Exhibit 99.3
DISTRIBUTION AND CONTRIBUTION AGREEMENT
OF
CGLH PARTNERS II LP
DATED AUGUST 17, 2004
TABLE OF CONTENTS
Page
1. Capital Contributions and Preference Amounts.........................2
2. Distribution of Shares to LB GP and LB LP............................2
3. Contribution to Capital of Subsidiary Partnerships...................2
4. Distribution of Subsidiary Partnerships Interests....................2
5. Closing..............................................................3
6. Conditions to Closing................................................3
7. Commencement of Dissolution of the Partnership.......................3
8. Restrictions on Transfer of Distributed Shares; Compliance with Law..3
9. Tax Treatment........................................................3
10. Notices..............................................................4
11. No Inconsistent Agreements...........................................4
12. Further Assurances...................................................4
13. Expenses.............................................................4
14. Severability.........................................................4
15. Governing Law........................................................4
16. Specific Performance; Injunction.....................................5
17. Successors and Assigns...............................................5
18. Amendments...........................................................5
19. Headings.............................................................5
20. Nouns and Pronouns...................................................5
21. Entire Agreement.....................................................5
22. No Third-Party Beneficiaries.........................................5
23. Counterparts.........................................................6
Schedule 1 Undistributed Capital and Preference Amounts..................11
Schedule 2 Number of IHR Shares to be Received...........................12
Schedule 3 Subsidiary Partnership Interests to be Received...............13
Exhibit A Form of Agreement of Limited Partnership.......................14
Exhibit B Form of Stockholders Agreement.................................15
Exhibit C Form of Amended and Restated Registration Rights Agreement.....16
DISTRIBUTION AND CONTRIBUTION AGREEMENT
OF
CGLH PARTNERS II LP
AGREEMENT, made as of August 17, 2004, by and among LB Interstate
GP LLC, a Delaware limited liability company ("LB GP") and MK/CG-GP LLC, a
Delaware limited liability company ("MK/CG-GP" and together with LB GP, the
"GENERAL PARTNERS") and LB Interstate LP LLC, a Delaware limited liability
company ("LB LP") and MK/CG-LP LLC, a Delaware limited liability company
("MK/CG-LP" and together with LB LP, the "LIMITED PARTNERS"; the Limited
Partners and the General Partners, together, the "PARTNERS"), and KFP/LB
IHR II, LP, a Delaware limited partnership; KA/LB IHR II, LP, a Delaware
limited partnership; CG Ventures/LB IHR II, LP, a Delaware limited
partnership; SMW/LB IHR II, LP, a Delaware limited partnership; DEL/LB IHR
II, LP, a Delaware limited partnership; and PS/LB IHR II, LP, a Delaware
limited partnership (each a "SUBSIDIARY PARTNERSHIP" and together the
"SUBSIDIARY PARTNERSHIPS").
WHEREAS, the General Partners are all of the general partners and
the Limited Partners are all of the limited partners of CGLH Partners II
LP, a Delaware limited partnership (the "PARTNERSHIP");
WHEREAS, the Partners desire to dissolve and liquidate (the
"LIQUIDATION") the Partnership in accordance herewith;
WHEREAS, the only assets of the Partnership (other than cash) are
the Partnership's shares of common stock (the "IHR SHARES") of Interstate
Hotels & Resorts, Inc., a Delaware corporation (the "COMPANY");
WHEREAS, in connection with the Liquidation, the Partnership will
distribute a portion of the IHR Shares in kind directly to LB GP and LB LP;
WHEREAS, the Partnership, CGLH Partners I LP, a Delaware limited
partnership ("CGLH I" and together with the Partnership, the "CGLH
ENTITIES") and the beneficial owners of the CGLH Entities have formed the
Subsidiary Partnerships (each with an Agreement of Limited Partnership
substantially in the form attached hereto as Exhibit A) for the purpose of
holding, and will contribute, all of the Partnership's IHR Shares not being
distributed to LB GP and LB LP and certain IHR Shares now held by CGLH II;
WHEREAS, after the contribution of the Partnership's IHR Shares
to the Subsidiary Partnerships, in connection with the Liquidation the
General Partners wish to distribute all of their interests in the
Subsidiary Partnerships in kind in accordance with the agreement of the
parties hereto;
WHEREAS, on the date hereof the partners of CGLH I are entering
into an agreement on substantially identical terms to those contained in
this Agreement (the "CGLH I AGREEMENT");
WHEREAS, the Subsidiary Partnerships wish to enter into a
Stockholders Agreement as contemplated hereby;
WHEREAS, the parties hereto wish to enter into a Registration
Rights Agreement as completed hereby;
WHEREAS, the Limited Partners wish to approve the transactions
contemplated by this Agreement,
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties agree as follows:
1. Capital Contributions and Preference Amounts. The Partners
acknowledge that Schedule 1 attached hereto correctly sets forth, as of the
date hereof, and as of the Closing Date (as defined below), the
Undistributed Capital Amounts, Undistributed Class A Preference Amounts and
Undistributed Class B Preference Amounts of each of the Partners under the
Partnership Agreement.
2. Distribution of Shares to LB GP and LB LP. On the Closing Date
and immediately prior to the distribution by the Partnership of the
interests in the Subsidiary Partnerships, pursuant to Section 4 hereof, the
Partnership shall distribute IHR Shares to LB GP and IHR Shares to LB LP in
partial redemption of their interest in the Partnership as set forth in
Schedule 2, which shall represent LB GP's and LB LP's Class B Preference
Amount.
3. Contribution to Capital of Subsidiary Partnerships. On the
Closing Date, the Partnership shall transfer all of its IHR Shares not
being distributed to LB GP and LB LP, pursuant to section 2 above to the
Subsidiary Partnerships in the respective amounts set out in Schedule 2
hereto, in each case in exchange for a general partnership interest and a
limited partnership interest of such Subsidiary Partnerships as set forth
in Schedule 2.
4. Distribution of Subsidiary Partnerships Interests. Immediately
following the transfer pursuant to section 3 above, the Partnership shall
distribute to the Partners all such interests in the Subsidiary
Partnerships and the interests of MK/CG-GP and MK/CG-LP in each of the
Subsidiary Partnerships shall be further transferred to the persons set out
in Schedule 3 hereto on behalf of MK/CG-GP and MK/CG-LP. LB GP, LB LP and
each of the persons set out on Schedule 3 hereto shall have an interest in
the respective Subsidiary Partnerships as set forth in the limited
partnership agreement for each such Subsidiary Partnership.
5. Closing. The closing of the transactions contemplated hereby
shall occur on the date hereof or on such later date as the parties may
agree, following satisfaction or waiver of the conditions to closing. The
date on which the closing shall occur is herein called the "CLOSING DATE".
6. Conditions to Closing.The closing of the transactions
contemplated hereby is subject, at the option of each General Partner, to
the execution and delivery by all appropriate parties of:
(a) the Stockholders Agreement substantially in the form attached
hereto as Exhibit B (the "STOCKHOLDERS AGREEMENT"); and
(b) the Amended and Restated Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "REGISTRATION
RIGHTS AGREEMENT").
7. Commencement of Dissolution of the Partnership. As soon as is
reasonably practicable after the Closing Date, the General Partners shall
take all actions as are necessary to commence the termination and
dissolution of the Partnership in accordance with Section 13.1(b)(3) of the
Amended and Restated Agreement of Limited Partnership of the Partnership
and ss. 17-801 of the Delaware Revised Uniform Limited Partnership Act, as
amended.
8. Restrictions on Transfer of Distributed Shares; Compliance
with Law.
(a) Each Subsidiary Partnership acknowledges that any IHR Shares
it may receive pursuant to this Agreement will be subject to resale
restrictions under the Stockholders Agreement, and may be subject to
additional resale restrictions in the hands of an affiliate of the Company.
In this connection, each party hereto represents that it is familiar with
Rule 144 under the Securities Act of 1933, as presently in effect (the
"SECURITIES ACT"), and understands the resale limitations imposed thereby
and by the Securities Act.
(b) Each Subsidiary Partnership agrees that it will comply with
all applicable provisions of US federal securities laws, including without
limitation, the requirements to timely file reports pursuant to Section 16
and Regulation 13D of the Securities Exchange Act of 1934, as amended.
9. Tax Treatment. The parties hereto intend for the distributions
under Sections 2 and 4 hereof to qualify as distributions from an
"investment partnership" to an "eligible partner" within the meaning of
Section 731 of the Internal Revenue Code of 1986, as amended, and hereby
agree to cause the Partnership to report such distributions consistent with
such treatment.
10. 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 by telecopy (with
a confirmatory copy sent by a different means within three business days of
such notice), 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 on Schedule A of the form
of Stockholders Agreement which is attached hereto as Exhibit B or such
other address as may hereafter be designated in writing by such party to
the other parties. All such notices, requests, consents and other
communications shall be deemed to have been given when received.
11. No Inconsistent Agreements. No party hereunder shall take any
action or enter into any agreement which is inconsistent with the rights of
any party hereunder or otherwise conflicts with the provisions hereof.
12. Further Assurances. At any time or from time to time after
the date hereof, the parties agree to cooperate with each other, and at the
request of any 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 and to otherwise carry out the intent
of the parties hereunder.
13. Expenses. All fees, commissions, and other expenses incurred
by any of the parties hereto in connection with negotiation of this
Agreement and in preparing to consummate the transactions contemplated
herein, including fees of counsel, shall be paid by the party incurring
such costs.
14. Severability. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other
provision hereof (or the remaining portion thereof) or the application of
such provision to any other persons or circumstances.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to principles of conflicts of law.
16. Specific Performance; Injunction. (a) The parties agree that
it is impossible to determine the monetary damages which would accrue to a
Stockholder by reason of the failure of any other Stockholder to perform
any of its obligations under this Agreement requiring the performance of an
act other than the payment of money only. Therefore, if any party to this
Agreement shall institute an action or proceeding to enforce the provisions
of this Agreement against any Stockholder not performing such obligations,
any tribunal hearing such cause shall have the power to render an award
directing one or more parties hereto to specifically perform its
obligations hereunder in accordance with the terms and conditions of this
Agreement.
(b) In the event of a breach or threatened breach by a
Stockholder of any of the provisions of this Agreement, the other
Stockholders shall be entitled to an injunction restraining such
Stockholder from any such breach. The availability of these remedies shall
not prohibit a Stockholder from pursuing any other remedies for such breach
or threatened breach, including the recovery of damages from such breaching
Stockholder.
17. Successors and Assigns. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors, assigns, heirs and personal representatives.
18. Amendments. Neither this Agreement nor any provisions hereof
can be modified, amended, changed, waived, discharged or terminated except
by an instrument in writing, signed by each of the parties hereto.
19. 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.
20. Nouns and Pronouns. Whenever the context requires, 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.
21. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous
agreements and understandings with respect thereto.
22. No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto and such assigns, any legal or
equitable rights hereunder.
23. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
GENERAL PARTNERS:
MK/CG-GP LLC
By: CG Interstate Associates, LLC,
a Managing Member
By: Continental Gencom Holdings, LLC,
its Sole Member
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
By: SMW-IHC, LLC,
a Managing Member
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
By: KFP Interstate Associates, LLC,
a Managing Member
By: KFP Interstate, LLC,
its Managing Member
By: KFP Holdings, Ltd.,
its Sole Member
By: ▇▇▇▇▇▇▇▇▇, ▇.▇.,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name:▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
LB INTERSTATE GP LLC
By: PAMI LLC,
its Sole Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Title: Authorized Signatory
---------------------------
LIMITED PARTNERS:
MK/CG-LP LLC
By: CG Interstate Associates, LLC,
a Managing Member
By: Continental Gencom Holdings, LLC,
its Sole Member
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
By: SMW-IHC, LLC,
a Managing Member
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
By: KFP Interstate Associates, LLC,
a Managing Member
By: KFP Interstate, LLC,
its Managing Member
By: KFP Holdings, Ltd.,
its Sole Member
By: ▇▇▇▇▇▇▇▇▇, ▇.▇.,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
LB INTERSTATE LP LLC
By: PAMI LLC,
its Sole Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Title: Authorized Signatory
---------------------------
SCHEDULE 1
UNDISTRIBUTED CAPITAL AND PREFERENCE AMOUNTS
(AS AT THE DATE HEREOF [AND AS AT THE CLOSING DATE])
--------------------- ----------------- ----------------- ---------------------- ---------------------- ----------------------
PARTNER UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED
CLASS A CAPITAL CLASS B CAPITAL CLASS A-1 PREFERENCE CLASS A-2 PREFERENCE CLASS B PREFERENCE
--------------------- ----------------- ----------------- ---------------------- ---------------------- ----------------------
MK/CG-GP LLC - 62,500 - - 13,292
--------------------- ----------------- ----------------- ---------------------- ---------------------- ----------------------
LB Interstate GP LLC 156,250 62,500 24,258 24,258 13,292
--------------------- ----------------- ----------------- ---------------------- ---------------------- ----------------------
MK/CG-LP LLC - 7,437,500 - - 1,581,760
--------------------- ----------------- ----------------- ---------------------- ---------------------- ----------------------
LB Interstate LP LLC 12,343,750 4,937,500 1,916,364 1,916,364 1,050,076
--------------------- ----------------- ----------------- ---------------------- ---------------------- ----------------------
SCHEDULE 2
NUMBER OF IHR SHARES TO BE RECEIVED
-------------------------------- ----------------------- ----------------------
TRANSFEREE NUMBER OF IHR SHARES TOTAL NUMBER OF
TO BE RECEIVED FROM SHARES RECEIVED FROM
PARTNERSHIP THE PARTNERSHIP AND
CGLH PARTNERS I LP
-------------------------------- ----------------------- ----------------------
LB Interstate GP LLC 27,769 33,323
-------------------------------- ----------------------- ----------------------
LB Interstate LP LLC 2,193,751 2,632,500
-------------------------------- ----------------------- ----------------------
KFP/LB IHR II, LP 990,803 1,188,964
-------------------------------- ----------------------- ----------------------
KA/LB IHR II, LP 712,824 855,389
-------------------------------- ----------------------- ----------------------
CG Ventures/LB IHR II, LP 390,395 468,474
-------------------------------- ----------------------- ----------------------
SMW/LB IHR II, LP 400,154 480,185
-------------------------------- ----------------------- ----------------------
DEL/LB IHR II, LP 400,154 480,185
-------------------------------- ----------------------- ----------------------
PS/LB IHR II, LP 78,080 93,696
-------------------------------- ----------------------- ----------------------
TOTAL 5,193,931 6,232,716
-------------------------------- ----------------------- ----------------------
SCHEDULE 3
SUBSIDIARY PARTNERSHIP INTERESTS TO BE RECEIVED
------------------------------ ------------------------------- --------------- ------------------
PARTNER SUBSIDIARY PARTNERSHIP TYPE OF PERCENTAGE
INTERESTS TO BE RECEIVED INTEREST INTEREST
------------------------------ ------------------------------- --------------- ------------------
KFP/LB IHR GP, LLC KFP/LB IHR II, LP GP 0.008%
------------------------------ ------------------------------- --------------- ------------------
KFP INTERSTATE ASSOCIATES, KFP/LB IHR II, LP LP 83.325%
LLC
------------------------------ ------------------------------- --------------- ------------------
KA/LB IHR GP, LLC KA/LB IHR II, LP GP 0.008%
------------------------------ ------------------------------- --------------- ------------------
KA/TB, LLC KA/LB IHR II, LP LP 83.325%
------------------------------ ------------------------------- --------------- ------------------
CG VENTURES/LB IHR GP, LLC CG VENTURES/LB IHR II, LP GP 0.008%
------------------------------ ------------------------------- --------------- ------------------
CG VENTURES LLC CG VENTURES/LB IHR II, LP LP 83.325%
------------------------------ ------------------------------- --------------- ------------------
SMW/LB IHR GP, LLC SMW/LB IHR II, LP GP 0.008%
------------------------------ ------------------------------- --------------- ------------------
SMW-IHC, LLC SMW/LB IHR II, LP LP 83.325%
------------------------------ ------------------------------- --------------- ------------------
DEL/LB IHR GP, INC. DEL/LB IHR II, LP GP 0.008%
------------------------------ ------------------------------- --------------- ------------------
DEL-IHC, LLC DEL/LB IHR II, LP LP 83.325%
------------------------------ ------------------------------- --------------- ------------------
PS/LB IHR GP, INC. PS/LB IHR II, LP GP 0.008%
------------------------------ ------------------------------- --------------- ------------------
▇▇▇▇▇ ▇▇▇▇▇▇ PS/LB IHR II, LP LP 83.325%
------------------------------ ------------------------------- --------------- ------------------
EXHIBIT A
FORM OF AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
OF
SMW/LB IHR II, LP
TABLE OF CONTENTS
-----------------
Page
----
1.1 Formation........................................................1
1.2 Name.............................................................2
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...............................................8
4.1 Capital Contributions; Initial Capital Contributions.............9
4.2 Intentionally Omitted............................................9
4.3 Additional Capital Contribution..................................9
4.4 Capital Accounts.................................................9
4.5 Negative Capital Accounts.......................................12
4.6 Interest........................................................12
4.7 No Withdrawal...................................................12
4.8 Loans From Partners.............................................12
5.1 Allocations of Profits and Losses...............................12
5.2 Special Allocations of Profits and Losses.......................13
5.3 Curative Allocations............................................14
5.4 Tax Allocations: Code Section 704(c)...........................14
5.5 Other Allocation Rules..........................................15
5.6 Intentionally Omitted...........................................15
6.1 Distributions...................................................15
6.2 Payments Not Deemed Distributions...............................16
6.3 Withheld Amounts................................................16
7.1 Designation and Authority of the General Partners...............17
7.2 Major Decisions.................................................17
7.3 Certificate of Limited Partnership..............................19
7.4. Compensation and Reimbursement of General Partners..............19
7.5 Partnership Funds...............................................19
7.6 Duties..........................................................19
7.7 Return of Capital...............................................19
7.8 Transactions with Affiliates....................................19
7.9 Outside Activities..............................................20
7.10 Resolution of Conflicts of Interest.............................20
7.11 Indemnification.................................................20
7.12 Liability of General Partners...................................21
7.13 Reliance by General Partners....................................21
7.14 Insurance.......................................................21
7.15 Certain Transactions............................................21
8.1 Limitation of Liability.........................................22
8.2 Management of Business..........................................22
8.3 Outside Activities..............................................22
8.4 Return of Capital...............................................22
9.1 Records and Accounting..........................................22
9.2 Fiscal Year.....................................................23
9.3 Reports.........................................................23
10.1 Preparation of Tax Returns......................................23
10.2 Tax Elections...................................................23
10.3 Tax Controversies...............................................24
10.4 Organizational Expenses.........................................24
10.5 Taxation as a Partnership.......................................24
11.1 Transfer Restrictions...........................................24
11.2 Transfer of Interests of General Partner........................25
11.3 Transfer of Interests of Limited Partners.......................25
11.4 Additional Limitations on Transfers of Limited
Partnership Interests...........................................25
11.5 Distributions and Allocations in Respect of
Transferred Partnership Interests...............................26
11.6 Admission of Initial and Substitute Limited
Partners and Successor General Partners.........................26
11.7 Buy-Sell Provision..............................................27
11.8 Call Option.....................................................28
11.9 Intentionally Omitted...........................................29
11.10 Intentionally Omitted...........................................29
12.1 Events of Withdrawal............................................29
12.2 Removal.........................................................29
13.1 Dissolution.....................................................30
13.2 Continuation of the Partnership.................................30
13.3 Liquidation.....................................................31
13.4 Distribution in Kind............................................32
13.5 Cancellation of Certificate of Limited Partnership..............32
13.6 Return of Capital...............................................32
14.1 Amendment Procedures............................................33
14.2 Action Without a Meeting........................................33
15.1 Addresses and Notices...........................................33
15.2 Titles and Captions.............................................33
15.3 Pronouns and Plurals............................................33
15.4 Further Action..................................................33
15.5 Binding Effect..................................................34
15.6 Integration.....................................................34
15.7 Creditors.......................................................34
15.8 Waiver..........................................................34
15.9 Counterparts....................................................34
15.10 Applicable Law..................................................34
15.11 Invalidity of Provisions........................................34
15.12 Third Party Beneficiaries.......................................34
EXECUTION COPY
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
SMW/LB IHR II, LP
THIS AGREEMENT OF LIMITED PARTNERSHIP is entered into as of
August ____, 2004 (the "Effective Date"), by and among SMW/LB IHR GP, LLC,
a Delaware limited liability company ("SMW GP"), and LB INTERSTATE GP LLC,
a Delaware limited liability company ("LB GP"), as the General Partners (as
defined in Section 2.1), SMW-IHC, LLC, a Delaware limited liability company
("SMW LP"), and LB INTERSTATE LP LLC, a Delaware limited liability company
("LB LP"), as the Limited Partners (as defined in Section 2.1).
WHEREAS, CGLH Partners I LP, a Delaware limited partnership
("CGLH I"), and CGLH Partners II LP, a Delaware limited partnership ("CGLH
II"), have contributed an aggregate of four hundred eighty thousand one
hundred eighty five (480,185) shares of Interstate Stock (as defined in
Section 2.1) to the Partnership (as defined in Section 2.1) in exchange for
all of the Partnership Interests (as defined in Section 2.1) in the
Partnership; and
WHEREAS, immediately thereafter, CGLH I and CGLH II were
dissolved and all of the Partnership Interests in the Partnership were
distributed in liquidation, directly or indirectly, to the Partners (as
defined in Section 2.1) pursuant to the Transaction Agreement (as defined
in Section 2.1).
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties desire to
agree as herein provided.
Certain terms used in this Agreement are defined in Article II
hereof.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 FORMATION.
---------
The Partners formed 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, SMW/LB IHR II, LP. The
General Partners in their sole discretion may change the name of the
Partnership at any time and from time to time and shall provide the Limited
Partners with written notice of such name change within 20 days after such
name change.
1.3 TERM.
----
The Partnership shall commence on the Commencement Date and shall
continue in existence until the earlier of (i) the close of Partnership
business on the tenth anniversary of the Effective Date or (ii) the
termination of the Partnership in accordance with the provisions of Section
13.1(b) of this Agreement, unless extended by mutual written agreement of
the parties. Neither of the General Partners shall commence or engage in
any business on behalf of the Partnership until after the Commencement
Date, other than matters necessary or incidental to the organization of the
Partnership.
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 ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and its registered agent for service of process on the
Partnership at such registered office shall be Corporate Creations
Network, Inc. or such other registered office or registered agent as
the General Partners may from time to time designate, on notice to the
other Partners. The principal office of the Partnership shall be ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such
other place as the General Partners 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 General Partners deem 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 his 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.
1.7 LIMITS OF PARTNERSHIP.
---------------------
The relationship between the parties hereto shall be limited to
the carrying on of 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 carrying on
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:
"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 as of such time; (b) provision for
payment of all Partnership costs and expenses that are anticipated to
become due and payable within 30 days following the date on which Available
Cash is being determined; and (c) provision for adequate reserves
(including, without limitation, working capital, capital and other
reserves), which reserves (and the amounts thereof) shall be established by
the General Partners in their reasonable discretion.
"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 11.7(a)(i)
of this Agreement.
"Buy-Sell Notice" has the meaning set forth in Section 11.7(a)(i)
of this Agreement.
"Call Notice" has the meaning set forth in Section 11.8 of this
Agreement.
"Call Option" has the meaning set forth in Section 11.8 of this
Agreement.
"Call Option Closing" has the meaning set forth in Section 11.8
of this Agreement.
"Call Price" 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 (or deemed contributed) by a Partner to the Partnership
pursuant to the provisions of this Agreement.
"Capital Event" means the sale or other disposition of all or a
portion of the property of the Partnership, excluding any such transaction
contemplated by Section 11.8 of this Agreement.
"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 I" has the meaning set forth in the Recitals of this
Agreement.
"CGLH II" has the meaning set forth in the Recitals of this
Agreement.
