Starwood 2010 Annual Report Download - page 36

Threshold in the relevant year, pro rata awards may be paid at the discretion of the Compensation Committee in
the event of death, disability, retirement or other termination of employment.
Once the EP Threshold is achieved, the maximum annual bonus amount specified in the Executive Plan
becomes available for each Named Executive Officer and the Compensation Committee may apply its
discretion to reduce such amount to determine the actual bonus amount for each individual. To determine the
actual bonus to be paid for a year under the Executive Plan, the Compensation Committee also establishes
specific annual Company financial and strategic/operational performance goals and a related target bonus
amount for each executive. These financial and strategic/operational goals are described below.
Additional Performance Criteria.
If the EP Threshold under the Executive Plan is met for a year, the Company’s performance in comparison
to the financial and strategic/operational goals for the year set by the Compensation Committee is then used to
determine a Named Executive Officer’s actual bonus, as follows:
Financial Goals.
The Company financial goals for Named Executive Officers under the Executive Plan consist of EBITDA
and earnings per share targets, with each criteria accounting for half of the financial goal portion of the annual
bonus. As the Compensation Committee generally sets target bonus award opportunities above the median
among the Company’s peer group, the Company financial and strategic/operational goals to achieve such
award levels are considered challenging but achievable, representing a superior level of performance.
Consistent with maintaining these high standards and subject to achieving the EP Threshold, the Compen-
sation Committee retains the ability to consider whether an adjustment of the financial goals for any year is
necessitated by exceptional circumstances, e.g., an unanticipated and material downturn in the business cycle
that triggers, in response, an increased focus by the Compensation Committee on the Company’s performance
relative to the industry. This ability is intended to be narrowly and infrequently used and, if applicable, the
basis for its use would be detailed in the Company’s proxy statement.
Performance against the financial goals determined 60% of Mr. van Paasschen’s total target annual bonus
opportunity and 50% of the total target opportunities for the other Named Executive Officers. Subject to
achieving the EP Threshold, actual bonuses paid to Named Executive Officers for financial performance may
range from 0% to 200% of the pre-determined target bonus for this category of performance, as determined by
the Compensation Committee. For Named Executive Officers, the Company financial performance portion is
based 50% on earnings per share and 50% on EBITDA of the Company.
As noted above, once the EP Threshold is achieved, the minimum and maximum annual bonus amount
specified in the Executive Plan becomes available for award. The maximum bonus payout for the applicable
Company financial performance metric is limited to 200% of target (i.e., the “Maximum”) and the Com-
pensation Committee may apply its discretion to reduce such amount to the actual bonus amount for each
Named Executive Officer. The table below sets forth for each metric the performance levels for 2010 which
would have resulted in 100% bonus pool payout (i.e., “Target”), the minimum performance level (i.e., the
“Minimum”) that would have resulted in a 20% bonus pool payout and the Maximum that would have resulted
in a 200% bonus pool payout. In addition, the table sets forth the approximate mid-points of payout between
the Minimum to Target and Target to Maximum and indicates the related required performance level:
Minimum
(20%)
Mid-point
(75%)
Target
(100%)
Mid-point
(150%)
Maximum
(200%)
Earnings per Share ....... $ 0.68 $ 0.80 $ 0.85 $ 0.96 $ 1.06
Company EBITDA ....... $640,000,000 $750,000,000 $800,000,000 $900,000,000 $1,000,000,000
For the 2010 performance period, EBITDA (which exceeded the EP Threshold) for purposes of
determining annual bonuses was $884,000,000, which reflects an adjusted EBITDA amount that is normalized
to exclude the potential impact of asset sales and/or foreign exchange swings. Actual results for earnings per
Share for purposes of determining annual bonuses were $1.26, which reflects earnings before special items.
The Compensation Committee, using the metrics described above, approved a maximum payout eligibility of
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