Document:

exv10w5w1

 

Exhibit 10.5.1

AMENDMENT NO. 1

          AMENDMENT NO. 1, dated as of May 24, 2007 (this “Amendment”), by and among INTERSTATE
OPERATING COMPANY, LP, a Delaware limited partnership (the “Borrower”), LEHMAN COMMERCIAL
PAPER INC. (the “Administrative Agent”), and the Lenders party hereto to the Credit
Agreement (as defined below).

W I T N E S S E T H:

          WHEREAS, the Borrower, the Administrative Agent, Lehman Brothers Inc. as sole lead arrange and
sole bookrunner, Société Générale, as syndication agent, Calyon New York Branch and Merrill Lynch
Capital, a division of Merrill Lynch Business Financial Services, Inc. as co-documentation agents
and the Lenders have entered into that certain Senior Secured Credit Agreement, dated as of March
9, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”);

          WHEREAS, the Borrower has requested, among other things, (i) an increase in the Commitments in
order to finance the acquisition of the Westin Atlanta Airport Hotel (as defined below), (ii) a
modification of certain financial covenant levels and (iii) an incremental term loan facility;

          WHEREAS, the additional term loan and revolving credit facilities provided by this Amendment
shall be considered the same as the original term loan and revolving credit facilities provided by
the Credit Agreement; and

          WHEREAS, the Administrative Agent and the Lenders have agreed, subject to the terms and
conditions hereinafter set forth, to amend the Credit Agreement as set forth below.

          NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

          1. Defined Terms. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement.

          2. Amendments. Effective as of the Amendment No. 1 Effective Date (as
defined in Section 3 of Amendment No. 1) and subject to the terms and conditions set forth herein,
the Credit Agreement is hereby amended as follows:

          (a) Section 1.01 (Definitions and Accounting) of the Credit Agreement is
hereby amended by inserting the following definitions in the appropriate alphabetical order:

          “Amendment No. 1” means the Amendment No. 1, dated as of May 24, 2007, by and among
the Borrower, the Administrative Agent and the Lenders party thereto.”

          “Amendment No. 1 Effective Date” means the Amendment No. 1 Effective Date as defined
in Amendment No. 1 to this Agreement.”

          “Applicable Margin Differential” has the meaning set forth in Section 2.17(b).”

          “Incremental Loan Extension Date” has the meaning set forth in Section 2.17(a).”

          “Incremental Term Advances” has the meaning set forth in Section 2.17(a).”

          “Initial Term Advance” means the term advance made by any Lender on the Effective
Date.”

 

 

          “Second Term Advance” means the term advance made by any Lender on the Amendment No.
1 Effective Date.”

          “Westin Atlanta Airport Hotel” means Westin Atlanta Airport hotel located in Atlanta,
Georgia.”

          (b) The following definitions in Section 1.01 (Definitions and Accounting)
of the Credit Agreement are hereby amended and restated in their entirety as follows:

          “Revolving Commitment” means, for each Lender, the Revolving Commitment set forth for
such Lender as its Revolving Commitment in the Register maintained by the Administrative Agent
pursuant to Section 10.06(c). As of the Amendment No. 1 Effective Date, the aggregate amount of
the Revolving Commitments under this Agreement is $85,000,000.”

          “Sliver Investments” shall mean debt and equity investments in partnerships,
companies or limited liability companies (a) for which the Borrower’s direct or indirect ownership
interest is less than 50% and (b) that own hospitality properties for which the Borrower or its
wholly-owned subsidiary will have a Customary Property Agreement; provided, that,
with respect to Investments of up to $15,000,000 in the aggregate, such Customary Property
Agreement may be held by an entity which is not a wholly owned subsidiary of Borrower or of a
Subsidiary of Borrower.”

          “Subsidiary” means, with respect to any Person, at any date, any other Person in whom
such Person holds an Investment and whose financial results would be consolidated under GAAP with
the financial results of such Person if such statements were prepared as of such date;
provided, that, any entity in which Borrower or its Subsidiaries has invested
pursuant to paragraph (d) of the definition of Permitted New Investments shall not be considered a
Subsidiary, whether or not the entity is so consolidated so long as the Investment Amount therein
shall not exceed $5,000,000 in the aggregate.”

          “Term Advance” means the combined Initial Term Advance and Second Term Advance.”

          “Term Commitment” means, for each Lender, the Term Commitment set forth for such
Lender as its Term Commitment in the Register maintained by the Administrative Agent pursuant to
Section 10.06(b); provided, however, that after the date of the Second Term
Advance, the Term Commitment for such Lender shall be zero. As of the Amendment No. 1 Effective
Date, the aggregate amount of the Term Commitments under this Agreement is $115,000,000.”

