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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[STARWOOD HOTELS & RESORTS WORLDWIDE INC. LOGO]
1999
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
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[STARWOOD HOTELS & RESORTS WORLDWIDE INC. LOGO]
Dear Stockholders:
You are cordially invited to attend Starwood's Annual Meeting of
Stockholders, which is being held on Wednesday, May 26, 1999, at 10 a.m., at the
Westin Fairfax, 2100 Massachusetts Avenue, N.W., Washington, D.C.
At this year's Annual Meeting, you will be asked to elect six directors and
to approve, among other things, Starwood's 1999 Long-Term Incentive Plan, which
provides for incentive and other awards that are designed to provide
participants with an increased proprietary interest in our Company. In addition,
as required by the Internal Revenue Code, you will also be asked to approve the
annual incentive compensation plan for certain executives to permit certain
compensation payments to be tax deductible by Starwood. Your vote on these
matters is important and we appreciate your continued support.
Stockholders of record can vote their shares in person at the meeting or by
marking their votes on the enclosed proxy card, signing and dating it, and
mailing it in the enclosed envelope.
Very truly yours,
/s/ Barry S. Sternlicht
Barry S. Sternlicht
Chairman and Chief Executive Officer
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[STARWOOD LOGO]
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
The 1999 Annual Meeting of Stockholders of Starwood Hotels & Resorts
Worldwide, Inc. (the "Company") will be held at The Westin Fairfax, 2100
Massachusetts Avenue, N.W., Washington, D.C., on May 26, 1999, at 10:00 a.m.,
local time. The items for business are:
1. Election of six Directors to the Board of Directors for a term of three
years;
2. Approval of the Company's 1999 Long-Term Incentive Plan;
3. Approval of an annual incentive compensation plan for certain
executives to permit certain payments to be tax deductible by Starwood;
and
4. Such other business as may properly come before the meeting.
Only holders of record of shares of common stock of the Company at the
close of business on April 7, 1999 are entitled to receive notice of, and to
vote at, the Annual Meeting or at any adjournment or postponement thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE URGED TO READ THE
ACCOMPANYING PROXY STATEMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED AT THE MEETING, AND YOUR PROMPTNESS WILL ASSIST
US IN AVOIDING ADDITIONAL SOLICITATION COSTS. IF YOU RECEIVE MORE THAN ONE PROXY
CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT
ADDRESSES, EACH CARD SHOULD BE SIGNED AND RETURNED.
/s/ Thomas C. Janson,Jr.
Thomas C. Janson, Jr.
Secretary
April 20, 1999
White Plains, New York
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WHO CAN HELP ANSWER YOUR QUESTIONS
If you have any questions about the Annual Meeting, you should contact:
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
777 Westchester Avenue
White Plains, New York 10604
Attention: Investor Relations
Phone Number: (914) 640-8100
If you would like additional copies of this Proxy Statement, or if you have
questions about the Annual Meeting or need assistance in voting your shares, you
should contact:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Phone Number: (800)758-5880 (toll free)
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THE ANNUAL MEETING
Starwood Hotels & Resorts Worldwide, Inc. (the "Company" and, together with
its subsidiaries, "Starwood") is furnishing this Proxy Statement to its
stockholders in connection with the solicitation of proxies by the Board of
Directors (the "Board") for use at the Company's 1999 Annual Meeting of
Stockholders (the "Annual Meeting").
DATE, TIME AND PLACE
The Annual Meeting will be held on May 26, 1999 at 10:00 a.m. (local time),
at The Westin Fairfax, 2100 Massachusetts Avenue, N.W., Washington, D.C.
MATTERS TO BE CONSIDERED
At the Annual Meeting, the stockholders of the Company will consider and
vote upon:
1. Election of six Directors to the Board of Directors;
2. Approval of the Company's 1999 Long-Term Incentive Plan (the "Proposed
LTIP");
3. Approval of an annual incentive compensation plan for certain
executives to permit certain payments to be tax deductible by Starwood
(the "Annual Incentive Plan"); and
4. Such other business as may properly come before the Annual Meeting.
The Board is not aware of any matter that will be presented at the Annual
Meeting other than as described above. If any other matter is presented at the
Annual Meeting, the persons named as proxies on the enclosed proxy card will, in
the absence of stockholder instructions to the contrary, vote the shares for
which such persons have voting authority in accordance with their best judgment
on such matter.
VOTING RIGHTS; VOTE REQUIRED
The record date for determining the stockholders entitled to notice of, and
to vote at, the Annual Meeting is the close of business on April 7, 1999 (the
"Record Date"). On the Record Date, 177,731,866 shares of common stock of the
Company ("Starwood Shares") were outstanding and entitled to vote at the Annual
Meeting. On the Record Date, there were approximately 37,000 record holders of
Starwood Shares. Starwood Shares are the only outstanding class of voting
securities of the Company. Each stockholder of the Company will be entitled to
one vote for each Starwood Share held of record by such stockholder on the
Record Date on each matter that is properly submitted to a vote at the Annual
Meeting. Stockholders of the Company do not have the right to cumulate votes in
the election of Directors.
