Article XI or otherwise.
(h) The fair market value of an Executive's
Redemption Interest shall be determined by agreement between the
Partnership and such Executive. In the absence of an agreement within
30 days following the date of the Redemption Notice, the following
procedure shall apply: The value of an Executive's Redemption Interest
as of the Redemption Closing Date shall be determined pursuant to an
appraisal performed by an appraiser of recognized standing in the
hospitality industry, selected by the Partnership in its reasonable
discretion. If such appraiser is not reasonably acceptable to such
Executive, such Executive shall so notify the Partnership and such
Executive shall select a second appraiser of recognized standing in the
hospitality industry. If, within ten days following notice to such
Executive of the selection of an appraiser by the Partnership, such
Executive does not notify the Partnership that such appraiser is not
acceptable, such appraiser shall be deemed reasonably satisfactory to
the Executive. If such Executive selects a second appraiser (as
provided herein), such two appraisers shall jointly select a third
appraiser of recognized standing in the hospitality industry and such
third appraiser shall be the appraiser for purposes of this Section
11.12. The appraiser selected by the Partnership, or the third
appraiser selected pursuant to this paragraph, as the case may be,
shall, within 60 days from the date of the Redemption Notice, complete
and deliver to the Executive and the Partnership certified copies of
the appraisal of the fair market value of the Executive's Redemption
Interest as of the Redemption Date. The costs of the appraisal shall be
borne by the Partnership. In order to determine the fair market value
of the Executive's Redemption Interest, the appraiser shall determine
the amount of cash the Executive would be entitled to receive under
Section 13 hereof if (i) the Partnership sold all of its property for
an amount of cash equal to the
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aggregate value of all hotels and other property owned by the
Partnership, and paid or reserved for all liabilities of the
Partnership, and the Partnership received liquidation value for its
interests in entities in which the Partnership owns a direct or
indirect interest and (ii) the Partnership thereafter liquidated in
accordance with Section 13 hereof.
11.13 TERMINATION FOR CAUSE AND WITHOUT GOOD REASON.
If the Corporation terminates an Executive for Cause (as such
term is defined in such Executive's Executive Employment Agreement) or if an
Executive terminates his employment with the Corporation without Good Reason (as
such term is defined in such Executive's Executive Employment Agreement), then
such Executive's Percentage Interest shall be reduced as of the date of such
termination, pursuant to Exhibit G hereto; provided, however, that if such
Percentage Interest has been reduced below the percentage provided on Exhibit G
hereto pursuant to the terms of this Agreement (by way of example and not as a
limitation, if such Executive's Percentage Interest has been diluted pursuant to
Section 4.3(b)) then such Executive's Percentage Interest shall equal such
lesser Percentage Interest. The then existing Percentage Interests of the
Partners (other than the Executives) shall each be increased by one-half of the
percentage by which such Executive's Percentage Interest is reduced. In any and
all events, such terminated Executive's Percentage Interest, if any, as reduced
hereby, shall be subject to optional redemption by the Partnership pursuant to
Section 11.12.
ARTICLE XII
WITHDRAWAL AND REMOVAL OF MANAGING GENERAL PARTNER AND GENERAL PARTNER
12.1 EVENTS OF WITHDRAWAL.
(a) Neither the Managing General Partner nor the General
Partner may voluntarily withdraw from the Partnership at any time. The
Managing General Partner or the General Partner (as the case may be),
however, will be deemed to have withdrawn from the Partnership on the
occurrence of any one of the following events (each event herein
referred to as an "Event of Withdrawal"):
(i) Pursuant to Section 12.2 hereof, the Managing
General Partner is removed as managing general partner of the
Partnership, or the General Partner is removed as general
partner of the Partnership; or
(ii) The Managing General Partner transfers all of
its right, title and interest as managing general partner of
the Partnership other than as permitted by Article XI; or
(iii) The General Partner transfers all of its right,
title and interest as general partner of the Partnership other
than as permitted by Article XI.
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(b) Upon an Event of Withdrawal with respect to the General
Partner, there shall be no dissolution of the Partnership, and if such
dissolution is otherwise mandated by applicable law, the remaining
Partners agree that they will be deemed to have unanimously elected to
continue the Partnership and the Partnership shall be deemed to be
dissolved and reconstituted as may be required by applicable law.
12.2 REMOVAL.
(a) A Managing General Partner may be removed as Managing
General Partner and a General Partner may be removed as General Partner
at any time: (i) after such Person commits an act of fraud or gross
negligence in its capacity as Managing General Partner or General
Partner, as the case may be; (ii) after such Person commits a material
breach of this Agreement; (iii) after such Person engages in
intentional and willful misconduct against the interests of the
Partnership; (iv) after such Person suffers or is subject to an Event
of Bankruptcy; or (v) with respect to the General Partner only, upon
the vote of a Majority Interest to remove the General Partner if the
General Partner exceeds the power or authority expressly granted herein
or the power or authority expressly granted by the Managing General
Partner in writing, or purports to have power or authority in excess of
those expressly granted herein or the power or authority expressly
granted by the Managing General Partner in writing.
(b) Any such removal of that Person as the Managing General
Partner or the General Partner shall be effective after the following
conditions have been satisfied: (i) delivery of a removal notice to
such Person, in the case of the removal of the Managing General
Partner, from a Majority Interest, and in the case of the General
Partner, from the Managing General Partner; and (ii) in the case of the
Managing General Partner, approval by a Majority Interest of a new
Managing General Partner and the admission of such Person as a Managing
General Partner in the Partnership. The removal of the Managing General
Partner shall cause a dissolution event under Section 13.1 of this
Agreement.
(c) If a Person is removed as a General Partner but continues
to own a Partnership Interest, then such Partnership Interest shall be
converted into a Partnership Interest as a Limited Partner. In the
event of a reconstitution of the Partnership pursuant to Section 13.2
of this Agreement, the Partnership Interest of a removed Managing
General Partner shall be converted into a Partnership Interest as a
Limited Partner.
(d) If a Person is removed as a General Partner, such Person
shall perform, execute and deliver or cause to be performed, executed
and delivered any and all acts, documents and assurances as the
Managing General Partner may reasonably require to evidence: (i) the
removal of the former General Partner; and (ii) if applicable, a
conversion of the Partnership Interest of the former General Partner to
a Partnership Interest as a Limited Partner. If a Person is removed as
a Managing General Partner, and thereafter the Partnership is
reconstituted pursuant to Section 13.2 of this Agreement, such Person
shall perform, execute and deliver or cause to be performed, executed
and delivered any and all acts, documents and assurances as the newly
appointed Managing General Partner may reasonably require to evidence:
(i) the removal of the Managing General Partner; and (ii) if
applicable, a conversion of the Partnership Interest of the former
Managing General Partner to a Partnership Interest as a Limited
Partner; and (iii) the admission of a new Managing General Partner.
(e) Notwithstanding anything to the contrary in Article XI, in
connection with the admission of a new Managing General Partner, the
Limited Partners may assign a portion of their respective Partnership
Interests to such new Managing General Partner so that such new
Managing General Partner has at least a 1% Percentage Interest in all
items of Profit, Loss,
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income, gain, loss and deduction, Partnership capital, and
distributions. The portion of the Partnership Interest of a Limited
Partner that is assigned to such new Managing General Partner shall be
converted into a Partnership Interest as a Managing General Partner
upon its receipt by the new Managing General Partner.
ARTICLE XIII
DISSOLUTION AND WINDING UP
13.1 DISSOLUTION.
(a) Except as otherwise provided in this Agreement, no Partner
shall have the right to terminate this Agreement or dissolve the
Partnership by its express will or by withdrawal without the prior
written consent of the other Partners.
(b) The Partnership shall be dissolved upon the first to occur
of any of the following:
(i) The expiration of its term as provided in Section
1.3 of this Agreement (as such term may have been extended in
accordance with the provisions of Section 1.3 prior to an
event of dissolution);
(ii) The removal of the Managing General Partner, or
any other event that results in its ceasing to be the managing
general partner of the Partnership;
(iii) An election to dissolve the Partnership by the
Managing General Partner that is approved by all of the
Limited Partners other than the Executives;
(iv) At the election of CGLH GP, at such time as CGLH
Partners I LP, CGLH Partners II LP and their Affiliates cease
to Beneficially Own Voting Securities representing at least
30% or more of the Total Voting Power (without taking into
account any limitation on the conversion of such Voting
Securities in determining such Beneficial Ownership or the
number of shares issuable upon complete conversion); or
(v) Any other event, under the Delaware Act, that
would require (notwithstanding provisions in this Agreement to
the contrary) the Partnership's dissolution.
13.2 CONTINUATION OF THE PARTNERSHIP.
(a) Except as otherwise provided in this Agreement, upon the
occurrence of an event described in Section 13.1(b)(i), (b)(ii) or
(b)(v), the Partnership shall be deemed to be dissolved and
reconstituted only if 50.1% of the Percentage Interests of the
remaining Partners elect to continue the Partnership within 90 days of
such event. If no election to continue the Partnership is made within
90 days of such event, the Partnership shall conduct only those
activities necessary to wind up its affairs. If an election to continue
the Partnership is made upon the occurrence of an event described in
Section 13.1(b)(i), (b)(ii) or (b)(v), then:
(i) If there is no remaining Managing General Partner
as a result of Section 13.1(b)(ii), then within such 90 day
period a successor Managing General Partner shall be selected
by a Majority Interest (if such Partners cannot agree on the
selection of a successor Managing General Partner, the
Partnership shall be dissolved and liquidated);
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(ii) The Partnership shall be deemed to be
reconstituted and shall continue until the end of the term for
which it is formed unless earlier dissolved in accordance with
this Article XIII;
(iii) If dissolution occurred pursuant to Section
(b)(ii), the withdrawn Managing General Partner shall be
automatically admitted to the Partnership as a Limited Partner
and its former Partnership Interest as a Managing General
Partner shall be automatically converted to a Limited
Partner's Partnership Interest in the manner provided in
Section 12.2 of the Agreement; and
(iv) All necessary steps shall be taken to amend or
restate this Agreement and the Certificate.
(b) Upon an Event of Withdrawal with respect to the General
Partner or an Event of Withdrawal other than removal with respect to
the Managing General Partner, there shall be no dissolution of the
Partnership, and if such dissolution is otherwise mandated by
applicable law, the remaining Partners agree that they will be deemed
to have unanimously elected to continue the Partnership and the
Partnership shall be deemed to be dissolved and reconstituted as may be
required by applicable law.
13.3 LIQUIDATION.
(a) Upon dissolution of the Partnership, unless the
Partnership is continued under Section 13.2 of this Agreement, the
Partnership's affairs shall be wound up. A Person selected by a
Majority Interest shall be the liquidator (the "Liquidator"). The
Liquidator shall be entitled to receive such compensation for its
services as may be approved by all of the Limited Partners other than
the Executives.
(b) The Liquidator shall agree not to resign at any time
without 15 days' prior written notice and may be removed at any time,
with or without cause, by notice of removal approved by a Majority
Interest. Upon dissolution, removal, or resignation of the Liquidator,
a successor and substitute Liquidator (who shall have, and succeed to,
all rights, powers, and duties of the original Liquidator) shall within
30 days thereafter be selected by a Majority Interest. The right to
appoint a successor or substitute Liquidator in the manner provided
herein shall be recurring and continuing for so long as the functions
and services of the Liquidator are authorized to continue under the
provisions hereof, and every reference herein to the Liquidator will be
deemed to refer also to any such successor or substitute Liquidator
appointed in the manner herein provided.
(c) Except as expressly provided in this Article XIII, the
Liquidator appointed in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the Managing General
Partner under the terms of this Agreement (but subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of
such powers) to the extent necessary or desirable in the good faith
judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to
complete the winding up and liquidation of the Partnership.
(d) The Liquidator shall liquidate the assets of the
Partnership and apply and distribute the proceeds of such liquidation
in the following order of priority, unless otherwise required by
mandatory provisions of applicable law:
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(i) To the payment of the expenses of the terminating
transactions including, without limitation, brokerage
commissions, legal fees, accounting fees and closing costs;
(ii) To the payment to creditors of the Partnership,
including Partners, in order of priority provided by law; and
(iii) To the Partners and assignees in accordance
with the manner in which proceeds from a Capital Event are
distributed pursuant to Section 6.1(b)(ii) hereof; provided,
however, that any Available Cash, on hand at the time of the
event of dissolution giving rise to the liquidation of the
Company and during the term of such liquidation, from the
operations of any Hotels and other, related assets or
otherwise not from a Capital Event shall be distributed in
accordance with the manner in which Available Cash is
distributed pursuant to Section 6.1(b)(i); provided, further,
however, that the Liquidator may place in escrow a reserve of
cash or other assets of the Partnership for contingent
liabilities in an amount determined by the Liquidator to be
appropriate for such purposes.
13.4 DISTRIBUTION IN KIND.
Notwithstanding the provisions of Section 13.3 of this
Agreement which require the liquidation of the assets of the Partnership, but
subject to the order of priorities set forth therein, if on dissolution of the
Partnership the Liquidator determines (and if the Liquidator is the Managing
General Partner, then if the Liquidator determines after consultation with the
Limited Partners) that an immediate sale of part or all of the Partnership's
assets would be impractical or would cause undue loss to the Partners and
assignees, the Liquidator may defer for a reasonable time the liquidation of any
assets except those necessary to satisfy liabilities of the Partnership (other
than those to Partners) and/or may distribute to the Partners and assignees, in
lieu of cash, as tenants in common and in accordance with the provisions of
Section 13.3 of this Agreement, undivided interests in such Partnership assets
as the Liquidator deems not suitable for liquidation. Any such distributions in
kind shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and equitable
and to any joint operating agreements or other agreements governing the
operation of such properties at such time. The Liquidator shall determine the
fair market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
13.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP.
Upon the completion of the distribution of Partnership
property as provided in Section 13.3 and Section 13.4 of this Agreement, the
Partnership shall be terminated, and the Liquidator (or the Managing General
Partner and Limited Partners if necessary) shall cause the cancellation of the
Certificate in the State of Delaware and of all qualifications and registrations
of the Partnership as a foreign limited partnership in jurisdictions other than
the State of Delaware and shall take such other actions as may be necessary to
terminate the Partnership.
13.6 RETURN OF CAPITAL.
Except as otherwise provided in Section 4.5, neither the
Managing General Partner nor the General Partner shall be personally liable for
the return of the Capital Contributions, or any portion thereof, it being
expressly understood that any such return shall be made solely from Partnership
assets.
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13.7 CERTAIN TERMINATIONS.
Notwithstanding any other provisions of this Article XIII, in
the event the Partnership is terminated within the meaning of Code Section
708(b)(1)(B), but no event requiring liquidation has occurred, the Partnership
shall not be liquidated, the Partnership's liabilities shall not be paid or
discharged, and the Partnership's affairs shall not be wound up.
ARTICLE XIV
AMENDMENT OF AGREEMENT; CONSENTS
14.1 AMENDMENT PROCEDURES.
Except as provided in Section 1.2 of this Agreement and the
amendments to Exhibit A and Exhibit B hereto, all amendments to this Agreement
shall be in accordance with the following requirements: (a) amendments to this
Agreement may be proposed only by a Partner; (b) if an amendment is proposed,
the Managing General Partner shall seek the written consent of the requisite
Percentage Interests of Limited Partners and as may be required under any debt
instruments pursuant to which the Partnership is debtor; (c) a proposed
amendment shall be effective upon its approval by: (i) the Managing General
Partner and the General Partner, and (ii) all of the Limited Partners; and (d)
the Managing General Partner shall notify all Partners upon final adoption of
any such proposed amendment.
14.2 ACTION WITHOUT A MEETING.
Any action that that requires the consent of all of the
Partners may be taken without a meeting if a consent in writing setting forth
the action so taken is signed by Limited Partners owning not less than the
minimum Percentage Interests that would be necessary to authorize or take such
action pursuant to the terms of this Agreement. To the extent that the laws of
any jurisdiction to which the Partnership or the Partnership Agreement is
subject require that any action of Limited Partners under this Agreement be
unanimous, any action taken by Limited Partners pursuant to and in accordance
with the preceding sentence shall be deemed to constitute the act of all Limited
Partners and, in such event, each Limited Partner that does not execute such
written consent hereby agrees to be bound by the decision of those Limited
Partners executing such consent and hereby approves such action to the extent
such approval is required for such matter to be effective under the laws of such
jurisdiction. Prompt notice of the taking of action shall be given to Limited
Partners that have not consented in writing.
ARTICLE XV
GENERAL PROVISIONS
15.1 ADDRESSES AND NOTICES.
Any notice, demand, request, or report required or permitted
to be given or made to a Partner under this Agreement shall be in writing and
shall be deemed given or made (unless otherwise expressly provided herein): (i)
when delivered in person, by overnight mail using a nationally recognized
courier service at his address as shown on the records of the Partnership or by
facsimile transmission (with call-back confirmation) at the telefacsimile phone
number for such Partner shown on the records of the Partnership, or (ii) three
days after being placed in a United States Postal Service mailbox when sent by
United States registered or certified mail to the Partner at its address as
shown on the records of the Partnership, in any case regardless of any claim of
any Person who may have an interest in any Partnership Interest by reason of an
assignment or otherwise. If any notice or action is to be given or taken, as the
case may be, on a day that is not a Business Day, then such notice or action may
be given or taken, as the case may be, on the next Business Day.
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<PAGE> 139
15.2 TITLES AND CAPTIONS.
All article and section titles and captions in this Agreement
are for convenience only, shall not be deemed part of this Agreement, and in no
way shall define, limit, extend, or describe the scope or intent of any
provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
15.3 PRONOUNS AND PLURALS.
Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine, or neuter forms,
and the singular form of nouns, pronouns, and verbs shall include the plural and
vice versa.
15.4 FURTHER ACTION.
The parties shall execute all documents, provide all
information, and take or refrain from taking all actions as may be necessary or
appropriate to achieve the purposes of this Agreement.
15.5 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their heirs, executors, administrators, successors,
legal representatives, and permitted assigns. The failure of any parties hereto
to execute and deliver this Agreement shall not invalidate the Partnership
created by and among those parties executing and delivering this Agreement.
15.6 INTEGRATION.
This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
15.7 CREDITORS.
Subject to the provisions of Section 7.15 only, none of the
provisions of this Agreement shall be for the benefit of or enforceable by any
creditors of the Partnership or any other Person not a party to this Agreement.
15.8 WAIVER.
No failure by any party to insist upon the strict performance
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute a waiver
of any such breach or any other covenant, duty, agreement, or condition.
15.9 COUNTERPARTS.
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart.
15.10 APPLICABLE LAW.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
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<PAGE> 140
15.11 INVALIDITY OF PROVISIONS.
If any provision of this Agreement is declared or found to be
illegal, unenforceable, or void, in whole or in part, then the parties shall be
relieved of all obligations arising under such provision, but only to the extent
that it is illegal, unenforceable, or void, it being the intent and agreement of
the parties that this Agreement shall be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable while
preserving its intent or, if that is not possible, by substituting therefor
another provision that is legal and enforceable and achieves the same
objectives.
15.12 CONFIDENTIALITY.
(a) The terms of this Agreement and information about the
Hotels and other, related assets and properties and operations of the
Partnership, its Controlled Entities and its non-Controlled Entities constitute
proprietary information and each of the Partners agrees to keep (and cause its
employees, agents, advisors, officers, directors, members and partners to keep)
all such information confidential. Proprietary information does not include,
however, information that is or becomes generally available to the public other
than as a result of a disclosure by a Partner or its employees, agents,
advisors, officers, directors, members and/or partners. If a Partner is
requested pursuant to, or required by, applicable law or regulation or by legal
process to disclose any proprietary information, prior to such disclosure by
such Partner (which disclosure, in such circumstances, will not constitute, or
be deemed to constitute, a breach of this Agreement), such Partner will provide
the Partnership and the other Partners with prompt notice of such request or
requirement in order to enable the Partnership to seek an appropriate protective
order or other remedy, to consult with such Partner with respect to taking steps
to resist or narrow the scope of such request or legal process, or to waive
compliance, in whole or in part, with the terms of this Section. In any such
event, such Partner will use its reasonable efforts to cause all proprietary
information that is so disclosed to be accorded confidential treatment. Without
prejudice to the rights and remedies otherwise available to the Partnership or
the Partners individually and collectively, each Partner agrees that the
Partnership and each other Partner shall be entitled to equitable relief by way
of injunction or otherwise if a Partner or any of its employees, agents,
advisors, officers, directors, members and/or partners breaches or threatens to
breach any of the provisions of this Section.
(b) Notwithstanding anything in this Section or the remainder
of the Agreement to the contrary (but subject to Article XI), each of the
Partnership and the Partners acknowledges that CGLH GP and/or CGLH LP may sell
or otherwise transfer all or a portion of its or their Partnership Interest(s)
to an investment fund or a party which may pool such interests with a number of
other equity positions and grant participations therein or issue one or more
classes of securities evidencing a beneficial interest in a rated or unrated
public offering or private placement (the "Securities"). One or more national
rating agencies may rate the investment fund or the Securities. In connection
therewith, each of the Partnership and the Partners agrees that CGLH LP and CGLH
GP may make available certain proprietary information to investment banking
firms, rating agencies, accounting firms, law firms and other third-party
advisory firms involved with the Securities or the investment fund(s). Such
proprietary information provided may ultimately be incorporated into the
offering documents for the Securities or investment fund(s) and thus such
information may be disclosed to various investors, purchasers and prospective
purchasers of the Securities or interests in the investment fund(s). All of the
aforesaid third-party advisors and professional firms shall be entitled to rely
on the information supplied by, or on behalf of, the Partnership. The
Partnership shall execute and deliver all such instruments, documents and other
papers, and do or cause to be done all such acts and things as CGLH LP and/or
CGLH GP may reasonably request in order to effect such sale, transfers,
participations and/or issuance of Securities. CGLH LP and/or CGLH GP shall pay
all of the Partnership's actual out-of-pocket expenses and third-party costs
(including attorneys' fees and expenses) associated therewith.
51
<PAGE> 141
15.13 REPRESENTATIONS AND WARRANTIES OF IHC.
Each of IHC GP and IHC LP, individually, hereby represents and
warrants to CGLH and the Partnership as follows:
(a) Organization and Good Standing; Power and Authority;
Qualifications. Such Person is duly organized, validly existing and in
good standing under the laws of its state of incorporation or
organization. Such Person has the Power to enter into and carry out the
transactions contemplated by this Agreement to which it is a party.
(b) Authorization of the Agreement. The execution, delivery
and performance by such Person of this Agreement has been duly
authorized by all requisite corporate, partnership or other company
action on the part of such entity and do not or will not require the
approval or consent of the constituent equity holders of such entity.
This Agreement constitutes a legal, valid and binding obligation of
such Person, enforceable against such entity in accordance with its
terms except to the extent that enforceability may be limited by
bankruptcy, solvency or other similar laws affecting creditors' rights
generally and subject to limitations on the availability of equitable
remedies.
(c) No Conflict. The execution and delivery by such Person of
this Agreement and the consummation by such entity of the transactions
contemplated hereby and its compliance with the provisions hereof and
thereof will not (a) violate any provision of any federal, state, local
or foreign law, statute, rule or regulation, or any ruling, writ,
injunction, order, judgment or decree of any court, administrative
agency or other governmental body applicable to it, or (b) violate its
organizational documents.
(d) Consents. No licenses, permits, qualifications and
authorizations, consents or approvals of or by, or any notifications of
or filings with, any Person is required in connection with the
execution, delivery and performance by such Person of this Agreement,
or the consummation by such entity of the transactions contemplated
hereby.
(e) Financial Capacity. Such Person has cash on hand, in an
aggregate amount sufficient to enable such Person to timely perform its
obligations to fund its Tier 1 Capital Contributions.
15.14 REPRESENTATIONS AND WARRANTIES OF CGLH.
Each of CGLH GP and CGLH LP, individually, hereby represents
and warrants to IHC and the Partnership as follows:
(a) Organization and Good Standing; Power and Authority;
Qualifications. Such Person is duly organized, validly existing and in
good standing under the laws of its state of incorporation or
organization. Such Person has the Power to enter into and carry out the
transactions contemplated by this Agreement to which it is a party.
(b) Authorization of the Documents. The execution, delivery
and performance by such Person of this Agreement has been duly
authorized by all requisite corporate, partnership or other company
action on the part of such entity and do not or will not require the
approval or consent of the constituent equity holders of such entity.
This Agreement constitutes a legal,
52
<PAGE> 142
valid and binding obligation of such Person, enforceable against such
entity in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, solvency or other similar
laws affecting creditors' rights generally and subject to limitations
on the availability of equitable remedies.
(c) No Conflict. The execution and delivery by such Person of
this Agreement and the consummation by such entity of the transactions
contemplated hereby and its compliance with the provisions hereof and
thereof will not (a) violate any provision of any federal, state, local
or foreign law, statute, rule or regulation, or any ruling, writ,
injunction, order, judgment or decree of any court, administrative
agency or other governmental body applicable to it, or (b) violate its
organizational documents.
(d) Consents. No licenses, permits, qualifications and
authorizations, consents or approvals of or by, or any notifications of
or filings with, any Person is required in connection with the
execution, delivery and performance by such Person of this Agreement,
or the consummation by such entity of the transactions contemplated
hereby.
(e) Financial Capacity. Such Person has cash on hand, or
commitments from its partners or other financially responsible third
parties, or a combination thereof, in an aggregate amount sufficient to
enable such Person to timely perform its obligations to fund its Tier 1
Capital Contributions.
15.15 CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
Notwithstanding anything to the contrary herein, this
Agreement shall not be effective unless and until the consummation of the
transactions contemplated under those certain Investor Agreement, dated as of
[____________], 2000 and Securities Purchase Agreement, dated as of August [__],
2000, each between the Corporation and the Investors, including, without
limitation, the filing of the Articles Supplementary to the Charter of the
Corporation designating the Series B Preferred Stock with the Secretary of State
of the State of Maryland, the issuance of the Series B Preferred Stock and the
Note to the Investors, and the execution of the Registration Rights Agreement.
15.16 THIRD PARTY BENEFICIARIES.
The terms and provisions of this Agreement are intended solely
for the benefit of each party hereto and their respective successors or
permitted assigns, and, except as expressly provided it is not the intention of
the parties to confer third-party beneficiary rights upon any other person.
[REMAINDER OF THE PAGE LEFT BLANK]
53
<PAGE> 143
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
ADDRESS MANAGING GENERAL PARTNER:
-------
3 World Financial Center CGLH PARTNERS III LP
12th Floor
New York, New York 10285 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:
GENERAL PARTNER:
Foster Plaza Ten Interstate Investment Corporation
680 Andersen Drive
Pittsburgh, PA 15220-8126
By:______________________
Name:
Title:
LIMITED PARTNERS:
__________________________ _________________________
__________________________ Thomas F. Hewitt
__________________________ _________________________
__________________________ J. William Richardson
54
<PAGE> 144
3 World Financial Center CGLH PARTNERS IV LP
12th Floor a Delaware limited partnership
New York, New York 10285
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:
Foster Plaza Ten INTERSTATE PROPERTY PARTNERSHIP, L.P.
680 Andersen Drive
Pittsburgh, PA 15220-8126 By: Interstate Property Corporation
its Sole General Partner
By:______________________
Name:
Title:
55
<PAGE> 145
[SAMPLE NOTARY BLOCKS FOR EXECUTIVES' SIGNATURES - TO BE CONFORMED AS NECESSARY]
--------------------------------------------------------------------------------
STATE OF ____________________ )
) ss.:
COUNTY OF ___________________ )
On the ___ day of _________ in the year ____ before me, the
undersigned, personally appeared _______________________________, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument, and that such individual made such appearance before
the undersigned in the __________________.
(Notarial Seal) ___________________________
Notary Public
STATE OF ____________________ )
) ss.:
COUNTY OF ___________________ )
On the ___ day of _________ in the year ____before me, the
undersigned, personally appeared _______________________________, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument, and that such individual made such appearance before
the undersigned in the __________________.
(Notarial Seal) ___________________________
Notary Public
56
<PAGE> 146
Exhibit 4
EXHIBIT C TO SECURITIES PURCHASE AGREEMENT
INVESTOR AGREEMENT
DATED AS OF [ ], 2000
AMONG
INTERSTATE HOTELS CORPORATION
AND
CGLH PARTNERS I LP
AND
CGLH PARTNERS II LP
<PAGE> 147
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1 Definitions; Representations and Warranties....... 1
1.1. Definitions.......................................... 1
1.2. Representations and Warranties of the Company........ 4
1.3. Representations and Warranties of Investor........... 4
Article 2 Standstill........................................ 5
2.1. Standstill........................................... 5
2.2. Early Termination of Standstill...................... 8
2.3. Modification Upon Subsequent Agreement............... 9
Article 3 Board Representation and Voting................... 9
3.1. Board Representation................................. 9
3.2. Voting............................................... 12
3.3. Required Board Approval.............................. 12
3.4. Notices of Dispositions of Voting Securities......... 14
3.5. Access to Information................................ 14
Article 4 Transfer Restrictions............................. 15
4.1. Restrictions on Dispositions......................... 15
4.2. Rights Agreement..................................... 16
Article 5 Miscellaneous..................................... 16
5.1. Notices.............................................. 16
5.2. Legends.............................................. 17
5.3. Enforcement.......................................... 18
5.4. Entire Agreement..................................... 18
5.5. Severability......................................... 18
5.6. Headings............................................. 18
5.7. Counterparts......................................... 18
5.8. No Waiver............................................ 18
5.9. Successors and Assigns............................... 18
5.10. Governing Law....................................... 18
5.11. Further Assurance................................... 19
5.12. Consent to Jurisdiction and Service of Process...... 19
5.13. Investment Banking Services......................... 19
</TABLE>
EXHIBITS
Exhibit A -- Market Rate Fees (section 5.13)
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<PAGE> 148
APPENDIX B
INVESTOR AGREEMENT
This Investor 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
(together, the "Investor"), on the other hand.
