Starwood 2007 Annual Report Download - page 35

obligation to reimburse for personal use based upon the Company’s operating cost, subject to the credit
described above.
The Company also reimburses Named Executive Officers generally for travel expenses and other out-of-
pocket costs incurred with respect to attendance by their spouses at one meeting of the Board each year.
Retirement Benefits. The Company maintains a tax-qualified retirement savings plan pursuant to Code
section 401(k) for a broadly-defined group of eligible employees that includes the Company’s Named
Executive Officers. Eligible employees may contribute a portion of their eligible compensation to the plan on a
before-tax basis, subject to certain limitations prescribed by the Code. For 2007, the Company matched 100%
of the first 2% of eligible compensation and 50% of the next 2% of eligible compensation that an eligible
employee contributes. These matching contributions, as adjusted for related investment returns, become fully
vested upon the eligible employee’s completion of three years of service with the Company. Our Named
Executive Officers, in addition to certain other eligible employees, were permitted to make additional deferrals
of base pay and regular annual incentive awards under our nonqualified deferred compensation plan. This plan
is discussed in further detail under the heading Nonqualified Deferred Compensation on page 34.
2. Change of Control Arrangements
Following the consummation of the sale of 33 hotels to Host Hotels & Resorts and the related return of capital
to stockholders, the Board reviewed the change of control arrangements then in place with the Named Executive
Officers and decided to enter into new change of control agreements with certain Named Executive Officers. On
March 25, 2005, the Company adopted a policy proscribing certain terms of severance agreements triggered upon a
change in control of the Company. Pursuant to the policy, the Company is required to seek shareholder approval of
severance agreements with executive officers that provide Benefits (as defined in the policy) in excess of 2.99 times
base salary plus most recent bonus.
The Company also included change of control arrangements in Mr. Van Paasschen’s employment agreement.
These change of control arrangements are described in more detail beginning on page 35 under the heading entitled
Potential Payments Upon Termination or Change-of-Control. The Change of Control Severance Agreements are
intended to promote stability and continuity of senior management. The Company believes that the provision of
severance pay to these Named Executive Officers upon a change of control aligns their interests with those of
stockholders. By making severance pay available, the Company is able to mitigate executive concern over
employment termination in the event of a change of control that benefits stockholders. In addition, the acceleration
of equity compensation vesting in connection with a change of control provides these Named Executive Officers
with protection against equity forfeiture due to termination and ample incentive to achieve Company goals,
including facilitating a sale of the Company at the highest possible price per share, which would benefit both
stockholders and executives. In addition, the Company acknowledges that seeking a new senior position is a long
and time consuming process. Lastly, each severance agreement permits the executive to maintain certain benefits
for a period of two years following termination and to receive outplacement services. The aggregate effect of our
change of control provisions is intended to focus executives on maximizing value to stockholders. In addition,
should a change of control occur, benefits will be paid after a “double trigger” event as described in Potential
Payments Upon Termination or Change-in-Control. Benefit levels have been set to be competitive with peer
group practices.
3. Additional Severance Arrangements
On August 14, 2007, the Company entered into letter agreements with each of Messrs. Siegel and Ouimet. The
letter agreements provided for the acceleration of 50% of each of Mr. Siegel’s and Ouimet’s then unvested restricted
stock and options in the event his employment was terminated without cause or by the executive for good reason
within two years of the hiring of a new Chief Executive Officer. The purpose of the letter agreements was to support
retention, stability and continuity and succession planning and to provide assurance to key executives in a time of
uncertainty regarding the Company’s chief executive officer position.
In addition, the Company entered into a letter agreement with Mr. Prabhu clarifying that his severance
included the acceleration of 50% of unvested restricted stock and options in the event that his employment was
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