THIS
AGREEMENT, dated December 30, 2008 the “Effective
Date”), is made by and between Starwood Hotels and Resorts
Worldwide, Inc., a Maryland corporation (the
“Company”), and Phil McAveety (the
“Executive”).
WHEREAS,
the Executive is employed by the Company as EVP and Chief Brand
Officer; and
WHEREAS,
the Company considers it essential to the best interests of its
stockholders to foster the continued employment of key management
personnel; and
WHEREAS,
the Board recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or
distraction of senior management personnel to the detriment of the
Company and its stockholders; and
WHEREAS,
the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
members of the Company’s senior management, including the
Executive, to their assigned duties without distraction in the face
of potentially disturbing circumstances arising from the
possibility of a Change in Control; and
WHEREAS,
the Company and the Executive entered into an employment agreement
(the “ Original Agreement ”) dated
February 1, 2008; and
WHEREAS,
the Company and the Executive hereby amend and restate the Original
Agreement in its entirety (the “ Agreement ”) in
order to evidence documentary compliance with section 409A of Code
and the guidance thereunder (collectively “
Section 409A ”);
NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the
Executive hereby agree as follows:
1.
Defined Terms . The definitions of capitalized terms used in
this Agreement are provided in Section 16 hereof.
2. Term
of Agreement . The Term of this Agreement shall commence on the
Effective Date and shall continue in effect through the third
anniversary of the Effective Date; provided , however
, that on each anniversary of the Effective Date during the Term of
this Agreement, the Term shall automatically be extended for one
additional year unless, not later than 90 days prior to any
such anniversary, the Company or the Executive shall have given
notice not to extend the Term; and further provided ,
however , that if a Change in Control or a Potential Change
in Control shall have occurred during the Term, the Term shall
expire no
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earlier than
twenty-four (24) months beyond the month in which such Change
in Control or a Potential Change in Control occurred.
3.
Company’s Covenants Summarized . In order to induce
the Executive to remain in the employ of the Company and in
consideration of the Executive’s covenants set forth in
Section 4 hereof, the Company agrees, under the conditions
described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as
provided in Section 10 hereof, no Severance Payments shall be
payable under this Agreement unless during the Term there shall
have been (or, under the terms of the second sentence of
Section 6 hereof, there shall be deemed to have been) a
termination of the Executive’s employment with the Company
following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment
and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be
retained in the employ of the Company.
4. The
Executive’s Covenants . The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event
a Potential Change in Control occurs during the Term, the Executive
will remain in the employ of the Company until the earliest of
(i) a date which is six (6) months from the date of such
Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the
Executive’s employment for Good Reason or by reason of death,
Disability or Retirement, or (iv) the termination by the
Company of the Executive’s employment for any
reason.
5.
Compensation Other Than Severance Payments .
a.
Payment of Salary During Disability . Following a Change in
Control and during the Term, during any period that the Executive
is unable to perform the Executive’s full-time duties with
the Company as a result of:
(1)
a period of 409A Disability, the Executive shall continue to
receive his base salary in accordance with the Company’s
standard payroll practices at the rate in effect at the
commencement of any such period, together with any compensation
payable to the Executive under the Company’s short-term and
long-term disability plans for salaried employees during such
period and any benefit coverages customarily provided to disabled
salaried employees, until the Executive’s employment is
terminated on account of the Executive’s General Disability;
or
(2)
a period of General Disability, the Executive shall receive any
compensation payable to the Executive under the Company’s
short-term and long-term disability plans for salaried employees
during such period, as well as any benefit coverages customarily
provided to disabled salaried employees, until the
Executive’s employment is terminated on account of the
Executive’s General Disability.
Thereafter the
Executive’s benefits shall be determined under the
Company’s retirement, insurance and other compensation
programs then in effect in accordance with the terms of such
programs.
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b.
Accrued Salary . If the Executive’s employment shall
be terminated for any reason following a Change in Control and
during the Term, the Company shall pay to the Executive such
Executive’s full salary through the Date of Termination at
the rate in effect immediately prior to the Date of Termination or,
if higher, the rate in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason,
together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of the
Company’s compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
c.
Post-Termination Benefits . If the Executive’s
employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive
the Executive’s normal post-termination compensation and
benefits as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Company’s retirement, insurance and
other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good
Reason.
d.