WHEREAS, pursuant to the Securities Purchase Agreement dated August [ ],
2000 between the Company and the Investor (the "Purchase Agreement") pursuant to
which, (i) upon the terms and subject to the conditions set forth in the
Purchase Agreement, the Investor shall purchase a subordinated convertible note
(the "Note") having a principal amount of $25,000,000 and shares of Series B
Convertible Preferred Stock, par value $.01 per share, of the Company having an
aggregate stated amount of $5,000,000 ("Series B Preferred Stock"), each of
which shall be convertible into shares of Class A Common Stock, par value $.01
per share, of the Company ("Common Stock"), subject to certain limitations, and
(ii) the Company and the Investor shall, simultaneously with the execution of
this Agreement, enter into a Registration Rights Agreement (the "Registration
Rights Agreement") granting certain registration rights;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the Purchase Agreement, and in the Registration
Rights Agreement and intending to be legally bound hereby, the parties agree as
follows, effective upon the closing of the purchase of the Series B Preferred
Stock and the Note pursuant to the Purchase Agreement (the "Closing"):
ARTICLE 1
Definitions; Representations and Warranties
SECTION 1.1 DEFINITIONS. Unless otherwise specified all references to
"days" shall be deemed to be references to calendar days. For purposes of this
Agreement, the following terms shall have the following meanings:
"Actual Voting Power" shall mean, as of the date of determination, the
total voting power of all of the outstanding securities of the Company at the
time then entitled to vote for the general election of directors, without giving
effect to securities issuable upon exercise or conversion of such outstanding
securities.
"Affiliate" of a Person shall have the meaning set forth in Rule 12b-2 of
the Exchange Act as in effect on the date of this Agreement, but shall not
include (i) any investment fund in which a Person has invested if the Person
does not otherwise Control the investment fund or have, directly or indirectly,
voting or dispositive power over any securities owned by such fund or (ii) any
investor or limited partner of any Person who does not otherwise have voting or
dispositive power over securities owned by that Person and is not Controlled by
that Person; provided, however, for the purposes of this Agreement, neither the
Company nor any Person Controlled by the Company shall be deemed an Affiliate of
any Investor.
"Beneficial Ownership" by a Person of any Voting Securities shall be
determined in accordance with the term "beneficial ownership" as defined in Rule
13d-3 under the Exchange Act as in effect on the date of this Agreement and, in
addition, "beneficial ownership" shall include securities which such Person has
the right to acquire (irrespective of whether such right is exercisable
immediately or only after the passage of time, including the passage of time in
excess of sixty (60) days) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise. For purposes of this Agreement, an Investor
shall be deemed to Beneficially Own any Voting Securities Beneficially Owned by
its Affiliates or any Group of which such Investor or any such Affiliate is a
member.
"Board of Directors" shall mean the Board of Directors of the Company.
"Class B Common Stock" shall mean the Company's Class B Common Stock, par
value $0.01 per share.
<PAGE> 149
"Class C Common Stock" shall mean the Company's Class C Common Stock, par
value $0.01 per share.
"Control" (including the term "Controlled by") shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise.
"Conversion Shares" shall mean the shares of Common Stock into which the
Note and/or shares of Series B Preferred Stock have been converted.
"EBITDA" shall mean, with respect to any person for any period, the sum
without duplication, determined on a consolidated basis, of such person's (a)
net income (or net loss), (b) net interest expense, (c) income tax expense, (d)
depreciation expense and (e) amortization expense, determined in accordance with
generally accepted accounting principles consistently applied.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Group" shall mean a "group" as such term is used in Section 13(d)(3) of
the Exchange Act as in effect on the date of this Agreement.
"Investor Designee" shall mean a person designated for election to the
Board of Directors by the Investor as provided in the Series B Preferred Stock
or in Section 3.1.
"Investor Partners" shall mean parties which have invested in the Investor.
"Joint Venture" shall mean the Joint Venture as defined in the Purchase
Agreement.
"Joint Venture Partnership Agreement" shall mean the Joint Venture
Partnership Agreement as defined in the Purchase Agreement.
"Law" shall mean all applicable foreign, federal, state and local laws,
statutes, rules, regulations, codes and ordinances.
"Lehman Parent Entities" shall mean Lehman Brothers Holdings Inc., Lehman
Brothers Inc., and any Person that, directly or indirectly, Controls or is under
common Control with Lehman Brothers Holdings Inc. or Lehman Brothers Inc. or is
managed by any such entity.
"Original Investment Amount" shall mean $30,000,000.
"Person" shall mean any individual, Group, corporation, general or limited
partnership, limited liability company, governmental entity, joint venture,
estate, trust, association, organization or other entity of any kind or nature.
"Related Person" shall mean, (i) with respect to any Person, (A) any
Affiliate of such Person, (B) any investment manager, investment advisor or
partner of such Person or an Affiliate of such Person, and (C) any investment
fund, investment account or investment entity whose investment manager,
investment advisor or general partner is such Person or a Related Person of such
Person;
"Reorganization Transaction" shall mean: (i) any merger, consolidation,
recapitalization, liquidation or other business combination transaction
involving the Company; (ii) any tender offer or exchange offer for any
securities of the Company; or (iii) any sale or other disposition of assets of
the Company or any of its Subsidiaries in a single transaction or in a series of
related transactions in each of the foregoing cases constituting individually or
in the aggregate 50% or more of the assets or Voting Securities (as applicable)
of the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiary" of any Person shall mean any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person. In respect of the
Company, Subsidiary shall also specifically include Interstate Hotels, LLC and
Northridge Holdings, Inc.
"Target Price" shall mean $10 per share of Common Stock for any measurement
period commencing prior to the first anniversary of the date of this Agreement
and shall thereafter increase by 15% on each anniversary of such date for
measurement periods starting on or after such anniversary.
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<PAGE> 150
"Total Voting Power" shall mean the total combined Voting Power, on a fully
diluted basis, of all the Voting Securities then outstanding.
"Voting Power" shall mean, as of the date of determination, the voting
power in the general election of directors of the Company, and shall be
calculated for each Voting Security by reference to the maximum number of votes
such Voting Security is or would be entitled to cast in the general election of
directors and, in the case of convertible (or exercisable or exchangeable)
securities, by reference to the maximum number of votes such Voting Security
would be entitled to cast in unconverted or converted (or exercised,
unexercised, exchanged or unexchanged) status. For purposes of determining
Voting Power under this Agreement, a Voting Security which is convertible into
or exchangeable for a Voting Security shall be counted as having the greater of
(i) the number of votes to which such Voting Security is entitled prior to
conversion or exchange and (ii) the number of votes to which the Voting Security
into which such Voting Security is convertible or exchangeable is entitled.
Notwithstanding anything else to the contrary contained in this Agreement, there
shall not be included in calculating Voting Power any votes which a Person shall
have upon and by reason of the non-payment of dividends on preferred shares in
accordance with the terms of such preferred shares.
"Voting Securities" shall mean (i) any securities entitled, or which may be
entitled, to vote generally in the election of directors of the Company
including shares of Common Stock, Class B Common Stock and Class C Common Stock
(ii) any securities, including the Note and the Series B Preferred Stock,
convertible or exercisable into or exchangeable for such securities (whether or
not the right to convert, exercise or exchange is subject to the passage of time
or contingencies or both), or (iii) any direct or indirect rights or options to
acquire any such securities; provided that unexercised options granted pursuant
to any employment benefit or similar plan and rights issued pursuant to any
shareholder rights plan shall be deemed not to be Voting Securities (or to have
Voting Power).
In addition, the following terms have the definitions specified in the
Sections noted:
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Acquiror Percentage...................................... 2.3
Agreement................................................ preamble
Applicable Number........................................ 3.1(b)
Beneficial Ownership Threshold........................... 3.1(b)
Charter.................................................. 1.2(b)
Closing.................................................. recitals
Common Stock............................................. recitals
Company.................................................. preamble
Company EBITDA........................................... 3.3
Compensation Committee................................... 3.1(b)
Competing Businesses..................................... 3.1(h)
Dilutive Issuance........................................ 2.1(a)
Disposition.............................................. 4.1
Documents................................................ 3.3(n)
EBITDA Target............................................ 3.3
Exempt Affiliates........................................ 2.1(b)
Financial Institution.................................... 5.13
Future Major Investor.................................... 2.3
Information.............................................. 3.5
Investor................................................. preamble and 4.1(f)
Investor Designee Period................................. 3.1(b)
Investor Material Adverse Effect......................... 1.3(b)
Lehman Brothers.......................................... 5.13
Material Adverse Effect.................................. 1.2(b)
Maximum Ownership........................................ 4.1
Moving Party............................................. 5.3
Nominating Committee..................................... 3.1(b)
</TABLE>
-3-
<PAGE> 151
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Note..................................................... recitals
Notice................................................... 5.13
Offer.................................................... 2.2(g)
Purchase Agreement....................................... recitals
Registration Rights Agreement............................ recitals
Related Transferee....................................... 4.1(f)
Rights Agreement......................................... 3.3(j)
Series B Preferred Stock................................. recitals
Shares................................................... 3.1(b)
Standstill Period........................................ 2.1(a)
Threshold Amount......................................... 3.3
Unaffiliated Directors................................... 3.1(b)
</TABLE>
SECTION 1.2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Investor as follows:
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby are within its corporate powers and have been duly authorized by all
necessary corporate action on its part. This Agreement constitutes a legal,
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, subject, as to enforcement, to bankruptcy, and
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditor's rights and to general
equity principles.
(b) The execution, delivery and performance of this Agreement by the
Company does not and will not (i) contravene or conflict with or constitute a
default under the Company's charter (the "Charter") or Bylaws, (ii) except as
set forth on Schedule 2.3 of the Company Disclosure Schedule which forms part of
the Securities Purchase Agreement, dated August [ ], 2000, between the Company
and the Investor contravene or conflict with or constitute a default under any
agreement to which the Company is a party or is bound, or result in a breach of
or default under any instrument or agreement to which the Company is a party or
is bound, which violation, breach or default would have a material adverse
effect on the Company's business taken as a whole or would adversely affect the
consummation of the transactions contemplated by this Agreement or the Purchase
Agreement (a "Material Adverse Effect"), (iii) violate any judgment, order,
injunction, decree or award against or binding upon the Company as of the date
of this Agreement, the violation of which, individually or in the aggregate,
would have a Material Adverse Effect, (iv) violate any Law relating to the
Company, the violation of which, individually or in the aggregate, would have a
Material Adverse Effect or (v) constitute a "change of control," or result in
the acceleration of rights, under any material debt instrument to which the
Company is a party.
(c) Except for applicable requirements of the Exchange Act or as disclosed
in the Purchase Agreement, the Company is not required to make any filing or
registration with, or obtain any permit, authorization, consent or approval of,
any governmental entity or any other Person in connection with this Agreement,
the Purchase Agreement, or any of the transactions contemplated hereby and
thereby.
(d) As of the date of this Agreement, there is no action, suit or
proceeding pending or, to the knowledge of the Company, threatened against the
Company that relates to this Agreement, the Purchase Agreement, or any of the
transactions contemplated hereby or thereby.
SECTION 1.3. REPRESENTATIONS AND WARRANTIES OF INVESTOR. The Investor
represents and warrants to the Company as follows:
(a) The execution, delivery and performance by the Investor of this
Agreement and the consummation by the Investor of the transactions contemplated
by this Agreement are within its powers and have been duly authorized by all
necessary action on its part. This Agreement constitutes a legal, valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject, as to enforcement, to
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bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's rights
and to general equity principles.
(b) The execution, delivery and performance of this Agreement by the
Investor does not and will not (i) contravene or conflict with or constitute a
default under the Investor's partnership agreement, (ii) contravene or conflict
with or constitute a default under any agreement to which the Investor is a
party or is bound, or result in a breach of or default under any instrument or
agreement to which the Investor is a party or is bound, which violation, breach
or default would have a material adverse effect on the Investor's business taken
as a whole or would adversely affect the consummation of the transactions
contemplated by this Agreement or the Purchase Agreement (an "Investor Material
Adverse Effect"), (iii) violate any judgment, order, injunction, decree or award
against or binding upon the Investor as of the date of this Agreement, the
violation of which, individually or in the aggregate, would have an Investor
Material Adverse Effect, (iv) violate any Law relating to the Investor, the
violation of which, individually or in the aggregate, would have an Investor
Material Adverse Effect, or (v) result in the acceleration of rights, under any
material debt instrument to which the Investor is a party.
(c) Except for applicable requirements of the Exchange Act or as disclosed
in the Purchase Agreement, the Investor is not required to make any filing or
registration with, or obtain any permit, authorization, consent or approval of,
any governmental entity or any other Person in connection with this Agreement,
the Purchase Agreement or any of the transactions contemplated hereby and
thereby.
(d) As of the date of this Agreement, there is no action, suit or
proceeding pending or, to the knowledge of the Investor, threatened against the
Investor that relates to this Agreement, the Purchase Agreement, or any of the
transactions contemplated hereby or thereby.
ARTICLE 2
Standstill
SECTION 2.1. STANDSTILL. (a) Until the earliest to occur of (A) the fourth
anniversary (or, in the case of any of the actions set forth in clauses (a)(ii),
(vii), (ix), (x) and (xi) hereof, the third anniversary) of the Closing, (B) the
date on which the Investor owns Voting Securities which would represent (i) less
than 20% of the Total Voting Power and (ii) less than 25% of the Actual Voting
Power, (C) at any time after 45 calendar days following any twenty consecutive
trading day period for which the average sales price for shares of Common Stock
is at least the Target Price, and (D) termination under Section 2.2 (such
period, the "Standstill Period"), Investor will not, and will cause its
Affiliates (other than the Lehman Parent Entities) not to, directly or
indirectly:
(i) acquire, offer to acquire, or agree to acquire, by purchase or
otherwise, any Voting Securities or voting rights or direct or indirect
rights or options to acquire any Voting Securities of the Company or any of
its Affiliates other than (A) the exercise of convertible securities
acquired in compliance with the terms of this Agreement (including the
acquisition of shares of Common Stock upon conversion of the Note or Series
B Preferred Stock), or an acquisition as a result of a stock split, stock
dividend or similar recapitalization, (B) the acquisition of shares of
Series B Preferred Stock and the Note pursuant to the Purchase Agreement or
(C) stock options or similar rights granted by the Company to an Affiliate
of Investor as compensation for performance as a director or officer of the
Company or its subsidiaries (and any shares issuable upon exercise
thereof), (D) transfers between Investor and Related Transferees as
permitted under Section 4.1(f), (E) any rights which are granted to all
stockholders of the Company (and any shares issuable upon exercise
thereof), (F) if the Company shall issue any Voting Securities which issue
has the effect of reducing, as a percentage of Total Voting Power, the
Voting Power of Voting Securities Beneficially Owned by Investor (a
"Dilutive Issuance"), the acquisition by the Investor of such number of
Voting Securities as restore the Investor's Voting Power to the percentage
of Total Voting Power of Voting Securities Beneficially Owned by the
Investor immediately prior to such Dilutive Issuance or (G) any or all
outstanding shares of Class C Common Stock unless the acquisition of Class
C Common Stock, together with any shares of Common Stock into which Series
B Preferred Stock or the Note have been converted at the time of such
acquisition (but not including for this purpose any shares of Series B
Preferred Stock or any portion of the Note that has not theretofore been
converted into Common Stock), would cause the Investor to Beneficially
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Own more than 49% of the Company's outstanding Voting Securities; provided,
however, that if the Investor in good faith inadvertently acquires Voting
Securities representing, convertible into, or having votes not more than
50,000 shares of Common Stock in violation of these provisions and within
15 days after the first date on which the Investor has actual knowledge
(including by way of written notice given by the Company) that a violation
has occurred Investor shall have transferred any Voting Securities held in
violation of these provisions to unrelated third parties so that the
Investor no longer Beneficially Owns any such shares or Voting Securities
or has any agreement or understanding relating to such shares, this Section
2.1 shall be deemed to not have been violated; and provided, further, that
no violation of this provision shall be deemed to have occurred by reason
of the indirect acquisition of Beneficial Ownership of securities resulting
from (x) investments in investment funds as to which no Investor or
Affiliate thereof has Control or power to Control with respect to voting or
investment decisions or (y) acquisitions of securities by a limited partner
in any Investor or Affiliates thereof as to which limited partner the
Investor or its Affiliates has Control or power to Control;
(ii) make or cause to be made any proposal for a Reorganization
Transaction;
(iii) form, join or in any way participate in a Group with respect to
any securities of the Company or its Affiliates, other than with Investor
Partners or their Affiliates;
(iv) make, or in any way cause or participate in, any "solicitation"
(other than solicitations of Investor or Affiliates of Investor) of
"proxies" to vote (as those terms are defined in Regulation 14A under the
Exchange Act) with respect to the Company or its Affiliates, or communicate
with, seek to advise, encourage or influence any Person, in any manner,
with respect to the voting of, securities of the Company or its Affiliates,
or become a "participant" in any "election contest" (as those terms are
defined or used in Rule 14a-11 under the Exchange Act) with respect to the
Company or its Affiliates (other than non-public communications which would
not require public disclosure by any Person or solicitation of proxies in
support of the election of Investor Designees or other persons nominated by
the Board of Directors in accordance with Section 3.1 hereof in
circumstances in which a third party is soliciting parties for the election
of nominees not nominated by the Board of Directors);
(v) initiate, propose or, except with the prior approval of a majority
of the Unaffiliated Directors (which approval is requested in a manner
which does not require disclosure publicly or to any third parties),
otherwise solicit stockholders for the approval of one or more stockholder
proposals with respect to the Company or its Affiliates or induce or
attempt to induce any other Person to initiate any stockholder proposal or
seek election to or seek to place a representative on the Board of
Directors of the Company (except pursuant to Section 3.1 of this Agreement)
or its Affiliates or seek the removal of any member of the Board of
Directors of the Company or its Affiliates (for this purpose, the actions
of the Investor Designees in communicating (without public disclosure or
disclosure to third parties) with the Board of Directors in their capacity
as directors of the Company, and non-public communication which would not
require public disclosure by any Person, shall not be deemed to be in
contravention of this paragraph (v));
(vi) in any manner, agree, attempt, seek or propose (other than making
any request for permission with respect thereto which would not require
disclosure publicly or to any third party) to deposit any securities of the
Company or its Affiliates in any voting trust or similar arrangement or to
subject any securities of the Company or its Affiliates to any other voting
or proxy agreement, arrangement or understanding (other than any such
agreements or understandings with other Investor Partners or their
Affiliates) provided, however, that Investor and its Affiliates may enter
into such voting trusts, agreements, arrangements or understandings for the
purpose of a monetization of all or part of the securities of the Company
Beneficially Owned by Investor or its Affiliates;
(vii) offer, sell or transfer any Voting Securities or rights to
receive Voting Securities except for Dispositions in accordance with
Article 4;
(viii) other than as required by law, disclose any intention, plan or
arrangement, or make any public announcement (or request permission to make
any such announcement other than making any request for
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permission which would not require disclosure publicly or to any third
party), or induce any other Person to take any action, inconsistent with
the foregoing clauses (a)(i), (iii), (iv), (v) and (vi);
(ix) other than as required by law, disclose any intention, plan or
arrangement, or make any public announcement (or request permission to make
any such announcement other than making any request for permission which
would not require disclosure publicly or to any third party), or induce any
other Person to take any action, inconsistent with the foregoing clauses
(a)(ii) and (vii);
(x) enter into any negotiations, arrangements or understandings with
any third party with respect to any of the foregoing;
(xi) advise, assist or encourage or finance (or assist or arrange
financing to or for) any other Person in connection with any of the
foregoing; or
(xii) otherwise act in concert with others, to seek to Control or
influence the management, Board of Directors or policies of the Company or
its Affiliates (for this purpose, the actions of the Investor Designees in
their capacity as directors of the Company shall not be deemed to be in
contravention of this paragraph (xii));
provided, that this Section 2.1 shall not restrict or inhibit the rights of an
Investor to exercise its voting rights as a stockholder of the Company (subject
to Section 3.2).
(b) Affiliates of Investor who (i) are not Related Transferees of any
Investor, (ii) are not in possession of any material non-public Information
provided to Investor by the Company, its subsidiaries or representatives
pursuant to Section 3.4 hereof or otherwise, and (iii) do not have voting or
dispositive power over any shares of Series B Preferred Stock, any of the Notes
or any Conversion Shares (such Affiliates being "Exempt Affiliates") shall not
be subject to this Section 2.1.
(c) The Company also agrees that the Lehman Parent Entities and their
Affiliates (other than (i) the Investor and (ii) Affiliates of the Investor to
the extent that such Affiliates are not also either the Lehman Parent Entities
or Affiliates of the Lehman Parent Entities) shall be deemed Exempt Affiliates,
provided, however that no such person will be deemed an Exempt Affiliate (x) if
any person involved in making the decision to enter into any transaction or take
any action that is prohibited during the Standstill Period was, at the time of
such decision, in possession of any material non-public Information provided to
Investor by the Company, its subsidiaries or representatives pursuant to Section
3.4 hereof or otherwise, (y) with respect to any action or transaction by such
person involving the Note, the Series B Preferred Stock, or any Conversion
Shares or (z) if such person is a Related Transferee.
(d) Except as expressly set forth herein or in any other Documents, or as
otherwise agreed to by the Company, the Investor agrees that it will, and will
cause all of the entities comprising the Investor and the principals and all
Affiliates of such entities comprising the Investor (other than Lehman Parent
Entities and their Affiliates (and their successors and assigns), but excluding
any non Lehman Parent Entities-affiliated Investor Partners), to (i) maintain
Investor in the role of a passive investor in the Company so as not to, directly
or indirectly, assert active involvement in the day-to-day management or
operations of the Company, (ii) not, directly or indirectly, utilize any
corporate or business tradename of the Company (including, without limitation,
in press releases, publications or interviews); provided, however, that nothing
in the foregoing clauses (i)-(ii) shall restrict (1) Investor and their
designees on the Board of Directors of the Company from engaging in the usual
and customary actions to be taken by members of boards of directors of public
companies in carrying out the fiduciary duties that such directors owe to
shareholders of a public company, (2) such Persons from carrying out their
respective duties as member(s) of any committees of the Board of Directors of
the Company, or (3) Investor or any of the entities comprising Investor from
disclosing in press releases, publications or interviews any information (a)
required by law, (b) reasonably necessary and appropriate in the ordinary course
of business to describe the investment or interests of such Person on the
Company or (c) reasonably consistent with ordinary, prudent and customary
business practices within the hospitality industry.
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SECTION 2.2. EARLY TERMINATION OF STANDSTILL. The obligations of Investor
under Section 2.1 may, at the sole option of the Investor, which option shall be
exercised by prior written notice delivered to the Company, terminate early upon
the occurrence of any of the following events:
(a) At least $1,500,000 in indebtedness for monies borrowed by the Company
or its subsidiaries shall have been accelerated and payment therefor shall not
have been made within 20 days after such acceleration, and the Company shall not
in good faith be contesting whether such amount is owed.
(b) A final judgment or judgments (not subject to appeal) for the payment
of money shall have been entered against the Company or its subsidiaries in an
aggregate amount in excess of $1,500,000 (exclusive of any amounts fully covered
by insurance (less any applicable deductible) or indemnification) by a court or
courts of competent jurisdiction, which judgments remain unsatisfied,
undischarged, unstayed or unbonded for a period of 45 days after the entry of
such judgment or judgments.
(c) The Company shall file a petition in bankruptcy or for reorganization
or for an arrangement or any composition, readjustment, liquidation, dissolution
or similar relief pursuant to Title 11 of the United States Code or under any
similar present or future federal law or the law of any other jurisdiction or
shall be adjudicated a bankrupt or insolvent, or consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or for all or any
substantial part of its property, or shall make a general assignment for the
benefit of its creditors.
(d) A petition or answer shall be filed proposing the adjudication of the
Company as bankrupt or its reorganization or arrangement, or any composition,
readjustment, liquidation, dissolution or similar relief with respect to it
pursuant to Title 11 of the United States Code or under any similar present or
future federal law or the law of any other jurisdiction, and the Company shall
consent to or acquiesce in the filing thereof, or such petition or answer shall
not be discharged or denied within 60 days after the filing thereof.
(e) The Company shall be in material breach of its obligations to Investor
under the Registration Rights Agreement and such breach shall not have been
cured within 20 days after receipt by the Company from Investor of a written
notice specifying such breach and requiring it to be remedied, and the Company
shall not in good faith be contesting whether such breach has occurred.
(f) If (i) the Company shall, in breach of its obligations under this
Agreement, fail to nominate for election to the Board of Directors any Investor
Designee who satisfies the requirements for designation to the Board of
Directors set forth in Section 3.1(d), (ii) the Company shall otherwise be in
material breach of any of its obligations under Section 3.3 hereof and such
breach shall not have been cured within 20 days after receipt by the Company
from the Investor of a written notice specifying such breach and requiring it to
be remedied, or (iii) the applicable number of Investor Designees shall not be
elected or appointed to serve on the Board or Directors.
(g) The public announcement by or on behalf of any Person or Group (other
than the Investor and its Affiliates) of the commencement of an offer to acquire
Beneficial Ownership of outstanding shares of Common Stock such that after such
acquisition such Person or Group would Beneficially Own more than 25% of the
outstanding shares of Voting Stock (an "Offer"), but only if (A) the Company has
not, within 10 business days after announcement of such Offer (or such longer
period as may then be permitted under applicable law for the Company's initial
recommendation with respect to such Offer), publicly recommended that such Offer
not be accepted, or (B) all of the material conditions to such Offer relating to
the elimination or satisfaction of the material defensive provisions established
by the Company, including any rights plan or similar defensive provision of the
Company, have been satisfied or waived.
(h) The receipt by the Company of a bona fide proposal relating to a
Reorganization Transaction from any Person or Group (other than the Investor and
its Affiliates) reasonably expected to have the financial resources to complete
the Reorganization Transaction, but only if the Company has not, within 20 days
after receipt of such proposal, rejected such proposal.
(i) The public announcement by or on behalf of any Person or Group (other
than the Investor and its Affiliates) of the commencement of a bona fide proxy
or consent solicitation subject to Section 14 of the Exchange Act (or any
successor provision) to elect or remove a majority of the directors of Company
which is
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not, within 10 business days after the announcement of such proxy or consent
solicitation (or such longer period as may then be permitted under applicable
law for the Company's initial recommendation with respect to such solicitation
if such a period is specified), publicly opposed by the Company's Board of
Directors and which would, if successful, result in a change in the composition
of a majority of the Board of Directors of the Company.
(j) The acceptance or approval by the Company of a proposal relating to a
Reorganization Transaction or recommendation by the Company that an Offer be
accepted.
(k) The execution of a definitive agreement with any Person or Group (other
than the Investor or its Affiliates) to acquire Voting Securities from the
Company such that, as a result of such acquisition such Person or Group would
Beneficially Own more than 25% of the shares of the Common Stock then issued and
outstanding.
(l) The Company shall be in default in respect of the payment of interest
on the Note or dividends on the Series B Preferred Stock and such default has
not been cured within 30 days.
(m) The Company shall not have made any of the capital contributions to the
Joint Venture (as such term is defined in the Purchase Agreement) as required by
the partnership agreement relating thereto.
The Company shall provide the Investor with prompt written notice of the
occurrence of any of the events set forth in (i) this Section 2.2, or (ii) the
receipt by the Company of a proposal for a Reorganization Transaction from any
Person or Group (such notice to be provided within 10 days after receipt
thereof, but without disclosing the terms thereof or the identity of such Person
or Group).
SECTION 2.3. MODIFICATION UPON SUBSEQUENT AGREEMENT. If (a) the Company
enters into any agreement, understanding or arrangement with any other Person or
Group who has made a proposal for a Reorganization Transaction or the
acquisition of the Acquiror Percentage or more (or owns the Acquiror Percentage
or more) of any class of equity securities of the Company (each a "Future Major
Investor") relating to the Company's obligation, whether absolute, contingent,
current or future, to support or cause the nomination of one or more Persons to
the Board of Directors at the request of the Future Major Investor, and (b) such
agreement, understanding or arrangement contains any terms with respect to the
matters covered by this Article 2 that are more favorable to the Future Major
Investor than those provided to the Investor hereunder, then this Article 2
shall be automatically modified to include the more favorable terms and thereby
provide the Investor with rights at least as favorable and obligations no more
burdensome as those given to the Future Major Investor. The "Acquiror
Percentage" means (i) 10% in the case of a Person or Group who would, following
such acquisition, be required to file an information statement on Schedule 13G
pursuant to Rules under the Exchange Act, and (ii) 5% in the case of a Person or
Group who would, following such acquisition, be required to file an information
statement on Schedule 13D pursuant to Rules under the Exchange Act.
