Document:

exv10w4w2

 

Amendment No. 1 to Services Agreement

     This Amendment No. 1 (“Amendment”) is made as of November 5, 2005 (“Effective Date”) by and
among MBT International, Inc., a New Jersey corporation (“MBT International”), Mahindra-British
Telecom Ltd., a limited liability company organized in India with its principal place of business
located at ‘Sharda Centre’, Erandwane, Pune 411 004, Pune, India (“Vendor”), and Visual Networks
Operations, Inc., a Delaware corporation with its principal place of business located at 2092
Gaither Road, Rockville, MD 20850, USA (“Visual”).

     A. MBT International and Visual have entered into that certain Services Agreement dated as of
July 30, 2004 (“Agreement”).

     B. MBT International and Visual hereby desire to amend the terms of the Agreement as set forth
herein, including without limitation providing for the assignment of all of the rights and
obligations of MBT International to Vendor.

     Accordingly, the parties, intending to be legally bound, hereby agree as follows:

     1. Definitions. Unless otherwise defined in this Amendment, capitalized terms shall
have the meanings ascribed to such terms in the Agreement.

     2. Assignment from MBT International to Vendor.

          2.1 Assignment. Effective as of the Effective Date, MBT International hereby assigns,
transfers and sets over (collectively, the “Assignment”) to Vendor all of MBT International’s
right, title, benefit, privileges and interest in, to and under the Agreement and all of MBT
International’s burdens, obligations and liabilities in connection with and under the Agreement.
Vendor hereby accepts the Assignment and assumes and agrees to observe and perform all of the
duties, obligations, terms, provisions and covenants under, and to pay and discharge all of the
liabilities arising under or in connection with the Agreement on and after the Effective Date.

          2.2 Representation. MBT International and Vendor each represent to Visual Networks
that MBT International is a direct wholly owned subsidiary of Vendor. Concurrent with the
execution of this Amendment, MBT International and Vendor shall provide a certificate signed on
behalf of MBT International and Vendor by an officer of each such company to the effect of the
foregoing representation.

          2.3 Further Assurances. Each of the parties hereto covenants and undertakes, at
Vendor’s expense, to execute and deliver, at the request of the other party hereto, such further
instruments of transfer and assignment and to take such other action as such other party may
reasonably request to more effectively consummate the assignments and assumptions contemplated by
this Amendment.

 

 

     3. Amendment to Section 18.2.2. Section 18.2.2 of the Agreement is hereby deleted in
its entirety and replaced with the following:

	 	18.2.2	 	Subject to Section 18.3, each Party’s total liability to the other, whether in
contract or in tort (including breach of warranty, negligence and strict liability in
tort) shall be limited to an amount equal to the total charges payable to Vendor
pursuant to this Agreement for the twelve (12) months prior to the month in which the
event giving rise to such liability occurred.

     4. Amendment to Section 19.3. Section 19.3 of the Agreement is hereby deleted in its
entirety and replaced with the following:

	 	19.3	 	Governing Law; Consent to Jurisdiction. This Agreement and performance
under it shall be governed by and construed in accordance with the laws of the State of
Maryland, USA, without regard to its choice of law principles. The parties hereby
irrevocably consent to the non-exclusive jurisdiction of, and venue in, any federal or
state court of competent jurisdiction located in Maryland, USA for the purposes of
adjudicating any matter arising from or in connection with this Agreement.

     5. Miscellaneous. Except as specifically amended herein, the Agreement shall remain
in full force and effect as written. This Amendment shall be governed by and construed in
accordance with the laws of the State of Maryland, without giving effect to applicable principles
of conflicts of laws. This Amendment may be executed in counterparts, each of which shall be an
original but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the
date set forth above.

	 	 	 	 	 	 	 	 	 	 	 
	MBT INTERNATIONAL, INC.	 	 	 	VISUAL NETWORKS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Patrick L. Murtha
 

	 	 	 	By:
	 	/s/ Wayne Fuller
 

	 	 
	Name: Patrick L. Murtha	 	 	 	Name: Wayne Fuller	 	 
	Title:   President	 	 	 	Title:   Executive Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	MAHINDRA-BRITISH	 	 	 	 	 	 	 	 
	TELECOM LTD.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Atanu Sarkar	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name: Atanu Sarkar	 	 	 	 	 	 	 	 
	Title:   Head – Legal Affairs	 	 	 	 	 	 	 	 

-2-exv10w3

 

Exhibit 10.3

EXECUTIVE EMPLOYMENT AGREEMENT

EXECUTIVE EMPLOYMENT AGREEMENT, effective as of February 17, 2005, by and between INTERSTATE HOTELS
& RESORTS, INC., a Delaware corporation (the “Company”), INTERSTATE MANAGEMENT COMPANY, L.L.C., a
Delaware limited liability company (the “LLC”) and any successor employer, and THOMAS F. HEWITT
(the “Executive”), an individual residing at ***********************************.

