Exhibit 10.18
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AND CONSULTING AGREEMENT
     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT AND CONSULTING AGREEMENT
(“Agreement”), dated as of July 1, 2008 (the “Effective Date”), made and entered
into by and between Interstate Hotels and Resorts, Inc., a Delaware corporation,
and Interstate Management Company, LLC, a Delaware corporation (together the
“Company”), and Henry L. Ciaffone (the “Executive”) hereby amends and restates
the Employment Agreement between the Company and the Executive dated as of
January 1, 2007 (the “2007 Agreement”).
RECITALS
     A. The Executive is currently serving as President, International
Operations and Development of the Interstate Hotels and Resorts, Inc. pursuant
to the 2007 Agreement.
     B. The Company and the Executive desire to amend and restate the 2007
Agreement and to continue the employment relationship with the Executive as
President, International Development and Operations through December 31, 2009,
on the terms and conditions herein provided, and subject to the termination
provisions set forth in Section 5.
     C. The Company and the Executive desire to continue Executive’s
relationship with the Company as a consultant beginning on January 1, 2010 which
consultancy shall continue until December 31, 2014, subject to the termination
provision set forth in Section 5.
     NOW, THEREFORE, the parties agree as follows:
     1. Definitions. In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this Agreement with
initial capital letters:
          (a) “Base Pay” means the salary provided for in Section 4(b), as such
amount may be adjusted hereunder.
          (b) “Board” means the Board of Directors of the Company or an
authorized committee thereof.
          (c) “Cause” means that the Executive shall have:
          (i) committed an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment or consultancy
with the Company or any Subsidiary;

 

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          (ii) committed intentional wrongful damage to property of the Company
or any Subsidiary;
          (iii) committed intentional Unauthorized Disclosure, Use or
Solicitation; or
          (iv) failed to fulfill his obligations set forth in Section 3 relating
to the Term, other than due to Executive’s death; provided that any failure by
the Executive to fulfillhis obligations during the Term because of factors
outside of his control, including but not limited to illness documented by
reasonable medical documentation, shall not constitute Cause for termination,
and further provided that before invoking this Section 1(c)(iv) to terminate the
Executive for Cause the Company shall provide the Executive written notice of
its intent to do so and shall provide Executive a reasonable opportunity to cure
the alleged breach by fulfilling the obligations within a reasonable time period
following delivery of such notice;
          (v) committed intentional wrongful engagement in any Competitive
Activity; and any such act shall have been materially harmful to the Company.
For purposes of this Agreement, no act or failure to act on the part of the
Executive will be deemed “intentional” if it was due primarily to an error in
judgment or negligence, but will be deemed “intentional” only if done or omitted
to be done by the Executive not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive will not be deemed to have been
terminated for “Cause” hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the full Board of Directors
then in office at a meeting of the Board of Directors called and held for such
purpose, after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in the
good faith opinion of the Board, the Executive had committed an act constituting
“Cause” as herein defined and specifying the particulars thereof in detail,
provided, however, that nothing herein will limit the right of the Executive or
his beneficiaries to contest the validity or propriety of any such determination
and such determination, albeit a condition to any termination for “Cause” as
aforesaid, will not create any presumption that “Cause” in fact exists.
          (d) “Competitive Activity” means any act by the Executive that is
prohibited under Section 6(a).
          (e) “Disability” means the Executive’s inability, as a result of
mental or physical illness, injury or disease, substantially to perform his
material duties and responsibilities under this Agreement for a period of 180
consecutive calendar days within any 12-month period.