"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 August 1, 2004,
for each Fiscal Year of the Partnership, with respect to a Partner, an
aggregate amount equal to the product of (i) ten percent (10%) per annum
multiplied by (ii) the average weighted daily outstanding balance of such
Partner's Undistributed Class A Capital (assuming for this purpose that the
Class A Capital Contributions set forth on Exhibit B had been made on
August 1, 2004) 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; provided, however, that if the
Call Option has not been exercised prior to 30 days from the date of
delivery to the Partnership of the Interstate Stock certificates owned by
the Partnership then the percentage set forth above in clause (i) shall be
twenty percent (20%) and shall be deemed to have been twenty percent (20%)
per annum from August 1, 2004. Without regard to the foregoing, the Class A
Preference Amount shall not accrue on any portion of the Class A Capital
Contribution in excess of each Partner's Original Class A Amount set forth
on Exhibit B (the "Preference Amount Limit") prior to January 1, 2005,
provided that if the Call Option has not been exercised prior to 30 days
from the date of delivery to the Partnership of the Interstate Stock
certificates owned by the Partnership, then each Partner's Preference
Amount Limit shall be increased as of August 1, 2004 by the
November-December Preference Amount as set forth on Exhibit B.
"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 ten (10%) 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 General Partners.
"Control" shall be used for the purposes of the definition of
"Affiliate" 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.
"Default" has the meaning set forth in Section 4.3(e)of this
Agreement.
"Default Amount" has the meaning set forth in Section 4.3(e) of
this Agreement.
"Default Notice" has the meaning set forth in Section 4.3(d) of
this Agreement.
"Default Partner" has the meaning set forth in Section 4.3(e) 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.
"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 this Agreement.
"Fiscal Year" has the meaning set forth in Section 9.2 of this
Agreement.
"General Partners" means SMW GP and LB GP, in their capacity as
the general partners of the Partnership, or their respective permitted
successors or assigns in accordance with the terms of this Agreement.
"Interstate" means Interstate Hotels & Resorts, Inc., a Delaware
corporation.
"Interstate Stock" means the common stock, par value $0.01 per
share, of Interstate.
"LB GP" has the meaning set forth in the Preamble of this
Agreement.
"LB LP" has the meaning set forth in the Preamble of this
Agreement.
"Limited Partner" means SMW LP or LB LP, and any other Person who
has been admitted as a limited partner in 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.
"Non-Defaulting Partners" has the meaning set forth in Section
4.3(e) of this Agreement.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"Partner" means 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 Class A Capital Contributions
and any other 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, to vote on those matters described
in this Agreement; and (d) if the General Partners, to manage and operate
the business of the Partnership.
"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 percentage set
forth under such Partner's name on Exhibit A to this Agreement under the
heading "Percentage Interest," as such Exhibit may be amended from time to
time in accordance with this Agreement.
"Person" means an individual or a corporation, partnership,
limited liability company, trust, estate, unincorporated organization,
association, or other entity.
"Profits" has the meaning set forth in Section 4.4(b) of this
Agreement.
"Property" means all of the property owned by the Partnership.
"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.
"Selling Partner" has the meaning set forth in Section 11.7(a)(i)
of this Agreement.
"SMW GP" has the meaning set forth in the Preamble of this
Agreement.
"SMW LP" has the meaning set forth in the Preamble of this
Agreement.
"Stated Value" has the meaning set forth in Section 11.7(a)(i) of
this Agreement.
"Stock Value" means, as of a valuation date, with respect to a
share of Interstate Stock, the average closing price on the NYSE Composite
Transaction Tape of a share of Interstate Stock for the 5 trading days
immediately prior to such valuation date.
"Transaction Agreement" means that certain Distribution and
Contribution Agreement, dated as of August ___, 2004, by and between, among
others, LB GP, LB LP, MK/CG-GP LLC, a Delaware limited liability company,
and MK/CG-LP LLC, a Delaware limited liability company.
"transfer" has the meaning set forth in Article XI of this
Agreement.
"Undistributed Capital" means, collectively, Undistributed Class
A Capital and Undistributed Class B Capital.
"Undistributed Class A Capital" means, with respect to the Class
A Capital Contributions of the LB GP or the LB LP and as of a given date,
the aggregate amount of such Partner's Class A Capital Contributions
actually or deemed made as of such date, reduced by all prior distributions
to such Partner in respect of its Class A Capital Contributions pursuant to
Section 6.1(b)(B).
"Undistributed Class A Preference Amount" means, with respect to
the Class A Preference Amount of a Partner and as of a given date, (i) the
aggregate amount of such Partner's Class A Preference Amount as of such
date reduced by (ii) all prior distributions to such Partner pursuant to
Section 6.1(b)(A). The calculation and recalculation of the Undistributed
Class A Preference Amount 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 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 or deemed
made as of such date, reduced by all prior distributions to such Partner in
respect of its Class B Capital Contributions pursuant to Section 6.1(b)(D).
"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)(C). The calculation and recalculation of the Undistributed
Class B Preference Amount 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.
ARTICLE III
PURPOSE
3.1 PURPOSES AND SCOPE.
------------------
The sole purpose and business of the Partnership shall be (i) to
acquire, hold, own, sell, and otherwise use shares of Interstate Stock and
(ii) to transact any and all lawful business for which the Partnership may
be organized under Delaware law that is incident, necessary and appropriate
to accomplish the foregoing.
ARTICLE IV
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; PARTNERSHIP INTERESTS
4.1 CAPITAL CONTRIBUTIONS; INITIAL CAPITAL CONTRIBUTIONS.
----------------------------------------------------
On the date hereof, CGLH I and CGLH II have contributed an
aggregate of four hundred eighty thousand one hundred eighty five (480,185)
shares of Interstate Stock to the Partnership in exchange for all of the
Partnership Interests in the Partnership, which Partnership Interests were
immediately distributed in liquidation, directly or indirectly, to the
Partners pursuant to the Transaction Agreement. As of the date hereof, each
Partner is deemed to have made the Class A Capital Contribution and Class B
Capital Contribution, in each case, set forth opposite such Partner's name
on Exhibit B hereto. The Partners hereby agree that the initial Book Value
of the Interstate Stock contributed by CGLH I and CGLH II is equal to the
closing stock price of the Interstate Stock on the Effective Date.
4.2 INTENTIONALLY OMITTED.
---------------------
4.3 ADDITIONAL CAPITAL CONTRIBUTION.
-------------------------------
The Partners shall not be required to make any additional Capital
Contributions unless such additional Capital Contributions have been
approved by all Partners.
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 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, 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
General Partners, acting jointly, determine 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 General Partners, acting jointly, may
authorize such modifications, provided that it is not likely to have a
material effect on the amounts 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 Section 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.
(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 General Partners, acting jointly.
(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 General Partners, acting
jointly, in their 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 General Partners, acting jointly, in their
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 General Partners, acting jointly,
reasonably determine 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 General Partners, acting jointly, reasonably
determine 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
General Partners, acting jointly, determine that an adjustment
pursuant to Section 4.4(c)(ii) is necessary or 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 is this Section
4.6 is intended to limit payments of Preference Amounts to Partners or
non-defaulting Partners as provided hereunder.
4.7 NO WITHDRAWAL.
-------------
No Partner shall be entitled to withdraw any part of his Capital
Contribution (initial and/or additional) or his Capital Account or to
receive any distribution from the Partnership, except as provided in
Section 6.1 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. Loans by a Partner to the Partnership shall not be considered
Capital Contributions.
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 (after giving effect to the
allocations hereunder) with positive Adjusted 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 5.1(b) below and without
duplication for amounts taken into account under clause (ii) of the
definition of Adjusted Capital Account); 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 this 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 General Partners.
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.
(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
General Partners, acting jointly, shall make such offsetting special
allocations of Partnership income, gain, loss, or deduction in whatever
manner they determine 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 General
Partners 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 General Partners in
any manner that reasonably reflects the purpose and intention of this
Agreement. In the absence of any affirmative decision to the contrary,
the "traditional method" of making Section 704(c) and "reverse"
Section 704(c) allocations shall be used. 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 General Partners, acting jointly, 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 INTENTIONALLY OMITTED.
---------------------
ARTICLE VI
DISTRIBUTIONS
6.1 DISTRIBUTIONS.
-------------
(a) Subject to the provisions of Section 6.1(b), the General
Partners, acting jointly, shall review the Partnership's accounts at
the end of each calendar quarter to determine whether distributions
are appropriate. The General Partners, acting jointly, shall make such
distributions of Available Cash as they may determine in their
discretion.
(b) With respect to Available Cash, including, but not limited
to, net proceeds from a Capital Event:
(A) First, to Partners entitled to receive Class A
Preference Amounts, Undistributed Class A Preference
Amounts, pro rata in proportion to their respective
Undistributed Class A Preference Amounts;
(B) Second, to Partners to the extent of their
respective Undistributed Class A Capital, pro rata in
proportion to their Undistributed Class A Capital, if any,
of all Partners, until such Undistributed Class A Capital is
reduced to zero;
(C) Third, to Partners entitled to receive Class B
Preference Amounts, pro rata in proportion to their
Undistributed Class B Preference Amounts;
(D) Fourth, to Partners to the extent of their
respective Undistributed Class B Capital, pro rata in
proportion to their Undistributed Class B Capital, if any,
of all Partners, until such Undistributed Class B Capital is
reduced to zero; and
(E) Fifth, to the Partners, pro rata in proportion to
their respective Percentage Interests.
(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 General Partners' reasonable calculation of such
Preference Amounts on a quarterly basis.
6.2 PAYMENTS NOT DEEMED DISTRIBUTIONS.
---------------------------------
Any amounts paid pursuant to Section 7.4 or Section 7.11 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.
(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 General Partners, acting jointly,
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 General Partners shall have received an opinion of counsel
or other evidence satisfactory to the General Partners 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 THE GENERAL PARTNERS.
-------------------------------------------------
(a) The Partners hereby designate SMW GP and LB GP as the general
partners of the Partnership.
(b) Subject to Section 7.2, the General Partners, acting jointly,
shall conduct, direct, and exercise full control over all activities
of the Partnership. Subject to Section 7.2, all management powers over
the business and affairs of the Partnership shall be vested in the
General Partners, acting jointly. 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 General
Partners, acting jointly, in accordance with the objects and purposes
of the Partnership set forth in Section 3.1. The General Partners,
acting jointly, 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. Notwithstanding anything to
the contrary contained in this Agreement, if a General Partner is an
Affiliate of a Partner that is in default of or under Sections 4.1 or
4.3 of this Agreement, then only the remaining General Partner(s)
shall elect remedies provided in this Agreement in connection with
such default.
(c) In connection with the opening of an account of the
Partnership, the General Partners appoint ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as authorized signatories on behalf of the
Partnership for the purposes of executing the necessary signatory
authorizations with respect to such bank account and as authorized and
required signatories on such account, provided, however, that there
shall be two required signatories with respect to any withdrawal or
other transfer of funds from such account, and such signatories shall
be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. For the avoidance of
doubt, no funds may be withdrawn or otherwise transferred from such
account without the signature or other written authorization of ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, for so long as either LB GP or LB LP is a Partner in the
Partnership.
7.2 MAJOR DECISIONS.
---------------
(a) Notwithstanding anything to the contrary contained in this
Agreement, all Major Decisions with respect to the Partnership's
business shall require the prior written approval of both of the
General Partners. The term "Major Decision," as used in this
Agreement, means any decision with respect to the following matters:
(i) doing any act in contravention of the Agreement
(including any act which requires the consent of other Partners)
or failing to do any act required by the Agreement;
(ii) doing any act which would make it impossible to carry
on the ordinary business of the Partnership;
(iii) except as contemplated by the Transaction Agreement or
by Section 11.8, approval of any indebtedness for borrowed money
or the assumption of any indebtedness by the Partnership or any
refinancing or restructuring thereof;
(iv) approval of any credit facility to provide financing
for any permitted investments of the Partnership;
(v) intentionally omitted;
(vi) intentionally omitted;
(vii) except as contemplated by the Transaction Agreement or
by Section 11.8, approval of any contract between the Partnership
and one of the Partners or any Affiliate of a Partner and
approval of any amendment or modification to, or waiver of a
provision of, any such contract;
(viii) except as contemplated by the Transaction Agreement
or by Section 11.8, approval of the restructuring, refinancing or
disposition of all or substantially all of the assets of the
Partnership, the merger or consolidation of the Partnership with
any other entity or the liquidation or dissolution of the
Partnership;
(ix) filing any petition in bankruptcy or reorganization or
instituting any other type of bankruptcy, reorganization or
insolvency proceeding with respect to the Partnership, consenting
to the institution of involuntary bankruptcy, reorganization or
insolvency proceedings with respect to the Partnership, the
admission in writing by the Partnership of its inability to pay
its debts generally as they become due or the making by the
Partnership of a general assignment for the benefit of its
creditors.
