EXHIBIT 10.2
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SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"),
dated as of July 30, 2002, made and entered into by and between Interstate
Hotels Corporation, a Maryland corporation (the "Company") and THOMAS F. HEWITT
(the "Executive"), hereby amends and restates the employment agreement between
the Company and the Executive, dated as of February 12, 2002 (the "Old
Agreement"), effective as of the date hereof (the "Effective Date").
RECITALS
WHEREAS, the Company and the Executive entered into that certain
Employment Agreement, dated as of August 31, 2000 and effective as of October
20, 2000 (the "Closing Date"), which was the closing date of the transactions
(the "Transactions") contemplated by the Securities Purchase Agreement by and
among the Company, CGLH Partners I LP, a Delaware limited partnership ("CGLH I")
and CGLH Partners II LP, a Delaware limited Partnership, ("CGLH II") dated as of
August 31, 2001 (the "Purchase Agreement"), and thereafter amended and restated
such agreement in its entirety pursuant to the Old Agreement;
WHEREAS, the Executive is currently serving as the Chairman and Chief
Executive Officer of the Company pursuant to the Old Agreement; and
WHEREAS, the Company has entered into an Agreement and Plan of Merger
with MeriStar Hotels & Resorts, Inc., a Delaware Corporation ("MeriStar"), dated
as of May 1, 2002 and amended on June 3, 2002 (as amended, the "Merger
Agreement") whereby, following the receipt of the requisite approvals of the
MeriStar stockholders and the Company's stockholders and the satisfaction or
waiver of the conditions set forth in the Merger Agreement, the Company will be
merged with and into MeriStar (the "Merger"). In connection with the Merger, the
Company and the Executive, with the consent of MeriStar, wish to amend and
restate the Old Agreement as provided herein.
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
5(a), 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 committed:
(i) an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his employment
with the Company or any Subsidiary;
(ii) intentional and material wrongful damage to
property of the Company or any Subsidiary;
(iii) intentional and material Unauthorized
Disclosure, Use or Solicitation; or
(iv) intentional and material 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 judgement 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 7(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.
(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,
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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) "GOOD REASON" means that Executive has complied with the
"Good Reason Process" (hereinafter defined) following the occurrence of any of
the following events: (i) a substantial diminution or other substantive adverse
change, not consented to by Executive in advance and in writing, in the nature
or scope of Executive's responsibilities, authorities, powers, functions, duties
or reporting relationship as in effect on the Effective Date and taking into
account the occurrence of the Transactions; (ii) except in connection with a
termination of Executive's employment, any removal, during the Term of
Employment, of Executive from or, any failure by management to nominate, or, if
nominated, any failure by the Board to re-elect, Executive to any of the
positions indicated in Section 4 as in effect on the Closing Date; (iii) a
reduction in Executive's Base Pay or Minimum Bonus; (iv) a breach by the Company
of any of its other material obligations under this Agreement and the failure of
the Company to cure such breach within 30 days after written notice thereof by
Executive; (v) the involuntary relocation of the Company's offices at which
Executive is principally employed or the involuntary relocation of the offices
of Executive's primary workgroup to a location more than 30 miles from such
offices, or the requirement by the Company for Executive to be based anywhere
other than the Company's offices at such location on an extended basis, except
for required travel on the Company's business to an extent substantially
consistent with Executive's business travel obligations; or (vi) the Company
chooses not to extend the Term of Employment under Section 2. "Good Reason
Process" shall mean that (A) the Executive reasonably determines in good faith
that a "Good Reason" event has occurred; (B) Executive notifies the Company in
writing of the occurrence of the Good Reason event; and (C) the Company does not
cure Executive's objections within a reasonable time not to exceed 60 days.
(h) "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.
(i) "TERM OF EMPLOYMENT" means the period specified in
Section 2.
(j) "UNAUTHORIZED DISCLOSURE, USE OR SOLICITATION" means any
violation or breach by the Executive of any provision of Section 9.
2. TERM OF EMPLOYMENT. The Company hereby employs the Executive and
the Executive hereby accepts such employment pursuant to the terms and
conditions contained herein, effective as of the Effective Date and ending at
the close of business on the fourth anniversary of the Effective Date. On the
second anniversary of the Effective Date and every even-numbered anniversary
date thereafter, the Term of Employment will automatically be extended for an
additional two years unless either party gives written notice to the other, not
less than 90 calendar days prior to the second anniversary or even-numbered
anniversary thereafter, that it or he does not want the Term of Employment so to
extend.
