Document:

exv10w11

 

Exhibit 10.11

EXECUTION COPY

AMENDED AND RESTATED

REGISTRATION RIGHTS AGREEMENT

          This Amended and Restated Registration Rights Agreement, dated as of August 17, 2004 (this
“Agreement”), by and between INTERSTATE HOTELS & RESORTS, INC., a Delaware corporation (the
“Company”), on the one hand, and LB INTERSTATE GP LLC, a Delaware limited liability company, LB
INTERSTATE LP LLC, a Delaware limited liability company (“LB LP”), and KFP/LB IHR II, LP, a
Delaware limited partnership; KA/LB IHR II, LP, a Delaware limited partnership; CG Ventures/LB IHR
II, LP, a Delaware limited partnership; SMW/LB IHR II, LP, a Delaware limited partnership; DEL/LB
IHR II, LP, a Delaware limited partnership; and PS/LB IHR II, LP, a Delaware limited partnership,
(each a “Shareholder” and collectively the “Shareholders”), on the other hand.

W I T N E S S E T H:

          WHEREAS, pursuant to a Distribution and Contribution Agreement dated as of August 17, 2004
(the “Distribution Agreement”) between LB LP, LB Interstate GP LLC, MK/CG-GP LLC and MK/CG-LP LLC
and KFP/LB IHR II, LP, a Delaware limited partnership; KA/LB IHR II, LP, a Delaware limited
partnership; CG Ventures/LB IHR II, LP, a Delaware limited partnership; SMW/LB IHR II, LP, a
Delaware limited partnership; DEL/LB IHR II, LP, a Delaware limited partnership; and PS/LB IHR II,
LP, a Delaware limited partnership      , all of the shares of common stock of the Company held by
CGLH Partners I LP and CGLH Partners II LP were distributed to the Shareholders (the
“Distribution”);

          WHEREAS, in connection with the Distribution the parties have agreed to enter into this
Agreement, which amends and restates the registration rights agreement subsisting between CGLH
Partners I LP and CGLH Partners II LP and the Company;

          NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements
contained in this Agreement, the Distribution Agreement and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows,
effective at the Effective Time:

ARTICLE I

Definitions

          1.1. Certain Definitions. In this Agreement:

          “Agreement” has the meaning given to it in the preamble.

          “Business Day” means any day that is not a Saturday, Sunday or day on which banks located in
New York City are authorized or required to be closed.

 

 

          “Common Stock” means the shares of common stock of the Company issued and outstanding from
time to time.

          “Demand Securities” has the meaning given to it in Section 2.2(a) of this Agreement.

          “Designated Jurisdictions” has the meaning given to it in Section 2.2(a) of this
Agreement.

          “Distribution Agreement” has the meaning given to it in the recitals of this Agreement.

          “Elected Jurisdictions” has the meaning given to it in Section 2.1(a) of this
Agreement.

          “Electing Shareholder” has the meaning given to it in Section 2.1(a) of this Agreement

          “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated under such Act.

          “Exercising Shareholder” has the meaning given to it in Section 2.2(a) of this
Agreement

          “Inspectors” has the meaning given to it in Section 2.4(h) of this Agreement.

          “Other Securities” has the meaning given to it in Section 2.2(b) of this Agreement.

          “Registrable Securities” means the shares of Common Stock held by the Shareholders immediately
following the consummation of the transactions contemplated by the Distribution Agreement, and any
additional shares of Common Stock thereafter acquired by a Shareholder whether in connection with
any stock dividend on, or any stock split, reclassification or reorganization of any of such shares
or such additional shares, or otherwise, in each case, until such Common Stock may be sold by such
Shareholder without restriction under Rule 144(k) under the Securities Act.

          “SEC” means the United States Securities and Exchange Commission or any successor agency.

          “Securities Act” means the United States Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated under such Act.

          “Selling Shareholder” has the meaning given to it in Section 2.4 of this Agreement

          “Shareholder” has the meaning given to it in the preamble of this Agreement.

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          “Specified Securities” has the meaning given to it in Section 2.1(a) of this
Agreement.

          “Subject Securities” means shares of Common Stock or other debt or equity securities of the
Company convertible into or exchangeable for shares of Common Stock.

ARTICLE II

REGISTRATION RIGHTS

          2.1. Incidental Rights.

               (a) If at any time or from time to time the Company proposes to file with the SEC a
registration statement (whether on Form S-1, S-2, or S-3, or any equivalent form then in
effect) for the registration under the Securities Act of any Subject Securities for sale,
for cash consideration, to the public by the Company or on behalf of one or more
securityholders of the Company (including in connection with a demand registration exercised
pursuant to Section 2.2 but excluding any sale of securities upon conversion into or
exchange or exercise for shares of Common Stock, and any shares of Common Stock issuable by
the Company upon the exercise of employee stock options, or to any employee stock ownership
plan, or in connection with any acquisition made by the Company, any securities exchange
offer, any registration of securities originally placed pursuant to Rule 144A under the
Securities Act, dividend reinvestment plan, employee benefit plan, corporate reorganization,
or in connection with any amalgamation, merger or consolidation of the Company or any direct
or indirect subsidiary of the Company with one or more other corporations if the Company is
the surviving corporation), the Company shall give each Shareholder (other than an
Exercising Shareholder in the event of a registration pursuant to Section 2.2) at
least 20 days’ prior written notice of the proposed filing (or if 20 days’ notice is not
practicable, a reasonable shorter period to be not less than 7 days), which notice shall
outline the nature of the proposed distribution and the jurisdictions in the United States
in which the Company proposes to qualify and offer such securities (the “Elected
Jurisdictions”). On the written request of a Shareholder (an “Electing Shareholder”)
received by the Company within 15 days after the date of the Company’s delivery to such
Shareholder of the notice of intended registration (which request shall specify the
Registrable Securities sought to be disposed by such Electing Shareholder and the intended
method or methods by which dispositions are intended to be made), the Company shall, under
the terms and subject to the conditions of this Article II, at its own expense as
provided in Section 4.2, include in the coverage of such registration statement (or
in a separate registration statement concurrently filed) and qualify for sale under the blue
sky or securities laws of the various states in the Elected Jurisdictions the number of
Registrable Securities of the kind being registered (the “Specified Securities”) held by
each such Electing Shareholder or into which such Registrable Securities are convertible, as
the case may be, and which each such Electing Shareholder has so requested to be registered
or qualified for distribution, to the extent required to permit the distribution (in
accordance with the intended method or methods thereof as aforesaid) in the Elected Jurisdictions requested
by each such Electing Shareholder of such Registrable Securities.