ARTICLE 3
Board Representation and Voting
SECTION 3.1. BOARD REPRESENTATION. (a) The Company agrees to the
provisions set forth in Section 3(b) of the Articles Supplementary relating to
the Series B Preferred Stock as if such provisions were included herein so long
as shares of Series B Preferred Stock are outstanding. After both (i) the
earliest to occur of (A) such time that there are no shares of Class B Common
Stock outstanding, (B) such time that there are no shares of Class C Common
Stock outstanding, (C) September 30, 2003, and (D) such other time as the number
of Directors of the Company otherwise may be validly fixed by a resolution
adopted by the Board of Directors and (ii) the end of the Investor Designee
Period, the Board of Directors shall consist of no more than eleven directors.
During the Investor Designee Period, the Investor shall be entitled to
nominate Investor Designees who shall serve on one-half of the seats on each
committee of the Board of Directors other than any committee formed for the
purpose of considering matters relating to the Investor provided, however, that
if the Applicable Number is less than one-half of the number of seats on any
committee of the Board of Directors, then the Investor shall be entitled to
nominate Investor Designees only to the Applicable Number of seats on such
committee.
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(b) Immediately following the Closing, the Company will cause the five
persons designated by the Investor to be elected or appointed to the Board of
Directors to serve as the Series B Preferred Directors and as the Investor
Designees pursuant to this Agreement and shall take all action required to cause
the election or appointment to the Board of Directors of the Investor Designees
nominated by the Company, as contemplated by the next sentence. At all times
until the Investor and its Related Transferees both (i) no longer Beneficially
Own at least 5% of the Total Voting Power and (ii) no longer Beneficially Own
shares of Series B Preferred Stock and Notes which have an aggregate liquidation
preference or outstanding principal amount of at least 10% of the Original
Investment Amount (the "Investor Designee Period"), the Company agrees, subject
to Section 3.1(d), to support the nomination of, and the Company's Nominating
Committee shall recommend to the Board of Directors the inclusion in the slate
of nominees recommended by the Board of Directors to stockholders for election
as directors at each annual meeting of stockholders of the Company: (i) the
Applicable Number of Investor Designees (as defined in the next sentence) and
(ii) the number of other persons obtained by subtracting the Applicable Number
of Investor Designees from eleven, each of whom is (A) recommended by the
Nominating Committee and (B) not a partner, employee, director, officer,
Affiliate or associate (as defined in Rule 12b-2 under the Exchange Act) of
Investor or any Affiliate of Investor or as to which the Investor or its
Affiliates own at least ten percent of the voting equity securities
("Unaffiliated Directors"). The "Applicable Number" of Investor Designees shall
be (A) five Investor Designees so long as the Investor and Related Persons
Beneficially Own Voting Securities representing at least 30% or more of the
Total Voting Power (without taking into account any limitation on the conversion
of such Voting Securities in determining such Beneficial Ownership or the number
of shares issuable upon complete conversion) ("Shares"), (B) four Investor
Designees, so long as the Investor and Related Persons Beneficially Own at least
20% or more but less than 30% of the Shares, (C) three Investor Designees, so
long as the Investor and Related Persons Beneficially Own at least 10% or more
but less than 20% of the Shares, and (D) one Investor Designee, so long as the
Investor and Related Persons Beneficially Own at least 5% or more but less than
10% of the Shares (each a "Beneficial Ownership Threshold"). If, during the
Investor Designee Period, any vacancy (whether by death, retirement,
disqualification, removal from office or other cause, or by increase in number
of directors) occurs prior to a meeting of the Company's stockholders, the Board
(i) shall appoint, subject to Section 3.1(d), a person designated by the
Investor to fill a vacancy created by an Investor Designee ceasing to serve as a
director (except as a result of the reduction of the number of Investor
Designees entitled to be included on the Board of Directors by reason of a
decrease in the Investor's Beneficial Ownership of Shares below any Beneficial
Ownership Threshold), and (ii) may appoint a person who qualifies as an
Unaffiliated Director and is recommended by the Nominating Committee pursuant to
the procedures set forth in the following paragraph to fill a vacancy created by
an Unaffiliated Director ceasing to serve as a director (provided, however, that
in the case of a vacancy relating to an Unaffiliated Director, if a majority of
the Nominating Committee is unable to recommend a replacement, then the Board
seat with respect to this vacancy shall remain vacant), and each such person
shall be an Investor Designee or Unaffiliated Director, as the case may be, for
purposes of this Agreement.
At all times during the Investor Designee Period, Unaffiliated Directors
shall be designated exclusively by a majority of a nominating committee (the
"Nominating Committee"), which shall at all times during the Investor Designee
Period consist of not more than four persons, two (or such lesser number of
Investor Designees as are then required to be included on the Board of
Directors) of whom shall be Investor Designees and the remainder of whom shall
be Unaffiliated Directors. If the Nominating Committee is unable to recommend
one or more persons to serve as Unaffiliated Directors (except with respect to
any vacancy created by an Unaffiliated Director ceasing to serve as such) for a
period of 180 days from the date the Nominating Committee first meets to
consider such recommendation, then upon, and only upon, the expiration of such
180-day period the Board of Directors may nominate and recommend for election by
stockholders one or more persons to serve as such Unaffiliated Directors.
At all times during the Investor Designee Period, the Board of Directors
shall maintain in existence a "Compensation Committee" consisting of four
directors of which two (or such lesser number of Investor Designees as are then
required to be included on the Board of Directors) shall be Investor Designees.
The Compensation Committee shall have the exclusive responsibility of
administering the Company's stock option and incentive plans and of determining
the compensation of executive officers of the Company.
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The foregoing provisions shall be effected pursuant to an amendment to the
Company's Bylaws in a form reasonably acceptable to the parties to this
Agreement, which shall not be further amended by the Board of Directors during
the Investor Designee Period.
(c) Upon any decrease in the Investor's Beneficial Ownership of Shares
below any Beneficial Ownership Threshold, the Investor shall cause a number of
Investor Designees to offer to immediately resign from the Company's Board of
Directors such that the number of Investor Designees serving on the Board of
Directors immediately thereafter will be equal to the number of Investor
Designees which the Investor would then be entitled to designate under Section
3.1(b). Upon termination of the Investor Designee Period, the Investor shall
promptly cause all of the Investor Designees to offer to resign immediately from
the Board of Directors and any committees thereof and the Company's obligations
under this Section 3.1 shall terminate.
(d) Notwithstanding the provisions of this Section 3.1, the Investor shall
not be entitled to designate any person to the Company's Board of Directors (or
any committee thereof) in the event (i) that the Company receives a written
opinion of its outside counsel that an Investor Designee would not be qualified
under any applicable law, rule or regulation to serve as a director of the
Company, (ii) if the Company objects to an Investor Designee because such
Investor Designee has been involved in any of the events enumerated in Item 2(d)
or (e) of Schedule 13D or such person is currently the target of an
investigation by any governmental authority or agency relating to felonious
criminal activity or is subject to any order, decree, or judgment of any court
or agency prohibiting service as a director of any public company or providing
investment or financial advisory services or (iii) such Investor Designee is an
employee of a Lehman Parent Entity but is not an officer of such Lehman Parent
Entity and, in any such event, the Investor shall withdraw the designation of
such proposed Investor Designee and designate a replacement therefor (which
replacement Investor Designee shall also be subject to the requirements of this
Section). The Company shall use its reasonable best efforts to notify the
Investor of any objection to an Investor Designee sufficiently in advance of the
date on which proxy materials are mailed by the Company in connection with such
election of directors to enable the Investor to propose a replacement Investor
Designee in accordance with the terms of this Agreement.
(e) Each Investor Designee serving on the Board of Directors shall be
entitled to all compensation and stock incentives granted to directors who are
not employees of the Company on the same terms provided to, and subject to the
same limitations applicable to, such directors.
(f) The Company shall obtain and cause to be maintained in effect, with
financially sound insurers, a policy of directors' and officers' liability
insurance in an amount and upon such terms as, from time to time, are reasonably
and customary for a public company, after taking into account the size and
nature of business of the Company.
(g) The Charter or Bylaws, or both, shall to the fullest extent permitted
by law provide for indemnification of, and advancement of expenses to, and
limitation of the personal liability of, the directors of the Company or such
other person or persons, if any, who, pursuant to a provision of such
Certificate of Incorporation, exercise or perform any of the powers or duties
otherwise conferred or imposed upon such directors, which provisions shall not
be amended, repealed or otherwise modified in any manner adverse to the
directors until at least six (6) years following the date that the Investor is
no longer entitled to designate directors pursuant to this Section 3.1.
(h) The parties acknowledge that Affiliates of the Investor and Investor
Partners and their Affiliates have investments in other business similar to and
which may compete with the Company's businesses ("Competing Businesses") and
reserve the right to make additional investments in other Competing Businesses
independent of their investments in the Company. By virtue of the Investor
holding securities of the Company or by having persons designated by or
affiliated with such Investor serving on the Board or any Subsidiary's Board of
Directors (or the functional equivalent thereof in the case of non-corporate
Subsidiaries) or otherwise, neither the Investor nor any of the Investor's
Affiliates and Investor Partners and their Affiliates shall have any obligation
to the Company, or any Subsidiary to refrain from competing with the Company or
any Subsidiary, making investments in Competing Businesses, otherwise engaging
in any commercial activity, and the Company and its Subsidiaries hereby waive
any right which they otherwise would have with respect to any such investments
or activities undertaken by Investor and Investor Partners and their Affiliates,
provided that nothing herein will affect the Company's rights under Section 3.5.
Without limitation of the foregoing, the Investor or any of the Investor's
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Affiliates and Investor Partners and their Affiliates may engage in or possess
an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Company or any Subsidiary, and none of the Company, nor any Subsidiary shall
have any rights or expectancy by virtue of Investor's relationships with the
Company, any Subsidiary, this Agreement or otherwise in and to such independent
ventures or the income of profits derived therefrom; and the pursuit of any such
venture, even if such investment is in a Competing Business, shall not be deemed
wrongful or improper, provided that nothing herein will affect the Company's
rights under Section 3.5. Neither the Investor nor any of its Affiliates and
Investor Partners and their Affiliates shall be obligated to present any
particular investment opportunity to the Company or any Subsidiary even if such
opportunity is of a character that, if presented to the Company or a Subsidiary,
could be taken by the Company or such Subsidiary, and the Investor and its
Affiliates and Investor Partners and their Affiliates shall continue to have the
right to take for their own respective account or to recommend to others any
such particular investment opportunity.
(i) The Company shall pay all reasonable travel expenses and other
out-of-pocket disbursements incurred by the directors to attend meetings of the
Board, of any Subsidiary board of directors or of any committees thereof in
accordance with the procedures from time to time in effect for Unaffiliated
Directors.
SECTION 3.2. VOTING. (a) Investor agrees that during the Standstill Period
Investor shall be present in person or represented by proxy, at all meetings of
stockholders of the Company so that all Conversion Shares Beneficially Owned by
Investor and entitled to vote at that meeting shall be counted for the purpose
of determining the presence of a quorum at such meetings. Investor agrees that
during the Standstill Period:
(i) In connection with the election of directors of the Company,
Investor shall vote or cause to be voted all Conversion Shares Beneficially
Owned by such Investor to elect those individuals nominated in accordance
with the provisions of Section 3.1.
(ii) In connection with other proposals submitted to stockholders of
the Company, Investor shall be free to vote or cause to be voted, or
consent with respect to, all Voting Securities Beneficially Owned by such
Investor in its discretion.
SECTION 3.3. REQUIRED BOARD APPROVAL. In addition to any other required
vote of the Board of Directors, the Company agrees that until the later of (i)
the expiration or termination of the Standstill Period, (ii) if the Standstill
Period is terminated by reason of the occurrence of any of the events specified
in Section 2.2(a) through (f) or Section 2.2(l), the fourth anniversary of the
Closing and (iii) such time as the Investor and its Affiliates no longer
Beneficially Own securities of the Company having an aggregate principal amount,
liquidation preference or Fair Market Value, as the case may be, of at least 51%
of the Original Investment Amount, each of the following actions also shall
require the affirmative vote of at least a majority of the Investor Designees:
(a) except for any transaction or series of transactions involving only
wholly-owned subsidiaries of the Company, (i) consolidate or merge into or with
any other Person, or (ii) enter into any other Reorganization Transaction (or
any transaction constituting a Change in Control, as such term is defined in the
Notes);
(b) voluntarily liquidate, dissolve or wind up;
(c) purchase, acquire or obtain any capital stock or other proprietary
interest, directly or indirectly, in any other entity, except for (i) any
transaction or series of transactions involving only wholly-owned subsidiaries
of the Company as of the date hereof, or (ii) the purchase of all or
substantially all of the capital stock or other proprietary interest of other
entities for an aggregate purchase price, including without limitation, any
liabilities of the acquired entities, of less than the Threshold Amount;
(d) purchase, acquire or obtain assets of any third party in an aggregate
amount (as to the Company and all of its subsidiaries), including without
limitation, any liabilities of the acquired entities, in excess of the Threshold
Amount;
(e) make or commit to make capital expenditures which exceed the amount set
forth in the Budget by more than the Threshold Amount;
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(f) sell, transfer or otherwise dispose of any equity interest of the
Company or any of its subsidiaries, except for transactions involving only
wholly-owned subsidiaries of the Company which either (i) is in excess of the
Threshold Amount, or (ii) relates to the Joint Venture;
(g) enter into or commit to enter into any joint ventures or any
partnerships, establish any non-wholly-owned subsidiaries or form any joint
venture (other than the Joint Venture) either (i) in excess of the Threshold
Amount, or (ii) in activity or business competitive with the Joint Venture;
(h) sell, lease, transfer or otherwise dispose of any assets of the Company
or any of its subsidiaries in excess of the Threshold Amount;
(i) create, incur, assume or suffer to exist any indebtedness for borrowed
money (including any capital leases) of the Company or any of its subsidiaries
at any one time outstanding in excess of the Threshold Amount;
(j) redeem the Rights issued pursuant to the Shareholder Rights Agreement,
dated as of July 8, 1999, between the Company and American Stock Transfer and
Trust Company, as Rights Agent (the "Rights Agreement") or any successor
agreement thereto or otherwise render the Rights Agreement inapplicable to any
person who would otherwise be an "Acquiring Person" as defined in the Rights
Agreement, except, in either case, (i) for any conversion of the Notes or the
Series B Preferred Stock into Common Stock or any Disposition by the Investor
permitted by this Agreement, (ii) in connection with a transaction approved or
recommended by unanimous vote of the Board members present and voting thereon
(in all events including at least a majority of the Investor Designees as are
then required to be included on the Board of Directors), and (iii) as reasonably
determined by the Board to be required by law or the requirements of a National
Securities Exchange;
(k) pay, or set aside any sums for the payment of, any dividends, or make
any distribution on, any shares of its common stock or redeem, repurchase or
otherwise acquire any outstanding shares of its common stock or any other of its
outstanding securities (other than indebtedness at maturity in accordance with
the terms thereof);
(l) issue, sell or amend the rights of any capital stock or other
securities of the Company or any of its subsidiaries except for (i) dividends or
other distributions payable on the Common Stock solely in the form of additional
shares of Common Stock; (ii) in connection with the issuance of Common Stock
upon conversion of the Notes or Series B Preferred Stock or otherwise in
accordance with the provisions of the Notes and the Series B Preferred Stock;
(iii) for the issuance of shares of Common Stock or the issuance of options to
purchase Common Stock approved by the Compensation Committee to employees,
advisors, consultants or outside directors of the Company directly or pursuant
to an employee benefit plan of the Company; and (iv) acquisitions and other
transactions permitted under other provisions of this Section 3.3;
(m) change the Company's independent public accountants (unless the Audit
Committee shall determine that they are no longer "independent" within the
meaning of Independence Standards Board Standard No. 1) or, other than as
provided by Section 5.13, retain a financial advisor to the Company in
connection with a merger, consolidation, recapitalization, an acquisition or
divestiture involving or expected (in the opinion of the Board) to involve,
gross proceeds in excess of the Threshold Amount or a public offering of
securities;
(n) become a party to any agreement which by its terms restricts the
Company's performance of the terms of the Purchase Agreement, the Registration
Rights Agreement, the Notes, the Series B Preferred Stock or this Agreement
(together, the "Documents");
(o) grant any registration rights in respect of securities of the Company
which have an aggregate value, in any year ending on the anniversary of the date
of this Agreement, greater than the lesser of (i) the Threshold Amount and (ii)
5% of the market capitalization of the Company that would be inconsistent with
the rights granted to the holders of Registrable Securities under the
Registration Rights Agreement or otherwise conflict with or violate the
provisions thereof;
(p) amend, modify or waive the Charter, the Notes or the Bylaws in any
manner which adversely affects the rights of any of the Investors thereunder,
including, without limitation, any change in the number of directors comprising
the Board, or become a party to any agreement which conflicts in any material
respect with the Documents; and
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(q) enter into any transaction (except (i) as expressly permitted by this
Agreement or the Purchase Agreement or (ii) relating to compensation of
executive officers as determined by the Compensation Committee) with any
"affiliate" or "associate" (as such terms are defined under Rule 12b-2 under the
Exchange Act) of the Company or any stockholder of the Company (other than the
Investor or its Affiliates).
For the purposes of this section the term "Threshold Amount" shall mean,
(a) with respect to any individual transaction, action or instance, the amount
of $2,000,000 at any time prior to the first anniversary of the Closing, which
amount shall increase by $1,000,000 from the amount then in effect on each
anniversary of the Closing if the Company EBITDA (as defined below) is greater
than or equal to the EBITDA Target (as defined below) for such anniversary, (b)
provided that (i) if the Company EBITDA for such anniversary is less than the
EBITDA Target for such anniversary, the Threshold Amount shall be the increased
Threshold Amount that would otherwise apply pursuant to clause (a) above
multiplied by the Company EBITDA for such anniversary divided by the EBITDA
Target for such anniversary, and (ii) the Threshold Amount shall not exceed
$5,000,000, and further provided, however, that all such transactions subject to
this limitation shall not, in the aggregate for any year ending on an
anniversary of the Closing, exceed the lesser of (x) two times the amount
applicable to any individual transaction, action or instance during such period
and (y) $10,000,000.
"Company EBITDA" for any anniversary of the date of the Closing shall mean
the EBITDA of the Company for the prior calendar year, including earnings
attributable to management agreements with respect to hotels owned directly or
indirectly by CGLH-IHC Fund I, L.P.
The "EBITDA Target" shall mean the EBITDA of the Company for calendar year
2000 adjusted for the revenues and expenses, including minority interest,
affected by the Wyndham Redemption Agreement as though such agreement had been
in effect throughout the entire year, plus: (i) for the first anniversary of the
date of the Closing, $10,000,000; (ii) for the second anniversary of the date of
the Closing, $20,000,000; and (iii) for the third anniversary of the date of the
Closing, $30,000,000.
SECTION 3.4 NOTICES OF DISPOSITIONS OF VOTING SECURITIES. Not later than
the tenth day following the end of any calendar month during the Standstill
Period in which one or more Dispositions of Voting Securities by Investor or any
of its Affiliates shall have occurred, Investor shall give written notice of all
such Dispositions by Investor, and shall use its reasonable best efforts to
cause its Affiliates to give written notice of all such Dispositions by its
Affiliates, to the Company unless any such Disposition has been reflected in a
public filing that was delivered to the Company on or in advance of the date
upon which notice thereof under this Section 3.4 would have been due. Such
notice shall state the date upon which each such Disposition was effected, the
number and type of Voting Securities involved in each such Disposition, the
means by which each such Disposition was effected and, to the extent known, the
identity of the Person acquiring Voting Securities.
SECTION 3.5. ACCESS TO INFORMATION. The Company will provide Investor
during normal business hours upon reasonable prior notice with (i) access to the
books and records of the Company and information relating to the Company, its
properties, operations, financial condition and affairs (together with the
reports specified in the following sentence, the "Information") and (ii) the
opportunity to consult with management of the Company, at least once each month,
regarding the Company, its properties, operations, finances and affairs, in the
case of each of clauses (i) and (ii), in accordance with and subject to the
limitations in Section 5.4 of the Purchase Agreement. The Company will provide
Investor, on a timely basis, with the financial and other information required
to be delivered to the Purchaser pursuant to Section 5.4 of the Purchase
Agreement. Certain of the parties who may hold partnership interests in Investor
may request the Information and consultation rights provided herein to enable
the securities held by such person to qualify as a "venture capital investment"
as to which such persons have "management rights," in each case as such terms
are defined in Department of Labor Regulation Section 2510.3-101(d) in which
event the Company shall provide such access; provided, however, that nothing
herein shall require the Company to furnish such person with more than rights of
access to Information and consultation provided herein regardless of whether
such rights are sufficient for such person to comply with venture capital
operating company requirements. In furtherance of the foregoing, and in addition
to the rights of Investor Designees under Section 3.3 for so long as the
Investor Beneficially Owns any of the Notes, shares of Series B Preferred Stock
or Conversion Shares, the Company agrees to inform the Investor in advance of
any corporate actions which the Company considers to be major or significant,
including, without limitation,
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extraordinary dividends, mergers, acquisitions or dispositions of significant
assets, issuances of significant amounts of debt or equity, the signing,
acquisition or termination of any hotel management contract, and material
amendments to the Charter or Bylaws of the Company, and (subject to the
limitations specified in the proviso in the preceding sentence) to provide the
Investor with the opportunity to consult with management of the Company with
respect to such matters. The Investor and such other persons exercising rights
under this Section agree to hold in strict confidence all nonpublic Information
furnished to them and to use all Information only in connection with the
management of their investment in the Company, except that they may disclose any
information that (i) is or becomes generally available to the public other than
as a result of disclosure by them, and (ii) is or becomes available to them from
a source other than the Company; provided, however, that, to their knowledge,
the source is not bound by a confidentiality obligation with the Company in
respect thereof. If any person is required by a court or administrative agency
to disclose any of the nonpublic Information, such person shall promptly notify
the Company of such requirement so that the Company may at its own expense
oppose such requirement or seek a protective order and request confidential
treatment of such Information. It is agreed that if such person is nonetheless
compelled to disclose the Information, the Investor may disclose such portion of
the Information which is legally required without liability hereunder. In any
event, such person will not oppose action by the Company to obtain a protective
order or other reliable assurance that confidential treatment will be accorded
the Information. Nothing herein shall permit any such person to disclose
material non-public Information to permit such person to purchase or sell
securities of the Company in compliance with the federal securities laws. The
Investor hereby acknowledges that it is aware, and that such other persons, and
the officers, partners, directors, employees, representatives and agents of such
other persons and the Investor, have been, or will be prior to receiving
Information, advised by the Investor that applicable securities laws may
prohibit any person who has material, non-public information from purchasing or
selling securities of the Company or from communicating the information to any
other person or entity.
ARTICLE 4
Transfer Restrictions
SECTION 4.1. RESTRICTIONS ON DISPOSITIONS. During the Standstill Period,
Investor shall not directly or indirectly, sell, assign, donate, transfer,
pledge, hypothecate, grant any option with respect to or otherwise dispose of
any interest in (or enter into an agreement or understanding with respect to the
foregoing) any Voting Securities acquired pursuant to the Purchase Agreement or
upon conversion of such securities (a "Disposition"), except as set forth below
in this Section 4.1.
Dispositions may be effected by an Investor during the Standstill Period as
follows:
(a) No Dispositions of any nature may be made prior to the date that is six
months after the Closing, except pursuant to Sections 4.1(e) and (f).
(b) After six months after the Closing, Dispositions of Voting Securities
may be made at any time in compliance with the Registration Rights Agreement.
(c) After six months after the Closing, Dispositions of Voting Securities
may be made pursuant to sales effected in accordance with Rule 144 under the
Securities Act; provided that such Dispositions shall not be made to any Person
who or which would immediately thereafter, to the knowledge of Investor, any of
its Affiliates, or Investor's broker, Beneficially Own Voting Securities
representing more than the Maximum Ownership.
(d) After six months after the Closing, Dispositions may be made to any
Person (other than pursuant to a Reorganization Transaction) that would,
following such Disposition, Beneficially Own no more than the Maximum Ownership.
(e) Dispositions may be made pursuant to a merger transaction or other
business combination or a tender offer for outstanding shares of Common Stock
which is recommended to the stockholders of the Company generally by at least a
majority of the entire Board of Directors.
(f) Dispositions may be made by Investor to (i) any holder of partnership
or other ownership interests in Investor or (ii) any other Person (provided,
that, in respect of any such disposition to any other Person before the
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second anniversary of the date hereof, the Company must consent in writing to
such disposition, such consent not to be unreasonably withheld) that, in either
case, executes an instrument in form and substance satisfactory to the Company
in which it makes the representations and warranties set forth in Section 1.3(b)
as of the date of the execution of such instrument and agrees to be bound by the
terms of this Agreement as if an original signatory to this Agreement (each such
transferee, a "Related Transferee"), in which case such Related Transferee shall
thereafter be an "Investor" for all purposes of this Agreement.
(g) With respect to Voting Securities which are, by their terms,
convertible into or exercisable or exchangeable for other Voting Securities such
conversion, exercise or exchange shall not be deemed a Disposition. Without
limiting the foregoing, the Company acknowledges that the conversion of the Note
or shares of Series B Preferred Stock into Conversion Shares shall not be a
Disposition.
As used herein, the term "Maximum Ownership" shall mean 20% of the Total
Voting Power in the case of a Person who is eligible to report such ownership on
Schedule 13G under the Exchange Act and 12.5% of the Total Voting Power in the
case of any other Person.
SECTION 4.2. RIGHTS AGREEMENT. The Company represents that it has amended
its Rights Agreement to permit the Dispositions permitted by this Agreement such
that the acquisition of the Maximum Ownership by any transferee shall not result
in such transferee becoming an Acquiring Person as defined in the Rights
Agreement. The Company agrees that it shall not adopt any amendment to the
Rights Agreement inconsistent with the foregoing.
ARTICLE 5
Miscellaneous
SECTION 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
with a copy to:
Jones, Day, Reavis & Pogue
North Point,
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Attn: Zachary Paris, Esq.
Fax: (216) 759-0212
or to such other person or address as the Company shall furnish to Investor in
writing;
(b) If to Investor, to:
CGLH Partners I LP and CGLH Partners II LP
c/o Lehman Brothers Holdings Inc.
200 Vesey St
12th Floor
New York, New York 10285
Attn: Joseph Flannery
Fax: (212) 526-7006
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with a copy to:
Continental Gencom Holdings
3250 Mary Street
Suite 500
Miami, Florida 33133
Attn: Mr. K. Alibhai and Mr. S. Weiser
Fax: (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
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 Investor 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.
SECTION 5.2. LEGENDS. (a) If requested in writing by the Company, Investor
shall present or cause to be presented promptly all certificates representing
Voting Securities Beneficially Owned by Investor for the placement thereon of a
legend substantially to the following effect, which legend will remain thereon
so long as such legend is required under applicable securities laws:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SHARES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH A REGISTRATION THEREUNDER OTHER THAN PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS AND DELIVERY TO INTERSTATE
HOTELS CORPORATION OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THOSE
LAWS."
(b) Investor shall present or cause to be presented promptly all
certificates representing Voting Securities Beneficially Owned by Investor, for
the placement thereon of a legend substantially to the following effect, which
legend will remain thereon during the Standstill Period as long as such Voting
Securities are Beneficially Owned by Investor:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF AN INVESTOR AGREEMENT, DATED AS OF AUGUST [ ],
2000, BETWEEN INTERSTATE HOTELS CORPORATION ("INTERSTATE") AND THE PARTY
NAMED THEREIN AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHER-
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WISE DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH. A COPY OF SAID AGREEMENT
IS ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF INTERSTATE."
(c) The Company may enter a stop transfer order with the transfer agent or
agents of Voting Securities against any Disposition not in compliance with the
provisions of this Agreement.
SECTION 5.3. ENFORCEMENT. Investor, on the one hand, and the Company, on
the other hand, acknowledge and agree that irreparable injury to the other party
would occur in the event any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached and
that such injury would not be adequately compensable in damages. It is
accordingly agreed that, in addition to any other remedies which may be
available at law or in equity, each party hereto (the "Moving Party") shall be
entitled to specific enforcement of, and injunctive relief to prevent any
violation of, the terms of this Agreement, and the other parties hereto will not
take action, directly or indirectly, in opposition to the Moving Party seeking
such relief on the grounds that any other remedy or relief is available at law
or in equity. The parties further agree that no bond shall be required as a
condition to the granting of any such relief.
SECTION 5.4. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the transactions
contemplated hereby. 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 directors of the Company other
than Investor Designees.
SECTION 5.5. SEVERABILITY. Whenever possible, each provision or portion of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable Law, rule or regulation in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision shall have been replaced
with a provision which shall, to the maximum extent permissible under such
applicable Law, rule or regulation, give effect to the intention of the parties
as expressed in such invalid, illegal or unenforceable provision.
SECTION 5.6. HEADINGS. Descriptive headings contained in the Agreement are
for convenience only and will not control or affect the meaning or construction
of any provision of this Agreement.
SECTION 5.7. COUNTERPARTS. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by the parties, and each such
executed counterpart will be an original instrument.
SECTION 5.8. NO WAIVER. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
SECTION 5.9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Company and Investor, and to their respective
successors and assigns other than, in the case of Investor, transferees that are
not Related Transferees, including any successors to the Company or Investor or
their businesses or assets as the result of any merger, consolidation,
reorganization, transfer of assets or otherwise, and any subsequent successor
thereto, without the execution or filing of any instrument or the performance of
any act; provided that no party may assign this Agreement without the other
party's prior written consent, except by the Investor to a Related Transferee as
expressly provided in this Agreement (and that nothing herein restricts the
transfer of any of the rights of Investor under the Registration Rights
Agreement in accordance the terms of the Registration Rights Agreement).
