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Exhibit 10.2
CONVERSION AND REDEMPTION AGREEMENT
This AGREEMENT FOR CONVERSION AND REDEMPTION is entered into as of the
31st day of August, 2000, by and among INTERSTATE HOTELS, LLC, a Delaware
limited liability company (the "Company"), PAH-INTERSTATE HOLDINGS, INC., a
Delaware corporation ("Wyndham"), WYNDHAM INTERNATIONAL, INC., a Delaware
corporation ("WII"), PATRIOT AMERICAN HOSPITALITY, INC., a Delaware corporation
("Patriot"), NORTHRIDGE HOLDINGS, INC., a Delaware corporation ("Northridge")
and INTERSTATE HOTELS CORPORATION, a Maryland corporation ("IHC").
RECITALS
A. Wyndham and Northridge constitute all of the Members of the Company,
pursuant to an Amended and Restated Limited Liability Company Agreement, dated
as of June 18, 1999 (the "LLC Agreement"). Northridge is the Managing Member of
the Company with a 45% membership interest in the Company. Wyndham is the
Non-Managing Member of the Company with a 55% membership interest in the Company
(the "Interest").
B. Wyndham and Northridge have agreed (i) to cause the Company to
distribute certain management agreement assets of the Company to Wyndham in
partial redemption of the Interest at closing, (ii) to convert a portion of the
Interest to a Preferred Interest (as hereinafter defined), and, (iii) to provide
for the subsequent redemption of the Preferred Interest and the Common Interest
(as hereinafter defined) pursuant to the terms and conditions hereinafter set
forth.
C. WII is the parent of Wyndham. WII is also the parent of Patriot,
which is a shareholder in IHC and has the right under IHC's Charter to designate
a member of IHC's Board of Directors (the "IHC Board"). In connection with and
as additional consideration for the conversion and redemption of Wyndham's
Interest pursuant to this Agreement, as more fully set
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forth herein, (i) WII and/or Patriot have agreed to cause its current
representative to the IHC Board to resign as of the Closing Date and to
relinquish its right to appoint a member of the IHC Board in the future and (ii)
each of Wyndham and Patriot has granted to IHC an option to acquire all of its
stock in IHC.
D. In order to accommodate the transactions described above, IHC and
Northridge have agreed to guaranty certain obligations of the Company and to
fund certain capital contributions to the Company, as more fully set forth in
this Agreement.
AGREEMENT
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, intending to be legally bound, the Company,
Wyndham, WII, Northridge and IHC hereby agree as follows:
1. Distribution of Management Agreements in Partial Redemption. On the
Closing Date (as defined below), Northridge as Managing Member of the Company
will cause the Company to distribute and assign to Wyndham or its affiliate, and
Wyndham or such affiliate will assume, the Company's interest (including rights
and obligations arising thereunder) as manager under the management agreements
with respect to the hotels identified on Exhibit 1-A to this Agreement
(collectively, the "Management Agreements") by executing an Assignment and
Assumption of Management Agreements in the form attached hereto as Exhibit 1-B
(the "Assignment of Management Agreements"). Wyndham, Northridge and the Company
agree that such distribution and assignment of the Management Agreements is in
partial redemption of its membership interest in the Company (the "Initial
Redemption"). The Initial Redemption shall be effected by execution and delivery
by Wyndham and the Company of an Assignment and Acceptance of Membership
Interest in the form attached hereto as Exhibit 1-C, modified to reflect
Wyndham's affiliate as assignee, if applicable. No termination fees, "make
whole" payments or similar fees or amounts shall be payable to or by the Company
or any other party as a result of such distribution and assignment of the
Management Agreements in partial redemption of the
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Interests, whether pursuant to the terms of the Management Agreements or any
other agreement to which the Company or any of its affiliates is a party. (The
interest of Wyndham in the Company remaining after the Initial Redemption is
sometimes referred to in this Agreement as the "Remaining Interest.")
2. Conversion of a Portion of the Remaining Interest to Preferred
Interest. On the Closing Date, a portion of the Remaining Interest shall be
converted into a preferred membership interest (the "Preferred Interest") with
rights and privileges as set forth in the Second Amended and Restated LLC
Agreement, a form of which is attached hereto as Exhibit 2 (the "Amended LLC
Agreement"). The parties agree that the Preferred Interest comprises forty-nine
percent (49%) of the total membership interests in the Company. (The balance of
the Remaining Interest, comprising one percent (1%) of the total membership
interests in the Company, is hereinafter referred to as the "Common Interest"
and shall have the rights and privileges set forth in the Amended LLC
Agreement.) IHC and Northridge hereby agree and guaranty for the benefit of
Wyndham that they shall cause capital contributions to be made to the Company in
order to fund payment of (i) the Preferred Redemption Amount to the extent the
Preferred Redemption Amount exceeds the amount of the Escrowed Funds and other
funds of the Company, and (ii) to fund quarterly distributions on the Preferred
Interest pursuant to the Amended LLC Agreement to the extent such required
distributions exceed the amounts available from the Company's operating cash
flow, and such obligation and guaranty of IHC and Northridge to cause such
capital contributions to be made to the Company shall not be affected in any
respect by an assignment of Northridge's membership interest in the Company to
an affiliate as permitted under the Amended LLC Agreement.