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          (f) “Employee Benefits” means the perquisites, benefits and service
credit for benefits as provided under any and all employee welfare benefit
policies, plans, programs or arrangements in which Executive is entitled to
participate, including without limitation any group or other life, health,
medical/hospital or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans,
programs or arrangements that may be adopted hereafter by the Company.
          (g) “Subsidiary” means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock or, if
a partnership, limited liability company or similar entity, at least 50% of the
equity capital interests thereof.
          (h) “Term” means the period specified in Section 2.
          (i) “Unauthorized Disclosure, Use or Solicitation” means any violation
or breach by the Executive of any provision of Section 7.
     2. Term. The Company hereby employs the Executive and the Executive hereby
accepts such employment, effective as of the Effective Date and ending at the
close of business on December 31, 2009 (the “Employment Term”). . The Company
hereby agrees to retain the Executive as an independent consultant and the
Executive hereby accepts such retention, effective from January 1, 2010 through
December 31, 2014 (the “Consulting Term). (The Employment Term together with the
Consulting Term are collectively referred to herein as the “Term”.)
     3. Duties, Responsibilities and Office Location. During the Employment
Term, the Executive will have and perform the duties and responsibilities set
forth in Exhibit A and shall devote substantially all of his business time to
the business and affairs of the Company and its Subsidiaries (excluding
reasonable amounts of time devoted to charitable purposes, passive investments
and directorships and periods in which he is physically or mentally ill, injured
or otherwise disabled), travel to Moscow on fifteen occasions during the
Employment Term for a period on each occasion lasting approximately seven to ten
days (including travel days), execute annually the Company’s standard Foreign
Corrupt Practices Act certification, and assist the Company’s Chief Executive
Officer with the evaluation and implementation of a succession plan. While in
the United States, the Executive shall utilize his residence as his primary
office location. During the Consulting Term, the Executive agrees to travel to
Moscow on two occasions annually for a period lasting approximately seven to ten
days on each occasion (including travel days) and to execute annually the
Company’s standard Foreign Corrupt Practices Act certification. During the
Consulting Term, from time to time as reasonably requested by the Company’s
Chief Executive Officer, the Executive will provide advice and counsel
concerning the Included Hotels..
     4. Compensation and Benefits.

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          (a) The Company and the Executive agree that the Executive’s overseas
assignment ended as of June 30, 2008, that the Company’s obligations to tax
equalize past payments received by the Executive remain in effect under the 2007
Agreement and that no additional payments to the Executive shall be tax
equalized except the Annual Special Bonus.
          (b) Base Pay. During the Employment Term, the Executive will receive
Base Pay of $475,000 per year. Base Pay will be payable by the Company in
accordance with its regular compensation practices and policies applicable to
senior executives of the Company.
          (c) Annual Special Bonus. The Annual Special Bonus will be payable on
the first business day of 2009. For 2009 the Annual Special Bonus will equal
$300,000. The Annual Special Bonus shall not be paid to the Executive in the
event that the owner of the Moscow hotels terminates the three management
agreements without compensation to the Company.
          (d) Annual Performance Bonus. For each fiscal year of the Company
during the Employment Term or pro-rata portion thereof the Executive shall
receive an Annual Performance Bonus that can vary from a minimum of 100% to a
maximum of 125% of the Executive’s Base Pay. In the event of termination of this
Agreement for any reason other than Cause during the Employment Term, the
Executive shall receive the pro rata portion of the Annual Performance Bonus for
the then current fiscal year.
          (e) Development Fee. Beginning the Effective date, the Executive shall
also receive quarterly 5% of the gross management fees (including base fees,
incentive fees, termination fees, liquidated damages or similar payments,
collectively “Fees”) actually received by the Company in connection with each
hotel management agreement related to the Included Hotels as defined below (“the
Development Fee”). The Development Fee shall be payable to the Executive
respecting the Holiday Inn Lesnaya, Holiday Inn Suschevsky, Hilton
Leningradskaya Hotel, the Renaissance Leningradsky Hotel, the Marriott Tverskaya
Hotel, the Marriott Grand Hotel, and the Marriott Aurora Hotel (the “Existing
Hotels”). It shall also be payable to the Executive respecting Fees from hotel
management agreements entered into by the Company respecting hotels located in
the former Soviet Union during the Term (the “New Hotels”). (The Existing Hotels
and New Hotels together are collectively referred to herein as the “Included
Hotels.”) The Company shall pay to the Executive $300,000 on or before the
fifteenthof July 2008 in full and complete satisfaction of its Development Fee
obligation to the Executive for the Marriott Tverskaya, Marriott Grand and
Marriott Aurora for fiscal year 2008. If the Hilton Leningradskaya opens prior
to the Effective Date, the Executive will receive the Development Fee for such
hotel from the date such hotel opens through the Effective Date. Except as set
forth in this Section and in Section 5, the Development Fee shall survive this
Agreement and be payable to the Executive or his heirs through the end of the
fiscal quarter which includes the tenth anniversary of the later of (i) the
Commencement Date as defined in each management agreement and (ii) the date of
inclusion of a particular management agreement in this Section 4(e) as an
Included Hotel. Notwithstanding the previous sentence, the Development Fee
obligation shall cease on (i) July 1, 2018 for the Marriott Tverskaya Hotel,
Marriott Grand Hotel and Marriott Aurora Hotel and (ii) with respect to New
Hotels, the tenth anniversary date of the