          (c) Section 2.07 (c)(iii) of the Credit Agreement is hereby amended and restated in
its entirety as follows:

          “(iii) Term Advances. Commencing on July 1, 2007 and on each October 1,
January 1, April 1 and July 1 thereafter, the Borrower shall repay the Term Advances by an
amount equal to $287,500.”

          (d) Article II (THE ADVANCES AND LETTERS OF CREDIT) of the Credit Agreement is
hereby amended by inserting the following:

     “Section 2.17. Incremental Loan Extensions.

          (a) The Borrower may from time to time (but no more than three times) after the
Effective Date, request one or more new tranches of term loans (the “Incremental Term
Advance”); provided, however, that (i) the aggregate amount of all Incremental
Term Advance shall not exceed $75,000,000 and (ii) each Incremental Term Advance shall be in an
amount not less than $20,000,000. Nothing in this Agreement shall be construed to obligate the
Administrative Agent, the Arranger or any Lender to negotiate for (whether or not in good faith),
solicit to or provide any Incremental Term Advance. The Administrative Agent shall promptly notify
each Lender of each proposed Incremental Term Advance and of the proposed terms and conditions
therefor agreed between the Borrower and the Administrative Agent. Each such Lender (and each of their Affiliates) may,
in its sole discretion, commit to participate in such Incremental Term Advance by forwarding its
commitment therefor to the

2

 

Administrative Agent in form and substance satisfactory to the Administrative Agent. The
Administrative Agent shall allocate, in its sole discretion but in amounts not to exceed for each
such Lender the commitment received from such Lender or Affiliate, the Incremental Term Advance
commitments to be made as part of such Incremental Term Advance, respectively, to the Lenders from
which it has received such written commitments. Each Incremental Term Advance shall become
effective on a date agreed by the Borrower and the Administrative Agent (each, an “Incremental
Loan Extension Date”), which shall be in any case on or after the date of satisfaction of the
conditions precedent set forth in Sections 3.02 and 3.03. The Administrative Agent shall notify
the Lenders and the Borrower, on or before 1:00 p.m., New York City time, on the day following a
Incremental Loan Extension Date of the effectiveness of an Incremental Term Advance and shall
record in the Register all applicable additional information in respect of such Incremental Term
Advance.

          (b) The Incremental Term Advance shall (i) not have a final maturity earlier than
the Term Maturity Date, (ii) not have a weighted average life to maturity shorter than the
remaining weighted average life to maturity of the Term Advance, (iii) if the Applicable Margin on
such Incremental Term Advance exceeds by more than 25 basis points (the amount of such excess above
25 basis points being referred to as the “Applicable Margin Differential”) the Applicable
Margin then in effect for any Term Advance, then the Applicable Margin then in effect for any Term
Advance shall automatically be increased by the Applicable Margin Differential, effective upon the
making of the Incremental Term Advance, (iv) share with the Term Advances, on a pro
rata basis, any mandatory or optional prepayments made by the Borrower, (v) have the same
Guaranty as, and be secured on a pari passu basis by the same Collateral securing,
the Advances and (vi) have the same terms and conditions as the other Advances (except for any
differences permitted hereby).

          (e) Article III (CONDITIONS OF LENDING) of the Credit Agreement is hereby amended by
inserting the following:

     “Section 3.03. Conditions Precedent to Each Incremental Loan Extension. Each
Incremental Term Advance shall not become effective prior to the satisfaction of all of the
following conditions precedent:

          (a) The Administrative Agent shall have received on or prior to the Incremental Loan Extension
Date each of the following, each dated as of such Incremental Loan Extension Date unless otherwise
indicated or agreed to by the Administrative Agent and each in form and substance satisfactory to
the Administrative Agent:

               (i) written commitments duly executed by existing Lenders (or their Affiliates) or new Lenders
in an aggregate amount equal to the amount of the proposed Incremental Term Advance (not to exceed,
in the aggregate, the maximum amount set forth in Section 2.17) and, in the case of each such new
Lender, an assumption agreement in form and substance satisfactory to the Administrative Agent and
duly executed by the Borrower, the Administrative Agent and such new Lender;

               (ii) an amendment to this Agreement, effective as of such Incremental Loan Extension Date and
executed by the Borrower and the Administrative Agent, to the extent necessary to implement terms
and conditions of such Incremental Term Advance as agreed by the Borrower and the Administrative
Agent;

               (iii) certified copies of resolutions of the Board of Members (or equivalent governing body)
of the Borrower and each Guarantor approving the consummation of such Incremental Term Advance and
the execution, delivery and performance of the corresponding amendments to this Agreement and the
other documents to be executed in connection therewith;

                    (1) a favorable opinion of counsel for the Borrower in form and substance reasonably
satisfactory to the Administrative Agent; and

                    (2) such other documents as the Administrative Agent may reasonably request or as
any Lender participating in such Incremental Term Loan may require as a condition to its commitment
therein.