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               (b) If the distribution proposed to be effected by the Company involves an underwritten
offering of the securities being so distributed by or through one or more underwriters, and
if the managing underwriter of such underwritten offering indicates in writing its opinion
that including all or part of the Specified Securities in the coverage of such registration
statement or in the distribution to be effected by such prospectus will materially and
adversely affect the sale of securities proposed to be sold (which opinion of the managing
underwriter shall also state the maximum number of shares, if any, which can be sold by the
Electing Shareholders under this Section 2.1 without materially adversely affecting
the sale of the securities proposed to be sold), then the number of Specified Securities
which the Electing Shareholders shall have the right to include in such registration
statement shall be reduced on a pro rata basis among the Electing Shareholders (based on the
aggregate number of Registrable Securities then held by them or on such other basis as they
shall agree) to the maximum number of shares or principal amount, in the case of debt,
specified by the managing underwriter. First priority, after the absolute priority afforded
to the Company, shall be afforded to the Specified Securities held by the Electing
Shareholders and no securities proposed to be sold by the Electing Shareholders shall be so
reduced until all securities proposed to be sold by all other parties (other than the
Company) have been entirely eliminated.

               (c) The Company shall have the sole right to select any underwriters, including the
managing underwriter, of any public offering of securities made other than as a result of
the rights granted in Section 2.2. Nothing in this Section 2.1 shall create
any liability on the part of the Company to any Shareholder if the Company for any reason
decides not to file or to delay or withdraw a registration statement (which the Company may
do in its sole discretion).

               (d) Each Electing Shareholder shall have the right to withdraw its request for
inclusion of its Specified Securities in any registration statement pursuant to this
Section 2.1 by giving written notice to the Company of its request to withdraw;
provided, however, that (i) such request must be made in writing prior to
the execution of the underwriting agreement (or such other similar agreement) with respect
to such registration and (ii) such withdrawal shall be irrevocable and, after making such
withdrawal, such Electing Shareholder shall no longer have any right to include any of its
Registrable Securities in the registration as to which such withdrawal was made.

               (e) Each Shareholder may request to have all or any portion of its Registrable
Securities included in an unlimited number of registrations under this Section 2.1.

          2.2. Demand Rights.

               (a) Upon written request of a Shareholder (an “Exercising Shareholder”) made at any
time, the Company shall, under the terms and subject to the conditions set forth in this
Section 2.2, and Sections 2.3 and 2.4, file (and use its
reasonable efforts to cause to become effective) a registration statement covering, and
use its reasonable efforts to qualify for sale under the blue sky or securities laws of the
various states of the United States as may be requested by such Exercising Shareholder

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(except any such state in which, in the opinion of the managing underwriter of the offering,
the failure to so qualify would not materially and adversely affect the proposed offering or
in which the Company would be required to submit to general jurisdiction to effect such
registration), in accordance with the intended method or methods of disposition set forth in
that notice, such number of Registrable Securities as may be designated by such Exercising
Shareholder in its request (the “Demand Securities”), or that portion thereof designated in
said request for registration in each of the Designated Jurisdictions (as defined below). A
request for registration under this Section 2.2 shall specify the number of Demand
Securities to be registered, the jurisdictions in the United States in which such
registration is to be effected (the “Designated Jurisdictions”) and the proposed manner of
sale, including the name and address of any proposed underwriter. The principal underwriter
or underwriters for any such offering shall be selected by the Exercising Shareholder,
subject to the Company’s approval, which may not be unreasonably withheld or delayed.
Notwithstanding any other provision in this Section, an Exercising Shareholder shall not be
permitted to make a demand for registration pursuant to this Section unless the number of
Demand Securities covered by such demand (together with the aggregate number of Specified
Securities to be included in such registration pursuant to Section 2.1 hereof) is at least
12,500,000 shares of Common Stock (or securities convertible into such number of shares of
Common Stock) (as such number may be appropriately adjusted to reflect stock splits, reverse
stock splits, dividends and any other recapitalization or reorganization of the Company) or
such lesser number of shares as would yield gross proceeds of not less than $2 million based
on the average closing price of the Common Stock over the ten trading day period immediately
preceding the date of the written request hereunder.

               (b) If the distribution proposed to be effected pursuant to this Section 2.2
involves an underwritten offering that includes securities of the Company in addition to the
Demand Securities (“Other Securities”), and if the managing underwriter of such underwritten
offering indicates in writing its opinion that including all or part of such securities in
the coverage of such registration statement will materially and adversely affect the sale of
the Demand Securities proposed to be sold, then the number of Other Securities proposed to
be sold shall be reduced to the maximum number of securities (or principal amount) specified
by the managing underwriter.

