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Exhibit 10.1
Amended and Restated
EMPLOYMENT AGREEMENT
between
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
and
XXXXXXX X. XXXXXX
Amended and Restated Employment Agreement ("Agreement"), dated as of
April 15, 1998, between Xxxxxxx X. Xxxxxx ("Executive") and Starwood Hotels &
Resorts Worldwide, Inc., a Maryland corporation (the "Company").
WHEREAS, the Company desires to employ the Executive as its President
and Chief Executive Officer and the Executive desires to accept such employment
upon the terms and conditions hereinafter set forth;
WHEREAS, the Executive currently holds a senior level position with
another employer and will forfeit certain equity awards related to such
employer's stock that have substantial economic value;
WHEREAS, by reason of his position at such other employer the Executive
has a reasonable expectation of continuing to receive substantial equity awards
expected to have significant value in the future;
WHEREAS, to induce the Executive to enter into employment with the
Company, the Company has to provide the Executive with an economic package of
compensation and benefits intended to approximate the value of the benefits
forfeited to join employment with the Company and the economic opportunity the
Executive expected to receive from his current employer;
WHEREAS, the Executive has indicated to the Company that, under the
current policies of his current employer, he would be entitled to receive
additional equity awards in the near term with respect to a significant number
of shares of such employer's stock. Such other employer's stock trades at
significantly higher value that a Paired Share. The Company believes that any
sizeable equity award to the Executive should take such factors into account,
should provide the Executive an incentive to increase substantially the value of
a Paired Share and should provide significant value to the Executive only when
holders of Paired Shares receive significant increases in value.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
EXECUTION COPY
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ARTICLE I
Employment and Term
Section I.1 Position; Responsibilities. (a) The Company hereby employs
Executive as its President and Chief Executive Officer ("CEO") upon the terms
and conditions hereinafter set forth.
(b) The Board of Directors of the Company (the "Board") has
also elected the Executive as a member of the Board effective upon execution of
this Agreement and the Executive agrees to serve as a member of the Board.
(c) Executive will use his reasonable best efforts to obtain
and possess, and once obtained, will maintain throughout the Term hereof, all
licenses, findings of suitability, qualifications, approvals, permits and
authorizations ("Licenses") necessary to perform Executive's duties hereunder,
including without limitation all Licenses required by any governmental agency
("Regulators") of any country, state, province, county, city or other similar
entity having jurisdiction to regulate gaming, liquor or other business
activities undertaken by the Company or any of its subsidiaries. Executive will
timely file all necessary applications required to obtain such Licenses and will
fully cooperate at all times with the Regulators. The Company will use its
reasonable best efforts to assist the Executive in applying for, obtaining and
maintaining the Licenses, including, without limitation, providing and paying
for the services of legal counsel to facilitate the licensing process.
Notwithstanding anything herein to the contrary, should the Board determine, in
good faith after due consideration and an opportunity for the Executive (with
the assistance of his counsel) to present his position at a meeting of the Board
at which the issue is considered, that the Executive (i) has failed to use his
reasonable best efforts to obtain the Licenses, (ii) has engaged in conduct
which is reasonably likely to result in the revocation or expiration without
renewal of any License, (iii) has failed after a reasonable period of time to
obtain any License that is material to the performance of his duties hereunder
and it is reasonably expected that the Executive will not obtain such License in
the near future, the Company may immediately terminate this Agreement. The
Executive shall assist the Company, its subsidiaries and their employees obtain
and thereafter maintain all Licenses required by any applicable law, ordinance,
regulation, order or otherwise.
(d) Inasmuch as the Executive will be the CEO of the Company,
except as and to the extent provided below in the case of a "Paired Share REIT
Transaction," no other person will be elected or appointed by the Board during
the term as an executive officer of the Company senior to the Executive. The
Executive shall have such duties, responsibilities and authority, consistent
with his position as a chief executive officer, as shall be prescribed by the
Board from time to time; and he shall be involved, consistent with the
foregoing, in all aspects of the Company's business.
(e) In the event of a merger, consolidation or other
combination of the Company with the Trust, or a de-pairing of the Paired Shares
of the Trust and the Corporation, or another corporate transaction in response
to, or for the purpose of complying with, any proposed
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or enacted legislation which would limit the expansion of paired share REITs (a
"Paired Share REIT Transaction"), the person who, immediately prior to such
Paired Share REIT Transaction, was serving as the Chief Executive Officer of the
Trust (the "Trust CEO") may be the chief executive officer of the resulting
entity or entities and have duties, responsibilities and authority senior to the
Executive; and in such event Executive's title, position, duties,
responsibilities and authority may be appropriately modified to give effect
thereto, but in such event Executive shall be senior to all other executives.
Section I.2 Performance of Duties. (a) The Executive shall duly and
faithfully perform all of the duties assigned to him to the best of his
abilities, and he shall devote his full business time, attention and best
efforts to the performance of such duties and shall not engage in any other
business activities except with the prior written approval of the Board. The
preceding sentence shall not be construed to prevent the Executive from managing
the Executive's own personal and family investments or performing services for
any charitable, religious or community organizations, so long as such activities
do not materially interfere with the performance of the Executive's duties
hereunder.
(b) The Executive's base of operations shall be at the
principal executive office of the Company. In that regard, Executive
acknowledges that the Company intends to move its principal executive office
from Phoenix, Arizona to the Westchester County, New York or Fairfield County,
Connecticut area. Executive will relocate his residence as soon as practicable
to the area of the Company's new principal executive office.
Section I.3 Term. Executive's term of employment under this Agreement
(the "Term") shall commence on June 1, 1998 (the "Commencement Date") and shall
expire on the fifth anniversary of the Commencement Date unless extended or
sooner terminated as herein provided.