     The Company and the LLC desire to employ the Executive in the capacity of Chief Executive
Officer, and the Executive desires to be so employed, on the terms and subject to the conditions
set forth in this agreement (the “Agreement”);

     Now, Therefore, in consideration of the mutual covenants set forth herein and other good and
valuable consideration the parties hereto hereby agree as follows:

     1. Employment; Term. The Company and the LLC each hereby employ the Executive, and
the Executive agrees to be employed by the Company and the LLC, upon the terms and subject to the
conditions set forth herein, for a term of three (3) years, commencing on February 17, 2005 (the
“Commencement Date”), and ending on February 17, 2008, unless terminated earlier in accordance with
Section 5 of this Agreement; provided that such term shall automatically be extended from
time to time for additional periods of one calendar year from the date on which it would otherwise
expire unless the Executive, on the one hand, or the Company and the LLC, on the other, give notice
to the other party at least 120 calendar days prior to such date that it elects to permit the term
of this Agreement to expire without extension on such date. (The initial term of this Agreement as
the same may be extended in accordance with the terms of this Agreement is hereinafter referred to
as the “Term”).

     2. Positions; Conduct.

          (a) During the Term, the Executive will hold the title and office of, and serve in the
position of Chief Executive Officer of the Company and the LLC. The Executive shall undertake the
responsibilities and exercise the authority customarily performed, undertaken and exercised by
persons situated in a similar executive capacity, and shall perform such other specific duties and
services (including service as an officer, director or equivalent position of any direct or
indirect subsidiary without additional compensation) as they shall reasonably request consistent
with the Executive’s positions.

          (b) During the Term, the Executive agrees to devote his full business time and attention to
the business and affairs of the Company and the LLC and to faithfully and diligently perform, to
the best of his ability, all of his duties and responsibilities hereunder. Nothing in this
Agreement shall preclude the Executive from devoting reasonable time and attention to (i) serving,
with the approval of the Board, as a director, trustee or member of any committee of any
organization, (ii) engaging in charitable and community activities and (iii) managing his personal
investments and affairs; provided that such activities do not involve any material
conflict of interest with
the interests of the Company or, individually or collectively, interfere materially with the
performance by the Executive of his duties and responsibilities under this Agreement.

 

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Notwithstanding the foregoing and except as expressly provided herein, during the Term, the
Executive may not accept employment with any other individual or entity, or engage in any other
venture which is directly or indirectly in conflict or competition with the business of the Company
or the LLC.

          (c) The Executive’s office and place of rendering his services under this Agreement shall be
in the principal executive offices of the Company which shall be in the Washington, D.C.
metropolitan area. During the Term, the Company shall provide the Executive with executive office
space, and administrative and secretarial assistance and other support services consistent with his
position as Chief Executive Officer and with his duties and responsibilities hereunder.

     3. Board of Directors. While it is understood that the right to elect directors of
the Company is by law vested in the stockholders and directors of the Company, it is nevertheless
mutually contemplated that, subject to such rights, during the Term the Executive will serve as a
member of the Company’s Board of Directors. Executive will not receive any additional compensation
or receive any stock options in the Company as a result of his position as a director of the
Company.

     4. Salary; Additional Compensation; Perquisites and Benefits.

          (a) During the Term, the Company and the LLC will pay the Executive a base salary at an
aggregate annual rate of not less than $400,000 per annum, subject to annual review by the
Compensation Committee of the Board (the “Compensation Committee”), and in the discretion of such
Committee, increased from time to time. Once increased, such base salary may not be decreased.
Such salary shall be paid in periodic installments in accordance with the Company’s standard
practice, but not less frequently than semi-monthly.

          (b) For each fiscal year during the Term, the Executive will be eligible to receive a bonus
from the Company. The award and amount of such bonus shall be based upon the achievement of
predefined operating or performance goals and other criteria established by the Compensation
Committee, which goals shall give the Executive the opportunity to earn a cash bonus equal to an
amount between 0% and 150% of base salary.

          (c) During the Term, the Executive will participate in all plans now existing or hereafter
adopted by the Company or the LLC for their management employees or the general benefit of their
employees, such as any pension, profit-sharing, deferred compensation plans, bonuses, stock option
or other incentive compensation plans, life and health insurance plans, or other insurance plans
and benefits on the same basis and subject to the same qualifications as other senior executive
officers. Notwithstanding the foregoing, the Company and the LLC may, in their sole discretion,
discontinue or eliminate any such plans.

