EXHIBIT 2 - BOARD COMPOSITION LETTER
INTERSTATE HOTELS CORPORATION MERISTAR HOTELS & RESORTS, INC.
000 Xxxxxxxx Xxxxx 0000 Xxxxxxxxx Xxxxxx
Xxxxxx Xxxxx Xxx Xxxxxxxxxx, XX 00000
Xxxxxxxxxx, XX 00000
CGLH PARTNERS I LP AND CGLH PARTNERS II LP
c/x Xxxxxx Brothers Holdings Inc.
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
May 1, 2002
Re: Board Composition.
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Ladies and Gentlemen:
Reference is made to that certain Agreement and Plan of Merger
between MeriStar Hotels & Resorts, Inc., a Delaware corporation
("MeriStar") and Interstate Hotels Corporation, a Maryland corporation
("Interstate") dated as of May 1, 2002 (the "Merger Agreement"), pursuant
to which Interstate will merge with and into MeriStar, and MeriStar will be
the surviving corporation (the "Company"). Reference is also made to that
certain Interstate Stockholder Voting and Conversion Agreement between
certain stockholders of Interstate, Meristar and CGLH Partners I LP, a
Delaware limited partnership and CGLH Partners II LP, a Delaware limited
partnership (such limited partnerships, together, "Investor") dated as of
May 1, 2002 and to that certain Conversion Incentive Agreement between
Interstate and Investor dated as of May 1, 2002 (such agreements, together,
the "Support Agreements"). Capitalized terms used but not defined herein
shall have the respective meanings ascribed to them in the Merger
Agreement.
As a further inducement for Investor to enter into the Support
Agreements, each of MeriStar and Interstate does hereby agree and
acknowledge that at each annual meeting of the stockholders of the Company,
or at any meeting of the stockholders of the Company at which members of
the Board of Directors of the Company are to be elected, or whenever
members of the Board of Directors are to be elected by written consent, the
Company shall use its best efforts and shall take all necessary action
within its power, so as to effectuate and carry out the following
provisions:
(a) (i) In connection with the election of members to the Company's
Board of Directors, the Company shall, at the request of Investor, include
in the slate of directors recommended for election by the Board of
Directors to the stockholders of the Company that number of persons
designated by the Investor ("Investor Designees") as would result in there
being five Investor Designees on Company's Board of Directors if all such
Investor Designees were elected (or such lesser number as there are
vacancies on the board); and
(ii) The remaining persons to be recommended for election by the Board
of Directors to the stockholders shall be designated in accordance with the
Company's certificate of incorporation and by laws.
(iii) As of the Effective Time, the class of directors of the Company,
the term of office of which is to expire at the annual meeting next
following the Effective Time shall be comprised of Investor Designees.
(b) Termination of Designation Rights. Investor shall lose its rights
provided in paragraph 1(a)(i) at the first to occur of (i) such time as
Investor and its affiliates and associates beneficially own less than 75%
of the shares of the Company's common stock that they beneficially own as
at the Effective Time and (ii) the date which is 18 calendar months after
the date of this letter agreement. Notwithstanding anything in this
paragraph 1(b) to the contrary, in the event Investor loses its director
nomination right pursuant to paragraph 1(a)(i) above directors appointed by
Investor shall be entitled to participate in the designation of directors
pursuant to paragraph 1(a)(ii) above. For purposes of this paragraph 1(b),
beneficial ownership shall be determined under the rules of the Securities
and Exchange Commission.
(c) Replacement and Removal of Directors. In the event of resignation,
death, removal or disqualification of a director nominated in accordance
with paragraph 1(a)(i) and subsequently elected to the Company's board of
directors, Investor shall promptly designate a replacement director. Any
director nominated in accordance with paragraph 1(a)(i) may be removed at
any time and from time to time, with or without cause (subject to the
bylaws of the Company as in effect from time to time and any requirements
of law), in Investor's sole discretion.
To the extent that beneficial ownership of any shares owned by Investor on
the date hereof has been transferred to any Permitted Transferee (as such
term is defined in the Capri Stockholder Voting and Conversion Agreement)
prior to the Effective Time, such Permitted Transferee shall be considered
to be part of the Investor for all purposes of this agreement.
This letter is being provided to Investor in connection with the Merger and
the Merger Agreement (and the transactions contemplated thereby).
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
This letter may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any
of the parties hereto may execute this instrument by signing any such
counterpart.
Very truly yours,
INTERSTATE HOTELS CORPORATION
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
MERISTAR HOTELS & RESORTS, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxxxxx X. Xxxxxxx
Title: SVP and General Counsel