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3. WAIVER OF RIGHTS. As of the Effective Date, the Old Agreement
shall be deemed of no further force or effect and superceded in its entirety by
this Agreement. In consideration for the compensation, benefits and other terms
provided by this Agreement, the Executive expressly waives any rights to
payments and benefits to which he may have been entitled pursuant the terms of
the Old Agreement, including, without limitation, stock options to purchase
shares of Company Common Stock (as hereinafter defined), cash severance
payments, continuation of Employee Benefits, forgiveness of outstanding loan
balances and/or accelerated vesting of outstanding options and restricted stock
of the Company
4. DUTIES AND RESPONSIBILITIES. During the Term of Employment, the
Executive shall serve as the Chairman of the Board and Chief Executive Officer
of the Company, reporting to the Board, shall have supervision and control over
and responsibility for the day-to-day business and affairs of the Company, and
shall have such other powers and duties as may from time to time be prescribed
by the Board, provided that such duties are consistent with Executive's position
or other positions that he may hold from time to time. Executive shall devote
his full working time and efforts to the business and affairs of the Company.
Notwithstanding the foregoing, (i) Executive may serve on other boards of
directors or engage in religious, charitable or other community activities as
long as such services and activities are disclosed to the Board and do not
materially interfere with Executive's performance of his duties to the Company
as provided in this Agreement; and (ii) Executive may perform services under the
Consulting Agreement by and among Wyndham International, Inc., CSMC Management
Services, Inc. and Executive dated June 30, 1999 (the "Consulting Agreement") so
long as the provision of such services pursuant to the Consulting Agreement does
not conflict with the interests of the Company (the determination of whether a
conflict of interest exists in respect of the Executive's provision of services
under the Consulting Agreement shall be determined by the Board in good faith.
5. COMPENSATION AND BENEFITS.
(a) BASE PAY. During the Term of Employment, the Executive
will receive Base Pay of not less than $400,000 per year; subject to review by
the Board for increase (but not decrease) at the end of each fiscal year during
the Term of Employment. Such Base Pay will be payable by the Company in
accordance with its regular compensation practices and policies applicable to
senior executives of the Company.
(b) ANNUAL PERFORMANCE BONUS. For each fiscal year of the
Company during the Term of Employment, the Executive will be eligible for an
annual performance bonus that can vary from a minimum of 100% to a maximum of
200% of the Executive's Base Pay. The bonus will be subject to the rules issued
each year by the Board. In no event shall the bonus (the "Minimum Bonus") for
any fiscal year payable to the Executive be less than 100% of his Base Pay for
such fiscal year; provided, however, that the Minimum Bonus shall be pro-rated
for any partial year employment.
(c) EMPLOYEE BENEFITS. During the Term of Employment, the
Executive will be entitled to (i) participate in all employee benefit plans,
programs,
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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. Notwithstanding the foregoing, the health and dental plans
offered to Executive pursuant to the preceding sentence shall be at least as
generous as the health and dental plans made available to executives of CHC
Holdings, Inc. at March 1,1999. Executive shall also be entitled to a car
allowance of $750 per month, plus maintenance, insurance and gas.
(d) EXPENSES. During the Term of Employment, the Executive
will be entitled to reimbursement of all documented reasonable first class
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. In addition, the
Company shall pay all expenses associated with membership in an executive eating
club selected by Executive.
(e) VACATION. During the Term of Employment, 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.