(x) approval of any amendment to this Agreement;
(xi) intentionally omitted;
(xii) approval of the appointment of a Liquidator pursuant
to Section 13.3 hereof if the Partnership is dissolved;
(xiii) approval of appointments to the board of directors of
Interstate;
(xiv) approval of any agreement or settlement with any tax
authorities; or
(xv) the continuation of the Partnership after an event of
dissolution.
(b) Notwithstanding anything to the contrary contained in this
Agreement, any decision with respect to the approval of the sale of
all or substantially all of the assets of the Partnership shall
require the prior written approval of both of the General Partners.
7.3 CERTIFICATE OF LIMITED PARTNERSHIP.
----------------------------------
The General Partners 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 General Partners 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 GENERAL PARTNERS.
--------------------------------------------------
The General Partners shall not be compensated for services
rendered to the Partnership as a General Partner unless such compensation
has previously been approved by all of the Limited Partners. The General
Partners shall, however, be reimbursed by the Partnership for all
reasonable expenditures incurred by the General Partners on the
Partnership's behalf.
7.5 PARTNERSHIP FUNDS.
-----------------
The funds of the Partnership shall be deposited in such
interest-bearing Partnership account or Partnership accounts as are
designated by the General Partners, acting jointly. All withdrawals from or
charges against such accounts shall be made by the General Partners or by
their representatives, acting jointly. Funds of the Partnership may be
invested as determined by the General Partners, acting jointly, in
accordance with the terms and provisions of this Agreement.
7.6 DUTIES.
------
Each of the General Partners 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. Each
of the General Partners 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.
7.7 RETURN OF CAPITAL.
-----------------
Neither SMW GP nor LB GP shall 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.
7.8 TRANSACTIONS WITH AFFILIATES.
----------------------------
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 General Partners or any Affiliate of either of them, and any
director, officer, employee, agent, or representative of the General
Partners or any Affiliate of either of them, 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 Partners shall have any rights by virtue of this
Agreement or the partnership relationship created hereby in any business
ventures of the General Partners, any Affiliate of either of them, or any
director, officer, employee, agent, or representative of the General
Partners or any Affiliate of either of them.
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 a 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 such General Partner, in the absence of bad faith by such
General Partner, 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.
7.11 INDEMNIFICATION.
---------------
(a) The Partnership shall indemnify and hold harmless the General
Partners and any director, officer, employee, agent, or representative
of the General Partners, 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. 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 engaged in gross negligence,
fraud, willful misconduct, or a material breach of this Agreement.
(b) The Partnership shall indemnify and hold harmless any Limited
Partner, employee, agent, or representative of the Partnership, any
Person who is or was serving at the request of the Partnership or the
General Partners as a director, officer, partner, trustee, employee,
agent, or representative of another corporation, partnership, joint
venture, trust, or other enterprise, but in no event shall such
indemnification exceed the indemnification 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 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 anything to the contrary in this Section
7.11, any indemnification pursuant to Section 7.11 shall be made only
out of the assets of the Partnership, and in no event shall Limited
Partners be subject to personal liability by reason of the
indemnification provisions of this Agreement.
7.12 LIABILITY OF GENERAL PARTNERS.
-----------------------------
(a) Neither of the General Partners nor their respective
directors, officers, employees, agents, or representatives shall be
liable to the Partnership or any Limited Partner for errors in
judgment or for any acts or omissions that do not constitute gross
negligence, fraud, or willful or wanton misconduct.
(b) The General Partners may exercise any of the powers granted
to them by this Agreement and perform any of the duties imposed upon
them hereunder either directly or by or through their respective
directors, officers, employees, agents, or representatives, and a
General Partners shall not be responsible for any misconduct or
negligence on the part of any agent or representative appointed by
such General Partner.
7.13 RELIANCE BY GENERAL PARTNERS.
----------------------------
(a) Each of the General Partners 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.
(b) The General Partners may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
and other consultants and advisers selected by them, and any opinion
of any such Person as to matters which the General Partners believe 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 General Partners hereunder
in good faith and in accordance with such opinion.
7.14 INSURANCE.
---------
The General Partners, 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 General Partners, acting jointly, reasonably deem advisable.
7.15 CERTAIN TRANSACTIONS.
--------------------
All of the Partners authorized, empowered and directed the
General Partners, on behalf of the Partnership and at the Partnership's
cost and expense, to consummate the transactions contemplated by the
Transaction Agreement and the other agreements entered in connection
therewith, on such terms and conditions as the General Partners deemed
appropriate, and to take any and all actions and execute any and all
documents deemed by the General Partners reasonable and appropriate for
such transactions, their execution of any such documents or taking any such
actions being evidence of the reasonableness and the appropriateness
thereof.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 LIMITATION OF LIABILITY.
-----------------------
Limited Partners shall have no liability under this Agreement
except as provided herein or under the Delaware Act.
8.2 MANAGEMENT OF BUSINESS.
----------------------
No Limited Partner shall 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.
8.3 OUTSIDE ACTIVITIES.
------------------
A Limited Partner or any Affiliate thereof, and any director,
officer, employee, agent, or representative of such Limited 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 shall have any rights by virtue of this Agreement in any
business ventures of any Limited Partner, any Affiliate thereof, or any
director, officer, employee, agent, or representative of any Limited
Partner or any Affiliate thereof.
8.4 RETURN OF CAPITAL.
-----------------
No Limited Partner shall 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 General Partners 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 General Partners 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 books of the Partnership shall
be maintained for financial reporting purposes on the method of accounting
approved by the General Partners in their reasonable discretion.
9.2 FISCAL YEAR.
-----------
The fiscal year of the Partnership shall be the calendar year for
tax and accounting purposes.
9.3 REPORTS.
-------
The General Partners 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.
Upon the request of a Partner, such financial statements shall be audited
at Partnership expense by a firm of independent public accountants selected
by the General Partners.
ARTICLE X
TAX MATTERS
10.1 PREPARATION OF TAX RETURNS.
--------------------------
The General Partners 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. 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, 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 cash or accrual method of
accounting for federal income tax purposes, as the General Partners shall
determine in accordance with applicable law. The General Partners in their
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 General Partners 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 such tax and related information it may reasonably request from
time to time.
10.2 TAX ELECTIONS.
-------------
Except as otherwise provided herein, the General Partners 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 or the transfer of Partnership Interests
from CGLH I and CGLH II to the Partners, the General Partners 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.
10.3 TAX CONTROVERSIES.
-----------------
Subject to the provisions hereof, SMW 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 SMW GP in
connection with such proceedings. Notwithstanding the above, SMW GP shall
not extend the statute of limitations with respect to any taxable years of
the Partnership without the consent of all the Partners or take any action
that would be materially adverse to LB LP or LB GP without the consent of
LB GP.
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.
---------------------
No Partnership Interest shall be transferred, in whole or in
part, except as contemplated by the Transaction Agreement or in accordance
with the terms and conditions set forth in this Article XI. 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,
financing, exchange, or any other disposition. A transfer of a Controlling
interest in SMW GP and/or SMW 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; provided, that, subject to the consent of LB GP, not to be
unreasonably withheld, the natural persons who are the direct or indirect
principals of SMW GP and/or SMW LP existing on the date hereof shall have
the right to transfer their direct or indirect ownership interests in SMW
GP and/or SMW LP to any person who is the spouse, natural or adopted child,
grandchild, parent, sibling or natural or adopted child of any sibling of
such direct or indirect principal, or trust for the benefit of any one of
the foregoing persons. Notwithstanding anything to the contrary contained
in this Article XI, SMW GP and/or SMW LP may transfer up to an aggregate of
25% of its Partnership Interest in the Partnership to a member or
stockholder of SMW GP and/or SMW LP, as the case may be, without first
obtaining the approval of LB GP or LB LP.
11.2 TRANSFER OF INTERESTS OF GENERAL PARTNER.
----------------------------------------
Except as provided in Section 11.7, each 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 other General Partner
(which approval may be withheld in such General Partner's sole and absolute
discretion) provided, however, that the consent of a General Partner shall
not be required for a transfer of LB GP's Partnership Interest: (a) as
collateral security for the indebtedness of an Affiliate of LB GP; (b) to
an Affiliate of the LB GP or an Affiliate of, or investment fund or other
vehicle sponsored by, ▇▇▇▇▇▇ Brothers Holdings Inc.; or (c) pursuant to the
provisions of Section 11.7. Any permitted transfer by a General Partner of
its Partnership Interest under this Section 11.2 shall not constitute a
withdrawal of such 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.
11.3 TRANSFER OF INTERESTS OF LIMITED PARTNERS.
-----------------------------------------
The Partnership Interest of SMW LP may not be transferred except:
(a) if the Limited Partner 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 the Limited Partner 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 General Partners, which consent may be withheld in the sole and
absolute discretion of each such Partners, or (d) pursuant to the
provisions of Section 11.7. Subject to the provisions of Sections 11.7 and
11.8, the Partnership Interests of LB LP, and any of its successors or
assigns, may be transferred, in whole or in part, at the discretion of LB
LP, or such successor or assign.
11.4 ADDITIONAL LIMITATIONS ON TRANSFERS OF LIMITED PARTNERSHIP
INTERESTS.
----------------------------------------------------------
The General Partners may require, as a condition to any transfer
of a Partnership Interest of a Limited Partner, that, in the General
Partners' reasonable determination: (a) the transfer will not jeopardize
the treatment of the Partnership as a partnership 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 General Partners 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 General
Partners may deem advisable in their sole discretion.
11.5 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 conventions permitted by law, selected
by the General Partners in their 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
General Partners 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 11.5, whether or not any Partner or the
Partnership has knowledge of any transfer of ownership of any Partnership
Interest.
11.6 ADMISSION OF INITIAL AND SUBSTITUTE LIMITED PARTNERS AND
SUCCESSOR GENERAL PARTNERS.
--------------------------------------------------------
(a) Admission of Initial Limited Partner. On the Effective Date,
the General Partners shall admit SMW LP and LB LP to the Partnership
as Limited Partners. Each Limited Partner shall execute this Agreement
(or a counterpart thereof) and thereby agree to be bound by the terms
hereof as a Limited Partner.
(b) Admission of Substitute Limited Partners. A transferee (which
may be the heir or legatee of a Limited Partner) or assignee of a
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 General Partners in the General Partners' sole and
absolute discretion. If acceptable to the General Partners, 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.
(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 a General Partner pursuant to Section 11.2 of this
Agreement shall be admitted to the Partnership as a 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 General Partners. In connection with the admission
of any substitute Limited Partner or successor General Partner, the
General Partners or the remaining General Partner, as the case may be,
shall have the authority to take all such actions as they deem
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.
11.7 BUY-SELL PROVISION.
------------------
(a) If a Partner wishes at any time after the date that is 18
calendar months after the Effective Date, for any reason, to purchase
the interests of another Partner and its Affiliates in this
Partnership, each Partner shall be permitted (but not required) to
notify the other Partners of its intent to invoke the following
procedure:
(i) The Partner giving notice (the "Buy-Sell Notice") shall
specify a gross value (i.e., without taking into account
liabilities) (the "Stated Value") attributable to the assets of
the Partnership, and indicate a willingness to be, at the option
of the other Partners, either the "Buying Partner" or the
"Selling Partner." 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 other Partners to the 60-day limit described
below for response. Delivery shall be in accordance with the
notice provisions of this Agreement.
(ii) The Partner receiving the Buy-Sell Notice shall have 60
days from the receipt of the Buy-Sell Notice to elect by written
notice given to the Partner who gave the Buy-Sell Notice to be
either the Selling Partner or the Buying Partner. In the event
the Partner receiving the Buy-Sell Notice fails to respond within
such 60-day period, then the Partner who gave the Buy-Sell Notice
shall be the Buying Partner.
(iii) Within 90 days after the Buy-Sell Notice has been
given:
(1) If SMW GP and SMW LP are the Selling Partners, LB
GP and LB LP shall pay to SMW GP and SMW LP in full payment
for their interests in this Partnership, the respective
amounts they would have received as a General and Limited
Partner of this Partnership 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 or its Affiliates, if such sale had
actually occurred) were distributed in accordance with the
provisions of this Agreement. SMW GP and SMW LP shall
thereupon cease to be members of this Partnership (or have
any economic or other interest, directly or indirectly,
therein).