               (c) The Company may delay the filing of any registration statement requested under this
Section 2.2, or delay its effectiveness, for a reasonable period (but not longer
than 90 days) if, in the sole judgment of the Company’s Board of Directors, (i) a delay is
necessary in light of pending financing transactions, corporate reorganizations or other
major events involving the Company, or (ii) filing at the time requested would materially
and adversely affect the business or prospects of the Company in view of disclosures that
may be thereby required. Once the cause of the delay is eliminated, the Company shall
promptly notify the Exercising Shareholder and, promptly after the Exercising Shareholder
notifies the Company to proceed, the Company shall file a
registration statement and begin performance of its remaining obligations under this
Section 2.2.

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               (d) Provided that in each case the filing of a registration statement in more
than one Designated Jurisdiction in connection with a concurrent or substantially concurrent
distribution shall be deemed for the purposes of this Agreement to be a single registration:

                    (i) LB LP shall be entitled to request not more than three
registrations under this Section 2.2;

                    (ii) KFP/LB IHR II, LP shall be entitled to request not more than one
registration under this Section 2.2;

                    (iii) KA/LB IHR II, LP and CG Ventures/LB IHR II, LP shall collectively be
entitled to request not more than one registration under this Section 2.2,
but such request may only be made upon their mutual agreement;

                    (iv) SMW/LB IHR II, LP and DEL/LB IHR II, LP shall collectively be entitled to
request not more than one registration under this Section 2.2, but such
request may only be made upon their mutual agreement; and

                    (v) KFP/LB IHR II, LP, KA/LB IHR II, LP, CG Ventures/LB IHR II, LP, SMW/LB IHR
II, LP, DEL/LB IHR II, LP and PS/LB IHR II, LP shall collectively be entitled to
request not more than one additional registration under this Section 2.2,
which registration may be requested by any one of them, but only upon the mutual
agreement of Sherwood M. Weiser, Donald E. Lefton, Karim Alibhai and Mahmood Khimji;

provided, that if a Shareholder requests a registration under this Section 2.2 but
no registration statement becomes effective with respect to such Shareholder’s Registrable
Securities covered by such request, or any registration statement is withdrawn or
prematurely terminated (whether pursuant to this Section 2.2 or as a result of any
stop order, injunction or other order or requirement of the SEC or any other governmental
agency or court), then such request shall not count as a request for purposes of determining
the number of requests for registration such Shareholder may make under this Section
2.2.

               (e) If there is an effective registration statement requested by a Shareholder pursuant
to this Section 2.2, such Shareholder may require the Company to delay the filing of
any registration statement relating to convertible securities or shares of Common Stock or
delay its effectiveness, for a reasonable period (but not longer than 90 days) if, in the
sole judgment of such Shareholder, a delay is necessary in order to avoid materially and
adversely affecting the disposition of the Demand Securities pursuant to the offering by
such Shareholder; provided that the foregoing shall not limit the Company’s right to
file and have declared effective registration statements for any other offering.

          2.3. Registration Conditions. Notwithstanding any other provision of this Agreement,
the Company shall not be required to effect a registration of any Registrable

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Securities held by a
Shareholder under this Article II, or file any post-effective amendment to such a
registration statement relating to such a qualification:

               (a) unless, in the case of a request to participate in a registration under Section
2.1, such Shareholder agrees to sell and distribute a portion or all of its Registrable
Securities in accordance with the plan or plans of distribution adopted by and through
underwriters, if any, acting for the Company or any such other sellers of Common Stock;

               (b) unless such Shareholder agrees to bear a pro rata share of underwriter’s discounts
and commissions;

               (c) if, in the case of a request for registration under Section 2.2, the
Company has given prior notice under Section 2.1 of its intention to file a
registration statement under the Securities Act and has not completed or abandoned the
proposed offering (for so long as the Company continues in good faith to pursue the proposed
offering); and

               (d) unless the Company has received from such Shareholder all information the Company
has reasonably requested concerning such Shareholder and its method of distribution of its
respective Registrable Securities, so as to enable the Company to include in the
registration statement all facts required to be disclosed in it.

          2.4. Covenants and Procedures. If the Company becomes obligated under this
Article II to effect a registration of Registrable Securities on behalf of one or more
Shareholders (each a “Selling Shareholder”), then (as applicable to the jurisdictions for which
such registration is to be made):

               (a) The Company, at its expense as provided in Section 4.2, shall prepare and
file with the SEC a registration statement covering such securities and such other related
documents as may be necessary or appropriate relating to the proposed distribution, and
shall use reasonable efforts to cause the registration statement to become effective. The
Company will also, with respect to any registration statement, file such post-effective
amendments to the registration statement (and use reasonable efforts to cause them to become
effective) and such supplements as are necessary so that current prospectuses are at all
times available for a period of at least 180 days after the effective date of the
registration statement or for such longer period, not to exceed 360 days, as may be required
under the plan or plans of distribution set forth in the registration statement. Each
Selling Shareholder shall promptly provide the Company with such information with respect to
such Selling Shareholder’s Registrable Securities to be so registered and, if applicable,
the proposed terms of their offering, as is required for the registration. If the
Registrable Securities to be covered by the registration statement are not to be sold to or
through underwriters acting for the Company, the Company shall:

                    (i) deliver to each Selling Shareholder, as promptly as practicable, as many
copies of preliminary prospectuses as such Selling Shareholder may reasonably
request (in which case such Selling Shareholder shall

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keep a written record of the
distribution of the preliminary prospectuses and shall refrain from delivery of the
preliminary prospectuses in any manner or under any circumstances which would
violate the Securities Act or the securities laws of any other jurisdiction,
including the various states of the United States);

                    (ii) deliver to each Selling Shareholder, as soon as practicable after the
effective date of the registration statement, and from time to time thereafter
during the applicable period described in Section 2.4, as many copies of the
relevant prospectus as each such Selling Shareholder may reasonably request; and

                    (iii) in case of the happening, after the effective date of the registration
statement and during the applicable 180 or 360-day period described in the second
sentence of Section 2.4(a), of any event or occurrence as a result of which
the prospectus, as then in effect, would include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary
to make any statement therein not misleading in the light of the circumstances in
which it was made, give each Selling Shareholder written notice of the event or
occurrence and prepare and furnish to each Selling Shareholder, in such quantities
as it may reasonably request, copies of an amendment of or a supplement to such
prospectus as may be necessary so that the prospectus, as so amended or supplemented
and thereafter delivered to purchasers of the Registrable Securities covered by such
prospectus, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which it was made, not
misleading.

