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Exhibit 10.6
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
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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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(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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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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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
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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