-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lco8nr4NK8G9LmDBfT0bQYB+SOKov+fcUMn8jVET2I+EtwDX74rJAUDlMeBKDQ7M +uo+ctaFDkS7JPvMT5eVCA== 0000950123-04-002717.txt : 20040302 0000950123-04-002717.hdr.sgml : 20040302 20040302173008 ACCESSION NUMBER: 0000950123-04-002717 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20040302 EFFECTIVENESS DATE: 20040302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE HOTELS & RESORTS INC CENTRAL INDEX KEY: 0001059341 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 510379982 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-113229 FILM NUMBER: 04643732 BUSINESS ADDRESS: STREET 1: 1010 WISCONSIN AVE NW CITY: WASHINGTON STATE: DC ZIP: 20007 BUSINESS PHONE: 2029654455 MAIL ADDRESS: STREET 1: 1010 WISCONSIN AVE N W CITY: WASHINGTON STATE: DC ZIP: 20007 FORMER COMPANY: FORMER CONFORMED NAME: MERISTAR HOTELS & RESORTS INC DATE OF NAME CHANGE: 19980407 S-8 1 y94388sv8.txt INTERSTATE HOTELS & RESORTS, INC. As filed with the Securities and Exchange Commission on March 2, 2004 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------- INTERSTATE HOTELS & RESORTS, INC. (Exact name of Registrant as specified in its charter) DELAWARE 52-2101815 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) -------------------- INTERSTATE HOTELS & RESORTS, INC. 4501 N. FAIRFAX DRIVE ARLINGTON, VA 22203 703-387-3100 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) -------------------- INTERSTATE HOTELS & RESORTS, INC. SUPPLEMENTAL DEFERRED COMPENSATION PLAN INTERSTATE HOTELS & RESORTS, INC. EXECUTIVE FUND (Full title of the plan) -------------------- CHRISTOPHER L. BENNETT, ESQ. SENIOR VICE PRESIDENT AND GENERAL COUNSEL INTERSTATE HOTELS & RESORTS, INC. 4501 N. FAIRFAX DRIVE ARLINGTON, VA 22203 703-387-3100 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------- COPY TO: RICHARD S. BORISOFF, ESQ. PAUL, WEISS, RIFKIND, WHARTON & GARRISON 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019-6064 (212) 373-3000 ==================== CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum Amount of Title of Each Class of Amount to be Offering Price Per Aggregate Offering Registration Securities to be Registered Registered Share Price Fee - ------------------------------------------------------------------------------------------------------------- Deferred Compensation Obligations(1) $ 8,500,000 100% $ 8,500,000 $ 1,076.95 - ------------------------------------------------------------------------------------------------------------- Plan Obligations(2) $ 15,000,000(3) 100% $ 15,000,000 $ 1900.50 - ------------------------------------------------------------------------------------------------------------- Total $ 23,500,000 $ 23,500,000 $ 2977.45 - -------------------------------------------------------------------------------------------------------------
(1) The Deferred Compensation Obligations are unsecured obligations of Interstate Hotels & Resorts, Inc. to pay deferred compensation in the future in accordance with the terms of the Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan (the "Plan"). (2) The Plan Obligations are unsecured obligations of Interstate Hotels & Resorts, Inc. to make payments in accordance with the terms of the Interstate Hotels & Resorts, Inc. Executive Fund (the "Fund"). (3) The $15,000,000 amount to be registered represents $6,000,000 in Plan Obligations attributable to compensation deferrals by participants under the Plan and $9,000,000 in Plan Obligations attributable to employer contributions under the Plan. ================================================================================ PART I INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS The documents containing the information specified in this Part I will be sent or given to employees as specified by Rule 428(b)(1) under the Securities Act of 1933, as amended (the "Securities Act"). Such documents need not be filed with the Commission either as part of this Registration Statement or as prospectuses or prospectus supplements pursuant to Rule 424 under the Securities Act. Those documents and the documents incorporated by reference in this Registration Statement pursuant to Item 3 of Part II, taken together, constitute a prospectus that meets the requirements of Section 10(a) of the Securities Act. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE The following documents, which have been filed by Interstate Hotels & Resorts, Inc. (the "Company") with the Securities and Exchange Commission (File No. 001-14331), are incorporated by reference into this Registration Statement: - the Company's Quarterly Reports on Form 10-Q for the quarter ended March 31, 2003, the quarter ended June 30, 2003 and the quarter ended September 30, 2003; - the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as amended by Form 10-K/A filed on March 31, 2003 and Form 10-K/A filed on April 2, 2003; and - the Company's Current Reports on Form 8-K, filed on February 12, 2003, August 4, 2003 and October 23, 2003. In addition, all reports and documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference herein and made a part hereof from the date of the filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein and to be a part hereof shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. ITEM 4. DESCRIPTION OF SECURITIES INTERSTATE HOTELS & RESORTS, INC. SUPPLEMENTAL DEFERRED COMPENSATION PLAN. Under the Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan (the "Plan"), the Registrant will provide eligible participating employees (each, a "Participant" and, collectively, the "Participant"") of Interstate Management Company, LLC (the "Employer") the opportunity to enter into agreements for the deferral of a specified percentage of their total cash base compensation ("Base Compensation") and/or a specified percentage of their total cash bonus 2 compensation ("Bonus Compensation"). In addition, each Plan Year (i.e., calendar year), the Employer will make a matching contribution on behalf of each eligible Participant, in the amount of the excess of (i) 100% of the Participant's Base Compensation deferrals to the Plan for such year, not to exceed 4% of the Participant's Base Compensation for such year (this percentage may be changed by the chief executive officer of the Registrant (the "CEO") from year to year), over (ii) the actual matching contributions made by the Employer on behalf of the Participant to the Registrant's tax-qualified 401(k) plan (the "Qualified Plan") for that year. The Employer may also make a profit sharing contribution on behalf of any eligible Participant for a Plan Year, which will be a percentage of the Participant's combined matching contributions under the Plan and under the Qualified Plan for such year (which percentage will be established by the CEO (but not exceed 150%) and may vary among Participants). Participant Base Compensation and/or Bonus Compensation deferrals, and earnings or losses thereon, at all times will be fully vested in the Participant. Employer matching contributions and profit sharing contributions (referred to herein as "Employer contributions"), and earnings or losses thereon, are subject to a vesting schedule whereby such contributions will vest ratably over five years (with certain pre-Plan service credited for purposes of this vesting schedule). In the event of a Participant's termination of employment because of death, disability, attainment of retirement age, or in the event of a "change in control" (discussed below), these Employer contributions (and earnings or losses thereon) will become fully vested. The obligations of the Employer under the Participant Base Compensation and/or Bonus Compensation deferral agreement and Employer contribution portions of the Plan (the "Obligations") will be unsecured general obligations of the Employer to pay the deferred compensation in the future in accordance with the terms of the Plan, and will rank pari passu with other unsecured and unsubordinated indebtedness of the Employer, from time to time outstanding. The amount to be deferred by each Participant and/or contributed by the Employer will be determined in accordance with the Plan based on elections made by each Participant in the case of deferrals and Employer matching contributions, and, in the case of Employer profit sharing contributions, in accordance with the CEO's exercise of discretion. Participants may choose to have deferred amounts and Employer contributions debited or credited with earnings or losses based on the performance of one or more mutual funds made available as a menu under the Plan. Participant accounts will be debited or credited with earnings, gains and losses as if the deferred amounts or Employer contributions were actually invested in accordance with the Participant's investment elections, although the actual assets held under the Plan for the purposes of eventually paying Plan benefits are not required to be so invested. The vested portion of a Participant's account under the Plan will be payable upon the date on which the Participant's employment with the Employer is terminated for any reason, including death, disability, retirement or other termination of employment. The payment of the Obligations upon termination of employment shall be made in accordance with the terms of the Plan in a lump-sum distribution, unless the Participant elects to receive distributions under the Plan upon termination of employment in the form of five (5) substantially equal annual installments (adjusted for gains and losses). Alternatively, a Participant's vested Plan account will be payable in accordance with the Participant's election to receive payment on the fixed payment date of January 1 of the third calendar year after the calendar year in which the election is made. Such elected fixed payment date may be postponed by the Participant, on a continual basis, in accordance with the terms of the Plan. However, if the Participant's employment with the Employer is terminated prior to an elected fixed payment date, the election will be null and void. 3 Within 30 days after a change in control (as defined in the Plan), unless a Participant affirmatively elects otherwise, the Participant shall receive a lump sum distribution of the Participant's entire Plan account. A Participant who suffers a severe financial hardship may request that the Employer grant a hardship withdrawal with respect to his or her vested Plan account. All distributions under the Plan are in cash. There is no trading market for the Obligations. The Obligations are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Any attempt by any individual to transfer or assign benefits under the Plan, other than a claim for benefits by a Participant or his or her beneficiary(ies), will be null and void. The Obligations are not convertible into any other security of the Registrant. No trustee has been appointed to take action with respect to the Obligations and each Participant in the Plan will be responsible for enforcing his or her own rights with respect to the Obligations. INTERSTATE HOTELS & RESORTS, INC. EXECUTIVE FUND. Under the Interstate Hotels & Resorts, Inc. Executive Fund (the "Plan"), the Registrant will provide eligible participating employees (each, a "Participant" and, collectively, the "Participants") of Interstate Management Company, LLC (the "Employer") the opportunity to enter into agreements each Plan Year (i.e., calendar year) for the deferral of a specified percentage of their annual bonus ("Regular Bonus"), and may, in addition, provide Participants the opportunity to enter into agreements with respect to any Plan Year to defer their following year's bonus ("Next Year's Bonus") and/or other items of cash compensation to which they may otherwise become entitled ("Other Compensation"). The Registrant will annually establish a deferral percentage with respect to Participants' Regular Bonuses (and with respect to any other items of compensation that the Registrant permits them to defer in any Plan Year), which will be a percentage of Participants' base salaries. Unless the Registrant permits otherwise, in no event may total Participant deferrals in a Plan Year exceed $2,000,000. In addition to Regular Bonus deferrals, and possibly also Next Year's Bonus deferrals and/or Other Compensation deferrals (collectively, "Compensation Deferrals"), each Plan Year, the Employer will make a matching contribution on behalf of each eligible Participant, which, unless and until changed by the Registrant, will be in the amount of 150% of the Participant's Regular Bonus deferrals to the Plan for such Plan Year. The Employer may also make a discretionary contribution on behalf of any eligible Participant for a Plan Year, for example, to similarly match any Next Year's Bonus deferrals and/or Other Compensation deferrals that the Registrant permits them to defer for the Plan Year. (Employer matching contributions and discretionary contributions (if any) are referred to herein, collectively, as "Employer contributions.") Compensation Deferrals and Employer contributions generally will be debited or credited with deemed earnings or losses based upon the performance of certain hotel and other realty investments of the Registrant in which the Registrant determines that the Plan will be deemed to co-invest with the Registrant (referred to herein as the "Qualified Investments"). Participant accounts under the Plan will be debited or credited with earnings, gains and losses as if the Compensation Deferrals or Employer contributions were actually invested in the Qualified Investments, although any actual assets held under the Plan for the purpose of eventually paying Plan benefits are not required to be so invested. Compensation Deferrals and Employer contributions awaiting deemed investment in Qualified Investments, and amounts that have ceased to be deemed invested in Qualified Investments but have yet to be distributed under the Plan, generally will be credited with interest (except that Next Year's Bonus deferrals (if any) and Employer contributions awaiting deemed investment in Qualified Investments generally will not be credited or debited with any earnings, gains, interest or losses). 4 Participant Compensation Deferrals, Employer contributions, and earnings or losses thereon, are subject to a vesting schedule whereby such amounts will, with respect to each Qualified Investment in which they are deemed invested, vest ratably over five years from the date of the Plan's deemed investment in the Qualified Investment. However, in the event of a complete disposition by the Registrant of a Qualified Investment, each active Participant's Plan account will become fully vested and distributable to the extent allocable to that Qualified Investment. In the event of a termination of a Participant's employment with the Employer prior to the complete disposition by the Registrant of any Qualified Investments, only the vested portion of the Participant's account under the Plan allocable to those Qualified Investments will become payable. If the Participant's employment is terminated due to death, disability, retirement or involuntary termination without cause, such portion will be payable generally upon the valuation date (i.e., the January 1 or July 1) next following the date of such termination. If the Participant's employment is terminated for any other reason, the Registrant may postpone payment of the Participant's vested Plan account until the complete disposition by the Registrant of the Qualified Investments in which the Participant's account is deemed invested. In either event, the unvested portion of the Participant's Plan account will be forfeited by the Participant, except that an amount equal to the Participant's unvested Compensation Deferrals (or, if less, the value of the portion of the Qualified Investment in which such unvested Compensation Deferrals are deemed invested), reduced by any Next Year's Bonus deferrals that have not yet been "repaid" to the Registrant from subsequent years' Regular Bonuses, will be returned to the Participant. The obligations of the Registrant under the Plan (the "Obligations") will be unsecured general obligations of the Registrant to pay the deferred compensation in the future in accordance with the terms of the Plan, and will rank pari passu with other unsecured and unsubordinated indebtedness of the Registrant, from time to time outstanding. The amount to be deferred by each Participant and/or contributed by the Employer will be determined in accordance with the Plan based on elections made by each Participant in the case of deferrals and Employer matching contributions, and, in the case of Employer discretionary contributions, in accordance with the Registrant's exercise of discretion. The payment of the Obligations shall be made in accordance with the terms of the Plan in a lump-sum distribution, unless the Participant, due to the level of his or her Plan account and the level of the other distributions required under the Plan at the time of the Participant's termination, is required to receive distributions under the Plan in the form of two (2) substantially equal installments. All distributions under the Plan are in cash. There is no trading market for the Obligations. The Obligations are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Any attempt by any individual to transfer or assign benefits under the Plan, other than a claim for benefits by a Participant or his or her beneficiary(ies), will be null and void. The Obligations are not convertible into any other security of the Registrant. No trustee has been appointed to take action with respect to the Obligations and each Participant in the Plan will be responsible for enforcing his or her own rights with respect to the Obligations. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL Not Applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law authorizes a corporation to indemnify its directors, officers, employees and agents against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement reasonably incurred, including liabilities under the Securities Act, 5 provided they act in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe their conduct was unlawful, although in the case of proceedings brought by or on behalf of the corporation, such indemnification is limited to expenses and is not permitted if the individual is adjudged liable to the corporation (unless the Delaware Court of Chancery or the court in which such proceeding was brought determines otherwise in accordance with the Delaware General Corporation Law). Section 102 of the Delaware General Corporation Law authorizes a corporation to limit or eliminate its directors' liability to the corporation or its stockholders for monetary damages for breaches of fiduciary duties, other than for (i) breaches of the duty of loyalty, (ii) acts or omissions not in good faith or that involve intentional misconduct or knowing violations of law, (iii) unlawful payments of dividends, stock purchases or redemptions or (iv) transactions from which a director derives an improper personal benefit. The registrant's certificate of incorporation contains such a provision. The Company's bylaws provide that it will indemnify each director and each officer of the registrant against all claims and expenses resulting from the fact that he or she was an officer or director of the registrant. In addition, the Company's board of directors may, at its option, indemnify any other persons who are not directors or officers of the Company but are serving, or who have served, at the request of the registrant, in similar capacities for any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Section 145 of the Delaware General Corporation Law authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such. The Company's certificate of incorporation and bylaws contain such provisions. The Company has obtained liability insurance covering its directors and officers for claims asserted against them or incurred by them in such capacity, including claims brought under the Securities Act. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED Not Applicable. ITEM 8. EXHIBITS Exhibits 4.1* Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan. 4.2* Interstate Hotels & Resorts, Inc. Executive Fund. 5.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to the Company, regarding the legality of the Securities being registered. 5.2* Opinion of Smith & Downey, P.A. as to compliance with the requirements of ERISA. 23.1* Consent of KPMG LLP. 23.2* Consent of PriceWaterhouseCoopers LLP. 23.3* Consent of Paul, Weiss, Rifkind, Wharton & Garrison LLP (included in Exhibit 5.1). 23.4* Consent of Smith & Downey, P.A. (included in Exhibit 5.2). 24.1 Power of Attorney (included on signature page). - --------------------- * Filed herewith. 6 ITEM 9. UNDERTAKINGS The undersigned Registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; (ii) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (iii) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the registrant's Certificate of Incorporation or by-laws, by contract, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Arlington, State of Virginia, on March 2, 2004. INTERSTATE HOTELS & RESORTS, INC. By: /s/ Christopher L. Bennett -------------------------------------- Name: Christopher L. Bennett, Esq. Title: Senior Vice President, General Counsel and Secretary POWER OF ATTORNEY The officers and directors of Interstate Hotels & Resorts, Inc. whose signatures appear below hereby constitute and appoint Paul W. Whetsell and Christopher L. Bennett and each of them (with full power to each of them to act alone), their true and lawful attorneys-in-fact, with full powers of substitution and resubstitution, to sign and execute on behalf of the undersigned any and all amendments, including any post-effective amendments, to this Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and each of the undersigned does hereby ratify and confirm all that said attorneys-in-fact shall do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below on March 2, 2004 by the following persons in the capacities indicated. SIGNATURE TITLES /s/ Paul W. Whetsell Chairman of the Board - ------------------------------ Paul W. Whetsell /s/ Steven D. Jorns Chief Executive Officer and Director - ------------------------------ (Principal Executive Officer) Steven D. Jorns /s/ J. William Richardson - ------------------------------ Chief Financial Officer J. William Richardson (Principal Financial and Accounting Officer) - ------------------------------ Director Karim J. Alibhai /s/ Leslie R. Doggett - ------------------------------ Director Leslie R. Doggett - ------------------------------ Director Joseph J. Flannery 8 SIGNATURE TITLES /s/ Thomas F. Hewitt Director - ------------------------------ Thomas F. Hewitt /s/ Mahmood J. Khimji Director - ------------------------------ Mahmood J. Khimji /s/ James B. McCurry Director - ------------------------------ James B. McCurry Director - ------------------------------ Raymond C. Mikulich - ------------------------------ Director John J. Russell, Jr. - ------------------------------ Director Sherwood M. Weiser 9 INDEX TO EXHIBITS Exhibits 4.1* Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan. 4.2* Interstate Hotels & Resorts, Inc. Executive Fund. 5.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to the Company, regarding the legality of the Securities being registered. 5.2* Opinion of Smith & Downey, P.A. as to compliance with the requirements of ERISA. 23.1* Consent of KPMG LLP. 23.2* Consent of PriceWaterhouseCoopers LLP. 23.3* Consent of Paul, Weiss, Rifkind, Wharton & Garrison LLP (included in Exhibit 5.1). 23.4* Consent of Smith & Downey, P.A. (included in Exhibit 5.2). 24.1 Power of Attorney (included on signature page). - --------------------- * Filed herewith. 10 EX-4.1 3 y94388exv4w1.txt SUPPLEMENTAL DEFERRED COMPENSATION PLAN EXHIBIT 4.1 INTERSTATE HOTELS & RESORTS, INC. SUPPLEMENTAL DEFERRED COMPENSATION PLAN Amended and Restated Effective as of January 1, 2004 INTERSTATE HOTELS & RESORTS, INC. SUPPLEMENTAL DEFERRED COMPENSATION PLAN Amended and Restated Effective as of January 1, 2004 TABLE OF CONTENTS ARTICLE I DEFINITIONS 1.1 ACCOUNT........................................................................................ 1 1.2 BASE COMPENSATION.............................................................................. 1 1.3 BASE COMPENSATION DEFERRALS.................................................................... 1 1.4 BENEFICIARY.................................................................................... 1 1.5 BOARD.......................................................................................... 1 1.6 CHANGE IN CONTROL.............................................................................. 2 1.7 CHIEF EXECUTIVE OFFICER........................................................................ 2 1.8 CODE........................................................................................... 2 1.9 COMMITTEE...................................................................................... 2 1.10 COMPENSATION................................................................................... 2 1.11 COMPENSATION DEFERRAL ACCOUNT.................................................................. 2 1.12 COMPENSATION DEFERRALS......................................................................... 2 1.13 DESIGNATION DATE............................................................................... 2 1.14 DISABILITY..................................................................................... 3 1.15 EFFECTIVE DATE................................................................................. 3 1.16 ELIGIBLE INDIVIDUAL............................................................................ 3 1.17 EMPLOYER....................................................................................... 3 1.18 EMPLOYER CONTRIBUTION CREDIT ACCOUNT........................................................... 3 1.19 EMPLOYER CONTRIBUTION CREDITS.................................................................. 3 1.20 ENTRY DATE..................................................................................... 3 1.21 PARTICIPANT.................................................................................... 3 1.22 PARTICIPANT ENROLLMENT AND ELECTION FORM....................................................... 3 1.23 PLAN........................................................................................... 4 1.24 PLAN SPONSOR................................................................................... 4 1.25 PLAN YEAR...................................................................................... 4 1.26 QUALIFIED PLAN................................................................................. 4 1.27 RETIREMENT..................................................................................... 4 1.28 TRUST.......................................................................................... 4 1.29 TRUSTEE........................................................................................ 4 1.30 VALUATION DATE................................................................................. 4
i ARTICLE II ELIGIBILITY AND PARTICIPATION 2.1 REQUIREMENTS................................................................................... 4 2.2 RE-EMPLOYMENT/BOARD MEMBERSHIP................................................................. 5 2.3 CHANGE OF EMPLOYMENT CATEGORY.................................................................. 5 ARTICLE III CONTRIBUTIONS AND CREDITS 3.1 EMPLOYER CONTRIBUTION CREDITS.................................................................. 5 3.2 PARTICIPANT COMPENSATION DEFERRALS............................................................. 6 3.3 CONTRIBUTIONS TO THE TRUST..................................................................... 7 ARTICLE IV ALLOCATION OF FUNDS 4.1 ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS............................................ 7 4.2 ACCOUNTING FOR DISTRIBUTIONS................................................................... 7 4.3 SEPARATE BOOKKEEPING ACCOUNTS.................................................................. 7 4.4 DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS................................................... 8 4.5 PAYMENT OF TAXES AND EXPENSES.................................................................. 9 ARTICLE V ENTITLEMENT TO BENEFITS 5.1 FIXED PAYMENT DATES; TERMINATION OF EMPLOYMENT/BOARD MEMBERSHIP................................ 9 5.2 HARDSHIP DISTRIBUTIONS......................................................................... 10 5.3 RE-EMPLOYMENT/BOARD MEMBERSHIP OF RECIPIENT.................................................... 10 5.4 VESTING........................................................................................ 10 ARTICLE VI DISTRIBUTION OF BENEFITS 6.1 AMOUNT......................................................................................... 11 6.2 METHOD OF PAYMENT.............................................................................. 11 (a) Medium of Payment..................................................................... 11 (b) Timing and Manner of Payment.......................................................... 11 6.3 DEATH OR DISABILITY BENEFITS................................................................... 12 6.4 CHANGE IN CONTROL.............................................................................. 12
ii ARTICLE VII BENEFICIARIES; PARTICIPANT DATA 7.1 DESIGNATION OF BENEFICIARIES................................................................... 12 7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS IES............................................................................... 12 ARTICLE VIII ADMINISTRATION AND RECORDKEEPING 8.1 ADMINISTRATIVE AND RECORDKEEPING AUTHORITY..................................................... 13 8.2 UNIFORMITY OF DISCRETIONARY ACTS............................................................... 13 8.3 LITIGATION..................................................................................... 13 8.4 CLAIMS PROCEDURE............................................................................... 14 ARTICLE IX AMENDMENT 9.1 RIGHT TO AMEND................................................................................. 16 9.2 AMENDMENT TO ENSURE PROPER CHARACTERIZATION OF THE PLAN........................................ 16 9.3 CHANGES IN LAW AFFECTING TAXABILITY............................................................ 16 ARTICLE X TERMINATION 10.1 PLAN SPONSOR'S RIGHT TO TERMINATE PLAN......................................................... 17 10.2 AUTOMATIC TERMINATION OF PLAN.................................................................. 17 10.3 SUCCESSOR TO PLAN SPONSOR...................................................................... 17 ARTICLE XI MISCELLANEOUS 11.1 LIMITATIONS ON LIABILITY OF PLAN SPONSOR AND EMPLOYER.......................................... 17 11.2 CONSTRUCTION................................................................................... 17 11.3 SPENDTHRIFT PROVISION.......................................................................... 18 ARTICLE XII THE TRUST 12.1 ESTABLISHMENT OF TRUST......................................................................... 18
iii INTERSTATE HOTELS & RESORTS, INC. SUPPLEMENTAL DEFERRED COMPENSATION PLAN Amended and Restated Effective as of January 1, 2004 RECITALS This amended and restated Plan, the Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan (the "Plan") is adopted by Interstate Hotels & Resorts, Inc. (the "Plan Sponsor") for certain of its directors and certain management employees of Interstate Management Company, LLC (the "Employer"). The Plan constitutes an amendment and restatement of the Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan. The purpose of the Plan is to offer participants deferred compensation benefits taxable under section 451 of the Internal Revenue Code of 1986, as amended (the "Code") and to supplement such participants' retirement benefits under the Plan Sponsor's tax-qualified retirement plan and other retirement programs. The Plan is intended to be a "top-hat plan" (i.e., an unfunded deferred compensation plan maintained for a select group of management or highly compensated employees) pursuant to sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Accordingly, the following Plan is adopted. ARTICLE I DEFINITIONS The following terms, as used herein, unless a different meaning is implied by the context, have the following meaning: 1.1 ACCOUNT means the balance credited to a Participant's Plan account, including amounts credited under the Compensation Deferral Account and the Employer Contribution Credit Account. Said Account shall be determined as of the date of reference. 1.2 BASE COMPENSATION means the total cash base compensation of the Participant for the Plan Year of reference. 1.3 BASE COMPENSATION DEFERRALS is defined in Section 3.1. 1.4 BENEFICIARY means any person or persons so designated in accordance with the provisions of Article VII. 1.5 BOARD means the Board of Directors of the Plan Sponsor. 1 1.6 CHANGE IN CONTROL means a transaction or series of transactions occurring after the Effective Date, in which (i) any individual, firm, corporation or other entity, or any group (as defined in Section 13(d)(3) or the Securities Exchange Act of 1934 (the "Act")), becomes, directly or indirectly, the beneficial owner (as defined in the general rules and regulations of the Securities and Exchange Commission with respect to Sections 13(d) and 13(g) of the Act) of more than fifty percent (50%) of the then outstanding shares of the Plan Sponsor's capital stock entitled to vote generally in the election of directors of the Plan Sponsor; or (ii) the stockholders of the Plan Sponsor approve a definitive agreement for (A) the merger or other business combination of the Plan Sponsor with or into another corporation pursuant to which the stockholders of the Plan Sponsor do not own, immediately after the transaction, more than fifty percent (50%) of the voting power of the corporation that survives and is a publicly owned corporation and not a subsidiary of another corporation, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Plan Sponsor; or (iii) during any period of two (2) years or less, individuals who at the beginning of such period constituted the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the stockholders of the Plan Sponsor, of each new director was approved by a vote of at least seventy-five percent (75%) of the directors then still in office who were directors at the beginning of the period. Notwithstanding the foregoing, a Change in Control shall not be deemed to have taken place if beneficial ownership is acquired by, or a tender exchange offer is commenced by, the Plan Sponsor or any of its subsidiaries, any profit sharing, employee ownership or other employee benefit plan of the Plan Sponsor or any subsidiary of any trustee of or fiduciary with respect to any such plan when acting in such capacity, or any group comprised solely of such entities. 1.7 CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of the Plan Sponsor. 1.8 CODE means the Internal Revenue Code of 1986 and the regulations thereunder, as amended from time to time. 1.9 COMMITTEE means the Compensation Committee of the Board. 1.10 COMPENSATION means the total current cash remuneration, including total cash base compensation, total cash bonus compensation, director retainers and/or meeting fees of the Participant for the Plan Year of reference. For purposes of the preceding sentence and for all other purposes under the Plan, bonus shall include both a bonus that would otherwise be payable to the Participant relating to services performed for the Employer, and an amount that would otherwise be distributable to the Participant under the Interstate Hotels & Resorts, Inc. Executive Fund. 1.11 COMPENSATION DEFERRAL ACCOUNT is defined in Section 3.2. 1.12 COMPENSATION DEFERRALS is defined in Section 3.2. 1.13 DESIGNATION DATE means the date or dates as of which a designation of deemed investment directions by an individual pursuant to Section 4.4 shall become effective. The Designation Dates in any Plan Year include January 1, April 1, July 1 and October 1. 2 1.14 DISABILITY means a disability with respect to which a Participant qualifies for permanent disability benefits under the Employer's long-term disability plan, or, if the Participant does not participate in such a plan or the Employer does not sponsor such a plan or discontinues to sponsor such a plan, the Participant shall be considered disabled if he or she qualifies for and receives Social Security disability benefits. 1.15 EFFECTIVE DATE means the effective date of this amendment and restatement of the Plan, which shall be January 1, 2004. 1.16 ELIGIBLE INDIVIDUAL means, for any Plan Year (or applicable portion thereof), any individual who is not employed by the Employer but is a member of the Board, any individual who is employed by the Employer in a Vice President or more senior position, or any individual employed by the Employer who is determined by the Plan Sponsor to be a member of a select group of management or highly compensated employees of the Employer (within the meaning of ERISA), and who is designated by the Chief Executive Officer to be an Eligible Individual under the Plan, and (i) whose benefits under the Qualified Plan are limited due to application of the compensation or nondiscrimination contribution limits of the Code, and/or (ii) to whom the Plan Sponsor desires to provide supplemental retirement benefits. By each December 1, the Employer shall notify those individuals, if any, who will be Eligible Individuals for the next Plan Year. If the Plan Sponsor determines that an individual first becomes an Eligible Individual during a Plan Year, the Employer shall notify such individual of that determination and of the date during the Plan Year on which the individual shall first become an Eligible Individual. 1.17 EMPLOYER means Interstate Management Company, LLC and its successors and assigns unless otherwise herein provided, or any other corporation or business organization which, with the consent of the Plan Sponsor or its successors or assigns, assumes the Employer's obligations hereunder, or any other corporation or business organization which agrees, with the consent of the Plan Sponsor to become a party to the Plan. 1.18 EMPLOYER CONTRIBUTION CREDIT ACCOUNT is defined in Section 3.1. 1.19 EMPLOYER CONTRIBUTION CREDITS is defined in Section 3.1. 1.20 ENTRY DATE with respect to an individual means the first day of a pay period following the date on which the individual becomes an Eligible Individual. 1.21 PARTICIPANT means any person so designated in accordance with the provisions of Article II, including, where appropriate according to the context of the Plan, any former employee or director who is or may become (or whose Beneficiaries may become) eligible to receive a benefit under the Plan. 1.22 PARTICIPANT ENROLLMENT AND ELECTION FORM means the form (or forms) on which a Participant elects to defer Compensation hereunder, on which the Participant 3 makes elections concerning the time and manner of payment of amounts attributable to such election, and on which the Participant makes certain other designations as required thereon. 1.23 PLAN means this amended and restated Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan, an amendment and restatement of the MeriStar Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan, as amended from time to time. 1.24 PLAN SPONSOR means Interstate Hotels & Resorts, Inc. and its successors and assigns. 1.25 PLAN YEAR means the twelve (12) month period ending on the December 31 of each year during which the Plan is in effect. 