A majority of the outstanding Starwood Shares entitled to vote must be
present at the Annual Meeting, either in person or by duly executed proxy, in
order to constitute a quorum for the transaction of business. Abstentions and
broker non-votes are counted for purposes of determining whether a quorum is
present at the Annual Meeting.
As of April 7, 1999, Directors and executive officers of the Company as a
group had the right to vote approximately 5.7 million Starwood Shares,
representing approximately 3.2% of the Starwood Shares outstanding on such date.
All such Directors and executive officers have indicated that they intend to
vote all such shares held by them in favor of the election of the nominees for
Director named herein and in favor of approval of the Proposed LTIP and Annual
Incentive Plan.
Directors are elected by a plurality of the votes actually cast.
Accordingly, shares that are not voted with respect to the election of Directors
will not have any effect on the outcome of the election of Directors. The
affirmative vote of a majority of votes cast on the proposal is required for
approval of the Proposed LTIP and the Annual Incentive Plan; provided that, with
respect to the Proposed LTIP, the total votes cast on such proposal represent
over 50% in interest of all Starwood Shares entitled to vote on such proposal.
For purposes of the vote on the Proposed LTIP, an abstention or a broker
non-vote will have the effect of a vote cast against the proposal, unless
holders of more than 50% of all Starwood Shares entitled to vote on the proposal
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cast votes. For purposes of the vote on the Annual Incentive Plan, an abstention
or broker non-vote will have no effect on the result of the vote, although it
will count toward the presence of a quorum.
PROXIES
Each Starwood Share represented by a properly executed proxy will be voted
at the Annual Meeting in accordance with the stockholder instructions specified
thereon, unless such proxy previously has been revoked. If no instructions are
specified, such Starwood Shares will be voted FOR the election of each of the
nominees for Director named herein, FOR the approval of the Proposed LTIP and
FOR the approval of the Annual Incentive Plan.
If a quorum is not present at the time the Annual Meeting is convened, or
if for any other reason the Board believes that the Annual Meeting should be
adjourned, the Annual Meeting may be adjourned by the stockholders entitled to
vote thereat present in person or by proxy. If the Board proposes to adjourn the
Annual Meeting, the persons named as proxies on the enclosed proxy card will
have discretion to vote on such adjournment all Starwood Shares for which such
persons have voting authority. It is intended that such persons will vote on any
such matter in accordance with the recommendation of the Board.
A stockholder of the Company may revoke a proxy at any time prior to
exercise of such proxy by (i) filing with the Secretary of the Company an
instrument of revocation bearing a date later than the date of the proxy, (ii)
properly executing a new proxy with a later date relating to the same Starwood
Shares and delivering such proxy to the Secretary of the Company, or (iii)
attending the Annual Meeting and voting in person, although attendance at the
Annual Meeting will not in and of itself constitute a revocation of a proxy. Any
instrument of revocation should be sent to: Starwood Hotels & Resorts Worldwide,
Inc., 777 Westchester Avenue, White Plains, New York 10604, Attention:
Secretary.
ELECTION OF DIRECTORS
The Board is divided into three classes. One class is elected at each
annual meeting of stockholders to serve for a three-year term and until
successor Directors are duly elected and qualify.
As a result of the restructuring of the Company and Starwood Hotels &
Resorts (the "Trust"), which was completed in January 1999, Starwood has
reconstituted the Board of the Company by adding the Trustees of the Trust and
two other persons to the Board of the Company. At the Annual Meeting, the terms
of six Directors are expiring. Each Director nominated for election at the
Annual Meeting would, upon election, serve as a Director of the Company and
Trustee of the Trust for a three year term expiring in 2002 and until a
successor Director and Trustee is duly elected and qualified. Other Directors
are not up for election this year and will continue in office for the remainder
of their terms.
If a nominee is unavailable for election, proxy holders will vote for
another nominee proposed by the Board or, as an alternative, the Board may
reduce the number of Directors to be elected at the meeting.
DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2002
BRENDA C. BARNES, 45, is a director of Sears, Roebuck & Company, the New
York Times Company, Avon Products, Inc., Lucas Arts and Digital Equipment
Corporation. Ms. Barnes was the President and Chief Executive Officer of
Pepsi-Cola North America from April 1996 to January 1998, and was the Chief
Operating Officer of Pepsi-Cola North America from January 1993 to March 1996.
Ms. Barnes is also a member of the Advisory Board of the For All Kids Foundation
and of the Board of Trustees of Augustana College. Ms. Barnes has been a
Director of the Company since April 1998 and a Trustee of the Trust since April
1999.