3. Redemption of the Preferred Interest. At any time on or subsequent
to July 1, 2001 (the date on which the Preferred Interest is so redeemed being
defined as the "Preferred Redemption Date"), Wyndham shall have the right to put
the Preferred Interest for redemption by
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the Company by giving written notice to such effect to the Company, and the
Company shall have the right to call for redemption of the entire Preferred
Interest by the Company by giving written notice to such effect to Wyndham, and
in either event, Northridge, as Managing Member of the Company, shall cause the
Company to redeem the entire Preferred Interest for Twelve Million Six Hundred
Eighty-One Thousand Eight Hundred Eighteen Dollars ($12,681,818) (the "Preferred
Redemption Amount"). The redemption of the Preferred Interest shall be completed
within five (5) business days of the exercise of such put or call right and
shall be effected by the execution by Wyndham and the Company of an Assignment
and Acceptance of Membership Interest in the form attached as Exhibit 3-D. Upon
delivery to the Escrow Agent by Wyndham of an executed Assignment and Acceptance
of Membership Interest in such form, the Company shall pay the Preferred
Redemption Amount to the Escrow Agent (as hereinafter defined) in the forms
outlined below, subject, however to the provisions of Section 40:
(a) A payment of Eight Million Two Hundred Fifty Thousand Dollars
($8,250,000.00) in the form of a release of the Escrowed Funds
(as defined below) to Wyndham and, to the extent such released
Escrowed Funds are less than $8,250,000, the balance shall be
paid in cash by wire transfer.
(b) A promissory note issued by the Company, in the form attached
hereto as Exhibit 3-A, payable to Wyndham, in the principal
amount of Seven Hundred Fifty Thousand Dollars ($750,000.00),
with a maturity date of July 1, 2002 and with interest at a
fixed rate of 9.75% (the "Note Rate") payable in quarterly
installments ("Promissory Note A"); and
(c) A promissory note issued by the Company, in the form attached
hereto as Exhibit 3-B, payable to Wyndham, in the principal
amount of Three Million Six Hundred Eighty One Thousand Eight
Hundred Eighteen Dollars ($3,681,818) with a maturity date of
July 1, 2004 and with interest at the Note Rate payable in
quarterly installments ("Promissory Note B" and, collectively
with Promissory Note A, the "Promissory Notes").
The Promissory Notes shall be guaranteed by IHC and Northridge pursuant to a
guaranty in the form attached hereto as Exhibit 3-C.
4. Creation of Escrow. In order to assure Wyndham that the Company will
have adequate liquidity to fund the cash portion of the Preferred Redemption
Amount if and when
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Wyndham or the Company exercise their respective rights to cause the redemption
of the entire Preferred Interest pursuant to Section 3 hereof, and to secure
payment of the cash portion of the Preferred Redemption Amount, on the Closing
Date the Company shall deposit with the Escrow Agent (as hereinafter defined)
cash in the amount of Seven Million Five Hundred Thousand Dollars ($7,500,000)
(the "Escrowed Funds"). The Escrowed Funds shall be held in an interest-bearing
account mutually acceptable to both the Company and Wyndham. All interest earned
on the Escrow Funds shall be deemed earned by and belong to the Company, but
shall be released from escrow and paid to Wyndham on behalf of the Company on a
quarterly basis and upon such payment shall be credited toward the Company's
obligation to make quarterly distributions with respect to the Preferred
Interest. On the Preferred Redemption Date, the Escrow Agent shall be required
to apply the Escrowed Funds (and any interest earned thereon which has not been
paid to Wyndham pursuant to the prior sentence) toward the cash portion of the
Preferred Redemption Amount pursuant to subsection 3(a) and, if applicable,
Section 40. Neither the Company, IHC, Northridge nor any of their affiliates
shall grant to any creditor any direct or indirect security interest, pledge,
security assignment or other interest in the Escrowed Funds or the escrow
agreement pursuant to which they are held.
5. Financial Covenants of the Company. Until the Preferred Redemption
Date, IHC agrees and covenants that it will maintain a minimum Net Worth (as
hereinafter defined) on a consolidated basis with its subsidiaries in accordance
with generally accepted accounting principles of not less than 1.75 multiplied
by Five Million One Hundred Eighty-One Thousand Eight Hundred Eighteen Dollars
($5,181,818) (representing the difference between the Preferred Redemption
Amount and the amount of Escrowed Funds). After the Preferred Redemption Date,
IHC agrees and covenants that it will maintain a minimum Net Worth of not less
than 1.75 multiplied by the aggregate outstanding balance from time to time due
to Wyndham under the Promissory Notes. "Net Worth" means (i) the value of all
tangible assets, including, without limitation, the cash proceeds from the
Securities Transaction (as hereinafter defined) but excluding the Escrowed
Funds, goodwill, contract rights and other intangibles, plus (ii) the amount of
funds
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which are available to be drawn by IHC or its subsidiaries on any credit
facility then in place with the Investor Group or its Affiliates or any
institutional lender without the requirement to post additional security or meet
material conditions which have not been satisfied, minus (iii) all liabilities
and debt (treating the preferred stock issued in connection with the Securities
Transaction (as hereinafter defined) and any other preferred stock as a
liability for this purpose). At all times until the redemption of the Preferred
Interest and the payment in full on the Notes, IHC agrees and covenants that all
of the assets owned by it from time to time, (including (x) assets owned from
time to time directly by IHC or its wholly-owned direct or indirect subsidiaries
or (y) interests held from time to time in other entities not wholly-owned by
IHC which own assets) will be owned by IHC or its wholly-owned direct or
indirect subsidiaries. The Company shall provide to Wyndham quarterly within
forty-five (45) business days of the end of each calender quarter financial
statements of the Company certified by the Chief Financial Officer of IHC as
accurate and complete in all material respects showing compliance with the
foregoing minimum net worth requirements. A default with respect to the
covenants in this Section 5, which is not cured within thirty (30) days
following written notice by Wyndham to IHC shall constitute an event of default
under this Agreement and the Notes.