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Commencement Date as defined in each management agreement. Notwithstanding the
two previous sentences, no Development Fee shall be due pursuant to this
Agreement after the date which is the conclusion of the second fiscal year after
the year of the death of the Executive.
          (f) Employee Benefits. During the Employment Term, the Executive will
be entitled to (i) participate in all employee benefit plans, programs, policies
and arrangements sponsored, maintained or contributed to by the Company, subject
to and in accordance with the terms and conditions of such plans, programs,
policies and arrangements as they relate to similarly situated senior executives
of the Company, (ii) participate in all equity and long-term incentive plans
sponsored or maintained by the Company at a level commensurate with his
position, subject to and in accordance with the terms and conditions of such
plans as they relate to senior executives of the Company, and (iii) receive all
other benefits and perquisites provided or made available by the Company to its
senior executives, subject to and in accordance with the terms and conditions of
such benefits and perquisites as they relate to senior executives of the
Company.
          (g) Expenses. During the Term, the Executive will be entitled to
reimbursement of all documented reasonable travel and entertainment expenses
incurred by him on behalf of the Company in the course of the performance of his
duties hereunder, subject to and in accordance with the terms and conditions of
the Company’s expense reimbursement policies as they relate to senior executives
of the Company.
          (h) Vacation. During the Employment Term, the Executive will be
entitled to not less than four weeks of vacation, in addition to paid public
holidays as observed by the Company from year to year, subject to and in
accordance with the terms and conditions of the Company’s regular compensation
practices and policies as they relate to senior executives of the Company.
          (i) [Intentionally Omitted].
          (j) Travel Reimbursement. Each fiscal year during the Employment Term
the Company shall reimburse to the Executive the cost of round trip first class
airline tickets between Moscow, Russia and Sarasota, Florida in the United
States for the Executive and his spouse as follows: (i) five (5) such trips by
the Executive in the second half of 2008 (three (3) by the spouse) and (ii) ten
(10) such trips by the Executive in 2009 (six (6) by his spouse). During the
Consulting Term, the Company shall reimburse to the Executive the cost of two
(2) such trips annually by the Executive and his spouse. If additional trips are
agreed to by the parties during the Consulting Term, Executive will be paid a
per diem to be mutually agreed upon by the parties for each such trip plus the
reimbursement of all reasonable travel expenses for him and his spouse.
          (k) [Intentionally Omitted]
          (l) Tax Equalization Program. As part of the Executive’s compensation
and benefits while in Russia, the Company will tax equalize the Annual Special
Bonus. The