3

 

               (iv) The Administrative Agent shall have received a certificate from a Responsible Officer of
the Borrower, certifying that on the Incremental Loan Extension Date and immediately after giving
effect to the Incremental Term Advance, the Parent shall be in compliance with the financial
covenants contained in Article VII, in each case determined on a pro forma basis after giving
effect to such Incremental Term Advance, as of the last day of the most recently ended fiscal
quarter of the Parent for which financial statements have been delivered to the Administrative
Agent pursuant to Section 5.05, as applicable, in each case in form and substance and with
supporting documentation reasonably satisfactory to the Administrative Agent.

               (v) There shall have been paid to the Administrative Agent, for the account of itself and the
Lenders, as applicable, all fees and expenses (including reasonable fees and expenses of counsel)
due and payable on or before such Incremental Loan Extension Date.

               (vi) The conditions precedent set forth in Section 3.02 shall have been satisfied both before
and after giving effect to such Incremental Term Advance.

               (vii) Such Incremental Term Advance shall have been made on the terms and conditions set forth
in Section 2.17.”

          (f) Section 7.01 (Debt Service Coverage Ratio) and Section 7.02
(Leverage Ratio) of the Credit Agreement are hereby amended and restated in their entity as
follows:

     “Section 7.01. Debt Service Coverage Ratio.’ The Parent shall maintain at the
end of each Rolling Period a Debt Service Coverage Ratio of not less than (i) 2.25 to 1.00
for the Rolling Period ending December 31, 2008 and (ii) 2.50 to 1.00 for each Rolling
Period thereafter.”

     “Section 7.02. Leverage Ratio.’ The Parent shall not on any date permit the
Leverage Ratio to exceed 5.75 to 1.00.”

          3. Conditions to Effectiveness of this Amendment. This Amendment shall
become effective as of the date (the “Amendment No. 1 Effective Date”) each of the
following conditions precedent shall have been satisfied:

          (a) The Administrative Agent shall have received on or prior to the Amendment No. 1
Effective Date each of the following, each dated the Amendment No. 1 Effective Date unless
otherwise indicated or agreed to by the Administrative Agent and in form and substance satisfactory
to the Administrative Agent:

     (i) Lender Addendums in respect of the Amendment duly executed and delivered
by each of the Borrower, the Administrative Agent and the Required Lenders under the Credit
Agreement;

     (ii) the Borrower shall have acquired the Westin Atlanta Airport Hotel in
accordance with the terms of the Credit Agreement;

     (iii) (A) a favorable written opinion of DeCampo, Diamond & Ash, special
counsel for the Borrower, the Parent, and their Subsidiaries, in a form reasonably
acceptable to the Administrative Agent and (B) such other legal opinions as the
Administrative Agent may reasonably request;

     (iv) a certificate of the Secretary or an Assistant Secretary of the Parent
on behalf of the Borrower certifying (A) the resolutions of the Board of Directors or the
members of the Parent and such other Persons approving and authorizing the execution,
delivery and performance of this Amendment and the other documents required hereunder to be
executed and delivered and (B) that there have been no changes in the organizational
documents of the Parent, the Borrower or any such other Persons previously delivered to the
Administrative Agent on the Effective Date (or if there has been such a change, attaching a
certified copy thereof); and

4

 

     (v) a certificate of the Parent’s chief financial officer as to the Solvency
of the Parent and its Subsidiaries after giving effect to the transactions contemplated
hereby.

          (b) There shall have been paid to the Administrative Agent, for the account of
itself and the Lenders, as applicable, all fees and expenses (including reasonable fees and
expenses of counsel) due and payable on or before the Amendment No. 1 Effective Date.

          4. Representations and Warranties. The Borrower hereby represents and
warrants to the Administrative Agent and the Lenders, on and as of the date hereof, that:

          (a) (i) The Borrower has taken all necessary action to authorize the execution,
delivery and performance of this Amendment, (ii) this Amendment has been duly executed and
delivered by the Borrower and (iii) this Amendment is the legal, valid and binding obligation of
the Borrower, enforceable against it in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and by general equitable principles.

          (b) After giving effect to this Amendment, each of the representations and
warranties made by any Loan Party in or pursuant to the Credit Documents is true and correct in all
material respects on and as of the date hereof, as if made on and as of such date, except to the
extent such representations and warranties expressly relate to an earlier date, in which case such
representations and warranties are true and correct in all material respects as of such earlier
date.