(2) If LB GP and LB LP are the Selling Partners, SMW GP
and SMW LP shall pay to LB GP and LB LP in full payment for
their interests in this Partnership, the respective amounts
they would have received as a General and Limited Partner of
this Partnership 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 or its Affiliates, if such sale had actually
occurred) were distributed in accordance with the provisions
of this Agreement. LB GP and LB LP shall thereupon cease to
be members of this Partnership (or have any economic or
other interest, directly or indirectly, therein).
(iv) If the Partner receiving the Buy-Sell Notice elects to
be the Buying Partner but fails to complete the transaction as
described above, the Partner who originally gave such notice
shall be entitled to be the Buying Partner as described above.
(v) The purchase price to be paid under this Section 11.7
shall be payable entirely in cash at closing.
(vi) Notwithstanding anything to the contrary contained in
this Section 11.7, if LB LP or any of its successors or assigns
transfers its Partnership Interest or any portion thereof
pursuant to Section 11.3 hereof, then, such transferee shall be
bound by the terms and conditions of this Section 11.7.
11.8 CALL OPTION.
-----------
SMW GP shall have the right (the "Call Option"), exercisable at
any time in SMW GP's sole and absolute discretion upon written notice to LB
LP (the "Call Notice"), to require LB GP and LB LP to sell all (but not
less than all) of their Partnership Interests to the Partnership, and to
cause the Partnership to purchase for cash all (but not less than all) of
LB GP and LB LP's Partnership Interests, for a purchase price equal to LB
GP and LB LP's aggregate Undistributed Class A Capital and Undistributed
Class A Preference Amount as of the date of the Call Option Closing (the
"Call Price"), provided that if the Call Option Closing is prior to 30 days
from the date of delivery to the Partnership of the Interstate Stock
certificates owned by the Partnership then the Call Price shall be
decreased by the Discount Amount set forth on Exhibit C. Within thirty (30)
days after the delivery of the Call Notice, the Partnership shall pay the
Call Price to LB LP (the "Call Option Closing"). Upon payment of the Call
Price in full, LB GP and LB LP's Partnership Interests and all rights in
respect thereof shall immediately, without any action on the part of LB GP
or LB LP, cease to exist. The Partners acknowledge and agree that SMW GP
shall be permitted to cause the Partnership to fund the Call Price by,
among other things, (i) the Partnership selling shares of the Interstate
Stock in a registered or unregistered resale, (ii) the Partnership
incurring indebtedness for borrowed money by obtaining loans on margin
secured by the Interstate Stock or by obtaining loans from SMW LP, or (iii)
the Partnership requesting additional Capital Contributions from only SMW
LP. The Partners further acknowledge and agree that SMW GP is authorized
and empowered, on behalf of the Partnership, to consummate the transactions
contemplated by this Section 11.8 and to execute any and all documents
deemed by SMW GP reasonable and appropriate for such transactions, its
execution of any such documents or taking any such actions being evidence
of the reasonableness and the appropriateness thereof. SMW GP and SMW LP
shall jointly and severally indemnify and hold harmless each of LP GP and
LB LP and their respective officers, directors, successors, transferees and
assigns from and against any and all claims, losses, damages, costs, fees
and expenses (including court costs and reasonable attorneys' fees and
expenses) resulting from, arising out of or related to the Call Option;
provided, however, that such indemnification shall be limited to the
respective Capital Account of SMW GP and SMW LP as of the date of this
Agreement. Upon written request by LB GP given at any time after the
three-month anniversary of the date hereof, SMW GP shall use all
commercially reasonable efforts to exercise the Call Option and consummate
the transactions contemplated thereby.
11.9 INTENTIONALLY OMITTED.
---------------------
11.10 INTENTIONALLY OMITTED.
---------------------
ARTICLE XII
WITHDRAWAL OF GENERAL PARTNERS
12.1 EVENTS OF WITHDRAWAL.
--------------------
A General Partner may not voluntarily withdraw from the
Partnership at any time. A General Partner, 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"):
(a) A General Partner is removed as a general partner pursuant to
Section 12.2; or
(b) A General Partner transfers all of its right, title and
interest as a General Partner other than as permitted in Article XI.
12.2 REMOVAL.
-------
(a) 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 General Partner; (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; or (iv) after such Person suffers or is subject to an
Event of Bankruptcy.
(b) Any such removal of that Person as a General Partner shall be
effective after the following two conditions have been satisfied: (i)
delivery of a removal notice to the General Partner from the Partners
holding 100% of the Percentage Interests and any Partners with
Undistributed Class A Capital; and (ii) approval by the Partners
holding 100% of the Percentage Interests of a new General Partner and
any Partners with Undistributed Class A Capital and the admission of
such Person as a General Partner in the Partnership.
(c) If a Person is removed as a General Partner but continues to
own a Partnership Interest, then the Partnership Interest shall be
converted into a Partnership Interest as a Limited Partner.
(d) If a Person is removed as 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 new
General Partner may reasonably require to evidence: (i) the removal of
the former General Partner; (ii) if applicable, a conversion of the
Partnership Interest of the former General Partner to a Partnership
Interest as a Limited Partner; and (iii) the admission of a new
General Partner.
(e) Notwithstanding anything to the contrary in Article XI, in
connection with the admission of a new General Partner, the Limited
Partners may assign Partnership Interests to such new General Partner
so that such new General Partner has at least a 1% Percentage Interest
in all items of Profit, Loss, income, gain, loss and deduction,
Partnership capital, and distributions. The Partnership Interest of a
Limited Partner that is assigned to such new General Partner shall be
converted into a Partnership Interest as a General Partner upon its
receipt by the new 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; provided, however, that LB GP
may dissolve the Partnership at any time after December 31, 2004 upon
five Business Days' written notice to 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;
(ii) the removal of both of the General Partners as general
partners of the Partnership, or any other event that results in
the General Partners' ceasing to be the general partners of the
Partnership;
(iii) an election to dissolve the Partnership by the General
Partners, acting jointly, that is approved by all of the Limited
Partners; or
(iv) 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.
-------------------------------
Except as otherwise provided in this Agreement, upon the
occurrence of an event described in Section 13.1(b)(ii) or Section
13.1(b)(iv), if there remains at least one General Partner, the business of
the Partnership shall be carried on if the remaining General Partner(s)
agree to carry on such business. In all other cases, upon the occurrence of
an event described in Section 13.1(b), the Partnership shall be deemed to
be dissolved and reconstituted only if 100% 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), then:
(a) if there is no remaining General Partner, then within such 90
day period a successor General Partner shall be selected by all of the
remaining Partners (if such Partners cannot agree on the selection of
a successor General Partner, the Partnership shall be dissolved and
liquidated);
(b) 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;
(c) the departing General Partner shall be automatically admitted
to the Partnership as a Limited Partner and its former Partnership
Interest as a 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
(d) all necessary steps shall be taken to amend or restate this
Agreement and the Certificate.
13.3 LIQUIDATION.
-----------
(a) Upon dissolution of the Partnership, unless the Partnership
is continued under Section 13.2 of this Agreement, a Person selected
by all of the Partners 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 Partners.
(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 all of the Partners.
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 all of the Partners. 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 General Partners
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:
(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) hereof; provided, 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 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, provided that the Interstate Stock (and
any other marketable securities or cash equivalents) shall not be
distributed to the Partners as tenants in common, but rather shall be
distributed among the Partners in accordance with the provisions of Section
13.3 based upon the Stock Value of the Interstate Stock (or in the case of
any other marketable securities or cash equivalents, their then fair market
value) as of the date of distribution. 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 General
Partners 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 4.4, the General Partners
shall not be personally liable for the return of the Capital Contributions
of Limited Partners, or any portion thereof, it being expressly understood
that any such return shall be made solely from Partnership assets.
ARTICLE XIV
AMENDMENT OF AGREEMENT; CONSENTS
14.1 AMENDMENT PROCEDURES.
--------------------
Except as provided in Section 1.2 of this Agreement, all
amendments to this Agreement shall be in accordance with the following
requirements: (a) amendments to this Agreement may be proposed only by the
General Partners; (b) a proposed amendment shall be effective upon its
approval by the General Partners; and (c) the General Partners shall notify
all Partners upon final adoption of any such proposed amendment.
14.2 ACTION WITHOUT A MEETING.
------------------------
Notwithstanding any contrary permissive provision under the
Delaware Act, any action that requires the consent of all of the Partners
under this Agreement may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by all of the Limited Partners.
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 when delivered in person or when sent by
United States registered or certified mail to the Partner at his address as
shown on the records of the Partnership, regardless of any claim of any
Person who may have an interest in any Partnership Interest by reason of an
assignment or otherwise.
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.
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.
---------
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.
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 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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
Address GENERAL PARTNERS:
-------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇/▇▇ IHR GP, LLC
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
By:
-----------------------------
Name:
Title:
c/▇ ▇▇▇▇▇▇ Brothers Holdings Inc. LB INTERSTATE GP LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ By: ▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ its sole member
By:
-----------------------------
Name:
Title:
Address LIMITED PARTNERS:
-------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇-▇▇▇, LLC
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
By:
-----------------------------
Name:
Title:
c/▇ ▇▇▇▇▇▇ Brothers Holdings Inc. LB INTERSTATE LP LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ By: ▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ its sole member
By:
-----------------------------
Name:
Title:
EXHIBIT A
PARTNERS AND PERCENTAGE INTERESTS
Partner Percentage Interest
------- -------------------
SMW/LB IHR GP, LLC, 0.01%
as a general partner
LB Interstate GP LLC, 0.00%
as a general partner
SMW-IHC, LLC, 99.99%
as a limited partner
LB Interstate LP LLC, 0.00%
as a limited partner
Total 100.00%
=======
EXHIBIT B
Aggregate Deemed Deemed
Class A Capital Contribution Class B Capital
Partner as of Effective Date Contribution
------- -------------------- ------------
SMW/LB IHR GP, LLC $ 0 $ 0
SMW-IHC, LLC $ 0 $1,491,589
LB Interstate GP LLC
(1) Original Class A Amount $15,953 $ 0
(2) November-December
Preference Amount $ 598
(3) January-July
Preference Amount $1,931
------
(4) Capital Contribution $18,482
LB Interstate LP LLC
(1) Original Class A Amount $1,260,292 $ 0
(2) November-December
Preference Amount $ 47,272
(3) January-July
Preference Amount $ 152,549
---------
(4) Capital Contribution $1,460,114
Total $1,478,596 $1,491,589
EXHIBIT C
PARTNER DISCOUNT AMOUNT
------- ---------------
LB INTERSTATE GP LLC $1,865
LB INTERSTATE LP LLC $147,309
EXHIBIT B
FORM OF STOCKHOLDERS AGREEMENT
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of August 17,
2004, by and among the Stockholders (as defined below).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, CGLH Partners I LP, a Delaware limited partnership, and CGLH
Partners II LP, a Delaware limited partnership (collectively, the "CGLH
Partnerships") have, on the date hereof, distributed Shares (as defined
below) to each of the Stockholders pursuant to two separate Distribution
and Contribution Agreements between (i) the Stockholders and CGLH Partners
I LP and (ii) the Stockholders and CGLH Partners II LP.
WHEREAS, the Stockholders wish to impose restrictions on the transfer
of the Shares by the Stockholders, the use of the Shares by the
Stockholders as security for indebtedness, and certain other matters.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the parties hereto hereby agree as
follows:
SECTION 1. CERTAIN DEFINITIONS.
-------------------
As used herein, the following terms shall have the following meanings:
"Affiliate" or "Affiliates" means, with respect to any Person, any
other Person that, directly or indirectly, controls, is controlled by, or
is under common control with such first Person or any other Person who
holds directly or indirectly more than a fifty percent (50%) economic
interest in such first Person or in whom such first Person holds directly
or indirectly more than a fifty percent (50%) economic interest. For the
purpose of this definition, "control" will mean, as to any Person, the
power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or
membership on the board of managers or directors, by contract (including
without limitation a limited partnership agreement or general partnership
agreement) or otherwise. Any trust or nominee directly or indirectly
holding securities principally for the benefit of employees of a party
hereto or its Affiliates shall be deemed to be an Affiliate of such party
hereto.
"Business Day" means any day that is not a Saturday, Sunday or day on
which banks located in New York City are authorized or required to be
closed.
"Company" means Interstate Hotels & Resorts, Inc., a Delaware
corporation.