Section I.4 Representation and Warranty of Executive. Executive hereby
represents and warrants to the Company that he is not aware of any presently
existing fact, circumstance or event (including, but without limitation, any
health condition or legal constraint) which would preclude or restrict him from
providing to the Company the services contemplated by this Agreement, or which
would give rise to any breach of any term or provision hereof, or which could
otherwise result in the termination of his employment hereunder for Cause or
Good Reason (as such terms are hereinafter defined). Prior to his employment by
the Company, Executive was employed by The Xxxx Disney Company ("Prior
Employer"). Executive represents and warrants that any and all employment
understandings or agreements with the Prior Employer were completely at will and
that Executive is free to terminate his employment with the Prior Employer and
to commence employment with the Company pursuant to this Agreement.
Section I.5 Representation and Warranty of Company. The Company hereby
represents and warrants to Executive that (i) it is not aware of any fact,
circumstance or event which would give rise to any breach of any term or
provision of this Agreement or which would form the basis for any claim or
allegation that Executive's employment hereunder could be
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terminated for Cause or Good Reason hereunder, and (ii) it has received all
authorizations and has taken all actions, necessary or appropriate for the due
execution, delivery and performance of this Agreement, including all amendments
thereto effected by this Agreement.
ARTICLE II Compensation
Section II.1 General. The Company shall compensate Executive for all of
his services under this Agreement, as set forth herein.
Section II.2 Basic Compensation. Executive's annual salary during the
Term ("Base Salary") shall be at the rate of $950,000 and shall be payable in
bi-weekly or other installments in accordance with the Company's normal payment
schedule for senior management (not less frequently than monthly). The Base
Salary shall be subject to annual review commencing at the end of 1998 and at
the end of each year thereafter during the Term, and may in the sole discretion
of the Board be increased (but not decreased) for subsequent years. In addition,
the Company will compensate Executive for all consulting services rendered to
the Company between the date of this Agreement and the Commencement Date by a
payment as soon as practicable following the Commencement Date of $70,000.
Section II.3 Incentive Compensation. (a) In addition to the Base
Salary, the Executive shall be eligible to receive incentive compensation
("Incentive Compensation") in respect of each calendar year (or portion thereof)
of the Company during the Term.
(b) The Executive is not guaranteed any Incentive Compensation
for 1998. Rather, for the period from the Commencement Date to December 31, 1998
the Incentive Compensation shall be as determined by the Board in its
discretion, taking into account such factors as it may deem appropriate,
including but not limited to Executive's performance during 1998 and the amount
of incentive compensation he could reasonably have expected for 1998 at his
Prior Employer.
(c) For 1999 and later years, Executive's opportunity for
Incentive Compensation shall be determined in accordance with a bonus or a short
term incentive compensation program which is expected to be established by the
Board either for Executive or for senior management generally, and which shall
be based generally on principles set forth on the attached Schedule A.
(d) Except as otherwise expressly contemplated in Schedule A,
all Incentive Compensation earned under this Section 2.03 shall be payable as
soon as reasonably practicable, but in no event later than 120 days after end of
the relevant calendar year.
Section II.4 Other Programs. (a) The Executive shall also be entitled
to participate in all employee benefit plans, including retirement programs, if
any, and group health care plans, and to take time off for vacation or illness
in accordance with the Company's policy for senior management (provided that
Executive shall not accrue more than 20 days of unused vacation at
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any time). Such plans shall at all times be comparable to those made available
to the senior-most management of the Trust. In addition, the Company shall
provide the Executive such fringe benefits and perquisites as are equivalent to
those which the Trust provides to its Chief Executive Officer (including
appropriate and reasonable use of any Company-owned aircraft). The foregoing
shall not, however, apply to the Company's LTIP or to any other stock award,
stock option or stock derivative or equity-based plan or program, for which
separate provision is made in Sections 2.05 and 2.06 of this Agreement.
(b) During the Term, the Company shall purchase and maintain a
life insurance policy on Executive's life in the face amount of $10,000,000, the
proceeds of which shall be payable to Executive's estate or such other person or
persons as Executive shall from time to time designate. The Company shall not be
required to maintain such insurance after termination of Executive's employment,
but upon such termination the Company shall take all actions reasonably
requested by Executive necessary to transfer title to such policy to Executive
at no cost to Executive.
(c) The Company shall reimburse Executive for all legal fees
(not exceeding $25,000) and expenses reasonably incurred by Executive in
connection with the negotiation and execution of this Agreement and any stock
option or Restricted Stock Unit Award agreements expressly contemplated
hereunder.
Section II.5 Severance. Except only to the limited extent hereinafter
provided, Executive shall not be entitled to any severance compensation in the
event of a termination of employment with or without cause.
Section II.6 Premium Priced Stock Options. (a) As material inducement
to Executive's entering into this Agreement, the Option Committee of the Board
has also granted to the Executive on April 15, 1998, conditioned upon
commencement of his employment by the Company hereunder, five premium priced
(i.e., the exercise price per Paired Share exceeds the market price per Paired
Share on the date of grant) "Paired Options" (the "Options") under the LTIP as
follows:
(i) One Paired Option (the "First Tranche") is for
the purchase of an aggregate of 600,000 Paired Shares of the Company and the
Trust and is exercisable at $53.2875 per Paired Share.
(ii) The second Paired Option is for the purchase of
an aggregate of 400,000 Paired Shares of the Company and the Trust and is
exercisable at $53.2875 per Paired Share .
(iii) The third Paired Option is for the purchase of
an aggregate of 1,000,000 Paired Shares of the Company and the Trust and is
exercisable at $55.8250 per Paired Share.
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(iv) The fourth Paired Option is for the purchase of
an aggregate of 500,000 Paired Shares of the Company and the Trust and is
exercisable at $63.4375 per Paired Share.
(v) The fifth Paired Option is for the purchase of an
aggregate of 500,000 Paired Shares of the Company and the Trust and is
exercisable at $76.1250 per Paired Share.