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purpose of the tax equalization program is to ensure that the Executive does not
incur any additional U.S. Federal income tax or state income tax that the
Executive would not have incurred had he been employed in the United States.The
Company will reimburse the Executive for all required Russian income taxes.
          The accounting firm of PriceWaterhouseCoopers or any independent,
certified public accounting firm so designated by the Company will compute the
tax equalization payment. The tax equalization payment will cover the year in
which the Executive starts his foreign assignment and will conclude when all tax
costs related to the overseas assignment have concluded.
          As part of the tax equalization program the Executive will be provided
with tax preparation services. These services will be provided for the Executive
beginning calendar year 2002 and ending the full calendar year when all tax
issues related to the overseas assignment have concluded.
          (m) [Intentionally Omitted]
          (n) [Intentionally Omitted]
          (o) Life and Disability Insurance. The Company agrees to reimburse the
Executive for up to $20,000 per fiscal year for a life insurance policy and/or a
disability policy during the Employment Term.
          (p) Annual Medical Examination. The Company agrees to reimburse the
Executive for all costs incurred by the Executive during the Employment Term for
an Annual Medical Examination at a facility such as the Mayo Clinic-
Jacksonville for the Executive and his spouse. These costs shall be reduced by
any costs reimbursed to the Executive or paid directly under the Company’s
medical plan. The total cost to the Company shall not exceed $6,000 per year.
(The Parties agree that the 2009 Annual Medical Examination may occur in 2010
due to scheduling considerations.)
          (q) Indemnification. As part of duties under this Agreement, the
Executive currently serves as the Director General of several entities
affiliated with or owned by Mospromstroi (as defined in Section 6(b)) and the
owner of the Renaissance Leningradsky Hotel. The Company shall indemnify, defend
and hold harmless the Executive from and against any and all liabilities,
actions, damages, costs and expenses (including attorneys’ fees) arising out of,
or relating to, the Executive holding such position(s) to the maximum extent
permitted by law. Such obligation shall, among other things, require the Company
to take all feasible steps at the request of the Executive to enable the
Executive to return to the United States promptly in the event that the
Executive is detained in Russia against his will or faces the possibility of
detention. In addition, as brought to the attention of Company by the Executive,
the Company shall use its best efforts to explore additional means to afford to
the Executive the maximum protections available in connection with holding such
positions. This indemnification obligation shall cease once the Executive no
longer serves as General Director of any hotel managed by the

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Company; provided that the indemnification obligation will continue after such
date relating to events or alleged events that occurred prior to such date.
     5. Termination of Employment or Consultancy.
          (a) Termination by Notice. The Executive’s employment and consultancy
hereunder will be for the terms specified in Section 2, provided that the Term
and the Executive’s employment and/or consultancy may be terminated at any time
subject to this Section 5. Any termination of Executive’s employment during the
Employment Term for Cause, death, or Disability, or by the Executive, shall
result in an automatic termination of the Consulting Term for Cause, death, or
Disability, or by the Executive, as the case may be. Any termination of
Executive’s employment during the Employment Term for any reason other than
Cause, death, or Disability, or by the Executive, shall not result in the
automatic termination of the Consulting Term.
          (b) Voluntary Termination or Termination for Cause. If the Executive’s
employment or consultancy is terminated by the Company effective during the Term
for Cause, or is terminated by the Executive, the Executive will not be entitled
to the continuation of any compensation or benefits provided herein, except as
provided in Section 4(e), and shall retain only the pro rata portion of the
Annual Special Bonus for the then current fiscal year.. Notwithstanding any
other provision of this Agreement including those in Section 4(e), upon
Termination for Cause in accordance with Section 1(c) or by the Executive during
the Term, the Company shall no longer be obligated to pay the Development Fee to
Executive relating to the Marriott Grand Hotel, Marriott Aurora Hotel, Marriott
Tverskaya Hotel, and the Hilton Leningradskaya Hotel. Moreover, management
agreements signed by the Company after such termination shall not be added to
the definition of New Hotels. Executive shall, however, remain entitled to
receive the Development Fee from all Included Hotels except as specifically
excluded above. Nothing herein will limit the Company’s rights against the
Executive or the rights and obligations of the parties under Sections 6 and 7.
          (c) Termination For Any Reason Other Than Cause, Death, or Disability.
               (i) If the Executive’s employment is terminated by the Company
during the Employment Term for any reason other than Cause, death, or Disability
:
          (A) The Executive will be entitled to receive the greater of (A) the
sum of his Base Pay, Annual Special Bonus and Annual Performance Bonus for one
(1) year immediately preceding the effective date of his termination of
employment and (B) his Base Pay (at the rate in effect on the effective date of
his termination of employment), and Annual Special Bonus and Annual Performance
Bonus payable during the remaining Employment Term , in either case payable in
accordance with the Company’s regular compensation practices and policies
applicable to senior executives; provided however, (y) that the Executive shall
receive only one half of the sums stipulated under this paragraph 5(c)(i) in the
event that total fees forecasted to be earned by the Company from