SECTION 5.10. GOVERNING LAW. This Agreement will be governed by and
construed and enforced in accordance with the internal laws of the State of
Maryland, without giving effect to the conflict of laws principles thereof.
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SECTION 5.11. FURTHER ASSURANCE. From time to time on and after the date
of this Agreement, the Company and Investor, as the case may be, shall deliver
or cause to be delivered to the other party hereto such further documents and
instruments and shall do and cause to be done such further acts as the other
parties hereto shall reasonably request to carry out more effectively the
provisions and purposes of this Agreement, to evidence compliance herewith or to
assure that it is protected in acting hereunder.
SECTION 5.12. 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, and any action for enforcement of any
judgment in respect thereof shall be brought exclusively in the state or federal
courts located in the State of Maryland, and, by execution and delivery of this
Agreement, the Company and Investor 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 Investor at their respective addresses referred to in this
Agreement. The Company and Investor 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 brought in the courts referred to above and 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.
SECTION 5.13. INVESTMENT BANKING SERVICES. Until the end of the Investor
Designee Period, if the Company seeks to retain an investment bank or similar
financial institution ("Financial Institution") other than one of the Lehman
Parent Entities, the Company shall deliver written notice of such intended
retention of another Financial Institution (the "Notice") to a Senior Vice
President of the Principal Transactions Group of Lehman Brothers Holdings Inc
("Lehman Brothers"), setting forth the identity of such other Financial
Institution, the nature of the engagement or Investment Banking Services sought
and offered, a description (including timing) of the contemplated
transaction(s), and the fees charged by, or payable to, such Financial
Institution. For a period of fifteen days after the date that Lehman Brothers
shall have received such notice, Lehman Brothers shall have the right to advise
the Company that Lehman Brothers will perform such Investment Banking Services
on the terms set forth in the notice; provided, however, that if the fees to be
paid such Financial Institution are less than the market rate fees charged for
the contemplated transaction, the fees payable to Lehman Brothers shall be the
"market rate fees." The Partners agree, for the purposes of this Agreement, that
listed on Exhibit A annexed hereto and made a part hereof are "market rate fees"
for certain transactions. If Lehman Brothers declines the engagement set forth
in the Notice, the Company may engage (i) the Financial Institution set forth in
the Notice on the terms set forth therein or (ii) such other Financial
Institution to provide the Investment Banking Services set forth in the Notice
in connection with the contemplated transaction(s) described therein for fees
not in excess of "market rate fees." Lehman Brothers shall be a third party
beneficiary of this Section and shall have the right to enforce the terms of
this Section to their fullest extent.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 167
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first referred to above.
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:
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:
<PAGE> 168
By: LB INTERSTATE GP LLC
General Partner
By: PAMI LLC
its Sole Member
By:
------------------------------------------------------------------
Name:
Title:
<PAGE> 169
EXHIBIT A
MARKET RATE FEES
<TABLE>
<CAPTION>
GROSS SPREAD
(AS A PERCENTAGE OF
THE AGGREGATE VALUE
TRANSACTION OF THE TRANSACTION(S))
----------- ----------------------
<S> <C>
Equity
Common Stock.............................................. 6.00%
Preferred Stock........................................... 6.00%
Convertible Debt.......................................... 6.00%
Investment Grade Debt....................................... 0.625%
Non-Investment Grade Debt
BB+ or higher rating...................................... 2.25%
BB rating................................................. 2.50%
BB- rating................................................ 2.75%
B+ rating................................................. 3.00%
B rating.................................................. 3.25%
B- or lower rating........................................ 3.50%
Merger and Acquisition Advisory (1)
Value between $0 and $50 million.......................... 2.00%
Value between $50 million and $250 million................ 1.00%
Value over $250 million................................... 0.75%
Commercial Mortgaged-Backed Securities
Agented................................................... 2.00%
Principal Transaction..................................... N/A
</TABLE>
---------------
(1) The M&A fee schedule accumulates (e.g. the fee for a $125 million
transaction equals the sum of (a) $50 million * 2.00% and (b) $75 million*
1.00%).
<PAGE> 170
Exhibit 5
ARTICLES SUPPLEMENTARY TO THE CHARTER OF
INTERSTATE HOTELS CORPORATION
DESIGNATING A SERIES OF PREFERRED STOCK
AS SHARES OF
SERIES B CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
Interstate Hotels Corporation, a corporation organized and existing under
the laws of Maryland (the "Corporation"), does hereby certify to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority contained in the Charter of the
Corporation (the "Charter"), and in accordance with the provisions of Section
2-208 of the Maryland General Corporation Law, the Board of Directors of the
Corporation duly adopted a resolution on [ ], 2000 creating and
classifying a series of preferred stock, par value $.01 per share (the
"Preferred Stock"), designated as Series B Convertible Preferred Stock (the
"Series B Preferred Stock") with the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of shares
of Series B Preferred Stock as set forth below.
SERIES B CONVERTIBLE PREFERRED STOCK
SECTION 1. DESIGNATION AND AMOUNT; RANK.
(a) Designation and Amount. The shares of such series shall be designated
as the "Series B Convertible Preferred Stock" and the number of shares
constituting such series shall be 850,000 shares of Series B Preferred Stock.
Section 9 contains the definitions of certain defined terms used herein.
(b) Rank. The Series B Preferred Stock shall, with respect to dividend
distributions and distributions upon liquidation, winding-up and dissolution of
the Corporation, rank (i) senior (to the extent set forth herein) to all Junior
Stock; (ii) on a parity with Parity Stock; provided that any such stock that was
not approved by the holders in accordance with Section 3(d) shall be deemed to
be Junior Stock and not Parity Stock; and (iii) junior to all Senior Stock;
provided, that any such stock that was not approved by the holders in accordance
with Section 3(d) shall be deemed to be Junior Stock and not Senior Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of shares of Series B Preferred Stock shall be entitled to
receive on each Dividend Payment Date in respect of the Dividend Period ending
on such Dividend Payment Date (but without including such Dividend Payment
Date), commencing on the first Dividend Payment Date, cumulative dividends
payable in cash on each such Dividend Payment Date at a rate per annum equal to
8.75% of the Stated Amount of each share of the then outstanding Series B
Preferred Stock. Up to 25% of the cumulative dividends payable on each Dividend
Payment Date may be paid in additional shares of Series B Preferred Stock. If
dividends on the Series B Preferred Stock are in arrears and unpaid for a period
of 60 days or more, then an additional amount of dividends shall accrue at a
rate per annum, equal to 2.00% of the Stated Amount of each share of the then
outstanding Series B Preferred Stock from the last Dividend Payment Date on
which cash dividends were to be paid in full until such time as all dividends in
arrears have been paid in full, such additional dividends to be cumulative and
payable in shares of Series B Preferred Stock (including fractional shares) at
the Stated Amount. Any reference herein to "cumulative dividends" or "accrued
dividends" or similar phrases means that such dividends are fully cumulative and
accumulate and accrue on a daily basis (computed on the basis of a 360-day year
of twelve 30-day months) and compound quarterly on the Dividend Payment Dates at
the rate indicated above and in the manner set forth herein, whether or not they
have been declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends. All dividends
payable in additional
<PAGE> 171
shares of Series B Preferred Stock shall be paid through the issuance of
additional shares of Series B Preferred Stock (including fractional shares) at
the Stated Amount.
(b) In case the Corporation shall at any time or from time to time declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
Subsidiaries by way of dividend or spin off on the Common Stock), other than any
dividend or distribution of shares of Common Stock covered by Section 7(b)(i) or
any issuance of rights pursuant to the Rights Plan, as it may be amended from
time to time, then, and in each such case (a "Triggering Distribution"), the
holders of shares of Series B Preferred Stock shall be entitled to receive from
the Corporation, with respect to each share of Series B Preferred Stock held, in
addition to the dividends payable under Section 2(a), the same dividend or
distribution received by a holder of the number of shares of Common Stock into
which such share of Series B Preferred Stock is convertible on the record date
for such dividend or distribution, after giving effect to the contemporaneous
issuance of any additional shares of Series B Preferred Stock as described in
Section 2(a) above with respect to Accrued Dividends. Any such dividend or
distribution shall be declared, ordered, paid or made on the Series B Preferred
Stock at the same time such dividend or distribution is declared, ordered, paid
or made on the Common Stock and shall be in addition to any dividends payable
under Section 2(a).
(c) (ii) No dividends shall be authorized by the Board of Directors or paid
or Set Apart for Payment by the Corporation on any Parity Stock for any period
unless the Accrued Dividends have been or contemporaneously are authorized and
declared and paid in full, or declared and, if payable in cash, a sum in cash
Set Apart for Payment, on the Series B Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of such dividends on such Parity
Stock. If any dividends are not so paid, all dividends declared upon shares of
the Series B Preferred Stock and any other Parity Stock shall be declared pro
rata so that the amount of dividends declared per share on the Series B
Preferred Stock and such Parity Stock shall in all cases bear to each other the
same ratio that the Accrued Dividends per share on the Series B Preferred Stock
and the accrued dividends on such Parity Stock bear to each other.
(ii) So long as any share of the Series B Preferred Stock is
outstanding, the Corporation shall not declare, pay or Set Apart for
Payment any dividend on any of the Junior Stock (other than dividends in
Junior Stock to the holders of Junior Stock), or make any payment on
account of, or Set Apart for Payment money for a sinking or other similar
fund for, the purchase, redemption or other retirement of, any of the
Junior Stock or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Stock whether in cash, obligations or
shares of the Corporation or other property (other than in exchange for
Junior Stock), and shall not permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase or redeem
any of the Junior Stock or any such warrants, rights, calls or options
(other than in exchange for Junior Stock) unless the Accrued Dividends on
the Series B Preferred Stock for all Dividend Periods ended on or prior to
the date of such payment in respect of Junior Stock have been or
contemporaneously are paid in full.
(iii) So long as any share of the Series B Preferred Stock is
outstanding, the Corporation shall not (except with respect to dividends as
permitted by Section 2(c)(i)) make any payment on account of, or Set Apart
for Payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Parity Stock or any warrants,
rights, calls or options exercisable for or convertible into any of the
Parity Stock, and shall not permit any corporation or other entity directly
or indirectly controlled by the Corporation to purchase or redeem any of
the Parity Stock or any such warrants, rights, calls or options unless the
Accrued Dividends on the Series B Preferred Stock for all Dividend Periods
ended on or prior to the date of such payment in respect of Parity Stock
have been or contemporaneously are paid in full.
SECTION 3. VOTING RIGHTS.
(a) Other than as expressly set forth herein, the Series B Preferred Stock
shall have no voting rights.
(b) Except in the case of a Payment Default (in which case the Board of
Directors of the Corporation shall consist of thirteen directors), after both
(i) the earliest to occur of (A) such time that there are no shares of
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<PAGE> 172
Class B Common Stock outstanding, (B) such time that there are no shares of
Class C Common Stock outstanding, (C) September 30, 2003, and (D) such other
time as the number of Directors of the Corporation otherwise may be validly
fixed by a resolution adopted by the Board of Directors and (ii) the end of the
Investor Designee Period, the Board of Directors shall consist of no more than
eleven directors. During the Investor Designee Period, the holders of Series B
Preferred Stock shall have, in addition to the other voting rights set forth
herein, the exclusive right, voting separately as a single class, (i) prior to a
Payment Default, to elect the Applicable Number of directors of the Corporation
(as defined in the next sentence), (the "Series B Preferred Directors") and (ii)
after an occurrence of a Payment Default, to elect seven directors (which number
shall include the Series B Preferred Directors) such that the directors elected
by the holders of Series B Preferred Stock constitute a majority of the maximum
number of directors of the Board of Directors of the Corporation (such
additional directors elected during a Payment Default being referred to as, the
"Default Series B Preferred Directors"). The "Applicable Number" of directors
shall be (A) five directors so long as the Investor and Related Persons
Beneficially Own Voting Securities representing at least 30% or more of the
Total Voting Power (without taking into account any limitation on the conversion
of such Voting Securities in determining such Beneficial Ownership or the number
of shares issuable upon complete conversion) ("Shares"), (B) four directors, so
long as the Investor and Related Persons beneficially own at least 20% or more
but less than 30% of the Shares, (C) three directors, so long as the Investor
and Related Persons Beneficially Own at least 10% or more but less than 20% of
the Shares, and (D) one director, so long as the Investor and Related Persons
Beneficially Own at least 5% or more but less than 10% of the Shares. The right
of the holders of Series B Preferred Stock to vote for the election of directors
may be exercised at any annual meeting or at any special meeting called for such
purpose or at any adjournment thereof, or by the written consent, delivered to
the Secretary of the Corporation, of the holders of a majority of all shares of
Series B Preferred Stock outstanding as of the record date of such written
consent.
(c) (i) With respect to the Series B Preferred Directors, immediately after
the date of the Issuance Date, and (ii) with respect to the Default Series B
Preferred Directors, immediately after such Payment Default has occurred, the
Board of Directors of the Corporation shall call for a special meeting or
written consent of the holders of shares of Series B Preferred Stock to elect
the Series B Preferred Directors or Default Series B Preferred Directors, as the
case may be. If the Corporation fails to send a notice, the meeting may be
called by any such holder. Each director, and any subsequent director elected
pursuant to this paragraph, shall serve as a director until his successor is
elected and qualified. In the event of a vacancy in respect of any directorship
elected by the holders of shares of Series B Preferred Stock pursuant to this
clause (c), the Corporation agrees to call a special meeting of the holders of
shares of Series B Preferred Stock at the request of the majority of the holders
of outstanding Series B Preferred Stock, in order that the holders of the Series
B Preferred Stock may elect a successor director, and at which meeting the
holders of Series B Preferred Stock shall be entitled to the same voting rights
as provided in the second sentence of the prior paragraph. The voting rights
with respect to the Default Series B Preferred Directors will terminate at such
time as all cumulative dividends in respect of all previously completed full
Dividend Periods that are in arrears on the Series B Preferred Stock have been
paid regularly for at least one year. Simultaneously with the termination of
such voting rights, the terms of office of the Default Series B Preferred
Directors (but not the Series B Preferred Directors) shall terminate; and the
remaining directors shall constitute the directors of the Corporation and the
size of the Board of Directors shall be reduced to nine. The holders of the
Series B Preferred Stock will continue to be entitled to vote for the Series B
Preferred Directors after a Payment Default has been cured.
(d) For so long as both (x) any share of Series B Preferred Stock is
outstanding and (y) the later of (i) the expiration or termination of the
Standstill Period (as such term is defined in the Investor Agreement), (ii) if
the Standstill Period is terminated by reason of the occurrence of any of the
events specified in Section 2.2(a) through (f) or Section 2.2(l) of the Investor
Agreement, the fourth anniversary of the Closing and (iii) such time as the
Investor and its Affiliates no longer Beneficially Own securities of the
Corporation having an aggregate principal amount, liquidation preference or Fair
Market Value, as the case may be, of at least 51% of the Original Investment
Amount, the Corporation shall not, nor shall it permit any of its Subsidiaries
to, without first obtaining the written consent or approval of at least the
Requisite Holders:
(i) voluntarily liquidate, dissolve or wind up;
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<PAGE> 173
(ii) purchase, acquire or obtain any capital stock or other
proprietary interest, directly or indirectly, in any other entity, except
for (i) any transaction or series of transactions involving only
wholly-owned subsidiaries of the Corporation as of the date hereof, or (ii)
the purchase of all or substantially all of the capital stock or other
proprietary interest of other entities for an aggregate purchase price,
including without limitation, any liabilities of the acquired entities, of
less than the Threshold Amount;
(iii) purchase, acquire or obtain assets of any third party in an
aggregate amount (as to the Corporation and all of its subsidiaries),
including without limitation, any liabilities of the acquired entities, in
excess of the Threshold Amount;
(iv) make or commit to make capital expenditures which exceed the
amount set forth in a budget approved by the Board of Directors by more
than the Threshold Amount;
(v) sell, transfer or otherwise dispose of any equity interest of the
Corporation or any of its subsidiaries, except for transactions involving
only wholly-owned subsidiaries of the Corporation which either (i) is in
excess of the Threshold Amount, or (ii) relates to the Venture Fund;
(vi) enter into or commit to enter into any joint ventures or any
partnerships, establish any non-wholly-owned subsidiaries or form any joint
venture (other than the Venture Fund) either (i) in excess of the Threshold
Amount, or (ii) in activity or business competitive with the Venture Fund;
(vii) sell, lease, transfer or otherwise dispose of any assets of the
Corporation or any of its subsidiaries in excess of the Threshold Amount;
(viii) create, incur, assume or suffer to exist any indebtedness for
borrowed money (including any capital leases) of the Corporation or any of
its subsidiaries at any one time outstanding in excess of the Threshold
Amount;
(ix) redeem the Rights issued pursuant to the Rights Plan or any
successor agreement thereto or otherwise render the Rights Plan
inapplicable to any person who would otherwise be an "Acquiring Person" as
defined in the Rights Plan, except, in either case, (i) for any conversion
of the Notes or the Series B Preferred Stock into Common Stock or any
Disposition by the Investor permitted by the Investor Agreement, (ii) in
connection with a transaction approved or recommended by unanimous vote of
the Board members present and voting thereon (in all events including at
least a majority of the Investor Designees as are then required to be
included on the Board of Directors), and (iii) as reasonably determined by
the Board to be required by law or the requirements of a National
Securities Exchange;
(x) pay, or set aside any sums for the payment of, any dividends, or
make any distribution on, any shares of its Common Stock or redeem,
repurchase or otherwise acquire any outstanding shares of its Common Stock
or any other of its outstanding securities (other than indebtedness at
maturity in accordance with the terms thereof);
(xi) issue, sell or amend the rights of any capital stock or other
securities of the Corporation or any of its subsidiaries except for (i)
dividends or other distributions payable on the Common Stock solely in the
form of additional shares of Common Stock; (ii) in connection with the
issuance of Common Stock upon conversion of the Notes or Series B Preferred
Stock or otherwise in accordance with the provisions of the Notes and the
Series B Preferred Stock; (iii) for the issuance of shares of Common Stock
or the issuance of options to purchase Common Stock approved by the
Compensation Committee to employees, advisors, consultants or outside
directors of the Corporation directly or pursuant to an employee benefit
plan of the Corporation; and (iv) acquisitions and other transactions for
which the approval of Holders of Series B Preferred Stock has been given
under this Section 3(d);
(xii) change the Corporation's independent public accountants (unless
the Audit Committee shall determine that they are no longer "independent"
within the meaning of Independence Standards Board Standard No. 1) or,
other than as provided by Section 5.13 of the Investor Agreement, retain a
financial advisor to the Corporation in connection with a merger,
consolidation, recapitalization, an acquisition or divestiture involving or
expected (in the opinion of the Board) to involve, gross proceeds in excess
of the Threshold Amount or a public offering of securities;
-3-
<PAGE> 174
(xiii) enter into any transaction (except (i) as expressly permitted
by the Investor Agreement or the Securities Purchase Agreement or (ii)
relating to compensation of executive officers as determined by the
Compensation Committee of the Board of Directors) with any Affiliate or
Associate of the Corporation or any stockholder of the Corporation (other
than the Investor or its Affiliates).
For the purposes of this section the term "Threshold Amount" shall mean,
(a) with respect to any individual transaction, action or instance, the amount
of $2,000,000 at any time prior to the first anniversary of the Closing, which
amount shall increase by $1,000,000 from the amount then in effect on each
anniversary of the Closing if the Corporation EBITDA (as defined below) is
greater than or equal to the EBITDA Target (as defined below) for such
anniversary, (b) provided that (i) if the Corporation EBITDA for such
anniversary is less than the EBITDA Target for such anniversary, the Threshold
Amount shall be the increased Threshold Amount that would otherwise apply
pursuant to clause (a) above multiplied by the Corporation EBITDA for such
anniversary divided by the EBITDA Target for such anniversary, and (ii) the
Threshold Amount shall not exceed $5,000,000, and further provided, however,
that all such transactions subject to this limitation shall not, in the
aggregate for any year ending on an anniversary of the Closing, exceed the
lesser of (x) two times the amount applicable to any individual transaction,
action or instance during such period and (y) $10,000,000.
"Corporation EBITDA" for any anniversary of the date of the Closing shall mean
the EBITDA of the Corporation for the prior calendar year, including earnings
attributable to management agreements with respect to hotels owned directly or
indirectly by CGLH-IHC Fund I, L.P.
The "EBITDA Target" shall mean the EBITDA of the Corporation for calendar year
2000 adjusted for the revenues and expenses, including minority interest,
affected by the Wyndham Redemption Agreement as though such agreement had been
in effect throughout the entire year, plus: (i) for the first anniversary of the
date of the Closing, $10,000,000; (ii) for the second anniversary of the date of
the Closing, $20,000,000; and (iii) for the third anniversary of the date of the
Closing, $30,000,000.
(e) So long as any share of Series B Preferred Stock is outstanding the
Corporation shall not, nor shall it permit any of its Subsidiaries to, without
first obtaining the consent or approval of at least the Requisite Holders,
voting as a single class:
(i) authorize, create or issue any class or series, or any shares of
any class or series, of Senior Stock;
(ii) authorize, create or issue any class or series, or any shares of
any class or series, of Parity Stock;
(iii) reclassify any shares of stock of the Corporation into shares of
Senior Stock or Parity Stock;
(iv) authorize any security exchangeable for, convertible into, or
evidencing the right to purchase any shares of Senior Stock or Parity
Stock;
(v) alter or change the rights, preferences or privileges of the
Series B Preferred Stock or the rights of the Class B Common Stock or the
Class C Common Stock;
(vi) alter or change the rights of the Class A Common Stock in a
manner adverse to the holders of the Series B Preferred Stock.
(vii) except for any transaction or series of transactions involving
only wholly-owned subsidiaries of the Corporation, (i) consolidate or merge
into or with any other Person (except where the Corporation is the
surviving entity), or (ii) enter into any other Reorganization Transaction
(including any transaction constituting a Change in Control;
(viii) become a party to any agreement which by its terms materially
restricts the Corporation's performance of the terms of the Purchase
Agreement, the Registration Rights Agreement, the Notes, the Series B
Preferred Stock or the Investor Agreement (together, the "Documents");
(ix) grant any registration rights in respect of securities of the
Corporation which have an aggregate value, in any year ending on the
anniversary of the date of the Investor Agreement, greater than the lesser
of (i) the Threshold Amount and (ii) 5% of the market capitalization of the
Corporation that would be
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<PAGE> 175
inconsistent with the rights granted to the holders of Registrable
Securities under the Registration Rights Agreement or otherwise conflict
with or violate the provisions thereof;
(x) amend, modify or waive the Articles of Amendment and Restatement,
any Articles Supplementary thereto, the Notes or the bylaws in any manner
which adversely affects the rights of any of the Investors thereunder,
including, without limitation, any change in the number of directors
comprising the Board; and
(xi) except for the repurchase of Class C Common Stock or redemptions
pursuant to the terms of the Notes, redeem or purchase or otherwise acquire
for consideration any securities of the Corporation unless the Corporation
shall concurrently offer to purchase, at a price per share equal to the
liquidation preference, from the holders of Series B Preferred Stock
(ratably amongst such holders) such portion of the outstanding Series B
Preferred Stock as such securities redeemed, purchased or otherwise
acquired for consideration (on an as-converted basis) bear to the total of
the then-outstanding securities of the Corporation (on an as-converted
basis).
SECTION 4. REDEMPTION
(a) The Corporation shall, on the seventh anniversary of the Issuance Date
and subject to applicable law, redeem (the "Mandatory Redemption") all remaining
issued and outstanding shares of Series B Preferred Stock, at a price per share
in cash equal to the Stated Amount thereof together with all Accrued Dividends
thereon to the date of redemption. The Corporation shall not be required to
provide written notice to holders of Series B Preferred Stock of the Mandatory
Redemption, and the redemption date with respect to the Mandatory Redemption
shall be the seventh anniversary of the Issuance Date. The holders shall be
permitted to convert their Series B Preferred Stock at any time prior to the
redemption date.
(b) In the event there occurs a Change in Control, the Corporation shall
offer to purchase from each holder all of the Series B Preferred Stock held by
such holder for an amount in cash equal to the greater of (i) the Liquidation
Preference of the shares of Series B Preferred Stock held by the holder, and
(ii) the Fair Market Value (as defined below) of the cash, securities and other
property that such holder of the Series B Preferred Stock would have received
had it converted its Series B Preferred Stock (including for such purposes any
shares of Series B Preferred Stock issuable in respect of Accrued Dividends)
into shares of Common Stock immediately prior to such Change in Control, plus
Accrued Dividends payable in cash to the extent not otherwise reflected pursuant
to the parenthetical phrase of this clause (ii) (the greater of (i) and (ii)
above being referred to as the "Change in Control Redemption Price"), in each
case by delivery of a notice in accordance with Section 4(c). In the event of a
Change in Control, each holder of Series B Preferred Stock shall have the right
(but not the obligation) to require the Corporation to purchase any or all of
the Series B Preferred Stock held by such holder for an amount in cash equal to
the Change in Control Redemption Price. Each holder of Series B Preferred Stock
shall also be permitted, until 20 Business Days following the date of the
mailing to it of the Corporation's notice described in Section 4(c)(i), to
convert all, and not less than all, of the shares of Series B Preferred Stock
held by such holder (including shares of Series B Preferred Stock issuable to
such holder as Accrued Dividends that have accelerated or will accelerate as a
result of a Change in Control) pursuant to Section 7 below; provided that any
shares of Common Stock issuable upon conversion of any Series B Preferred Stock
converted pursuant to this sentence after a Change in Control has occurred shall
be entitled to receive the same amount of cash, securities and other property in
connection with such Change in Control as the Common Stock outstanding prior to
the Change in Control. In the event a holder of Series B Preferred Stock does
not elect to have all of its shares of Series B Preferred Stock either (i)
redeemed by the Corporation pursuant to Section 4 or (ii) converted pursuant to
Section 7 below, in each case in connection with a specific Change in Control
event, then no dividends shall be deemed to have been accelerated in connection
with such Change in Control. In the event that any holder does not elect to
convert or redeem such holder's shares of Series B Preferred Stock pursuant to
the foregoing sentence, such holder shall retain any rights it has to convert or
redeem its shares of Series B Preferred Stock in connection with any subsequent
Change in Control. "Fair Market Value" with respect to any securities shall be
the Current Market Price thereof as of the close of business on the date of
measurement. The Fair Market Value of any asset other than cash and securities
shall be determined jointly and in good faith by the Corporation and the
Requisite Stockholders. In the event any dispute between the Corporation and the
Requisite Stockholders as to the Fair Market Value or Current Market Price
(which dispute remains unresolved for 10 Business Days), such dispute
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shall be submitted for final determination to a mutually acceptable Investment
Banking Firm of national reputation familiar with the valuation of companies in
the hospitality and lodging industry ("Investment Banking Firm"). In the event
that the Corporation and the Requisite Stockholders cannot agree on a mutually
acceptable Investment Banking Firm within 10 Business Days, the Corporation, on
the one hand, and the Requisite Stockholders, on the other hand, shall each
select one Investment Banking Firm which two Investment Banking Firms shall
jointly make such determination within 20 business days after the date of such
event, or, if such two Investment Banking Firms are unable to agree on such
determination, the two Investment Banking Firms shall, by the end of the 20(th)
business day after the date of such event, select a third Investment Banking
Firm and notify such third Investment Banking Firm in writing (with a copy to
the Corporation and the holders of Series B Preferred Stock) of their respective
determinations of the Fair Market Value or Current Market Price following which
such third Investment Banking Firm shall, within 15 business days after the date
of its selection, notify the Corporation and the holders of Series B Preferred
Stock in writing of its selection of one or the other of the two original
determinations of the Fair Market Value or Current Market Price, which
determination shall be final and binding on the Corporation and the holders. The
fees and expenses of any such determination shall be borne by the Corporation.
(c) (i) Within five Business Days following an event giving a holder of
shares of Series B Preferred Stock the right, pursuant to Section 4(b), to
require the Corporation to redeem all of such shares, the Corporation shall give
notice by mail to each holder of Series B Preferred Stock, at such holder's
address as it appears on the transfer books of the Corporation, of such event,
which notice shall set forth each holder's right to convert all, and not less
than all, of the shares of Series B Preferred Stock held by such holder, or to
require the Corporation to redeem all, but not less than all, shares of Series B
Preferred Stock held by it which are eligible for redemption pursuant to the
terms of Section 4(b), the redemption date (which date shall be no more than 30
Business Days following the date of such mailed notice), and the procedures to
be followed by such holder in exercising its right to cause such redemption or
effect such conversion. In the event a record holder of shares of Series B
Preferred Stock shall elect to require the Corporation to redeem all such shares
of Series B Preferred Stock pursuant to Section 4(b), such holder shall deliver
within 20 Business Days of the mailing to it of the Corporation's notice
described in this Section 4(c)(i), a written notice to the Corporation so
stating, specifying the number of shares to be redeemed pursuant to Section
4(b). The Corporation shall, in accordance with the terms hereof, redeem the
number of shares so specified on the date fixed for redemption. Failure of the
Corporation to give any notice required by this Section 4(c)(i), or the formal
insufficiency of any such notice, shall not prejudice the rights of any holders
of shares of Series B Preferred Stock to cause the Corporation to redeem or to
convert all such shares held by them. Notwithstanding the foregoing, the Board
of Directors of the Corporation may modify any offer pursuant to this Section
4(c)(i) to the extent necessary to comply with the Exchange Act and the rules
and regulations thereunder.