Except to the extent otherwise provided in this Agreement, each of the
Options shall vest in 48 equal monthly installments with one installment vesting
on May 1, 1998 and one installment vesting on each of the next 47 monthly
anniversaries of May 1, 1998 so long as Executive is still employed on such
monthly anniversary date. To the extent not previously exercised, each of the
Options will terminate one year after any termination of Executive's employment,
except that in the event of a termination by the Company without Cause or by the
Executive for "Good Reason" each of the Options will terminate on the second
anniversary of the date of Executive's termination of employment. To the extent
not previously exercised or terminated as provided herein, the Options will in
all events each expire ten years from the date of grant.
(b) In order to assure to the Company the deductibility of the
compensation payable upon exercise of the Options, except as provided below, the
grant of the Options (other than the First Tranche) shall be subject to the
approval by the Company's stockholders of an appropriate amendment to the
Company's LTIP relating to the grant of the Options, in accordance with the
requirements of 162(m) of the Internal Revenue Code (the "Shareholder
Approval"). The Company agrees to use its reasonable best commercial efforts to
seek and obtain such Shareholder Approval as soon as practicable after the
execution hereof.
(c) The Executive shall be eligible for grants in the future
of additional Paired Options under the LTIP at the discretion of the Option
Committee of the Board.
Section II.7 Change of Control. In the event that during the Term,
there shall occur a "Change of Control" as defined in the LTIP (as such
definition is expected to be changed in the future so as (i) to exclude an
acquisition such as the recent acquisition of ITT Corporation by the Company and
(ii) to exclude a Paired Share REIT Transaction (such change to be generally
applicable to all LTIP awards)) the Restricted Stock Unit Award and the Options
shall become fully vested.
Section II.8 Relocation. In recognition of the necessity for the
Executive to relocate his residence from Beverly Hills, California where he
currently resides ("Executive's Current Residence") to the vicinity of Company's
new executive offices in Westchester County, New York (the "New Offices"), the
Company shall reimburse Executive for his reasonable out-of-pocket expenses for
transporting his family and household furnishings and belongings from his
Existing Residence to his new residence ("Executive's New Residence") in the
community of the Company's New Offices. Relocation expenses will include, with
respect to Executive's Existing
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Residence, the amount of any shortfall of the actual sales price after
reasonable sales efforts, compared to the current appraised value of Executive's
Existing Residence (provided that Company may instead elect to purchase
Executive's Existing Residence at its current appraised value). Relocation
expenses shall also include (i) normal escrow costs, (ii) up to one mortgage
"point" and (iii) other out-of-pocket closing costs in respect of the purchase
of the Executive's New Residence. The Company will also reimburse the Executive
for reasonable out-of-pocket temporary housing expenses for the Executive and
his family for a period of time (up to 12 months) necessary to make a full
transition to Executive's New Residence and travel expenses for Executive and
his family to and from his Existing Residence as necessary during the
transition. The foregoing relocation expense reimbursements shall be made in
accordance with the Company's current policy.
Section II.9 Expense Reimbursements. The Company shall reimburse
Executive for all proper expenses incurred by him in the performance of his
duties hereunder, upon presentation of expense statements or vouchers and such
other information as the Company may require and in accordance with the
generally applicable policies and procedures of the Company.
Section II.10 Withholding. The Base Salary and all other payments to
Executive for his services to the Company shall be subject to all withholding
and deductions required by federal, state or other law (including those
authorized by Executive but not otherwise required by law), including but not
limited to state, federal and local income taxes, unemployment tax, Medicare and
FICA, together with such deductions as Executive may from time to time
specifically authorize under any employee benefit program which may be adopted
by the Company for the benefit of its senior executives or Executive.
ARTICLE III
Termination of Employment
Section III.1 Termination. (a) Executive's employment hereunder shall
be terminable by either party with or without Cause and with or without notice
except as otherwise provided herein, but with the effect set forth herein.
(b) Executive shall give the Company at least 30 days' advance
written notice prior to any termination by Executive other than for Good Reason.
The Company shall give Executive at least 30 days' advance written notice prior
to any termination of Executive without Cause.