6. Redemption of Common Interest. At any time on or subsequent to July
1, 2004 (the "Common Redemption Date"), Wyndham shall have the right to put the
Common Interest for redemption by the Company by giving written notice to such
effect to the Company, and the Company shall have the right to call for
redemption of the entire Common Interest by giving written notice to such effect
to Wyndham, and, in either event, Northridge, as Managing Member of the Company,
shall cause the Company to redeem the entire Common Interest for the Common
Redemption Amount (as hereinafter defined). The "Common Redemption Amount" shall
mean the lesser of (a) the product of (i) five (5) times the Company's net
income before interest, taxes, depreciation and amortization ("EBITDA") as
determined by the Company's independent
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accountants for the Company's fiscal year ending closest to December 31, 2003
and (ii) the percentage of membership interest represented by the Common
Interest or (b) Four Hundred Thirty-Two Thousand Eight Hundred Eighty-Three
Dollars ($432,883). The redemption of the entire Common Interest shall be
completed within five (5) business days of the exercise of such put or call
right and shall be effected by execution and delivery by Wyndham and the Company
of an Assignment and Acceptance of Membership Interests in the form attached
hereto as Exhibit 6 and payment by the Company to Wyndham of the Common
Redemption Amount. Immediately prior to the Common Redemption Date, the Company
shall have the right to admit one of Northridge's Affiliates as a member of the
Company on such terms as the Company and such Affiliate shall agree, as long as
such admission is effectively conditioned (to the reasonable satisfaction of
Wyndham) on the consummation of the redemption of the Common Interest by the
Company. IHC and Northridge hereby agree and guaranty for the benefit of Wyndham
that they shall cause capital contributions to be made to the Company in order
to fund payment of the Common Redemption Amount, to the extent the Common
Redemption Amount exceeds the amounts available from the Company's operating
cash flow, and such obligation and guaranty of IHC and Northridge to cause such
capital contributions to be made to the Company shall not be affected in any
respect by an assignment of Northridge's membership interest in the Company to
an affiliate as permitted under the Amended LLC Agreement. In connection with
the redemption of the Common Interests, the Company and Wyndham shall cooperate
in making any Hart-Scott-Rodino filing, if any, as may be deemed necessary under
the then applicable laws and regulations, and the Company and Wyndham shall each
pay one-half (1/2) of any filing fees in connection therewith.
7. Relinquishment of Board Seat. In consideration for the Initial
Redemption and the agreements set forth in this Agreement regarding the future
redemption of the Preferred Interest and the Common Interest, WII and Patriot
agree that, effective at the Closing, (i) WII and/or Patriot, as the case may
be, will deliver to IHC a Resignation of its designee/nominee on the IHC Board
as currently provided for in IHC's Charter, fully and duly executed and
effective
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immediately, which Resignation shall be in the form of Exhibit 7 hereto (the
"Resignation"); (ii) WII's and/or Patriot's (as the case may be) contractual
right to designate or nominate a member of the IHC Board shall be extinguished;
and (iii) WII and/or Patriot, as the case may be, shall approve and cast its
stockholder votes in favor of amendments of IHC's Charter to reflect the
extinguishment of WII's or Patriot's right to designate/nominate a member of the
IHC Board.
8. Option to Acquire Wyndham's IHC Stock. In consideration for the
Initial Redemption at Closing and the agreements set forth in this Agreement
regarding the future redemption of the Preferred Interest and the Common
Interest, Wyndham and Patriot each hereby grants to IHC or its designee the
option to acquire all, but not less than all, of the shares of stock in IHC
presently owned by Wyndham and Patriot at its Weighted Average Trading Price (as
hereinafter defined); provided, however, that unless such option is exercised
effective on the Closing Date under this Agreement, the purchase price shall not
be less than Three Dollars ($3.00) nor more than Four Dollars ($4.00) per share.
For example, assuming that the date of exercise is not on the Closing Date, if
on the date of exercise of the foregoing option the Weighted Average Trading
Price were $2.50 per share, then the price to be paid to Wyndham and Patriot for
their stock in IHC would be $3.00 per share, and if on such exercise date the
Weighted Average Trading Price were $4.50 per share, then the price to be paid
by IHC to Wyndham and Patriot for their stock in IHC would be $4.00 per share.
"Weighted Average Trading Price" means the average trading price of the common
stock of IHC during the ten (10) trading days immediately preceding the date on
which IHC or its designee gives notice to Wyndham and Patriot of the exercise of
the option described in this Section 8, weighted by trading volume. The
foregoing option shall be exercisable on or before ninety (90) days following
the Closing Date hereunder, by written notice from IHC or its designee to
Wyndham and Patriot. The purchase shall close five (5) business days after
delivery of the exercise notice and at the time of closing the shares of stock
in IHC shall be conveyed to IHC or its designee free and clear of all liens,
encumbrances and security interests of
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any kind; provided that Wyndham shall have the right to defer the closing date
for up to an additional forty (40) days in order to permit Wyndham and Patriot
to cause the shares of IHC to be released from the existing pledge to Chase
Manhattan Bank.