(ii) The Corporation shall publish the fact that it is redeeming, or
offering to redeem, shares of Series B Preferred Stock through a nationally
prominent newswire service on or before the date of mailing any notice of
redemption or right of redemption. At any time after a notice of redemption
shall have been mailed and before such date of redemption the Corporation
may deposit for the benefit of the holders of the Series B Preferred Stock
called for redemption the funds necessary for such redemption with a bank
or trust company doing business in the Borough of Manhattan, the City of
New York, and having a capital and surplus of at least $1,000,000,000. Any
interest allowed on moneys so deposited shall be paid to the Corporation.
Upon the deposit of such funds or, if no such deposit is made, upon the
date fixed for redemption (unless the Corporation shall default in making
payment of the appropriate redemption amount), whether or not certificates
for shares so called for redemption have been surrendered for cancellation,
the shares of Series B Preferred Stock to be redeemed shall be deemed to be
no longer outstanding and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no rights with
respect thereto, except for the rights to receive the amount payable upon
redemption, but without interest, and, up to the close of business on the
date immediately preceding the date fixed for such redemption, the right to
convert such shares pursuant to Section 7 hereof. Such deposit in trust
shall be irrevocable except that any funds deposited by the Corporation
which shall not be required for the redemption for which they were
deposited because of the exercise of conversion rights shall be returned to
the Corporation forthwith, and any funds deposited by the Corporation which
are unclaimed at the end of one year from the date fixed for such
redemption shall be
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paid over to the Corporation upon its request, and upon such repayment the
holders of the shares of Series B Preferred Stock so called for redemption
shall look only to the Corporation for payment of the appropriate amount.
Any such unclaimed amounts paid over to the Corporation shall, for a period
of six years from the date fixed for such redemption, be set apart and held
by the corporation in trust for the benefit of the holders of such shares
of Series B Preferred Stock, but no such holder shall be entitled to
interest thereon. At the expiration of such six-year period, all right,
title, interest and claim of such holders in or to such unclaimed amounts
shall be extinguished, terminated and discharged, and such unclaimed
amounts shall become part of the general funds of the Corporation free of
any claim of such holders.
SECTION 5. REACQUIRED SHARES. Any shares of Series B Preferred Stock
converted, redeemed, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof, and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Maryland General Corporation Law. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock, par
value $.01 per share, of the Corporation and may be reissued as part of another
series of Preferred Stock, par value $.01 per share, of the Corporation subject
to the conditions or restrictions on authorizing, creating or issuing any class
or series, or any shares of any class or series, set forth in Section 3(d).
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING-UP. If the Corporation
shall adopt a plan of liquidation or of dissolution, or commence a voluntary
case under the Federal bankruptcy laws or any other applicable state or Federal
bankruptcy, insolvency or similar law, or consent to the entry of an order for
relief in any involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy, insolvency or similar
law, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 90 consecutive days and on account of such event the Corporation shall
liquidate, dissolve or wind up, or upon any other liquidation, dissolution or
winding-up of the Corporation (a "Liquidation"), the holders shall be entitled
to receive the greatest of (i) the Liquidation Preference of the shares of
Series B Preferred Stock held by the holder, and (ii) the Fair Market Value of
the cash, securities and other property that such holder of the Series B
Preferred Stock would have received had they converted their Series B Preferred
Stock (including for such purposes any shares of Series B Preferred Stock
issuable in respect of Accrued Dividends) into shares of Common Stock
immediately prior to such Liquidation, plus Accrued Dividends payable in cash to
the extent not otherwise reflected pursuant to the parenthetical phrase of this
clause (ii) (including for such purposes any shares of Series B Preferred Stock
issuable in respect of Accrued Dividends through the date of the Liquidation),
before any distribution shall be made or any assets distributed in respect of
Junior Stock to the holders of any Junior Stock including, without limitation,
Common Stock of the Corporation. After payment of the full amount of the
greatest of the amounts set forth in clause (i) or (ii) above to which they are
entitled, the holders of shares of Series B Preferred Stock will not be entitled
to any further participation in any distribution of assets of the Corporation.
For the purposes of this Section 6 the voluntary sale, conveyance, exchange or
transfer of all or substantially all of the property or assets of the
Corporation or the consolidation or merger of the Corporation with or into one
or more other corporations shall not be deemed to be a liquidation, winding-up
or dissolution of the Corporation.
SECTION 7. CONVERSION INTO COMMON STOCK. Each share of Series B Preferred
Stock, including any shares of Series B Preferred Stock issued as Accrued
Dividends (including Accrued Dividends that have been accelerated in connection
with a Change in Control and assuming any shares of Common Stock into which such
shares are converted will be treated in all respects as shares of Common Stock
outstanding prior to the Change in Control), may, subject to the provisions of
paragraph (h) below, at the option of the holder thereof, be converted into
shares of Common Stock at any time, whether or not the Corporation has given
notice of redemption under Section 4, on the terms and conditions set forth in
this Section 7.
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(a) Subject to the provisions for adjustment hereinafter set forth, each
share of Series B Preferred Stock shall be convertible in the manner hereinafter
set forth into a number of fully paid and nonassessable shares of Common Stock
equal to the product obtained by multiplying the Applicable Conversion Rate (as
defined below) by the number of shares of Series B Preferred Stock being
converted. The "Applicable Conversion Rate" means the quotient obtained by
dividing the Conversion Value on the date of conversion by the Conversion Price
as adjusted pursuant to Section 7(b) on the date of conversion.
(b) The Conversion Price shall be subject to adjustment from time to time
as follows:
(i) In case the Corporation shall at any time or from time to time
after the original issuance of the Series B Preferred Stock declare a
dividend, or make a distribution, on the outstanding shares of Common Stock
in either case, in shares of Common Stock, or effect a subdivision,
combination, consolidation or reclassification of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock,
then, and in each such case, the Conversion Price in effect immediately
prior to such event or the record date therefor, whichever is earlier,
shall be adjusted by multiplying such Conversion Price by a fraction, the
numerator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event and the denominator of which is
the number of shares of Common Stock outstanding immediately after such
event. An adjustment made pursuant to this Section 7(b)(i) shall become
effective (x) in the case of any such dividend or distribution, immediately
after the close of business on the record date for the determination of
holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision, reclassification,
consolidation or combination, at the close of business on the day upon
which such corporate action becomes effective.
(ii) In case the Corporation shall issue (other than upon the exercise
of options, rights or convertible securities) shares of Common Stock (or
options, rights, warrants or other securities convertible into or
exchangeable for shares of Common Stock) at a price per share (or having an
exercise or conversion price per share) less than the Current Market Price
as of the Business Day immediately preceding the Measurement Date, other
than (x) in a transaction to which Section 2(a), 2(b) or 7(b)(i) applies,
(y) pursuant to options or other securities under any employee or director
benefit plan or program of the Corporation approved by the Board of
Directors of the Corporation or shares of Common Stock issued upon the
exercise thereof, (z) pursuant to the conversion of the Series B Preferred
Stock or the Class B Common Stock or Class C Common Stock (the issuances
under clauses (x), (y) and (z) being referred to as "Excluded Issuances"),
then, and in each such case, the Conversion Price in effect immediately
prior to the Measurement Date shall be reduced so as to be equal to an
amount determined by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock of all
classes outstanding at the close of business on the Measurement Date plus
the number of shares of Common Stock (or the number of shares of Common
Stock issuable upon the conversion, exchange or exercise of such options,
rights, warrants or other securities convertible into or exchangeable for
shares of Common Stock) which the aggregate consideration receivable by the
Corporation in connection with such issuance would purchase at such Current
Market Price and the denominator shall be the number of shares of Common
Stock of all classes outstanding at the close of business on the
Measurement Date plus the number of shares of Common Stock (or the number
of shares of Common Stock issuable upon the conversion, exchange or
exercise of such options, rights, warrants or other securities convertible
into or exchangeable for shares of Common Stock) so issued. For purposes of
this Section 7(b)(ii), the aggregate consideration receivable by the
Corporation in connection with the issuance of shares of Common Stock or of
options, rights, warrants or other convertible securities shall be deemed
to be equal to the sum of the gross offering price (before deduction of
customary underwriting discounts or commissions and expenses payable to
third parties) of all such securities plus the minimum aggregate amount, if
any, payable upon conversion or exercise of any such options, rights,
warrants or other convertible securities into shares of Common Stock, less
any original issue discount, premiums and other similar incentives which
have the effect of reducing the effective price per share. For purposes of
this Section 7(b)(ii), such adjustment shall become effective immediately
prior to the opening of business on the Business Day immediately following
the Measurement Date.
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(iii) In the event the Purchaser (as such term is defined in the
Securities Purchase Agreement) exercises its option, pursuant to Section
10.2(b) of the Securities Purchase Agreement, to decrease the Conversion
Price of its shares of Series B Preferred Stock, the Conversion Price of
such shares shall be decreased in the manner and to the extent set forth in
Section 10.2(b) of the Securities Purchase Agreement.
(iv) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 0.1% of
the Conversion Price; provided, that any adjustments which by reason of
this Section 7(b)(iv) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this Section 7 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(c) In case of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
Section 7(b)(i)), or in case of any consolidation or merger of the Corporation
with or into another Person, or in case of any sale or conveyance to another
Person of the property of the Corporation as an entirety or substantially as an
entirety (each of the foregoing being referred to as a "Transaction"), each
share of Series B Preferred Stock then outstanding shall thereafter be
convertible into, in lieu of the Common Stock issuable upon such conversion
prior to the consummation of such Transaction, the kind and amount of shares of
stock and other securities and property (including cash) receivable upon the
consummation of such transaction by a holder of that number of shares of Common
Stock into which one share of Series B Preferred Stock was convertible
immediately prior to such Transaction (including, on a pro rata basis, the cash,
securities or property received by holders of Common Stock in any tender or
exchange offer that is a step in such Transaction). In any such case, if
necessary, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions set forth in this
Section 7 with respect to rights and interests thereafter of the holders of
shares of Series B Preferred Stock to the end that the provisions set forth
herein for the protection of the conversion rights of the Series B Preferred
Stock shall thereafter be applicable, as nearly as reasonably may be, to any
such other shares of stock and other securities and property deliverable upon
conversion of the shares of Series B Preferred Stock remaining outstanding (with
such adjustments in the conversion price and number of shares issuable upon
conversion and such other adjustments in the provisions hereof as the Board of
Directors shall determine in good faith to be appropriate). In case securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 7 shall be deemed
to apply, so far as appropriate and as nearly as may be, to such other
securities or property.
Notwithstanding anything contained herein to the contrary, the Corporation
will not effect any Transaction unless, prior to the consummation thereof, (i)
the Surviving Person thereof, if other than the Corporation, shall assume, by
written instrument mailed to each record holder of shares of Series B Preferred
Stock, at such holder's address as it appears on the transfer books of the
Corporation, the obligation to deliver to such holder such cash, property and
securities to which, in accordance with the foregoing provisions, such holder is
entitled. Nothing contained in this Section 7(c) shall limit the rights of
holders of the Series B Preferred Stock to convert the Series B Preferred Stock
in connection with the Transaction or to exercise their rights to require the
redemption of the Series B Preferred Stock under Section 4(b).
(d) The holder of any shares of Series B Preferred Stock may exercise its
right to convert such shares into shares of Common Stock by surrendering for
such purpose to the Corporation, at its principal office or at such other office
or agency maintained by the Corporation for that purpose, a certificate or
certificates representing the shares of Series B Preferred Stock to be converted
duly endorsed to the Corporation in blank accompanied by a written notice
stating that such holder elects to convert all or a specified whole number of
such shares in accordance with the provisions of this Section 7. The Corporation
will pay any and all documentary, stamp or similar issue or transfer tax and any
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series B Preferred Stock pursuant hereto. As
promptly as practicable, and, in any event, within three Business Days after the
surrender of such certificate or certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Corporation that such taxes are
inapplicable), the Corporation shall deliver or cause to be delivered (i)
certificates registered in the name of such holder representing the number of
validly issued, fully paid and nonassessable full shares of Common Stock to
which the holder of shares of Series B Preferred Stock so
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converted shall be entitled and (ii) if less than the full number of shares of
Series B Preferred Stock evidenced by the surrendered certificate or
certificates are being converted, a new certificate or certificates, of like
tenor, for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversion shall be
deemed to have been made at the close of business on the date of receipt of such
notice and of such surrender of the certificate or certificates representing the
shares of Series B Preferred Stock to be converted so that the rights of the
holder thereof as to the shares being converted shall cease except for the right
to receive shares of Common Stock, and the person entitled to receive the shares
of Common Stock shall be treated for all purposes as having become the record
holder of such shares of Common Stock at such time.
(e) Shares of Series B Preferred Stock may be converted at any time and, if
subject to Mandatory Redemption, up to the close of business on the last
Business Day immediately preceding the date fixed for such Mandatory Redemption
of such shares.
(f) In connection with the conversion of any shares of Series B Preferred
Stock, no fractions of shares of Common Stock shall be issued, but in lieu
thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Common Stock on the day on which such
shares of Series B Preferred Stock are deemed to have been converted.
(g) In case at any time or from time to time the Corporation shall pay any
dividend or make any other distribution to the holders of its Common Stock in
additional shares of stock of any class, or shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any
class or any other right, other than pursuant to the Rights Plan, or there shall
be any capital reorganization or reclassification of the Common Stock of the
Corporation or consolidation or merger of the Corporation with or into another
corporation, or any sale or conveyance to another corporation of the property of
the Corporation as an entirety or substantially as an entirety, or there shall
be a voluntary or involuntary dissolution, liquidation or winding-up of the
Corporation, then, in any one or more of said cases the Corporation shall give
at least 20 days' prior written notice (the time of mailing of such notice shall
be deemed to be the time of giving thereof) to the registered holders of the
Series B Preferred Stock at the addresses of each as shown on the books of the
Corporation of the date on which (i) the books of the corporation shall close or
a record shall be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
sale or conveyance, dissolution, liquidation or winding-up shall take place, as
the case may be, provided that in the case of any Transaction to which Section
7(c) applies the Corporation shall give at least 30 days' prior written notice
as aforesaid. Such notice shall also specify the date, if known, as of which the
holders of the Common Stock and of the Series B Preferred Stock of record shall
participate in said dividend, distribution or subscription rights or shall be
entitled to exchange their Common Stock or Series B Preferred Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale or conveyance, or participate in
such dissolution, liquidation or winding-up, as the case may be.
(h) Notwithstanding the provisions of this Section 7, no holder of Series B
Preferred Stock shall be permitted to convert a number of its shares of Series B
Preferred Stock which shall result in such holder and its Affiliates or any
group (as such term is used in Section 13(d)(3) of the Exchange Act) of which
any of them is a member having Beneficial Ownership, after giving effect to such
conversion, of more than 49% of the then-outstanding Common Stock. If a holder
requests conversion of shares of Series B Preferred Stock which would result in
ownership by such holder and its Affiliates or any group (as such term is used
in Section 13(d)(3) of the Exchange Act) of which any of them is a member of
more than 49% of the outstanding Common Stock after giving effect to such
conversion, then such holder's conversion request shall be deemed to represent a
request to convert up to the maximum number of shares of Series B Preferred
Stock permitted under the prior sentence and the Corporation shall deliver or
cause to be delivered, along with the Common Stock certificates and the new
certificate or certificates represent the remaining unconverted shares of Series
B Preferred Stock, a calculation in reasonable detail setting forth the maximum
number of shares convertible by such holder pursuant to the provisions of this
Section 7(h). If a holder of Series B Preferred Stock requests conversion of
such stock at the time it also requests conversion of any convertible debt of
the Corporation which it holds, then any limitation on conversion set forth in
such debt shall be applied first so as to permit the conversion of the maximum
amount of Series B Preferred Stock, subject to the beneficial ownership
limitation set forth above. If a holder is subject to
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the limitation on conversion set forth in the first sentence of this Section
7(h), then such holder shall not be permitted to convert shares of Series B
Preferred Stock which were rendered non-convertible by the first sentence hereof
and have subsequently become convertible under the first sentence hereof for a
period of 75 days after such shares would otherwise first have become
convertible under the first sentence hereof (it being understood that
transferees of such shares whose beneficial ownership of Common Stock would not
exceed 49% of the then-outstanding Common Stock after giving effect to
conversion of their convertible securities, including the Series B Preferred
Stock, shall not be subject to any of the foregoing limitations on the amount or
timing of the conversion of shares of Series B Preferred Stock).
(i) If the Corporation issues any securities convertible into any equity
security of the Corporation which contains any provisions that protect the
holder thereof against dilution upon the occurrence of certain events in a
manner more favorable to such holder than those set forth in this section (other
than a provision specifying an initial exercise or conversion price), such
provisions shall be deemed to be incorporated herein with respect to such events
as if fully set forth herein and to the extent any existing provision herein is
inconsistent with such provision, such incorporated provision shall be
substituted therefor.
(j) If at the time of conversion of shares of Series B Preferred Stock, the
Common Stock of the Corporation is listed on a national securities exchange, or
is designated as a "national market system security" or "small cap market
security" on NASDAQ, the Corporation shall take all action necessary to cause
the shares of Common Stock issuable upon conversion of such shares of Series B
Preferred Stock to be listed on such exchange, subject to official notice of
issuance.
(k) If the Corporation shall issue shares of Common Stock upon conversion
of the shares of Series B Preferred Stock as contemplated by this Section 7, the
Corporation shall issue together with each such share of Common Stock one Right
(as such term is defined in the Rights Plan) (or other securities in lieu
thereof), or any rights issued to holders of Common Stock in addition thereto or
in replacement therefor, whether or not such rights shall be exercisable at such
time, but only if such rights are issued and outstanding and held by other
holders of Common Stock at such time and have not expired, and only if the
Person to whom such shares of Common Stock are issued is not an "Acquiring
Person" under the Rights Plan or such other agreement pursuant to which such
rights are issued; provided, however, that, in such event such rights shall be
issued to such Person promptly after such time at which such Person is no longer
an "Acquiring Person."
SECTION 8. REPORTS AS TO ADJUSTMENTS AND OUTSTANDING SHARES. Whenever the
number of shares of Common Stock into which each share of Series B Preferred
Stock is convertible (or the number of votes to which each share of Series B
Preferred Stock is entitled) is adjusted as provided in Section 7, the
Corporation shall promptly mail to the holders of record of the outstanding
shares of Series B Preferred Stock at their respective addresses as the same
shall appear in the Corporation's stock records a notice stating that the number
of shares of Common Stock into which the shares of Series B Preferred Stock are
convertible has been adjusted and setting forth the new number of shares of
Common Stock (or describing the new stock, securities, cash or other property)
into which each share of Series B Preferred Stock is convertible, as a result of
such adjustment, a brief statement of the facts requiring such adjustment and
the computation thereof, and when such adjustment became effective.
At the request of any holder of Series B Preferred Stock the Corporation
shall reasonably promptly issue to such holder, in any reasonable manner
requested by such holder, a notice setting forth the number of shares of Common
Stock then outstanding and the maximum number of shares into which the holder's
shares of Series B Preferred Stock are then convertible.
SECTION 9. DEFINITIONS.
For the purposes of the Certificate of Designation of Series B Convertible
Preferred Stock which embodies this resolution:
"Accrued Dividends" to a particular date (the "Applicable Date") means (i)
all dividends accrued but not paid on the Series B Preferred Stock pursuant to
Section 2(a), whether or not earned or declared, accrued to the Applicable Date,
plus (ii) all dividends or distributions payable pursuant to Section 2(b) for
which the Triggering Distribution was declared, ordered, paid or made on or
prior to the Applicable Date.
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"Affiliate" shall have the meaning set forth in Rule l2b-2 promulgated by
the Securities and Exchange Commission under the Exchange Act.
"Associate" shall have the meaning set forth in Rule l2b-2 promulgated by
the Securities and Exchange Commission under the Exchange Act.
"Beneficial Ownership" by a Person of any Voting Securities shall be
determined in accordance with the term "beneficial ownership" as defined in Rule
13d-3 under the Exchange Act as in effect on the date hereof and, in addition,
"beneficial ownership" shall include securities which such Person has the right
to acquire (irrespective of whether such right is exercisable immediately or
only after the passage of time, including the passage of time in excess of sixty
(60) days) pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise. For purposes of these Articles Supplementary, an Investor shall be
deemed to beneficially own any Voting Securities beneficially owned by its
Affiliates or any Group (as such term is used in Section 13(d)(3) of the
Exchange Act) of which such Investor or any such Affiliate is a member.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which commercial banks in the City of New York are authorized or obligated by
law or executive order to close.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing person.
"Change in Control" means any of the following:
(a) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act, a "Group"), other than the
Corporation, or any of its wholly owned Subsidiaries or any Investor or Excluded
Group, of Beneficial Ownership of 35% or more of the combined voting power or
economic interests of the then-outstanding Voting Securities (a "Control
Interest"); provided, however, that (i) any transfer of Notes or shares of
Series B Preferred Stock or other securities from any Investor or Excluded Group
will not result in a Change in Control unless such transfer is pursuant to a
Reorganization Transaction, merger proposal or tender offer in respect of the
Corporation which has been approved by (or participated in by) the Board of
Directors of the Corporation or by a majority of the Voting Securities, and (ii)
in no event shall the conversion of any or all of the Notes in accordance with
the terms of the Notes constitute a Change in Control; or
(b) there is a change in a majority of the members of the Board within 12
months of an "election contest" (as defined in Rule 14a pursuant to the Exchange
Act) relating to the election of persons not recommended by the Board of
Directors at the time of the first public announcements of such election contest
and in which a Person not an Affiliate of the Investor or any Related Person
obtained valid proxies or consents to effect such change; or
(c) the approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the Voting Securities immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, Beneficially Own more than 50% of the combined voting
power of the then-outstanding Voting Securities of the Corporation resulting
from such reorganization, merger or consolidation; or
(d) the sale or other disposition of assets representing 50% or more of the
assets of the Corporation in one transaction or series of related transactions;
or
(e) the disposition by the Corporation of any of its interest in the Joint
Venture to a third party that is not a subsidiary of the Corporation (other than
a disposition to the Investor or its Affiliate) except as otherwise permitted
under the Joint Venture Partnership Agreement;
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provided, that the occurrence of any event identified in subparagraphs (a)
through (e) above that would otherwise be treated as a Change in Control shall
not constitute a Change in Control hereunder if a majority of the Series B
Preferred Directors, by vote duly taken, shall so determine.
"Class A Common Stock" means the Class A Common Stock, par value $0.01 per
share, of the Corporation.
"Class A Directors" has the meaning set forth in the Articles of Amendment
and Restatement.
"Class B Common Stock" means the Class B Common Stock, par value $0.01 per
share, of the Corporation.
"Class C Common Stock" means the Class C Common Stock, par value $0.01 per
share.
"Closing" means the closing of the purchase of the Note and the Series B
Preferred Stock pursuant to the Securities Purchase Agreement.
"Closing Price" per share of Common Stock on any date shall be the last
sale price, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, in either case as reported on the Nasdaq Small Cap
Market or the Nasdaq National Market or in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or American Stock Exchange, as the case
may be, or, if the Common Stock is listed or admitted to trading on the New York
Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on any national securities exchange, the last quoted sale
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Stock is not quoted by
any such organization, the average of the Closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors and reasonably acceptable to the Requisite
Stockholder.
"Common Stock" means the Class A Common Stock and the Class B Common Stock
and the Class C Common Stock or, if there shall no longer be separate classes,
the common stock, par value $0.01 per share, of the Corporation.
"Conversion Price" shall initially be equal to $4.00, subject to adjustment
as provided in Section 7(b).
"Conversion Value" per share of Series B Preferred Stock shall be an amount
equal to the Stated Amount plus all Accrued Dividends thereon to the date of
conversion or redemption, as the case may be.
"Current Market Price" per share of Common Stock on any date shall be the
average of the Closing Prices of a share of Common Stock for the five
consecutive Trading Days selected by the Corporation commencing not less than 10
Trading Days nor more than 20 Trading Days before the date in question. If on
any such Trading Day the Common Stock is not quoted by any organization referred
to in the definition of Closing Price, the Current Market Price of the Common
Stock on such day shall be determined by agreement between the Corporation and
the Requisite Stockholders, provided that if such agreement is not reached
within 10 business days, such Current Market Price shall be determined as set
forth in Section 4(b).
"Dividend Payment Date" means the following dates: (i) the date that is
three months after the Issuance Date; (ii) the date that is six months after the
Issuance Date; (iii) the date that is nine months after the Issuance Date; (iv)
the date that is first anniversary of the Series B Preferred Stock Issuance
Date; and the anniversaries of the foregoing dates.
"Dividend Period" means the period from the Issuance Date to the first
Dividend Payment Date (but without including such Dividend Payment Date) and,
thereafter, each Dividend Payment Date to the next following Dividend Payment
Date (but without including such later Dividend Payment Date).
"EBITDA" means, with respect to any person for any period, the sum without
duplication, determined on a consolidated basis, of such person's (a) net income
(or net loss), (b) net interest expense, (c) income tax expense, (d)
depreciation expense and (e) amortization expense, determined in accordance with
generally accepted accounting principles consistently applied.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Excluded Group" means any Group in which (A) the Voting Securities either
Beneficially Owned by such Group after the applicable acquisition or
Beneficially Owned by such Group and being transferred by such Group, as the
case may be, multiplied by (B) the percentage of the Investor's interest in the
Beneficial Ownership of such Group, represent a Control Interest.
"Investor" has the meaning ascribed to it in the Investor Agreement.
"Investor Agreement" means the Investor Agreement to be entered into
between the Corporation and the Investor pursuant to the Securities Purchase
Agreement, in the form attached to the Securities Purchase Agreement.
"Investor Designee Period" has the meaning ascribed to it in the Investor
Agreement.
"Issuance Date" means the original date of issuance of Series B Preferred
Stock to the Investors.
"Joint Venture" means the Joint Venture as defined in the Securities
Purchase Agreement.
"Junior Stock" means all classes of Common Stock of the Corporation and
each other class of Capital Stock of the Corporation or series of Preferred
Stock of the Corporation currently existing or hereafter created the terms of
which do not expressly provide that it ranks senior to, or on a parity with, the
Series B Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Corporation.
"Liquidation Preference" means, in the event of a liquidation or winding-up
of the Corporation, an amount per share of Series B Preferred Stock equal to the
greater of (i) the amount the holders of the Series B Preferred Stock would have
received had they converted their Series B Preferred Stock (including for such
purposes any shares of Series B Preferred Stock issuable in respect of Accrued
Dividends through the date of liquidation) into Common Stock immediately prior
to such liquidation or winding-up and (ii) the Stated Amount of their Series B
Preferred Stock plus any Accrued Dividends.
"Measurement Date" means, for purposes of Section 7(b)(ii), (i) in the case
of an offering of rights, warrants or options to all or substantially all of the
holders of the Common Stock or any other issuance contemplated by such Section
where a record date is fixed for the determination of stockholders entitled to
participate in such issuance, such record date and (ii) in all other cases, the
Business Day immediately preceding the date of issuance of shares of Common
Stock (or options, rights, warrants or other securities convertible into or
exchangeable for shares of Common Stock) contemplated by such Section.
"Note" and "Notes" means the 8.75% Convertible Notes issued by the
Corporation pursuant to the Securities Purchase Agreement.
"Original Investment Amount" means the sum of $30,000,000.
"Parity Stock" means any class of Capital Stock of the Corporation or
series of preferred stock of the Corporation hereafter created the terms of
which expressly provide that such class or series will rank on a parity with the
Series B Preferred Stock as to dividend distributions, redemptions and
distributions upon liquidation, winding-up and dissolution.
"Payment Default" means (i) dividends on the Series B Preferred Stock are
in arrears and unpaid for six quarterly Dividend Periods, whether or not
consecutive and such failure thereafter continues or (ii) payments of interest
pursuant to any of the Notes are in arrears and unpaid for six quarterly
Interest Periods (as such term is defined in the Notes), whether or not
consecutive and such failure thereafter continues.
"Person" means an individual, partnership, corporation, limited liability
company or partnership, unincorporated organization, trust or joint venture, or
a governmental agency or political subdivision thereof, or other entity of any
kind.
"Preferred Stock" means the preferred stock, par value $0.01 per share, of
the Corporation.
"Related Person" means with respect to any Person, (A) any Affiliate of
such Person, (B) any investment manager, investment advisor or partner of such
Person or an Affiliate of such Person, and (C) any investment
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fund, investment account or investment entity whose investment manager,
investment advisor or general partner is such Person or a Related Person of such
Person.
"Reorganization Transaction" means: (i) any merger, consolidation,
recapitalization, liquidation or other business combination transaction
involving the Corporation; (ii) any tender offer or exchange offer for any
securities of the Corporation; or (iii) any sale or other disposition of assets
of the Corporation or any of its Subsidiaries in a single transaction or in a
series of related transactions in each of the foregoing cases constituting
individually or in the aggregate 50% or more of the assets or Voting Securities
(as applicable) of the Corporation.
"Registration Rights Agreement" means that registration rights agreement to
be entered into between the Corporation and the Investor pursuant to the
Securities Purchase Agreement, in the form attached to the Securities Purchase
Agreement.
"Requisite Holders" means the holders of Notes or shares of Series B
Preferred Stock representing a majority of the combined (i) aggregate principal
amount of the Notes outstanding and (ii) aggregate stated amount of the Series B
Preferred Stock outstanding, on the record date for such vote or, if no such
record date is established, on the date any written consent of such holders is
solicited, in each case excluding Notes or shares of Series B Preferred Stock
then owned by the Corporation or any of its Affiliates, voting as a single
class.