(c) Executive may resign and terminate his employment
hereunder for Good Reason (which shall also be deemed a termination by the
Company other than for Cause), subject, however, to prior delivery to the
Company of a Preliminary Notice of Good Reason (as defined below) and the
failure of the Company to remedy the circumstances giving rise to such notice
within the cure period provided below. For purposes of this Agreement, "Good
Reason" means except as provided below in this paragraph (c): (i) the failure to
elect and continue Executive as CEO and President of the Company (subject to the
provisions of Section 1.01(e)) or
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to nominate Executive for re-election as a member of the Board (unless a Cause
Termination Notice (as hereinafter defined) shall theretofore have been given to
Executive); (ii) the failure to assign Executive duties, authorities,
responsibilities and reporting requirements consistent with his position and
otherwise as set forth herein, or (subject to the provisions of Section 1.01(e))
if the scope of any of Executive's material duties or responsibilities as CEO of
the Company is reduced to a significant degree without Executive's prior
consent, except for any reduction in duties and responsibilities due to
Executive's illness or disability or temporary suspensions of duties and
responsibilities pending results of any Board commissioned investigation as to
potential Cause for termination of Executive's employment and except if a Cause
Termination Notice shall theretofore have been given to Executive; (iii) a
reduction in or a substantial delay (not to exceed one month) in the payment of
Executive's compensation or benefits from those required to be provided in
accordance with the provisions of this Agreement; (iv) the failure of the
Company to indemnify Executive (including the prompt advancement of expenses),
or to maintain directors' and officers' liability insurance coverage for
Executive, in accordance with the provisions of Section 5.11 hereof; (v) the
Company's purported termination of Executive's employment for Cause other than
in accordance with the requirements of this Agreement; (vi) a "Change of
Control," as such term is defined and used in the LTIP (as the same may be
amended as contemplated by Section 2.07), shall have occurred (unless a Cause
Termination Notice shall theretofore have been given to Executive), (vii) a
requirement by the Company or the Board, without the Executive's prior consent,
that Executive be based outside of Westchester County, New York or Fairfield
County, Connecticut, other than on travel reasonably required to carry out the
Executive's obligations under this Agreement, (viii) Xxxxx X. Xxxxxxxxxx shall
for any reason cease to be Chairman of the Board of the Company or Chairman and
CEO of the Trust and his successor shall not have been approved by the Executive
(such approval not to be unreasonably withheld), or (ix) any other breach by the
Company of any provision of this Agreement; provided, that in the event Good
Reason is based on clause (ii), (iii) (other than with respect to the payment of
Base Salary), (iv) or (ix) above, (a) "Good Reason" shall not include acts which
are cured by the Company within 30 days from receipt by the Company of a written
notice from Executive (a "Preliminary Notice of Good Reason") identifying in
reasonable detail the act or acts constituting Good Reason, (b) Good Reason
shall not exist unless the Preliminary Notice of Good Reason shall have been
given by Executive within 60 days after learning of the act, failure or event
(or, in the case of a series of related acts, failures or events, within 180
days of the first such act, failure or event) which Executive alleges
constitutes Good Reason hereunder, (c) if the Company has failed to cure as
provided above, Good Reason shall not exist unless Executive shall have given
notice of termination hereunder for Good Reason within 60 days from delivery of
the Preliminary Notice of Good Reason (which termination shall be effective 30
days from the giving of such notice), and (d) if the Company has commenced an
expedited arbitration in the manner prescribed below within 15 days after
receipt of Executive's notice of termination called for under the immediately
preceding clause (c), such termination shall not be effective as a termination
of employment and shall not be deemed a termination by Executive for Good Reason
unless and until the Arbitrator shall have determined otherwise. If the Company
has timely commenced such an arbitration proceeding, in the manner prescribed
below, no payments shall be due Executive under Section 3.02 (i) or (ii) hereof
until the conclusion of the arbitration proceeding or further proceeding
contemplated by Section 5.04 hereof and only if an award is
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rendered by the Arbitrator in favor of Executive. Notwithstanding the foregoing,
if the Company fails to file a demand for arbitration with the American
Arbitration Association ("AAA") and pay the requisite fees pursuant to Rule 4 of
the AAA's National Rules for the Resolution of Employment Disputes effective
June 1, 1996 (the "National Rules") within 30 days after receipt of notice of
termination from Executive, and diligently pursue such proceeding in accordance
with the procedures set forth in Section 5.04 hereof, Executive's termination of
employment from the Company shall be conclusively presumed to have been for Good
Reason. Notwithstanding the foregoing, "Good Reason" shall not exist in the
event that any reduction in duties, titles or responsibilities results from the
senior position of the Trust's CEO in the case of a Paired Share REIT
Transaction as contemplated in Section 1.01(e).
(d) The Company shall have the right to terminate Executive's
employment hereunder for Cause. For purposes hereof, "Cause" shall be defined as
Executive's having (a) been convicted of a criminal offense constituting a
felony, (b) committed one or more acts or omissions constituting fraud or
willful misconduct, or (c) failed, after written warning from the Board
specifying in reasonable detail the breach(es) complained of, to substantially
perform his duties under this Agreement (excluding, however, any failure to meet
any performance targets), except where such failure results from Executive's
incapacity due to physical or mental illness. For purposes of the foregoing, no
act or failure to act on the part of Executive shall be considered "willful"
unless it is done, or omitted to be done, by Executive without reasonable belief
that Executive's action or omission was in the best interests of the Company.
Any act or failure to act that is expressly authorized by the Board pursuant to
a resolution duly adopted by the Board, or pursuant to the written advice of
counsel for the Company, shall be conclusively presumed to be done, or omitted
to be done, by Executive in the best interests of the Company.
Notwithstanding the foregoing, termination by the Company for Cause
shall not be effective until and unless each of the following provisions shall
have been complied with: (i) notice of intention to terminate for Cause (a
"Preliminary Cause Notice"), the giving of which shall have been authorized by a
vote of not less than 50% of all disinterested Directors then in office, which
shall include a written statement of the particular acts or circumstances which
are the basis for the termination for Cause and shall set forth a reasonable
period (not less than 30 days) to cure (the "Cure Period"), shall have been
given to Executive by the Board within sixty days after the Company first learns
of the act, failure or event constituting Cause; and (ii) Executive shall not
have cured the acts or circumstances complained of within the Cure Period; and
(iii) the Board shall have called an in personam meeting of the Board, at which
termination of Executive is an agenda item, and shall have provided Executive
with not less than 20 days' notice thereof; and (iv) Executive shall have been
afforded the opportunity, accompanied by counsel, to provide written materials
to the Board in advance of such meeting and, if he so desires, personally to
address the Board at such meeting; and (v) the Board shall have provided, within
three business days after such meeting, a written notice of termination for
Cause, stating that, based upon the evidence it has received and reviewed, and
specifying in reasonable detail the acts and circumstances complained of, it has
voted by a vote of at least a majority of all of the disinterested Directors
then in office to terminate Executive for Cause (such a notice, a "Cause
Termination Notice"), which such notice shall be effective on the sixteenth day
after receipt
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thereof by Executive, subject to the provisions hereof; provided that if
Executive has commenced an expedited arbitration in the manner prescribed below
within 15 days after his receipt of the Cause Termination Notice, disputing the
Company's right under this Agreement to so terminate for Cause, Executive shall
not be deemed to have been terminated for Cause unless and until the Arbitrator
shall thereafter have determined that Executive was properly terminated for
Cause in accordance with the provisions hereof; and provided, further that the
Company may suspend Executive (a) with pay, at any time after any indictment of
Executive for a criminal offense constituting a felony or after the giving of
the Preliminary Cause Notice, and (b) without pay, at any time after the giving
of the Cause Termination Notice, except that any payments not so made shall be
made within three business days after the Arbitrator shall have made a
determination that Executive was terminated other than in compliance with the
foregoing provisions relating to termination for Cause. If Executive or his
representative fails to file a demand for arbitration with the AAA and pay the
requisite fees pursuant to Rule 4 of the National Rules within 30 days of his
receipt of a Cause Termination Notice from the Board, and diligently pursue such
proceeding in accordance with the procedures set forth in Section 5.04 hereof,
such termination shall be conclusively presumed to have been for Cause.
