AMENDED AND RESTATED EMPLOYMENT
AGREEMENT
AND CONSULTING AGREEMENT
THIS AMENDED AND
RESTATED EMPLOYMENT AGREEMENT AND CONSULTING AGREEMENT
(“Agreement”), dated as of July 1, 2008 (the
“Effective Date”), made and entered into by and between
Interstate Hotels and Resorts, Inc., a Delaware corporation, and
Interstate Management Company, LLC, a Delaware corporation
(together the “Company”), and Henry L. Ciaffone (the
“Executive”) hereby amends and restates the Employment
Agreement between the Company and the Executive dated as of
January 1, 2007 (the “2007 Agreement”).
A. The
Executive is currently serving as President, International
Operations and Development of the Interstate Hotels and Resorts,
Inc. pursuant to the 2007 Agreement.
B. The
Company and the Executive desire to amend and restate the 2007
Agreement and to continue the employment relationship with the
Executive as President, International Development and Operations
through December 31, 2009, on the terms and conditions herein
provided, and subject to the termination provisions set forth in
Section 5.
C. The
Company and the Executive desire to continue Executive’s
relationship with the Company as a consultant beginning on
January 1, 2010 which consultancy shall continue until
December 31, 2014, subject to the termination provision set
forth in Section 5.
NOW, THEREFORE,
the parties agree as follows:
1.
Definitions . In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a)
“ Base Pay ” means the salary provided for in
Section 4(b), as such amount may be adjusted
hereunder.
(b)
“ Board ” means the Board of Directors of the
Company or an authorized committee thereof.
(c)
“ Cause ” means that the Executive shall
have:
(i)
committed an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment or
consultancy with the Company or any Subsidiary;
(ii)
committed intentional wrongful damage to property of the Company or
any Subsidiary;
(iii)
committed intentional Unauthorized Disclosure, Use or Solicitation;
or
(iv)
failed to fulfill his obligations set forth in Section 3
relating to the Term, other than due to Executive’s death;
provided that any failure by the Executive to fulfillhis
obligations during the Term because of factors outside of his
control, including but not limited to illness documented by
reasonable medical documentation, shall not constitute Cause for
termination, and further provided that before invoking this Section
1(c)(iv) to terminate the Executive for Cause the Company shall
provide the Executive written notice of its intent to do so and
shall provide Executive a reasonable opportunity to cure the
alleged breach by fulfilling the obligations within a reasonable
time period following delivery of such notice;
(v)
committed intentional wrongful engagement in any Competitive
Activity; and any such act shall have been materially harmful to
the Company. For purposes of this Agreement, no act or failure to
act on the part of the Executive will be deemed
“intentional” if it was due primarily to an error in
judgment or negligence, but will be deemed
“intentional” only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the
Company.
Notwithstanding
the foregoing, the Executive will not be deemed to have been
terminated for “Cause” hereunder unless and until there
shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three
quarters of the full Board of Directors then in office at a meeting
of the Board of Directors called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses to
have counsel present at such meeting), to be heard before the
Board, finding that, in the good faith opinion of the Board, the
Executive had committed an act constituting “Cause” as
herein defined and specifying the particulars thereof in detail,
provided, however, that nothing herein will limit the right of the
Executive or his beneficiaries to contest the validity or propriety
of any such determination and such determination, albeit a
condition to any termination for “Cause” as aforesaid,
will not create any presumption that “Cause” in fact
exists.
(d)
“ Competitive Activity ” means any act by the
Executive that is prohibited under Section 6(a).
(e)
“ Disability ” means the Executive’s
inability, as a result of mental or physical illness, injury or
disease, substantially to perform his material duties and
responsibilities under this Agreement for a period of 180
consecutive calendar days within any 12-month period.
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(f)
“ Employee Benefits ” means the perquisites,
benefits and service credit for benefits as provided under any and
all employee welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate,
including without limitation any group or other life, health,
medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company), disability, salary
continuation, expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that
may be adopted hereafter by the Company.
(g)
“ Subsidiary ” means an entity in which the
Company directly or indirectly beneficially owns 50% or more of the
outstanding Voting Stock or, if a partnership, limited liability
company or similar entity, at least 50% of the equity capital
interests thereof.
(h)
“ Term” means the period specified in
Section 2.
(i)
“ Unauthorized Disclosure, Use or Solicitation ”
means any violation or breach by the Executive of any provision of
Section 7.
2.
Term . The Company hereby employs the Executive and the
Executive hereby accepts such employment, effective as of the
Effective Date and ending at the close of business on
December 31, 2009 (the “Employment Term”). . The
Company hereby agrees to retain the Executive as an independent
consultant and the Executive hereby accepts such retention,
effective from January 1, 2010 through December 31, 2014
(the “Consulting Term). (The Employment Term together with
the Consulting Term are collectively referred to herein as the
“Term”.)