          (c) After giving effect to this Amendment, no Default or Event of Default has
occurred and is continuing as of the date hereof.

          5. Affirmative Covenant.

          (a) The Borrower hereby agrees that the Borrower shall deliver to the Administrative Agent all
Security Documents, including a Mortgage, an Assignment of Lease and a Title Policy for the Westin
Atlanta Airport Hotel, as are necessary for the Administrative Agent on behalf of the Lender to
have an Acceptable Lien on the Westin Atlanta Airport Hotel as and when required by the Credit
Agreement.

          (b) The Borrower hereby agrees that within thirty (30) days after the Amendment No. 1
Effective Date, the Borrower shall take all necessary actions to properly characterize, for
off-site disposal by a licensed contractor in accordance with Environmental Law, the drums and
containers of unknown materials identified and currently located at the Westin Atlanta Airport
Hotel.

          6. Reaffirmation.

          (a) Each Loan Party hereby consents to the execution, delivery and performance of
this Amendment and agrees that each reference to the Credit Agreement in the Credit Documents
shall, on and after the Amendment No. 1 Effective Date, be deemed to be a reference to the Credit
Agreement as amended by this Amendment.

          (b) Each Loan Party acknowledges and agrees that, after giving effect to this
Amendment, the additional term loan and revolving credit facilities provided by this Amendment
shall be subject to the same rights and obligations as the original term loan and revolving credit
facilities provided by the Credit Agreement.

          (c) Each Loan Party hereby acknowledges and agrees that, after giving effect to this
Amendment, all of its respective obligations and liabilities under the Credit Documents to which it
is a party are reaffirmed, and remain in full force and effect.

5

 

          7. Lender Participation. Subject to the terms and conditions set forth in
this Amendment, each Lender severally agrees to make a Second Term Advance to the Borrower on the
Amendment No. 1 Effective Date, in an amount equal to the amount by which such Lender’s Term
Commitment exceeds such Lender’s Initial Term Advance.

          8. Notes. The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will promptly execute and deliver to such Lender a promissory
note of the Borrower evidencing the additional Revolving Advance or Second Term Advance, as the
case may be, of such Lender, with appropriate insertions as to date and principal amount;
provided, that delivery of Notes shall not be a condition precedent to the occurrence of
the Amendment No. 1 Effective Date or the making of Advances.

          9. Continuing Effect. Except as expressly set forth in this Amendment, all
of the terms and provisions of the Credit Agreement are and shall remain in full force and effect
and the Borrower shall continue to be bound by all of such terms and provisions. The Amendment
provided for herein is limited to the specific provisions of the Credit Agreement specified herein
and shall not constitute an amendment of, or an indication of the Administrative Agent’s or the
Lenders’ willingness to amend or waive, any other provisions of the Credit Agreement or the same
sections for any other date or purpose. This Amendment is a Credit Document.

          10. Expenses. The Borrowers agree to pay and reimburse the Administrative
Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the
negotiation, preparation, execution and delivery of this Amendment, and other documents prepared in
connection herewith, and the transactions contemplated hereby, including, without limitation,
reasonable fees and disbursements and other charges of counsel to the Administrative Agent relating
to the Amendment.

          11. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND
ENFORCED, AND ANY DISPUTE BETWEEN THE BORROWER, THE ADMINISTRATIVE AGENT, ANY LENDER, OR ANY
INDEMNITEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK; PROVIDED THAT THE PERFECTION OF THE LIENS
OF THE ADMINISTRATIVE AGENT ON THE COLLATERAL AND THE EXERCISE OF REMEDIES AGAINST THE COLLATERAL
SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE APPLICABLE
JURISDICTION.

          12. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties and separate counterparts, each of which when so executed and
delivered, shall be deemed an original, and all of which, when taken together, shall constitute one
and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment
by facsimile or e-mail shall be effective as delivery of a manually executed counterpart of this
Amendment.

          13. Integration. This Amendment, together with the other Credit Documents,
incorporates all negotiations of the parties hereto with respect to the subject matter hereof and
is the final expression and agreement of the parties hereto with respect to the subject matter
hereof.

          14. Severability. In case any provision in this Amendment shall be invalid,
illegal or unenforceable, such provision shall be severable from the remainder of this Amendment
and the validity, legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

          15. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR

6

 

DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.

[Signature Pages Follow]

7

 

          IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above
written.