1.26 QUALIFIED PLAN means the Plan Sponsor's tax-qualified 401(k) plan, as amended from time to time. 1.27 RETIREMENT means a Participant's termination from the employ of the Employer upon or after attaining age sixty-five (65). 1.28 TRUST means the trust fund, if any, established pursuant to the Plan. 1.29 TRUSTEE means the trustee named in the agreement establishing the Trust and such successor and/or additional trustees as may be named pursuant to the terms of the agreement establishing the Trust. 1.30 VALUATION DATE means each day of each Plan Year. ARTICLE II ELIGIBILITY AND PARTICIPATION 2.1 REQUIREMENTS. Every Eligible Individual on the Effective Date shall be eligible to become or continue as a Participant on the Effective Date. Every other Eligible Individual shall be eligible to become a Participant on the first Entry Date occurring on or after the date on which he or she becomes an Eligible Individual. No individual shall become a Participant, however, if he or she is not an Eligible Individual on the date his or her participation is to begin. Participation in the Compensation Deferral Account portion of the Plan is voluntary. In order to participate in the Compensation Deferral Account portion of the Plan, an otherwise Eligible Individual must make written application in such manner as may be required by Section 3.2 and by the Employer and must agree to make Compensation Deferrals as provided in Article III. Participation in the Employer Contribution Credit Account portion of the Plan is automatic for all eligible Participants. 4 2.2 RE-EMPLOYMENT/BOARD MEMBERSHIP. If a Participant whose employment with the Employer (or Board membership, as applicable) is terminated is subsequently re-employed (or again becomes a Board member), he or she shall become a Participant in accordance with the provisions of Section 2.1. 2.3 CHANGE OF EMPLOYMENT CATEGORY. During any period in which a Participant remains in the employ of the Employer (or a member of the Board), but ceases to be an Eligible Individual, he or she shall not be eligible to make Compensation Deferrals or to be credited with Employer Contribution Credits hereunder. ARTICLE III CONTRIBUTIONS AND CREDITS 3.1 EMPLOYER CONTRIBUTION CREDITS. There shall be established and maintained a separate Employer Contribution Credit Account in the name of each Participant. There shall be established the following two (2) sub-accounts under a Participant's Employer Contribution Credit Account: (a) the Employer Matching Contribution Sub-Account; and (b) the Employer Profit Sharing Contribution Sub-Account. Each such Sub-Account shall be credited or debited, as applicable, with (a) amounts equal to the Employer's Contribution Credits credited to that Sub-Account; and (b) amounts equal to any deemed earnings and losses (to the extent realized, based upon deemed fair market value of the Sub-Account's deemed assets as determined by the Employer, in its discretion) allocated to that Sub-Account; and (c) expenses and/or taxes charged to that Sub-Account. Provided a Participant remains in the employ of the Employer as an employee on the last day of a Plan Year and the Participant has elected to defer all or a portion of his or her Base Compensation pursuant to Section 3.2 (referred to herein as "Base Compensation Deferrals") with respect to such Plan Year, Employer Contribution Credits shall be credited to the Participant's Employer Matching Contribution Sub-Account for such Plan Year in an amount equal to the excess of (a) one hundred percent (100%) of the Participant's Base Compensation Deferrals for such Plan Year, but not to exceed such percentage of the Participant's Base Compensation for such Plan Year as shall be established in the sole discretion of the Chief Executive Officer (until changed by the Chief Executive Officer, a four percent (4%) rate shall apply); over (b) the sum of the matching contributions actually made by the Employer to the Qualified Plan for such Plan Year. Provided a Participant remains in the employ of the Employer as an employee on the last day of a Plan Year, Employer Contribution Credits shall be credited to the Participant's Employer Profit Sharing Contribution Sub-Account for such Plan Year in an amount (if any) equal to a percentage of the Participant's combined Employer Matching Contribution Sub-Account credits and Qualified Plan matching contributions for such Plan Year, which percentage shall be established in the sole discretion of the Chief Executive Officer and may vary from Participant to Participant (but may in no event exceed one hundred fifty percent (150%)). A Participant shall become vested in amounts credited to his or her Employer Contribution Credit Account as provided in Section 5.4. 5 3.2 PARTICIPANT COMPENSATION DEFERRALS. In accordance with rules established by the Employer, a Participant may elect to defer Compensation which is due to be earned and which would otherwise be paid to the Participant, in any percentages designated by the Participant. Amounts so deferred will be considered a Participant's "Compensation Deferrals." Ordinarily, a Participant shall make such elections with respect to a coming twelve (12) month Plan Year during the period beginning on the December 1 and ending on the December 31 of the prior Plan Year, or during such other period as is established by the Employer. The Employer shall have the discretion to permit special Compensation Deferral election periods for bonus deferral elections, provided that any such elections to defer bonuses are made prior to the date the applicable bonus is first due to be paid in cash. In addition, with respect to any non-employee director Participants, the Employer shall have the discretion to permit such individuals to make Compensation Deferral elections relating to Compensation which is due to be earned as a non-employee director during such other period of time as is established by the Employer but in no event may the non-employee director be permitted to defer Compensation earned by the non-employee director prior to the date of such election. Compensation Deferrals shall be made through regular payroll deductions (including, if applicable, deductions of regular cash retainer payments or payments of meeting fees to a Participant who is a Board member) or through an election by the Participant to defer the payment of a bonus not yet payable to him or her at the time of the election. Excepting any special bonus election period, the Participant may change his or her Compensation Deferral election once during a Plan Year to increase or decrease his or her other Compensation Deferrals for that Plan Year, or the Participant may completely cancel his or her Compensation Deferral election with respect to a Plan Year. Any such change or cancellation shall be made as of, and by written notice delivered to the Employer prior to, the beginning of any regular payroll period (or prior to the date the applicable bonus is first due to be paid), with such change or cancellation being first effective for Compensation to be earned in that payroll period (and, in the case of a cancellation, being irrevocable for the remainder of the Plan Year). Unless so changed or canceled, a Compensation Deferral payroll deduction election shall continue in force indefinitely, until changed by the Participant as provided above. Compensation Deferrals shall be deducted by the Employer from the pay of a deferring Participant and shall be credited to the Account of the deferring Participant. There shall be established and maintained by the Employer a separate Compensation Deferral Account in the name of each Participant, to which shall be credited or debited, as applicable: (a) amounts equal to the Participant's Compensation Deferrals; (b) amounts equal to any deemed earnings and losses (to the extent realized, based upon deemed fair market value of the Account's deemed assets as determined by the Employer in its discretion) attributable or allocable thereto; and (c) expenses and/or taxes charged to that Account. A Participant shall at all times be one hundred percent (100%) vested in amounts credited to his or her Compensation Deferral Account, as provided in Section 5.4. 6 3.3 CONTRIBUTIONS TO THE TRUST. Amounts shall be contributed by the Employer to the Trust maintained under Section 12.1 equal to the amounts required to be credited to the Participant's Account under Sections 3.1 and 3.2. The Employer shall contribute the amounts referred to in Section 3.2 to the Trust as soon as is practicable after the pay periods to which they relate. The Employer shall contribute the amounts referred to in Section 3.1 to the Trust within sixty (60) days after the close of the Plan Year to which they relate. ARTICLE IV ALLOCATION OF FUNDS 4.1 ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS. Pursuant to Section 4.4, each Participant shall have the right to direct the Employer as to how amounts in his or her Plan Account shall be deemed to be invested in the deemed investment options made available under the Plan. Subject to such limitations as may from time to time be required by law, imposed by the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Employer, prior to the date on which a direction will become effective, the Participant shall have the right to direct the Employer as to how amounts in his or her Account shall be deemed to be invested. The Employer shall direct the Trustee to invest the account maintained in the Trust on behalf of the Participant pursuant to the deemed investment directions the Employer properly has received from the Participant. The value of the Participant's Account shall be equal to the value of the account maintained under the Trust on behalf of the Participant. As of each valuation date of the Trust, the Participant's Account will be credited or debited to reflect the Participant's deemed investments of the Trust. The Participant's Plan Account will be credited or debited with the increase or decrease in the realizable net asset value or credited interest, as applicable, of the designated deemed investments, as follows. As of each Valuation Date, an amount equal to the net increase or decrease in realizable net asset value or credited interest, as applicable (as determined by the Trustee), of each deemed investment option within the Account since the preceding Valuation Date shall be allocated among all Participants' Accounts deemed to be invested in that investment option in accordance with the ratio which the portion of the Account of each Participant which is deemed to be invested within that investment option, determined as provided herein, bears to the aggregate of all amounts deemed to be invested within that investment option. 4.2 ACCOUNTING FOR DISTRIBUTIONS. As of the date of any distribution hereunder, the distribution made hereunder to a Participant or his or her Beneficiary or Beneficiaries shall be charged to such Participant's Account. Such amounts shall be charged on a pro rata basis against the investment options in which the Participant's Account is deemed to be invested. Such amounts shall be charged first against any money market, fixed income or similar fund in which the Participant's Account is deemed to be invested, and thereafter on a pro rata basis against the investment options in which the Participant's Account is deemed to be invested. 4.3 SEPARATE BOOKKEEPING ACCOUNTS. A separate bookkeeping account under the Plan shall be established and maintained by the Employer to reflect the Account for each Participant, with bookkeeping sub-accounts to show separately the Participant's Compensation 7 Deferral Account and the Participant's Employer Contribution Credit Account. Each sub-account will separately account for the credits and debits described in Article III. 4.4 DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to such limitations as may from time to time be required by law, imposed by the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Employer, prior to and effective for each Designation Date, each Participant may communicate to the Employer a direction (in accordance with (a), below) as to how his or her Plan Accounts should be deemed to be invested among such categories of deemed investments as may be made available by the Employer hereunder. Such direction shall designate the percentage (in any whole percent multiples) or amount (in any whole dollar multiples) or amount (in any whole dollar multiples) of each portion of the Participant's Plan Accounts which is requested to be deemed to be invested in such categories of deemed investments, and shall be subject to the following rules: (a) Any initial or subsequent deemed investment direction shall be in writing, on a form supplied by and filed with the Employer, and/or, as required or permitted by the Employer, shall be by oral designation and/or electronic transmission designation. A designation shall be effective as of the Designation Date next following the date the direction is received and accepted by the Employer on which it would be reasonably practicable for the Employer to effect the designation. (b) All amounts credited to the Participant's Account shall be deemed to be invested in accordance with the then effective deemed investment direction, and as of the Designation Date with respect to any new deemed investment direction, all or a portion of the Participant's Account at that date shall be reallocated among the designated deemed investment options according to the percentages or amounts specified in the new deemed investment direction unless and until a subsequent deemed investment direction shall be filed and become effective. An election concerning deemed investment choices shall continue indefinitely as provided in the Participant's most recent Participant Enrollment and Election Form, or other form specified by the Employer. (c) If the Employer receives an initial or revised deemed investment direction which it deems to be incomplete, unclear or improper, the Participant's investment direction then in effect shall remain in effect (or, in the case of a deficiency in an initial deemed investment direction, the Participant shall be deemed to have filed no deemed investment direction) until the next Designation Date, unless the Employer provides for, and permits the application of, corrective action prior thereto. (d) If the Employer possesses (or is deemed to possess as provided in (c), above) at any time directions as to the deemed investment of less than all of a Participant's Account, the Participant shall be deemed to have directed that the undesignated portion of the Account be deemed to be invested in a money market, fixed income or similar fund made available under the Plan as determined by the Employer in its discretion. 8 (e) Each Participant hereunder, as a condition to his or her participation hereunder, agrees to indemnify and hold harmless the Employer and its agents and representatives from any losses or damages of any kind relating to the deemed investment of the Participant's Account hereunder. (f) Each reference in this Section to a Participant shall be deemed to include, where applicable, a reference to a Beneficiary. 4.5 PAYMENT OF TAXES AND EXPENSES. Expenses, including Trustee fees, associated with the administration or operation of the Plan shall be paid by the Employer, unless, in the discretion of the Employer, the Employer elects to charge such expenses against the appropriate Participant's Account or Participants' Accounts. Any taxes (or net operating loss reductions) allocable to an Account (or portion thereof) maintained under the Plan which arise prior to the complete distribution of the Account, shall be absorbed by the Employer, unless, in the discretion of the Employer, the Employer elects to charge such taxes against the appropriate Participant's Account or Participants' Accounts. ARTICLE V ENTITLEMENT TO BENEFITS 5.1 FIXED PAYMENT DATES; TERMINATION OF EMPLOYMENT/BOARD MEMBERSHIP. Subject to Section 6.4, on his or her Participant Enrollment and Election Form, a Participant may select a fixed payment date for the payment or commencement of payment of his or her vested Account, which will be valued and payable according to the provisions of Article VI. Such payment dates may be extended to later dates so long as elections to so extend the dates are made by the Participant at least six (6) months prior to the date on which the distribution is to be made or commence. Such payment dates may not be accelerated. Alternatively, on his or her Participant Enrollment and Election Form, a Participant may select payment or commencement of payment of his or her vested Account (or a sub-account thereof) at his or her termination of employment with the Employer (or, with respect to any non-employee Participant, upon his or her termination of Board membership). A Participant who selects payment or commencement of payment of his or her vested Account (or portions thereof) on a fixed date or dates shall receive payment or commence to receive payment of his or her vested Account at the earlier of such fixed payment date or dates (as extended, if applicable) or his or her termination of employment with the Employer (or, with respect to non-employee Participants, upon his or her termination of Board membership). Any Participant who is employed as an employee of the Employer and who also is a director of the Board, and who ceases his or her employment but retains membership on the Board shall not be deemed to have terminated employment hereunder. Any fixed payment date elected by a Participant as provided above must be the January 1 of the third calendar year after the calendar year in which the election is made. If a Participant does not make an election as provided above for any particular amounts hereunder, and the Participant terminates employment with the Employer for any reason (or, 9 Board membership, as applicable), the Participant's vested Account at the date of such termination shall be valued and payable at or commencing at such termination according to the provisions of Article VI. 5.2 HARDSHIP DISTRIBUTIONS. In the event of financial hardship of the Participant, as hereinafter defined, the Participant may apply to the Employer for the distribution of all or any part of his or her vested Account. The Employer shall consider the circumstances of each such case, and the best interests of the Participant and his or her family, and shall have the right, in its sole discretion, if applicable, to allow such distribution, or, if applicable, to direct a distribution of part of the amount requested, or to refuse to allow any distribution. Upon a finding of financial hardship, the Employer shall make the appropriate distribution to the Participant from amounts held by the Employer in respect of the Participant's vested Account. In no event shall the aggregate amount of the distribution exceed either the full value of the Participant's vested Account or the amount determined by the Employer to be necessary to alleviate the Participant's financial hardship (which financial hardship may be considered to include any taxes due because of the distribution occurring because of this Section), and which is not reasonably available from other resources of the Participant. For purposes of this Section, the value of the Participant's vested Account shall be determined as of the date of the distribution. "Financial hardship" means (a) a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Code section 152(a)) of the Participant, (b) loss of the Participant's property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, each as determined to exist by the Employer. 5.3 RE-EMPLOYMENT/BOARD MEMBERSHIP OF RECIPIENT. If a Participant receiving installment distributions pursuant to Section 6.2 is re-employed by the Employer (or again becomes a Board member), the remaining distributions due to the Participant shall be suspended until such time as the Participant (or his or her Beneficiary) once again becomes eligible for benefits under Section 5.1 or 5.2, at which time such distribution shall commence, subject to the limitations and conditions contained in this Plan. 5.4 VESTING. A Participant shall at all times be one hundred percent (100%) vested in amounts credited to his or her Compensation Deferral Account. With respect to amounts credited to a Participant's Employer Contribution Credit Account, such amounts shall vest according to the following schedule:
