Starwood 2012 Annual Report Download - page 56

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.-2013Proxy Statement50
EXECUTIVE COMPENSATION
at the highest possible price per share, which would benefi t both
stockholders and executives. In addition, we acknowledge that
seeking a new senior position is a long and time-consuming process.
Lastly, each severance agreement permits the executive to maintain
certain benefi ts 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,
benefi ts will be paid only after a “double trigger” event as described
in the section entitled Potential Payments Upon Termination or
Change in Control beginning on page 61 of this proxy statement .
We believe benefi t levels have been set to be competitive with peer
group practices.
Additional Severance Arrangements
In 2007, we entered into a letter agreement with Mr.Prabhu clarifying
that, pursuant to his employment agreement dated November13,
2003, his severance included the acceleration of 50% of unvested
stock options in the event that his employment was terminated without
cause by us or by him for good reason. The clarifi cation formally
documented Mr.Prabhu’s existing severance arrangements as part
of his employment with us. This additional severance arrangement
is described in more detail below in the section entitled Potential
Payments Upon Termination or Change in Control beginning
on page 61 of this proxy statement .
New 2013 Employment Agreement with
Mr.van Paasschen
We have reached agreement in principle with Mr. van Paasschen
regarding a new employment agreement, which new agreement will
supersede his prior agreement dated December 30, 2008. The new
employment agreement will have an initial term ending December
31, 2016, and then will renew on an annual basis unless either party
timely elects not to renew the agreement. The new employment
agreement will provide for Mr. van Paasschen having a base salary
of at least $1,250,000 and allow for continued participation in the
Executive Plan, with an annual bonus targeted at 200% of base
salary, and actual payments ranging from 0% to 400% of base salary
depending on performance against objectives set by the Board. In
addition, Mr. van Paasschen will continue to be eligible to participate
in the LTIP, and his annual LTIP awards will provide an opportunity
with an expected value that ranges from $5,500,000 to $9,500,000,
with a target of $7,500,000. Actual payout of performance-based
LTIP awards will depend on performance against objectives set by
the Board. The agreement also will provide for Mr. van Paasschen
to receive certain limited perquisites and personal benefi ts at a level
consistent with his prior agreement (such as the use of a driver and
car service for business purposes and a private aircraft for business
travel, with any permitted personal use being imputed as income
consistent with established practice, or as otherwise agreed), but
no longer will permit any tax gross-ups on such benefi ts.
Mr. van Paasschen will be entitled to receive termination payments
and benefi ts for various employment termination scenarios under
the agreement. If Mr. van Paasschen’s employment is terminated
by the Company without cause or by Mr. van Paasschen for good
reason, then Mr. van Paasschen will be entitled to: (i) a severance
payment equal to two times the sum of his base salary and target
bonus; (ii) a prorated portion of his annual bonus through the date
of termination (based on actual performance at the end of the
performance period); (iii) vesting of his stock options and restricted
stock grants only in accordance with the terms of the awards, with
performance-based LTIP awards vesting on a pro-rata basis, and
then paid at the usual time based on actual performance; and (iv)
certain health coverage and previously accrued benefi ts. If the
termination without cause or by Mr. van Paasschen for good reason
occurs within 24 months after a change in control, or prior to but
in contemplation of a change in control (including at the direction
of a buyer), then Mr. van Paasschen will be entitled to the benefi ts
described in the preceding sentence, except: (i) the prorated bonus
will be based on his target bonus, (ii) LTIP legacy awards outstanding
before January 1, 2013 will fully vest (with performance at maximum in
the case of uncompleted performance periods); (iii) later LTIP awards
will vest only in accordance with the terms of the awards; and (iv)
additional life, disability and accident coverage and outplacement
services will be provided; however, Mr. van Paasschen will no longer
be entitled to any excise tax gross-up under the agreement. If Mr.
van Paasschen’s employment is terminated because of death or
disability, then: (i) Mr. van Paasschen (or his estate) will be entitled
to certain previously accrued benefi ts and a prorated portion of his
target bonus through the date of termination, (ii) his unvested stock
options will fully vest, and (iii) his other LTIP awards will either fully
vest (if not conditioned on performance) or vest on a pro-rata basis
(if conditioned on performance), assuming the requisite service has
been performed under the related agreement. If Mr. van Paasschen’s
employment is terminated by the Company for cause or by Mr. van
Paasschen without good reason, or if his employment terminates as
a result of non-renewal of the agreement, then Mr. van Paasschen
will be entitled to certain previously accrued benefi ts, excluding any
earned but unpaid bonus for a completed prior year.
Under the terms of the new agreement, Mr. van Paasschen will
also be subject to customary restrictive covenants, including two-
year non-competition and non-solicitation provisions, consistent
with his prior agreement. We expect to provide more information
about the terms of Mr. van Paasschen’s compensation under the
new employment agreement in our proxy statement for the 2014
Annual Meeting of Stockholders.