	 	 	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	INTERSTATE OPERATING COMPANY, LP,	 	 
	 	 	a Delaware Limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By: Interstate Hotels & Resorts, Inc., 
	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	 	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	 	 	Title:
	 	 Executive Vice President	 	 

 

 

	 	 	 	 	 
	 	LEHMAN COMMERCIAL PAPER INC.,

as a Lender and as Administrative Agent

 	 
	 	By:  	/s/
Craig Malloy	 
	 	 	Name:  	Craig Malloy	 
	 	 	Title:  	Authorized Signatory	 
	 

 

 

     IN WITNESS WHERE, the parties have acknowledged and agreed upon this Amendment as of the date
first written above.

	 	 	 	 	 	 	 	 	 
	 	 	GUARANTORS:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	INTERSTATE HOTELS & RESORTS, INC.	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	 	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	 	 	Title:
	 	Executive Vice President	 	 

 

 

INTERSTATE HOTELS COMPANY

a Delaware corporation

INTERSTATE PARTNER CORPORATION

a Delaware corporation

INTERSTATE PROPERTY CORPORATION

a Delaware corporation

NORTHRIDGE HOLDINGS, INC.

a Delaware corporation

INTERSTATE MEMBER INC.

a Delaware corporation

CROSSROADS HOSPITALITY MANAGEMENT COMPANY

a Delaware corporation

INTERSTATE MANAGEMENT SERVICES, INC.

a Delaware corporation

SUNSTONE HOTEL PROPERTIES, INC.

a Colorado corporation

	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	Title:
	 	Executive Vice President	 	 

 

 

INTERSTATE BATON ROUGE, LLC

a Delaware limited liability company

INTERSTATE TESORO, LLC

a Delaware limited liability company

INTERSTATE CLEVELAND, LLC

a Delaware limited liability company

INTERSTATE SAWGRASS, LLC

a Delaware limited liability company

INTERSTATE DURHAM, LLC

a Delaware limited liability company

IHR DEVELOPMENT GROUP, LLC

a Delaware limited liability company

INTERSTATE INVESTMENTS I, LLC

a Delaware limited liability company

INTERSTATE AIRPORT ATLANTA, LLC

a Delaware limited liability company

	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Interstate Operating Company, LP, its Member
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Interstate Hotels & Resorts, Inc., its general partner
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	 	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	 	 	Title:
	 	Executive Vice President	 	 

 

 

INTERSTATE MANAGEMENT COMPANY, LLC

a Delaware limited liability company

CAPSTAR ST. LOUIS COMPANY, L.L.C.

a Delaware limited liability company

MERISTAR STORRS COMPANY, LLC

a Delaware limited liability company

INTERSTATE CROSS KEYS, LLC

a Delaware limited liability company

INTERSTATE HOTEL MANAGEMENT SYSTEM, LLC

a Delaware limited liability company

	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Interstate Operating Company, LP, its Member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	Interstate Hotels & Resorts, Inc., its
general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	 	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	 	 	Title:
	 	Executive Vice President	 	 

INTERSTATE PROPERTY PARTNERSHIP, L.P.

a Delaware limited partnership

	 	 	 	 	 	 	 
	 

	 	By:
	 	Interstate Property Corporation, its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	Title:
	 	 Executive Vice President	 	 

INTERSTATE MANCHESTER COMPANY, L.L.C.

a Delaware limited liability company

	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Interstate Property Partnership, L.P., its member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	Interstate Property Corporation, its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	 	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	 	 	Title:
	 	Executive Vice President	 	 

 

 

INTERSTATE HOTELS, LLC

a Delaware limited liability company

	 	 	 	 	 	 	 
	 

	 	By:
	 	Northridge Holdings, Inc., its member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	Title:
	 	Executive Vice President	 	 

CONTINENTAL DESIGN & SUPPLIES COMPANY, L.L.C.

a Delaware limited liability company

CROSSROADS HOSPITALITY COMPANY, L.L.C.

a Delaware limited liability company

	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Interstate Hotels, LLC, its managing member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	Northridge Holdings, Inc., its member	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	 	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	 	 	Title:
	 	Executive Vice President	 	 

INTERSTATE HOLDINGS, INC.

a Delaware corporation

	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	Name:
	 	 

Christopher L. Bennett
	 	 
	 

	 	Title:
	 	 Executive Vice President	 	 

 

 

NORTHRIDGE INSURANCE COMPANY

a corporation organized under the laws of the Cayman Islands

	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	Name:
	 	 

 Christopher L. Bennett
	 	 
	 

	 	Title:    Director
	 	 

MERISTAR MANAGEMENT (VANCOUVER-METROTOWN) LTD.

a British Columbia (Canada) corporation

	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Christopher L. Bennett	 	 
	 

	 	Name:
	 	 

 Christopher L. Bennett
	 	 
	 

	 	Title:    Executive Vice Presidentexv10w31

 

EXHIBIT
10.31

April 11, 2007

Steven D. Fitz

920 Madonna Way

Los Altos, CA 94024

Dear Steve:

          On behalf of Isilon Systems, Inc., (the “Company”), I am pleased to offer you the
position of Senior Vice President, Worldwide Sales, with the Company. Speaking for myself, as well
as the other members of the Company’s management team, we are all very impressed with your
credentials and we look forward to your future success in this position. The terms of your
position with the Company are as set forth below.