"Group" means:
(i) in the case of any Stockholder that is a partnership, (A)
such partnership and all of its limited or general partners, (B) any
corporation or other business organization to which such partnership
shall sell all or substantially all of its assets or with which it
shall be merged and (C) any Affiliate of such partnership;
(ii) in the case of any Stockholder that is a corporation, (A)
such corporation, (B) any corporation or other business organization
to which such corporation shall sell or transfer all or substantially
all of its assets or with which it shall be merged and (C) any
Affiliate of such corporation;
(iii) in the case of any Stockholder that is a limited liability
company, (A) such limited liability company and all of its members,
(B) any corporation or other business organization to which such
limited liability company shall sell all or substantially all of its
assets or with which it shall be merged and (C) any Affiliate of such
limited liability company; and
(iv) in the case of any individual, such individual's ascendants
and descendants (whether natural or adopted), such individual's spouse
(and such individual's spouse's ascendants and descendants, whether
natural or adopted), and any trust or other similar entity established
for the benefit of any of the foregoing persons for estate planning
purposes.
"Person" shall mean any individual, corporation, limited liability
company, limited or general partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or other legal
entity or government or any agency or political subdivision thereof.
"Principal Stockholder" shall mean LB Interstate LP LLC and its
successors and assigns.
"Stockholder" shall mean each of the Persons set forth on Schedule A
hereto, as updated from time to time to reflect the addition or removal of
Stockholders upon a permitted Transfer of Shares in accordance with the
terms and conditions set forth herein.
"Shares" shall mean any shares of common stock, par value $0.01 per
share, of the Company held by a Stockholder from time to time.
"Transfer" shall mean any sale, assignment, mortgage, hypothecation,
transfer or pledge of, creation of a security interest in, or lien on, or
any encumbrance, gift, trust (voting or other), bequest or any testamentary
or other disposition of, whether directly or indirectly, voluntary or by
operation of law.
SECTION 2. LIMITATIONS ON TRANSFERS BY STOCKHOLDERS.
----------------------------------------
2.1. General Prohibition. Except as otherwise provided in this
Section 2, each Stockholder agrees that such Stockholder will not Transfer
any Shares without the prior written consent of the Principal Stockholder.
2.2. Co-Sale Rights.
--------------
(a) At any time the Principal Stockholder intends to
Transfer any Shares in one or more brokerage transactions, the Principal
Stockholder shall deliver to each other Stockholder a notice (a "Market
Trade Notice") stating the number of Shares that the Principal Stockholder
intends to Transfer and providing an indicative range of prices per Share.
Each other Stockholder shall have two Business Days following delivery of a
Market Trade Notice to respond to the Principal Stockholder in writing (a
"Market Trade Response") indicating its desire to participate in such
brokerage transactions with respect to a number of Shares not to exceed (i)
the number of Shares then held by such Stockholder multiplied by a
fraction, the numerator of which is the number of Shares proposed to be
transferred by the Principal Stockholder in such Transfer and the
denominator of which is the number of Shares held by the Principal
Stockholder at the time of such Transfer (such maximum being the "Pro Rata
Allocation"). Each Stockholder agrees to execute any such brokerage
transactions through a broker designated by the Principal Stockholder (the
"Broker"). Each Market Trade Response shall indicate the maximum number of
Shares that the Stockholder intends to make available for Transfer through
the Broker in connection with the Market Trade Notice and the price range
at which such Stockholder agrees to a Transfer of Shares. Commencing on the
third Business Day after delivery of the Market Trade Notice, the Broker
shall use its reasonable efforts to execute such Transfers, subject to
market conditions. Such Transfers shall be effected as closely as
practicable in proportion to the respective Pro Rata Allocations of each
participating Stockholder at the time of such Transfer or, if less, the
number of Shares specified in such Stockholder's Market Trade Response, and
provided that any Stockholder that has specified a minimum price in its
Market Trade Response that exceeds the minimum price indicated in the
Market Trade Notice shall not be considered a participating Stockholder
with respect to Transfers executed below such Stockholder's specified
minimum price.
Each Stockholder agrees that it is solely responsible to
ensure that its respective Shares are available for Transfer through the
Broker. Each Stockholder shall be liable for and shall pay any customary
brokerage commissions related to its respective Transfer (it being
acknowledged that the Principal Stockholder may not be liable to pay
commissions in respect of its Transfers). Each Stockholder also agrees that
neither the delivery of a Market Trade Notice nor the receipt of a Market
Trade Response creates any liability or obligation on the part of the
Principal Stockholder and acknowledges that the Broker may be unable to
execute any Transfer for the number of Shares or at the price range
indicated in a Market Trade Response. To the extent that any Shares subject
thereto have not been Transferred, the Broker shall cease making trades in
connection with a Market Trade Notice at the close of business on the
twelfth Business Day following delivery of the Market Trade Notice. Upon
written request of any Stockholder, any unsold Shares shall be promptly
returned to such Stockholder.
(b) If at any time the Principal Stockholder proposes to
Transfer any Shares (other than Permitted Transfers or Transfers to which
paragraph (a) applies), then at least 30 days prior to the closing of such
Transfer, the Principal Stockholder shall deliver a written notice (the
"Sale Notice") to each of the other Stockholders specifying in reasonable
detail the identity of the prospective transferee and the terms and
conditions of the Transfer. Each Stockholder may, within 15 days of the
giving of the Sale Notice, give written notice (a "Tag-Along Notice") to
the Principal Stockholder stating that such Stockholder wishes to
participate in such proposed Transfer and specifying the amount of Shares
such Stockholder desires to include in such proposed Transfer, not to
exceed its Pro Rata Allocation.
If no Stockholder gives the Principal Stockholder a timely
Tag-Along Notice with respect to the Transfer proposed in the Sale Notice,
the Principal Stockholder may thereafter Transfer the Shares specified in
the Sale Notice on substantially the same terms and conditions set forth in
the Sale Notice. If one or more of the Stockholders gives the Principal
Stockholder a timely Tag-Along Notice, then the Principal Stockholder shall
use all reasonable efforts to cause each prospective transferee to agree to
acquire all Shares identified in all Tag-Along Notices that are timely
given to the Principal Stockholder, upon the same terms and conditions as
applicable to the Principal Stockholder's Shares. If such prospective
transferee is unwilling or unable to acquire all Shares proposed to be
included in such sale upon such terms, then the Principal Stockholder may
elect either (i) to cancel such proposed Transfer or (ii) to allocate the
maximum number of Shares that each prospective transferee is willing to
purchase among the Principal Stockholder and the Stockholders giving timely
Tag-Along Notices in proportion to each such Stockholder's and such
Principal Stockholder's respective Pro Rata Allocation.
2.3. Permitted Transfers. Notwithstanding anything to the
contrary in this Agreement, the restrictions in Section 2.1 and Section 2.2
shall not apply to the following:
(a) a Transfer of Shares by a Stockholder to one or more
Persons in such Stockholder's Group in a private sale; provided, however,
that (i) the restrictions on Transfer contained in this Section 2 shall
continue to be applicable to such Shares after any such Transfer and (ii)
the transferee(s) of such Shares shall have executed and delivered to the
other Stockholders, with a copy, for notice purposes, to the Company, a
Joinder Agreement substantially in the form attached as Schedule B hereto
(whereby each such transferee shall, upon such Transfer, become a
Stockholder hereunder); and
(b) subject to the provisions of Section 3, a Pledge of
Shares by a Stockholder pursuant to a permitted Margin Loan, and in the
event of a foreclosure, forfeiture or similar proceeding arising from the
operation of such Pledge, a Transfer of such pledged Shares to a Margin
Lender or by a Margin Lender.
2.4. Adjustment of Permitted Loan Value. In the event of a
permitted Transfer of Shares pursuant to Section 2.3 (a), the Permitted
Loan Value set forth next to such Stockholder's name on Schedule A shall be
reallocated on a pro rata basis between such transferred Shares and the
remaining Shares, if any, retained by such transferring Stockholder and
Schedule A shall be amended to reflect such Transfer and reallocation.
2.5. Restrictive Legend. Upon the execution of this Agreement,
all certificates representing issued and outstanding Shares held by the
Stockholders shall contain a restrictive legend substantially similar to
the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND ARE
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS
AGREEMENT, DATED AUGUST 17, 2004 AMONG CERTAIN STOCKHOLDERS OF THE
COMPANY. A COPY OF THE ABOVE REFERENCED AGREEMENT MAY BE OBTAINED FROM THE
SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE.
2.6. Securities Laws. Notwithstanding anything to the contrary
herein, each Stockholder hereby covenants and agrees that any Transfer of
Shares by such Stockholder shall be undertaken only in full compliance with
all applicable federal and state securities laws including any restrictions
arising by virtue of such Stockholder's status as an Affiliate of the
Company.
SECTION 3. MARGIN LOANS.
------------
3.1. A Stockholder may ▇▇▇▇▇ ▇ ▇▇▇▇ or security interest in,
pledge, hypothecate or encumber (collectively, a "Pledge") any Shares
beneficially owned by such Stockholder to a reputable bank, savings and
loan association, investment bank, brokerage firm of other financial or
lending institution, but specifically excluding hedge funds, with assets
(in name or under management) of not less than $1,000,000,000 (a "Margin
Lender") in connection with the incurrence by such Stockholder of financial
indebtedness (a "Margin Loan") in a principal amount not to exceed the
lesser of (a) the Permitted Loan Value set forth next to such Stockholder's
name on Schedule A and (b) fifty percent (50%) of the fair market value of
such Pledged Shares at the time such Pledge is granted by such Stockholder;
provided, however, that the Margin Lender must agree in writing at or prior
to the time such Pledge is made that no Transfer of Shares in connection
with a foreclosure, forfeiture or similar proceeding arising from the
operation of such Pledge shall be made except as provided in Section 3.2.
3.2. A Margin Lender that has been granted a Pledge of Shares may
Transfer such Shares in connection with, and only in connection with, a
foreclosure, forfeiture or similar proceeding arising from the operation of
such Pledge. Upon such a foreclosure, forfeiture or similar proceeding, the
Margin Lender shall promptly give written notice (a "Notice") thereof to
the Principal Stockholder. The Notice shall state the number of Shares to
which such Notice relates (which shall be all Shares related to such
foreclosure, forfeiture or similar proceeding) and offer (the "Offer") the
Principal Stockholder the option to acquire any or all of such Shares. The
Principal Stockholder shall have five Business Days following receipt of a
Notice (the "Response Period") to respond to the Margin Lender in writing
(a "Response") indicating its intention to accept the Offer, subject to
negotiation of mutually satisfactory terms. Upon delivery by the Principal
Stockholder of a Response, the Principal Stockholder and Margin Lender
shall use their respective reasonable best efforts to consummate a Transfer
of the Shares identified in the Offer within thirty Business Days upon
terms satisfactory to both the Margin Lender and the Principal Stockholder.
Upon the first to occur of (i) rejection of the Offer by the Principal
Stockholder and (ii) the expiration of the Response Period without the
Principal Stockholder delivering a Response, the Margin Lender shall be
free to Transfer the Shares, subject only to any applicable legal
limitations or restrictions thereon. During the period immediately
following any foreclosure, forfeiture or similar proceeding, the Margin
Lender shall Transfer Shares only pursuant to the provisions of this
Section 3.2. Shares Pledged to a Margin Lender that are acquired by it in
connection with a foreclosure, forfeiture or similar proceeding arising
from a Pledge of such Shares may be transferred to a member of such Margin
Lender's Group without regard to the limitations imposed by this Agreement
so long as the transferee agrees to be bound by the provisions of this
Agreement to the same extent such Margin Lender is bound.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
------------------------------
4.1. Each party hereto represents and warrants to the other
parties hereto as follows:
(a) it has full power and authority to execute, deliver and
perform its obligations under this Agreement;
(b) this Agreement has been duly and validly authorized,
executed and delivered by it, and constitutes a valid and binding
obligation enforceable against it in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally;
(c) the execution, delivery and performance of this
Agreement by it does not (i) violate, conflict with, or constitute a breach
of or default under its organizational documents, if any, or any material
agreement or arrangement applicable to it or to which it is a party or by
which it is bound or (ii) violate any law, regulation, order, writ,
judgment, injunction or decree applicable to it; and
(d) no consent or approval of, or filing with, any
governmental or regulatory body is required to be obtained or made by it in
connection with the transactions contemplated hereby other than any such
filings required pursuant to Section 13 or Section 16 of the Securities
Exchange Act of 1934 upon the execution of this Agreement, which filings
shall timely be made by it upon the execution of this Agreement.