               (b) The Company will notify each Selling Shareholder of any action by the SEC or any
Commission to suspend the effectiveness of any registration statement filed pursuant hereto
or the initiation or threatened initiation of any proceeding for such purpose or the receipt
by the Company of any notification with respect to the suspension of the qualification of
the securities for sale in any jurisdiction. Immediately upon receipt of any such notice,
each Selling Shareholder shall cease to offer or sell any Registrable Securities pursuant to
the registration statement or prospectus in the jurisdiction to which such order or
suspension relates. The Company will also notify each Selling Shareholder promptly of the
occurrence of any event or the existence of any state of facts that, in the judgment of the
Company, should be set forth in such registration statement or prospectus. Immediately upon
receipt of such notice, each Selling Shareholder shall cease to offer or sell any
Registrable Securities pursuant to such registration statement or prospectus, cease to
deliver or use such registration statement or prospectus and, if so requested by the
Company, return to the Company at the Company’s expense all copies of such registration
statement or prospectus. The Company will as promptly as practicable take such action as
may be necessary to amend or supplement such registration statement
or prospectus in order to set forth or reflect such event or state of facts and provide
copies of such proposed amendment or supplement to each Selling Shareholder.

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               (c) On or before the date on which the registration statement is declared effective,
the Company shall use its reasonable efforts to:

                    (i) register or qualify (and cooperate with each Selling Shareholder, the
underwriter or underwriters, if any, and their counsel, in connection with the
registration or qualification of) the securities covered by the registration
statement for offer and sale under the securities or blue sky laws of each state and
other jurisdiction as any Selling Shareholder or any underwriter reasonably
requests;

                    (ii) keep each such registration or qualification effective, including through
new filings, or amendments or renewals, during the period the registration statement
or prospectus is required to be kept effective; and

                    (iii) do any and all other acts or things necessary or advisable to enable the
disposition in all such jurisdictions of the Registrable Securities covered by the
applicable registration statement, provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified.

               (d) The Company shall use its reasonable efforts to cause all Registrable Securities of
each Selling Shareholder included in the registration statement to be listed, by the date of
the first sale of such shares pursuant to such registration statement, on the New York Stock
Exchange or such other securities exchange or exchanges on which the Common Stock is then
listed or proposed to be listed, if any, as directed by any Selling Shareholder (subject to
the Company’s consent, which consent shall not be unreasonably withheld or delayed).

               (e) The Company shall make available to each Selling Shareholder and any underwriter
participating in the offering conducted pursuant to the registration statement an earnings
statement satisfying Section 11(a) of the Securities Act no later than 45 days after the end
of the 12-month period beginning with the first day of the Company’s first fiscal quarter
commencing after the effective date of the registration statement. The earnings statement
shall cover such 12-month period. This requirement will be deemed to be satisfied if the
Company timely files complete and accurate information on Forms 10-Q, 10-K, and 8-K under
the Exchange Act, and otherwise complies with Rule 158 under the Securities Act as soon as
feasible.

               (f) The Company shall cooperate with each Selling Shareholder and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable Securities to be
sold under the registration statement, and to enable such securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or any Selling Shareholder, may request, subject to the
underwriters’ obligation to return any certificates representing unsold securities.

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               (g) The Company shall use its reasonable efforts to cause Registrable Securities
covered by the registration statement to be registered with or approved by such other
governmental agencies or authorities in the United States (including the registration of
Registrable Securities under the Exchange Act) as may be necessary to enable each Selling
Shareholder or the underwriter or underwriters, if any, to consummate the disposition of
such securities.

               (h) The Company shall, during normal business hours and upon reasonable notice, make
available for inspection by any Selling Shareholder, any underwriter participating in any
offering pursuant to the registration statement, and any attorney, accountant or other agent
retained by any Selling Shareholder or any such underwriter (collectively, the
“Inspectors”), all financial and other records, pertinent corporate documents, and
properties of the Company (including non-public information), as shall be reasonably
necessary to enable the Inspectors to exercise their due diligence responsibilities;
provided that any Inspector receiving non-public information shall have previously
entered into an appropriate confidentiality agreement in mutually satisfactory form and
substance. The Company shall also cause its officers, directors, and employees to supply
all information reasonably requested by any Inspector in connection with the registration
statement.

               (i) The Company shall use its reasonable efforts to obtain a “cold comfort” letter and,
as applicable, a “long-form comfort letter” from the Company’s independent public
accountants, and an opinion of counsel for the Company, each in customary form and covering
such matters of the type customarily covered by cold comfort letters and long form comfort
letters and legal opinions in connection with public offerings of securities, as any Selling
Shareholder reasonably request.

               (j) The Company shall enter into such customary agreements (including an underwriting
agreement containing such representations and warranties by the Company and such other terms
and provisions, as are customarily contained in underwriting agreements for comparable
offerings and are reasonably satisfactory to the Company) and take all such other actions as
any Selling Shareholder or underwriter participating in such offering and sale may
reasonably request in order to expedite or facilitate such offering and sale (other than
such actions which are disruptive to the Company or require significant management
availability), including providing reasonable availability of appropriate members of senior
management of the Company to provide customary due diligence assistance in connection with
any offering and to participate in customary “road show” presentations in connection with
any underwritten offerings in substantially the same manner as they would in an underwritten
primary registered public offering by the Company of its Common Stock, after taking into
account the reasonable business requirements of the Company in determining the scheduling
and duration of any road show.