(f) RESTRICTED STOCK. On or around June 18, 1999, the
Executive received from the Company a grant of restricted Stock ("Restricted
Stock Grant") in an amount equal to 3% of the outstanding shares of Common Stock
of the Company. Any unvested portion of the Restricted Stock Grant shall fully
vest on the Closing Date; provided, however, that the Company and the Executive
may mutually agree to defer vesting until a specified date or dates after the
Closing Date on a mutually agreeable schedule. Because the Executive filed an
election pursuant to Section 83 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Company provided Executive a personal recourse loan in an
amount sufficient to enable Executive to satisfy his income and employment tax
liabilities associated with the Restricted Stock Grant. Such loan is due on June
17, 2003 or 30 days after Executive's termination of employment, whichever is
earlier, and will accrue interest at the applicable federal rate under Section
1274(d) of the Code, payable at the maturity date. (Such loan, together with
accrued interest, shall hereinafter be referred to as the "Tax Loan"). If, on
the earlier of June 17, 2003 or the date of the Executive's termination of
employment for any reason other than Cause (the "Determination Date"), the
Market Value of the Common Stock underlying the Restricted Stock Grant is less
than $1.5 million, the Company shall forgive a portion of the Tax Loan
determined by multiplying the outstanding amount of the Tax Loan by a fraction,
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the numerator of which shall be the Market Value on the Determination Date and
the denominator of which shall be $1.5 million. For purposes of this Section
5(f) only, the Market Value of the Common Stock will be determined using the
average quoted closing price per share on a national securities exchange for the
20 business days ending on the Determination Date.
(g) LOAN. The Company has provided to the Executive a loan
of $400,000 which shall be due on June 18, 2005 or 30 days after Executive's
termination of employment, whichever is earlier. The loan will accrue interest
at the applicable federal rate under Section 1274(d) of the Code, payable at the
maturity date. Upon termination of employment of the Executive for any reason
other than the Merger or Cause, this $400,000 loan, plus accrued interest (the
"Loan") shall be forgiven. Upon termination of employment of the Executive by
reason of the Merger, the Loan shall be forgiven on June 30, 2005.
(h) INTEREST IN COMPANY'S JOINT VENTURE.
(i) As of the Closing Date, and subject to the
terms and conditions of the "JV Agreement" (as defined below), the
Executive was granted a 3.00% "Percentage Interest" (as defined in the
JV Agreement) as a limited partner in CGLH-IHC Fund I, L.P. (the JV
Interest") pursuant to, and subject to the terms and conditions of, the
JV Agreement. Subject to Section 6 hereof, the Executive's JV Interest
fully vested as of the Closing Date. For purposes of this Agreement the
"JV Agreement" shall mean the Agreement of Limited Partnership of
CGLH-IHC Fund I, L.P. by and between CGLH Partners III LP, a Delaware
limited partnership, Interstate Investment Corporation, a Delaware
corporation, CGLH Partners IV LP, a Delaware limited partnership,
Interstate Property Partnership, L.P. a Delaware limited partnership,
J. William Richardson, and the Executive, which is attached as Exhibit
E to the Purchase Agreement, entered into at the Closing Date.
(ii) To the extent that any additional joint venture
funds or arrangements (similar to the joint venture established
pursuant to the JV Agreement) are established or entered into by the
Company and the other parties to the JV Agreement following the Closing
Date and during the Term of Employment, the parties hereto agree to
negotiate in good faith to determine whether the Executive will
participate in such additional joint venture and the terms and
conditions of any such participation.
(i) PREFERRED STOCK. As of the Closing Date, and subject to
the last sentence of this Section 5(i), the Company granted to the Executive
100,000 shares of Series B Preferred Stock of the Company (the "Series B
Shares"). Subject to Section 6 hereof, the Series B Shares fully vested as of
the Closing Date. The grant of Series B Shares pursuant to this Section 5(i)
shall be subject to the stockholders agreement by and among the Executive, Kevin
P. Kilkeary, J. William Richardson, CGLH I and CGLH II entered into on the date
hereof which provides for certain rights and restrictions in connection with the
Executive's ownership of the Series B Shares.
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6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION UPON EXPIRATION OF THE TERM OF EMPLOYMENT.
Subject to the provisions of Section 2 and this Section 6, the Executive's
employment hereunder will be for the Term of Employment specified in Section 2.
(b) TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION WITHOUT
GOOD REASON. Upon notice of the Board's determination of Cause, the Company may
terminate the Executive's employment hereunder for Cause. Except as otherwise
provided in this Section 6, if the Executive's employment is terminated during
the Term of Employment by the Company for Cause, or by the Executive without
Good Reason, the Executive will not be entitled to any compensation or benefits
provided herein, and nothing herein will limit the Company's rights against the
Executive or the rights and obligations of the parties under Sections 7 and 8.