9. Consent to Amendment of IHC Bylaws. Wyndham and WII acknowledge
that, except as set forth in Section 17, the obligation of IHC and its
Affiliates to close the transaction contemplated by this Agreement is expressly
conditioned upon the closing of the issuance by IHC of convertible preferred
stock and convertible notes in the aggregate amount of Thirty Million Dollars
($30,000,000) (the "Securities Transaction") to, and the purchase of such stock
and notes by, an investment group led by Lehman Brothers (the "Investor Group"),
and that the closing of the Securities Transaction requires the amendment of
IHC's Bylaws to eliminate the rights of the Class B Director (as defined in the
Bylaws) and the Class C Director (as defined in the Bylaws) to approve the
creation of committees of the Board of Directors or the appointment or removal
of any member from such committee pursuant to Section 4.1 of the Bylaws. WII and
Wyndham, in their capacity as Class C Stockholders, (a) hereby consent to the
amendment to IHC's Bylaws in the form attached hereto as Exhibit 9, and (b)
hereby acknowledge that the Class C Director has voted in favor of such
amendment to the Bylaws in connection with the unanimous approval by the IHC
Board of Directors of the Securities Transaction and the documents to be
executed in connection therewith, in each case conditional on the closing of the
Securities Transaction.
10. Amended LLC Agreement; Discharge of Obligations Under LLC
Agreement. At the closing, Wyndham and Northridge shall execute and deliver the
Amended LLC Agreement in the form attached hereto as Exhibit 2 in order to
permit, among other things, all of the transactions contemplated by this
Agreement. Except as otherwise expressly set forth in this Agreement and the
Amended LLC Agreement, the Initial Redemption on the Closing Date and the
agreements set forth in this Agreement with respect to the redemption of the
Preferred Interest on the Preferred Redemption Date and of the Common Interest
on the Common Redemption Date
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shall constitute a complete satisfaction and discharge of all of the Company's
and/or Northridge's obligations and/or liabilities to Wyndham under the LLC
Agreement, as specified in the Amended LLC Agreement; provided, however, that
such obligations and liabilities shall be replaced by, and to the extent of,
those created under this Agreement or under the Amended LLC Agreement including,
without limitation, the Company's obligation to make distributions with respect
to the Preferred Interest, the Company's obligations under the Promissory Notes,
Northridge's and the Company's obligations to redeem the Preferred Interest and
the Common Interest as set forth in this Agreement, and the Company's or
Northridge's liability as a result of a breach of a representation or warranty
contained in this Agreement. Except as expressly set forth in this Agreement,
the Initial Redemption, and the redemption of the Preferred Interest and the
Common Interest at the times set forth above, shall constitute a complete
satisfaction and discharge of all of Wyndham's obligations and/or liability to
Northridge or the Company under the LLC Agreement; provided, however, that the
foregoing shall not absolve Wyndham from any liability it may have pursuant to
this Agreement or the Amended LLC Agreement, including, without limitation, its
obligation to tender the entire Preferred Interest or the entire Common Interest
for redemption if called by the Company, at the times and under the conditions
set forth herein, or its liability as a result of a breach of a representation
or warranty contained in this Agreement.
11. Treatment of Intercarp Transaction. In connection with the
preparation of the Company's Federal Income Tax Return for 1999, the parties
agree that the Company shall elect not to take installment sale treatment under
Section 453 of the Internal Revenue Code, as amended, with respect to the gain
associated with the sale by the Company to F&H Realty LLC ("F&H") of its
partnership interest in Intercarp Limited Partnership, a Delaware limited
partnership, a portion of the purchase price of which was taken by the Company
in the form of a Secured Promissory Note, dated June 18, 1999, in the principal
amount of $5,750,000 from F&H and F&H GP Corporation, its general partner, as
makers, to the Company, as payee.
12. Continuation of Obligations Under Distribution Agreement. The
Closing of this transaction shall not terminate, modify or affect in any respect
the obligations, if any, of
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Wyndham, Northridge, Patriot, WII, the Company, or IHC pursuant to the
Distribution Agreement dated as of June 18, 1999 by and among such parties (the
"Distribution Agreement"), including, without limitation, the Patriot/Wyndham
Obligations set forth in Schedule 5.2.1(b) of the Distribution Agreement, the
indemnities among the parties pursuant to Section 5.2 of the Distribution
Agreement, the provisions of Section 11.2 relating to the obligation to pay
taxes and the provisions of Section 11.7 relating to cooperation with tax
audits.
13. Wyndham's Representations and Warranties. Wyndham represents and
warrants to Northridge, as of the date of this Agreement, as follows:
(a) Wyndham is duly authorized by all necessary corporate
action to execute and deliver this Agreement and to
complete the transactions contemplated herein in
accordance with its terms;
(b) No consent, approval or authorization (except such
consent as has already been obtained) or filing with
any governmental agency, is required for Wyndham to
consummate the transactions contemplated hereunder;
(c) Subject to obtaining the consents described in
Section 26, neither the execution and delivery of
this Agreement nor the consummation of the
transactions contemplated hereby will constitute a
default under the terms of any agreement or court
order to which Wyndham is a party or by which the
Interest is bound;
(d) Wyndham owns the Interest free and clear of all lien,
pledge, security interest, adverse claim,
restriction, covenant, option or right of any third
person to purchase, or other encumbrance;
(e) This Agreement has been duly executed and delivered
by Wyndham and constitutes the valid and binding
obligation of Wyndham, enforceable against Wyndham in
accordance with its terms;
(f) There is no litigation pending or, to Wyndham's
knowledge, threatened in writing which in any manner
does or could adversely affect Wyndham's legal
capacity to consummate the transactions contemplated
by this Agreement or Wyndham's title to the Interest;
(g) Wyndham has paid all income or personal property
taxes which are due and payable with respect to the
Interest;
(h) The Interest constitutes Wyndham's entire legal and
beneficial interest in the Company (except for
Wyndham's or Patriot's indirect interest in the
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Company by virtue of their ownership of IHC stock),
and, upon consummation of transactions contemplated
in this Agreement, except as expressly provided in
this Agreement and the Amended LLC Agreement, Wyndham
will have no further right, title or interest in the
Interest, the Company or IHC (except for such stock
in IHC owned by Wyndham or Patriot);
(i) Wyndham has not made any agreement or taken any
action as a result of which Northridge or the Company
would be obligated to pay any person or entity a
broker's fee or commission as a result of the
transactions contemplated by this Agreement;
(j) Each of the hotels that is the subject of a
Management Agreement is owned in fee simple by, or
ground leased to, an Affiliate of Wyndham or WII
(each, a "Wyndham Affiliate"). (For purposes of this
Agreement "Affiliate" means as to any entity, an
individual or entity that directly or indirectly
Controls (as hereinafter defined), is controlled by,
or is under common Control with such entity.