1. Position and Location

          You are being offered the position of Senior Vice President, Worldwide Sales. You will report
directly to me and subject to fulfillment of any condition imposed by this letter agreement, you
will begin this new position on April 30, 2007 (the “Start Date”). It is the Company’s intention
that you will work out of the Company’s office in Sunnyvale, California, although you may be
transferred to Seattle at the Company’s discretion.

2. Proof of Right to Work

          This offer of employment is contingent upon you presenting, in accordance with applicable law,
verification of your identity and your legal right to work in the United States. In the event that
you do not possess, or are unable to obtain authorization to accept employment in the United
States, our offer of employment is withdrawn.

3. No Conflicts.

          It is the policy of Isilon that employees neither disclose nor use any confidential
information from prior employment while employed by Isilon. Although you have not provided copies
of all agreements with your prior employer EMC Corporation (“EMC”), it is the Company’s
understanding that any such agreements will not prevent you from performing the duties of your
position.

							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com

 

 

4. ***

5. References

	 	•	 	This offer is contingent upon successful references and background check.

6. Compensation

	 	•	 	Base Salary: You will be paid $225,000 on an annual basis. Your salary will
be payable every two weeks pursuant to the Company’s regular payroll policy and will be
subject to applicable withholding taxes. Your base salary may be increased in the future,
but will not be decreased, by the Company.
	 
	 	•	 	Bonus: You are eligible for a quarterly bonus of $31,250 ($125,000 total
annual bonus potential or higher with Company performance above plan) upon successful
achievement of MBOs and Company goals. The bonus is split equally between achievement of
MBOs and certain revenue/EBIT goals, as determined by the Compensation Committee of the
Board of Directors (the “Compensation Committee”).
	 
	 	•	 	Commission Plan: You will be eligible for commissions based on Isilon’s global
sales revenue. The 2007 plan calls for *** of total revenue, with *** of revenue
contribution in Q2, *** in Q3, and *** of revenue in Q4. Target annual commission is
$125,000 at plan, plus upside above target as noted below:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	% Increase over	 	 
	Annual Revenue	 	% of Target	 	Commission %	 	Commission $	 	Target	 	Total Compensation*
	***
	 	 	100	%	 	 	*	**	 	$	125,000	 	 	 	 	 	 	$	475,000	 
	***
	 	 	110	%	 	 	*	**	 	$	300,000	 	 	 	*	**	 	$	650,000	 
	***
	 	 	125	%	 	 	*	**	 	$	450,000	 	 	 	*	**	 	$	800,000	 
	***
	 	 	150	%	 	 	*	**	 	$	650,000	 	 	 	*	**	 	$	1,000,000	 

 

			
	*	 	plus potential bonus upside for Company performance above plan

7. Stock Options

	 	•	 	Initial Option Grant. Following the commencement of your employment, the
Company will recommend that the Compensation Committee grant you a nonstatutory stock
option to purchase 360,000 shares of the Company’s Common Stock. The exercise price will
be the market closing price (or the closing bid, if no sales are reported) of the Company’s
Common Stock on The NASDAQ Global Market on the date of the grant, which will be on the
first new hire stock option approval date following your Start Date, unless such date falls
within a quarterly trading blackout period, in which case the date of grant will be the
first day the Company’s trading window opens following that quarterly blackout period. The
option may be exercised in accordance with the following vesting schedule: 25% of the shares will vest on the

							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com

 

 

twelve (12) month anniversary of your Start Date and 1/12th
of the remaining
shares will vest quarterly thereafter, such that the option will be fully vested and
exercisable on the four-year anniversary of your Start Date. Vesting will, of course,
depend on your continued employment with the Company. The option will be a nonstatutory
stock option and will be subject to the terms of the Company’s 2006 Equity Incentive Plan
(the “2006 Plan”) and Notice of Grant of Stock Option, each of which is attached hereto.

	 	•	 	Subsequent Option Grants. At the discretion of the Company’s Board of Directors
(or its designated committee), you may be eligible to receive additional grants of stock
options or purchase rights from time to time in the future, on such terms and subject to
such conditions as the Compensation Committee shall determine as of the date of such grant.