YEARS OF SERVICE VESTED PERCENTAGE ---------------- ----------------- Less than 1 0% 1 but less than 2 20% 2 but less than 3 40% 3 but less than 4 60% 4 but less than 5 80% 5 or more 100%
10 For purposes of this Section 5.4, a "year of service" shall mean (i) any Plan Year during which a Participant is employed by the Employer (i.e., the Participant is on the Employer's payroll) on a full-time basis for any full six (6) months and remains employed by the Employer as of the last day of that Plan Year; and (ii) any calendar year before the Effective Date during which a Participant was employed by the Employer, Interstate Hotels Corporation, Continental Design & Supplies Company, LLC, Crossroads Hospitality Company, LLC, Colony Hotels and Resorts Company or Interstate Hotels Company on a full-time basis for any full six (6) months and remained employed by that employer as of the last day of that calendar year. Notwithstanding anything above that may suggest otherwise, in no event shall more than one (1) year of service be credited to a Participant with respect to the 2002 calendar year during which the Plan was established. Notwithstanding the foregoing, if a Participant's employment is terminated because of death, Disability or Retirement, or if there occurs a Change in Control, the Participant shall become one hundred percent (100%) vested in his or her Employer Contribution Credit Account. If a Participant terminates employment for any other reason, he or she shall become vested in his or her Employer Contribution Credit Account, if at all, under the vesting schedule set forth above. ARTICLE VI DISTRIBUTION OF BENEFITS 6.1 AMOUNT. A Participant (or his or her Beneficiary) shall become entitled to receive, on or about the date or dates selected by the Participant on his or her Participant Enrollment and Election Form or, if none, on or about the date of the Participant's termination of employment (or Board membership, as applicable) (or earlier as provided in Article V or in Section 6.4), a distribution in an aggregate amount equal to the Participant's vested Account. Any payment due hereunder will be paid by the Employer from its general assets or from the Trust, if any. 6.2 METHOD OF PAYMENT. (a) MEDIUM OF PAYMENT. Payments under the Plan shall be made in cash. (b) TIMING AND MANNER OF PAYMENT. In the case of distributions to a Participant or his or her Beneficiary by virtue of an entitlement pursuant to Section 5.1, an aggregate amount equal to the Participant's vested Account will be paid by the Employer or the Trust, as provided by Section 6.1, in a lump sum or in five (5) substantially equal annual installments (adjusted for gains, losses and expenses), as selected by the Participant as provided in Article 5. If a Participant fails to designate properly the manner of payment of the Participant's benefit under the Plan, such payment will be in a lump sum. If the whole or any part of a payment hereunder by the Employer is to be in installments, the total to be so paid shall continue to be deemed to be invested pursuant to Sections 4.1 and 4.4 under such procedures as the Employer may establish, in which case any deemed income, gain, loss or expense attributable thereto (as determined by the Employer, in its discretion) shall be reflected in the installment payments, in such equitable manner as the Employer shall determine. 11 6.3 DEATH OR DISABILITY BENEFITS. If a Participant dies or experiences a Disability before terminating his or her employment (or Board membership, as applicable) with the Employer, the entire value of the Participant's Account shall become fully vested and shall be paid, as provided in Section 6.2, to the Participant, or, in the case of the death, to the person or persons designated in accordance with Section 7.1. Upon the death of a Participant after payments hereunder have begun but before he or she has received all payments to which he or she is entitled under the Plan, the remaining benefit payments shall be paid to the person or persons designated in accordance with Section 7.1, in the manner in which such benefits were payable to the Participant, unless the Employer elects a more rapid form of distribution. 6.4 CHANGE IN CONTROL. Notwithstanding anything herein to the contrary, upon a Change in Control, each Participant shall become entitled to receive the entire balance of his or her Account in a single lump sum payment on the thirtieth (30th) day following the Change in Control (or as soon thereafter as is administratively feasible). Notwithstanding the preceding, the Participant may irrevocably elect, prior to the end of such thirty (30) day period, to waive his or her right to receive such Change in Control distribution. If such waiver election is timely made, the Participant shall receive his or her Account as previously elected by the Participant. ARTICLE VII BENEFICIARIES; PARTICIPANT DATA 7.1 DESIGNATION OF BENEFICIARIES. Each Participant from time to time may designate any person or persons (who may be named contingently or successively) to receive such benefits as may be payable under the Plan upon or after the Participant's death, and such designation may be changed from time to time by the Participant by filing a new designation. Each designation will revoke all prior designations by the same Participant, shall be in the form prescribed by the Employer, and will be effective only when filed in writing with the Employer during the Participant's lifetime. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Employer shall pay any such benefit payment to the Participant's spouse, if then living, but otherwise to the Participant's estate. 7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES. Any communication, statement or notice addressed to a Participant or to a Beneficiary at his or her last post office address as shown on the Employer's records, shall be binding on the Participant or Beneficiary for all purposes of the Plan. Neither the Trustee nor the Employer shall be obliged to search for any Participant or Beneficiary beyond the sending of a registered letter to such last known address. If the Employer notifies any Participant or Beneficiary that he or she is entitled to an amount under the Plan and the Participant or Beneficiary fails to claim such amount or make his or her location known to the Employer within three (3) years thereafter, then, except as otherwise 12 required by law, if the location of one or more of the next of kin of the Participant is known to the Employer, the Employer may direct distribution of such amount to any one or more or all of such next of kin, and in such proportions as the Employer determines. If the location of none of the foregoing persons can be determined, the Employer shall have the right to direct that the amount payable shall be deemed to be a forfeiture and paid to the Employer, except that the dollar amount of the forfeiture, unadjusted for deemed gains or losses in the interim, shall be paid by the Employer if a claim for the benefit subsequently is made by the Participant or the Beneficiary to whom it was payable. If a benefit payable to an unlocated Participant or Beneficiary is subject to escheat pursuant to applicable state law, neither the Trustee nor the Employer shall be liable to any person for any payment made in accordance with such law. ARTICLE VIII ADMINISTRATION AND RECORDKEEPING 8.1 ADMINISTRATIVE AND RECORDKEEPING AUTHORITY. Except as otherwise specifically provided herein, the Employer shall have the sole responsibility for and the sole control of the operation, administration and recordkeeping of the Plan, and shall have the power and authority to take all action and to make all decisions and interpretations which may be necessary or appropriate in order to administer and operate the Plan, including, without limiting the generality of the foregoing, the power, duty and responsibility to: (a) Resolve and determine all disputes or questions arising under the Plan, including the power to determine the rights of Participants and Beneficiaries, and their respective benefits, and to remedy any ambiguities, inconsistencies or omissions, in the Plan. (b) Adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the Plan and as are consistent with the Plan. (c) Implement the Plan in accordance with its terms and the rules and regulations adopted as above. (d) Subject to Section 9.1, make determinations concerning the crediting and distribution of Participants' benefits. 8.2 UNIFORMITY OF DISCRETIONARY ACTS. Whenever in the administration or operation of the Plan discretionary actions by the Employer are required or permitted, such action shall be consistently and uniformly applied to all persons similarly situated, and no such action shall be taken which shall discriminate in favor of any particular person or group of persons. 8.3 LITIGATION. In any action or judicial proceeding affecting the Plan, it shall be necessary to join as a party only the Plan Sponsor. Except as may be otherwise required by law, no Participant or Beneficiary shall be entitled to any notice or service of process, and any final judgment entered in such action shall be binding on all persons interested in, or claiming under, the Plan. 8.4 CLAIMS PROCEDURE. This Section 8.4 is based on final regulations issued by the 13 Department of Labor and published in the Federal Register on November 21, 2000 and codified at section 2560.503-1 of the Department of Labor Regulations. If any provision of this Section 8.4 conflicts with the requirements of those regulations, the requirements of those regulations will prevail. (a) INITIAL CLAIM. A Participant or Beneficiary (hereinafter referred to as a "Claimant") who believes he or she is entitled to any Plan benefit under this Plan may file a claim with the Employer. The Employer shall review the claim itself or appoint an individual or an entity to review the claim. The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the Claimant receives written notice from the Employer or appointee of the Employer prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed. If the Employer denies a claim, it must provide to the Claimant, in writing or by electronic communication: (i) The specific reasons for the denial; (ii) A reference to the Plan provision upon which the denial is based; (iii) A description of any additional information or material that the Claimant must provide in order to perfect the claim; (iv) An explanation of why such additional material or information is necessary; (v) Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and (vi) A statement of the Claimant's right to bring a civil action under ERISA section 502(a) following a denial on review of the initial denial. (b) REVIEW PROCEDURES. A request for review of a denied claim must be made in writing to the Employer within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Employer's receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision. The reviewer shall afford the Claimant an opportunity to review and receive, 14 without charge, all relevant documents, information and records and to submit issues and comments in writing to the Employer. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination. Upon completion of its review of an adverse initial claim determination, the Employer will give the Claimant, in writing or by electronic notification, a notice containing: (i) its decision; (ii) the specific reasons for the decision; (iii) the relevant Plan provisions on which its decision is based; (iv) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Plan's files which is relevant to the Claimant's claim for benefits; (v) a statement describing the Claimant's right to bring an action for judicial review under ERISA section 502(a); and (vi) if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request. (c) CALCULATION OF TIME PERIODS. For purposes of the time periods specified in this Section, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the Plan procedures without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant's failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds. (d) Failure of Plan to Follow Procedures. If the Plan fails to follow the claims procedures required by this Section, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under ERISA section 502(a) on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. ARTICLE IX AMENDMENT 9.1 RIGHT TO AMEND. The Plan Sponsor, by action of the Committee or other designee of the Board, shall have the right to amend the Plan at any time and with respect to any 15 provisions hereof, and all parties hereto or claiming any interest hereunder shall be bound by such amendment; provided, however, that no such amendment shall deprive any Participant or Beneficiary of a right accrued hereunder prior to the date of the amendment. 9.2 AMENDMENT TO ENSURE PROPER CHARACTERIZATION OF THE PLAN. Notwithstanding the provisions of Section 9.1, the Plan may be amended at any time, retroactively if required, if found necessary, in the opinion of the Plan Sponsor, in order to ensure that the Plan is characterized as a non-tax-qualified "top hat" plan of deferred compensation maintained for a select group of management or highly compensated employees, as described under ERISA sections 201(2), 301(a)(3) and 401(a)(1) and to conform the Plan and the Trust to the provisions and requirements of any applicable law (including ERISA and the Code). 9.3 CHANGES IN LAW AFFECTING TAXABILITY. This Section shall become operative upon the enactment of any change in applicable statutory law or the promulgation by the Internal Revenue Service of a final regulation or other pronouncement having the force of law, which statutory law, as changed, or final regulation or pronouncement, as promulgated, would cause any Participant to include in his or her federal gross income amounts accrued by the Participant under the Plan on a date (an "Early Taxation Event") prior to the date on which such amounts are made available to him or her hereunder. (a) AFFECTED RIGHT OR FEATURE NULLIFIED. Notwithstanding any other Section of this Plan to the contrary (but subject to subsection (b), below), as of an Early Taxation Event, the feature or features of this Plan that would cause the Early Taxation Event shall be null and void, to the extent, and only to the extent, required to prevent the Participant from being required to include in his or her federal gross income amounts accrued by the Participant under the Plan prior to the date on which such amounts are made available to him or her hereunder. If only a portion of a Participant's Account is impacted by the change in the law, then only such portion shall be subject to this Section, with the remainder of the Account not so affected being subject to such rights and features as if the law were not changed. If the law only impacts Participants who have a certain status with respect to the Employer, then only such Participants shall be subject to this Section. (b) TAX DISTRIBUTION. If an Early Taxation Event is earlier than the date on which the statute, regulation or pronouncement giving rise to the Early Taxation Event is enacted or promulgated, as applicable (i.e., if the change in the law is retroactive), there shall be distributed to each Participant, as soon as practicable following such date of enactment or promulgation, the amounts that became taxable on the Early Taxation Event. ARTICLE X TERMINATION 10.1 PLAN SPONSOR'S RIGHT TO TERMINATE PLAN. The Plan Sponsor reserves the right, at any time, to terminate the Plan and/or its obligation to make further credits to Plan Accounts by unanimous action of the Committee or other designee of the Board; provided, however, that no such termination shall deprive any Participant or Beneficiary of a right accrued hereunder 16 prior to the date of termination and provided that, upon termination, the full amount of each Participant's Plan account(s) shall become immediately distributable to him or her. 10.2 AUTOMATIC TERMINATION OF PLAN. The Plan shall terminate automatically upon the dissolution of the Plan Sponsor or upon the Plan Sponsor's merger into or consolidation with any other corporation or business organization which does not specifically adopt and agree to continue the Plan; provided, however, that no such termination shall deprive any Participant or Beneficiary of a right accrued hereunder prior to the date of termination and provided that, upon termination, the full amount of each Participant's Plan Account shall become immediately distributable to him or her. 10.3 SUCCESSOR TO PLAN SPONSOR. Any corporation or other business organization which is a successor to the Plan Sponsor by reason of a consolidation, merger or purchase of substantially all of the assets of the Plan Sponsor shall have the right to become a party to the Plan by adopting the same by resolution of the entity's board of directors or other appropriate governing body. If, within thirty (30) days from the effective date of such consolidation, merger or sale of assets, such new entity does not become a party hereto, as above provided, the Plan shall be terminated automatically, and the provisions of the foregoing Sections shall become operative. ARTICLE XI MISCELLANEOUS 11.1 LIMITATIONS ON LIABILITY OF PLAN SPONSOR AND EMPLOYER. Neither the establishment of the Plan nor any modification hereof, nor the creation of any account under the Plan, nor the payment of any benefits under the Plan, shall be construed as giving to any Participant or any other person any legal or equitable right against the Plan Sponsor or the Employer or any officer or employee thereof, except as provided by law or by any Plan provision. The Plan Sponsor and Employer do not in any way guarantee any Participant's Account from loss or depreciation, whether caused by poor investment performance of a deemed investment or the inability to realize upon an investment due to an insolvency affecting an investment vehicle or any other reason. In no event shall the Plan Sponsor or the Employer, or any successor, employee, officer, director or stockholder of the Plan Sponsor or the Employer, be liable to any person on account of any claim arising by reason of the provisions of the Plan or of any instrument or instruments implementing its provisions, or for the failure of any Participant, Beneficiary or other person to be entitled to any particular tax consequences with respect to the Plan, or any credit or distribution hereunder. 11.2 CONSTRUCTION. If any provision of the Plan is held to be illegal or void, such illegality or invalidity shall not affect the remaining provisions of the Plan, but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provisions had never been inserted herein. For all purposes of the Plan, where the context permits, the singular shall include the plural, and the plural shall include the singular. Headings of Articles and Sections herein are inserted only for convenience of reference and are not to be considered in the construction of the Plan. The laws of Delaware shall govern, control and determine all questions of law arising with respect to the Plan and the interpretation and validity of its respective provisions, except where those laws are preempted by the laws of the United States. Participation under the Plan will not give a 17 Participant the right to be retained in the service of the Employer nor any right or claim to any benefit under the Plan unless such right or claim has specifically accrued hereunder. The Plan is intended to be and at all times shall be interpreted and administered so as to qualify as an unfunded plan of deferred compensation, and no provision of this Plan shall be interpreted so as to give any individual any right in any assets of the Employer which right is greater than the rights of any general unsecured creditor of the Employer. 