4.2. Each Stockholder acknowledges that it understands the
meaning and legal consequences of the representations and warranties
contained herein, and it hereby agrees to indemnify and hold harmless the
other Stockholders from and against any and all loss, damage or liability,
including, without limitation, all costs and expenses (including reasonable
attorneys fees), due to or arising out of a breach of any such
representations or warranties. All representations, warranties and
covenants contained in this Agreement including, without limitation, the
indemnification contained in this section shall survive the termination of
this Agreement.
SECTION 5. TERMINATION.
-----------
(a) The rights and obligations of the Stockholders under
this Agreement shall terminate and, except with respect to Section 6 and as
otherwise expressly provided herein, shall be of no further force or effect
upon the first anniversary of the date hereof.
5.2. As to any particular Stockholder, this Agreement shall no
longer be binding or of further force or effect as to such Stockholder,
except with respect to Section 6 and as otherwise expressly provided
herein, as of the date such Stockholder has transferred all of such
Stockholder's interests in the Shares in accordance with the terms set
forth herein and the transferee(s) of such Shares, if required by this
Agreement, have become a party hereto; provided, however, that any
previously accrued rights of the other Stockholders shall be unaffected and
shall survive notwithstanding any such termination.
SECTION 6. MISCELLANEOUS.
-------------
6.1. 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 by telecopy (with
a confirmatory copy sent by a different means within three business days of
such notice), 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 on Schedule A or such
other address as may hereafter be designated in writing by such party to
the other parties. All such notices, requests, consents and other
communications shall be deemed to have been given when received.
6.2. No Inconsistent Agreements. No party hereunder shall take
any action or enter into any agreement which is inconsistent with the
rights of any party hereunder or otherwise conflicts with the provisions
hereof.
6.3. Further Assurances. At any time or from time to time after
the date hereof, the parties agree to cooperate with each other, and at the
request of any 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 and to otherwise carry out the intent
of the parties hereunder.
6.4. Expenses. All fees, commissions, and other expenses incurred
by any of the parties hereto in connection with negotiation of this
Agreement and in preparing to consummate the transactions contemplated
herein, including fees of counsel, shall be paid by the party incurring
such costs.
6.5. Severability. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other
provision hereof (or the remaining portion thereof) or the application of
such provision to any other persons or circumstances.
6.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each case located in the County of New York,
for any action, proceeding or investigation in any court or before any
governmental authority ("Litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to
commence any Litigation relating thereto except in such courts), and
further agrees that service of any process, summons, notice or document by
U.S. registered mail to its respective address set forth in this Agreement,
or such other address as may be given by one or more parties to the other
parties in accordance with the notice provisions herein, shall be effective
service of process for any Litigation brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives
any objection to the laying of venue of any Litigation arising out of this
Agreement or the transactions contemplated hereby in the courts of the
State of New York or the United States of America, in each case located in
the County of New York, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such
Litigation brought in any such court has been brought in an inconvenient
forum.
6.7. Specific Performance; Injunction.
--------------------------------
(a) The parties agree that it is impossible to determine the
monetary damages which would accrue to a Stockholder by reason of the
failure of any other Stockholder to perform any of its obligations under
this Agreement requiring the performance of an act other than the payment
of money only. Therefore, if any party to this Agreement shall institute an
action or proceeding to enforce the provisions of this Agreement against
any Stockholder not performing such obligations, any tribunal hearing such
cause shall have the power to render an award directing one or more parties
hereto to specifically perform its obligations hereunder in accordance with
the terms and conditions of this Agreement.
(b) In the event of a breach or threatened breach by a
Stockholder of any of the provisions of this Agreement, the other
Stockholders shall be entitled to an injunction restraining such
Stockholder from any such breach. The availability of these remedies shall
not prohibit a Stockholder from pursuing any other remedies for such breach
or threatened breach, including the recovery of damages from such breaching
Stockholder.
6.8. Successors and Assigns. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors, assigns, heirs and personal representatives. Except
pursuant to a Transfer of Shares permitted by Section 2.2, no Stockholder
shall have the right to assign its rights and obligations under this
Agreement.
6.9. Amendments. Neither this Agreement nor any provisions hereof
can be modified, amended, changed, waived, discharged or terminated except
by an instrument in writing, signed by each of the parties hereto.
6.10. 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.
6.11. Nouns and Pronouns. Whenever the context requires, 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.
6.12. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous
agreements and understandings with respect thereto.
6.13. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto and such assigns, any legal or
equitable rights hereunder.
6.14. Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE STOCKHOLDERS:
----------------
LB INTERSTATE GP LLC
By: PAMI LLC,
its Sole Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Title: Authorized Signatory
----------------------
LB INTERSTATE LP LLC
By: PAMI LLC,
its Sole Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Title: Authorized Signatory
----------------------
KFP/LB IHR II, LP
By: KFP/LB IHR GP, LLC,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
KA/LB IHR II, LP
By: KA/LB IHR GP, LLC,
its General Partner
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
CG VENTURES/LB IHR II, LP
By: CG Ventures/LB IHR GP, LLC,
its General Partner
By:/s/ Haider Alibhai ▇▇▇▇▇
-------------------------
Name: Haider Alibhai ▇▇▇▇▇
Title: Vice President
SMW/LB IHR II, LP
By: SMW/LB IHR GP, LLC,
its General Partner
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
DEL/LB IHR II, LP
By: DEL/LB IHR GP, Inc.,
its General Partner
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
PS/LB IHR II, LP
By: PS/LB IHR GP, Inc.,
its General Partner
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
SCHEDULE A
STOCKHOLDERS
------------
------------------------------------- ------------------------------------ ---------------- ---------------
PERMITTED
STOCKHOLDER LOAN VALUE
ADDRESS FOR NOTICES SHARES OWNED (50%) AT $5.77
------------------------------------- ------------------------------------ ---------------- ---------------
LB Interstate LP LLC c/▇ ▇▇▇▇▇▇ Brothers Holdings Inc. 2,632,500 $7,594,763
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ Mechanic, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
LB Interstate GP LLC c/▇ ▇▇▇▇▇▇ Brothers Holdings Inc. 33,323 $96,137
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ Mechanic, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
KFP/LB IHR II, LP 545 E. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Freeway 1,188,964 $3,430,161
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
KA/LB IHR II, LP ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 855,389 $2,467,797
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
CG VENTURES/LB IHR II, LP ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 468,474 $1,351,547
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
SMW/LB IHR II, LP ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 480,185 $1,385,334
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
DEL/LB IHR II, LP ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 480,185 $1,385,334
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
PS/LB IHR II, LP ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 93,696 $270,313
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------- ------------------------------------ ---------------- ---------------
SCHEDULE B
FORM OF JOINDER AGREEMENT
-------------------------
TO: Each Stockholder (as defined in the Stockholders Agreement) at the
address for notices for such Stockholder pursuant to Section 6.1 of the
Stockholders Agreement.
WITH A COPY TO: Interstate Hotels & Resorts, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Ladies & Gentlemen:
In consideration of the transfer to the undersigned of [___________]
shares (the "TRANSFERRED SHARES") of Common Stock, par value $0.01 per
share of Interstate Hotels & Resorts, Inc. a Delaware corporation (the
"COMPANY"), the undersigned hereby agrees that, as of the date written
below, it shall become a party to that certain Stockholders Agreement dated
as of [_____ __], 2004, as such agreement may have been amended,
supplemented or modified from time to time (the "STOCKHOLDERS AGREEMENT"),
among certain individuals and institutions named therein, and shall be
fully bound by, and subject to, all of the covenants, terms and conditions
of such agreement that were applicable to the undersigned's transferor as
though an original party thereto and shall be deemed a Stockholder for all
purposes thereof. Capitalized terms not defined herein shall have the
meanings given to such terms in the Stockholders Agreement.
The undersigned hereby acknowledges that, for the purposes of Section
2.3 and 6.1 and Schedule A of the Stockholders Agreement, the Permitted
Loan Value of the Transferred Shares and Address for Notices shall be as
follows:
------------------------------------- ------------------------------------ ---------------- ----------------
STOCKHOLDER ADDRESS FOR NOTICES SHARES OWNED PERMITTED LOAN
VALUE
------------------------------------- ------------------------------------ ---------------- ----------------
[Name] ____________ [__________] $[________]
____________
____________
Attn:
Fax:
------------------------------------- ------------------------------------ ---------------- ----------------
The undersigned hereby represents and warrants to the addressees
hereof that it has all the requisite corporate power and authority and the
legal right to execute, deliver and perform its obligations under this
agreement, that performance of this agreement does not and will not violate
any provisions of its charter, by-laws or other similar document, or,
except as could not reasonably be expected to result in a material adverse
effect, any contractual obligations binding on it; and that when this
agreement is executed and delivered, it will constitute a valid and legally
binding agreement enforceable against the undersigned in accordance with
its terms.
Executed as of the ___ day of ________, 20__.
By:
---------------------------------
Name:
Title:
Acknowledged:
LB INTERSTATE GP LLC
By: PAMI LLC, its Sole Member
By:
------------------------------
Name:
Title
LB INTERSTATE LP LLC
By: PAMI LLC, its Sole Member
By:
------------------------------
Name:
Title
KFP/LB IHR II, LP
By:
------------------------------------
By:
------------------------------
Name:
Title
KA/LB IHR II, LP
By:
------------------------------------
By:
------------------------------
Name:
Title
CG VENTURES/LB IHR II, LP
By:
------------------------------------
By:
------------------------------
Name:
Title
SMW/LB IHR II, LP
By:
------------------------------------
By:
------------------------------
Name:
Title
DEL/LB IHR II, LP
By:
------------------------------------
By:
------------------------------
Name:
Title
PS/LB IHR II, LP
By:
------------------------------------
By:
------------------------------
Name:
Title
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement, dated as
of August 17, 2004 (this "AGREEMENT"), by and between INTERSTATE HOTELS &
RESORTS, INC., a Delaware corporation (the "COMPANY"), on the one hand, and
LB INTERSTATE GP LLC, a Delaware limited liability company, LB INTERSTATE
LP LLC, a Delaware limited liability company ("LB LP"), and KFP/LB IHR II,
LP, a Delaware limited partnership; KA/LB IHR II, LP, a Delaware limited
partnership; CG Ventures/LB IHR II, LP, a Delaware limited partnership;
SMW/LB IHR II, LP, a Delaware limited partnership; DEL/LB IHR II, LP, a
Delaware limited partnership; and PS/LB IHR II, LP, a Delaware limited
partnership, (each a "SHAREHOLDER" and collectively the "SHAREHOLDERS"), on
the other hand.
W I T N E S S E T H:
WHEREAS, pursuant to a Distribution and Contribution Agreement
dated as of August 17, 2004 (the "DISTRIBUTION AGREEMENT") between LB LP,
LB Interstate GP LLC, MK/CG-GP LLC and MK/CG-LP LLC and KFP/LB IHR II, LP,
a Delaware limited partnership; KA/LB IHR II, LP, a Delaware limited
partnership; CG Ventures/LB IHR II, LP, a Delaware limited partnership;
SMW/LB IHR II, LP, a Delaware limited partnership; DEL/LB IHR II, LP, a
Delaware limited partnership; and PS/LB IHR II, LP, a Delaware limited
partnership, all of the shares of common stock of the Company held by CGLH
Partners I LP and CGLH Partners II LP were distributed to the Shareholders
(the "DISTRIBUTION");
WHEREAS, in connection with the Distribution the parties have
agreed to enter into this Agreement, which amends and restates the
registration rights agreement subsisting between CGLH Partners I LP and
CGLH Partners II LP and the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, the Distribution
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows,
effective at the Effective Time:
ARTICLE I
Definitions
1.1. Certain Definitions. In this Agreement:
"AGREEMENT" has the meaning given to it in the preamble.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
day on which banks located in New York City are authorized or required to
be closed.
"COMMON STOCK" means the shares of common stock of the Company
issued and outstanding from time to time.
"DEMAND SECURITIES" has the meaning given to it in Section 2.2(a)
of this Agreement.
"DESIGNATED JURISDICTIONS" has the meaning given to it in Section
2.2(a) of this Agreement.
"DISTRIBUTION AGREEMENT" 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.