"Control" means the possession, directly or
indirectly, of the power to direct or cause the
direction of the management and policies of an
entity, whether through ownership of voting
securities or interests, by contract, or otherwise.
(k) Each applicable Wyndham Affiliate has consented to
the transfer of the Management Agreement with respect
to the hotel property listed on Exhibit 26 owned or
ground leased by such Wyndham Affiliate.
(l) Wyndham is the legal and beneficial owner of 60,639
Class C shares of IHC stock representing, to
Wyndham's knowledge, approximately one percent (1%)
of the common stock of IHC, and such shares of IHC
stock are not subject to any encumbrances or options
(other than the option to IHC granted hereunder).
The foregoing representations and warranties shall be deemed remade at
the Closing.
14. WII's and Patriot's Representations and Warranties. WII and Patriot
represent and warrant to IHC and Northridge, as of the date of this Agreement,
as follows:
(a) Each of WII and Patriot is duly authorized by all
necessary corporate action to execute and deliver
this Agreement and to complete the transactions
contemplated herein in accordance with its terms;
(b) No consent, approval or authorization (except such
consent as has already been obtained)
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or filing with any governmental agency, is required
for Wyndham or Patriot to consummate the transactions
contemplated hereunder;
(c) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated
hereby will constitute a default under the terms of
any agreement or court order to which WII or Patriot
is a party;
(d) This Agreement has been duly executed and delivered
by WII and Patriot and constitutes the valid and
binding obligation of WII and Patriot, enforceable
against WII and/or Patriot in accordance with its
terms;
(e) There is no litigation pending or, to WII's or
Patriot's knowledge, threatened in writing which in
any manner does or could adversely affect WII's or
Patriot's legal capacity to consummate the
transactions contemplated by this Agreement; and
(f) Patriot is the legal and beneficial owner of 181,916
Class A shares of IHC stock representing, to WII's
and Patriot's knowledge, approximately three percent
(3%) of the common stock of IHC, and such shares of
IHC stock are not subject to any encumbrances or
options other than a pledge of such stock to Chase
Manhattan Bank as administrative agent for certain
lenders as security for a credit facility provided by
such lenders to WII and certain of its affiliates and
other than the option to IHC granted hereunder.
Patriot represents and warrants that there is not
currently an Event of Default under any of the terms
of such credit facility and that under the terms of
such credit facility Patriot is entitled to release
of such pledge upon the sale of such shares of IHC
stock, conditioned only on WII making a request
therefor and related certifications in accordance
with the provisions of the documents governing such
credit facility and there being no default under such
credit facility.
The foregoing representations and warranties shall be deemed remade at
the Closing.
15. Northridge's Representations and Warranties. Northridge represents
and warrants to Wyndham and WII, as of the date of this Agreement, as follows:
(a) Northridge is duly authorized by all necessary
corporate action to execute and deliver this
Agreement and to complete the transactions
contemplated herein in accordance with its terms;
(b) Subject to obtaining the consents described in
Section 26, no consent, approval or authorization
(except such consent as has already been obtained),
or filing with any governmental agency, is required
for Northridge to consummate the transactions
contemplated hereunder;
(c) Neither the execution and delivery of this Agreement
nor the consummation of the transaction contemplated
hereby will constitute a default under the terms of
any agreement or court order to which Northridge is a
party or by which its property is bound;
(d) This Agreement has been duly executed and delivered
by Northridge and constitutes the
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valid and binding obligation of Northridge,
enforceable against Northridge in accordance with its
terms;
(e) There is no litigation pending or, to Northridge's
knowledge, threatened in writing which in any manner
does or could adversely affect Northridge's or the
Company's legal capacity to consummate the
transactions contemplated by this Agreement; and
(f) Northridge has not made any agreement or taken any
action as a result of which Wyndham would be
obligated to pay any person or entity a broker's fee
or commission as a result of the transactions
contemplated by this Agreement.
(g) Since June 18, 1999 (the effective date of the LLC
Agreement), none of the Existing Contracts or
Existing Subsidiary Contracts (each as defined in the
LLC Agreement) have been terminated or amended except
as disclosed on the schedule attached hereto as
Exhibit 15.
The foregoing representations and warranties shall be deemed remade at
the Closing.