Time of Payment . Upon termination of the Executive’s
employment following a Change in Control and during the Term, the
Executive shall receive the payments or benefits to which he may be
entitled under Section 5(b) and 5(c) and which constitute deferred
compensation subject to Section 409A either (A) at the
time when due hereunder, or (B) if a payment date sufficient
to satisfy Section 409A is not otherwise stated for such
payment or benefit, on the date of Executive’s termination of
employment, except as provided in Section 14 below.
a.
If the Executive’s employment is terminated following a
Change in Control and during the Term, other than (A) by the
Company for Cause, (B) by reason of death or Disability, or
(C) by the Executive without Good Reason, then, the Company
shall pay the Executive the amounts, and provide the Executive the
benefits, described in this Section 6 (“Severance
Payments”) and Section 7, in addition to any payments
and benefits to which the Executive is entitled under
Section 5 hereof. For purposes of this Agreement, the
Executive’s employment shall be deemed to have been
terminated following a Change in Control by the Company without
Cause or by the Executive with Good Reason, if (i) the
Executive’s employment is terminated by the Company without
Cause prior to a Change in Control (whether or not a Change in
Control ever occurs) and such termination was at the request or
direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in
Control (an “Acquiring Person”), (ii) the
Executive terminates his employment for Good Reason prior to a
Change in Control (whether or not a Change in Control ever occurs)
and the circumstance or event which constitutes Good Reason occurs
at the request or direction of an Acquiring Person, or
(iii) the Executive’s employment is terminated by the
Company without Cause or by the Executive for Good Reason and such
termination or the circumstance or event which constitutes Good
Reason is otherwise in connection with or in
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anticipation of
a Change in Control (whether or not a Change in Control ever
occurs). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position
taken by the Executive shall be presumed to be correct unless the
Company establishes to the Board by clear and convincing evidence
that such position is not correct.
(1) Lump Sum
Payment . In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and in
lieu of any severance benefit otherwise payable to the Executive
under the terms of his offer letter from the Company, the Company
shall pay to the Executive a lump sum severance payment, in cash,
equal to two times the sum of (i) the Executive’s base
salary as in effect immediately prior to the Date of Termination
or, if higher, in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, and
(ii) the average of the annual bonuses earned by the Executive
in the three fiscal years ending immediately prior to the fiscal
year in which occurs the Date of Termination or, if higher,
immediately prior to the fiscal year in which occurs the first
event or circumstance constituting Good Reason. For purposes of the
preceding sentence, in determining any bonus amount for any fiscal
year, bonuses paid with respect to any year in which employment of
the Executive commenced shall be annualized based on the number of
days employed by the Company during such year. In the event the
date of the Executive’s termination of employment occurs on
or within two years following an event that constitutes a change in
the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company
within the meaning of section 409A(a)(2)(a)(vi) of the Code, such
amount will be paid in a lump sum within 30 days following the
date of the Executive’s termination of employment, except as
set forth in Section 14 below; otherwise, such amount will be
paid 53 days following the date of the Executive’s
termination of employment, except as provided by Section 14
below.
(2)
Continuation of Welfare Benefits . Subject to
Paragraph 15 in the case of any benefits that are not exempt
from Section 409A, for the twenty-four (24) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life,
disability, and accident insurance benefits and other benefits and
perquisites (including employee stay rates) substantially similar
to those provided to the Executive and his dependents immediately
prior to the Date of Termination or, if more favorable to the
Executive, those provided to the Executive and his dependents
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
date or occurrence. Benefits otherwise receivable by the Executive
pursuant to this Section 6(a)(2) shall be reduced to the
extent benefits of the same type are received by the Executive from
another employer during the twenty-four (24) month period
following the Executive’s termination of employment;
provided , however , that the Company shall reimburse
the Executive for the excess, if any, of the cost of such benefits
to the Executive over such cost immediately prior to the Date of
Termination or, if more favorable to the Executive, the first
occurrence of an event or circumstance constituting Good
Reason.
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(3) Health
Benefits . For the twenty-four (24) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive with group health coverage
substantially similar to that which the Executive was receiving
immediately prior to the Notice of Termination. The premium charge
to the Executive for each month of such coverage will equal the
Company’s monthly COBRA charge for such coverage in which the
Executive, his spouse and covered dependents (as applicable) is
enrolled from time to time (less the amount of any administrative
charge typically assessed by the Company as part of its COBRA
charge) and the Executive will be required to pay such monthly
premium charge in accordance with the Company’s standard
COBRA premium payment requirements. The Company will pay Executive
a lump sum in cash equal to an initial multiple that is increased
by a percentage. For this purpose, the initial multiple is 24 times
the difference that results from calculating (i) the
Company’s monthly COBRA charge on the Date of Termination for
family coverage with respect to the highest value health coverage
provided to salaried employees, minus (ii) the amount the
Company charges active salaried employees for such coverage on
Executive’s Date of Termination. In addition, for this
purpose, the percentage is the sum of (I) 1% for each month in
the 24-month period that will fall in the calendar year following
Executive’s Date of Termination, plus (II) 2% for each
month in the 24-month period that will fall in the second calendar
year following Executive’s Date of Termination. The Company
will make such payment within 30 days following the date of
the Executive’s termination of employment, except as provided
by Section 14 below.