If the Arbitrator declines to rule that Executive was terminated for
Cause, Executive shall be treated as having been terminated without Cause and
Executive shall have the rights provided under Section 3.02 below and provided
elsewhere in this Agreement with respect to a termination without Cause.
For all purposes of this Agreement, "Good Reason" and "Cause" shall
have the applicable defined meaning as set forth above in this Section 3.01.
Upon any termination of Executive's employment, whether by the Company
or by the Executive, Executive will concurrently resign his membership, if any,
on the Board.
Section III.2 Rights on Termination. (a) In the event of termination of
Executive's employment during the Term for any reason, including but not limited
to termination by the Company with Cause or without Cause or termination by the
Executive with Good Reason or without Good Reason or due to death or disability
of Executive then, except as and to the extent provided below in Section
3.02(b), 3.02(c) and 3.02(d):
(i) Executive shall not be entitled to any severance
or other special payments or awards from the Company;
(ii) Executive shall be paid all accrued but unpaid
Base Salary and any earned but unpaid Incentive Compensation and other benefits
through the date of termination;
(iii) Executive shall be entitled to receive and
retain all Paired Shares underlying the Restricted Stock Unit Award referenced
in Section 2.05 as well as all Paired Shares received in respect of the
Incentive Compensation Formula referenced in Item 7 of Schedule A hereto; and
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(iv) There shall be no acceleration of vesting of any
Paired Shares underlying Paired Options or of unvested restricted Paired Shares,
and all such unvested Paired Options (including but not limited to the Options
referred to in Section 2.06) and unvested restricted Paired Shares held by
Executive shall automatically be forfeited (subject however to any contrary
provisions in the agreements relating to the grant of such Paired Options or the
award of such Paired Shares or any contrary determination of the Board in its
sole discretion).
(b) In the event Executive exercises his right to terminate
under Clause (viii) of Section 3.01(c), an amount equal to 50% of the then
unvested Paired Shares underlying any Paired Options and 50% of any then
unvested restricted Paired Shares held by Executive shall be deemed accelerated
to the date of termination; in addition, such termination shall be deemed a
voluntary termination of employment by the Executive and all Paired Options held
by Executive, including the Options referred to in Section 2.06, shall be deemed
to terminate one year after the date of termination of employment.
(c) In the event of the termination of Executive's employment
due to death or disability of Executive, all then unvested Paired Shares
underlying any Paired Options held by Executive and all then unvested restricted
Paired Shares held by Executive shall be deemed accelerated to the date of
termination; and all such Paired Options held by Executive, including the
Options referred to Section 2.06, shall be deemed to terminate one year after
such date of termination of employment.
(d) If Shareholder Approval is not obtained by April 15, 1999,
the Executive shall be entitled to be paid, if and to the extent applicable, the
"Basic Severance" plus the "Additional Severance" (each defined below) as
follows:
(i) To the extent that the exercise price per Paired
Share of a Paired Option included in the Restorative Grants exceeds the exercise
price per Paired Share of its "Hypothetically Equivalent Option" defined below,
then upon each exercise of such a Paired Option the Executive shall be entitled
to receive Basic Severance equal to the amount of such excess multiplied by the
number of Paired Shares purchased upon such exercise. Basic Severance shall be
paid within 10 days after termination of employment for all Paired Options
exercised prior to any termination of employment and otherwise within 10 days
after exercise.
(ii) The Hypothetically Equivalent Options shall be
hypothetical Paired Options deemed granted for the number of Paired Shares
indicated, sequentially at the increasing exercise prices as follows:
400,000 Paired Shares exercisable at $53.2875 per Paired Share;
1,000,000 Paired Shares exercisable at $55.8250 per Paired Share;
500,000 Paired Shares exercisable at $63.4375 per Paired Share;
500,000 Paired Shares exercisable at $76.1250 per Paired Share.
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(Thus, by way of illustration, the initial
Restorative Grant on May 1, 1999 for purchase of 900,000 Paired Shares shall be
deemed to have as its Hypothetically Equivalent Options a Paired Option for
400,000 Paired Shares exercisable at $53.2875 per Paired Share, and a Paired
Option for 500,000 Paired Shares exercisable at $55.8250 per Paired Share.)
(iii) If Executive's employment is terminated prior
to January 2, 2001 by the Company without Cause or by the Executive for Good
Reason, and if the Market Price per Paired Share exceeds the exercise price per
Paired Share with respect to one or more segments of the then ungranted
Restorative Grants (such excess hereafter called the "Spread"), the Company
shall pay as Additional Severance the sum of the products, calculated separately
for each segment of the ungranted Restorative Grants as to which there is a
Spread (A) the Spread times (B) the number of Paired Shares subject to such
segment which would have been vested had the Options under Section 2.06(a) been
granted instead of such Restorative Grants. For purposes of the foregoing, the
Market Price per Paired Share shall be the closing sale price of a Paired Share
on the New York Stock Exchange Composite Transactions Tape on the earlier to
occur of (i) the second anniversary of the date of Executive's termination of
employment and (ii) the date of the last exercise of Paired Options granted to
the Executive pursuant to the terms of this Agreement.
