Starwood 2009 Annual Report Download - page 39

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. Prior to 2008, 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. Beginning in 2008, the Company matches 100% of the first 1% of eligible compen-
sation and 50% of the next 6% 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 40.
2. Change in Control Arrangements
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
stockholder approval of severance agreements with executive officers that provide Benefits (as defined in the
policy) in excess of 2.99 times base salary plus such officer’s most recent annual incentive award.
In 2006, the Board reviewed the change in control arrangements then in place with the Named Executive Officers
and decided to enter into new change in control agreements with the Named Executive Officers at that time, which
included Messrs. Prabhu and Siegel. In connection with the hiring of Mr. Turner and the promotion of Mr. Avril in
September 2008 to President, Hotel Group, the Company entered into change in control arrangements with them that
were similar to the arrangements in place for the other Named Executive Officers (other than the Chief Executive
Officer). Pursuant to the Company’s 2008 policy decision to cease paying tax gross-ups in change in control agreements,
the arrangements with Messrs. Turner and Avril, however, do not provide for a tax gross-up if the benefits payable
thereunder are subject to the excise tax under Section 280G of the Code. Instead, the benefits provided are reduced to the
point that it would be more advantageous to the executive to pay the excise tax rather than reduce benefits further. The
Company also included change in control arrangements in Mr. van Paasschen’s employment agreement.
These change in control arrangements are described in more detail beginning on page 41 under the heading
entitled Potential Payments Upon Termination or Change in Control. The change in 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 in control aligns their interests with those of
stockholders. By making severance pay available, the Company is able to mitigate executive concern over employ-
ment termination in the event of a change in control that benefits stockholders. In addition, the acceleration of equity
compensation vesting in connection with a change in 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 in control provisions is intended
to focus executives on maximizing value to stockholders. In addition, should a change in control occur, benefits will be
paid after a “double trigger” event as described in Potential Payments Upon Termination or Change in Control.The
Company believes benefit levels have been set to be competitive with peer group practices.
In connection with Section 409A of the Code (“Section 409A), in 2008 the Company amended the employ-
ment arrangements with each of the Named Executive Officers (including the Chief Executive Officer). These
amendments made several technical changes designed to make the employment arrangements with such officers
comply with Section 409A and the final regulations issued thereunder, and generally affect the timing, but not the
amount of compensation of such officers under specified circumstances.
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