(4) Incentive
Compensation . Notwithstanding any provision of any annual or
long-term incentive plan to the contrary, the Company shall pay to
the Executive in cash the following amounts:
(A) A lump sum
equal to any unpaid incentive compensation which has been allocated
or awarded to the Executive for a completed fiscal year or other
measuring period preceding the Date of Termination under any such
plan and which, as of the Date of Termination, is contingent only
upon the continued employment of the Executive to a subsequent
date, paid during the fiscal year of termination when bonuses for
such completed fiscal year are paid to senior executives (but not
later than 2-1/2 months after such completed fiscal year,
except as provided by Section 14 below; and
(B) the value of
each contingent incentive compensation award allocated or awarded
to the Executive for a then uncompleted period under any such plan
that the Executive would have earned on the last day of the
performance award period, assuming the achievement, at the target
level, of the individual and corporate performance goals
established with respect to such award, paid in the year following
the end of such performance period when awards for such performance
period are paid to senior executives (but not later than
2-1/2 months after the end of such performance period, except
as provided by Section 14 below. Awards for uncompleted
periods shall be prorated based upon the number of days the
Executive is employed by the Company during such year.
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(5) Accelerated
Vesting of Stock Options . All stock options and restricted
stock held by the Executive under any stock option or incentive
plan maintained by the Company (including the Company’s 2004
Long-Term Incentive Plans) shall immediately vest and become
exercisable as of the Date of Termination, to be exercised in
accordance with the terms of the applicable plan
(6)
Outplacement Services . The Company shall provide the
Executive with outplacement services suitable to the
Executive’s position for a period of two (2) years
following the date of the Executive’s termination of
employment or, if earlier, until the first acceptance by the
Executive of an offer of employment. The cost of such outplacement
services shall not exceed twenty percent (20%) of the
Executive’s base salary in effect on the Date of
Termination.
(7) 401(k)
Contributions . The Company shall pay the Executive an amount
equal to the unvested portion (if any) of the Executive’s
account balance under the Company’s 401(k) Plan that is
forfeited by reason of the Executive’s termination of
employment. Such payment shall be made within 30 days
following the date of the Executive’s termination of
employment, except as provided by Section 14 below.
a.
Notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by the
Executive in connection with a change in the ownership or effective
control of the Company or in the ownership of a substantial portion
of the assets of the Company (within the meaning of section
280G(b)(2)(A)(i) of the Code (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in such change in
ownership or effective control or in the ownership of Company
assets or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the Severance Payments,
being hereinafter called “Total Payments”) would not be
deductible (in whole or part), by the Company, an affiliate or
Person making such payment or providing such benefit as a result of
section 280G of the Code, then, the Total Payments shall be reduced
(with the cash Severance Payments being reduced first (if
necessary, to zero) in the order in which they appear in
Section 6 above, and all other Severance Payments shall
thereafter be reduced (if necessary, to zero) in the order in which
they appear in Section 6 above provided that extended health
benefits will be reduced last to the minimum extent necessary such
that, after deducting the amount of any Excise Tax imposed on such
Total Payments (as so reduced) from such Total Payments (as so
reduced), the amount of the Total Payments (after such reduction)
will be greater if such reduction is made than it would be without
such reduction. All determinations, including the order and timing
of any such reduction shall be determined by the accounting firm
which was, immediately prior to the Change in Control, the
Company’s independent auditor (the
“Auditor”).
b.
For purposes of this limitation, (i) no portion of the Total
Payments the receipt or enjoyment of which the Executive shall have
waived at such time and in such manner as not to constitute a
“payment” within the meaning of section 280G(b) of the
Code shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which, in the opinion of tax
counsel (“Tax Counsel”) reasonably acceptable to the
Executive and selected by
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the Auditor,
does not constitute a “parachute payment” within the
meaning of section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code and (iii) the value of any
noncash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Auditor in accordance
with the principles of sections 280
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