          (d) The Executive shall be eligible for stock option and restricted stock award grants from
time to time pursuant to the Company’s Incentive Plan
in accordance with the terms thereof. Except as noted below, all such grants shall be at the sole
discretion of the Board. Executive shall receive a separate option agreement

 

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governing any such
grants. Notwithstanding the foregoing, the Executive shall be granted annually no later than March
31 of each year (beginning in 2005) at least 50,000 restricted shares in the Company, as determined
by the Board, depending on the performance of the Company. The shares will vest equally on the
first, second and third anniversary of the date of grant.

          (e) The Company and the LLC will reimburse the Executive, in accordance with its standard
policies from time to time in effect, for all out-of-pocket business expenses as may be incurred by
the Executive in the performance of his duties under this Agreement. Until April 21, 2005, the
Company shall provide at the Company’s cost an apartment for the Executive in Arlington, Virginia
and shall reimburse the Executive for all travel to and from Arlington, Virginia relating to his
relocation to the Washington, D.C. metropolitan area.

          (f) The Executive shall be entitled to vacation time to be credited and taken in accordance
with the Company’s policy from time to time in effect for senior executives, which in any event
shall not be less than a total of four weeks per calendar year. Such vacation time shall not be
carried over year to year, and shall not be paid out upon termination of employment, or upon
expiration of this Agreement.

          (g) The Company, at its sole cost, shall pay (i) up to $10,000 annually toward the premium of
a life insurance policy with a death benefit payable to a beneficiary designated by the Executive
and (ii) up to $15,000 annually toward the premium of a disability insurance policy with a
disability benefit payable to the executive in accordance with the terms and conditions of such
disability insurance policy. The Company makes no representations or warranties that the insurance
benefits contained in the insurance policies supplied pursuant to this section will be paid under
any particular conditions, and the Company shall not be deemed a guarantor of such benefits. Such
benefits shall be payable in accordance with the terms of the respective insurance policy.

          (h) The Executive shall be granted a car allowance of up to $1,000 per month.

          (i) The Company shall reimburse Executive for all relocation expenses incurred by Executive in
moving he and his family to the Washington, D.C. metropolitan area (including but not limited to
brokerage commissions on selling his current home) up to a maximum of $125,000 .

          (j) In addition to any bonus payable for calendar year 2005 pursuant to paragraph 4(b) above,
the Executive shall be eligible for a one-time bonus for calendar year 2005 which shall have a
maximum potential of $500,000 and shall be based on criteria, including the Company’s financial
performance for the year, established by the Board. The bonus will be paid within 30 days of the
Company’s filing of its Form 10-K for 2005 with the Securities and Exchange Commission.

          (k) To the fullest extent permitted by applicable law, the Executive shall be indemnified and
held harmless by the Company and the LLC against
any and all judgments, penalties, fines, amounts paid in settlement, and other reasonable
expenses (including, without limitation, reasonable attorneys’ fees and disbursements)

 

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actually
incurred by the Executive in connection with any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative, investigative or other) for any action or
omission in his capacity as a director, officer or employee of the Company or the LLC.

          Indemnification under this Section 4(i) shall be in addition to, and not in substitution of,
any other indemnification by the Company or the LLC of its officers and directors. Expenses
incurred by the Executive in defending an action, suit or proceeding for which he claims the right
to be indemnified pursuant to this Section 4(k) shall be paid by the Company or the LLC, as the
case may be, in advance of the final disposition of such action, suit or proceeding upon the
Company’s or the LLC’s receipt of (x) a written affirmation by the Executive of his good faith
belief that the standard of conduct necessary for his indemnification hereunder and under the
provisions of applicable law has been met and (y) a written undertaking by or on behalf of the
Executive to repay the amount advanced if it shall ultimately be determined by a court that the
Executive engaged in conduct, including fraud, theft, misfeasance, or malfeasance against the
Company or the LLC, which precludes indemnification under the provisions of such applicable law.
Such written undertaking in clause (y) shall be accepted by the Company or the LLC, as the case may
be, without security therefor and without reference to the financial ability of the Executive to
make repayment thereunder. The Company and the LLC shall use commercially reasonable efforts to
maintain in effect for the Term of this Agreement a directors’ and officers’ liability insurance
policy, with a policy limit of at least $25,000,000, subject to customary exclusions, with respect
to claims made against officers and directors of the Company or the LLC; provided,
however, the Company or the LLC, as the case may be, shall be relieved of this obligation
to maintain directors’ and officers’ liability insurance if, in the good faith judgment of the
Company or the LLC, it cannot be obtained at a reasonable cost.