Notwithstanding the foregoing, in the case of a termination by the Executive
during the Term of Employment without Good Reason, the Executive shall be
entitled to receive his Minimum Bonus for the year of termination, pro-rated for
partial year employment. Notwithstanding anything in this Agreement to the
contrary, (i) if the Executive's employment is terminated hereunder prior to the
first anniversary of the Closing Date, the Series B Shares and the JV Interest
shall immediately be forfeited and the Executive shall have no further rights
with respect to the forfeited Series B Shares or JV Interest as of such date of
termination; (ii) if the Executive's employment is terminated hereunder on or
after the first anniversary of the Closing Date, but prior to the second
anniversary of the Closing Date, two-thirds (2/3) of each of the Series B Shares
and the JV Interest shall immediately be forfeited as of such date of
termination and the Executive shall have no further rights with respect to the
forfeited Series B Shares or JV Interest; and (iii) if the Executive's
employment is terminated on or after the second anniversary of the Closing Date,
but prior to the third anniversary of the Closing Date, one-third (1/3) of each
of the Series B Shares and the JV Interest shall immediately be forfeited as of
such date of termination and the Executive shall have no further rights with
respect to the forfeited Series B Shares or JV Interest.
(c) TERMINATION FOR ANY REASON OTHER THAN THE MERGER, CAUSE,
DISABILITY OR DEATH; AND VOLUNTARY TERMINATION FOR GOOD REASON. If the
Executive's employment is terminated during the Term of Employment by the
Company for any reason other than the Merger, Cause, Disability or death, or by
the Executive for Good Reason:
(i) The Executive will be entitled to receive his
Minimum Bonus for the year of termination, pro-rated for partial year
employment; and
(ii) The Executive will be entitled to receive in a
lump sum in cash the greater of (A) an amount equal to two times the
sum of his Base Pay (at the rate in effect on the effective date of his
termination of employment) and the average of each of the annual
performance bonuses received by the Executive during the Term of this
Agreement (but in no event less than the Minimum Bonus), and (B) his
Base Pay (at the rate in effect on the effective date of his
termination of employment) and the average of each of the annual
performance
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bonuses received by the Executive during the Term of this
Agreement (but in no event less than the Minimum Bonus) for the
remainder of the Term of Employment; and
(iii) For 24 months following the effective date of
the Executive's termination of employment (the "Continuation Period"),
the Company will arrange to provide the Executive and his eligible
dependents with Employee Benefits (excluding retirement, deferred
compensation and stock option, stock purchase, stock appreciation or
similar compensatory benefits) that are substantially similar to those
that the Executive and such dependents were receiving or entitled to
receive immediately prior to the effective date of the Executive's
termination of employment, except that the level of any such Employee
Benefits (other than health and dental benefits) to be provided to the
Executive and such dependents may be reduced in the event of a
corresponding reduction generally applicable to all senior executives.
If and to the extent that any benefit described in this Section
6(c)(iii) is not or cannot be paid or provided under any policy, plan,
program or arrangement of the Company or any Subsidiary, as the case
may be, then the Company will itself pay or provide for the payment of
such Employee Benefits to the Executive, his dependents and his
beneficiaries, and
(iv) The portion of each of the Series B Shares
and/or the JV Interest held by the Executive, which are unvested or
subject to restrictions as of the date of such termination of
employment, shall vest and become immediately nonforfeitable and
unrestricted as of such date of termination.
(d) TERMINATION BY VIRTUE OF THE MERGER. In the event that
the Merger is consummated, then as of the effective time of the Merger (the
"Effective Time"):
(i) The Executive's employment shall be terminated
and his status as an officer shall cease;
(ii) The Executive shall serve as a member of the
Board pursuant to the Stockholder and Board Composition Agreement dated
as of July 31, 2002;
(iii) The Executive will be entitled to receive
monthly payments from the Company in the amount of $75,000 (of which
$7,500 per month shall be deemed consideration for the obligations set
forth in Section 7), payable in cash within seven business days after
the end of each such monthly period, during the period commencing at
the Effective Time and ceasing at the end of the monthly period ending
in January 2006 (the "Payment Period"), such payments to be reduced by
applicable federal and state tax withholdings as determined by the
Company; and
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(iv) From the Effective Time through the Payment
Period, the Company will arrange to provide the Executive and his
eligible dependents with Employee Benefits (excluding retirement,
deferred compensation and stock option, stock purchase, stock
appreciation or similar compensatory benefits) that are substantially
similar to those that the Executive and such dependents were receiving
or entitled to receive immediately prior to the effective date of the
Executive's termination of employment ("Comparable Benefits"); except
that the level of any such Employee Benefits to be provided to the
Executive and such dependants may be reduced in the event of a
corresponding reduction generally applicable to all senior executives.