16. IHC's Representations and Warranties. IHC represents and warrants
to Wyndham and WII, as of the date of this Agreement, as follows:
(a) IHC is duly authorized by all necessary corporate
action to execute and deliver this Agreement and to
complete the transactions contemplated herein in
accordance with its terms;
(b) No consent, approval or authorization (except such
consent as has already been obtained) or filing with
any governmental agency, is required for IHC to
consummate the transactions contemplated hereunder;
(c) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated
hereby will constitute a default under the terms of
any agreement or court order to which IHC is a party;
(d) This Agreement has been duly executed and delivered
by IHC and constitutes the valid and binding
obligation of IHC, enforceable against IHC in
accordance with its terms;
(e) There is no litigation pending or, to IHC's
knowledge, threatened in writing which in any manner
does or could adversely affect IHC's legal capacity
to consummate the transactions contemplated by this
Agreement; and
(f) The only material conditions to the closing of the
Securities Transaction (other than performance by IHC
and the Investor Group of their respective
obligations under the documents governing the
Securities Transaction) are (i) the approval by the
stockholders of IHC, (ii) receipt of a consent from
Holiday Hospitality Franchising, Inc., (iii)
obtaining certain NASDAQ
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approvals relating to the Securities Transaction; and
(iv) the absence of material adverse effect since the
date of the Securities Purchase Agreement with
respect to the Securities Transaction. IHC covenants
to keep Wyndham informed from time to time on any
developments in the Securities Transaction, including
any amendments to the deal and progress (or lack of
progress) in obtaining consents and meeting
conditions.
The foregoing representations and warranties shall be deemed remade at
the Closing.
17. Closing Date. This transaction shall close ("Closing Date") on the
same day as the closing of the Securities Transaction, except as expressly
provided below. The closing of the Securities Transaction is anticipated to
occur on or before October 16, 2000, but is subject to extension by IHC until
November 30, 2000, whereupon either IHC or the Investor Group has the option to
terminate the Securities Transaction. In the event that the Securities
Transaction is terminated by either IHC or the Investor Group prior to January
16, 2001, then IHC shall give notice of such termination to Wyndham within two
(2) business days of such termination, whereupon either Northridge or Wyndham
may elect to close this transaction, notwithstanding such termination, by
delivering written notice (the "Closing Notice") to the other parties on or
before that date which is five (5) business days after Wyndham's receipt of such
notice and this transaction shall close within ten (10) business days thereafter
under the alternative terms set forth in Section 40 hereof. In the event that by
the end of the business day on January 16, 2001 (a) the Securities Transaction
has not closed, and (b) neither Northridge nor Wyndham has delivered the Closing
Notice, Wyndham or Northridge may elect at any time thereafter to terminate this
Agreement by delivering written notice to the other parties. In the event of the
termination by either Wyndham or Northridge of this Agreement, the LLC Agreement
shall remain in full force and effect and this Agreement shall be of no further
force and effect, except for the agreement set forth in Section 11 hereof.
18. Accounting at Closing. Within thirty (30) days following the
Closing Date, Northridge shall provide to Wyndham an accounting of all Net
Operating Cash Flow and Net Capital Proceeds (each as defined in the LLC
Agreement) of the Company through the day immediately preceding the Closing Date
in form reasonably acceptable to Wyndham and certified
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by the Chief Financial Officers of IHC and of Northridge, as Managing Members of
the Company, as true and accurate in all material respects. To the extent
Wyndham accepts such accounting, Northridge shall distribute Wyndham's share of
any such Net Operating Cash Flow and Net Capital Proceeds with respect to such
accepted accounting to Wyndham in accordance with the LLC Agreement as in effect
immediately prior to Closing. Wyndham shall have the right to review the books
and records of the Company with respect to any aspect of such accounting and to
cause an audit of such accounting. Such audit shall be at Wyndham's expense
unless it discloses that Northridge's accounting would have resulted in an
underpayment to Wyndham of more than three percent (3%), in which event the cost
of such audit shall be borne by Northridge. Such audit, if desired by Wyndham,
shall be completed before Wyndham accepts the accounting with respect to
questioned matters and receives payment on account of such questioned matters.
No interest shall accrue on such payment during the pendency of such audit. Upon
receipt of such payment, Wyndham's audit rights with respect to such books and
records shall terminate, except as expressly provided in the Amended LLC
Agreement.
19. Escrow Agent. Chicago Title Insurance Company, Pittsburgh,
Pennsylvania, shall serve as the escrow agent for this transaction (the "Escrow
Agent") pursuant to closing escrow instructions reasonably satisfactory to
Wyndham and Northridge.
20. Closing Procedures.
(a) On or before the Closing Date, Wyndham shall deliver to the Escrow
Agent the following documents executed by Wyndham in multiple counterparts:
(i) Assignment of Management Agreements;
(ii) Initial Redemption Assignment;
(iii) Resignation; and
(iv) Amended LLC Agreement.
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(b) On or before the Closing Date, the Company shall deliver to the
Escrow Agent the following documents executed by the Company in multiple
counterparts:
(i) Assignment of Management Agreements;
(ii) Initial Redemption Assignment; and
(iii) cash in the amount of the required Escrowed Funds
pursuant to Section 4 hereof.
(c) On or before the Closing Date, Northridge shall deliver to the
Escrow Agent the Amended LLC Agreement executed by Northridge in multiple
counterparts.
(d) When the Escrow Agent has received from Wyndham, the Company and
Northridge, respectively, all of the deliveries required under Sections 20(a),
20(b) and 20(c) above, the Escrow Agent shall close the transaction (the
"Closing") by:
(i) delivering to Wyndham, by overnight courier, the
Assignment of Management Agreements and a counterpart
of the Amended LLC Agreement;
(ii) delivering to the Company, by overnight courier, the
Initial Redemption Assignment;
(iii) delivering to IHC, by overnight courier, the
Resignation; and
(iv) delivering to Northridge, by overnight courier, a
counterpart of the Amended LLC Agreement.