"Requisite Stockholders" means the holders of at least a majority of the
shares of Series B Preferred Stock outstanding (excluding any shares of Series B
Preferred Stock Beneficially Owned by the Corporation) on the record date for
such vote or, if no such record date is established, on the date any written
consent of stockholders is solicited.
"Rights Plan" means the Shareholder Rights Agreement, dated as of July 8,
1999, between the Corporation and American Stock Transfer and Trust Company, as
Rights Agent, and any successor shareholder rights plan of a similar nature.
"Securities Purchase Agreement" means the securities purchase agreement
entered into among the Corporation and CGLH Partners I LP, a Delaware limited
partnership and CGLH Partners II LP, a Delaware limited partnership, dated
August [ ], 2000.
"Senior Stock" means each other class of Capital Stock of the Corporation
or series of Preferred Stock of the Corporation hereafter created that has been
approved by the holders in accordance with Section 3(d) hereof and the terms of
which expressly provide that such class or series will rank senior to the Series
B Preferred Stock as to dividend distributions, redemptions and distributions
upon liquidation, winding-up and dissolution of the Corporation.
"Set Apart for Payment" means the Corporation shall have irrevocably
deposited with a bank or trust company doing business in the Borough of
Manhattan, the City of New York, and having a capital and surplus of at least
$1,000,000,000 in trust for the exclusive benefit of the holders of shares of
Series B Preferred Stock, funds sufficient to satisfy the Corporation's payment
obligation.
"Stated Amount" means $10.00 per share.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person. Subsidiary, with respect to
the Corporation, shall specifically include Interstate Hotels, LLC and
Northridge Holdings, Inc.
"Surviving Person" means the continuing or surviving Person of a merger,
consolidation or other corporate combination, the Person receiving a transfer of
all or a substantial part of the properties and assets of the Corporation, or
the Person consolidating with or merging into the Corporation in a merger,
consolidation or other corporate combination in which the Corporation is the
continuing or surviving Person, but in connection with which the Series B
Preferred Stock or Common Stock of the Corporation is exchanged, converted or
reinstated into the securities of any other Person or cash or any other
property; provided, however, if such Surviving Person is a direct or indirect
Subsidiary of a Person, the parent entity also shall be deemed to be a Surviving
Person.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is quoted, listed or admitted to trading is
open for the transaction of business or, if the Common Stock is
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<PAGE> 186
not quoted, listed or admitted to trading on any national securities exchange
(including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Voting Securities" means (x) any securities entitled, or which may be
entitled, to vote generally in the election of directors of the Corporation (y)
any securities, including the Note and the Series B Preferred Stock, convertible
or exercisable into or exchangeable for such securities (whether or not the
right to convert, exercise or exchange is subject to the passage of time or
contingencies or both), or (z) any direct or indirect rights or options to
acquire any such securities; provided that unexercised options granted pursuant
to any employment benefit or similar plan and rights issued pursuant to any
shareholder rights plan shall be deemed not to be Voting Securities.
"Wyndham Redemption Agreement" means the Conversion and Redemption
Agreement among PAH-Interstate Holdings, Inc., Wyndham International, Inc. and
Northridge Holdings, Inc. dated August [ ], 2000.
SECOND: The Series B Preferred Stock have been classified and designated by
the Board of Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned Chief Executive Officer of the Corporation
acknowledges these Articles Supplementary to be the corporate act of the
Corporation and, as to all matters or facts required to be verified under oath,
the undersigned Chief Executive Officer acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties for
perjury.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its Chief Executive
Officer and attested to by its secretary on [ ], 2000.
INTERSTATE HOTELS CORPORATION
By: (SEAL)
------------------------------------
Thomas F. Hewitt
Chief Executive Officer
Witnessed by:
------------------------------------------
--------------------------------Secretary
<PAGE> 188
Exhibit 6
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF A REGISTRATION STATEMENT THEREUNDER AND REGISTRATION OR
QUALIFICATION UNDER APPLICABLE SECURITIES LAWS OR AN EXEMPTION THEREFROM.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN INVESTOR
AGREEMENT BETWEEN INTERSTATE HOTELS CORPORATION AND CERTAIN INVESTORS NAMED
THEREIN AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH. A COPY OF
SAID AGREEMENT IS ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF THE
COMPANY.
INTERSTATE HOTELS CORPORATION
8.75% CONVERTIBLE SUBORDINATED NOTE DUE [ ], 2007
No. ______
$ ____________________ New York, New York
[ ], 2000
INTERSTATE HOTELS CORPORATION (the "Company"), a Maryland corporation, for value
received, hereby unconditionally promises to pay to , or its
registered assigns, the principal amount of $ on
[ ], 2007 (the "Due Date"), with interest payable on the
unpaid balance of such principal amount in accordance with the terms and
conditions set forth below.
SECTION 1. PAYMENT OF PRINCIPAL AND INTEREST ON THE NOTES.
1.1. Payment of Principal. The entire unpaid principal balance of this Note
(together with all Accrued Interest) shall be paid in full by the Company on the
Due Date. Payment of all or any portion of the principal amount due hereunder
shall be made in such coin or currency of the United States of America as at the
time of payment shall be legal tender therein for the payment of public and
private debts.
1.2. Interest. The unpaid principal balance of this Note outstanding at any
time shall accrue cumulative interest, at the rate per annum equal to 8.75% from
the date hereof, until such unpaid balance shall become due and payable (whether
at maturity or at a date fixed for redemption or by declaration or otherwise).
Interest shall be paid by the Company (in cash or up to 25% by PIK Note as
provided in Section 1.3) in arrears on each Interest Payment Date until this
Note has been fully paid or converted as hereafter provided. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months. Interest shall
accrue on a daily basis and compound quarterly on the Interest Payment Dates.
1.3. Payment of Interest. The Company shall pay interest on this Note on
each Interest Payment Date. Subject to Section 1.4, the Company shall pay the
interest due hereunder in such coin or currency of the United States of America
as at the time of payment shall be legal tender therein for the payment of
public and private debts; provided, however, that the Company, at its sole
option, may elect to pay up to 25% of interest then due and payable by "payment
in kind" by the delivery to the Holder of an additional note (a "PIK Note")
identical in all respects to this Note except (a) registered in the name of the
Holder and (b) in the principal amount equal to the amount of interest then due
and payable for which the PIK Note is being issued. As used in this Note, the
term "Note" or "Notes" includes any PIK Note or PIK Notes executed and delivered
by the Company in payment of interest.
1.4. Default Interest. During the continuance of any Event of Default, the
Company shall pay interest ("Default Interest") on the outstanding principal of,
and any other amounts (other than interest), if any, due on this Note and (to
the extent legally enforceable) on any overdue installment of interest, at the
rate per annum equal to 10.75% (computed on the same basis as above) until such
overdue amount is paid or until such Event of
<PAGE> 189
Default is cured. Default Interest shall be computed on the basis of a 360-day
year of twelve 30-day months. The Company shall pay such Default Interest in
cash on demand from time to time, and shall not have the option to pay Default
Interest by issuance of a PIK Note.
1.5. Home Office Payment. The Company will pay to the Purchaser or any
transferee thereof all sums becoming due on this Note (including all sums which
become due on this Note at the maturity hereof) which are made in coin or
currency at the account/address to be specified by the Purchaser for such
purpose by notice to the Company not less than three nor more than seven
Business Days before such payment is due, by wire transfer of immediately
available funds no later than 2:00 p.m. on the due date of such payment. Before
selling or otherwise transferring this Note, the Holder will make a notation
hereon of the aggregate amount of all payments of principal, if any, theretofore
made, and of the date to which interest has been paid.
1.6. Limitation on Interest. No provision of this Note shall require the
payment or permit the collection of interest in excess of the maximum rate which
is permitted by Law. If any such excess interest is provided for herein, or
shall be adjudicated to be so provided for, then the Company shall not be
obligated to pay such interest in excess of the maximum rate permitted by Law,
and the right to demand payment of any such excess interest is hereby waived,
any other provisions in this Note or in the Securities Purchase Agreement to the
contrary notwithstanding.
1.7. Securities Purchase Agreement. This Note is the Company's 8.75%
Convertible Note due 2007 (the "Note", and collectively with any notes issued
pursuant to the terms of this Note or the Securities Purchase Agreement, the
"Notes") in the aggregate principal amount of $25,000,000 issued pursuant to a
Securities Purchase Agreement, dated as of August , 2000 (the "Securities
Purchase Agreement"), among the Company 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 "Purchaser"), and is
entitled to the benefits, and is subject to the terms and conditions thereof as
if included herein.
1.8. Deemed Ownership. The Company may deem and treat the person in whose
name this Note is registered in the Note Register as the Holder and owner hereof
for the purpose of receiving payments and for all other purposes whatsoever,
notwithstanding any notations of ownership or transfer hereon and
notwithstanding that this Note is overdue, and the Company shall not be affected
by any notice to the contrary until presentation of this Note for registration
of transfer as provided in Section 4 of the Securities Purchase Agreement. This
Note may be transferred or exchanged and, if lost, stolen, damaged or destroyed,
this Note may be replaced, only in the manner and upon the conditions set forth
in the Securities Purchase Agreement.
1.9 Withholding. The Holder hereby authorizes the Company to withhold from
or pay on behalf of or with respect to the Holder any amount of federal, state,
local or foreign taxes that the Company reasonably determines it is required by
law to withhold or pay with respect to any amount payable to the Holder pursuant
to this Note. Any amount withheld or paid pursuant to the foregoing sentence
shall be treated as having been paid to the Holder pursuant to this Note.
SECTION 2. COVENANTS.
2.1 Covenants. So long as any of the Notes is outstanding the Company shall
not, nor shall it permit any of its Subsidiaries to, without first obtaining the
written consent or approval of at least the Required Holders:
(a) except for any transaction or series of transactions involving only
wholly-owned subsidiaries of the Company, (i) consolidate or merge into or with
any other Person (except where the Company is the surviving entity), or (ii)
enter into any other Reorganization Transaction or any transaction constituting
a Change in Control;
(b) become a party to any agreement which by its terms materially restricts
the Company's performance of the terms of the Securities Purchase Agreement, the
Registration Rights Agreement, the Notes, the Series B Preferred Stock or the
Investor Agreement (together the "Transaction Documents");
(c) grant any registration rights in respect of securities of the Company
which have an aggregate value, in any year ending on the anniversary of the date
of the Investor Agreement, greater than the lesser of (i) the Threshold Amount
and (ii) 5% of the market capitalization of the Company that would be
inconsistent with the
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rights granted to the holders of Registrable Securities under the Registration
Rights Agreement or otherwise conflict with or violate the provisions thereof;
(d) amend, modify or waive any provisions of the charter of the Company
(the "Charter"), the Notes or the bylaws of the Company in any manner which
adversely affects the rights of any of the Investors thereunder, including,
without limitation, any change in the number of directors comprising the Board;
and
(e) except for the repurchase of Class C Common Stock or redemptions
pursuant to the terms of the Series B Preferred Stock, redeem or purchase or
otherwise acquire for consideration any securities of the Company unless the
Company shall concurrently offer to redeem from the Holder such portion of this
Note as such securities redeemed, purchased or acquired (on an as-converted
basis) bear to the total of the then-outstanding securities of the Company (on
an as-converted basis).
For the purposes of this Section 2 the term "Threshold Amount" shall mean, (a)
with respect to any individual transaction, action or instance, the amount of
$2,000,000 at any time prior to the first anniversary of the Closing, which
amount shall increase by $1,000,000 from the amount then in effect on each
anniversary of the Closing if the Company EBITDA (as defined below) is greater
than or equal to the EBITDA Target (as defined below) for such anniversary, (b)
provided that (i) if the Company EBITDA for such anniversary is less than the
EBITDA Target for such anniversary, the Threshold Amount shall be the increased
Threshold Amount that would otherwise apply pursuant to clause (a) above
multiplied by the Company EBITDA for such anniversary divided by the EBITDA
Target for such anniversary, and (ii) the Threshold Amount shall not exceed
$5,000,000, and further provided, however, that all such transactions subject to
this limitation shall not, in the aggregate for any year ending on an
anniversary of the Closing, exceed the lesser of (x) two times the amount
applicable to any individual transaction, action or instance during such period
and (y) $10,000,000.
"Company EBITDA" for any anniversary of the date of the Closing shall mean
the EBITDA of the Company for the prior calendar year, including earnings
attributable to management agreements with respect to hotels owned directly or
indirectly by CGLH-IHC Fund I, L.P.
The "EBITDA Target" shall mean the EBITDA of the Company for calendar year
2000 adjusted for the revenues and expenses, including minority interest,
affected by the Wyndham Redemption Agreement as though such agreement had been
in effect throughout the entire year, plus: (i) for the first anniversary of the
date of the Closing, $10,000,000; (ii) for the second anniversary of the date of
the Closing, $20,000,000; and (iii) for the third anniversary of the date of the
Closing, $30,000,000.
2.2 Further Covenants. For so long as both (x) any of the Notes is
outstanding and (y) the later of (i) the expiration or termination of the
Standstill Period, (ii) if the Standstill Period is terminated by reason of the
occurrence of any of the events specified in Section 2.2(a) through (f) or
Section 2.2(l) of the Investor Agreement, the fourth anniversary of the Closing
and (iii) such time as the Investor and its Affiliates no longer Beneficially
Own securities of the Company having an aggregate principal amount, liquidation
preference or Fair Market Value, as the case may be, of at least 51% of the
Original Investment Amount, (such period, the "Covenant Period") the Company
shall not, nor shall it permit any of its Subsidiaries to, without first
obtaining the written consent or approval of at least the Required Holders:
(a) voluntarily liquidate, dissolve or wind up;
(b) purchase, acquire or obtain any capital stock or other proprietary
interest, directly or indirectly, in any other entity, except for (i) any
transaction or series of transactions involving only wholly-owned subsidiaries
of the Company as of the date hereof, or (ii) the purchase of all or
substantially all of the capital stock or other proprietary interest of other
entities for an aggregate purchase price, including without limitation, any
liabilities of the acquired entities, of less than the Threshold Amount;
(c) purchase, acquire or obtain assets of any third party in an aggregate
amount (as to the Company and all of its subsidiaries), including without
limitation, any liabilities of the acquired entities, in excess of the Threshold
Amount;
(d) make or commit to make capital expenditures which exceed the amount set
forth in the Budget by more than the Threshold Amount;
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(e) sell, transfer or otherwise dispose of any equity interest of the
Company or any of its subsidiaries, except for transactions involving only
wholly-owned subsidiaries of the Company which either (i) is in excess of the
Threshold Amount, or (ii) relates to the Joint Venture;
(f) enter into or commit to enter into any joint ventures or any
partnerships, establish any non-wholly-owned subsidiaries or form any joint
venture (other than the Joint Venture) either (i) in excess of the Threshold
Amount, or (ii) in activity or business competitive with the Joint Venture;
(g) sell, lease, transfer or otherwise dispose of any assets of the Company
or any of its subsidiaries in excess of the Threshold Amount;
(h) create, incur, assume or suffer to exist any indebtedness for borrowed
money (including any capital leases) of the Company or any of its subsidiaries
at any one time outstanding in excess of the Threshold Amount;
(i) redeem the Rights issued pursuant to the Rights Plan or otherwise
render the Rights Agreement inapplicable to any person who would otherwise be an
"Acquiring Person" as defined in the Rights Plan, except, in either case, (i)
for any conversion of the Notes or the Series B Preferred Stock into Class A
Common Stock or any Disposition by the Investor permitted by the Investor
Agreement, (ii) in connection with a transaction approved or recommended by
unanimous vote of the Board members present and voting thereon (in all events
including at least a majority of the Investor Designees as are then required to
be included on the Board of Directors), and (iii) as reasonably determined by
the Board to be required by law or the requirements of a National Securities
Exchange;
(j) pay, or set aside any sums for the payment of, any dividends, or make
any distribution on, any shares of its Class A Common Stock or redeem,
repurchase or otherwise acquire any outstanding shares of its Class A Common
Stock or any other of its outstanding securities (other than indebtedness at
maturity in accordance with the terms thereof);
(k) issue, sell or amend the rights of any capital stock or other
securities of the Company or any of its subsidiaries except for (i) dividends or
other distributions payable on the Class A Common Stock solely in the form of
additional shares of Class A Common Stock; (ii) in connection with the issuance
of Class A Common Stock upon conversion of the Notes or Series B Preferred Stock
or otherwise in accordance with the provisions of the Notes and the Series B
Preferred Stock; (iii) for the issuance of shares of Class A Common Stock or the
issuance of options to purchase Class A Common Stock approved by the
Compensation Committee to employees, advisors, consultants or outside directors
of the Company directly or pursuant to an employee benefit plan of the Company;
and (iv) acquisitions and other transactions for which approval of the Required
Holders is given under other provisions of this Section 2.1;
(l) change the Company's independent public accountants (unless the Audit
Committee shall determine that they are no longer "independent" within the
meaning of Independence Standards Board Standard No. 1) or, other than as
provided by Section 5.13 of the Investor Agreement, retain a financial advisor
to the Company in connection with a merger, consolidation, recapitalization, an
acquisition or divestiture involving or expected (in the opinion of the Board)
to involve, gross proceeds in excess of the Threshold Amount or a public
offering of securities;
(m) enter into any transaction (except (i) as expressly permitted by the
Investor Agreement or the Securities Purchase Agreement or (ii) relating to
compensation of executive officers as determined by the Compensation Committee
of the Board of Directors) with any Affiliate or Associate of the Company or any
stockholder of the Company (other than the Investor or its Affiliates).
2.3 Specific Enforcement. The Company agrees that irreparable injury would
occur if the provisions of this Section 2 are breached and that such injury
would not be adequately compensable in damages. Accordingly, the Company agrees
that, in addition to any other remedies which may be available, Holders of the
Note shall be entitled to specific enforcement of this Section.
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SECTION 3. REDEMPTION OF NOTES.
3.1 Mandatory Redemption Offer.
(a) In the event there occurs a Change in Control, the Company shall offer
to purchase from each Holder all of the Notes held by such Holder for an amount
in cash equal to the greater of (i) the principal amount of the Notes held by
such Holder plus Accrued Interest through the date of purchase, and (ii) the
Fair Market Value (as defined below) of the cash, securities and other property
that such Holder of the Notes would have received had it converted its Notes
(including for such purposes any Notes issuable in respect of Accrued Interest)
into shares of Common Stock immediately prior to such Change in Control, plus
Accrued Interest payable in cash to the extent not otherwise reflected pursuant
to the parenthetical phrase of this clause (ii), (the greater of (i) and (ii)
above being referred to as the ("Change in Control Redemption Price"), in each
case by delivery of a notice in accordance with Section 3.1(b). In the event of
a Change in Control, each Holder of Notes shall have the right (but not the
obligation) to require the Company to purchase any or all of the Notes held by
such Holder for an amount in cash equal to the Change in Control Redemption
Price. Each Holder of Notes shall also be permitted, until 20 Business Days
following the date of the mailing to it of the Company's notice described in
Section 3.1(b)(i), to convert all, and not less than all, of the Notes held by
such Holder (including Notes issuable to such Holder as Accrued Interest that
have accelerated or will accelerate as a result of a Change in Control) pursuant
to Section 4 below; provided that any shares of Common Stock issuable upon
conversion of any Notes converted pursuant to this sentence after a Change in
Control has occurred shall be entitled to receive the same amount of cash,
securities and other property in connection with such Change in Control as the
Common Stock outstanding prior to the Change in Control. In the event a Holder
of Notes does not elect to have all of its Notes either (i) redeemed by the
Company pursuant to this Section 3 or (ii) converted pursuant to Section 4
below, in each case in connection with a specific Change in Control event, then
no interest shall be deemed to have been accelerated in connection with such
Change in Control. In the event that any Holder does not elect to convert or
redeem such Holder's Notes pursuant to the foregoing sentence, such Holder shall
retain any rights it has to convert or redeem its Notes in connection with any
subsequent Change in Control. "Fair Market Value" with respect to any securities
shall be the Current Market Price thereof as of the close of business on the
date of measurement. The Fair Market Value of any asset other than cash and
securities shall be determined jointly and in good faith by the Company and the
Required Noteholders. In the event any dispute between the Company and the
Required Noteholders as to the Fair Market Value or Current Market Price (which
dispute remains unresolved for 10 Business Days), such dispute shall be
submitted for final determination to a mutually acceptable investment banking
firm of national reputation familiar with the valuation of companies in the
hospitality and lodging industry ("Investment Banking Firm"). In the event that
the Company and the Required Noteholders cannot agree on a mutually acceptable
Investment Banking Firm within 10 Business Days, the Company, on the one hand,
and the Required Noteholders, on the other hand, shall each select one
Investment Banking Firm, which two investment banking firms shall jointly make
such determination within 20 business days after the date of such event, or, if
such two Investment Banking Firms are unable to agree on such determination, the
two Investment Banking Firms shall, by the end of the 20th business day after
the date of such event, select a third Investment Banking Firm and notify such
third Investment Banking Firm in writing (with a copy to the Company and the
Holders) of their respective determinations of the Fair Market Value or Current
Market Price following which such third Investment Banking Firm shall, within 15
business days after the date of its selection, notify the Company and the
Holders in writing of its selection of one or the other of the two original
determinations of the Fair Market Value or Current Market Price, which
determination shall be final and binding on the Company and the Holders. The
fees and expenses of any such determination shall be borne by the Company.
(b) (i) Within five Business Days following an event giving a Holder of
Notes the right, pursuant to Section 3.1(a), to require the Company to redeem
all of such Notes, the Company shall give notice by mail to each Holder of
Notes, at such Holder's address as it appears on the Note Register, of such
event, which notice shall set forth each Holder's right to convert all, and not
less than all of the Notes held by such Holder, or to require the Company to
redeem all, but not less than all, of the Notes held by such Holder which are
eligible for redemption pursuant to the terms of Section 3.1(a), the redemption
date (which date shall be no more than 30 Business Days following the date of
such mailed notice), and the procedures to be followed by such Holder in
exercising its right to cause such redemption or effect such conversion. In the
event a record Holder of Notes shall
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elect to require the Company to redeem all such Notes pursuant to Section
3.1(a), such Holder shall deliver, within 20 Business Days of the mailing to it
of the Company's notice described in this Section 3.1(b)(i), a written notice to
the Company so stating, specifying the principal amount of Notes to be redeemed
pursuant to Section 3.1(a). The Company shall, in accordance with the terms
hereof, redeem the principal amount of Notes so specified on the date fixed for
redemption. Failure of the Company to give any notice required by this Section
3.1(b)(i), or the formal insufficiency of any such notice, shall not prejudice
the rights of any Holders of Notes to cause the Company to redeem or to convert
all such Notes held by them. Notwithstanding the foregoing, the Board of
Directors of the Company may modify any offer pursuant to this Section 3.1(b)(i)
to the extent necessary to comply with the Exchange Act and the rules and
regulations thereunder.
(ii) The Company shall publish the fact that it is redeeming, or offering
to redeem, Notes through a nationally prominent newswire service on or before
the date of mailing any notice of redemption or right of redemption. At any time
after a notice of redemption shall have been mailed and before such date of
redemption the Company may deposit for the benefit of the Holders of the Notes
called for redemption the funds necessary for such redemption with a bank or
trust company doing business in the Borough of Manhattan, the City of New York,
and having a capital and surplus of at least $1,000,000,000. Any interest
allowed on moneys so deposited shall be paid to the Company. Upon the deposit of
such funds or, if no such deposit is made, upon the date fixed for redemption
(unless the Company shall default in making payment of the appropriate
redemption amount), whether or not Notes so called for redemption have been
surrendered for cancellation, the Notes to be redeemed shall be deemed to be no
longer outstanding and the Holders thereof shall cease to be Holders with
respect to such Notes and shall have no rights with respect thereto, except for
the rights to receive the amount payable upon redemption, but without interest,
and, up to the close of business on the date immediately preceding the date
fixed for such redemption, the right to convert such Notes pursuant to Section 4
hereof. Such deposit in trust shall be irrevocable except that any funds
deposited by the Company which shall not be required for the redemption for
which they were deposited because of the exercise of conversion rights shall be
returned to the Company forthwith, and any funds deposited by the Company which
are unclaimed at the end of one year from the date fixed for such redemption
shall be paid over to the Company upon its request, and upon such repayment the
Holders of the Notes so called for redemption shall look only to the Company for
payment of the appropriate amount. Any such unclaimed amounts paid over to the
Company shall, for a period of six years from the date fixed for such
redemption, be set apart and held by the Company in trust for the benefit of the
Holders of such Notes, but no such Holder shall be entitled to interest thereon.
At the expiration of such six-year period, all right, title, interest and claim
of such Holders in or to such unclaimed amounts shall be extinguished,
terminated and discharged, and such unclaimed amounts shall become part of the
general funds of the Company free of any claim of such Holders.
SECTION 4. CONVERSION OF NOTES.
4.1. Holder's Option to Convert Notes into Common Stock.
(a) This Note or any portion of the outstanding principal amount of such
Note, including any Notes issued as PIK Notes under Section 1.3 of this Note,
shall be convertible at the option of the Holder at any time after the Closing
into a number of shares of Class A Common Stock, on the terms and conditions set
forth in this Section 4.
(b) Subject to the provisions for adjustment hereinafter set forth, each
Note shall be convertible in the manner hereinafter set forth into a number of
fully paid and nonassessable shares of Class A Common Stock equal to the product
obtained by multiplying the Applicable Conversion Rate by the outstanding
principal amount of this Note or portion thereof being converted. The
"Applicable Conversion Rate" means the quotient obtained by dividing the
Conversion Value on the date of conversion by the Conversion Price as adjusted
pursuant to Section 4.1(c) on the date of conversion.
(c) The Conversion Price shall be subject to adjustment from time to time
as follows:
(i) In case the Company shall at any time or from time to time after
the original issuance of the Notes declare a dividend, or make a
distribution, on the outstanding shares of Common Stock in either case, in
shares of Common Stock, or effect a subdivision, combination, consolidation
or reclassification of the
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outstanding shares of Common Stock into a greater or lesser number of
shares of Common Stock, then, and in each such case, the Conversion Price
in effect immediately prior to such event or the record date therefor,
whichever is earlier, shall be adjusted by multiplying such Conversion
Price by a fraction, the numerator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event. An adjustment made pursuant to this Section
4.1(c)(i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of any such
subdivision, reclassification, consolidation or combination, at the close
of business on the day upon which such corporate action becomes effective.
(ii) In case the Company shall issue (other than upon the exercise of
options, rights or convertible securities) shares of Common Stock (or
options, rights, warrants or other securities convertible into or
exchangeable for shares of Common Stock) at a price per share (or having an
exercise or conversion price per share) less than the Current Market Price
as of the Measurement Date, other than (x) in a transaction to which
Section 1.3 applies, (y) pursuant to options or other securities under any
employee or director benefit plan or program of the Company approved by the
Board of Directors of the Company or shares of Common Stock issued upon the
exercise thereof, (z) pursuant to the conversion of the Notes, the Series B
Preferred Stock, or the Class B Common Stock or Class C Common Stock (the
issuances under clauses (x), (y) and (z) being referred to as "Excluded
Issuances"), then, and in each such case, the Conversion Price in effect
immediately prior to the Measurement Date shall be reduced so as to be
equal to an amount determined by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of Common
Stock of all classes outstanding at the close of business on the
Measurement Date plus the number of shares of Common Stock (or the number
of shares of Common Stock issuable upon the conversion, exchange or
exercise of such options, rights, warrants or other securities convertible
into or exchangeable for shares of Common Stock) which the aggregate
consideration receivable by the Company in connection with such issuance
would purchase at such Current Market Price and the denominator shall be
the number of shares of Common Stock of all classes outstanding at the
close of business on the Measurement Date plus the number of shares of
Common Stock (or the number of shares of Common Stock issuable upon the
conversion, exchange or exercise of such options, rights, warrants or other
securities convertible into or exchangeable for shares of Common Stock) so
issued. For purposes of this Section 4.1(c)(ii), the aggregate
consideration receivable by the Company in connection with the issuance of
shares of Common Stock or of options, rights, warrants or other convertible
securities shall be deemed to be equal to the sum of the gross offering
price (before deduction of customary underwriting discounts or commissions
and expenses payable to third parties) of all such securities plus the
minimum aggregate amount, if any, payable upon conversion or exercise of
any such options, rights, warrants or other convertible securities into
shares of Common Stock, less any original issue discount, premiums and
other similar incentives which have the effect of reducing the effective
price per share. For purposes of this Section 4.1(c)(ii), such adjustment
shall become effective immediately prior to the opening of business on the
Business Day immediately following the Measurement Date.
(iii) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 0.1% of
the Conversion Price; provided, that any adjustments which by reason of
this Section 4.1(c)(iii) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 4 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be.
(d) In case of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
Section 4.1(c)(i)), or in case of any consolidation or merger of the Company
with or into another Person, or in case of any sale or conveyance to another
Person of the property of the Company as an entirety or substantially as an
entirety (each of the foregoing being referred to as a "Transaction"), each Note
then outstanding shall thereafter be convertible into, in lieu of the Common
Stock issuable upon such conversion prior to the consummation of such
Transaction, the kind and amount of shares of stock and other securities and
property (including cash) receivable upon the consummation of such Transaction
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by a holder of that number of shares of Common Stock into which such Note was
convertible immediately prior to such Transaction (including, on a pro rata
basis, the cash, securities or property received by holders of Common Stock in
any tender or exchange offer that is a step in such Transaction). In any such
case, if necessary, appropriate adjustment (as determined in good faith by the
Board of Directors) shall be made in the application of the provisions set forth
in this Section 4 with respect to rights and interests thereafter of the Holders
of Notes to the end that the provisions set forth herein for the protection of
the conversion rights of the Notes shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities and
property deliverable upon conversion of the Notes remaining outstanding (with
such adjustments in the Conversion Price and number of shares issuable upon
conversion and such other adjustments in the provisions hereof as the Board of
Directors shall determine in good faith to be appropriate). In case securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 4 shall be deemed
to apply, so far as appropriate and as nearly as may be, to such other
securities or property.