If and to the extent that any specific category of Comparable Benefit
is not or cannot be paid or provided under any policy, plan, program or
arrangement of the Company or any Subsidiary, as the case may be, then
upon submission of an expense report by Executive to the Company
relating to an out-of-pocket expense incurred by Executive because the
level of such Employee Benefits are lower than Comparable Benefits, the
Company will reimburse Executive, his dependents and his beneficiaries
in the amount set forth in the expense report;
(v) The Company shall pay the Executive a monthly
car allowance of $750 per month, plus maintenance, insurance and gas
during the Payment Period;
(vi) During the Payment Period, the Company shall
pay all membership fees associated with membership in an executive
eating club substantially comparable to those selected by Executive
while employed by the Company; and
(vii) The portion of the JV Interest held by the
Executive, which is unvested or subject to restrictions as of the
Effective Time, shall vest and become immediately nonforfeitable and
unrestricted as of the Effective Time.
(e) DEATH OR DISABILITY. If the Executive's employment is
terminated prior to the Effective Date of the Merger as a result of his death or
by the Company as a result of his Disability, the Executive (or, in the event of
his death, his designated beneficiary) will be entitled to receive his Minimum
Bonus for the year of termination. pro-rated for partial year employment. The
Executive (or, in the event of his death, his designated beneficiary) will be
entitled to receive his Base Pay (at the rate in effect on the effective date of
his termination of employment) and Minimum Bonus for a period of 12 months
following such effective date, payable in accordance with the Company's regular
compensation practices and policies applicable to senior executives but less any
amounts paid to the Executive under any long-term disability plan, program,
policy or arrangement of the Company or any Subsidiary. The portion of each of
the Series B Shares and the JV Interest held by the Executive which are unvested
or subject to restrictions as of the date of such termination shall vest and
become immediately nonforfeitable and unrestricted as of the date of such
termination.
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(f) EXCISE TAXES. (i) If Executive incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986 (the "Code") on "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code, the Company will pay to Executive an
amount (the "Gross Up Payment") such that the net amount retained by
Executive, after deduction of any Excise Tax on the excess parachute
payment and any federal, state and local taxes (together with penalties
and interest) and Excise Tax upon the payment provided for by this
Section 6(f)(i), and any federal, state and local taxes (together with
penalties and interest thereon) will be equal to the payments made to
the Executive that constitute a parachute payment pursuant to Prop.
Treas. Reg. Section 1.280G-1 (including any such payments made pursuant
to this Section 6(f)(i)) minus the Gross Up Payment.
(ii) For purposes of determining the amount of the
Gross Up Payment, Executive will be deemed to pay federal income taxes
at the highest marginal rate of federal taxation in the calendar year
in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and
locality of Executive's residence on the date of Executive's
termination, net of the maximum reduction in federal income taxes that
could be obtained from deduction of such state and local taxes. The
determination of whether the Excise Tax is payable and the amount
thereof will be determined by a firm of independent certified public
accountants jointly selected by the Company and the Executive.
(iii) The Company will pay the estimated amount of
the Gross Up Payment to the Federal tax authorities as withholding
taxes. The Executive and the Company agree to reasonably cooperate in
the determination of the actual amount of the Gross Up Payment.
Further, Executive and the Company agree to make such adjustments to
the estimated amount of the Gross Up Payment as may be necessary to
equal the actual amount of the Gross Up Payment, which in the case of
Executive will refer to refunds of prior overpayments and in the case
of the Company will refer to makeup of prior underpayments.
(g) COMPENSATION AND BENEFITS ON TERMINATION. Except as
otherwise provided in Section 6(b), (c), (d) or (e);
(i) All compensation and benefits payable to the
Executive pursuant to Section 5 (other than compensation and benefits
previously earned and, if applicable, vested under the terms of this
Agreement or any other applicable employee benefit plan, program,
policy, arrangement or agreement) will terminate as of the termination
of Executive's employment;
(ii) The Executive will not be entitled to, and
hereby waives, any claims for compensation or benefits (other than
compensation and benefits previously earned and, if applicable, vested
under the terms of this Agreement or any other applicable employee
benefit plan, program, policy, arrangement or agreement) payable after
the end of the Term of Employment Date and for
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damages arising in connection with his termination of employment
pursuant to this Agreement; and
(iii) The portion of the JV Interest held by the
Executive on the date of such termination which is unvested or subject
to restrictions as of such date, shall vest and become nonforfeitable
and unrestricted as of such termination.