Section III.3 Sole Remedy. The parties agree that the foregoing shall
be Executive's sole and exclusive monetary remedy under this Agreement by reason
of termination by Executive or by the Company, it being agreed that as his
actual damages under this Agreement would be difficult to measure or quantify
and would be impracticable to determine, such amount shall constitute liquidated
damages under this Agreement for Executive by reason of such termination. Such
payments shall not be reduced or limited by amounts Executive might earn or be
able to earn from other employment or ventures.
Section 3.04 Restricted Stock Units. As material inducement to
Executive's entering into this Agreement and in order to compensate in part for
the stock option and other benefits from his prior employer forfeited by
Executive, the Option Committee of the Board has granted to the Executive on
April 15, 1998, conditioned on commencement of his employment by the Company
hereunder, an award under the Company's 1995 Long-Term Incentive Plan (the
"LTIP") of 300,000 Restricted Stock Units, each such Unit representing the right
to receive, subject to vesting, at the times provided for herein one Paired
Share of the Company and the Trust (the "Restricted Stock Unit Award"). In
addition, the Company shall pay to the Executive dividend equivalent amounts
with respect to the Restricted Stock Units at the time and in the amount of any
dividend distributions paid with respect to Paired Shares. The Restricted Stock
Unit Award shall vest at the end of 120 days after the Commencement Date
(subject to acceleration as provided in Section 2.07). The number of Paired
Shares underlying vested Restricted Stock Units shall be delivered to the
Executive upon the earlier of (i) the termination of Executive's employment for
any reason and (ii) the fifth anniversary of the Commencement Date (provided
that Executive shall be permitted to elect to defer delivery of all or a portion
of such Paired Shares by written notice specifying a deferred delivery date(s)
sent to the Company not later than the fourth anniversary of the Commencement
Date (or such other dates as the Company and Executive shall determine)). The
Company and the Executive will work together
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in good faith towards the establishment of a "rabbi trust" or other structure to
assure Executive that the Paired Shares underlying the Restricted Stock Unit
Award will be delivered as contemplated hereunder, subject to appropriate
protections for the Trust's REIT status (including seeking an appropriate ruling
from the Internal Revenue Service).
ARTICLE IV
Noncompetition; Confidential Information; Etc.
Section IV.1 Other Business Ventures. In addition to the restriction
from having other employment provided in Section 1.02 above, during the term of
Executive's employment hereunder the Executive shall not, without the prior
written approval of the Board, directly or indirectly engage in, represent, be
connected with or have a financial interest in any business which is or, to the
best of his knowledge, is about to become competitive with the business of the
Company; provided, however, that nothing herein contained shall be deemed to
prohibit the Executive from being a passive investor owning up to 1% of any
class of outstanding publicly traded securities of any Company.
Section IV.2 Confidential Information. Except in the course of his
employment with the Company, or as he may be required pursuant to any law or
court order or similar process, Executive shall not at any time either during or
after his termination of employment hereunder, directly or indirectly disclose
or use any secret, proprietary, confidential information or data of the Company
or the Corporation, or any of their respective subsidiaries or affiliates;
provided, however, that after the expiration of 18 months from such termination
of employment, the Company's sole remedy shall be to seek and procure
appropriate equitable remedies. In the event of any dispute between Executive
and the Company or between Executive or the Company and others, Executive shall
cooperate with the Company as to redaction or other protective measures with
respect to any unnecessary public disclosure of any such confidential
information or proprietary data.
Section IV.3 Inducing of Company Employees. Except in the course of his
employment with the Company, or with the prior written approval of the Board,
Executive shall not at any time through the 18 month period after his
termination of employment hereunder, in any way directly or indirectly hire,
attempt to hire, or cause to be hired any person or persons who to Executive's
best knowledge was employed at any time during the period commencing six months
prior to such termination by the Company, the Corporation, or their respective
subsidiaries or SLT Realty Limited Partnership or SLC Operating Limited
Partnership (other than Executive's secretaries or personal assistants).
Section IV.4 Prior Employment. The Company has no desire to obtain nor
to utilize any proprietary or confidential information to which the Executive
may have had access during his employment with his Prior Employer. The Executive
shall not in the performance of his duties hereunder utilize or disclose
(whether to the Company or any of its officers, employees, directors or agents)
any trade secrets or other proprietary or confidential information of his Prior
Employer to which the Executive may have had access during his employment with
his Prior
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Employer. The Company agrees that it will not request the Executive to
utilize or disclose any trade secrets or other proprietary or confidential
information of his Prior Employer.
Section 4.05 Restorative Grants. (a) If Shareholder Approval is not
received by April 15, 1999, then on each of May 1, 1999 and January 2, 2000, the
Company will grant to Executive a Paired Option for the purchase of 900,000
Paired Shares of the Company and the Trust, and on January 2, 2001, a Paired
Option for 600,000 Paired Shares of the Company and the Trust, each exercisable
at a price per Paired Share equal to the "Fair Market Value" per Paired Share on
the date of its grant as defined in the LTIP (the foregoing Paired Options for
an aggregate of 2,400,000 Paired Shares are referred to as the "Restorative
Grants"). Each of the Restorative Grants shall, however, only be made if
Executive is then employed by the Company.
Each Paired Option in the Restorative Grants shall be vested
as of its date of grant in a number of Paired Shares subject to that Paired
Option equal to a fraction the numerator of which the number of whole months
elapsed between May 1, 1998 and its date of grant, and the denominator of which
is 48; and each such Paired Option shall thereafter vest in equal monthly
installments for the balance of the 48 month period commencing May 1, 1998 ("the
Vesting Period"), on the last day of the month of the date of grant and on the
last day of each month thereafter during the Vesting Period (thus, by way of
illustration, the Restorative Grant of a Paired Option on May 1, 1999 for
900,000 Paired Shares would be vested on the date of its grant to the extent of
225,000 Paired Shares, and the balance would vest in equal monthly increments of
18,750 Paired Shares through April 30, 2002).