3.
Duties, Responsibilities and Office Location . During the
Employment Term, the Executive will have and perform the duties and
responsibilities set forth in Exhibit A and shall devote
substantially all of his business time to the business and affairs
of the Company and its Subsidiaries (excluding reasonable amounts
of time devoted to charitable purposes, passive investments and
directorships and periods in which he is physically or mentally
ill, injured or otherwise disabled), travel to Moscow on fifteen
occasions during the Employment Term for a period on each occasion
lasting approximately seven to ten days (including travel days),
execute annually the Company’s standard Foreign Corrupt
Practices Act certification, and assist the Company’s Chief
Executive Officer with the evaluation and implementation of a
succession plan. While in the United States, the Executive shall
utilize his residence as his primary office location. During the
Consulting Term, the Executive agrees to travel to Moscow on two
occasions annually for a period lasting approximately seven to ten
days on each occasion (including travel days) and to execute
annually the Company’s standard Foreign Corrupt Practices Act
certification. During the Consulting Term, from time to time as
reasonably requested by the Company’s Chief Executive
Officer, the Executive will provide advice and counsel concerning
the Included Hotels..
4.
Compensation and Benefits .
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(a) The
Company and the Executive agree that the Executive’s overseas
assignment ended as of June 30, 2008, that the Company’s
obligations to tax equalize past payments received by the Executive
remain in effect under the 2007 Agreement and that no additional
payments to the Executive shall be tax equalized except the Annual
Special Bonus.
(b)
Base Pay . During the Employment Term, the Executive will
receive Base Pay of $475,000 per year. Base Pay will be payable by
the Company in accordance with its regular compensation practices
and policies applicable to senior executives of the
Company.
(c)
Annual Special Bonus. The Annual Special Bonus will be
payable on the first business day of 2009. For 2009 the Annual
Special Bonus will equal $300,000. The Annual Special Bonus shall
not be paid to the Executive in the event that the owner of the
Moscow hotels terminates the three management agreements without
compensation to the Company.
(d)
Annual Performance Bonus . For each fiscal year of the
Company during the Employment Term or pro-rata portion thereof the
Executive shall receive an Annual Performance Bonus that can vary
from a minimum of 100% to a maximum of 125% of the
Executive’s Base Pay. In the event of termination of this
Agreement for any reason other than Cause during the Employment
Term, the Executive shall receive the pro rata portion of the
Annual Performance Bonus for the then current fiscal
year.
(e)
Development Fee. Beginning the Effective date, the Executive
shall also receive quarterly 5% of the gross management fees
(including base fees, incentive fees, termination fees, liquidated
damages or similar payments, collectively “Fees”)
actually received by the Company in connection with each hotel
management agreement related to the Included Hotels as defined
below (“the Development Fee”). The Development Fee
shall be payable to the Executive respecting the Holiday Inn
Lesnaya, Holiday Inn Suschevsky, Hilton Leningradskaya Hotel, the
Renaissance Leningradsky Hotel, the Marriott Tverskaya Hotel, the
Marriott Grand Hotel, and the Marriott Aurora Hotel (the
“Existing Hotels”). It shall also be payable to the
Executive respecting Fees from hotel management agreements entered
into by the Company respecting hotels located in the former Soviet
Union during the Term (the “New Hotels”). (The Existing
Hotels and New Hotels together are collectively referred to herein
as the “Included Hotels.”) The Company shall pay to the
Executive $300,000 on or before the fifteenthof July 2008 in
full and complete satisfaction of its Development Fee obligation to
the Executive for the Marriott Tverskaya, Marriott Grand and
Marriott Aurora for fiscal year 2008. If the Hilton Leningradskaya
opens prior to the Effective Date, the Executive will receive the
Development Fee for such hotel from the date such hotel opens
through the Effective Date. Except as set forth in this Section and
in Section 5, the Development Fee shall survive this Agreement
and be payable to the Executive or his heirs through the end of the
fiscal quarter which includes the tenth anniversary of the later of
(i) the Commencement Date as defined in each management
agreement and (ii) the date of inclusion of a particular
management agreement in this Section 4(e) as an Included Hotel.
Notwithstanding the previous sentence, the Development Fee
obligation shall cease on (i) July 1, 2018 for the
Marriott Tverskaya Hotel, Marriott Grand Hotel and Marriott Aurora
Hotel and (ii) with respect to New Hotels, the tenth
anniversary date of the
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Commencement
Date as defined in each management agreement. Notwithstanding the
two previous sentences, no Development Fee shall be due pursuant to
this Agreement after the date which is the conclusion of the second
fiscal year after the year of the death of the
Executive.