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ARTICLE III

INDEMNIFICATION

          3.1. Indemnification by the Company. In the event of any registration under the
Securities Act by any registration statement pursuant to rights granted in this Agreement of
Registrable Securities held by any Shareholder, the Company will hold harmless each such
Shareholder and each underwriter of such securities and each other person, if any, who controls any
such Shareholder or underwriter within the meaning of the Securities Act, against any losses,
claims, damages, or liabilities (including legal fees and costs of court), joint or several, to
which any such Shareholder, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages, or liabilities (or any
actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact (i) contained, on its effective date, in any registration statement
under which such securities were registered under the Securities Act or any amendment or supplement
to any of the foregoing, or which arise out of or are based upon the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) contained in any preliminary prospectus, if used prior to the effective date
of such registration statement, or in the final prospectus (as amended or supplemented if the
Company shall have filed with the SEC any amendment or supplement to the final prospectus) if used
within the period which the Company is required to keep the registration to which such registration
statement or prospectus relates current under Section 2.4, or which arise out of or are
based upon the omission or alleged omission (if so used) to state a material fact required to be
stated in such prospectus or necessary to make the statements in such prospectus not misleading;
and will reimburse each such Shareholder and underwriter and each such controlling person, if any,
for any legal or any other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, or liability; provided, however, that the
Company shall not be liable to any Shareholder or its underwriters or controlling persons in any
such case to the extent that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged omission made in such
registration statement or such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company through a written instrument duly executed by such Shareholder
or underwriter specifically for use in the preparation thereof; provided further that the
Company shall not be liable to any Shareholder or its underwriters or controlling persons in any
such case with respect to losses, claims, damages or liabilities (including legal fees and costs of
court) that arise out of or are based on an untrue statement or alleged untrue statement or
omission or alleged omission made in any prospectus used in connection with any request for
registration under Section 2.2, to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission is corrected in any amendment or supplement to such
prospectus if both (y) the person asserting such loss, claim, damage or liability purchased
securities in reliance on such prospectus but was not given such amendment or supplement thereto on
or prior to the confirmation of the sale of such securities and such amendment or supplement was
required by law to be delivered on or prior to the confirmation of such sale and (z) the Company
had delivered to such Shareholder or its underwriters such amendment or supplement thereto pursuant
to Section 2.4(a)(iii) in the

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requisite quantity and on a timely basis to permit proper delivery to such person on or prior
to the date of confirmation of the sale of such securities.

          3.2. Indemnification by Selling Shareholders. It shall be a condition precedent to
the obligation of the Company to include in any registration statement any Registrable Securities
of any Selling Shareholder that the Company shall have received from such Selling Shareholder an
undertaking, reasonably satisfactory to the Company and its counsel, to indemnify and hold
harmless, on a several but not joint basis, (in the same manner and to the same extent as set forth
in Section 3.1) the Company, each director of the Company, each officer of the Company who
shall sign the registration statement, any person who controls the Company within the meaning of
the Securities Act, and each other Selling Shareholder (i) with respect to any statement or
omission from such registration statement, or any amendment or supplement to it, if such statement
or omission was made in reliance upon and in conformity with information furnished to the Company
through a written instrument duly executed by such Selling Shareholder specifically for use in the
preparation of such registration statement or amendment or supplement, and (ii) with respect to
compliance by such Selling Shareholder with applicable laws in effecting the sale or other
disposition of the securities covered by such registration statement.

          3.3 Indemnification Procedures. Promptly after receipt by an indemnified party
of notice of the commencement of any action involving a claim referred to in the preceding Sections
of this Article III, the indemnified party will, if a resulting claim is to be made or may
be made against an indemnifying party, give written notice to the indemnifying party of the
commencement of the action. If any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense of the action with
counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying
party to such indemnified party of its election to assume defense of the action, the indemnifying
party will not be liable to such indemnified party for any legal or other expenses incurred by the
latter in connection with the action’s defense. An indemnified party shall have the right to
employ separate counsel in any action or proceeding and participate in the defense thereof, but the
fees and expenses of such counsel shall be at such indemnified party’s expense unless (a) the
employment of such counsel has been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party has not assumed the defense and employed counsel reasonably
satisfactory to the indemnified party within 30 days after notice of any such action or proceeding,
or (iii) the named parties to any such action or proceeding (including any impleaded parties)
include the indemnified party and the indemnifying party and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available to the indemnified
party that are different from or additional to those available to the indemnifying party (in which
case the indemnifying party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified party), it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in addition to all local
counsel which is necessary, in the good faith opinion of both counsel for the indemnifying party
and counsel for the indemnified party in order to adequately represent the indemnified parties) for
the indemnified party and that all such fees

-12-

 

and expenses shall be reimbursed as they are incurred upon written request and
presentation of invoices. Whether or not a defense is assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for any
settlement made without its consent. No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an unconditional
term the giving by the claimant or plaintiff, to the indemnified party, of a release
from all liability in respect of such claim or litigation.

          3.4. Contribution. If the indemnification required by this Article III from
the indemnifying party is unavailable to or insufficient to hold harmless an indemnified party in
respect of any indemnifiable losses, claims, damages, liabilities, or expenses, then the
indemnifying party shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities, or expenses in such proportion as is
appropriate to reflect (i) the relative benefit of the indemnifying and indemnified parties and
(ii) if the allocation in clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative benefit referred to in clause (i) and also the relative fault
of the indemnified and indemnifying parties, in connection with the actions which resulted in such
losses, claims, damages, liabilities, or expenses, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact, has been made by, or relates to information
supplied by, such indemnifying party or parties, and the parties’ relative intent, knowledge,
access to information, and opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damage, liabilities, and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding. The Company and each Shareholder agree
that it would not be just and equitable if contribution pursuant to this Section 3.4 were
determined by pro rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the prior provisions of this Section 3.4.