(b) The Company acknowledges that in the event that
Shareholder Approval is not received by April 15, 1999, the Restorative Grants
may not provide Executive with the full equivalent economic benefits as
Executive would otherwise receive by the grant of the Options. In that event,
the Board will consider such additional compensation for Executive (which may or
may not be other performance based compensation deductible under Section 162(m)
of the Internal Revenue Code and which may be conditioned on changes to this
Agreement, including but not limited to modifications to the terms of the
Restorative Grants) as it may in its sole discretion deem appropriate in the
circumstances
ARTICLE V
Miscellaneous
Section V.1 Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to the
Secretary of the Company at the Company's principal executive office, and if to
Executive, to his address on the books of the Company (or to such other address
as the Company or Executive may give to the other for purposes of notice
hereunder).
Copies of all notices given to Executive shall be sent to:
Debevoise & Xxxxxxxx
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000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Copies of all notices given to the Company shall be sent to:
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
All notices, requests or other communications required or permitted by
this Agreement shall be made in writing either (a) by personal delivery to the
party entitled thereto, (b) by mailing via certified mail, postage prepaid,
return receipt requested, in the United States mails to the last known address
of the party entitled thereto, (c) by reputable overnight courier service, or
(d) by facsimile with confirmation of receipt. The notice, request or other
communication shall be deemed to be received upon actual receipt by the party
entitled thereto; provided, however, that if a notice, request or other
communication is not received during regular business hours, it shall be deemed
to be received on the next succeeding business day of the Company.
Section V.2 Assignment and Succession. The rights and obligations of
the Company under this Agreement may not be assigned in whole or any part except
in the case of (i) a consolidation or merger with, or a transfer of all or
substantially all of the assets of the Company to, another entity reasonably
acceptable to Executive which not later than 15 days prior to the consummation
of such combination transaction expressly assumes in a writing reasonably
satisfactory in form and substance to Executive all of the Company's obligations
to Executive hereunder or (ii) a Paired Share REIT Transaction. No such
assignment shall limit or restrict Executive's right to terminate this Agreement
for Good Reason, which right shall remain absolute. Executive's rights and
obligations hereunder are personal and may not be assigned. This Agreement shall
inure to the benefit of and be enforceable by Executive's heirs, beneficiaries
and/or legal representatives.
Section V.3 Headings. The Article, Section, paragraph and subparagraph
headings are for convenience of reference only and shall not define or limit the
provisions hereof.
Section V.4 Arbitration. In the event of any controversy, dispute or
claim arising out of or related to this Agreement or Executive's employment by
the Company, the parties shall negotiate in good faith in an attempt to reach a
mutually acceptable settlement of such dispute. If negotiations in good faith do
not result in a settlement of any such controversy, dispute or claim, it shall,
except as otherwise provided for herein be finally settled by expedited
arbitration conducted by a single arbitrator selected as hereinafter provided
(the "Arbitrator") in accordance with the National Rules, subject to the
following (the parties hereby agreeing that,
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notwithstanding the provisions of Rule 1 of the National Rules, in the event
that there is a conflict between the provisions of the National Rules and the
provisions of this Agreement, the provisions of this Agreement shall control):
(a) The Arbitrator shall be determined from a list of names of
five impartial arbitrators each of whom shall be an attorney experienced in
arbitration matters concerning executive employment disputes, supplied by the
AAA chosen by Executive and the Company each in turn striking a name from the
list until one name remains (with the Company being the first to strike a name).
(b) The Arbitrator shall assess the costs of the proceeding,
including the prevailing party's reasonable attorneys' fees on any unsuccessful
party to the extent the Arbitrator concludes that such party is unsuccessful
unless he or she concludes that matters of equity or important considerations of
fairness dictate otherwise.
(c) The Arbitrator shall determine whether and to what extent
any party shall be entitled to damages under this Agreement; provided that no
party shall be entitled to punitive or consequential damages (including, in the
case of the Company, any claim for alleged lost profits or other damages that
would have been avoided had Executive remained an employee), and each party
waives all such rights, if any.
(d) The Arbitrator shall not have the power to add to nor
modify any of the terms or conditions of this Agreement. The Arbitrator's
decision shall not go beyond what is necessary for the interpretation and
application of the provision(s) of this Agreement in respect of the issue before
the Arbitrator. The Arbitrator shall not substitute his or her judgment for that
of the parties in the exercise of rights granted or retained by this Agreement.
The Arbitrator's award or other permitted remedy, if any, and the decision shall
be based upon the issue as drafted and submitted by the respective parties and
the relevant and competent evidence adduced at the hearing.
(e) The Arbitrator shall have the authority to award any
remedy or relief (including provisional remedies and relief) that a court of
competent jurisdiction could order or grant. The Arbitrator's written decision
shall be rendered within sixty days of the closing of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the parties as to the
matter in dispute. To the extent that the relief or remedy granted by the
Arbitrator is relief or remedy on which a court could enter judgment, a judgment
upon the award rendered by the Arbitrator shall be entered in any court having
jurisdiction thereof (unless in the case of an award of damages, the full amount
of the award is paid within 10 days of its determination by the Arbitrator).
Otherwise, the award shall be binding on the parties in connection with their
continuing performance of this Agreement and in any subsequent arbitral or
judicial proceedings between the parties.
(f) The arbitration shall take place in New York, New York.
(g) The arbitration proceeding and all filing, testimony,
documents and
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information relating to or presented during the arbitration proceeding shall be
disclosed exclusively for the purpose of facilitating the arbitration process
and in any court proceeding relating to the arbitration, and for no other
purpose, and shall be deemed to be information subject to the confidentiality
provisions of this Agreement.