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hotels under the Executive’s direction are less than $9 million during the
fiscal year when termination occurs and (z) the Development Fee will continue
following such termination as provided for in Section 4(e) of this Agreement as
if the Consulting Term had not been terminated and management agreements signed
by the Company after such termination shall be added to the definition of New
Hotels through the entire Term. The Development Fee is not subject to being
reduced by half as provided for in clause 5(c)(i)(y) above; and
          (B) For eighteen (18) months following the effective date of the
Executive’s termination of employment (or the expiration of the Employment Term
by its own terms) or, if longer, the remainder of the Employment Term (the
“Continuation Period”), the Company will arrange to provide the Executive and
his eligible dependents with Employee Benefits (excluding retirement, deferred
compensation and stock option, stock purchase, stock appreciation or similar
compensatory benefits) that are substantially similar to those that the
Executive and such dependents were receiving or entitled to receive immediately
prior to the effective date of the Executive’s termination of employment, except
that the level of any such Employee Benefits to be provided to the Executive and
such dependents may be reduced in the event of a corresponding reduction
generally applicable to all senior executives. If and to the extent that any
benefit described in this Section 5(c)(ii) is not or cannot be paid or provided
under any policy, plan, program or arrangement of the Company or any Subsidiary,
as the case may be, then the Company will itself pay or provide for the payment
of such Employee Benefits to the Executive, his dependents and his
beneficiaries. Employee Benefits otherwise receivable by the Executive pursuant
to this Section 5(c)(ii) will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer or
Medicare during the Continuation Period following the effective date of the
Executive’s termination of employment, and any such benefits actually received
by the Executive must be reported by the Executive to the Company.
          (ii) If the Executive’s consultancy is terminated by the Company
during the Consulting Term for any reason other than Cause , the Executive shall
retain all rights to the Development Fees set forth in Section 4(e) as if the
Consulting Term had not been terminated. Management agreements signed by the
Company after such termination shall be added to the definition of New Hotels
through the entire Term.
          (d) Death or Disability. If the Executive’s employment is terminated
effective during the Employment Term as a result of his death or by the Company
as a result of his Disability, the Executive (or, in the event of his death, his
designated beneficiary) will be entitled to receive his Base Pay (at the rate in
effect on the effective date of his termination of employment), the Annual
Special Bonus, and the Annual Performance Bonus, if any, for a period of
12 months following such effective date, payable in accordance with the
Company’s regular compensation practices and policies applicable to senior
executives but less any amounts paid to the Executive under any long-term
disability plan, program, policy or arrangement of the Company or any
Subsidiary. If the Executive’s consultancy is terminated effective during the
Consulting Term as a result of his death, the Executive’s designated beneficiary
will be entitled