(f)
Employee Benefits. During the Employment Term, the Executive
will be entitled to (i) participate in all employee benefit plans,
programs, policies and arrangements sponsored, maintained or
contributed to by the Company, subject to and in accordance with
the terms and conditions of such plans, programs, policies and
arrangements as they relate to similarly situated senior executives
of the Company, (ii) participate in all equity and long-term
incentive plans sponsored or maintained by the Company at a level
commensurate with his position, subject to and in accordance with
the terms and conditions of such plans as they relate to senior
executives of the Company, and (iii) receive all other
benefits and perquisites provided or made available by the Company
to its senior executives, subject to and in accordance with the
terms and conditions of such benefits and perquisites as they
relate to senior executives of the Company.
(g)
Expenses . During the Term, the Executive will be entitled
to reimbursement of all documented reasonable travel and
entertainment expenses incurred by him on behalf of the Company in
the course of the performance of his duties hereunder, subject to
and in accordance with the terms and conditions of the
Company’s expense reimbursement policies as they relate to
senior executives of the Company.
(h)
Vacation . During the Employment Term, the Executive will be
entitled to not less than four weeks of vacation, in addition to
paid public holidays as observed by the Company from year to year,
subject to and in accordance with the terms and conditions of the
Company’s regular compensation practices and policies as they
relate to senior executives of the Company.
(i)
[Intentionally Omitted].
(j)
Travel Reimbursement . Each fiscal year during the
Employment Term the Company shall reimburse to the Executive the
cost of round trip first class airline tickets between Moscow,
Russia and Sarasota, Florida in the United States for the Executive
and his spouse as follows: (i) five (5) such trips by the
Executive in the second half of 2008 (three (3) by the spouse)
and (ii) ten (10) such trips by the Executive in 2009 (six
(6) by his spouse). During the Consulting Term, the Company
shall reimburse to the Executive the cost of two (2) such
trips annually by the Executive and his spouse. If additional trips
are agreed to by the parties during the Consulting Term, Executive
will be paid a per diem to be mutually agreed upon by the parties
for each such trip plus the reimbursement of all reasonable travel
expenses for him and his spouse.
( k) [Intentionally Omitted]
( l) Tax Equalization Program . As part of the
Executive’s compensation and benefits while in Russia, the
Company will tax equalize the Annual Special Bonus. The
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purpose of the
tax equalization program is to ensure that the Executive does not
incur any additional U.S. Federal income tax or state income tax
that the Executive would not have incurred had he been employed in
the United States.The Company will reimburse the Executive for all
required Russian income taxes.
The
accounting firm of PriceWaterhouseCoopers or any independent,
certified public accounting firm so designated by the Company will
compute the tax equalization payment. The tax equalization payment
will cover the year in which the Executive starts his foreign
assignment and will conclude when all tax costs related to the
overseas assignment have concluded.
As
part of the tax equalization program the Executive will be provided
with tax preparation services. These services will be provided for
the Executive beginning calendar year 2002 and ending the full
calendar year when all tax issues related to the overseas
assignment have concluded.
(m)
[Intentionally Omitted]
(n)
[Intentionally Omitted]
(o)
Life and Disability Insurance. The Company agrees to
reimburse the Executive for up to $20,000 per fiscal year for a
life insurance policy and/or a disability policy during the
Employment Term.
(p)
Annual Medical Examination . The Company agrees to reimburse
the Executive for all costs incurred by the Executive during the
Employment Term for an Annual Medical Examination at a facility
such as the Mayo Clinic- Jacksonville for the Executive and his
spouse. These costs shall be reduced by any costs reimbursed to the
Executive or paid directly under the Company’s medical plan.
The total cost to the Company shall not exceed $6,000 per year.
(The Parties agree that the 2009 Annual Medical Examination may
occur in 2010 due to scheduling considerations.)
(q)
Indemnification . As part of duties under this Agreement,
the Executive currently serves as the Director General of several
entities affiliated with or owned by Mospromstroi (as defined in
Section 6(b)) and the owner of the Renaissance Leningradsky
Hotel. The Company shall indemnify, defend and hold harmless the
Executive from and against any and all liabilities, actions,
damages, costs and expenses (including attorneys’ fees)
arising out of, or relating to, the Executive holding such
position(s) to the maximum extent permitted by law. Such obligation
shall, among other things, require the Company to take all feasible
steps at the request of the Executive to enable the Executive to
return to the United States promptly in the event that the
Executive is detained in Russia against his will or faces the
possibility of detention. In addition, as brought to the attention
of Company by the Executive, the Company shall use its best efforts
to explore additional means to afford to the Executive the maximum
protections available in connection with holding such positions.
This indemnification obligation shall cease once the Executive no
longer serves as General Director of any hotel managed by
the
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Company;
provided that the indemnification obligation will continue
after
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