Notwithstanding anything contained herein to the contrary, the Company will
not effect any Transaction unless, prior to the consummation thereof, the
Surviving Person thereof, if other than the Company, shall assume, by written
instrument mailed to each record Holder of Notes, at such Holder's address as it
appears in the Note Register, the obligation to deliver to such Holder such
cash, property and securities to which, in accordance with the foregoing
provisions, such Holder is entitled. Nothing contained in this Section 4.1(d)
shall limit the rights of Holders of the Notes to convert the Notes in
connection with the Transaction or to exercise their rights to require the
redemption of the Notes under Section 3.
(e) Conversion of this Note may be effected by the Holder upon the
surrender to the Company at the office of the Company designated for notices in
accordance with Section 8.4 or at the office of any agent or agents of the
Company, as may be designated by the Board of Directors, of this Note,
accompanied by a written notice (a "Note Holder Conversion Notice") stating that
such Holder elects to convert all or a specified portion of the outstanding
principal amount of this Note in accordance with the provisions of this Section
4.1 and specifying the name or names in which such Holder wishes the certificate
or certificates for shares of Common Stock to be issued. In case the Holder's
Note Holder Conversion Notice shall specify a name or names other than that of
such Holder, such notice shall be accompanied by payment of all transfer Taxes
payable upon the issuance of shares of Common Stock in such name or names that
would not have been incurred had such shares of Common Stock been issued in the
name of the Holder. Other than such Taxes, the Company will pay any and all
issue and other Taxes, whether or not imposed on the Company (other than taxes
based on income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of this Note pursuant hereto. As promptly
as practicable, and in any event within five (5) Business Days after the
surrender of such Note and, if applicable, the receipt of a Note Holder
Conversion Notice relating thereto by the Company and, if applicable, payment of
all transfer Taxes (or the demonstration to the satisfaction of the Company that
such taxes have been paid), the Company shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the Holder of the Note shall
be entitled and (ii) if less than the entire outstanding principal amount of
this Note is being converted, a new Note in the principal amount which remains
outstanding upon such partial conversion. The date of delivery of this Note
after or together with the delivery of a Note Holder Conversion Notice shall be
deemed to be the date of conversion.
(f) Notes may be converted at any time up to the close of business on the
last Business Day immediately preceding the Due Date.
(g) In connection with the conversion of any Notes, no fractions of shares
of Common Stock shall be issued, but in lieu thereof the Company shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Current Market Price per share of
Common Stock on the day on which such Notes are deemed to have been converted.
(h) In case at any time or from time to time the Company shall pay any
dividend or make any other distribution to the holders of its Common Stock in
additional shares of stock of any class, or shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any
class or any other right, other than pursuant to the Rights Plan, or there shall
be any capital reorganization or reclassification of the Common Stock of the
Company or consolidation or merger of the Company with or into another company,
or any
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sale or conveyance to another company of the property of the Company as an
entirety or substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Company, then, in any
one or more of said cases the Company shall give at least 20 days' prior written
notice (the time of mailing of such notice shall be deemed to be the time of
giving thereof) to the Holders of the Notes at the addresses of each as shown in
the Note Register of the date on which (i) the books of the Company shall close
or a record shall be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
sale or conveyance, dissolution, liquidation or winding up shall take place, as
the case may be, provided that in the case of any Transaction to which Section
4.1(d) applies the Company shall give at least 30 days' prior written notice as
aforesaid. Such notice shall also specify the date, if known, as of which the
holders of the Common Stock and the Holders of the Notes shall participate in
said dividend, distribution or subscription rights or shall be entitled to
exchange their Common Stock or Notes for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale or conveyance, or participate in such dissolution, liquidation or winding
up, as the case may be.
(i) Notwithstanding the provisions of this Section 4.1, no Holder of Notes
shall be permitted to convert all or any portion of the principal amount of its
Notes which shall result in such Holder and its Affiliates or any group (as such
term is used in Section 13(d)(3) of the Exchange Act) of which any of them is a
member having Beneficial Ownership, after giving effect to such conversion, of
more than 49% of the then-outstanding Common Stock. If a Holder requests
conversion of Notes which would result in ownership by such Holder and its
Affiliates or any group (as such term is used in Section 13(d)(3) of the
Exchange Act) of which any of them is a member of more than 49% of the
outstanding Common Stock after giving effect to such conversion, then such
Holder's conversion request shall be deemed to represent a request to convert up
to the maximum principal amount of Notes permitted under the prior sentence and
the Company shall deliver or cause to be delivered, along with the Common Stock
certificates and the new Note representing the remaining unconverted principal
amount of such Notes, a calculation in reasonable detail setting forth the
maximum principal amount of such Notes convertible by such holder pursuant to
the provisions of this Section 4.1(i). If a Holder is subject to the limitation
on conversion set forth in the first sentence of this Section 4.1(i), then such
Holder shall not be permitted to convert Notes which were rendered
non-convertible by the first sentence hereof and have subsequently become
convertible under the first sentence hereof for a period of 75 days after such
Notes would otherwise first have become convertible under the first sentence
hereof (it being understood that transferees of the Note whose Beneficial
Ownership of Common Stock would not exceed 49% of the then-outstanding Common
Stock, after giving effect to the conversion of their Notes, shall not be
subject to any of the foregoing limitations on the amount or timing of the
conversion of the Note).
(j) If the Company issues any securities convertible into any equity
security of the Company which contains any provisions that protect the holder
thereof against dilution upon the occurrence of certain events in a manner more
favorable to such holder than those set forth in this Section 4.1 (other than a
provision specifying an initial exercise or conversion price), such provisions
shall be deemed to be incorporated herein with respect to such events as if
fully set forth herein and to the extent any existing provision herein is
inconsistent with such provision, such incorporated provision shall be
substituted therefor.
4.2. Reports as to Adjustments and Outstanding Shares.
(a) Whenever the number of shares of Common Stock into which each Note is
convertible is adjusted as provided in Section 4.1, the Company shall promptly
mail to the Holders of the outstanding Notes at their respective addresses as
the same shall appear in the Note Register a notice stating that the number of
shares of Common Stock into which the Notes are convertible has been adjusted
and setting forth the new number of shares of Common Stock (or describing the
new stock, securities, cash or other property) into which each Note is
convertible, as a result of such adjustment, a brief statement of the facts
requiring such adjustment and the computation thereof, and when such adjustment
became effective.
(b) At the request of any Holder the Company shall reasonably promptly
issue to such Holder, in any reasonable manner requested by such Holder, a
notice setting forth the number of shares of Common Stock then outstanding and
the maximum number of shares into which the Note is then convertible.
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4.3. Reservation of Stock; Listing Rights.
(a) The Company shall at all times reserve and keep available for issuance
upon the conversion of the Notes, free from any preemptive rights, such number
of its authorized but unissued shares of Common Stock as will from time to time
be sufficient to permit the conversion of the entire outstanding principal
amount of the Notes into Common Stock, and shall take all action required to
increase the authorized number of shares of Common Stock, if necessary, to
permit the conversion of the entire outstanding principal amount of the Notes.
(b) If at the time of conversion of any Notes, the Common Stock of the
Company is listed on a national securities exchange, or is designated as a
"national market system security" or "small cap market security" on NASDAQ, the
Company shall take all action necessary to cause the shares of Common Stock
issuable upon conversion of such Notes to be listed on such exchange, subject to
official notice of issuance.
(c) If the Company shall issue shares of Common Stock upon conversion of
the Notes as contemplated by this Section 4, the Company shall issue together
with each such share of Common Stock one Right (as such term is defined in the
Rights Plan) (or other securities in lieu thereof), or any rights issued to
holders of Common Stock in addition thereto or in replacement therefor, whether
or not such rights shall be exercisable at such time, but only if such rights
are issued and outstanding and held by other holders of Common Stock at such
time and have not expired, and only if the Person to whom such shares of Common
Stock are issued is not an "Acquiring Person" under the Rights Plan or such
other agreement pursuant to which such rights are issued; provided, however,
that, in such event such rights shall be issued to such Person promptly after
such time at which such Person is no longer an "Acquiring Person."
SECTION 5. EVENTS OF DEFAULT AND REMEDIES.
5.1. Events of Default. Each of the following shall constitute an Event of
Default with respect to this Note:
(a) Nonpayment of Principal of the Notes. If the Company fails to pay the
principal of or any other sum (other than interest), if any, due on any of the
Notes, when and as the same becomes due and payable, whether at the maturity
thereof, on a date fixed for a redemption, or otherwise;
(b) Nonpayment of Interest. If the Company fails to pay interest on any of
the Notes in full, when and as the same becomes due and payable, and such
failure shall be continuing for five (5) Business Days;
(c) Voluntary Bankruptcy and Insolvency Proceedings. If the Company or any
Subsidiary shall file a petition in bankruptcy or for reorganization or for an
arrangement or any composition, readjustment, liquidation, dissolution or
similar relief pursuant to the Bankruptcy Code, or under any similar present or
future federal law or the law of any other jurisdiction or shall be adjudicated
a bankrupt or become insolvent, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of the Company or such Subsidiary or for all or any
substantial part of its respective property, or the Company or any of its
Subsidiaries shall make an assignment for the benefit of its creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
shall take any corporate action, as the case may be, in furtherance of any of
the foregoing;
(d) Adjudication of Bankruptcy. If a petition or answer shall be filed
proposing the adjudication of the Company or any of its Subsidiaries as a
bankrupt or its reorganization or arrangement, or any composition, readjustment,
liquidation, dissolution or similar relief with respect to it pursuant to the
Bankruptcy Code or under any similar present or future federal law or the law of
any other jurisdiction applicable to the Company or any of its Subsidiaries, and
the Company or such Subsidiary (as applicable) shall consent to or acquiesce in
the filing thereof, or such petition or answer shall not be discharged or denied
within 60 days after the filing thereof;
(e) Receivership or Sequestration. If a decree or order is rendered by a
court having jurisdiction (i) for the appointment of a receiver or custodian or
liquidator or trustee or sequestrator or assignee (or similar official) in
bankruptcy or insolvency of the Company or any of its Subsidiaries or of all or
a substantial part of its property, or for the winding-up or liquidation of its
affairs, and such decree or order shall have remained in force undischarged and
unstayed for a period of 60 days, or (ii) for the sequestration or attachment of
any property of the Company or any of its Subsidiaries without its return to the
possession of the Company or such Subsidiary (as applicable) or its release from
such sequestration or attachment within 60 days thereafter;
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(f) Acceleration of Other Indebtedness. If, during the Covenant Period,
default shall be made with respect to any Indebtedness of the Company (other
than the Notes) with a principal amount outstanding in excess of $1,500,000 with
the result that such Indebtedness can be accelerated so that the same will
become due and payable prior to the date on which the same would otherwise have
become due and payable;
(g) Covenant Defaults. The Company shall have breached in any material
respect any of the covenants of the Company set forth in this Note or it shall
have breached its obligation, if any, to appoint or nominate for election to the
Company's Board of Directors any designee of the Investor under Section 3.1 of
the Investor Agreement; provided that, if capable of being remedied, such breach
continues for 15 days after notice to the Company in writing by any Holder of
this Note or other party entitled to the benefit of such covenant;
(h) Judgments. A final judgment or judgments entered by a court of
competent jurisdiction for the payment of money aggregating in excess of
$1,500,000 is or are outstanding against the Company or any Subsidiary and any
one such judgment in excess of $1,500,000 has, or such judgments aggregating in
excess of $1,500,000 have, remained unpaid, unvacated, unbonded, or unstayed by
appeal or otherwise for a period of 30 days from the date of entry.
5.2. Acceleration of Maturity. If any Event of Default shall have occurred
and be continuing, the Holders of a majority of the outstanding principal amount
of Notes may, by notice to the Company, declare the entire outstanding principal
balance of the Notes, and all accrued and unpaid interest thereon, to be due and
payable immediately, and upon any such declaration the entire outstanding
principal balance of this Note, and said accrued and unpaid interest shall
become and be immediately due and payable, without presentment, demand, protest
or other notice whatsoever, all of which are hereby expressly waived, anything
in this Note or the Securities Purchase Agreement to the contrary
notwithstanding; provided that if an Event of Default under clause (c), (d), or
(e) of Section 5.1 with respect to the Company shall have occurred, the
outstanding principal amount of this Note, and all accrued and unpaid interest
thereon, shall immediately become due and payable, without any declaration and
without presentment, demand, protest or other notice whatsoever, all of which
are hereby expressly waived, anything in this Note or the Securities Purchase
Agreement to the contrary notwithstanding.
5.3. Other Remedies. If any Event of Default shall have occurred and be
continuing, from and including the date of such Event of Default to but not
including the date such Event of Default is cured or waived, the Holder may
enforce its rights by suit in equity, by action at law, or by any other
appropriate proceedings, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in this Note or the
Securities Purchase Agreement or in aid of the exercise of any power granted in
this Note or the Securities Purchase Agreement, and the Holder may enforce the
payment of this Note and any of its other legal or equitable rights.
5.4. Conduct No Waiver; Collection Expenses. No course of dealing on the
part of the Holder, nor any delay or failure the part of the Holder to exercise
any of its rights, shall operate as a waiver of such right or otherwise
prejudice the Holder's rights, powers and remedies. If the Company fails to pay,
when due, the principal or the interest on this Note, the Company will pay to
the Holder to the extent permitted by law, on demand, all costs and expenses
incurred by the Holder in the collection of any amount due in respect of this
Note, including reasonable legal fees incurred by the Holder in enforcing its
rights hereunder.
5.5 Annulment of Acceleration. If a declaration is made in accordance with
Section 5.2, then and in every such case, the Holders of at least a majority of
the outstanding principal amount of the Notes may, by an instrument delivered to
the Company, annul such declaration and the consequences thereof, provided that
at the time such declaration is annulled:
(a) all arrears of interest on the Notes and all other sums payable on the
Notes and pursuant to the Securities Purchase Agreement (except any principal of
or interest or premium on the Notes which has become due and payable by reason
of such declaration) shall have been duly paid; and
(b) every other Event of Default under each of the Notes shall have been
duly waived or otherwise made good or cured;
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provided, however, that only the Purchaser or an Affiliate of the Purchaser (but
not any transferee thereof other than an Affiliate of the Purchaser) that is a
Holder of the Note or Notes with respect to which the declaration permitted by
the last proviso of Section 5.2 was made may annul such declaration; and
provided, further, that no such annulment shall extend to or affect any
subsequent Event of Default or impair any right consequent thereon.
5.6. Remedies Cumulative, Etc. No right or remedy conferred upon or
reserved to the Holder of this Note is intended to be exclusive of any other
right or remedy, and every right and remedy shall be cumulative and in addition
to every other right and remedy given hereunder or now and hereafter existing
under applicable Law. Every right and remedy given by this Note or by applicable
Law to the Holder may be exercised from time to time and as often as may be
deemed expedient by such Holder. Notwithstanding the foregoing or any other
provision of this Section 5, the rights and obligations in this Note will be
subordinate as set forth in Section 6.
SECTION 6. SUBORDINATION OF NOTES.
6.1. Subordination of Notes to Senior Indebtedness. The Indebtedness
evidenced by the Notes shall at all times be wholly subordinate and junior in
right of payment to any and all Senior Indebtedness of the Company (including
any claims by the holders of such Senior Indebtedness for interest accruing
after any assignment for the benefit of creditors by the Company or the
institution by or against the Company of any proceedings under the Bankruptcy
Code or any law for the relief of or relating to debtors, or any other claim by
such holders for any such interest which would have accrued in the absence of
such assignment or the institution of such proceedings) in the manner and with
the force and effect hereafter set forth:
(a) In the event of any liquidation, dissolution or winding up of the
Company, or of any execution, sale, receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or other similar proceeding relative
to the Company or its property, all sums owing on all Senior Indebtedness of the
Company (including cash collateral and amounts not yet due and payable) shall
first be paid in full in cash, or provision shall be made for such payment in
money or money's worth, before any payment is made upon the Notes; and if in any
such event any payment or distribution, whether in cash, property, or securities
shall be made upon or in respect of the Notes at a time when such payment is
prohibited under this Section 6, the same shall be paid over to the holders of
the Senior Indebtedness of the Company, pro rata, for application in payment
thereof unless and until such Senior Indebtedness shall have been paid or
satisfied in full in cash, or provision shall be made for such payment in money
or money's worth.
In case of any assignment for the benefit of creditors by the Company or in
case any proceedings under the Bankruptcy Code or any other law for the relief
of or relating to debtors are instituted by or against the Company, or in case
of the appointment of any receiver for the Company's business or assets, or in
case of any dissolution or winding up of the affairs of the Company, the Company
and any assignee, trustee in bankruptcy, receiver, debtor in possession or other
person or persons in charge are hereby directed to pay to the holders of the
Senior Indebtedness of the Company the full amount of such holders' claims
against the Company (including interest to the date of payment) in cash, or
provision shall be made for such payment in money or money's worth, before
making any payments to the Holders of Notes, and insofar as may be necessary for
that purpose, the Holder hereby assigns and transfers to the holders of Senior
Indebtedness of the Company all rights to any payments, dividends or other
distributions.
(b) In the event that all or any part of the Indebtedness evidenced by the
Notes is declared or becomes due and payable because of the occurrence of any
Event of Default or otherwise than at the option of the Company (other than
pursuant to its terms at its final maturity or upon a Change in Control), under
circumstances when the foregoing clause (a) shall not be applicable, the Holders
of the Notes consent, subject to Section 6.5, to the payment to holders of
Senior Indebtedness (or the provision, in a manner satisfactory to the holders
of Senior Indebtedness, for such payment) of such amounts as are then due and
payable pursuant to such Senior Indebtedness prior to the payment to the Holders
of Notes of any amount due and payable in respect of the Notes.
(c) For purposes of this Section 6 only, the words "cash, property or
securities" shall (so long as the effect of this paragraph is not to cause the
Note to be treated in any case or proceeding or other event described in this
Section 6 as part of the same class of claims as any Senior Indebtedness or any
class of claims on a parity with or senior to any Senior Indebtedness for any
payment or distribution) not be deemed to include shares of stock of the
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Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which are
subordinated in right of payment to all Senior Indebtedness which may at the
time be outstanding to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Section 6.
(d) All payments, cash, or noncash distributions made to the Holders of
Notes which should have been made to the holders of Senior Indebtedness of the
Company shall be received and held by the former in trust for the benefit of the
latter, and the Holders of Notes shall forthwith remit each such payment, cash,
or noncash distribution to the holders of the Senior Indebtedness of the
Company, pro rata, in the form in which it was received, together with such
endorsements or documents as may be necessary to effectively negotiate or
transfer the same to the holders of the Senior Indebtedness of the Company.
(e) The Company shall not, at any time after the end of the Covenant
Period, pay the principal of, premium (if any) or interest on the Notes or make
any other payment to Holders of the Notes or repay, repurchase, redeem, defease
or otherwise retire any Notes (collectively, "pay the Notes") if (i) both (y)
any Senior Indebtedness is not paid when due in cash and (z) provision has not
been made for payment in full in a manner satisfactory to the holders of such
Senior Indebtedness or (ii) any other default on Senior Indebtedness occurs and
the maturity of such Senior Indebtedness is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded in writing or (y) such Senior Indebtedness
has been paid in full in cash or provision has been made for payment in full in
a manner satisfactory to the holders of such Senior Indebtedness; provided,
however, that the Company may pay the Notes without regard to the foregoing if
the Company and the Purchaser receive written notice approving such payment from
the representative of the Senior Indebtedness with respect to which either of
the events set forth in clause (i) or (ii) of this sentence has occurred or is
continuing. During the continuance of any Payment Blockage Period, the Company
may not pay the Notes. Notwithstanding the provisions of the immediately
preceding sentence, unless the holders of Senior Indebtedness which initiated
the Payment Blockage Period or the representative of such holders shall have
accelerated the maturity of the Senior Indebtedness, the Company may resume
payments on the Note after the end of such Payment Blockage Period. A "Payment
Blockage Period" commences on the receipt by the Company of a written notice (a
"Blockage Notice") from the representative of the holders of such Senior
Indebtedness of a default, other than a default set forth in clause (i) or (ii)
of the first sentence of this Section 6.1(e), on any Senior Indebtedness that
permits the holders of the Senior Indebtedness to accelerate its maturity
immediately without either further notice (except such notice as may be required
to effect such acceleration) or the expiration of any applicable grace periods,
specifying an election to effect a Payment Blockage Period and ends 90 days
thereafter. The Payment Blockage Period will end earlier if such Payment
Blockage Period is terminated (1) by written notice to the Company from the
Person or Persons who gave such Blockage Notice, (2) because the default giving
rise to such Blockage Notice is no longer continuing or (3) because such Senior
Indebtedness has been repaid in full or provision has been made for payment in
full in a manner satisfactory to the holders of such Senior Indebtedness. Not
more than one Blockage Notice may be given in any 360-day period, irrespective
of the number of defaults with respect to Senior Indebtedness during such
period.
Notwithstanding anything set forth in this Section 6.1, nothing set forth
herein shall restrict Holders of the Notes from exercising their rights of
conversion hereunder.
6.2. Proofs of Claim of Holders of Senior Indebtedness; Voting. Each Holder
of Notes undertakes and agrees for the benefit of each holder of Senior
Indebtedness of the Company to execute, verify, deliver and file any proofs of
claim relating to the Notes which any holder of such Senior Indebtedness may at
any time require in order to prove and realize upon any rights or claims
pertaining to the Notes and to effectuate the full benefit of the subordination
contained herein. Upon failure of any Holder of Notes to file the required proof
or proofs of claim prior to 30 days before the expiration of the time to file
claims in such proceeding, each holder of Senior Indebtedness of the Company is
hereby irrevocably appointed by such Holder to be such Holder's agent to file
the appropriate claim or claims and if such holder of Senior Indebtedness elects
at its sole discretion to file such claim or claims (i) to accept or reject any
plan of reorganization or arrangement on behalf of such Holder, and (ii) to
otherwise vote such Holder's claim in respect of the Notes in any manner deemed
appropriate for the benefit and protection of the holders of the Senior
Indebtedness of the Company.
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6.3. Rights of Holders of Senior Indebtedness Unimpaired. No right of any
holder of any Senior Indebtedness to enforce subordination as herein provided
shall at any time or in any way be affected or impaired by any failure to act on
the part of the Company or the holders of Senior Indebtedness, or by any
noncompliance by the Company with any of the terms, provisions and covenants of
this Note, regardless of any knowledge thereof that any such holder of Senior
Indebtedness may have or be otherwise charged with.
6.4. Effects of Event of Default. The Company agrees, for the benefit of
the holders of Senior Indebtedness, that in the event that any Note is declared
due and payable before its maturity because of the occurrence of an Event of
Default, the Company will give prompt notice in writing of such happening to the
holders of Senior Indebtedness.
6.5. Company's Obligations Unimpaired. The provisions of this Section 6 are
solely for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand, and the Holders of Notes on the other hand, and
nothing herein shall impair, as between the Company and the Holders of Notes,
the obligation of the Company which is unconditional and absolute, to pay the
principal, premium, if any, and interest on the Notes in accordance with the
Securities Purchase Agreement and the terms of the Notes, nor shall anything
herein prevent any Holder of Notes from exercising all remedies otherwise
permitted by applicable law or under the Securities Purchase Agreement or the
Notes upon the occurrence of an Event of Default, subject to the rights of the
holders of Senior Indebtedness as herein provided for.
6.6. Subrogation.
(a) Upon the indefeasible payment in full in cash of all amounts payable
under or in respect of the Senior Indebtedness, the rights of the Holder shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Company made on such Senior
Indebtedness (until this Note shall be paid in full or converted as provided
herein); and for the purposes of such subrogation, no distributions in respect
of such Senior Indebtedness of any cash, property or securities to which the
Holder would be entitled except for the provisions of this Section 6, and no
payment pursuant to the provisions of this Section 6 to such holders of Senior
Indebtedness by the Holder, shall, as between the Company, its creditors other
than such holders of Senior Indebtedness and the Holder, be deemed to be a
payment by the Company to or on account of such Senior Indebtedness, it being
understood that the provisions of this Section 6 are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness, on the one
hand, and the Holder, on the other hand.
(b) If any payment or distribution to which the Holder would otherwise have
been entitled but for the provisions of this Section 6 shall have been applied,
pursuant to the provisions of this Section 6, to the payment of all amounts
payable under the Senior Indebtedness, then and in such case, the Holder shall
be entitled to receive from such holders of Senior Indebtedness at the time
outstanding any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount sufficient to pay all amounts payable under
or in respect of the Senior Indebtedness in full in cash.
SECTION 7. INTERPRETATION.
7.1. Definitions.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Securities Purchase Agreement.
"Accrued Interest" to a particular date (the "Applicable Date") means (i)
all interest accrued but not paid on this Note pursuant to Section 1.2, accrued
to the Applicable Date, provided that if a Change in Control or Event of Default
occurs at any time on or prior to the Due Date, Accrued Interest payable on the
date of the Change in Control or Event of Default shall be deemed to include all
interest on the entire amount of the Notes outstanding on the date of the Change
in Control or Event of Default which have not been previously paid but which
otherwise would accrue through and including the Due Date (assuming that all
interest was paid solely in additional Notes rather than cash), which interest
shall be deemed to have been accelerated, recalculated and paid on their
respective Interest Payment Dates, in each case payable solely in additional
Notes; provided, however, that with respect to any Holder of this Note, no such
interest shall be deemed to have been accelerated,
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recalculated or paid in connection with a Change in Control in the event such
Holder has not elected, in connection with such Change in Control, to have all
of its Notes either (i) redeemed by the Company pursuant to Section 3 or (ii)
converted pursuant to Section 4.
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated by
the Commission under the Exchange Act.
"Applicable Conversion Rate" has the meaning ascribed thereto in Section
4.1(b).
"Associate" shall have the meaning set forth in Rule 12b-2 promulgated by
the Commission under the Exchange Act.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto.
"Beneficially Own" with respect to any securities means having "beneficial
ownership" of such securities (as determined pursuant to Rule 13d-3 under the
Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
"Blockage Notice" has the meaning ascribed thereto in Section 6.1(e).
"Board" and "Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which commercial banks in the City of New York are authorized or obligated by
law or executive order to close.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing person.
"Capitalized Lease Obligation" of any Person means and includes, as of any
date as of which the amount thereof is to be determined, the amount of the
liability capitalized or disclosed (or which should be disclosed) in a balance
sheet of such Person in respect of a Capitalized Lease of such Person.
"Capitalized Lease" means, with respect to any Person, any lease or any
other agreement for the use of property which, in accordance with generally
accepted accounting principles, should be capitalized on the lessee's or user's
balance sheet.
"Change in Control" means any of the following:
(a) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act, a "Group"), other than the
Company, or any of its wholly owned Subsidiaries or any Investor or Excluded
Group, of Beneficial Ownership of 35% or more of the combined voting power or
economic interests of the then-outstanding Voting Securities (a "Control
Interest"); provided, however, that (i) any transfer of Notes or shares of
Series B Preferred Stock or other securities from any Investor or Excluded Group
will not result in a Change in Control unless such transfer is pursuant to a
Reorganization Transaction, merger proposal or tender offer in respect of the
Company which has been approved by (or participated in by) the Board of
Directors of the Company or by a majority of the Voting Securities, and (ii) in
no event shall the conversion of any or all of the Notes in accordance with the
terms of this Note constitute a Change in Control; or
(b) there is a change in a majority of the members of the Board within 12
months of an "election contest" (as defined in Rule 14a pursuant to the Exchange
Act) relating to the election of persons not recommended by the Board of
Directors at the time of the first public announcements of such election contest
and in which a Person not an Affiliate of the Investor or any Related Person
obtained valid proxies or consents to effect such change; or
(c) the approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the Voting Securities immediately prior to such
reorganization, merger or consolidation do
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not, following such reorganization, merger or consolidation, Beneficially Own
more than 50% of the combined voting power of the then-outstanding Voting
Securities resulting from such reorganization, merger or consolidation;
(d) the sale or other disposition of assets representing 50% or more of the
assets of the Company in one transaction or series of related transactions; or
(e) the disposition by the Company of any of its interest in the Joint
Venture to a third party that is not a Subsidiary of the Company (other than a
disposition to Purchaser or its Affiliates) except as otherwise permitted under
the Joint Venture Partnership Agreement;
provided, that the occurrence of any event identified in subparagraphs (a)
through (e) above that would otherwise be treated as a Change in Control shall
not constitute a Change in Control hereunder if the Required Holders, by vote
duly taken, shall so determine.
"Change in Control Redemption Price" has the meaning ascribed thereto in
Section 3.1(a).
"Class A Common Stock" means the Class A Common Stock, par value $0.01 per
share, of the Company.
"Class B Common Stock" means the Class B Common Stock, par value $0.01 per
share, of the Company.
"Class C Common Stock" means the Class C Common Stock, par value $0.01 per
share of the Company.
"Closing" means the closing of the purchase of the Series B Preferred Stock
and the Note pursuant to the Securities Purchase Agreement.