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to receive the Development Fee set forth in Section 4(e) through the conclusion
of the second fiscal year following his death.
          (e) Compensation and Benefits on Termination. Except as otherwise
provided in Section 5(c) or (d):
          (i) All compensation and benefits payable to the Executive pursuant to
Section 4 (other than compensation and benefits previously earned and, if
applicable, provided for under the terms of this Agreement including Section
4(e) or any other applicable employee benefit plan, program, policy, arrangement
or agreement) will terminate as of the effective date of the Executive’s
termination of employment; and
          (ii) The Executive will not be entitled to, and hereby waives, any
claims for compensation or benefits (other than compensation and benefits
previously earned and, if applicable, provided for under the terms of this
Agreement including Section 4(e) or any other applicable employee benefit plan,
program, policy, arrangement or agreement) payable after such effective date and
for damages arising in connection with his termination of employment pursuant to
this Agreement.
          (f) No Mitigation Obligation. The Company hereby acknowledges that it
will be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date and that the
non-competition covenant contained in Section 6 will further limit the
employment opportunities for the Executive. Accordingly, the payment of the
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Section 5(c)(ii).
     6. Competitive Activity. (a) During the Term and for a period ending
eighteen (18) thereafter, the Executive will not:

  (i)   enter into or engage in any business which competes or interferes with,
or disturbs, the Company’s business; or     (ii)   solicit customers, business
patronage or orders for, or sell, any product or products, or service or
services, in competition with, or for any business, wherever located, that
competes or interferes with, or disturbs, the Company’s business; or     (iii)  
divert, entice or otherwise take away any customers, business or patronage or
orders of the Company, or attempt to do so; or

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  (iv)   promote or assist, financially or otherwise, any firm, person,
association, partnership, corporation or other entity engaged in any business
which competes with the Company’s business.

          (b) The Executive hereby expressly acknowledges and agrees that the
Company and the Executive intend for this Section 6 to apply to their dealings
with Mospromstroi, Inc. or any affiliated companies or persons affiliated
therewith (“Mospromstroi”) and any successors or assigns of Mospromstroi or any
other owner or lessee of the Moscow Marriott Grand, the Moscow Marriott
Tverskaya, the Moscow Marriott Royal or any other customer to which the Company
has assigned the Executive for which the Company has caused or permitted the
Executive to have any direct or indirect relationship or responsibility.
     7. Unauthorized Disclosure, Use or Solicitation. (a) Executive will keep in
strict confidence, and will not, directly or indirectly, at any time during or
after his employment with the Company, disclose, furnish, disseminate, make
available or, except in the course of performing his duties of employment
hereunder, use any trade secrets or confidential business and technical
information of the Company or its customers, vendors or property owners or
managers, without limitation as to when or how Executive may have acquired such
information. Such confidential information will include, without limitation, the
Company’s unique selling methods and trade techniques, management, training,
marketing and selling manuals, promotional materials, training courses and other
training and instructional materials, vendor, owner, manager and product
information, customer lists, other customer information and other trade
information. Executive specifically acknowledges that all such confidential
information including, without limitation, customer lists, other customer
information and other trade information, whether reduced to writing, maintained
on any form of electronic media, or maintained in the mind or memory of
Executive and whether compiled by the Company, and/or Executive, derives
independent economic value from not being readily known to or ascertainable by
proper means by others who can obtain economic value from its disclosure or use,
that reasonable efforts have been made by the Company to maintain the secrecy of
such information, that such information is the sole property of the Company and
that any retention and use of such information by Executive during his
employment with the Company (except in the course of performing his duties and
obligations hereunder) or after the termination of his employment will
constitute a misappropriation of the Company’s trade secrets.
          (b) Executive agrees that upon termination of Executive’s employment
or consultancy with the Company, for any reason, Executive will return to the
Company, in good condition, all property of the Company, including without
limitation, the originals and all copies of all management, training, marketing
and selling manuals, promotional materials, other training and instructional
materials, vendor, owner, manager and product information, customer lists, other
customer information and all other selling, service and trade information and
equipment. In the event that such items are not so returned, the Company will
have the right to charge Executive for all reasonable damages, costs, attorneys’
fees and other expenses incurred in searching for, taking, removing and/or
recovering such property.