     5. Termination.

          (a) The Term will terminate immediately upon the Executive’s death, Disability, or, upon
thirty (30) days’ prior written notice by the Company, in the case of a Determination of
Disability. As used herein the term “Disability” means the Executive’s inability to perform his
duties and responsibilities under this Agreement for a period of more than 120 consecutive days, or
for more than 180 days, whether or not continuous, during any 365-day period, due to physical or
mental incapacity or impairment. A “Determination of Disability” shall occur when a physician,
reasonably satisfactory to both the Executive and the Company and paid for by the Company or the
LLC, finds that the Executive will likely be unable to perform his duties and responsibilities
under this Agreement for the above-specified period due to a physical or mental incapacity or
impairment. Such decision shall be final and binding on the Executive and the Company;
provided that if they cannot agree as to a physician, then each shall select and pay for a
physician and these two together shall select a third physician whose fee shall be borne equally by
the Executive and either the Company or the LLC and whose Determination of Disability shall be
binding on the Executive and the Company. Should the Executive become incapacitated, his
employment shall continue and all base and other compensation due the Executive hereunder shall
continue to be
paid through the date upon which the Executive’s employment is terminated for Disability or
Determination of Disability in accordance with this section.

 

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          (b) The Term may be terminated by the Company upon notice to the Executive and with or without
“Cause” as defined herein.

          (c) The Term may be terminated by the Executive upon notice to the Company and with or without
“Good Reason” as defined herein.

     6. Severance.

          (a) If the Term is terminated by the Company
for Cause,

	 	(i)	 	the Company and the LLC
will pay to the Executive an aggregate amount equal to the
Executive’s accrued and unpaid base salary through the date
of such termination;
	 
	 	(ii)	 	all unvested options and
restricted shares will terminate immediately; and
	 
	 	(iii)	 	any vested options issued
pursuant to the Company’s Incentive Plan and held by the
Executive at termination, will expire ninety (90) days after
the termination date.

          (b) If the Term is terminated by the Executive other than because of death, Disability or for
Good Reason,

	 	(i)	 	the Company and the LLC
will pay to the Executive an aggregate amount equal to the
Executive’s accrued and unpaid base salary through the date
of such termination;
	 
	 	(ii)	 	all unvested options and
restricted shares terminate immediately; and
	 
	 	(iii)	 	any vested options issued
pursuant to the Company’s Incentive Plan and held by the
Executive at termination, will expire ninety (90) days after
the termination date.

          (c) If the Term is terminated upon the Executive’s death or Disability,

	 	(i)	 	the Company and the LLC
will pay to the Executive’s estate or the Executive, as the
case may be, a lump sum payment equal to the Executive’s base
salary through the termination date, plus a pro
rata portion of the Executive’s bonus for the fiscal year
in which the termination occurred;

 

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	 	(ii)	 	the Company will make
payments for one (1) year of all compensation otherwise
payable to the Executive pursuant to this Agreement,
including, but not limited to, base salary, bonus and welfare
benefits;
	 
	 	(iii)	 	all of the Executive’s
unvested stock options will immediately vest and such
options, along with those previously vested and unexercised,
will become exercisable for a period of one (1) year
thereafter; and
	 
	 	(iv)	 	all of the Executive’s
unvested restricted stock will immediately vest and all of
the restricted stock of the Company held by the Executive
shall become free from all contractual restrictions.

          (d) Subject to Section 6(e) hereof, if the Term is terminated by the Company without Cause or
other than by reason of Executive’s death or Disability, in addition to any other remedies
available, or if the Executive terminates the Term for Good Reason,

	 	(i)	 	the Company and the LLC
shall pay the Executive a lump sum equal to two (2) times the
product of (x) the sum of (A) the Executive’s then annual
base salary and (B) the amount of the Executive’s bonus for
the preceding calendar year; provided that,
if Executive separates from employment pursuant to this
Section 6(d) prior to his first anniversary with the Company,
then Executive’s bonus amount for purposes of this Section
6(d)(i) will be 112.5% of Executive’s base salary;
	 
	 	(ii)	 	all of the Executive’s
unvested stock options will immediately vest and such
options, along with those previously vested and unexercised,
will become exercisable for a period of one (1) year
thereafter;
	 
	 	(iii)	 	all of the Executive’s
unvested restricted stock will immediately vest and all of
the restricted stock of the Company held by the Executive
shall become free from all contractual restrictions; and
	 
	 	(iv)	 	the Company shall also
continue in effect the Executive’s health and dental benefits
(or similar health and dental benefits paid to senior
executives) noted in Section 3(c) as follows: Upon
Executive’s
termination of employment, Executive shall be eligible for
continued health insurance benefits under the federal law
known as COBRA. Executive

 

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	 	 	 	is required to timely elect
COBRA in order to receive continued health insurance
coverage under this Agreement. Upon Executive’s election
of COBRA coverage and timely payment of applicable monthly
COBRA premiums, Executive will receive health insurance
coverage under COBRA up to the maximum period provided by
law. The Company will reimburse Executive of the cost of
such COBRA coverage until the earlier of (x) eighteen (18)
months from the termination date or (y) the date on which
the Executive obtains health insurance coverage from a
subsequent employer. Executive acknowledges that if he
does not timely elect COBRA coverage he will not receive
continued health insurance benefits from the Company.
Executive also acknowledges that he is responsible for any
taxes due on payments from the Company in reimbursement
for COBRA premium amounts.