8. Benefits

	 	•	 	Insurance Benefits. The Company will provide you with standard medical and
dental insurance benefits according to Company policy. Benefits will commence the first of
the month following your first day of full-time employment with the company.
	 
	 	•	 	Vacation. You will be entitled to vacation according to Company policy.
	 
	 	•	 	Indemnification. The Company currently indemnifies all officers and directors
to the maximum extent permitted by law, and you will enter into the Company’s standard form
of Indemnification Agreement giving you such protection. Pursuant to the Indemnification
Agreement, the Company will agree to advance any expenses for which indemnification is
available to the extent allowed by applicable law. You shall be covered by all directors
and officers insurance policies in place during your employment, providing protection at
least comparable to present coverage.

9. Relocation Benefits. If the Company requests that you relocate to Seattle, the Company will
provide the following:

	 	•	 	House hunting trip for up to 4 days for you and your family (includes airfare,
hotel, rental car, meals in accordance with Isilon’s travel policy);
	 
	 	•	 	Household move to include goods/cars and storage for up to 60 days;
	 
	 	•	 	Temporary housing for up to 60 days. Temporary housing beyond 60 days will be
by mutual agreement; and
	 
	 	•	 	Closing costs in connection with the sale of your current residence in
California and the purchase of a primary residence in the Seattle area will be reimbursed
up to $200,000.

          The following elements of your compensation package will be contingent upon your relocation
date:

							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com

 

 

	 	•	 	Upon the date of the relocation (the “Relocation Date”) with your family to
Seattle, if requested by the Company, the Company will recommend that the Compensation
Committee grant you a nonstatutory stock option to purchase 40,000 shares of the Company’s
Common Stock (the “Relocation Grant”). The exercise price for this Relocation Grant will
be the market closing price (or the closing bid, if no sales are reported) of the Company’s
Common Stock on The NASDAQ Global Market on the date of the grant, which will be on the
first new hire stock option approval date following the Relocation Date, unless such date
falls within a quarterly trading blackout period, in which case the date of grant will be
the first day the Company’s trading window opens following that quarterly blackout period.
The Relocation Grant (if provided) will vest in accordance with the following schedule:
25% of the shares will vest on the twelve (12) month anniversary of the Relocation Date and
1/12th of the remaining shares will vest quarterly thereafter, such that the
Relocation Grant will be fully vested and exercisable on the four-year anniversary of the
Relocation Date. For purposes of this clause, the Relocation Date shall be understood to
mean the later of the dates on which (a) you have closed on the purchase of a primary
residence in the Seattle area; and (b) your immediate family members are all permanently
living in the Seattle area.50% of your quarterly MBO payout will accrue but not be paid
unless and until you have relocated to Seattle, to occur no later than July 1, 2008,
provided that the Company has requested such relocation. If the Company does not request
such relocation prior to April 15, 2008, any accrued MBO payments will be made to you on or
before May 15, 2008.

10. Severance Benefits.

	 	•	 	General. In the event of termination of your employment under any
circumstances you will not be entitled to any benefits (other than those you are due under
applicable law) except as set forth in this Section.

	 	•	 	Termination. If the Company terminates your employment for any reason other
than for Cause (as defined below), or you resign your position with the Company for Good
Reason (as defined below), subject to your signing and not revoking a release of claims
substantially similar to a form attached hereto as Exhibit A, you will be entitled to
receive an immediate lump-sum payment in an amount equal to your then current base salary
or $225,000 on an annualized basis, whichever is higher. Furthermore, you shall be entitled
to receive reimbursement of COBRA premiums for a period of six (6) months (the “Severance
Period”). To the extent that you obtain health benefits from another employer or pursuant
to a consulting relationship during the Severance Period, if applicable, reimbursement of
COBRA premiums will cease to the extent that you ceased to make COBRA payments because of
such health benefits. You agree that you will notify the Company of your obtaining
employment or a consulting agreement, and the relevant terms thereof, during the Severance
Period. You will not be entitled to any additional payments, salary, bonus or benefits in
the event of termination for Cause.

	 	•	 	Section 409A. Notwithstanding anything to the contrary in this letter
agreement, any cash severance payments otherwise due to you pursuant to the foregoing
paragraph or otherwise on or within the six-month period following your termination will
accrue

							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com

 

 

during such six-month period and will become payable in a lump sum payment on the date six
(6) months and one (1) day following the date of your termination, provided, that such cash
severance payments will be paid earlier, at the times and on the terms set forth in the
applicable provisions of the foregoing paragraph, if the Company reasonably determines that
the imposition of additional tax under Section 409A of the Internal Revenue Code of 1986, as
amended, will not apply to an earlier payment of such cash severance payments. In addition,
this letter agreement will be deemed amended to the extent necessary to avoid imposition of
any additional tax or income recognition prior to actual payment to you under Code Section
409A and any temporary or final Treasury Regulations and guidance promulgated thereunder and
the parties agree to cooperate with each other and to take reasonably necessary steps in
this regard.