(h) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence of a dispute
while the dispute is being resolved unless and until such obligations are
terminated or expire in accordance with the provisions hereof.
(i) The parties may obtain a pre-hearing exchange of
information including depositions, interrogatories, production of documents,
exchange of summaries of testimony or exchange of statements of position, and
the Arbitrator shall limit such disclosure to avoid unnecessary burden to the
parties and shall schedule promptly all discovery and other procedural steps and
otherwise assume case management initiative and control to effect an efficient
and expeditious resolution of the dispute. At any oral hearing of evidence in
connection with an arbitration proceeding, each party and its counsel shall have
the right to examine its witness and to cross-examine the witnesses of the other
party. No testimony of any witness, or any evidence, shall be introduced by
affidavit, except as the parties otherwise agree in writing.
(j) Notwithstanding the dispute resolution procedures
contained in this Section 5.04, either party may apply to any court sitting in
the County, City and State of New York (i) to enforce this agreement to
arbitrate, (ii) to seek provisional injunctive relief so as to maintain the
status quo until the arbitration award is rendered or the dispute is otherwise
resolved, (iii) to confirm any arbitration award, or (iv) to challenge or vacate
any final judgment, award or decision of the Arbitrator that does not comport
with the express provisions of this Section 5.04.
(k) If a corporate transaction which would constitute a Change
of Control event under the LTIP is agreed to during the pendency of an
arbitration hereunder, the Company will include appropriate provisions which
will enable Executive to participate in such Change of Control event as if the
arbitration were resolved favorably to Executive, but subject to such a
favorable resolution.
Section V.5 Invalidity. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired.
Section V.6 Waivers. No omission or delay by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof, or the exercise of
any other right, power or privilege.
Section V.7 Counterparts. This Agreement may be executed in multiple
counterparts,
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each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
Section V.8 Entire Agreement. Except as otherwise provided or referred
to herein, this Agreement contains the entire understanding of the parties and
supersedes all prior agreements and understandings relating to the subject
matter hereof. This Agreement may not be amended, except by a written instrument
hereafter signed by each of the parties hereto.
Section V.9 Interpretation. The parties hereto acknowledge and agree
that each party and its or his counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its drafting. Accordingly,
(i) the rules of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party regardless of which party was generally responsible for the preparation of
this Agreement. Except where the context requires otherwise, all references
herein to Sections, paragraphs and clauses shall be deemed to be reference to
Sections, paragraphs and clauses of this Agreement. The words "include",
"including" and "includes" shall be deemed in each case to be followed by the
phrase "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section V.10 Governing Law. This Agreement and the performance hereof
shall be construed and governed in accordance with the internal laws of the
State of New York without reference to principles of conflict of laws.
Section V.11 Indemnification. In addition to any additional benefits
provided under applicable state law, as a Director and Officer of the Company,
Executive shall be entitled to the benefits of: (a) those provisions of the
Articles of Incorporation of the Company, as amended, and of the Bylaws of the
Company, as amended, which provide for indemnification of Officers and Directors
of the Company (and no such provision shall be amended in any way to limit or
reduce the extent of indemnification available to Executive as a Director or
Officer of the Company), (b) the customary Indemnification Agreement between the
Company and its Directors and Officers, as amended through the date hereof (the
"Indemnification Agreement").
The rights of Executive under such indemnification obligations shall
survive the termination of this Agreement and be applicable for so long as
Executive may be subject to any claim, demand, liability, cost or expense, which
the indemnification obligations referred to in this Section are intended to
protect and indemnify him against.
The Company shall, at no cost to Executive, use its best efforts to at
all times include Executive, during the term of Executive's employment hereunder
and for so long thereafter as Executive may be subject to any such claim, as an
insured under any directors' and officers' liability insurance policy maintained
by the Company, which policy shall provide such coverage
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in such amounts as the Board shall deem appropriate for coverage of all
Directors and Officers of the Company.
Section V.12 Effectiveness. This Agreement shall be of no force and
effect, and shall be treated as having had no force and effect from the date
hereof, if the Commencement Date shall not have occurred by December 31, 1998.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer and the Executive has signed this Agreement as of
the day and year first above written.
The "Company":
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
By:____________________________________
Name: Xxxxxx X. Xxxxx
Its: Executive Vice President and Chief Financial
Officer
By:____________________________________
Name: _________________________________
Its: ___________________________________
The "Executive":
_______________________________________
Xxxxxxx X. Xxxxxx
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Schedule A to Employment Agreement
Principles To Be Used In Developing Performance-Based Formula For
Incentive Compensation
1. The Formula will be calculated by awarding a certain percentage of
growth in the Company's EBITDA (or the combined EBITDA of the Company and the
Trust), over a hurdle rate, adjusted for the number of Paired Shares outstanding
and the capital structure of the Company (or of the Company and the Trust);
2. The Formula is to be applied on an ongoing/multi-year basis;
3. The Formula is to be structured so that it has no floor but has a
maximum of $6 million.
4. The Company understands that the Executive's range of expectation
for 1999, which the Executive understands is not guaranteed, is between $1
million and $3 million.
5. The Board will maintain discretion to provide a bonus award over and
above the Formula amount, based on exceptional circumstances.
6. A deferred compensation plan is expected to be developed for the
senior management team, in order to maximize the tax efficiency of the Incentive
Compensation awards.
7. Any Incentive Compensation in any year in excess of $3 million will
be paid in restricted Paired Shares or Restricted Stock Units (at the
Executive's election), which are expected to have a vesting period equal to the
then balance of the Term (provided that any such Paired Shares or Restricted
Stock Units shall vest immediately upon the termination of Executive's
employment for any reason).
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