          (e) Intentionally left blank.

          (f) If at any time the Term is not extended pursuant to the proviso to Section 1 hereof as a
result of the Company giving notice thereunder that it elects to permit the term of this Agreement
to expire without extension, the Company shall be deemed to have terminated the Executive’s
employment without Cause.

          (g) As used herein, the term “Cause” means:

          (i) the Executive’s willful and intentional failure or refusal to perform or observe
any of his material duties, responsibilities or obligations set forth in this Agreement;
provided, however, that the Company shall not be deemed to have Cause
pursuant to this clause (i) unless the Company gives the Executive written notice that the
specified conduct has occurred and making specific reference to this Section 6(g)(i) and
the Executive fails to cure the conduct within thirty (30) days after receipt of such
notice;

          (ii) any willful and intentional act of the Executive involving malfeasance, fraud,
theft, misappropriation of funds, or embezzlement affecting the Company or the LLC;

          (iv) the Executive’s conviction of, or a plea of guilty or nolo contendere to, an
offense which is a felony;

          (v) Executive’s material breach of this Agreement; or

          (vi) Gross misconduct by Executive that is of such a serious or substantial nature
that a substantial likelihood exists that such misconduct would injure the reputation of
the Company if the Executive were to remain employed by the Company or LLC.

 

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Termination of the Executive for Cause shall be communicated by a Notice of Termination. For
purposes of this Agreement, a “Notice of Termination” shall mean delivery to the Executive of a
copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire
membership of the Company’s Board at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and reasonable opportunity for the Executive, together with the
Executive’s counsel, to be heard before the Board prior to such vote) of finding that in the good
faith opinion of the Board, the Executive was guilty of conduct constituting Cause and specifying
the particulars thereof in detail, including, with respect to any termination based upon conduct
described in clause (i) above that the Executive failed to cure such conduct during the thirty-day
period following the date on which the Company gave written notice of the conduct referred to in
such clause (i). For purposes of this Agreement, no such purported termination of the Executive’s
employment shall be effective without such Notice of Termination;

          (h) As used herein, the term “Good Reason” means the occurrence of any of the following,
without the prior written consent of the Executive:

          (i) assignment to the Executive of duties materially inconsistent with the Executive’s
positions as described in Section 2(a) hereof, or any significant diminution in the
Executive’s duties or responsibilities, other than in connection with the termination of
the Executive’s employment for Cause, Disability or as a result of the Executive’s death or
by the Executive other than for Good Reason;

          (ii) the change in the location of the Company’s principal executive offices or of the
Executive’s principal place of employment to a location outside the Washington, D.C.
metropolitan area;

          (iii) the failure of the Company to nominate the Executive to the Board, removal from
the Board or the failure of the Executive to be elected to the Board;

          (iv) any material breach of this Agreement by the Company or the LLC which is
continuing;

          (v) a Change in Control; provided that a Change of Control shall only constitute Good
Reason if (i) the Executive terminates this Agreement within the twelve month period
following a Change of Control, or (ii) the Company terminates the Executive within two
years following a Change of Control

provided, however,

     (x) that the Executive shall not be deemed to have Good Reason pursuant to
clauses (h)(i), (ii), (iii) or (iv) above unless the Executive gives the Company or
the LLC, as the case may be, written notice that the specified conduct or event has
occurred and the Company or the LLC fails to cure such conduct or event within
thirty (30) days of the receipt of such notice; and

 

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     (y) that if that Executive terminates for Good Reason under paragraph
6(h)(v)(i) above, notwithstanding paragraph 6(d) above, Executive will not receive
any severance payment pursuant to paragraph 6(d)(i) above.

              (i) As used herein, the term “Change in Control” shall have the following meaning:

                        (i) the acquisition (other than from the Company) by any “Person” (as the term is used
for purposes of Sections 13(d) or 14(d) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty (30%)
percent or more of the combined voting power of the Company’s then outstanding voting
securities;

                        (ii) the individuals who were members of the Board (the “Incumbent Board”) during the
previous twelve (12) month period, cease for any reason to constitute at least a majority
of the Board; provided, however, that if the election, or nomination for
election by the Company’s stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board;