21. Indemnities by Wyndham. Following the Closing, Wyndham shall
indemnify, defend and hold Northridge and IHC harmless with respect to all loss,
cost, liability and expense arising (a) as a result of any breaches by Wyndham
or WII of any representations and warranties of Wyndham or WII pursuant to this
Agreement, or (b) under the Management Agreements subsequent to the Closing
Date.
22. Indemnities by Northridge. Following the Closing, Northridge shall
indemnify, defend and hold Wyndham or WII harmless with respect to all loss,
cost, liability or expense arising as a result of (a) any breaches by Northridge
or IHC of any representations and warranties of Northridge pursuant to this
Agreement or (b) Northridge's ownership of any portions of the Interest or
Northridge's operation of the Company subsequent to the Closing Date, provided
that
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the foregoing indemnity does not constitute a guaranty by either the Company or
Northridge with respect to the profitability of the Company or its ability to
make distributions (other than the obligation and guaranty of IHC and Northridge
to make or cause to be made capital contributions to the Company to fund
distributions payable on the Preferred Interest and to pay the Preferred
Redemption Amount and the Common Redemption Amount). IHC agrees to contribute
timely cash capital to Northridge in order that Northridge can make the capital
contributions to the Company described in the foregoing parenthetical.
23. Transition of Management; Liquor Licenses. The management fees
under the Management Agreements shall be paid through the effective date of
termination or assignment in accordance with the provisions of the Management
Agreements except that no termination or other fees shall be payable as a result
of the transactions contemplated in this Agreement notwithstanding the
provisions of such Management Agreements. The parties agree to cooperate, but at
no out-of-pocket cost to the Company, IHC or Northridge, in connection with any
required transfer of liquor licenses to Wyndham or any affiliate of Wyndham
designated by Wyndham or any required amendment to liquor licenses with respect
to the hotels listed on Exhibit 1-A both before and after the Closing Date in
the same manner as set forth in Section 6.3.3 of the Distribution Agreement,
mutatis mutandis, in order to ensure to the maximum extent possible that all
bars and lounges and other liquor facilities at such hotels remain open and
operating during the period following the Closing Date.
24. Defaults and Remedies. In the event any party defaults in its
obligations hereunder, the other parties shall have such rights and remedies as
may be available at law or in equity or as specified in the Promissory Notes.
25. Lien Search. It shall be a condition of the Company's and
Northridge's obligation to close this transaction that a personal property lien
search (Form UCC-11) reveal no lien or encumbrance on the Interest (a "Defect").
Promptly following the execution of this Agreement,
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the Company shall order a lien search at the Company's expense. If any Defect
shall be discovered as the result of such lien search, the Company shall
promptly notify Wyndham and Wyndham shall have up to twenty (20) days to cure
the Defect to the Company's satisfaction. In the event that Wyndham fails to
cure the Defect at the conclusion of said twenty (20) days, the Company may
elect, in its sole discretion (a) to close the transaction with a reduction in
the Consideration, in the amount(s) of the obligation underlying any such
Defect(s) or (b) to extend the Closing Date for an additional period designated
by the Company, but in no event more than (45) days, to give Wyndham time to
eliminate the Defect; or (c) to terminate this Agreement. If the Company elects
to terminate this Agreement such uncured Defect shall be deemed to constitute a
default by Wyndham under this Agreement.
26. Consents. Wyndham shall use best efforts to obtain each of the
mortgagee consents described in Exhibit 26 within forty-five (45) days following
the date hereof to the transfer of the Management Agreements as provided herein
or, alternatively, to an amendment to the Management Agreements which provides
for (i) a thirty (30) day termination right by Wyndham (or its applicable
affiliate) without any termination payment, "make whole" payment or similar
payment, and (ii) reduced management fees of $5,000 per month per hotel (and
elimination of any incentive fees) plus pass-through of out-of-pocket expenses
as provided in the Management Agreements. It shall be a condition to Wyndham's,
WII's and Patriot's obligations under this Agreement that all such mortgagee
consents are obtained. Wyndham shall not be required to make any payments or
undertake any additional liabilities in order to obtain such mortgagee consents
other than the payment of legal costs and other out-of-pocket expenses of such
mortgagees. Wyndham and Northridge shall each use commercially reasonable
efforts to obtain each of the franchisor consents described in Exhibit 26, with
Northridge assuming primary responsibility for obtaining the franchisor consents
listed on Exhibit 26 from Promus Hotels, Inc. and Hilton Inns, Inc.; provided,
however, that any assignment fees or amounts paid or payable in connection with
obtaining such consents shall be subject to Wyndham's approval in its sole and
absolute discretion. All out-of-pocket costs associated with obtaining the
foregoing consents shall be borne by
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Wyndham. In the event that any of the franchisor consents is not obtained prior
to the Closing Date, the transaction shall close in accordance with the terms of
this Agreement, except that the Management Agreement(s) with respect to the
Hotel(s) with respect to which consent has not been obtained shall not be
assigned on the Closing Date and the Company shall continue to manage such
hotel(s) pursuant to the terms of the applicable Management Agreement(s),
provided that such Management Agreement(s) will be amended to provide for (a) a
thirty (30) day termination right by Wyndham without any termination payment,
"make-whole" or similar payment, and (b) management fees shall be reduced to
$5,000 per month per hotel plus pass-through of out-of-pocket expenses. Any
amendment of Management Agreements pursuant to this Section 26 shall be treated
for purposes of this Agreement as a distribution of such Management Agreements
pursuant to Section 1 hereof and shall not affect the Initial Redemption at
Closing.