"Closing Price" per share of Common Stock on any date shall be the last
sale price, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, in either case as reported on the Nasdaq Small Cap
Market or the Nasdaq National Market or in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or American Stock Exchange, as the case
may be, or, if the Common Stock is listed or admitted to trading on the New York
Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on any national securities exchange, the last quoted sale
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Stock is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors and reasonably acceptable to the Required
Noteholders.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock and the Class B Common Stock
and the Class C Common Stock or, if there shall no longer be separate classes,
the common stock, par value $0.01 per share, of the Company.
"Company" has the meaning ascribed thereto in the recitals and includes all
Subsidiaries of the Company.
"Company EBITDA" has the meaning ascribed thereto in Section 2.1.
"Conversion Price" shall initially be equal to $4.00 in principal amount of
this Note per share of common stock, subject to adjustment as provided in
Section 4.1(c).
"Conversion Value" per Note shall be an amount equal to the principal
amount plus all Accrued Interest thereon to the date of conversion or
redemption, as the case may be.
"Current Market Price" per share of Common Stock on any date means the
average of the Closing Prices of a share of Common Stock for the five
consecutive Trading Days selected by the Company commencing not less than 10
Trading Days nor more than 20 Trading Days before the date in question. If on
any such Trading Day the Common Stock is not quoted by any organization referred
to in the definition of Closing Price, the Current Market Price of the Common
Stock on such day shall be determined by agreement between the Company and the
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Required Noteholders, provided that if such agreement is not reached within 10
Business Days, such Current Market Price shall be determined as set forth in
Section 3.1(a).
"Default Interest" has the meaning ascribed thereto in Section 1.4.
"Due Date" has the meaning ascribed thereto in the recitals.
"EBITDA" means, with respect to any person for any period, the sum without
duplication, determined on a consolidated basis, of such person's (a) net income
(or net loss), (b) net interest expense, (c) income tax expense, (d)
depreciation expense and (e) amortization expense, determined in accordance with
generally accepted accounting principles consistently applied.
"EBITDA Target" has the meaning ascribed thereto in Section 2.1.
"Event of Default" means each of the happenings or circumstances enumerated
in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such successor
federal statute.
"Excluded Group" means any Group in which (A) the Voting Securities either
Beneficially Owned by such Group after the applicable acquisition or
Beneficially Owned by such Group and being transferred by such Group, as the
case may be, multiplied by (B) the percentage of the Investor's interest in the
Beneficial Ownership of such Group, represent a Control Interest.
"Excluded Issuances" has the meaning ascribed thereto in Section
4.1(c)(ii).
"Fair Market Value" has the meaning ascribed thereto in Section 3.1(a).
"Guarantee" by any Person means all obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of any Person guaranteeing, or in effect guaranteeing, any
Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation and (y)
to maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of such Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the outstanding amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Holder" means, at any time of reference, a Person in whose name a Note is
registered in the Note Register at such time.
"Indebtedness" means, with respect to any Person, (i) all obligations of
such Person for borrowed money, or with respect to deposits or advances of any
kind, (ii) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (iii) all obligations of such Person under conditional
sale or other title retention agreements relating to property purchased by such
Person including sale leasebacks, (iv) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (other than
accounts payable to suppliers and similar accrued liabilities incurred in the
ordinary course of business and paid in a manner consistent with industry
practice), (v) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any lien or security interest on property owned or acquired by such Person
whether or not the obligations secured thereby have been assumed,
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(vi) all Capitalized Lease Obligations of such Person, (vii) all Guarantees of
such Person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Interest Payment Date" means March 31, June 30, September 30 and December
31.
"Interest Period" means the period from the Issuance Date to the first
Interest Payment Date (but without including such Interest Payment Date) and,
thereafter, each Interest Payment Date to the next following Interest Payment
Date (but without including such later Interest Payment Date).
"Investment Banking Firm" has the meaning ascribed thereto in Section
3.1(a).
"Investor" means the Purchaser, and such other persons as are included
within the definition of Investor in the Investor Agreement by virtue of Section
4.1(f) of the Investor Agreement.
"Investor Agreement" means the Investor Agreement by and among the Company
and the Purchaser dated [ ], 2000.
"Investor Designee" has the meaning ascribed thereto in section 3.1 of the
Investor Agreement.
"Issuance Date" means the original date of issuance of the Notes to the
Investors.
"Joint Venture" has the meaning ascribed thereto in the Securities Purchase
Agreement.
"Joint Venture Partnership Agreement" has the meaning ascribed thereto in
the Securities Purchase Agreement.
"Measurement Date" means, for purposes of Section 4.1(c)(ii), (i) in the
case of an offering of rights, warrants or options to all or substantially all
of the holders of the Common Stock or any other issuance contemplated by such
Section where a record date is fixed for the determination of stockholders
entitled to participate in such issuance, such record date and (ii) in all other
cases, the Business Day immediately preceding the date of issuance of shares of
Common Stock (or options, rights, warrants or other securities convertible into
or exchangeable for shares of Common Stock) contemplated by such Section.
"Note Holder Conversion Notice" has the meaning ascribed thereto in Section
4.1(e).
"Note" and "Notes" have the meanings ascribed thereto in Section 1.7.
"Original Investment Amount" means the sum of $30,000,000.
"Outstanding" means when used with reference to the Notes at a particular
time, all Notes theretofore issued as provided in the Securities Purchase
Agreement, except (i) Notes theretofore reported as lost, stolen, damaged or
destroyed, or surrendered for transfer, exchange or replacement, in respect to
which replacement Notes have been issued, (ii) Notes theretofore paid in full,
and (iii) Notes theretofore canceled by the Company, except that, for the
purpose of determining whether Holders of the requisite principal amount of
Notes have made or concurred in any waiver, consent, approval, notice or other
communication under this Agreement, Notes registered in the name of, or
Beneficially Owned by, the Company or any Subsidiary of any thereof, shall not
be deemed to be outstanding.
"Payment Blockage Period" has the meaning ascribed thereto in Section
6.1(e).
"PIK Note" has the meaning ascribed thereto in Section 1.3.
"Purchaser" has the meaning ascribed thereto in Section 1.7.
"Registration Rights Agreement" means that registration rights agreement
entered into between the Company and Investor dated [ ],
2000.
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"Related Person" means, with respect to any person, (A) any Affiliate of
such person, (B) any investment manager, investment advisor or partner of such
person or an Affiliate of such person, and (C) any investment fund, investment
account or investment entity whose investment manager, investment advisor or
general partner is such person or a Related Person of such person.
"Reorganization Transaction" means: (i) any merger, consolidation,
recapitalization, liquidation or other business combination transaction
involving the Company; (ii) any tender offer or exchange offer for any
securities of the Company; or (iii) any sale or other disposition of assets of
the Company or any of its Subsidiaries in a single transaction or in a series of
related transactions in each of the foregoing cases constituting individually or
in the aggregate 50% or more of the assets or Voting Securities (as applicable)
of the Company.
"Required Noteholders" means the Holders of at least a majority of the
combined value of the aggregate principal amount of the Notes Outstanding on the
record date for such vote or, if no such record date is established, on the date
any written consent of Holders is solicited.
"Required Holders" means the holders of Notes or shares of Series B
Preferred Stock representing a majority of the combined (i) aggregate principal
amount of the Notes Outstanding and (ii) aggregate stated amount of the Series B
Preferred Stock outstanding, on the record date for such vote or, if no such
record date is established, on the date any written consent of such holders is
solicited, in each case excluding Notes or shares of Series B Preferred Stock
then owned by the Company or any of its Affiliates.
"Rights Plan" means the Shareholder Rights Agreement, dated as of July 8,
1999, between the Company and American Stock Transfer and Trust Company, as
Rights Agent, and any successor shareholder rights plan of a similar nature.
"Securities Purchase Agreement" has the meaning ascribed thereto in Section
1.7.
"Senior Indebtedness" means any Indebtedness of the Company approved by the
Board of Directors the terms of which provide that such Indebtedness will rank
senior to the Notes as to payment distributions and distributions upon
liquidation, winding-up and dissolution of the Company; provided, that in no
event shall Senior Indebtedness include intercompany Indebtedness obligations
and/or receivables.
"Series B Preferred Stock" means the Series B Preferred Stock, par value
$0.01 per share, of the Company.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person. Subsidiary shall also
specifically include Interstate Hotels, LLC and Northridge Holdings, Inc.
"Surviving Person" means the continuing or surviving Person of a merger,
consolidation or other corporate combination, the Person receiving a transfer of
all or a substantial part of the properties and assets of the Company, or the
Person consolidating with or merging into the Company in a merger, consolidation
or other corporate combination in which the Company is the continuing or
surviving Person, but in connection with which the Notes or Common Stock of the
Company is exchanged, converted or reinstated into the securities of any other
Person or cash or any other property; provided, however, if such Surviving
Person is a direct or indirect Subsidiary of a Person, the parent entity also
shall be deemed to be a Surviving Person.
"Taxes" means any federal, state, county, local or foreign taxes, charges,
fees, levies or other assessments, including all net income, gross income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any Governmental
Entity, and includes any interest and penalties (civil or criminal) on or
additions to any such taxes.
"Threshold Amount" has the meaning ascribed thereto in Section 2.1.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is quoted, listed or admitted to trading is
open for the transaction of business or, if the Common Stock is not quoted,
listed or admitted to trading on any national securities exchange (including the
NASDAQ), any day other than a Saturday, Sunday, or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
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"Transaction" has the meaning ascribed thereto in Section 4.1(d).
"Transaction Documents" has the meaning ascribed thereto in Section 2.1(b).
"Voting Securities" means (i) any securities entitled, or which may be
entitled, to vote generally in the election of directors of the Company, (ii)
any securities, including the Note and the Series B Preferred Stock, convertible
or exercisable into or exchangeable for such securities (whether or not the
right to convert, exercise or exchange is subject to the passage of time or
contingencies or both), or (iii) any direct or indirect rights or options to
acquire any such securities; provided, that unexercised options granted pursuant
to any employment benefit or similar plan and rights issued pursuant to any
shareholder rights plan shall be deemed not to be Voting Securities.
"Wyndham Redemption Agreement" means the Conversion and Redemption
Agreement among PAH-Interstate Holdings, Inc, Wyndham International, Inc.,
Northridge Holdings, Inc, Interstate Hotels, LLC and Interstate Hotels
Corporation, dated August [ ], 2000.
7.2. Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Note, and any consolidation or other
accounting computation required to be made pursuant to this Note, and the
construction of any definition in this Note containing a financial term, shall
be determined or made, as the case may be, in accordance with GAAP, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Note.
7.3. Severability. Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid, but if any provision of
this Note is held to be invalid or unenforceable in any respect, such invalidity
or unenforceability shall not render invalid or unenforceable any other
provision of this Note.
7.4. Headings. The headings of the sections of this Note have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Note.
7.5. Nouns and Pronouns. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and vice
versa.
SECTION 8. MISCELLANEOUS.
8.1. Payment. If the date on which any payment under this Note is required
to be made occurs on a day other than a Business Day, such payment shall be due
and payable on the next succeeding Business Day.
8.2. Successors and Assigns. This Note shall bind and inure to the benefit
of the Company and the Holder and the respective successors, permitted assigns,
heirs and personal representatives of the Company and the Holder except that the
Company may not assign its rights and obligations under this Note to any person
without the prior written consent of the Holder. In addition, and whether or not
any express assignment has been made, the provisions of this Note which are for
the Holder's benefit are also for the benefit of, and enforceable by, any
subsequent holder of the Conversion Shares.
8.3. Entire Agreement. This Note and the Securities Purchase Agreement
(including the Schedules and Exhibits hereto and thereto) contain the entire
understanding of the parties with respect to the transactions contemplated
hereby and thereby.
8.4. Notices and Other Communications. All notices, requests, consents and
other communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by facsimile,
nationally recognized overnight courier or first class registered or certified
mail, return receipt
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<PAGE> 208
requested, postage prepaid, addressed to such party at the address set forth
below or such other address as may hereafter be designated in writing by such
party to the other parties:
(i) if to the Company, to:
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
Pittsburgh, Pennsylvania 15220
Facsimile: (412) 920-5733
Attention: General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
32nd Floor
New York, New York 10022
Facsimile: (212) 755-7306
Attention: Robert A. Profusek, Esq.
(ii) if to the Purchaser, 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
Facsimile: (212) 526-7006
Attention: Joseph Flannery
with a copy to:
Continental Gencom Holdings
c/o Mr. K. Alibhai and Mr. S. Weiser
3250 Mary Street
Suite 500
Miami, FL 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
Facsimile: (305) 789-3395
Attention: Richard E. Schatz, Esq.
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Facsimile: (212) 859-8582
Attention: Jonathan Mechanic, Esq.
All such notices, requests, consents and other communications shall be
deemed to have been given at the time delivered if delivered in person, when
receipt is confirmed if sent by facsimile, on the next Business Day if timely
delivered to a nationally recognized overnight courier and five days after being
deposited in the U.S. mail, postage prepaid.
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<PAGE> 209
8.5. Amendments. No amendment or waiver of any provision of this Note, nor
consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Required
Noteholders and then such amendment, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No
alteration of the amount of principal or interest due under this Note shall in
any event be effective unless the same shall be in writing and signed by the
Holder or this Note.
8.6. Governing Law. THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT REFERENCE TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
8.7. Submission to Jurisdiction. The Company and the Holder agree that
irreparable damage would occur and that the Holder would not have any adequate
remedy at law in the event that any of the provisions of this Note were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Holder shall be entitled to an injunction or
injunctions to prevent breaches of this Note and to enforce specifically the
terms and provisions of this Note in any federal court located in the State of
Maryland or in Maryland state court, this being in addition to any other remedy
to which they are entitled at law or in equity. In addition, the Company (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Maryland or any Maryland state court in the event any
dispute arises out of this Note or any of the transactions contemplated by this
Note, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (c)
agrees that it will not bring any action relating to this Note or any of the
transactions contemplated by this Note in any court other than a federal court
sitting in the State of Maryland or a Maryland state court.
8.8. Service of Process. Nothing herein shall affect the right of the
Holder to serve process in any other manner permitted by Law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
8.9. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS NOTE OR ANY OF
THE OTHER TRANSACTION DOCUMENTS
8.10. Enforcement Costs. The Holder shall be entitled to reasonable
attorney's fees and disbursements incurred by such Holder in enforcing its
rights under this Note or the Securities Purchase Agreement in the event the
Company shall default in its performance hereof or thereof.
INTERSTATE HOTELS CORPORATION
By:
------------------------------------
Name:
Title:
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Exhibit 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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<PAGE> 214
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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<PAGE> 215
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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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> 224
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> 225
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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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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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> 228
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:
<PAGE> 229
Exhibit 8
EXECUTION COPY
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "AGREEMENT"), dated as of August 31,
2000, by and among Thomas F. Hewitt, J. William Richardson and Kevin P. Kilkeary
(each a "STOCKHOLDER" and together the "STOCKHOLDERS") and CGLH Partners I LP
and CGLH Partners II LP, each a Delaware limited partnership (together the
"INVESTOR").
WITNESSETH
WHEREAS, contemporaneously with the execution hereof, Interstate Hotels
Corporation, a Maryland corporation (the "COMPANY"), is entering into an amended
and restated employment agreement with each of the Stockholders pursuant to
which each Stockholder shall become, upon the closing of the transactions
contemplated by the Securities Purchase Agreement to be entered into between the
Company and the Investor (the "PURCHASE AGREEMENT"), the record holder of the
number of shares of Series B Convertible Preferred Stock, par value $.01 per
share (the "SERIES B PREFERRED STOCK") set forth beside such Stockholder's name
below, and which Series B Preferred Stock shall vest over time; and
WHEREAS the Stockholders and the Investors desire to enter into certain
agreements with each of the Stockholders with respect to the Series B Preferred
Stock to be granted to the Stockholders.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations herein set forth, the parties agree as follows:
Section 1. Irrevocable Proxy. Each Stockholder as the record holder and
beneficial owner of the below indicated shares of Series B Preferred Stock,
hereby revokes all previous proxies and appoints CGLH Partners III LP, a
Delaware limited partnership, as representative of the Investor, as the true and
lawful proxy and attorney-in-fact for the undersigned to vote on any and all
matters at any annual or special meeting of the holders of Series B Preferred
Stock and to exercise any and all rights to execute written consent or approval
and any similar right granted to all of the below indicated shares of Series B
Preferred Stock of such Stockholder and all of the shares of Series B Preferred
Stock hereafter acquired by such Stockholder pursuant to Section 2(a) of the
Articles Supplementary to the Charter of the Company designating the Series B
Preferred Stock (together such "STOCKHOLDER'S SHARES").
Each Stockholder authorizes and directs the proxy holder to file this
proxy with the Secretary of the Company and authorizes the proxy holder, and any
subsequent proxy holder, to substitute another person as proxy holder and to
file the substitution instrument with the Secretary of the Company.
This proxy is irrevocable and is coupled with an interest in that it is
given in consideration of the agreements herein between each Stockholder and the
Investor, and is being delivered as an inducement for the Investor to allow such
Stockholder to participate with the
<PAGE> 230
Company and affiliates of the Investor in an investment partnership. As such
this proxy may not be revoked without the written consent of the Investor. Each
Stockholder agrees not to attempt to vote such Stockholder's Shares, execute
consents in respect thereof or grant proxies or assign rights to vote with
respect to such Stockholder's Shares to any other party
Section 2. Tag-Along Rights. (a) Subject to Section 2(d) below in the
event that the Investor proposes to Sell (a "DISPOSITION") any Series B
Preferred Stock to a person other than an affiliate or associate of the Investor
or a Related Transferee (as such term is defined in the Investor Agreement,
which appears as Exhibit C to the Securities Purchase Agreement) and other than
to the Stockholders (a "PURCHASER"), in any private sale or any registered
public offering, then the Investor shall provide notice (a "PROPOSAL NOTICE") of
such proposed Disposition to each of the Stockholders no later than five (5)
days prior to the proposed closing of such Disposition. Each Proposal Notice
shall describe in reasonable detail the terms of the proposed Disposition,
including, without limitation, (i) the identity and address of the Purchaser,
(ii) the number of shares of Series B Preferred Stock proposed to be Sold by the
Investor (the "SALE STOCK"), (iii) the proposed amount and form of consideration
to be paid by the Purchaser to the Investor and (iv) any other material terms or
conditions of such proposed Disposition, and shall include a statement to the
effect that the Purchaser has been informed of the Tag-Along Rights (as defined
herein) and an acknowledgment by the Purchaser indicating that it has been so
informed and agrees to such terms. A copy of the Proposal Notice shall promptly
be sent to the Company.
(b) Subject to Sections 2(c) and 2(d) below, with respect to
each proposed Disposition each Stockholder shall have the right (the "TAG-ALONG
RIGHT") to require the Purchaser to purchase from such Stockholder and at the
Price Per Share (as defined below) all or a portion of the number of shares of
Series B Preferred Stock which represents the number of shares of Series B
Preferred Stock obtained by multiplying (A) a fraction, the numerator of which
is the number of shares of Sale Stock and the denominator of which is the number
of shares of Series B Preferred Stock Beneficially Owned by the Investor and any
Group of which it is a member as of the date of the Proposal Notice, times (B)
the number of shares of Series B Preferred Stock Beneficially Owned by such
Stockholder as of the date of the Proposal Notice.
(c) If the Purchaser declines to purchase all of the shares of
Series B Preferred Stock of the Investor and the Stockholders to be sold
pursuant to Section 2(b) hereof, each Stockholder shall have the right to
require the Purchaser to purchase from such Stockholder and at the Price Per
Share all or a portion of the number of shares of Series B Preferred Stock equal
to the number obtained by multiplying (A) a fraction, the numerator of which is
the number of shares of Series B Preferred Stock represented by the Sale Stock
and the denominator of which is the number of shares of Series B Preferred Stock
Beneficially Owned by the Investor and any Group of which it is a member and the
Stockholders as of the date of the Proposal Notice, times (B) the number of
shares of Series B Preferred Stock Beneficially Owned by the Stockholder as of
the date of the Proposal Notice. The number of shares sold by the Investor shall
be reduced to the extent any of the Stockholders choose to exercise their rights
under this Section 2(c).
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(d) To exercise his Tag-Along Right such Stockholder shall
provide to the Investor written notice of his election to exercise such right
(an "ACCEPTANCE") no later than three (3) days after his receipt of a Proposal
Notice (such three day period, the "ACCEPTANCE PERIOD"). After the lapse of the
Acceptance Period within which the Investor shall not have received an
Acceptance from the Stockholder, the Investor may consummate, without the
participation of the Stockholder, a Sale to one or more purchasers, for
consideration equal to or less than the purchase price specified in the Proposal
Notice and on terms no more favorable to the Investor than those specified in
the Proposal Notice.
(e) All Sales of shares of Series B Preferred Stock to the
Purchaser by any Stockholder shall be on the same terms, including
representations, warranties and covenants, as apply to the Investor in respect
of the Sale of the Sale Stock.
(f) For purposes of this Agreement:
(i) "PER SHARE PRICE" means an amount equal to the quotient
obtained by dividing (A) the aggregate purchase price to be paid by the
Purchaser in respect of the Sale Stock by (B) the number of shares of Sale
Stock;
(ii) "SELL" means to sell, or in any other way directly or
indirectly transfer, assign, distribute, pledge, encumber or otherwise dispose
of, either voluntarily or involuntarily, and the terms "SALE," "SELLING" and
"SOLD" shall have meanings correlative to the foregoing; and
(iii) "GROUP" has the meaning as such term is used in Rule
13(d) of the Rules under the Securities Exchange Act of 1934.
Section 3. Drag-Along Rights. (a) If the Investor proposes to Sell to
any person or group of persons (other than an affiliate of the Investor or a
Related Transferee and other than the Stockholders) (collectively, a "BUYER"),
in a bona fide arm's-length transaction or series of transactions, including by
way of a purchase agreement, tender offer, merger or other business combination
transaction or otherwise, 10% or more (such percentage the "SALE PERCENTAGE") of
the shares of Series B Preferred Stock beneficially owned by the Investor and
any Group of which it is a member (any such transaction being referred to herein
as a "MAJOR Sale"), then the Investor may elect to require each Stockholder to
Sell the Sale Percentage of shares of Series B Preferred Stock beneficially
owned by such Stockholder concurrently with such Major Sale to such Buyer at the
purchase price per share, and upon the terms and conditions of, and with the
same representations, warranties and covenants as apply to the Investor in, the
Major Sale.
(b) The rights set forth in this Section 3(a) shall be
exercised by giving notice (the "SECTION 3 NOTICE") to each Stockholder setting
forth in detail the terms of the proposed Sale, including without limitation,
(i) the identity and address of the Buyer, (ii) the number of shares of Series B
Preferred Stock proposed to be Sold by the Investor (the "SALE STOCK"), (iii)
the proposed amount and form of consideration to be paid by the Buyer to the
Investor and (iv) any other material terms or conditions of such proposed
Disposition, and shall include a
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statement to the effect that the Buyer has been informed of the Drag-Along
Rights (as defined herein) and an acknowledgment by the Buyer indicating that it
has been so informed and agrees to such terms, and (vi) the proposed closing
date of the Major Sale, which proposed date (the "SECTION 3 CLOSING DATE") shall
be the later of (A) a business day not less than 15 or more than 60 days after
such Section 3 Notice is delivered to the Stockholders or (B) the fifth business
day following the receipt of all regulatory or third party consents and
approvals, if any, applicable to such Sale.
(c) Each Stockholder will (i) take all such actions as may be
requested by Investor to carry out the purposes of this Section 3, and (ii)
execute all documents containing such terms and conditions, including, without
limitation, representations and warranties with respect to (x) matters of title
to such Stockholder's securities and (y) the due authorization (or capacity) and
due and valid execution and delivery by such Stockholder of documentation in
respect of the Major Sale, as those executed by the Investor, and shall execute
and deliver such other instruments and agreements as may be requested by the
Investor. Each Stockholder shall be severally obligated to join on a pro-rata
basis (based on such Shareholder's share of the aggregate proceeds paid in such
Major Sale) in any indemnification that is to be provided in connection with
such Major Sale, other than any such indemnification that relates specifically
to a particular Stockholder, such as indemnification with respect to
representations and warranties given by an Stockholder regarding such
Stockholder's title to and ownership of shares of Series B Preferred Stock or
valid authorization by such Stockholder with respect to such Major Sale.
Section 4. Purchase upon Termination.At any time after the
termination of any Stockholder's employment with the Company the Investor shall
have the right (but not the obligation) to acquire all of such Stockholder's
Shares (the "PURCHASE INTEREST"), for an amount equal to the fair market value
of such Purchase Interest as of the Purchase Interest Closing Date. The
following procedure shall apply to such proposed acquisition:
(a) The Investor shall give notice (the "PURCHASE NOTICE") to
such Stockholder specifying the fair market value for such Stockholder's
Purchase Interest as of the date of such Purchase Notice, determined by the
Investor in good faith. For a period of 10 days after the Purchase Notice has
been given, the Investor and such Stockholder shall negotiate in good faith to
mutually agree on such fair market value (the "PURCHASE PRICE").
(b) On a date mutually agreed by the Investor and the
Stockholder, but in no event later than 20 days after the Purchase Notice has
been given (such date, the "PURCHASE CLOSING DATE"), the Investor shall pay to
the Stockholder the Purchase Price against the delivery of certificates or other
instruments evidencing such shares of Series B Preferred Stock duly endorsed for
transfer.
(c) Any dispute as to the fair market value of the Purchase
Interest shall be submitted for final determination to a mutually acceptable
investment banking firm of national reputation familiar with the valuation of
companies in the hospitality and lodging industry (an
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"INVESTMENT BANKING FIRM"). In the event that the Investor and the Stockholder
cannot agree on a mutually acceptable Investment Banking Firm within 10 business
days, the Investor, on the one hand, and the Stockholder, on the other hand,
shall each select one Investment Banking Firm, which two Investment Banking
Firms shall jointly make such determination within 20 business days after the
date of the Purchase Notice, or, if such two Investment Banking Firms are unable
to agree on such determination, the two Investment Banking Firms shall, by the
end of the 20th business day after the date of the Purchase Notice, select a
third Investment Banking Firm and notify such third Investment Banking Firm in
writing (with a copy to the Investor and the Stockholder) of their respective
determinations of the fair market value of the Purchase Interest following which
such third Investment Banking Firm shall, within 15 business days after the date
of its selection, notify the Investor and the Stockholder in writing of its
selection of one or the other of the two original determinations of the fair
market value of the Purchase Interest, which determination shall be final and
binding on the Investor and the Stockholder. The costs of the Investment Banking
Firms shall be borne by the Investor.
Section 5. Notices.Any notice required or permitted to be
given or made to a person under this Agreement shall be in writing and shall be
deemed given or made: (i) when delivered in person, by overnight mail using a
nationally recognized courier service at his address as shown below or by
facsimile transmission (with call-back confirmation) at the facsimile number for
such person shown below or (ii) three days after being placed in a United States
Postal Service mailbox when sent by United States registered or certified mail
to such person at his address as shown below.
(a) if to Thomas F. Hewitt, to
Thomas F. Hewitt
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
Pittsburgh, Pennsylvania 15220
Facsimile: (412) 937-8051
(b) if to J. William Richardson, to
J. William Richardson
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
Pittsburgh, Pennsylvania 15220
Facsimile: (412) 937-8051
(c) if to Kevin P. Kilkeary, to
Kevin P. Kilkeary
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
Pittsburgh, Pennsylvania 15220
Facsimile: (412) 937-8051
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<PAGE> 234
(d) if to the Investor, 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
Facsimile: (212) 526-7006
Attention: Joseph Flannery
with a copy to:
Continental Gencom Holdings
3250 Mary Street
Suite 500
Miami, Florida 33133
Facsimile: (305) 445-4255
Attention: Mr. K. Alibhai and Mr. S. Weiser
with a copy to:
Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Facsimile: (305) 789-3395
Attention: Richard E. Schatz, Esq.
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Facsimile: (212) 859-8582
Attention: Jonathan Mechanic, Esq.
(e) if to the Company, to:
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
Pittsburgh, Pennsylvania 15220
Facsimile: (412) 920-5733
Attention: General Counsel
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<PAGE> 235
with a copy to:
Jones, Day, Reavis & Pogue
North Point,
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Facsimile: (216) 759-0212
Attention: Zachary Paris, Esq.
Any such address for notice may be amended by such person by giving notice to
all such other persons, in accordance with this Section.
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<PAGE> 236
SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ Thomas F. Hewitt
Number of Shares of -----------------------------
Series B Preferred Stock: 100,000 Thomas F. Hewitt
/s/ J. William Richardson
Number of Shares of -----------------------------
Series B Preferred Stock: 75,000 J. William Richardson
/s/ Kevin P. Kilkeary
Number of Shares of -----------------------------
Series B Preferred Stock: 50,000 Kevin P. Kilkeary
<PAGE> 237
SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT
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: /s/ Sherwood Weiser
---------------------------------
Name: Sherwood Weiser
Title: Authorized Signatory
By: LB INTERSTATE GP LLC
General Partner
By: PAMI LLC
its Sole Member
By: /s/ Joseph J. Flannery
----------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
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: /s/ Sherwood Weiser
---------------------------------
Name: Sherwood Weiser
Title: Authorized Signatory
By: LB INTERSTATE GP LLC
General Partner
By: PAMI LLC
its Sole Member
By: /s/ Joseph J. Flannery
---------------------------------
Name: Joseph J. Flannery
Title: Authorized Signatory