11.3 SPENDTHRIFT PROVISION. No amount payable to a Participant or any Beneficiary under the Plan will, except as otherwise specifically provided by law, be subject in any manner to anticipation, alienation, attachment, garnishment, sale, transfer, assignment (either at law or in equity), levy, execution, pledge, encumbrance, charge or any other legal or equitable process, and any attempt to do so will be void; nor will any benefit hereunder be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled thereto. Further, (a) the withholding of taxes from Plan benefit payments, (b) the recovery under the Plan of overpayments of benefits previously made to a Participant or any Beneficiary, (c) if applicable, the transfer of benefit rights from the Plan to another plan, or (d) the direct deposit of Plan benefit payments to an account in a banking institution (if not actually part of an arrangement constituting an assignment or alienation) shall not be construed as an assignment or alienation. In the event that a Participant's or any Beneficiary's benefits hereunder are garnished or attached by order of any court, the Employer may bring an action for a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid under the Plan. During the pendency of said action, any benefits that become payable shall be held as credits to a Participant's or Beneficiary's Account or, if the Employer prefers, paid into the court as they become payable, to be distributed by the court to the recipient as it deems proper at the close of said action. ARTICLE XII THE TRUST 12.1 ESTABLISHMENT OF TRUST. The Plan Sponsor may, but need not, establish the Trust with the Trustee pursuant to such terms and conditions as are set forth in the Trust agreement to be entered into between the Plan Sponsor and the Trustee. The Trust is intended to be treated as a "grantor" trust under the Code and the establishment of the Trust is not intended to cause the Participant to realize current income on amounts contributed thereto nor to cause the Plan to be "funded" within the meaning of ERISA, and the Trust shall be so interpreted. IN WITNESS WHEREOF, the Plan Sponsor has caused this amended and restated Plan to be executed and its seal to be affixed hereto, effective as of the 1st day of January, 2004. ATTEST/WITNESS: INTERSTATE HOTELS & RESORTS, INC. 18 _________________________________ By: _______________________________(SEAL) Print Name:______________________ Print Name: _____________________________ Date: ___________________________________ 19 EX-4.2 4 y94388exv4w2.txt EXECUTIVE FUND EXHIBIT 4.2 INTERSTATE HOTELS & RESORTS, INC. EXECUTIVE FUND Effective as of January 1, 2004 . . . INTERSTATE HOTELS & RESORTS, INC. EXECUTIVE FUND Effective as of January 1, 2004 TABLE OF CONTENTS ARTICLE I DEFINITIONS 1.1 ACCOUNT........................................................................................ 1 1.2 ADJUSTED ALLOCABLE SHARE....................................................................... 1 1.3 AGGREGATE CONTRIBUTION CREDITS................................................................. 1 1.4 ALLOCABLE SHARE................................................................................ 1 1.5 AVAILABLE CONTRIBUTION CREDITS................................................................. 2 1.6 BENEFICIARY.................................................................................... 2 1.7 BOARD.......................................................................................... 2 1.8 CHANGE IN CONTROL.............................................................................. 2 1.9 CHIEF EXECUTIVE OFFICER........................................................................ 2 1.10 CODE........................................................................................... 2 1.11 COMPENSATION................................................................................... 2 1.12 COMPENSATION DEFERRAL ACCOUNT.................................................................. 3 1.13 COMPENSATION DEFERRAL MAXIMUM PERCENTAGE....................................................... 3 1.14 COMPENSATION DEFERRALS......................................................................... 3 1.15 DEEMED INVESTMENT DATE......................................................................... 3 1.16 EFFECTIVE DATE................................................................................. 3 1.17 ELIGIBLE EMPLOYEE.............................................................................. 3 1.18 EMPLOYER....................................................................................... 3 1.19 EMPLOYER CONTRIBUTION CREDIT ACCOUNT........................................................... 3 1.20 EMPLOYER CONTRIBUTION CREDITS.................................................................. 4 1.21 ENTRY DATE..................................................................................... 4 1.22 ERISA.......................................................................................... 4 1.23 INVESTMENT COMMITTEE........................................................................... 4 1.24 NEXT YEAR'S BONUS.............................................................................. 4 1.25 NEXT YEAR'S BONUS DEFERRALS.................................................................... 4 1.26 OTHER COMPENSATION............................................................................. 5 1.27 PARTICIPANT.................................................................................... 5 1.28 PLAN........................................................................................... 5 1.29 PLAN SPONSOR................................................................................... 5 1.30 PLAN YEAR...................................................................................... 5 1.31 QUALIFIED INVESTMENTS.......................................................................... 5 1.32 QUALIFIED INVESTMENT DOLLAR LIMIT.............................................................. 5 1.33 REGULAR BONUS.................................................................................. 5 1.34 REGULAR BONUS DEFERRALS........................................................................ 5 1.35 TRANSACTIONAL EXPENSES......................................................................... 5 1.36 TRUST.......................................................................................... 5
i 1.37 VALUATION DATE................................................................................. 5 1.38 YEAR OF VESTING................................................................................ 6 ARTICLE II ELIGIBILITY AND PARTICIPATION 2.1 REQUIREMENTS................................................................................... 6 2.2 RE-EMPLOYMENT.................................................................................. 6 2.3 CHANGE OF EMPLOYMENT CATEGORY.................................................................. 6 ARTICLE III CONTRIBUTIONS AND CREDITS 3.1 EMPLOYER CONTRIBUTION CREDITS.................................................................. 7 3.2 PARTICIPANT COMPENSATION DEFERRALS............................................................. 7 ARTICLE IV ALLOCATION OF FUNDS 4.1 DEEMED INVESTMENTS UNDER THE PLAN.............................................................. 9 4.2 VALUATION OF QUALIFIED INVESTMENTS............................................................. 10 4.3 ALLOCATION OF DEEMED INVESTMENTS AND DEEMED EARNINGS OR LOSSES AMONG PLAN ACCOUNTS ............ 11 4.4 SEPARATE BOOKKEEPING ACCOUNTS.................................................................. 11 4.5 PAYMENT OF EXPENSES............................................................................ 12 ARTICLE V ENTITLEMENT TO BENEFITS 5.1 NON-LIQUIDATING DISTRIBUTION FROM A QUALIFIED INVESTMENT....................................... 12 5.2 COMPLETE DISPOSITION BY PLAN SPONSOR OF A QUALIFIED INVESTMENT................................. 13 5.3 TERMINATION OF EMPLOYMENT...................................................................... 12 5.4 CHANGE IN CONTROL.............................................................................. 13 5.5 VESTING........................................................................................ 13 5.6 RETURN OF COMPENSATION DEFERRALS AND RELINQUISHMENT OF CORRESPONDING EMPLOYER CONTRIBUTIONS.... 13 ARTICLE VI DISTRIBUTION OF BENEFITS 6.1 AMOUNT AND METHOD OF PAYMENT................................................................... 14 6.2 TERMINATION BENEFIT............................................................................ 14
ii 6.3 OTHER BENEFITS................................................................................. 15 ARTICLE VII BENEFICIARIES; PARTICIPANT DATA 7.1 DESIGNATION OF BENEFICIARIES................................................................... 15 7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES.................................................................. 16 ARTICLE VIII ADMINISTRATION AND RECORDKEEPING 8.1 ADMINISTRATIVE AND RECORDKEEPING AUTHORITY..................................................... 16 8.2 UNIFORMITY OF DISCRETIONARY ACTS............................................................... 17 8.3 LITIGATION..................................................................................... 17 8.4 CLAIMS PROCEDURE............................................................................... 17 ARTICLE IX AMENDMENT 9.1 RIGHT TO AMEND................................................................................. 19 9.2 AMENDMENT TO ENSURE PROPER CHARACTERIZATION OF THE PLAN........................................ 18 9.3 CHANGES IN LAW AFFECTING TAXABILITY............................................................ 19 ARTICLE X TERMINATION 10.1 PLAN SPONSOR'S RIGHT TO TERMINATE PLAN......................................................... 20 10.2 AUTOMATIC TERMINATION OF PLAN.................................................................. 20 10.3 SUCCESSOR TO PLAN SPONSOR...................................................................... 20 ARTICLE XI MISCELLANEOUS 11.1 LIMITATIONS ON LIABILITY OF PLAN SPONSOR AND EMPLOYER.......................................... 20 11.2 CONSTRUCTION................................................................................... 21 11.3 SPENDTHRIFT PROVISION.......................................................................... 21 ARTICLE XII TRUST 12.1 ESTABLISHMENT OF TRUST......................................................................... 22
iii INTERSTATE HOTELS & RESORTS, INC. EXECUTIVE FUND Effective as of January 1, 2004 RECITALS This Interstate Hotels & Resorts, Inc. Executive Fund (the "Plan") is adopted by Interstate Hotels & Resorts, Inc. (the "Plan Sponsor") for certain management employees of Interstate Management Company, LLC (the "Employer"). The purpose of the Plan is to align the interests of those employees more closely with the interests of the Plan Sponsor and the Employer, by offering them incentive compensation benefits taxable under section 451 of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan is intended to be a "top-hat plan" (i.e., an unfunded deferred compensation plan maintained for a select group of management or highly compensated employees) pursuant to sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Accordingly, the following Plan is adopted. ARTICLE I DEFINITIONS The following terms, as used herein, unless a different meaning is implied by the context, have the following meaning: 1.1 ACCOUNT means the balance credited to a notational account maintained on the books of the Employer with respect to each Participant, including amounts credited to the Participant's Compensation Deferral Account and to his or her Employer Contribution Credit Account. Said Account shall be determined as of the relevant Valuation Date hereunder. 1.2 ADJUSTED ALLOCABLE SHARE means, with respect to each Qualified Investment, the Allocable Share of the Plan for that Qualified Investment as reduced pursuant to Section 4.1(d) and as reduced by any distributions (other than as provided in Section 5.1) or forfeitures hereunder allocable to that Qualified Investment. 1.3 AGGREGATE CONTRIBUTION CREDITS means, for each Plan Year, the aggregate Compensation Deferrals and Employer Contribution Credits credited under the Plan for that Plan Year. 1.4 ALLOCABLE SHARE means, with respect to each Plan Year, that portion (expressed as a percentage, and as adjusted pursuant to Section 4.1(d)) of the Plan Sponsor's aggregate investment commitment to each Qualified Investment arising during that Plan Year which the Board determines to be the appropriate level at which Plan Accounts should be deemed to co-invest with the Plan Sponsor in such Qualified Investment. The Board may establish for each Plan Year the 1 Allocable Share to apply to all Qualified Investments with a Deemed Investment Date falling within that Plan Year. 1.5 AVAILABLE CONTRIBUTION CREDITS means, with respect to each Qualified Investment, the aggregate amount credited to Plan Accounts (including deemed interest credited pursuant to Section 4.1(a)) that are available for allocation to that Qualified Investment (i.e., amounts credited to Plan Accounts that have not yet been deemed invested in other Qualified Investments and that have not been returned to or relinquished by Participants pursuant to Section 5.5) as of the Deemed Investment Date for that Qualified Investment. 1.6 BENEFICIARY means any person or persons so designated in accordance with the provisions of Article VII. 1.7 BOARD means the Board of Directors of the Plan Sponsor. 1.8 CHANGE IN CONTROL means a transaction or series of transactions occurring after the Effective Date, in which (i) any individual, firm, corporation or other entity, or any group (as defined in Section 13(d)(3) or the Securities Exchange Act of 1934 (the "Act")), becomes, directly or indirectly, the beneficial owner (as defined in the general rules and regulations of the Securities and Exchange Commission with respect to Sections 13(d) and 13(g) of the Act) of more than fifty percent (50%) of the then outstanding shares of the Plan Sponsor's capital stock entitled to vote generally in the election of directors of the Plan Sponsor; or (ii) the stockholders of the Plan Sponsor approve a definitive agreement for (A) the merger or other business combination of the Plan Sponsor with or into another corporation pursuant to which the stockholders of the Plan Sponsor do not own, immediately after the transaction, more than fifty percent (50%) of the voting power of the corporation that survives and is a publicly owned corporation and not a subsidiary of another corporation, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Plan Sponsor; or (iii) during any period of two (2) years or less, individuals who at the beginning of such period constituted the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the stockholders of the Plan Sponsor, of each new director was approved by a vote of at least seventy-five percent (75%) of the directors then still in office who were directors at the beginning of the period. Notwithstanding the foregoing, a Change in Control shall not be deemed to have taken place if beneficial ownership is acquired by, or a tender exchange offer is commenced by, the Plan Sponsor or any of its subsidiaries, any profit sharing, employee ownership or other employee benefit plan of the Plan Sponsor or any subsidiary of any trustee of or fiduciary with respect to any such plan when acting in such capacity, or any group comprised solely of such entities. 1.9 CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of the Plan Sponsor. 1.10 CODE means the Internal Revenue Code of 1986 and the regulations thereunder, as amended from time to time. 1.11 COMPENSATION means the total cash base salary compensation and the total cash 2 bonus compensation of the Participant with respect to the Plan Year of reference, including the Participants Next Year's Bonus. 1.12 COMPENSATION DEFERRAL ACCOUNT is defined in Section 3.2. 1.13 COMPENSATION DEFERRAL PERCENTAGE means, for each Plan Year and each item of Compensation that the Participant is permitted to defer with respect to that Plan Year, the percentage of the Participant's base salary that the Plan Sponsor establishes as the deferral percentage for that Plan Year with respect to that item of Compensation. For each Plan Year, the Plan Sponsor may establish a different Compensation Deferral Percentage with respect to each item of Compensation that may be deferred for that Plan Year and with respect to any Participant or group of Participants, and may increase the Compensation Deferral Percentage for each such item of deferrable Compensation with respect to Participants who have elected to defer the Compensation Deferral Percentage (before such increase) with respect to that item. 1.14 COMPENSATION DEFERRALS is defined in Section 3.2. 1.15 DEEMED INVESTMENT DATE means, with respect to each Qualified Investment, the date on which the Plan Sponsor's investment in that Qualified Investment is made (as reasonably determined by the Plan Sponsor), as of which a Participant's Account is deemed to become invested in that Qualified Investment. 1.16 EFFECTIVE DATE means the effective date of the Plan, which shall be January 1, 2004. 1.17 ELIGIBLE EMPLOYEE means any individual employed by the Employer in a Vice President or more senior position, or any other individual employed by the Employer who is determined by the Plan Sponsor to be a member of a select group of management or highly compensated employees of the Employer (within the meaning of ERISA), who is designated by the Chief Executive Officer to be an Eligible Employee under the Plan. Generally, by each December 1, the Employer shall notify those individuals, if any, who will be Eligible Employees for the next Plan Year. If the Plan Sponsor determines that an individual first becomes an Eligible Employee during a Plan Year, the Employer shall notify such individual of that determination and of the date during the Plan Year on which the individual shall first become an Eligible Employee. 1.18 EMPLOYER means Interstate Management Company, LLC and its successors and assigns unless otherwise herein provided, or any other corporation or business organization which, with the consent of the Plan Sponsor or its successors or assigns, assumes the Employer's obligations hereunder, or any other corporation or business organization which agrees, with the consent of the Plan Sponsor to become a party to the Plan. 1.19 EMPLOYER CONTRIBUTION CREDIT ACCOUNT is defined in Section 3.1. 3 1.20 EMPLOYER CONTRIBUTION CREDITS is defined in Section 3.1. 1.21 ENTRY DATE means, with respect to any individual, the day, following the date on which that individual becomes an Eligible Employee, on which that individual's Regular Bonus is payable (or would be payable, but for a Regular Bonus Deferral election made by the Participant hereunder). If, pursuant to Section 3.2, the Plan Sponsor permits deferrals of Participant's Next Year's Bonus or Other Compensation in addition to Regular Bonus Deferrals, then Entry Date shall mean, with respect to any individual who has not yet experienced an Entry Date, the day, following the date on which the individual becomes an Eligible Employee, that is (i) in the case of base salary deferrals, the first day of a pay period, (ii) in the case of deferrals of bonuses other than the Regular Bonus or the Next Year's Bonus, the day on which that bonus is (or would be) payable, and (iii) in the case of Next Year's Bonus Deferrals, the day on which those amounts first are deemed invested in a Qualified Investment. 