                        (iii) approval by the stockholders of the Company of (a) merger or consolidation
involving the Company if the stockholders of the Company, immediately before such merger or
consolidation do not, as a result of such merger or consolidation, own, directly or
indirectly, more than fifty (50%) percent of the combined voting power of the then
outstanding voting securities of the corporation resulting from such merger or
consolidation in substantially the same proportion as their ownership of the combined
voting power of the voting securities of the Company outstanding immediately before such
merger or consolidation or (b) a complete liquidation or dissolution of the Company or an
agreement for the sale or other disposition of all or substantially all of the assets of
the Company; or

                        (iv) approval by the stockholders of the Company of any transaction (including without
limitation a “going private transaction”) involving the Company if the stockholders of the
Company, immediately before such transaction, do not as a result of such transaction, own
directly or indirectly, more than fifty (50%) percent of the combined voting power of the
then outstanding voting securities of the corporation resulting from such transaction in
substantially the same proportion as their ownership of the combined voting power of the
voting securities of the Company outstanding immediately before such transaction.

            Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to
clause (i) above solely because thirty (30%) percent or more of the combined voting power of the
Company’s then outstanding securities is acquired by (a) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Company or any of its
subsidiaries or (b) any corporation which,

 

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immediately prior to such acquisition, is owned directly
or indirectly by the stockholders of the Company in the same proportion as their ownership of stock
in the Company immediately prior to such acquisition.

          (j) The amounts required to be paid and the benefits required to be made available to the
Executive under this Section 6 are absolute. Under no circumstances shall the Executive, upon the
termination of his employment hereunder, be required to seek alternative employment and, in the
event that the Executive does secure other employment, no compensation or other benefits received
in respect of such employment shall be set-off or in any other way limit or reduce the obligations
of the Company under this Section 6.

          (k) Excise Tax Payments.

          (i) Gross-Up Payment. If it shall be determined that any payment or
distribution of any type to or in respect of the Executive, by the Company, the LLC, or any
other person, whether paid or payable or distributed or distributable pursuant to the terms
of the Agreement or otherwise (the “Total Payments”), is or will be subject to the excise
tax imposed by Section 4999 of the Internal Code of 1986, as amended (the “Code”) or any
interest or penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are collectively referred to as the “Excise Tax”), then the
Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Total Payments.

          (ii) Determination by Accountant.

               (A) All computations and determinations relevant to this Section 6(k) shall be made by
a national accounting firm selected by the Company from among the five (5) largest
accounting firms in the United States (the “Accounting Firm”) which firm may be the
Company’s accountants. Such determinations shall include whether any of the Total Payments
are “parachute payments” (within the meaning of Section 280G of the Code). In making the
initial determination hereunder as to whether a Gross-Up Payment is required the Accounting
Firm shall determine that no Gross-Up Payment is required, if the Accounting Firm is able
to conclude that no “Change of Control” has occurred (within the meaning of Section 280G of
the Code) on the basis of “substantial authority” (within the meaning of Section 6230 of
the Code) and shall
provide opinions to that effect to both the Company and the Executive. If the
Accounting Firm determines that a Gross-Up Payment is required, the Accounting Firm shall
provide its determination (the “Determination”), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant matter
both to the Company and the Executive by no later than ten (10) days following the
Termination Date, if applicable, or such earlier time as is requested by the Company or the
Executive (if the Executive reasonably believes that any of the Total Payments may be
subject to the Excise

 

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Tax). If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive and the Company with a written
statement that such Accounting Firm has concluded that no Excise Tax is payable (including
the reasons therefor) and that the Executive has substantial authority not to report any
Excise Tax on his federal income tax return.

               (B) If a Gross-Up Payment is determined to be payable, it shall be paid to the
Executive within twenty (20) days after the later of (i) the Determination (and all
accompanying calculations and other material supporting the Determination) is delivered to
the Company by the Accounting Firm or (ii) the date of the event which leads to the
Gross-up Payment. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive, absent manifest error.

               (C) As a result of uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments not made by the Company should have been made (“Underpayment”), or that
Gross-Up Payments will have been made by the Company which should not have been made
(“Overpayments”). In either such event, the Accounting Firm shall determine the amount of
the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the
amount of such Underpayment (together with any interest and penalties payable by the
Executive as a result of such Underpayment) shall be promptly paid by the Company to or for
the benefit of the Executive.

               (D) In the case of an Overpayment, the Executive shall, at the direction and expense
of the Company, take such steps as are reasonably necessary (including the filing of
returns and claims for refund), follow reasonable instructions from, and procedures
established by, the Company, and otherwise reasonably cooperate with the Company to correct
such Overpayment, provided, however, that (i) the Executive shall not in any event be
obligated to return to the Company an amount greater than the net after-tax portion of the
Overpayment that he has retained or has recovered as a refund from the applicable taxing
authorities and (ii) this provision shall be interpreted in a manner consistent with the
intent of Section 6(k)(i), which is to make the Executive whole, on an after-tax basis,
from the application of the Excise Taxes, it being acknowledged and understood that the
correction of an Overpayment may result in the Executive repaying to the Company an amount
which is less than the Overpayment.