          Notwithstanding the provisions of this Section 3.4, no indemnifying party shall be
required to contribute any amount in excess of the amount by which the total price at which the
securities were offered to the public by the indemnifying party exceeds the amount of any damages
which the indemnifying party has otherwise been required to pay by reason of an untrue statement or
omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was not guilty of such a
fraudulent misrepresentation.

ARTICLE IV

OTHER AGREEMENTS

          4.1. Other Registration Rights. The Company agrees that it will not grant to any
party registration rights which would allow such party to limit a Shareholder’s priority for the
sale or distribution of Registrable Securities upon the exercise of a demand registration right
pursuant to Section 2.2 or incidental registration rights pursuant to Section 2.1.

-13-

 

          4.2. Expenses. All expenses incurred by the Company in connection with any
registration statement covering Registrable Securities offered by a Selling Shareholder, including,
without limitation, all registration and filing fees (including all expenses incident to filing
with the New York Stock Exchange), printing expenses, reasonable fees and disbursements of counsel
(except for the fees and disbursements of counsel for the Selling Shareholders) and of the
independent certified public accountants, underwriter’s reasonable legal, accounting and
out-of-pocket expenses, and the expense of qualifying such securities under state blue sky laws,
shall be borne by the Company, including such expenses of any registration delayed by the Company
under the fourth paragraph of Section 2.2; provided, however, that the
Company shall not be required to pay for any expenses of any registration proceeding begun pursuant
to Section 2.2 if the registration request is subsequently withdrawn at the request of the
Exercising Shareholder (in which case the Exercising Shareholder shall bear its pro rata share of
the expenses based on the number of Registrable Securities such Shareholder intended to include in
such registration compared to the total number of Subject Securities intended to include in such
registration), unless such Exercising Shareholder agrees to forfeit its right to one demand
registration under Section 2.2; provided further, however, that if at the
time of such withdrawal such Exercising Shareholder has learned of a material adverse change in the
condition, business, or prospects of the Company that was not known to it at the time of its
request, then such Exercising Shareholder shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 2.2. The Company’s obligations under this
Section 4.2 shall apply to each registration under the Securities Act or state blue sky
legislation pursuant to Section 2.2. The foregoing notwithstanding, all underwriter’s
discounts and commissions covering Registrable Securities offered by a Shareholder shall be borne
by such Shareholder.

          4.3. Dispositions During Registration. Each Shareholder agrees that, without the
consent of the managing underwriter(s) in an underwritten offering in respect of Common Stock or
other Subject Securities, it will not effect any sale or distribution of Common Stock or other
Subject Securities (other than Registrable Securities included in such offering), during the ten
(10) day period prior to, and during the ninety (90) day period beginning on, the effective date of
the registration statement filed by the Company in respect of such underwritten offering, or any
shorter period as may apply to the Company and its affiliates.

          4.4. Transfer of Rights. All rights of each Shareholder under this Agreement shall be
transferable by such Shareholder to any party who acquires Registrable Securities from such
Shareholder and who executes an instrument in form and substance satisfactory to the Company in
which it agrees to be bound by the terms of this Agreement as if an original signatory hereto, in
which case such transferee shall thereafter be a “Shareholder” for all purposes of this Agreement.
In the case of any assignment, the party or parties who have the rights and benefits of the
assigning Shareholder under this Agreement shall become parties to and be subject to this
Agreement, and shall not, as a group, have the right to request any greater number of registrations
than such Shareholder would have had if no assignment had occurred. Upon any transfer of the
registration rights or benefits of this Agreement, such assigning Shareholder shall give the
Company written notice prior to or promptly following such transfer stating the name and address of
the transferee and identifying the securities with respect to which such rights are being assigned.
Such notice shall include or be accompanied by a written undertaking by the transferee to comply
with the obligations imposed hereunder. Unless

-14-

 

otherwise agreed by the assigning Shareholder and the parties to whom registration rights have
been transferred, in the event any registration rights are transferred in accordance with the terms
of this Agreement, any actions required to be taken by such assigning Shareholder will be taken
with the approval of the holders of such registration rights who hold a majority of the Registrable
Securities, whose actions shall bind all such holders of such registration rights.

          4.5. Best Registration Rights. If the Company grants to any Person with respect to
any security issued by the Company or any of its Affiliates registration rights (other than as to
the number of demand registrations) that provide for terms that are in any manner more favorable to
the holder of such registration rights than the terms granted to any Shareholder (or if the Company
amends or waives any provision of any agreement providing registration rights of others or takes
any other action whatsoever to provide for terms that are more favorable to other holders than the
terms provided to any Shareholder other than the number of demand registrations or the minimum
amount of shares required to exercise demand registration rights), then this Agreement shall
immediately be deemed amended to provide each Shareholder with any (or all) of such more favorable
terms as any Shareholder shall elect to include herein. The Company shall promptly give notice to
each Shareholder of the granting of any such registration rights to another Person.

ARTICLE V

MISCELLANEOUS

          5.1. Notices. All notices, requests, demands and other communications required or
permitted hereunder shall be made in writing by hand-delivery, registered first-class mail,
telecopier, or air courier guaranteeing delivery:

	 	 	 
	       (a)

	 	If to the Company, to:
	 
	 	 
	

	 	Interstate Hotels & Resorts, Inc.
	

	 	1010 Wisconsin Avenue
	

	 	Suite 500
	

	 	Washington, D.C. 20007
	

	 	Attention: Christopher L. Bennett, Esq.
	

	 	Telecopy: (207) 295-1026
	 
	 	 
	

	 	with a copy to:
	 
	 	 
	

	 	Paul, Weiss, Rifkind, Wharton & Garrison
	

	 	1285 Avenue of the Americas
	

	 	New York, New York 10019-6064
	

	 	Attention: Richard S. Borisoff, Esq.
	