27. Notices. All notices, consents or waivers required or permitted in
this Agreement shall be in writing and be deemed to have been duly given on the
earlier of (a) when delivered to the recipient personally; (b) 72 hours after
being mailed by registered or certified mail, return receipt requested, postage
prepaid, addressed to the recipient as set forth below; or (c) upon
electronically verified transmission by telecopier, as long as a confirming copy
is sent by overnight courier service which provides evidence of delivery or
attempted delivery. A party may change its address for notice by such notice.
If to Wyndham, Patriot c/o Wyndham International, Inc.
or WII: 1950 Stemmons Freeway, Suite 6001
Dallas, TX 75201
Attn: Leslie Ng
Facsimile No.: 212/355-7772
With a copy to: c/o Wyndham International, Inc.
1950 Stemmons Freeway, Suite 6001
Dallas, TX 75201
Attn: General Counsel
Facsimile No.: 214/863-1986
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If to Northridge, the c/o Interstate Hotels Corporation
Company or IHC Foster Plaza 10
680 Andersen Drive
Pittsburgh, PA 15220-8126
Attn: Chairman and CEO
Facsimile No.: 412/937-8051
With a copy to: c/o Interstate Hotels Corporation
Foster Plaza 10
680 Andersen Drive
Pittsburgh, PA 15220-8126
Attn: General Counsel
Facsimile No.: 412/937-3116
28. Entire Agreement. This Agreement, including the Exhibits and other
documents referred to herein, contains the entire agreement between the parties
pertaining to the subject matter hereof and fully supersedes all prior
agreements and understandings between the parties pertaining to such subject
matter. No change in or amendment to this Agreement shall be valid unless set
forth in writing and signed by all of the parties after the execution of this
Agreement.
29. Expenses. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated hereby are consummated, each party
will pay its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the transactions contemplated
hereby.
30. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of Delaware.
31. Counterparts. This Agreement may be executed in several
counterparts, and all such executed counterparts shall constitute the same
agreement. It shall be necessary to account for only one such counterpart in
proving this Agreement.
32. Headings, Gender and Number. The section headings used in this
Agreement are intended solely for convenience of reference and shall not
amplify, limit, modify or otherwise be used in the interpretation of any
provision of this Agreement. The masculine, feminine or neuter gender and the
singular or plural number shall be deemed to include the others whenever the
context so indicates or requires.
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33. Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
34. Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
35. No Third Party Beneficiary. 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 it is not the intention of the
parties to confer third-party beneficiary rights upon any other person.
36. Binding Agreement; Assignment. The provisions of this Agreement
shall be binding upon and inure to the benefit of the successors and permitted
assigns of the parties hereto. No party shall be permitted to assign any of
their respective rights or obligations under this Agreement without the prior
written consent of the other parties. Notwithstanding the foregoing, either
Wyndham or Northridge may cause documents executed and delivered on the Closing
Date to be executed in favor of an Affiliated nominee by giving written
direction to such effect to the other parties, on which such other parties may
conclusively rely, but no such direction shall affect any of the rights,
interests or obligations of Wyndham or Northridge under this Agreement.
37. Severability. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable, the remainder of
this Agreement shall nonetheless remain in full force and effect.
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38. Exhibits. References in this Agreement to Exhibits mean the
exhibits attached hereto, all of which are incorporated by reference into this
Agreement.
39. Further Documents. Each party will, whenever and as often as it
shall be reasonably requested by the other party, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such further
instruments and documents as may reasonably be necessary in order to carry out
the terms and conditions of this Agreement and to complete the transactions,
herein contemplated and shall do any and all other acts as may be reasonably
requested in order to carry out the intent and purpose of this Agreement.
40. Alternative Redemption Terms. In the event that either Northridge
or Wyndham exercise their respective rights under Section 17 hereof to close
this transaction notwithstanding the termination of the Securities Transaction,
the terms of the redemption shall be as set forth in prior sections of this
Agreement except as follows:
(a) At the Closing, the Company shall increase the amount of the
Escrowed Funds from the amount required under Section 4 to an
amount equal to the Preferred Redemption Amount.
(b) On the Preferred Redemption Date, the Preferred Redemption
Amount shall be paid by the Company in full in cash. The
Escrowed Funds shall be applied toward this obligation.
(c) Since no Promissory Notes will be issued by the Company
pursuant to Section 3, there will be no guaranties of the
Promissory Notes by IHC or Northridge.
(d) Since the Preferred Redemption Amount is being secured in full
pursuant to subparagraph (a) above and since the Preferred
Redemption Amount is being paid in full in cash on the
Preferred Redemption Date, there will be no financial
covenants pursuant to Section 5.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
INTERSTATE HOTELS, LLC
By: Northridge Holdings, Inc.,
its Managing Member
By: /s/ Timothy Q. Hudak
Name: Timothy Q. Hudak
Title: Senior Vice President
PAH-INTERSTATE HOLDINGS, INC.
By: /s/ Fred J. Kleisner
Name: Fred J. Kleisner
Title:
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ Fred J. Kleisner
Name: Fred J. Kleisner
Title:
WYNDHAM INTERNATIONAL, INC.
By: /s/ Fred J. Kleisner
Name: Fred J. Kleisner
Title: President and Chief Executive Officer
NORTHRIDGE HOLDINGS, INC.
By: /s/ Timothy Q. Hudak
Name: Timothy Q. Hudak
Title: Senior Vice President
INTERSTATE HOTELS CORPORATION
By: /s/ Timothy Q. Hudak
Name: Timothy Q. Hudak
Title: Senior Vice President