(h) NO MITIGATION OBLIGATION. The Company hereby
acknowledges that it will be difficult and may be impossible for the Executive
to find reasonably comparable employment following the termination of
Executive's Employment. Accordingly, the payment of the compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income, earnings
or other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of the Executive hereunder or
otherwise.
(i) PURCHASE OF SERIES B SHARES UPON TERMINATION OF
EMPLOYMENT.(i) At any time after the termination of the Executive's
employment with the Company, the Company shall have the right (but not
the obligation) to acquire all of the Executive's Series B Shares (the
"PURCHASE INTEREST"), for an amount equal to the fair market value of
such Purchase Interest as of the Purchase Interest Closing Date (as
defined below). The following procedure shall apply to such proposed
acquisition:
(ii) The Company shall give notice (the "Purchase
Notice") to the Executive specifying the fair market value for the
Executive's Purchase Interest as of the date of such Purchase Notice,
determined by the Company in good faith. For a period of 10 days after
the Purchase Notice has been given, the Company and the Executive shall
negotiate in good faith to mutually agree on such fair market value
(the "Purchase Price").
(iii) On a date mutually agreed by the Company and
the Executive, but in no event later than 20 days after the Purchase
Notice has been given (such date, the "Purchase Closing Date"), the
Company shall pay to the Executive the Purchase Price against the
delivery of certificates or other instruments evidencing such Series B
Shares duly endorsed for transfer.
(iv) Any dispute as to the fair market value of the
Purchase Interest shall be submitted for final determination to a
mutually acceptable investment banking firm of national reputation
familiar with the valuation of companies in the hospitality and lodging
industry (an "Investment Banking Firm"). In the event that the Company
and the Executive cannot agree on a mutually acceptable Investment
Banking Firm within 10 business days, the Company, on the one hand, and
the Executive, on the other hand, shall each select one Investment
Banking Firm, which two Investment Banking Firms shall jointly
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make such determination within 20 business days after the date of the
Purchase Notice, or, if such two Investment Banking Firms are unable to
agree on such determination, the two Investment Banking Firms shall, by
the end of the 20th business day after the date of the Purchase Notice,
select a third Investment Banking Firm and notify such third Investment
Banking Firm in writing (with a copy to the Company and the Executive)
of their respective determinations of the fair market value of the
Purchase Interest following which such third Investment Banking Finn
shall, within 15 business days after the date of its selection, notify
the Company and the Executive in writing of its selection of one or the
other of the two original determinations of the fair market value of
the Purchase Interest, which determination shall be final and binding
on the Company and the Executive.
(v) The costs of the Investment Banking Firms shall
be borne by the Company.
7. COMPETITIVE ACTIVITY. During the period ending one year
following the Effective Date of the Merger, the Executive will not:
(a) enter into or engage in any business which competes with
the Company's business or promote or assist, financially or otherwise, any firm,
person, association, partnership, corporation or other entity engaged in any
business which competes with the Company's business; or
(b) solicit or endeavor to cause any employee of the Company
or any Subsidiary to leave his employment or induce or attempt to induce any
such employee to breach any employment agreement with the Company or any
Subsidiary or otherwise interfere with the employment of any such employee; or
(c) solicit, endeavor to cause, induce or attempt to induce
any agent who engages in the business of marketing the services of the Company
or any Subsidiary to terminate, reduce or modify its agency relationship with
the Company or any Subsidiary.
Notwithstanding the foregoing, the Executive's activities under the
Consulting Agreement will not be deemed to be a violation of this Section 7.