1.22 ERISA means the Employee Retirement Income Security Act of 1974 and the regulations thereunder, as amended from time to time. 1.23 INVESTMENT COMMITTEE means the Investment Committee of the Board. 1.24 NEXT YEAR'S BONUS means the total annual bonus of the Participant with respect to the Plan Year immediately following the Plan Year of reference, generally payable in March of that following Plan Year. 1.25 NEXT YEAR'S BONUS DEFERRALS means, with respect to each Plan Year, that portion (if any) of a Participant's Next Year's Bonus that the Participant is offered the opportunity to defer under the Plan, and that he or she elects to defer pursuant to Section 3.2. A Participant's Next Year's Bonus Deferrals shall be considered an "advance" by the Employer against the annual bonus that is not otherwise payable to the Participant for more than a year after the date of his or her deferral election, with the results that (i) any Next Year's Bonus Deferrals made by a Participant with respect to a Plan Year shall be charged against, and shall reduce, his or her Regular Bonus for the following Plan Year (and for the Plan Year(s) after that, if the immediately following Plan Year's Regular Bonus is insufficient to "repay" the Next Year's Bonus Deferral "advance"), and, if any portion of those Next Year's Bonus Deferrals has been deemed invested in one or more Qualified Investments prior to the date on which the "advance" is repaid from the Regular Bonus for the following Plan Year (and for the Plan Year(s) after that, if necessary), then interest on that portion so deemed invested also shall be charged against, and shall reduce, the Participant's Regular Bonus for the following Plan Year (and for the Plan Year(s) after that, if necessary), such interest to be calculated from the date(s) of the deemed investment in the Qualified Investment(s) through the date(s) on which the "advance" is repaid, using the interest rate described in Section 5.5(b), (ii) as provided in Section 4.1, a Participant's Next Year's Bonus Deferrals will not be credited with any income or earnings until the earlier of when they are deemed invested in one or more Qualified Investments or when the "advance" is repaid from the Participant's Regular Bonus for following Plan Year (and for the Plan Year(s) after that, if necessary), and (iii) a Participant's Next Year's Bonus Deferrals will not be deemed invested in any Qualified Investments unless and until his or her 4 Compensation Deferrals, excluding Next Year's Bonus Deferrals, have been deemed invested in full in Qualified Investments. 1.26 OTHER COMPENSATION means the Compensation of the Participant with respect to the Plan Year of reference, excluding the Participant's Regular Bonus and Next Year's Bonus. 1.27 PARTICIPANT means any individual so designated in accordance with the provisions of Article II, including, where appropriate according to the context of the Plan, any former Participant who is or may become (or whose Beneficiary may become) eligible to receive a benefit under the Plan. 1.28 PLAN means this Interstate Hotels & Resorts, Inc. Executive Fund, as amended from time to time. 1.29 PLAN SPONSOR means Interstate Hotels & Resorts, Inc. and its successors and assigns. 1.30 PLAN YEAR means the twelve (12) month period ending on the December 31 of each year during which the Plan is in effect. 1.31 QUALIFIED INVESTMENTS mean those hotel and corporate housing properties in which the Plan Sponsor invests subsequent to the Effective Date (including through whole ownership, joint ventures, sliver investments and mezzanine loans) and in which the Board determines to have Plan Accounts deemed co-invested with the Plan Sponsor. 1.32 QUALIFIED INVESTMENT DOLLAR LIMIT means, for each Plan Year, twenty five percent (25%) of the Aggregate Contribution Credits for that Plan Year (unless, with respect to any Plan Year, the Board increases the Qualified Investment Dollar Limit due to an anticipated insufficiency of Qualified Investments available for deemed investment during such Plan Year or for any other reason as determined by the Board). 1.33 REGULAR BONUS means the annual bonus of the Participant with respect to the Plan Year of reference, generally payable in March of that Plan Year. 1.34 REGULAR BONUS DEFERRALS is defined in Section 3.1. 1.35 TRANSACTIONAL EXPENSES means, with respect to each Qualified Investment, the aggregate expenses incurred by the Plan Sponsor and any other co-investors in the Qualified Investment in connection with the acquisition transaction involving that Qualified Investment, as reasonably determined by the Plan Sponsor. 1.36 TRUST means the trust fund, if any, established pursuant to the Plan. 1.37 VALUATION DATE means (i) in the case of deemed interest to be credited pursuant to Section 4.1(a), such dates as shall be determined by the Plan Sponsor in its discretion, (ii) in the 5 case of a benefit entitlement arising out of a non-liquidating distribution from a Qualified Investment to the Plan Sponsor pursuant to Section 5.1, the date of the distribution, (iii) in the case of a benefit entitlement arising out of a complete disposition of a Qualified Investment by the Plan Sponsor pursuant to Section 5.2, the date of disposition, (iv) in the case of a benefit entitlement arising out of a Change in Control (unless receipt of that benefit is waived pursuant to Section 6.3), the date of the Change in Control and (v) in the case of a benefit entitlement arising out of a termination of employment pursuant to Section 5.3, the January 1 and July 1 of each Plan Year; and, where relevant in the case of certain installment distributions made hereunder, a twelve (12) month anniversary of such Valuation Date. 1.38 YEAR OF VESTING means, with respect to each Qualified Investment, the twelve (12) month anniversary of the Deemed Investment Date with respect to that Qualified Investment, and each twelve (12) month anniversary thereof until the complete disposition by the Plan Sponsor of that Qualified Investment; provided that a Participant who experiences an entitlement event in accordance with Section 5.3(a) shall cease to accrue any further Years of Vesting following his or her termination of employment with the Employer, and a Participant who, pursuant to Section 5.3(b), does not experience an entitlement event in accordance with Section 5.3(a), shall accrue Years of Vesting following his or her termination of employment solely with respect to his or her Compensation Deferral Account. ARTICLE II ELIGIBILITY AND PARTICIPATION 2.1 REQUIREMENTS. Every Eligible Employee shall be eligible to become a Participant on the first Entry Date occurring on or after the date on which he or she becomes an Eligible Employee. No individual shall become a Participant, however, if he or she is not an Eligible Employee on the date his or her participation is to begin. Participation in the Compensation Deferral Account portion of the Plan is voluntary. In order to participate in the Compensation Deferral Account portion of the Plan, an otherwise Eligible Employee must make written application in such manner as may be required by Section 3.2 and by the Employer and must agree to make Compensation Deferrals as provided in Article III. Participation in the Employer Contribution Credit Account portion of the Plan is automatic for all Participants. 2.2 RE-EMPLOYMENT. If a Participant whose employment with the Employer is terminated is subsequently re-employed with the Employer, he or she shall become a Participant in accordance with the provisions of Section 2.1. 2.3 CHANGE OF EMPLOYMENT CATEGORY. During any period in which a Participant remains in the employ of the Employer, but ceases to be an Eligible Employee, he or she shall not be eligible to make Compensation Deferrals or to be credited with Employer Contribution Credits hereunder. 6 ARTICLE III CONTRIBUTIONS AND CREDITS 3.1 EMPLOYER CONTRIBUTION CREDITS. There shall be established and maintained a separate Employer Contribution Credit Account in the name of each Participant. There shall be established the following two (2) sub-accounts under a Participant's Employer Contribution Credit Account: (a) the Employer Matching Contribution Sub-Account; and (b) the Employer Discretionary Contribution Sub-Account. Each such Sub-Account shall be credited or debited, as applicable, with (a) amounts equal to the Employer's Contribution Credits credited to that Sub-Account; and (b) amounts equal to any deemed earnings and losses (to the extent realized, based upon deemed fair market value of the Sub-Account's deemed assets as determined hereunder) allocated to that Sub-Account. Provided a Participant has elected to defer all or a portion of his or her Regular Bonus pursuant to Section 3.2 (referred to herein as "Regular Bonus Deferrals") with respect to a Plan Year, Employer Contribution Credits shall be credited to the Participant's Employer Matching Contribution Sub-Account for such Plan Year in an amount equal to one hundred fifty percent (150%) of the Participant's Regular Bonus Deferrals (after adjustment, if applicable, as provided in the first paragraph of Section 3.2) for such Plan Year. The Plan Sponsor, by action of its Board, may increase or decrease (down to zero (0)) this matching percentage with respect to any Plan Year, provided that any decrease may only be made with respect to Regular Bonus Deferrals for which Participants have not yet made deferral elections. In addition to Employer Contribution Credits credited to Participants' Employer Matching Contribution Sub-Accounts each Plan Year, as provided above, the Plan Sponsor, by action of the Board, may credit Employer Contribution Credits to Participants' Employer Discretionary Contribution Sub-Accounts as well with respect to any Plan Year, at such times, in such manner and to such extent as the Plan Sponsor shall determine in its sole discretion, including for example, to match Next Year's Bonus Deferrals (if such deferrals are permitted) and/or to match Other Compensation deferrals (if such deferrals are permitted) similarly to the manner in which Regular Bonus Deferrals are matched, as provided above. A Participant shall become vested in amounts credited to his or her Employer Contribution Credit Account as provided in Section 5.4. 3.2 PARTICIPANT COMPENSATION DEFERRALS. In accordance with rules established by the Employer, a Participant may elect to defer each Plan Year a Regular Bonus which would otherwise be paid to the Participant, in an amount equal to that Plan Year's Compensation Deferral Percentage for Regular Bonuses. In addition, the Plan Sponsor, by action of the Board, may permit Participants to defer Next Year's Bonuses and/or Other Compensation under the Plan with respect to any Plan Year, at such times, in such manner, and to such extent as the Plan Sponsor shall determine, in its sole discretion, in an amount equal to the applicable Compensation Deferral Percentage(s) for that Plan Year. Amounts deferred pursuant to this Section 3.2 will be considered a Participant's "Compensation Deferrals." 7 The preceding notwithstanding, the Compensation Deferrals of all Participants for a Plan Year may not exceed two million dollars ($2,000,000) in the aggregate (unless, with respect to any Plan Year, the Board increases this ceiling in its discretion). If all Participants' Compensation Deferral elections with respect to a Plan Year would result in this limit being exceeded for that Plan Year, then each Participant's Compensation Deferral election with respect to that Plan Year shall be reduced on a pro rata basis, with the result that each Participant's Compensation Deferrals for that Plan Year will be determined by multiplying two million dollars ($2,000,000) (or such other ceiling as the Board may establish) by a fraction, the numerator of which is the Participant's Compensation Deferral election for the Plan Year and the denominator is all Participants' Compensation Deferral elections for the Plan Year. Compensation Deferrals shall be made through regular payroll deductions or through an election by the Participant to defer the payment of a bonus not yet payable to him or her at the time of the election. Ordinarily, a Participant shall make Compensation Deferral elections with respect to a coming twelve (12) month Plan Year during the period beginning on the December 1 and ending on the December 31 of the prior Plan Year, or during such other period as is established by the Employer which ends no later than (i) in the case of a base salary compensation deferral election, the day preceding the beginning of the regular payroll period to which such election relates, (ii) in the case of a Regular Bonus Deferral election, the day preceding the date on which the Regular Bonus is first due to be paid and (iii) in the case of a Next Year's Bonus Deferral election, the day preceding the date on which any portion of the Next Year's Bonus is to become deemed invested in a Qualified Investment. The Participant's Compensation Deferral election with respect to a Plan Year, once made, is irrevocable for that Plan Year (except if and to the extent that the Plan Sponsor, in its sole discretion, permits a complete revocation of a Participant's Compensation Deferral election with respect to the remainder of the Plan Year). Compensation Deferrals shall be deducted by the Employer from the pay of a deferring Participant and shall be credited to the Account of the deferring Participant. There shall be established and maintained by the Employer a separate Compensation Deferral Account in the name of each Participant, to which shall be credited or debited, as applicable: (a) amounts equal to the Participant's Compensation Deferrals; and (b) amounts equal to any deemed earnings and losses (to the extent realized, based upon deemed fair market value of the Account's deemed assets as determined hereunder) attributable or allocable thereto. A Participant shall become vested in amounts credited to his or her Compensation Deferral Account as provided in Section 5.4. In addition to the foregoing, the Plan Sponsor, by action of its Board, may permit Participants to defer under the Plan amounts that would otherwise be distributable to the Participants under the Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan. Any such deferrals, which may be accomplished by the Participant surrendering his or her interest under the Supplemental Deferred Compensation Plan in exchange for an agreement by the Employer to credit his or her Compensation Deferral Account hereunder in the amount so surrendered, shall be permitted solely at such times, in such manner, to such extent, and subject to such terms and conditions as the Plan Sponsor shall determine, in its sole discretion. 8 ARTICLE IV ALLOCATION OF FUNDS 4.1 DEEMED INVESTMENTS UNDER THE PLAN. (a) AMOUNTS CREDITED PENDING OR FOLLOWING QUALIFIED INVESTMENT. Subject to Section 5.3, Participants' Compensation Deferral Accounts, to the extent they have not yet been deemed invested in a Qualified Investment as provided below, shall be deemed invested in money market funds or similar cash equivalent, interest-bearing investments, as selected by the Plan Sponsor in its discretion. The preceding notwithstanding, Participants' Next Year's Bonus Deferrals and Employer Contribution Credit Accounts shall not be credited with any deemed earnings or losses until they have been deemed invested in a Qualified Investment, or, in the case of Next Year's Bonus Deferrals, until they have been "repaid" from Regular Bonus(es) as provided in Section 1.25. If any Participant is required to receive payment of his or her vested Account in two (2) installments pursuant to Section 6.2(b), his or her Account shall be considered as ceasing to be deemed invested in any Qualified Investment following his or her receipt of the first (1st) installment payment under Section 6.2(b), such that the amounts remaining unpaid shall be deemed to be invested in money market funds or similar cash equivalent, interest-bearing investments, as selected by the Plan Sponsor in its discretion, until payment of the second (2nd) installment. (b) INVESTMENT IN QUALIFIED INVESTMENTS IN GENERAL. Except as provided in subsection (a), Participants' Accounts shall be deemed to be invested in Qualified Investments. With respect to each Plan Year's Qualified Investments, the Board shall determine the Allocable Share, i.e., the level at which the Plan will be deemed to participate with the Plan Sponsor, on a pari-passu basis (on the same basis in gains, losses, Transactional Expenses, cash distributions, etc.), in those Qualified Investments. For the Plan's initial Plan Year (i.e., the 2004 calendar year), the Board has established as the Allocable Share five percent (5%), meaning that, for example, if the Plan Sponsor has committed to invest twenty million dollars ($20,000,000) in a particular Qualified Investment with a 2004 Deemed Investment Date, one million dollars ($1,000,000) in Available Contribution Credits should be deemed to be co-invested by the Plan in that Qualified Investment. Notwithstanding the preceding, the level at which the Plan may participate with the Plan Sponsor in any Qualified Investment may not exceed the Qualified Investment Dollar Limit in effect as of the Deemed Investment Date for that Qualified Investment. (c) CARRYFORWARDS. If the Available Contribution Credits with respect to a particular Qualified Investment are greater than either (i) the Allocable Share as of the Deemed Investment Date for that Qualified Investment or (ii) the Qualified Investment Dollar Limit then in effect, the amount by which such Available Contribution Credits exceed the lesser of (i) or (ii) shall be carried forward for deemed investment in the next available Qualified Investment, and, if any excess still remains, it shall be carried forward for deemed investment in the next available Qualified Investment, and so on. Subject to Section 5.5, if any such carryforwards, together with the Aggregate Contribution Credits for a given Plan Year (plus any interest earned thereon, pursuant to subsection (a)), exceed the amount deemed invested in Qualified Investments during that Plan Year 9 (such as, for example, because of the absence or insufficiency of Qualified Investments with respect to that Plan Year), such total shall be carried forward for deemed investment in Qualifying Investments made during a future Plan Year (regardless of whether the Participant makes a Compensation Deferral election with respect to that future Plan Year), in the order in which those Qualified Investments become available. (d) ADJUSTMENTS TO ALLOCABLE SHARE. If the Qualified Investment Dollar Limit in effect as of the Deemed Investment Date for a particular Qualified Investment is less than the Allocable Share then in effect, the Allocable Share shall be reduced down to the Qualified Investment Dollar Limit. If the Available Contribution Credits with respect to that Qualified Investment are less than the Allocable Share as so reduced, the Allocable Share shall be further reduced, down to the Available Contribution Credits. For example, if the Board establishes as the Allocable Share with respect to a particular Plan Year's Qualified Investments five percent (5%), then the Allocable Share with respect to a Qualified Investment falling within that Plan Year to which the Plan Sponsor has a twenty million dollar ($20,000,000) investment commitment is one million dollars ($1,000,000) (that is, five percent (5%) of twenty million dollars ($20,000,000)). However, if the Qualified Investment Dollar Limit is then seven hundred fifty thousand dollars ($750,000), the Allocable Share will be reduced to seven hundred fifty thousand dollars ($750,000). Further, if the Available Contribution Credits are then only five hundred thousand dollars ($500,000) (for example, because all but five hundred thousand dollars ($500,000) of that Plan Year's Aggregate Contribution Credits, and all prior Plan Years' Aggregate Contribution Credits, have already been deemed invested in other Qualified Investments or have been returned to or relinquished by Participants pursuant to Section 5.5), the Allocable Share will be further reduced to five hundred thousand dollars ($500,000), with the result that the Plan (i.e., Participants' Accounts in the aggregate) will be deemed to invest five hundred thousand dollars ($500,000) in the subject Qualified Investment. 