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          (c) Executive acknowledges that to the extent permitted by law, all
work papers, reports, documentation, drawing, photographs, negatives, tapes and
masters therefor, prototypes and other materials (hereinafter, “items”),
including, without limitation, any and all such items generated and maintained
on any form of electronic media, generated by Executive during his employment
with the Company (as well as any such item generated during his consultancy with
the Company that reasonably related to the business of the Company) will be
considered a “work made for hire” and that ownership of any and all copyrights
in any and all such items will belong to the Company. The item will recognize
the Company as the copyright owner, will contain all proper copyright notices
(e.g., year of creation, “Interstate Hotels & Resorts, Inc.. All rights
reserved,”) and will be in condition to be registered or otherwise placed in
compliance with registration or other statutory requirements throughout the
world.
          (d) Executive hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or note, made, conceived or
suggested, either solely or jointly with others, by Executive while in the
Company’s employ (as well as any such discoveries, inventions or improvements
made during the course of the consultancy that reasonably relate to the
Company’s business), whether in the course of his employment or consultancy with
the use of the Company’s time, materials or facilities or in any way within or
related to the existing or contemplated scope of the Company’s business. Any
discovery, invention or improvement relating to any subject matter with which
the Company was concerned during Executive’s employment or consultancy and made,
conceived or suggested by Executive, either solely or jointly with others,
within one year following termination of Executive’s employment or consultancy
under this Agreement or any successor agreements will be irrebuttably presumed
to have been so made, conceived or suggested in the course of such employment or
consultancy with the use of the Company’s time, materials or facilities. Upon
request by the Company with respect to any such discoveries, inventions or
improvements, Executive will execute and deliver to the Company, at any time
during or after his employment or consultancy, all appropriate documents for use
in applying for, obtaining and maintaining such domestic and foreign patents as
the Company may desire, and all proper assignments therefor, when so requested,
at the expense of the Company, but without further or additional consideration.
          (e) Executive may use the Company’s trade names, trademarks and/or
service marks in connection with the sale of the Company’s products and
services, but only in such manner and for such purposes as may be authorized by
the Company. Upon any termination of this Agreement, Executive’s employment,
and/or the consultancy, Executive immediately will cease the use of such trade
names, trademarks and/or service marks and eliminate them wherever they have
been used or incorporated by Executive.
          (f) During the Term and the period ending twelve (12) months
thereafter , the Executive will not directly or indirectly (i) solicit or
endeavor to cause any employee of the Company or any Subsidiary to leave his
employment or induce or attempt to induce any such employee to breach any
employment agreement with the Company or any Subsidiary or otherwise interfere
with the employment of any such employee or (ii) solicit, endeavor to cause,
induce or attempt to induce any agent who engages in the business of marketing
the services of

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the Company or any Subsidiary to terminate, reduce or modify its agency
relationship with the Company or any Subsidiary.
     8. Successors and Binding Agreement.
          (a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance reasonably satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
“Company” for the purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company.
          (b) This Agreement will inure to the benefit of and be enforceable by
the Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
          (c) This Agreement is personal in nature and neither of the parties
hereto will, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 8(a) and (b). Without limiting the generality or effect of the
foregoing, the Executive’s right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive’s will or by the
laws of descent and distribution and, in the event of any attempted assignment
or transfer contrary to this Section 8(c), the Company will have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
     9. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive’s rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation, arbitration or other action or proceeding designed to
deny, or to recover from, the Executive the benefits provided or intended to be
provided to the Executive hereunder, the Company irrevocably authorizes the
Executive from time to time to retain counsel of Executive’s choice, at the
expense of the Company as hereafter provided, to advise and represent the
Executive in connection with any such interpretation, enforcement or defense,
including without limitation the initiation or defense of any litigation,
arbitration or other legal action, whether by or against the Company or any