8. UNAUTHORIZED DISCLOSURE, USE OR SOLICITATION.
(a) Executive will keep in strict confidence, and will not,
directly or indirectly, at any time during or after his employment with the
Company, disclose, furnish, disseminate, make available or, except in the course
of performing his duties of employment hereunder, use any trade secrets or
confidential business and technical information of the Company or its customers,
vendors or property owners or managers, without limitation as to when or how
Executive may have acquired such information. Such confidential information will
include, without limitation, the Company's unique selling methods and trade
techniques, management, training, marketing and selling manuals, promotional
materials, training courses and other training and instructional
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materials, vendor, owner, manager and product information, customer lists, other
customer information and other trade information. Executive specifically
acknowledges that all such confidential information including, without
limitation, customer lists, other customer information and other trade
information, whether reduced to writing, maintained on any form of electronic
media, or maintained in the mind or memory of Executive and whether compiled by
the Company, and/or Executive, derives independent economic value from not being
readily known to or ascertainable by proper means by others who can obtain
economic value from its disclosure or use, that reasonable efforts have been
made by the Company to maintain the secrecy of such information, that such
information is the sole property of the Company and that any retention and use
of such information by Executive during his employment with the Company (except
in the course of performing his duties and obligations hereunder) or after the
termination of his employment will constitute a misappropriation of the
Company's trade secrets.
(b) Executive agrees that upon termination of Executive's
employment with the Company, for any reason, Executive will return to the
Company, in good condition, all property of the Company, including without
limitation, the originals and all copies of all management, training, marketing
and selling manuals, promotional materials, other training and instructional
materials, vendor, owner, manager and product information, customer lists, other
customer information and all other selling, service and trade information and
equipment. In the event that such items are not so returned, the Company will
have the right to charge Executive for all reasonable damages, costs, attorneys'
fees and other expenses incurred in searching for, taking, removing and/or
recovering such property.
(c) Executive acknowledges that to the extent permitted by
law, all work papers, reports, documentation, drawing, photographs, negatives,
tapes and masters therefor, prototypes and other materials (hereinafter,
"items"), including, without limitation, any and all such, items generated and
maintained on any form of electronic media, generated by Executive during his
employment with the Company will be considered a "work made for hire" and that
ownership of any and all copyrights in any and all such items will belong to the
Company. The item will recognize the Company as the copyright owner, will
contain all proper copyright notices, e.g., "(year of creation" Interstate
Hotels Management, Inc All rights reserved" and will be in condition to be
registered or otherwise placed in compliance with registration or other
statutory requirements throughout the world.
(d) Executive may use the Company's trade names, trademarks
and/or service marks in connection with the sale of the Company's products and
services, but only in such manner and for such purposes as may be authorized by
the Company. Upon any termination of this Agreement or the Termination of the
Term of Employment, Executive immediately will cease the use of such trade
names, trademarks and/or service marks and eliminate them wherever they have
been used or incorporated by Executive.
9. SUCCESSORS AND BINDING AGREEMENT.
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(a) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance reasonably satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place, including specifically MeriStar in the event of the consummation of the
Merger. This Agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
"Company" for the purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto will, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 9(a) and (b). Without limiting the generality or
effect of the foregoing, the Executive's right to receive payments hereunder
will not be assignable, transferable or delegable, whether by pledge, creation
of a security interest, or otherwise, other than by a transfer by Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 9(c), the Company will
have no liability to pay any amount so attempted to be assigned, transferred or
delegated.
10. LEGAL FEES AND EXPENSES. It is the intent of the Company that
the Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under the Agreement
or in the event that the Company or any other person takes or threatens to take
any action to declare this Agreement void or unenforceable, or institutes any
litigation, arbitration or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation, arbitration or
other legal action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in
14
that connection the Company and the Executive agree that a confidential
relationship shall exist between the Executive and such counsel. Without respect
to whether the Executive prevails, in whole or in part, in connection with any
of the foregoing, the Company will pay and be solely financially responsible for
any and all reasonable attorneys' and reasonable related fees and expenses
incurred by the Executive in connection with any of the foregoing.
11. ADDITIONAL REMEDIES.
(a) Notwithstanding any other remedy herein provided for or
available, if the Executive should be in breach of any of the provisions of
Section 7 or 8, the Executive expressly acknowledges and agrees that the Company
will be entitled to injunctive relief or specific performance, without the
necessity of proving damages, in addition to any other remedies it may have.