4.2 VALUATION OF QUALIFIED INVESTMENTS. As of the appropriate Valuation Date, the value of the deemed investment of all Plan Accounts in each Qualified Investment shall be determined as follows: (a) For each hotel Qualified Investment, such value shall be the product of (1) multiplied by (2), where: (1) equals (a) the trailing twelve (12) months net operating income of the Qualified Investment as of the relevant Valuation Date divided by the projected year five (5) capitalization rate established by the Plan Sponsor with respect to the Qualified Investment (which rate shall be set forth in the Investment Committee Memorandum for the Qualified Investment, or substantially similar document, approved by the Investment Committee), minus (b) two percent (2%) of (a) (representing assumed selling costs) plus the debt and preferred equity of the Qualified Investment; and (2) equals a fraction, the numerator of which is the Adjusted Allocable Share of the Qualified Investment as of the relevant Valuation Date and the denominator of which is the aggregate investments made by all parties in the Qualified Investment. 10 The preceding notwithstanding, (i) in the case of the complete disposition of a hotel Qualified Investment by the Plan Sponsor, such Qualified Investment shall instead be valued by reference to the actual net proceeds of the disposition, and (ii) in any event in which the Plan Sponsor determines in its sole and absolute discretion that the above formula does not reflect fair market value of any Qualified Investment as of any Valuation Date, the Plan Sponsor shall have the right to commission an independent valuation firm selected and paid by the Plan Sponsor to value that Qualified Investment, and to utilize such valuation in lieu of the above formula for making distributions in respect of such Valuation Date. (b) Each non-hotel Qualified Investment shall be valued solely by reference to a valuation prepared by an independent valuation firm selected and paid by the Plan Sponsor. 4.3 ALLOCATION OF DEEMED INVESTMENTS AND DEEMED EARNINGS OR LOSSES AMONG PLAN ACCOUNTS. Subject to Section 5.3, as of each Valuation Date, the portion of each Participant's Compensation Deferral Account that has not yet been deemed to be invested in a Qualified Investment (except for the portion, if any, representing the Participant's Next Year's Bonus Deferrals that have not yet been repaid as provided in Section 1.25), and the portion (if any) of each Participant's vested Account that has ceased to be deemed invested in a Qualified Investment but is not yet distributable hereunder, shall be credited with deemed interest in accordance with Section 4.1(a). As of each Valuation Date, the portion of each Participant's Account that is deemed to be invested in one or more Qualified Investments will be debited or credited to reflect the value of the Participant's portion of the aggregate deemed investments under the Plan in such Qualified Investment(s). The portion of each Participant's Plan Account that is deemed to be invested in a particular Qualified Investment shall be determined by multiplying the Allocable Share with respect to that Qualified Investment (as reduced pursuant to Section 4.1(d)) by a fraction, the numerator of which is that Participant's Available Contribution Credits as of the Deemed Investment Date for that Qualified Investment and the denominator of which is all Participants' Available Contribution Credits as of such Deemed Investment Date. As of the relevant Valuation Date, the value of each Participant's Plan Account attributable to a particular Qualified Investment shall be determined by multiplying the aggregate value of the Plan's investment in such Qualified Investment as determined pursuant to Section 4.2 by a fraction, the numerator of which is the portion of such Participants' Account that is deemed to be invested in that Qualified Investment (determined pursuant to the previous sentence) and the denominator of which is the Adjusted Allocable Share with respect to that Qualified Investment as of such Valuation Date. Distributions under the Plan shall be valued as of the Valuation Date occurring on or next following the event giving rise to the distribution. As provided in Section 1.37, the Valuation Date in the case of a distribution resulting from a complete disposition of a Qualified Property shall be the date of such disposition. 4.4 SEPARATE BOOKKEEPING ACCOUNTS. A separate bookkeeping account under the Plan shall be established and maintained by the Employer to reflect the Account for each 11 Participant, with bookkeeping sub-accounts to show separately the Participant's Compensation Deferral Account and the Participant's Employer Contribution Credit Account. Each sub-account will separately account for the credits and debits described in Article III. For all purposes under the Plan, Compensation Deferrals and Employer Contribution Credits shall be deemed invested in each Qualified Investment in the ratio of Compensation Deferrals to Employer Contribution Credits for the Plan Year in which falls the Deemed Investment Date for that Qualified Investment (e.g., in a one (1) to one and one-half (1 1/2) ratio with respect to the Plan's initial Plan Year). 4.5 PAYMENT OF EXPENSES. Expenses associated with the administration or operation of the Plan shall be paid by the Employer. For these purposes, Transactional Expenses will not be considered to be an expense of Plan administration or operation, but rather will be considered to be among the costs of the Qualified Investments. ARTICLE V ENTITLEMENT TO BENEFITS 5.1 NON-LIQUIDATING DISTRIBUTION FROM A QUALIFIED INVESTMENT. Upon a non-liquidating distribution (for example, a dividend) from a Qualified Investment to the Plan Sponsor occurring prior to an entitlement event described in Section 5.2 or 5.3, a Participant whose Account is deemed invested in that Qualified Investment shall have his or her Account credited with its allocable portion of such non-liquidating distribution. Such portion shall be determined in accordance with the methodology set forth in Section 4.3, and shall result in a cash distribution to the Participant in such amount in accordance with Article VI, regardless of the Participant's Years of Vesting as of the date of such distribution, whereupon the Participant's Account shall be debited in the amount of such distribution. 5.2 COMPLETE DISPOSITION BY PLAN SPONSOR OF A QUALIFIED INVESTMENT. Upon a disposition by the Plan Sponsor of its entire interest in a Qualified Investment, a Participant whose Account is then deemed invested in that Qualified Investment (i.e., either because he or she remains an employee of the Employer as of such disposition, or because, pursuant to Section 5.3(b), he or she did not experience an entitlement event upon his or her termination of employment with the Employer) shall become entitled to receive the vested portion of his or her Account deemed invested in that Qualified Investment. Such portion shall be determined and valued in accordance with the methodology set forth in Section 4.3, and shall be distributed in accordance with Article VI. The Participant shall also become entitled to receive the lesser of (i) the unvested portion of his or her Compensation Deferral Account deemed invested in that Qualified Investment, such portion to be determined and valued in accordance with the methodology set forth in Section 4.3, or (ii) a return of his or her Compensation Deferrals attributable to the unvested portion of his or her Compensation Deferral Account deemed invested in that Qualified Investment, with no deemed gains, earnings, interest or losses credited or debited thereto; such amount to be distributed in accordance with Article VI. 5.3 TERMINATION OF EMPLOYMENT. (a) Involuntary Termination. Upon a Participant's termination of employment with the Employer by reason of death, retirement (i.e., termination upon or after reaching age sixty-five (65)), disability (i.e., qualifying for long term disability benefits under the Employer's long-term disability plan), or involuntary termination by the Employer other than for cause (as reasonably determined by the Plan Sponsor), the Participant (or his or her Beneficiary) shall become entitled to receive the vested portion of his or her Account, such portion to be determined and valued in accordance with the methodology set forth in Section 4.3, and to be distributed in accordance with Article VI. The Participant shall also become entitled to receive the lesser of (i) the unvested portion of his or her Compensation Deferral Account, such portion to be determined and valued in accordance with the methodology set forth in Section 4.3, or (ii) a return of his or her Compensation Deferrals attributable to the unvested portion of his or her Compensation Deferral Account, with no deemed gains, earnings, interest or losses credited or debited thereto; such amount to be distributed in accordance with Article VI. (b) Other Terminations. Upon a Participant's termination of employment with the Employer for any reason other than those described in Section 5.3(a), the Plan Sponsor, in its discretion, may determine that the Participant shall nevertheless become entitled to receive the vested portion of his or her Account in accordance with Section 5.3(a) (i.e., as if the Participant's employment was involuntarily terminated without cause), or it may determine that the Participant shall not become entitled to receive the vested portion of his or her Account until the complete disposition(s) by the Plan Sponsor of the Qualified Investment(s) in which the Participant's Account is deemed invested as of his or her termination of employment, in accordance with Section 5.2. The Plan Sponsor shall make this determination on a Participant-by-Participant basis 12 5.4 VESTING. Subject to Section 5.1 and Section 5.5, with respect to amounts credited to a Participant's Account, such amounts shall vest with respect to each Qualified Investment in which the Participant's Account is deemed invested according to the following schedule:
YEARS OF VESTING VESTED PERCENTAGE ---------------- ----------------- Less than 1 0% 1 but less than 2 20% 2 but less than 3 40% 3 but less than 4 60% 4 but less than 5 80% 5 or more 100%
Notwithstanding the foregoing, upon complete disposition by the Plan Sponsor of a Qualified Investment, a Participant shall become one hundred percent (100%) vested in that portion of his or her Account deemed invested in that Qualified Investment. If a Participant terminates employment for any reason prior to such disposition he or she shall become vested in his or her Account, if at all, under the vesting schedule set forth above. 5.5 RETURN OF COMPENSATION DEFERRALS AND RELINQUISHMENT OF CORRESPONDING EMPLOYER CONTRIBUTIONS. Notwithstanding anything in Section 5.4 or elsewhere in the Plan that may suggest otherwise: (a) RETURN OF CARRYFORWARDS. If any portion of the Aggregate Contribution Credits credited to a Participant's Account with respect to a particular Plan Year is carried forward to the following Plan Year pursuant to Section 4.1 but is not deemed invested or committed to deemed investment (as reasonably determined by the Plan Sponsor) in any Qualified Investment by the end of that following Plan Year, then, as soon as practicable after the end of that following Plan Year, the portion of such unused carryover amount that represents Compensation Deferrals (and interest deemed credited thereon) shall be distributed to the Participant, and the portion representing Employer Contribution Credits shall be relinquished by, and shall no longer be available to, the Participant. (b) RETURN OF NEXT YEAR'S BONUS DEFERRALS. With respect to any Participant who has made a Next Year's Bonus Deferral election with respect to a Plan Year and whose employment with the Employer is terminated for any reason prior to the date on which the following Plan Year's Regular Bonus would have been payable (or prior to the Regular Bonus payment date for the Plan Year(s) after that, if the immediately following Plan Year's Regular Bonus is insufficient to "repay" the Next Year's Bonus Deferral "advance"), such deferral election, shall, upon such termination of 13 employment, become null and void to the extent the "advance" has not yet been repaid from Regular Bonus(es), and any Employer Contribution Credits representing matching contributions thereon shall be relinquished by, and shall no longer be available to, the Participant. Such amounts shall be charged against, and shall reduce, the Participant's Account. Further, if such termination of employment occurs after any portion of the Participant's Next Year's Bonus Deferral which has not yet been repaid from Regular Bonus(es) has been deemed invested in one or more Qualified Investments and has become vested as provided in Section 5.4, then, in addition, interest on such portion also shall be charged against, and shall reduce, the Participant's Plan Account (such interest to be calculated from the date(s) of vesting through the date of the Participant's termination of employment, using an interest rate that shall be established by the Plan Sponsor with respect to each Plan Year by the date on which Participants make their Compensation Deferral elections for that Plan Year). As a result of this charging of certain Participants' Accounts by their Next Year's Bonus Deferrals and certain other items, as described in this Section 5.5(b), each such Participant's interest in each Qualified Investment in which his or her Next Year's Bonus Deferral has been deemed to be invested shall be reduced using the allocation methodology set forth in Section 4.3, and, if this still does not adequately reduce the Participant's Account as provided herein, the Employer shall reduce the Participant's interests to the extent of such shortfall in any other Qualified Investment in which the Participant has an interest, in such reasonable manner as the Employer shall determine. ARTICLE VI DISTRIBUTION OF BENEFITS 6.1 AMOUNT AND METHOD OF PAYMENT. A Participant (or his or her Beneficiary) shall become entitled to receive, on or about the Valuation Date applicable to the Participant's entitlement event as provided in Article V, a distribution in an aggregate amount equal to the value of the Participant's entitlement as provided in the applicable provision of Article V. Any payment due hereunder will be paid by the Plan Sponsor from its general assets or from the Trust, if there is one. Payments under the Plan shall be made in cash. Except as provided immediately below or in Section 6.3, upon the death of a Participant after payments hereunder have begun but before he or she has received all payments to which he or she is entitled under the Plan, the remaining benefit payments shall be paid to the person or persons designated in accordance with Section 7.1, in the manner in which such benefits were payable to the Participant, unless the Plan Sponsor elects a more rapid form of distribution. 6.2 TERMINATION BENEFIT. (a) ORDINARY DISTRIBUTIONS. In the case of distributions to a Participant (or his or her Beneficiary) by virtue of an entitlement pursuant to Section 5.3(a), an aggregate amount equal to the value of the Participant's entitlement shall be paid to the Participant (or his or her Beneficiary), as provided by Section 6.1, in a lump sum. 14 (b) CERTAIN LARGE ACCOUNT DISTRIBUTIONS. Notwithstanding subsection (a) above, if the amount to which a Participant (or his or her Beneficiary) becomes entitled pursuant to Section 5.3(a) exceeds fifty thousand dollars ($50,000) (or such other dollar amount as may be established by the Plan Sponsor), and if the aggregate amounts to which all similarly situated Participants (i.e., those who terminate employment immediately prior to the same Valuation Date as applies to that Participant) or their Beneficiaries become entitled pursuant to Section 5.3 exceed twenty five percent (25%) of the value of all Participants' Accounts as of such Valuation Date, then the Plan Sponsor may require that Participant (or his or her Beneficiary) to be paid the amount to which he or she becomes entitled pursuant to Section 5.3(a) in up to two (2) substantially equal annual installments notwithstanding that the Participant had elected a lump sum distribution. However, this requirement to receive payments in installments shall not apply with respect to the Account of any Participant who has been involuntarily terminated from employment by the Employer other than for cause (as reasonably determined by the Plan Sponsor). As provided in Section 4.1(a), if a Participant is required hereunder to receive payment in two (2) installments, his or her Account shall, after payment of the first (1st) installment, no longer be deemed to be invested in any Qualified Investment, but rather shall be deemed invested in an interest-bearing investment. 6.3 OTHER BENEFITS. In the case of distributions to a Participant (or his or her Beneficiary) by virtue of an entitlement pursuant to Section 5.1 or Section 5.2, an aggregate amount equal to the value of the entitlement shall be paid to the Participant (or his or her Beneficiary), as provided by Section 6.1, in a lump sum. ARTICLE VII BENEFICIARIES; PARTICIPANT DATA 7.1 DESIGNATION OF BENEFICIARIES. Each Participant from time to time may designate any person or persons (who may be named contingently or successively) to receive such benefits as may be payable under the Plan upon or after the Participant's death, and such designation may be changed from time to time by the Participant by filing a new designation. Each designation will revoke all prior designations by the same Participant, shall be in the form prescribed by the 15 Employer, and will be effective only when filed in writing with the Employer during the Participant's lifetime. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Employer shall pay any such benefit payment to the Participant's spouse, if then living, but otherwise to the Participant's estate. 7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES. Any communication, statement or notice addressed to a Participant or to a Beneficiary at his or her last post office address as shown on the Employer's records, shall be binding on the Participant or Beneficiary for all purposes of the Plan. The Employer shall not be obliged to search for any Participant or Beneficiary beyond the sending of a registered letter to such last known address. If the Employer notifies any Participant or Beneficiary that he or she is entitled to an amount under the Plan and the Participant or Beneficiary fails to claim such amount or make his or her location known to the Employer within three (3) years thereafter, then, except as otherwise required by law, if the location of one or more of the next of kin of the Participant is known to the Employer, the Employer may direct distribution of such amount to any one or more or all of such next of kin, and in such proportions as the Employer determines. If the location of none of the foregoing persons can be determined, the Employer shall have the right to direct that the amount payable shall be deemed to be a forfeiture and paid to the Plan Sponsor, except that the dollar amount of the forfeiture, unadjusted for deemed gains or losses in the interim, shall be paid by the Plan Sponsor if a claim for the benefit subsequently is made by the Participant or the Beneficiary to whom it was payable. If a benefit payable to an unlocated Participant or Beneficiary is subject to escheat pursuant to applicable state law, the Plan Sponsor shall not be liable to any person for any payment made in accordance with such law. ARTICLE VIII ADMINISTRATION AND RECORDKEEPING 8.1 ADMINISTRATIVE AND RECORDKEEPING AUTHORITY. Except as otherwise specifically provided herein, the Employer shall have the sole responsibility for and the sole control of the operation, administration and recordkeeping of the Plan, and shall have the power and authority to take all action and to make all decisions and interpretations which may be necessary or appropriate in order to administer and operate the Plan, including, without limiting the generality of the foregoing, the power, duty and responsibility to: (a) Resolve and determine all disputes or questions arising under the Plan, including the power to determine the rights of Participants and Beneficiaries, and their respective benefits, and to remedy any ambiguities, inconsistencies or omissions, in the Plan. (b) Adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the Plan and as are consistent with the Plan. 16 (c) Implement the Plan in accordance with its terms and the rules and regulations adopted as above. (d) Subject to Sections 9.1 and 10.1, make determinations concerning the crediting and distribution of Participants' benefits. 