	 	•	 	“Cause” for termination will exist if you are terminated for any of the
following conduct that has caused or is reasonably expected to result in material injury to
the Company: (i) your willful failure substantially to perform your duties or
responsibilities to the Company or deliberate violation of a Company policy; (ii) your
commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct;
(iii) unauthorized use or disclosure by you of any proprietary information or trade secrets
of the Company or any other party to whom you owe an obligation of nondisclosure as a
result of your relationship with the Company; or (iv) your willful breach of any of your
obligations under any written agreement or covenant with the Company.

	 	•	 	“Good Reason” is defined as (1) any action by the Company or any successor that
results in a diminution of your position, authority, duties, responsibilities, compensation
or benefits without your written consent, (2) any failure by the Company or any successor
to comply with any provision of this letter agreement, (3) the Company’s or any successor’s
requiring you to be based at any office or location more than 30 miles from your office
location; provided however, that a future relocation to Seattle shall not constitute Good
Reason, or (4) any failure by a successor to the Company to assume the Company’s material
obligations under this letter agreement.

	 	•	 	Conditions. Any payments made will be subject to applicable tax withholding,
and your receipt of such payments shall be subject to your executing the Company’s (or it’s
successors) standard form release of claims releasing the Company and it’s successor(s)
from claims relating to your employment relationship and termination of that relationship.

11. Change of Control.

          Generally, any stock options granted to you will be subject to the terms set forth in the
attached 2006 Plan.

							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com

 

 

          Notwithstanding the foregoing, upon a Change in Control (as defined in the 2006 Plan), the
Initial Option Grant and the Relocation Grant (if provided) shall immediately vest and become
exercisable as to twenty-five percent (25%) of the Shares that are unvested under each option as of
the date of the Change in Control. Additionally, in the event the Company terminates your status
as a Service Provider (as defined in the 2006 Plan) without Cause (as defined in the 2006 Plan) or
you resign your position with the Company for Good Reason (as defined above), within twelve (12)
months after the consummation of a Change in Control, the Initial Option Grant and the Relocation
Grant (if provided) shall immediately vest and become exercisable as to an additional twenty-five
percent (25%) of the Shares that are unvested under each option as of the date of termination shall
immediately vest and become exercisable.

12. Proprietary Information and Inventions Agreement

          Your acceptance of this offer and commencement of employment with the Company is contingent
upon the execution, and delivery to an officer of the Company, of the Company’s Proprietary
Information and Invention Assignment Agreement, a copy of which is enclosed for your review and
execution (the “Assignment Agreement”), prior to or on your Start Date.

13. At-Will Employment

          Your employment with the Company will be on an “at will” basis, meaning that either you or the
Company may terminate your employment at any time for any reason or no reason, without further
obligation or liability.

14. Acceptance

          We are all delighted to be able to extend you this offer and look forward to working with you.
To indicate your acceptance of the Company’s offer, please sign and date this letter in the space
provided below and return it to me, along with a signed and dated copy of the Assignment Agreement
by 3:00 p.m. (PDT) on Thursday, April 12, 2007.

          This letter, together with the Assignment Agreement, set forth the terms of your employment
with the Company and supersedes any prior representations or agreements, whether written or oral.
This letter shall be interpreted and enforced in accordance with the laws of the State of
Washington without regard to conflicts of law principles. This letter may not be modified or
amended except by a written agreement, signed by the Company and by you.

							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com

 

 

	 	 	 	 	 
	 	Very truly yours,

ISILON SYSTEMS, INC.

 	 
	 	By:  	
/s/ Steve Goldman	 
	 	 	Steve Goldman 	 
	 	 	CEO and President 	 
	 

ACCEPTED AND AGREED:

Steven D. Fitz

	 	 	 
	
/s/ Steven D. Fitz	 
	Signature 	 
	 	 
	
April 12, 2007	 
	Date	 

			
	Enclosures:	 	Proprietary Information and Invention Assignment Agreement

2006 Stock Incentive Plan

Exhibit A — Sample Separation Agreement

							
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3101 Western Ave, Seattle, WA 98121
	 	TEL (206) 315-7500
	 	FAX (206) 315-7501
	 	www.isilon.com

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