Starwood 2004 Annual Report Download - page 55

lessor), plus (ii) $300 for each hour that the aircraft is in use. The lease was revised eÅective January 1, 2004.
Under the revised terms, the monthly lease payment is equal to (i) 1% of the fair market value of the aircraft
as determined by an independent appraisal in February 2005, with the fair market value of the aircraft to be
determined annually, plus (ii) $300 for each hour that the aircraft is in use. The term of the new lease
agreement is for one year and it automatically renews for one-month terms unless either party terminates the
lease upon 90 days' written notice. The amount paid in 2004 in excess of the revised amount due
(approximately $658,000) will be refunded by Star Flight LLC upon execution of the amended lease.
Payments to Star Flight LLC were $1,724,000 (before the refunded amount disclosed above), $1,865,000 and
$2,052,000 in 2004, 2003 and 2002, respectively. Starwood Capital has used the GIII as well as the
Gulfstream IV Aircraft (""GIV'') operated by us. For use of the GIII, Star Flight LLC relieves us of lease
payments for the days the plane is used and reimburses us for costs of operating the aircraft. For use of the
GIV, Starwood Capital pays a charter rate that is at least equal to the amount we would have received from an
unaÇliated third party through our charter agent, net of commissions. Lease relief and reimbursed operating
costs were approximately $208,000, $52,000 and $161,000 for Ñscal 2004, 2003 and 2002, respectively.
Other
We on occasion made loans to employees, including executive oÇcers prior to August 23, 2002,
principally in connection with home purchases upon relocation. As of December 31, 2004, approximately
$5.6 million in loans to approximately 15 employees was outstanding of which approximately $4.4 million were
non-interest bearing home loans. Home loans are generally due Ñve years from the date of issuance or upon
termination of employment and are secured by a second mortgage on the employee's home. Executive oÇcers
receiving home loans in connection with relocation were Robert F. Cotter, President and Chief Operating
OÇcer, in June 2001 (original balance of $600,000), David K. Norton, Executive Vice President of Human
Resources, in July 2000 (original balance of $500,000), and Theodore W. Darnall, President, Real Estate
Group, in 1996 and 1998 (original balance of $750,000 ($150,000 bridge loan in 1996 and $600,000 home loan
in 1998), of which $600,000 was repaid in August 2003). As a result of the acquisition of ITT Corporation in
1998, restricted stock awarded to Messrs. Sternlicht and Darnall in 1996 vested at a price for tax purposes of
$53 per Share. This amount was taxable at ordinary income rates. By late 1998, the value of the stock had
fallen below the amount of income tax owed. In order to avoid a situation in which the executives could be
required to sell all of the Shares acquired by them to cover income taxes, in April 1999 we made interest-
bearing loans at 5.67% to Messrs. Sternlicht and Darnall of approximately $1,222,000 and $416,000
respectively, to cover the taxes payable. Mr. Darnall's loan was repaid in 2004. Accrued interest on
Mr. Sternlicht's loan at December 31, 2004 is approximately $396,000. The note and all associated
accumulated interest become due on their tenth anniversary.
Dina Diagonale held various positions with us from January 2001 through June 2004. In 2004,
Ms. Diagonale earned a total of $241,409, which includes (i) approximately $77,500 upon the exercise of
in-the-money options and restricted stock that vested or became exercisable in the ordinary course,
(ii) Ms. Diagonale's 2003 bonus which was paid in March 2004, and (iii) base compensation and severance.
In addition, Ms. Diagonale was awarded 2,500 options to purchase Company shares in 2004, which terminated
prior to vesting upon her ceasing to be employed by us. Subsequent to her departure from the Company,
Ms. Diagonale married Kenneth S. Siegel, Executive Vice President and General Counsel.
Item 14. Principal Accountant Fees and Services
The Audit Committee has adopted a policy requiring pre-approval by the committee of all services (audit
and non-audit) to be provided to us by our independent auditors. In accordance with that policy, the Audit
Committee has given its approval for the provision of audit services by Ernst & Young LLP for Ñscal 2004. All
other services must be speciÑcally pre-approved by the full Audit Committee or by a designated member of
the Audit Committee who has been delegated the authority to pre-approve the provision of services.
Fees paid by us to our independent auditors are set forth in the proxy statement under the heading ""Audit
Fees'' and are incorporated herein by reference. The auditors do not speciÑcally allocate any of the audit fees
for the audit of the Trust.
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