8.2 UNIFORMITY OF DISCRETIONARY ACTS. Whenever in the administration or operation of the Plan discretionary actions by the Employer are required or permitted, such action shall be consistently and uniformly applied to all persons similarly situated, and no such action shall be taken which shall discriminate in favor of any particular person or group of persons. 8.3 LITIGATION. In any action or judicial proceeding affecting the Plan, it shall be necessary to join as a party only the Plan Sponsor. Except as may be otherwise required by law, no Participant or Beneficiary shall be entitled to any notice or service of process, and any final judgment entered in such action shall be binding on all persons interested in, or claiming under, the Plan. 8.4 CLAIMS PROCEDURE. This Section 8.4 is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at section 2560.503-1 of the Department of Labor Regulations. If any provision of this Section 8.4 conflicts with the requirements of those regulations, the requirements of those regulations will prevail. (a) INITIAL CLAIM. A Participant or Beneficiary (hereinafter referred to as a "Claimant") who believes he or she is entitled to any Plan benefit under this Plan may file a claim with the Employer. The Employer shall review the claim itself or appoint an individual or an entity to review the claim. The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the Claimant receives written notice from the Employer or appointee of the Employer prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed. If the Employer denies a claim, it must provide to the Claimant, in writing or by electronic communication: (i) The specific reasons for the denial; (ii) A reference to the Plan provision upon which the denial is based; (iii) A description of any additional information or material that the Claimant must provide in order to perfect the claim; (iv) An explanation of why such additional material or information is necessary; 17 (v) Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and (vi) A statement of the Claimant's right to bring a civil action under ERISA section 502(a) following a denial on review of the initial denial. (b) REVIEW PROCEDURES. A request for review of a denied claim must be made in writing to the Employer within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Employer's receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision. The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Employer. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination. Upon completion of its review of an adverse initial claim determination, the Employer will give the Claimant, in writing or by electronic notification, a notice containing: (i) its decision; (ii) the specific reasons for the decision; (iii) the relevant Plan provisions on which its decision is based; (iv) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Plan's files which is relevant to the Claimant's claim for benefits; (v) a statement describing the Claimant's right to bring an action for judicial review under ERISA section 502(a); and (vi) if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request. (c) CALCULATION OF TIME PERIODS. For purposes of the time periods specified in this Section, the period of time during which a benefit determination is required to be made begins at 18 the time a claim is filed in accordance with the Plan procedures without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant's failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds. (d) FAILURE OF PLAN TO FOLLOW PROCEDURES. If the Plan fails to follow the claims procedures required by this Section, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under ERISA section 502(a) on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. ARTICLE IX AMENDMENT 9.1 RIGHT TO AMEND. The Plan Sponsor, by action of the Board, shall have the right to amend the Plan at any time and with respect to any provisions hereof, and all parties hereto or claiming any interest hereunder shall be bound by such amendment; provided, however, that no such amendment shall deprive any Participant or Beneficiary of a right accrued hereunder prior to the date of the amendment. 9.2 AMENDMENT TO ENSURE PROPER CHARACTERIZATION OF THE PLAN. Notwithstanding the provisions of Section 9.1, the Plan may be amended at any time, retroactively if required, if found necessary, in the opinion of the Plan Sponsor, in order to ensure that the Plan is characterized as a non-tax-qualified "top hat" plan of deferred compensation maintained for a select group of management or highly compensated employees, as described under ERISA sections 201(2), 301(a)(3) and 401(a)(1) and to conform the Plan and the Trust, if there is one, to the provisions and requirements of any applicable law (including ERISA and the Code). 9.3 CHANGES IN LAW AFFECTING TAXABILITY. This Section shall become operative upon the enactment of any change in applicable statutory law or the promulgation by the Internal Revenue Service of a final regulation or other pronouncement having the force of law, which statutory law, as changed, or final regulation or pronouncement, as promulgated, would cause any Participant to include in his or her federal gross income amounts accrued by the Participant under the Plan on a date (an "Early Taxation Event") prior to the date on which such amounts are made available to him or her hereunder. (a) AFFECTED RIGHT OR FEATURE NULLIFIED. Notwithstanding any other Section of this Plan to the contrary (but subject to subsection (b), below), as of an Early Taxation Event, the feature or features of this Plan that would cause the Early Taxation Event shall be null and void, to the extent, and only to the extent, required to prevent the Participant from being required to include in his or her federal gross income amounts accrued by the Participant under the Plan prior to the date on which such amounts are made available to him or her hereunder. If only a portion of a Participant's Account is impacted by the change in the law, then only such portion shall be subject to this Section, with the remainder of the Account not so affected being subject to such rights and features as if the 19 law were not changed. If the law only impacts Participants who have a certain status with respect to the Employer, then only such Participants shall be subject to this Section. (b) TAX DISTRIBUTION. If an Early Taxation Event is earlier than the date on which the statute, regulation or pronouncement giving rise to the Early Taxation Event is enacted or promulgated, as applicable (i.e., if the change in the law is retroactive), the Plan Sponsor shall have the right to distribute to each Participant, as soon as practicable following such date of enactment or promulgation, any amount up to the amounts that became taxable on the Early Taxation Event. ARTICLE X TERMINATION 10.1 PLAN SPONSOR'S RIGHT TO TERMINATE PLAN. The Plan Sponsor reserves the right, at any time, to terminate the Plan and/or its obligation to make further credits to Plan Accounts by action of the Board; provided, however, that no such termination shall deprive any Participant or Beneficiary of a right accrued hereunder prior to the date of termination and provided that, upon termination, the full amount of each Participant's vested Plan Account(s) shall become immediately distributable to him or her. 10.2 AUTOMATIC TERMINATION OF PLAN. The Plan shall terminate automatically upon the dissolution of the Plan Sponsor or upon the Plan Sponsor's merger into or consolidation with any other corporation or business organization which does not specifically adopt and agree to continue the Plan; provided, however, that no such termination shall deprive any Participant or Beneficiary of a right accrued hereunder prior to the date of termination and provided that, upon termination, the full amount of each Participant's vested Plan Account shall become immediately distributable to him or her. 10.3 SUCCESSOR TO PLAN SPONSOR. Any corporation or other business organization which is a successor to the Plan Sponsor by reason of a consolidation, merger or purchase of substantially all of the assets of the Plan Sponsor shall have the right to become a party to the Plan by adopting the same by resolution of the entity's board of directors or other appropriate governing body. If, within thirty (30) days from the effective date of such consolidation, merger or sale of assets, such new entity does not become a party hereto, as above provided, the Plan shall be terminated automatically, and the provisions of the foregoing Sections shall become operative. ARTICLE XI MISCELLANEOUS 11.1 LIMITATIONS ON LIABILITY OF PLAN SPONSOR AND EMPLOYER. Neither the establishment of the Plan nor any modification hereof, nor the creation of any Account under the Plan, nor the payment of any benefits under the Plan, shall be construed as giving to any Participant or any other person any legal or equitable right against the Plan Sponsor or the Employer or any officer or employee thereof, except as provided by law or by any Plan provision. The Plan Sponsor and Employer do not in any way guarantee any Participant's Account from loss or depreciation, whether caused by poor investment performance of a Qualified Investment or the inability to realize 20 upon a Qualified Investment due to an insolvency affecting a Qualified Investment vehicle or any other reason. In no event shall the Plan Sponsor or the Employer, or any successor, employee, officer, director or stockholder of the Plan Sponsor or the Employer, be liable to any person on account of any claim arising by reason of the provisions of the Plan or of any instrument or instruments implementing its provisions, or for the failure of any Participant, Beneficiary or other person to be entitled to any particular tax consequences with respect to the Plan, or any credit or distribution hereunder. 11.2 CONSTRUCTION. If any provision of the Plan is held to be illegal or void, such illegality or invalidity shall not affect the remaining provisions of the Plan, but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provisions had never been inserted herein. For all purposes of the Plan, where the context permits, the singular shall include the plural, and the plural shall include the singular. Headings of Articles and Sections herein are inserted only for convenience of reference and are not to be considered in the construction of the Plan. The laws of Delaware shall govern, control and determine all questions of law arising with respect to the Plan and the interpretation and validity of its respective provisions, except where those laws are preempted by the laws of the United States. Participation under the Plan will not give a Participant the right to be retained in the service of the Employer nor any right or claim to any benefit under the Plan unless such right or claim has specifically accrued hereunder. The Plan is intended to be and at all times shall be interpreted and administered so as to qualify as an unfunded plan of deferred compensation, and no provision of this Plan shall be interpreted so as to give any individual any right in any assets of the Plan Sponsor which right is greater than the rights of any general unsecured creditor of the Plan Sponsor. 11.3 SPENDTHRIFT PROVISION. No amount payable to a Participant or any Beneficiary under the Plan will, except as otherwise specifically provided by law, be subject in any manner to anticipation, alienation, attachment, garnishment, sale, transfer, assignment (either at law or in equity), levy, execution, pledge, encumbrance, charge or any other legal or equitable process, and any attempt to do so will be void; nor will any benefit hereunder be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled thereto. Further, (a) the withholding of taxes from Plan benefit payments, (b) the recovery under the Plan of overpayments of benefits previously made to a Participant or any Beneficiary, (c) if applicable, the transfer of benefit rights from the Plan to another plan, or (d) the direct deposit of Plan benefit payments to an account in a banking institution (if not actually part of an arrangement constituting an assignment or alienation) shall not be construed as an assignment or alienation. In the event that a Participant's or any Beneficiary's benefits hereunder are garnished or attached by order of any court, the Plan Sponsor may bring an action for a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid under the Plan. During the pendency of said action, any benefits that become payable shall be held as credits to a Participant's or Beneficiary's Account or, if the Plan Sponsor prefers, paid into the court as they become payable, to be distributed by the court to the recipient as it deems proper at the close of said action. 21 ARTICLE XII TRUST 12.1 ESTABLISHMENT OF TRUST. The Plan Sponsor may, but need not, establish in contemplation of a Change in Control a Trust with a qualified institution, to serve as a vehicle through which to satisfy the Plan Sponsor's benefit obligations under the Plan. It is intended that such Trust, which may not provide for contributions thereto (except for a minimal contribution upon establishment of the Trust) unless and until a Change in Control becomes imminent, would be treated as a "grantor" trust under the Code, and therefore would neither cause any Participant to realize current income on amounts contributed thereto nor cause the Plan to be "funded", within the meaning of ERISA. IN WITNESS WHEREOF, the Plan Sponsor has caused this Plan to be executed and its seal to be affixed hereto, effective as of the 1st day of January, 2004. ATTEST/WITNESS: INTERSTATE HOTELS & RESORTS, INC. _________________________________ By: _______________________________(SEAL) Print Name:______________________ Print Name: _____________________________ Date: ___________________________________ 22 EX-5.1 5 y94388exv5w1.txt OPINION OF PAUL, WEISS, RIFKIND, ET. AL. EXHIBIT 5.1 [Letterhead of Paul, Weiss, Rifkind, Wharton & Garrison LLP] March 2, 2004 Interstate Hotels & Resorts, Inc. 4501 N. Fairfax Drive Arlington, VA 22203 Ladies and Gentlemen: In connection with the Registration Statement on Form S-8 (the "Registration Statement") filed by Interstate Hotels & Resorts, Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules and regulations promulgated thereunder (the "Rules"), we have been requested by the Company to render this opinion as to the legality of up to $8,500,000 of deferred compensation obligations (the "Deferred Compensation Obligations") under the Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan (the "Compensation Plan") and up to $15,000,000 of obligations (the "Plan Obligations" and, together with the "Deferred Compensation Obligations," the "Obligations") under the IHR Executive Plan I (the "Executive Plan"). In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of (1) the Registration Statement, (2) the Certificate of Incorporation and the By-laws of the Company, each as amended to date, (3) the Compensation Plan, (4) the plan documents relating to the Executive Plan, and (5) all such corporate records of the Company and all such other documents as we have considered necessary in order to form a basis for the opinion hereinafter expressed. In our examination of documents, we have assumed, without independent investigation, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, photostatic, reproduced or conformed copies of valid existing agreements or other documents, the authenticity of all such latter documents and the legal capacity of all individuals who have executed any of the aforesaid documents. As to certain matters of fact, we have relied on representations, statements or certificates of officers of the Company and of public authorities. Based on the foregoing, and subject to the stated assumptions, exceptions and qualifications in this letter, we are of the opinion that the Obligations, when established pursuant to the terms of the Compensation Plan and the Executive Plan, as the case may be, will be legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization, moratorium and other similar laws affecting creditors' rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). Our opinion expressed above is limited to the General Corporation Law of the State of Delaware and the judicial decisions interpreting these laws. Our opinion is also rendered only with respect to the laws and the rules, regulations and orders thereunder, which are currently in effect. Please be advised that no member of this firm is admitted to practice in the State of Delaware. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not hereby agree that we come within the category of persons whose consent is required by the Act or the Rules. Very truly yours, /s/ Paul, Weiss, Rifkind, Wharton & Garrison LLP EX-5.2 6 y94388exv5w2.txt OPINION OF SMITH & DOWNEY, P.A. EXHIBIT 5.2 [Letterhead of Smith & Downey, P.A.] March 2, 2004 Interstate Hotels & Resorts, Inc. 4501 N. Fairfax Drive Arlington, VA 22203 Re: Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan and IHR Executive Plan -- Registration Statement on Form S-8 Ladies and Gentlemen: We have acted as your counsel in connection with the preparation of the written documents constituting the Interstate Hotels & Resorts, Inc. Supplemental Deferred Compensation Plan and the IHR Executive Plan (collectively, the "Plans"). This is to confirm our opinion that the provisions of such written documents comply with the requirements of the Employee Retirement Income Security Act of 1974 pertaining to such provisions. We hereby consent to the filing of this opinion as an exhibit to the above-referenced Registration Statement. Very truly yours, /s/ Smith & Downey, P.A. EX-23.1 7 y94388exv23w1.txt CONSENT OF KPMG LLP EXHIBIT 23.1 Independent Auditors' Consent The Board of Directors Interstate Hotels & Resorts, Inc.: We consent to the use of our report dated February 11, 2003, with respect to the consolidated balance sheet of Interstate Hotels & Resorts, Inc. and subsidiaries (formerly Interstate Hotels Corporation) as of December 31, 2002 and the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for the year ended December 31, 2002, incorporated herein by reference in the registration statement on Form S-8. /s/ KPMG LLP McLean, Virginia March 2, 2004 EX-23.2 8 y94388exv23w2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated February 13, 2002, except for the fifth paragraph of Note 4, as to which the date is February 21, 2002 relating to the consolidated financial statements as of December 31, 2001 and for each of the two years in the period ended December 31, 2001, which appears in the Annual Report to Shareholders, which is incorporated by reference in Interstate Hotels and Resorts, Inc.'s Annual Report on Form 10-K/A for the year ended December 31, 2002. /s/ PriceWaterhouseCoopers LLP Pittsburgh, PA March 3, 2004 -----END PRIVACY-ENHANCED MESSAGE-----