exv10w18






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;



 









 






          (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



13









 







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.



     [Remainder of page intentionally left blank]



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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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