               (E) The Executive shall notify the Company in writing of any claim by the Internal
Revenue Service relating to the possible application of the Excise Tax under Section 4999
of the Code to any of the payments and amounts referred to herein and shall afford the
Company, at its expense, the opportunity to control the defense of such claim.

 

12

     7. Cooperation with Company. Following the termination of the Executive’s employment
for any reason, Executive shall fully cooperate with the Company in all matters relating to the
winding up of his pending work on behalf of the Company including, but not limited to, any
litigation in which the Company is involved and the orderly transfer of any such pending work to
other employees of the Company as may be designated by the Company. The Company agrees to
reimburse the Executive for any out-of-pocket expense he incurs in performing any work on behalf of
the Company following the termination of his employment. In addition, after the six month period
following Executive’s termination of employment, Executive will be paid a per diem at a daily rate
equivalent to his base salary at the time of termination for the time Executive spends on behalf of
the Company pursuant to this paragraph.

     8. Confidential Information.

          (a) The Executive acknowledges that the Company and its subsidiaries or affiliated ventures
(“Company Affiliates”) own and have developed and compiled, and will in the future own, develop and
compile, certain Confidential Information and that during the course of his rendering services
hereunder Confidential Information will be disclosed to the Executive by the Company Affiliates.
The Executive hereby agrees that, during the Term and for a period of three years thereafter, he
will not use or disclose, furnish or make accessible to anyone, directly or indirectly, any
Confidential Information of the Company Affiliates. In particular, Executive covenants and agrees
that Executive shall not, directly or indirectly, communicate or divulge, or use for the benefit of
Executive or for any other person, or to the disadvantage of the Company, the Confidential
Information or any information in any way relating to the Confidential Information, without prior
written consent from the Company.

          (b) As used herein, the term “Confidential Information” means any trade secrets, confidential
or proprietary information, or other knowledge, know-how, information, documents, materials, owned,
developed or possessed by a Company Affiliate pertaining to its businesses, including, but not
limited to, records, memoranda, computer files and disks, audio and video tapes, CD’s, and property
in any form containing information generally not known in the hospitality industry, including but
not limited to trade secrets, techniques, know-how (including designs, plans, procedures, processes
and research records), operations, market structure, formulas, data, programs, licenses, prices,
costs, software, computer programs, innovations, discoveries, improvements, research, developments,
test results, reports, specifications, data, formats, marketing data and business plans and
strategies, customer lists, client lists and client contact lists, agreements and other forms of
documents, expansion plans, budgets, projections, and salary, staffing and employment information.
Notwithstanding the foregoing, Confidential Information shall not in any event include information
which (i)
was generally known or generally available to the public prior to its disclosure to the
Executive, (ii) becomes generally known or generally available to the public subsequent to its
disclosure to the Executive through no wrongful act of the Executive, (iii) is or becomes available
to the Executive from sources other than the Company Affiliates which sources are not known to the
Executive to be under any duty of confidentiality with respect thereto or (iv) the Executive is
required to disclose by applicable law or regulation or by order of any court or federal, state or
local regulatory or administrative

 

13

body (provided that the Executive provides the Company with
prior notice of the contemplated disclosure and reasonably cooperates with the Company, at the
Company’s sole expense, in seeking a protective order or other appropriate protection of such
information).

          (c) Upon demand by the Company and/or upon termination of employment with the Company for any
reason, Executive shall promptly deliver to the Company all property and materials, whether
written, descriptive, or maintained in some other form belonging to or relating to the Company, its
business affairs and those of its Affiliates, including all Confidential Information. If Executive
desires to retain copies of any forms or other materials developed by Executive during his
employment with the Company, he may request permission to do so from the Chairman of the Board of
Directors, which permission shall not be unreasonably withheld.

          (d) The Executive agrees that during his
employment
hereunder and for a period of twelve (12) months thereafter he will not solicit or accept the
business of, or assist any other person to solicit or accept the business of, any persons or
entities who were customers of the Company, as of, or within one (1) year prior to, the Executive’s
termination of employment, for the purposes of providing products or services competitive with the
products or services of the Company or to cause such customers to reduce or end their business with
the Company.

          (e) The Executive agrees that during his employment hereunder and for a period of twelve (12) months thereafter he will not solicit, raid, entice or
induce any person that then is or at any time during the twelve (12) month period prior to the
Executive’s termination was an employee of the Company (other than a person whose employment with
the Company has been terminated by the Company), to become employed by any person, firm or
corporation.

          (f) Executive shall make no statements disparaging the Company, any of its affiliates, any of
its officers, directors, or employees, or any of its business practices. The Company’s directors
and officers shall make no statements disparaging the Executive.