(b) Notwithstanding any of the foregoing, in the event of
any disputes regarding the interpretation or application of any provision of
this Agreement, either the Executive or the Company, or both parties, may
request in writing that such dispute be resolved through final and binding
arbitration. The parties will jointly select the arbitrator who will hear such
dispute. If the parties cannot agree on the selection of an arbitrator, the
parties will request that one be appointed by the American Arbitration
Association. The arbitration will be conducted in the city in which the
EXECUTIVE'S PRINCIPAL OFFICE IS LOCATED (or in any other location mutually
agreed upon by the parties) in accordance with the Employment Dispute Resolution
Rules of the American Arbitration Association. The parties acknowledge and agree
that time will be of the essence throughout such procedure. The decision of the
arbitrator may be entered in any court having subject matter and personal
jurisdiction over the dispute and the Executive. The Company will pay any
reasonable costs and expenses of the Executive in connection with any such
dispute or procedure.
12. REPRESENTATION. Each party represents and warrants that it is
fully authorized and empowered to enter into this Agreement, including Board
approval in the case of the Company, and that the performance of its obligations
under this Agreement will not violate any agreement between it and any other
person or entity.
13. SEVERABILITY. In the event that any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
14. LITIGATION AND REGULATORY COOPERATION. During and after
Executive's employment, Executive shall reasonably cooperate with the Company in
the defense or prosecution of any claims or actions now in existence or which
may be brought in the future against or on behalf of the Company which relate to
events or occurrences that transpired while Executive was employed by the
Company; provided, however, that such cooperation shall not materially and
adversely affect Executive or expose Executive to an increased probability of
civil or criminal litigation. Executive's cooperation in
16
connection with such claims or actions shall include, but not be limited to,
being available to meet with counsel to prepare for discovery or trial and to
act as a witness on behalf of the Company at mutually convenient times. During
and after Executive's employment, Executive also shall cooperate fully with the
Company in connection with any investigation or review of any federal, state or
local regulatory authority as any such investigation or review relates to events
or occurrences that transpired while Executive was employed by the Company. The
Company shall also provide Executive with compensation on an hourly basis
calculated as his final Base Pay for requested litigation and regulatory
cooperation that occurs after his termination of employment, and reimburse
Executive for all costs and expenses incurred in connection with his performance
under this Section 14; including, but not limited to, reasonable attorney's fees
and costs.
15. INDEMNIFICATION. The Executive shall receive the maximum
indemnification from the Company as permitted by the Company's by-laws in effect
at any time during the Term of this Agreement and applicable law. This Section
shall survive the termination of this Agreement.
16. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express or UPS, addressed to the Company (to the attention of the Secretary of
the Company) at its principal executive office and to the Executive at his
principal residence (with a copy to [David Kenin, Greenberg Traurig, P.A.. 1221
Brickell Avenue, Miami, FL 33131]), or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address will be effective only upon receipt.
17. MODIFICATIONS AND WAIVERS. No provision of this Agreement may be
modified or discharged unless such modification or discharge is authorized by
the Board and is agreed to in writing, signed by the Executive and by an officer
of the Company duly authorized by the Board. No waiver by either party hereto of
any breach by the other party hereto of any condition or provision of this
Agreement to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the time or at any prior or subsequent
time. Prior to the Effective Time, no amendment or waiver may be made without
the prior written consent of MeriStar, which is hereby expressly acknowledged by
the parties hereto to be an intended third-party beneficiary of this Agreement
with respect to this sentence.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties hereto with respect to its subject matter, except
as such parties may otherwise agree in a writing which specifies that it is an
exception to the foregoing. Without limiting the generality of the foregoing
sentence, as of the Commencement Date,
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the Old Agreement shall cease to be of any force or effect. This Agreement
supersedes all prior agreements between the parties hereto with respect to its
subject matter and, notwithstanding any other provision hereof, will become
effective upon the execution of this Agreement by the parties.
19. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the Commonwealth of Pennsylvania, without giving
effect to the principles of conflict of laws of such Commonwealth.
20. COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which will be deemed to be an original but all
of which together will constitute one and the same instrument.
21. HEADINGS, ETC. The section headings contained in this Agreement
are for convenience of reference only and will not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
References to Sections are to Sections in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTERSTATE HOTELS CORPORATION
By: /s/ Timothy Q. Hudak
----------------------------------
Name: Timothy Q. Hudak
Title: Senior Vice President and
General Counsel
/s/ Thomas F. Hewitt
-------------------------------------
THOMAS F. HEWITT
ACKNOWLEDGED:
MERISTAR HOTELS AND RESORTS, INC.
By: /s/ Christopher L. Bennett
-------------------------------------------
Christopher L. Bennett
Senior Vice President and General Counsel