	 	Facsimile: (212) 757-3990

or to such other person or address as the Company shall furnish to each Shareholder in writing;

-15-

 

	 	 	 
	(b)

	 	If to LB LP, to:
	 
	 	 
	

	 	LB Interstate LP LLC
	

	 	c/o Lehman Brothers Holdings Inc.
	

	 	1284 Avenue of the Americas,
	

	 	13th Floor
	

	 	New York, New York 10019
	

	 	Attention: Joseph Flannery
	

	 	Fax: (646) 758-1938
	 
	 	 
	

	 	with a copy to:
	 
	 	 
	

	 	Fried, Frank, Harris, Shriver & Jacobson
	

	 	1 New York Plaza
	

	 	New York, New York 10004
	

	 	Attn: Jonathan Mechanic, Esq.
	

	 	Fax: (212) 859-8582
	 
	 	 
	(c)

	 	If to KFB/LB IHR II, LP, to:
	 
	 	 
	

	 	545 E. John Carpenter Freeway
	

	 	Suite 1400
	

	 	Irving, TX 75062
	 
	 	 
	(d)

	 	If to KA/LB IHR II, LP, to:
	 
	 	 
	

	 	1221 Brickell Avenue
	

	 	Suite 900
	

	 	Miami, FL 33131
	 
	 	 
	(e)

	 	If to CG Ventures/LB IHR II, to:
	 
	 	 
	

	 	1221 Brickell Avenue
	

	 	Suite 900
	

	 	Miami, FL 33131
	 
	 	 
	(f)

	 	If to SMW/LB IHR II, LP, to:
	 
	 	 
	

	 	3250 Mary Street
	

	 	5th Floor
	

	 	Miami, FL 33133
	 
	 	 
	(g)

	 	If to DEL/LB IHR II, to:
	 
	 	 
	

	 	3250 Mary Street

-16-

 

	 	 	 
	

	 	5th Floor
	

	 	Miami, FL 33133
	 
	 	 
	       (h)

	 	If to PS/LB IHR II, LP, to:
	 
	 	 
	

	 	3250 Mary Street
	

	 	5th Floor
	

	 	Miami, FL 33133

or to such other person or address as a Shareholder shall furnish to the Company and each other
Shareholder in writing.

          All such notices, requests, demands and other communications shall be deemed to have been duly
given: at the time of delivery by hand, if personally delivered; five (5) Business Days after
being deposited in the mail, postage prepaid, if mailed domestically in the United States (and
seven (7) Business Days if mailed internationally); when receipt acknowledged, if telecopied; and
on the Business Day for which delivery is guaranteed, if timely delivered to an air courier
guaranteeing such delivery.

          5.2. Section Headings. The article and section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of this Agreement.
References in this Agreement to a designated “Article” or “Section” refer to an Article or Section
of this Agreement unless otherwise specifically indicated.

          5.3. Governing Law. This Agreement shall be construed and enforced in accordance with
and governed by the law of New York, without regard to its conflict of laws principles that would
indicate the applicability of the laws of any other jurisdiction.

          5.4. Consent to Jurisdiction and Service of Process. Any legal action or proceeding
with respect to this Agreement or any matters arising out of or in connection with this Agreement
and any action for enforcement of any judgment in respect thereof shall be brought exclusively in
the state or federal courts located in the State of New York, and, by execution and delivery of
this Agreement, the Company and each of the Shareholders each hereby irrevocably consents to
service of process out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, or by recognized
international express carrier or delivery service to such party at its respective address referred
to in this Agreement. The Company and each of the Shareholders each hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Agreement brought in the courts referred
to above and each hereby further irrevocably waives and agrees, to the extent permitted by
applicable law, not to plead or claim in any such court that any such action or proceeding brought
in any such court has been brought in an inconvenient forum. Nothing in this Agreement shall
affect the right of any party hereto to serve process in any other manner permitted by law.

          5.5. Amendments. This Agreement may be amended only by an instrument in writing
executed by all of its parties.

-17-

 

          5.6. Entire Agreement. This Agreement and the Distribution Agreement constitute the
entire agreement and understanding of the parties with respect to the transactions contemplated
hereby and thereby. This Agreement may be amended only by a written instrument duly executed by
the parties or their respective successors or assigns; provided, however, that any
amendment or waiver by the Company shall be made only with the prior approval of a majority of the
entire Board of Directors of the Company.

          5.7. Severability. The invalidity or unenforceability of any specific provision of
this Agreement shall not invalidate or render unenforceable any of its other provisions. Any
provision of this Agreement held invalid or unenforceable shall be deemed reformed, if practicable,
to the extent necessary to render it valid and enforceable and to the extent permitted by law and
consistent with the intent of the parties to this Agreement.

          5.8. Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute the same instrument.

-18-

 

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

	 	 	 	 	 	 	 
	 	 	THE SHAREHOLDERS:
	 
	 	 	 	 	 	 
	 	 	LB INTERSTATE GP LLC
	 
	 	 	 	 	 	 
	 	 	By:	 	PAMI LLC,
	 
	 	 	 	 	 	 
	 	 	 	 	its Sole Member
	 
	 	 	 	 	 	 
	

	 	 	 	By:	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	LB INTERSTATE LP LLC
	 
	 	 	 	 	 	 
	 	 	By:	 	PAMI LLC,
	 
	 	 	 	 	 	 
	 	 	 	 	its Sole Member
	 
	 	 	 	 	 	 
	

	 	 	 	By:	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name:	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Title:	 	 
	

	 	 	 	 	 	 

-19-

 