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Director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction; provided, however, the provisions of this Section 9 shall not
apply to any claim or assertion by the Company that the Executive has violated
the terms of Sections 6 or 7 of this Agreement. Notwithstanding any existing or
prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Executive’s entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. Without respect to whether the Executive prevails,
in whole or in part, in connection with any of the foregoing, the Company will
pay and be solely financially responsible for any and all attorneys’ and related
fees and expenses incurred by the Executive in connection with any of the
foregoing.
     10. Additional Remedies.
          (a) Notwithstanding any other remedy herein provided for or available,
if the Executive should be in breach of any of the provisions of Section 6 or 7,
the Executive expressly acknowledges and agrees that the Company will be
entitled to injunctive relief or specific performance, without the necessity of
proving damages, in addition to any other remedies it may have.
          (b) Notwithstanding any of the foregoing, in the event of any disputes
regarding the interpretation or application of any provision of this Agreement,
either the Executive or the Company, or both parties, may request in writing
that such dispute be resolved through final and binding arbitration. The parties
will jointly select the arbitrator who will hear such dispute. If the parties
cannot agree on the selection of an arbitrator, the parties will request that
one be appointed by the American Arbitration Association. The arbitration will
be conducted in Arlington, Virginia (or in any other location mutually agreed
upon by the parties) in accordance with the rules of the American Arbitration
Association. The parties acknowledge and agree that time will be of the essence
throughout such procedure. The decision of the arbitrator may be entered in any
court having subject matter and personal jurisdiction over the dispute and the
Executive. The Company will pay any costs and expenses in connection with any
such dispute or procedure.
     11. Representation. Each party represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement between
it and any other person or entity.
     12. Severability. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
     13. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or

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dispatched by electronic facsimile transmission (with receipt thereof orally
confirmed), or five business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or
three business days after having been sent by a nationally recognized overnight
courier service such as Federal Express or UPS, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive office and
to the Executive at his principal residence (with a copy to any counsel
designated by the Executive), or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except that
notices of changes of address will be effective only upon receipt.
     14. Disclosure. During the Term and for one year thereafter, Executive will
not communicate the contents of this Agreement to any person, firm, association,
partnership, corporation or other entity which he or she intends to be employed
by, associated with, or represent and which is engaged in a business that is
competitive to the business of the Company.
     15. Modifications and Waivers. No provision of this Agreement may be
modified or discharged unless such modification is agreed to in writing, signed
by the Executive and the Chief Executive Officer, Chief Financial Officer or
General Counsel. No waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the time or at any prior or subsequent time.
     16. Entire Agreement. This Agreement constitutes the entire understanding
of the parties hereto with respect to its subject matter, except as such parties
may otherwise agree in a writing which specifies that it is an exception to the
foregoing. This Agreement supersedes all prior agreements between the parties
hereto with respect to its subject matter and, notwithstanding any other
provision hereof, will become effective upon the execution of this Agreement by
the parties. Notwithstanding the foregoing, the Company acknowledges that this
Agreement recognizes a continuation of the Executive’s employment which began in
or around November, 1989.
     17. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the Commonwealth of Virginia, without giving effect
to the principles of conflict of laws of such Commonwealth.
     18. Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which will be deemed to be an original but all of
which together will constitute one and the same instrument.
     19. Headings, Etc. The section headings contained in this Agreement are for
convenience of reference only and will not be deemed to control or affect the
meaning or construction of any provision of this Agreement. References to
Sections are to Sections in this Agreement.
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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

            INTERSTATE HOTELS AND RESORTS, INC.
      By:                   INTERSTATE MANAGEMENT COMPANY, LLC
      By:              

         
 
 
 
Henry L. Ciaffone    

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EXHIBIT A

     
Executive:
  Henry L. Ciaffone
 
   
Duties and Responsibilities:
  President
 
  International Operations and Development
 
   
Primary Reporting Relationship:
  Chief Executive Officer

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