     9. Specific Performance.

          (a) The Executive acknowledges that the services to be rendered by him hereunder are of a
special, unique, extraordinary and personal character and that the Company Affiliates would sustain
irreparable harm in the event of a violation by the Executive of Section 8 hereof. Therefore, in
addition to any other remedies available, the Company shall be entitled to specific enforcement
and/or an injunction
from any court of competent jurisdiction restraining the Executive from committing or
continuing any such violation of this Agreement without proving actual damages or posting a bond or
other security. Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including the recovery of
damages.

          (b) If any of the restrictions on activities of the Executive contained in Section 8 hereof
shall for any reason be held by a court of competent

 

14

jurisdiction to be excessively broad, such
restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the
maximum extent compatible with the applicable law as it shall then appear; it being understood that
by the execution of this Agreement the parties hereto regard such restrictions as reasonable and
compatible with their respective rights.

          (c) Notwithstanding anything in this Agreement to the contrary, in the event that the Company
fails to make any payment of any amounts or provide any of the benefits to the Executive when due
as called for under Section 6 of this Agreement and such failure shall continue for twenty (20)
days after written notice thereof from the Executive, all restrictions on the activities of the
Executive under Section 8 hereof shall be immediately and permanently terminated.

     10. Withholding. The parties agree that all payments to be made to the Executive by
the Company pursuant to the Agreement shall be subject to all applicable withholding obligations of
such company.

     11. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed given and received when delivered personally, four (4) days after being mailed if
sent by registered or certified mail, postage pre-paid, or by one (1) day after delivery if sent by
air courier (for next-day delivery) with evidence of receipt thereof or by facsimile with receipt
confirmed by the addressee. Such notices shall be addressed respectively:

If to the Executive, to:

Thomas F. Hewitt

********************

********************

If to the Company or to the LLC, to:

Interstate Hotels & Resorts, Inc.

4501 North Fairfax Drive

Arlington, VA 22203

Attention: Legal Department

or to any other address of which such party may have given notice to the other parties in the
manner specified above.

     12. Miscellaneous.

          (a) This Agreement is a personal contract calling for the provision of unique services by the
Executive, and the Executive’s rights and obligations hereunder may not be sold, transferred,
assigned, pledged or hypothecated by the Executive. The rights and obligations of the Company and
the LLC hereunder will be binding upon and run in favor of their respective successors and assigns.
The Company

 

15

will not be deemed to have breached this Agreement if any obligations of the Company
to make payments to the Executive are satisfied by the LLC.

          (b) This Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Delaware, without regard to conflict of laws principles.

          (c) The headings of the various sections of this Agreement are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof.

          (d) The provisions of this Agreement which by their terms call for performance subsequent to
the expiration or termination of the Term shall survive such expiration or termination.

          (e) The Company and the LLC shall reimburse the Executive for all costs incurred by the
Executive in any proceeding for the successful enforcement of the terms of this Agreement,
including without limitation all costs of investigation and reasonable attorneys’ fees and expenses
incurred in the preparation of or in connection with such proceeding.

          (f) This Agreement constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and undertakings, both written and
oral, among the parties with respect to the subject matter hereof, all of which shall be terminated
on the Commencement Date. In addition, the parties hereto hereby waive all rights such party may
have under all other prior agreements and undertakings, both written and oral, among the parties
hereto. Notwithstanding the preceding two sentences, Sections 6(d)(iii), (iv), (v) and (vi) of the
Second Amended and Restated Employment Agreement between Executive and Interstate Hotels
Corporation (a predecessor of the Company) will remain in full force and effect through January 31,
2006.

 

16

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date
first above written.

	 	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	     /s/ Thomas F. Hewitt
	 	 	 	 	 
	 	 	 	 	Thomas F. Hewitt
	 
	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	INTERSTATE HOTELS & RESORTS, INC.
	 
	 	 	 	 	 	 
	 
	 	 	 	By:	 	/s/ Christopher L. Bennett
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	Christopher L. Bennett 
	 

	 	 	 	Title:	 	Senior Vice President, General
Counsel and Secretary
	 
	 	 	 	 	 	 
	 
	 	 	 	LLC:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	INTERSTATE MANAGEMENT COMPANY, LLC
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	By: Interstate Operating Company, L.P., a
member
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	By: Interstate Hotels & Resorts, Inc.,
	 
	 	 	 	 	 	its general partner
	 
	 	 	 	 	 	 
	 
	 	 	 	By:	 	/s/ Christopher L. Bennett
	 	 	 	 	 	 	 
	 
	 	 	 	Name:	 	Christopher L. Bennett 
	 
	 	 	 	Title:	 	Senior Vice President General
Counsel and Secretary

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