	 	 	 	 	 	 	 
	 	 	KFP/LB IHR II, LP
	 
	 	 	 	 	 	 
	 	 	By:	 	KFP/LB IHR GP, LLC,
	 
	 	 	 	 	 	 
	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Mahmood Khimji
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name:
	 	Mahmood Khimji
	 
	 	 	 	 	 	 
	

	 	 	 	Title:
	 	President
	 
	 	 	 	 	 	 
	 	 	KA/LB IHR II, LP
	 
	 	 	 	 	 	 
	 	 	By:	 	KA/LB IHR GP, LLC,
	 
	 	 	 	 	 	 
	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Karim Alibhai
	

	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name:
	 	Karim Alibhai
	 
	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Managing Member

-20-

 

	 	 	 	 	 	 	 
	 	 	CG Ventures/LB IHR II, LP
	 
	 	 	 	 	 	 
	 	 	By:	 	CG Ventures/LB IHR GP, LLC,
	 
	 	 	 	 	 	 
	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Haider Alibhai Ukani
	

	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name:
	 	Haider Alibhai Ukani
	 
	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 
	 	 	SMW/LB IHR II, LP
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	By:	 	SMW/LB IHR GP, LLC,
	 
	 	 	 	 	 	 
	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Sherwood M. Weiser
	

	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name:
	 	Sherwood M. Weiser
	 
	 	 	 	 	 	 
	

	 	 	 	Title:
	 	Managing Member
	 
	 	 	 	 	 	 
	 	 	DEL/LB IHR II, LP
	 
	 	 	 	 	 	 
	 	 	By:	 	DEL/LB IHR GP, Inc.,
	 
	 	 	 	 	 	 
	 	 	 	 	its General Partner

-21-

 

	 	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Donald E. Lefton
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name: Donald E. Lefton

	 
	 	 	 	 	 	 
	

	 	 	 	Title: President

	 
	 	 	 	 	 	 
	 	 	PS/LB IHR II, LP
	 
	 	 	 	 	 	 
	 	 	By:	 	PS/LB IHR GP, Inc.,
	 
	 	 	 	 	 	 
	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Peter Sibley
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	Name: Peter Sibley

	 
	 	 	 	 	 	 
	

	 	 	 	Title: President

-22-

 

	 	 	 	 	 	 	 
	 	 	THE COMPANY:
	 
	 	 	 	 	 	 
	 	 	INTERSTATE HOTELS & RESORTS, INC.
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	Name:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	Title:	 	 	 	 
	 	 	 	 	 

-23-exv10w12

 

Exhibit 10.12

EXECUTIVE EMPLOYMENT AGREEMENT

EXECUTIVE EMPLOYMENT AGREEMENT, effective as of December 31, 2003 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 STEVEN D. JORNS (the
“Executive”), an individual residing at 900 Kingsbury Way, Southlake, TX 76092.

          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 December 31, 2003 (the
“Commencement Date”), and ending on December 31, 2006 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.

 

 

 2

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; provided that Executive may render his services on a periodic basis out of the
Company’s offices in Dallas, Texas. 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.

          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, the Interstate
Executive Real Estate Fund, 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 governing any such grants. Notwithstanding the foregoing, the
Executive shall be

 

 

 3

granted annually each January a minimum of 25,000 and a maximum of 125,000 restricted stock shares
in the Company, as determined within that range 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. Annual restricted stock grants thereafter shall be at the discretion of the Board.
Additionally, the Executive shall be granted annually each January a minimum of 50,000 and a
maximum of 100,000 stock options in the Company, as determined within that range by the Board,
depending on the performance of the Company. The options will vest equally on the first, second
and third anniversary of the date of grant. Annual stock option grants thereafter shall be at the
discretion of the Board.

               (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. While Executive holds the
title of Chief Executive Officer of the Company, the Company shall provide at the Company’s cost an
apartment for the Executive in Arlington, Virginia. The Company also agrees to reimburse Executive
for all costs incurred by Executive traveling between Dallas, Texas and Arlington, Virginia for
Company business.

               (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) 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) 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.

 

 

 4

               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(i) 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.

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

 

 

 5

               (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;
	 
	 	(ii)  	the Company will make
payments for one (1) year of all compensation otherwise
payable to the Executive pursuant to this Agreement,
including,

 

 

 6

	 	   	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;
	 
	 	(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 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

 

 

  7

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.

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

 

 

  8

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 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;

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

                    (iv) 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, that the Executive shall not be deemed to have Good
Reason pursuant to clauses (h)(i), (ii) or (iii) 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.

               (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

 

 

  9

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)(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, 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

 

 

  10

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 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.

 

 

  11

                         (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.

          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.

 

 

  12

               (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 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

 

 

  13

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.

          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 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)

 

 

  14

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:

Steven D. Jorns

900 Kingsbury Way

Southlake, TX 76092

If to the Company or to the LLC, to:

Interstate Hotels & Resorts, Inc.

4501 North Fairfax Drive, Suite 800

Fairfax, 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 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

 

 

  15

agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof (other than previously executed
option agreements, restricted stock agreements executed by the Executive and the Company and/or the
LLC, the “Grant Agreements”), 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 (other then the Grant Agreements), including without limitation, the Employment Agreement dated August 3, 1998, as amended December 10, 1998, between the Executive
and the Company, 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 (other than the Grant Agreements).

 

 

  16

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

	 	 	 	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Steven D. Jorns	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	INTERSTATE HOTELS & RESORTS, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 
	

	 	 	 	 	 	 	 	 
	

	 	 	 	Name:	 	 	 	 
	

	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	LLC:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	INTERSTATE MANAGEMENT COMPANY,	 	 
	

	 	 	 	LLC	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

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

member	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	By: Interstate Hotels & Resorts, Inc.,

        its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	 	 	 
	

	 	 	 	 	 	 	 	 
	

	 	 	 	Name:	 	 	 	 
	

	 	 	 	Title:

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