"ELECTING SHAREHOLDER" 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.
"EXERCISING SHAREHOLDER" has the meaning given to it in Section
2.2(a) of this Agreement
"INSPECTORS" has the meaning given to it in Section 2.4(h) of
this Agreement.
"OTHER SECURITIES" has the meaning given to it in Section 2.2(b)
of this Agreement.
"REGISTRABLE SECURITIES" means the shares of Common Stock held by
the Shareholders immediately following the consummation of the transactions
contemplated by the Distribution Agreement, and any additional shares of
Common Stock thereafter acquired by a Shareholder whether in connection
with any stock dividend on, or any stock split, reclassification or
reorganization of any of such shares or such additional shares, or
otherwise, in each case, until such Common Stock may be sold by such
Shareholder without restriction under Rule 144(k) under the Securities Act.
"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.
"SELLING SHAREHOLDER" has the meaning given to it in Section 2.4
of this Agreement
"SHAREHOLDER" has the meaning given to it in the preamble of this
Agreement.
"SPECIFIED SECURITIES" has the meaning given to it in Section
2.1(a) of this Agreement.
"SUBJECT SECURITIES" means shares of 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 the Company proposes
to file with the SEC a registration statement (whether on Form ▇-▇, ▇-▇, 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 (including in connection with a demand registration exercised
pursuant to Section 2.2 but 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, any registration of securities originally placed pursuant
to Rule 144A under the Securities Act, 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 each
Shareholder (other than an Exercising Shareholder in the event of a
registration pursuant to Section 2.2) 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 a
Shareholder (an "ELECTING SHAREHOLDER") received by the Company within 15
days after the date of the Company's delivery to such Shareholder of the
notice of intended registration (which request shall specify the
Registrable Securities sought to be disposed by such Electing 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 4.2, 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 each such Electing Shareholder or into
which such Registrable Securities are convertible, as the case may be, and
which each such Electing 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 thereof as
aforesaid) in the Elected Jurisdictions requested by each such Electing
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 the
Electing Shareholders 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 the Electing Shareholders shall have the
right to include in such registration statement shall be reduced on a pro
rata basis among the Electing Shareholders (based on the aggregate number
of Registrable Securities then held by them or on such other basis as they
shall agree) 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 the Electing Shareholders and no securities
proposed to be sold by the Electing Shareholders 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 any 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) Each Electing 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, such Electing Shareholder shall no longer have any
right to include any of its Registrable Securities in the registration as
to which such withdrawal was made.
(e) Each Shareholder may request to have all or any portion
of its Registrable Securities included in an unlimited number of
registrations under this Section 2.1.
2.2. Demand Rights.
-------------
(a) Upon written request of a Shareholder (an "EXERCISING
SHAREHOLDER") made at any time, 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 sale under the blue sky or securities laws of the various
states of the United States as may be requested by such Exercising
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, such number of Registrable Securities as may be designated by
such Exercising Shareholder in its request (the "DEMAND SECURITIES"), 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 Demand 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 Exercising Shareholder, subject to the
Company's approval, which may not be unreasonably withheld or delayed.
Notwithstanding any other provision in this Section, an Exercising
Shareholder shall not be permitted to make a demand for registration
pursuant to this Section unless the number of Demand Securities covered by
such demand (together with the aggregate number of Specified Securities to
be included in such registration pursuant to Section 2.1 hereof) is at
least 12,500,000 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 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.
(b) If the distribution proposed to be effected pursuant to
this Section 2.2 involves an underwritten offering that includes securities
of the Company in addition to the Demand 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 Demand Securities proposed to be sold, then the
number of Other Securities proposed to be sold shall be reduced to the
maximum number of securities (or principal amount) specified by the
managing underwriter.
(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 disclosures that may be thereby required. Once the cause of the
delay is eliminated, the Company shall promptly notify the Exercising
Shareholder and, promptly after the Exercising 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) Provided that in each case 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:
(i) LB LP shall be entitled to request not more than
three registrations under this Section 2.2;
(ii) KFP/LB IHR II, LP shall be entitled to request not
more than one registration under this Section 2.2;
(iii) KA/LB IHR II, LP and CG Ventures/LB IHR II, LP
shall collectively be entitled to request not more than one
registration under this Section 2.2, but such request may only be made
upon their mutual agreement;
(iv) SMW/LB IHR II, LP and DEL/LB IHR II, LP shall
collectively be entitled to request not more than one registration
under this Section 2.2, but such request may only be made upon their
mutual agreement; and
(v) KFP/LB IHR II, LP, KA/LB IHR II, LP, CG Ventures/LB
IHR II, LP, SMW/LB IHR II, LP, DEL/LB IHR II, LP and PS/LB IHR II, LP
shall collectively be entitled to request not more than one additional
registration under this Section 2.2, which registration may be
requested by any one of them, but only upon the mutual agreement of
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇;
provided, that if a Shareholder requests a registration under this Section
2.2 but no registration statement becomes effective with respect to such
Shareholder's 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 such Shareholder may
make under this Section 2.2.
(e) If there is an effective registration statement
requested by a Shareholder pursuant to this Section 2.2, such 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 such Shareholder, a delay is necessary in order to
avoid materially and adversely affecting the disposition of the Demand
Securities pursuant to the offering by such 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 Registrable Securities held by a Shareholder under this
Article II, or file any post-effective amendment to such a registration
statement relating to such a qualification:
(a) unless, in the case of a request to participate in a
registration under Section 2.1, such Shareholder agrees to sell and
distribute a portion or all of its 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 Common Stock;
(b) unless such Shareholder agrees to bear a pro rata share
of underwriter's discounts and commissions;
(c) if, in the case of a request for registration under
Section 2.2, the Company has given prior 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
(d) unless the Company has received from such Shareholder
all information the Company has reasonably requested concerning such
Shareholder and its method of distribution of its respective
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 one or more Shareholders (each a "SELLING 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. Each Selling Shareholder shall promptly provide the Company
with such information with respect to such Selling Shareholder's
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 each Selling Shareholder, as promptly as
practicable, as many copies of preliminary prospectuses as such
Selling Shareholder may reasonably request (in which case such
Selling 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 each Selling 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 each such Selling 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 each Selling Shareholder written notice of the event
or occurrence and prepare and furnish to each Selling
Shareholder, in such quantities as it may reasonably request,
copies of an amendment of or a supplement to such 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 each Selling 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, each Selling 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 each Selling 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, each Selling 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 each Selling
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 each
Selling 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 any Selling
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.
(d) The Company shall use its reasonable efforts to cause
all Registrable Securities of each Selling 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 New York Stock
Exchange or such other securities exchange or exchanges on which the Common
Stock is then listed or proposed to be listed, if any, as directed by any
Selling Shareholder (subject to the Company's consent, which consent shall
not be unreasonably withheld or delayed).
(e) The Company shall make available to each Selling
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 each Selling
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 any Selling 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 each
Selling 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 any Selling
Shareholder, any underwriter participating in any offering pursuant to the
registration statement, and any attorney, accountant or other agent
retained by any Selling 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.
(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
any Selling 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 any Selling Shareholder or underwriter 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 any Shareholder, the Company will hold harmless each such Shareholder
and each underwriter of such securities and each other person, if any, who
controls any such Shareholder or 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 any
such Shareholder, 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 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 each such
Shareholder and underwriter and each such controlling person, if any, 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 such
Shareholder or underwriter specifically for use in the preparation thereof;
provided further that the Company shall not be liable to any Shareholder or
its underwriters or controlling persons in any such case with respect to
losses, claims, damages or liabilities (including legal fees and costs of
court) that arise out of or are based on an untrue statement or alleged
untrue statement or omission or alleged omission made in any prospectus
used in connection with any request for registration under Section 2.2, to
the extent that such untrue statement or alleged untrue statement or
omission or alleged omission is corrected in any amendment or supplement to
such prospectus if both (y) the person asserting such loss, claim, damage
or liability purchased securities in reliance on such prospectus but was
not given such amendment or supplement thereto on or prior to the
confirmation of the sale of such securities and such amendment or
supplement was required by law to be delivered on or prior to the
confirmation of such sale and (z) the Company had delivered to such
Shareholder or its underwriters such amendment or supplement thereto
pursuant to Section 2.4(a)(iii) in the requisite quantity and on a timely
basis to permit proper delivery to such person on or prior to the date of
confirmation of the sale of such securities.
3.2. Indemnification by Selling Shareholders. It shall be a
condition precedent to the obligation of the Company to include in any
registration statement any Registrable Securities of any Selling
Shareholder that the Company shall have received from such Selling
Shareholder an undertaking, reasonably satisfactory to the Company and its
counsel, to indemnify and hold harmless, on a several but not joint basis,
(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, any person who controls the Company
within the meaning of the Securities Act, and each other Selling
Shareholder (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 such Selling Shareholder specifically for use in the
preparation of such registration statement or amendment or supplement, and
(ii) with respect to compliance by such Selling 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, (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 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 each 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.
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 a Shareholder's 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
a Selling Shareholder, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the New York
Stock Exchange), printing expenses, reasonable fees and disbursements of
counsel (except for the fees and disbursements of counsel for the Selling
Shareholders) 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
Exercising Shareholder (in which case the Exercising Shareholder shall bear
its pro rata share of the expenses based on the number of Registrable
Securities such Shareholder intended to include in such registration
compared to the total number of Subject Securities intended to include in
such registration), unless such Exercising 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 such Exercising Shareholder
has learned of a material adverse change in the condition, business, or
prospects of the Company that was not known to it at the time of its
request, then such Exercising 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. The foregoing notwithstanding, all underwriter's
discounts and commissions covering Registrable Securities offered by a
Shareholder shall be borne by such 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 each Shareholder under
this Agreement shall be transferable by such Shareholder to any party who
acquires Registrable Securities from such Shareholder 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
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 the
assigning 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 such Shareholder would
have had if no assignment had occurred. Upon any transfer of the
registration rights or benefits of this Agreement, such assigning
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 the assigning 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 such assigning 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 any
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 any 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 each Shareholder with any (or all) of such more
favorable terms as any Shareholder shall elect to include herein. The
Company shall promptly give notice to each 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, telecopier, or air courier
guaranteeing delivery:
(a) If to the Company, to:
Interstate Hotels & Resorts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as the Company shall furnish to each
Shareholder in writing;
(b) If to LB LP, to:
LB Interstate LP LLC
c/▇ ▇▇▇▇▇▇ Brothers Holdings Inc.
1284 Avenue of the ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ Mechanic, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to KFB/LB IHR II, LP, to:
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(d) If to KA/LB IHR II, LP, to:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(e) If to CG Ventures/LB IHR II, to:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(f) If to SMW/LB IHR II, LP, to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(g) If to DEL/LB IHR II, to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(h) If to PS/LB IHR II, LP, to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other person or address as a Shareholder shall furnish to the
Company and each other Shareholder 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 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 New York, without
regard to its conflict of laws principles that would indicate the
applicability of the laws of any other jurisdiction.
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 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 New York, and, by execution
and delivery of this Agreement, the Company and each of the Shareholders
each hereby irrevocably consents 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 such party
at its respective address referred to in this Agreement. The Company and
each of the Shareholders 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 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.
5.6. Entire Agreement. This Agreement and the Distribution
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.
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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE SHAREHOLDERS:
LB INTERSTATE GP LLC
By: PAMI LLC,
its Sole Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Title: Authorized Signatory
------------------------
LB INTERSTATE LP LLC
By: PAMI LLC,
its Sole Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Title: Authorized Signatory
------------------------
KFP/LB IHR II, LP
By: KFP/LB IHR GP, LLC,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
KA/LB IHR II, LP
By: KA/LB IHR GP, LLC,
its General Partner
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
CG VENTURES/LB IHR II, LP
By: CG Ventures/LB IHR GP, LLC,
its General Partner
By:/s/ Haider Alibhai ▇▇▇▇▇
---------------------------
Name: Haider Alibhai ▇▇▇▇▇
Title: Vice President
SMW/LB IHR II, LP
By: SMW/LB IHR GP, LLC,
its General Partner
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
DEL/LB IHR II, LP
By: DEL/LB IHR GP, Inc.,
its General Partner
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
PS/LB IHR II, LP
By: PS/LB IHR GP, Inc.,
its General Partner
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
THE COMPANY:
INTERSTATE HOTELS & RESORTS, INC.
By:/s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------
Title: Chief Financial Officer
------------------------