BRUCE W. DUNCAN, 47, has been the Chairman, President and Chief Executive
Officer of The Cadillac Fairview Corporation Limited, a real estate operating
company, since December 1995. From October 1994 to December 1995, Mr. Duncan was
President of Blakely Capital, Inc., a private firm focusing on investments in
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real estate and telecommunications. From 1992 to 1994, Mr. Duncan was President
and Co-Chief Executive Officer of JMB Institutional Realty Corporation providing
advice and management for investments in real estate by tax-exempt investors and
from 1978 to 1992, he worked for JMB Realty Corporation where he served as
Executive Vice-President and a member of the Board of Directors. Mr. Duncan is a
trustee of Amresco Capital Trust and Kenyon College and is a member of the Board
of Directors of The Cadillac Fairview Corporation Limited and the Canadian
Institute of Public Real Estate Companies. In addition, Mr. Duncan is a member
of the Urban Land Institute and a member and past trustee of the International
Council of Shopping Centres. Mr. Duncan has been a Trustee of the Trust since
August 1995 and a Director of the Company since April 1999.
MICHAEL A. LEVEN, 61, has been the Chairman of the Board, President and
Chief Executive Officer of U.S. Franchise Systems, a hotel franchising and
development company, since September 1995. From October 1990 to September 1995,
Mr. Leven was President and Chief Operating Officer of Holiday Inn Worldwide.
Mr. Leven is a director of U.S. Franchise Systems and Servico, Inc. Mr. Leven is
also a member of the Board of Governors and the Chairman of the BioMedical
Services Board of the American Red Cross. Mr. Leven has been a Director of the
Company since August 1995 and a Trustee of the Trust since April 1999.
STEPHEN R. QUAZZO, 38, has been the Managing Director, Chief Executive
Officer and co-founder of Transwestern Investment Company, L.L.C., a real estate
principal investment firm, since March 1996. From April 1991 to March 1996, Mr.
Quazzo was President of Equity Institutional Investors, Inc., a subsidiary of
Equity Group Investments, Inc., a Chicago-based holding company controlled by
Samuel Zell. Mr. Quazzo is an advisory board member of City Year Chicago. Mr.
Quazzo has been a Trustee of the Trust since August 1995 and a Director of the
Company since April 1999.
DANIEL H. STERN, 37, has been the President of Reservoir Capital Group,
L.L.C., a New York-based investment management firm, since July 1997. Mr. Stern
was a Trustee of the Trust from August 1995 to November 1997. From December 1992
to July 1997, Mr. Stern was President of Ziff Brothers Investments, L.L.C., a
diversified investment management firm. Mr. Stern has been a Director of the
Company since November 1997 and a Trustee of the Trust since April 1999.
RAYMOND S. TROUBH, 72, is a financial consultant in New York City and a
former Governor of the American Stock Exchange. He was also a general partner of
Lazard Freres & Co., an investment banking firm. Mr. Troubh is a director of
ARIAD Pharmaceuticals, Inc., Becton, Dickinson and Company, Diamond Offshore
Drilling, Inc., Foundation Health Systems, Inc., General American Investors
Company, Olsten Corporation, Triarc Companies, Inc. and WHX Corporation and is a
Trustee of MicroCap Liquidating Trust and Petrie Stores Liquidating Trust. Mr.
Troubh has been a Trustee of the Trust since April 1998 and a Director of the
Company since April 1999.
The Board recommends a vote FOR election of these nominees.
DIRECTORS WITH TERMS EXPIRING IN 2000
JUERGEN BARTELS, 58, has been the Chief Executive Officer of Starwood's
Hotel Group since March 1998. From May 1995 to March 1998, Mr. Bartels was the
Chairman and Chief Executive Officer of Westin Hotels & Resorts Worldwide, Inc.
("Westin Worldwide"). Prior to joining Westin Worldwide, Mr. Bartels was the
President and Chief Executive Officer of Carlson Hospitality Group, Inc.
("Carlson"), which controls Radisson Hotels International, T.G.I. Friday's
restaurants and Country Inns and Suites. Prior to joining Carlson in 1983, Mr.
Bartels was the President of Ramada's worldwide holding company and founder of
Ramada Renaissance Hotels. Mr. Bartels has been a Director of the Company since
January 1998 and a Trustee of the Trust since April 1999.
JEAN-MARC CHAPUS, 39, has been Managing Director and Portfolio Manager of
Trust Company of the West and President of TCW/Crescent Mezzanine L.L.C., a
private investment fund, since March 1995. Prior to that time, Mr. Chapus was a
Managing Director and Principal of Crescent Capital Corporation with primary
responsibility for the firm's private lending and private placement activities.
Mr. Chapus was a
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Director of the Corporation from August 1995 to November 1997, and is currently
a member of the Board of Directors of Home Asset Management Company and
Firstamerica Automotive, Inc. Mr. Chapus has been a Trustee of the Trust since
November 1997 and a Director of the Company since April 1999.
JONATHAN D. EILIAN, 31, has been a Senior Managing Director, Managing
Director or executive officer of Starwood Capital Group, L.L.C. ("Starwood
Capital") and its predecessor entities since its formation in 1991. Prior to
being a founding member of Starwood Capital, Mr. Eilian served as an Associate
for JMB Realty Corporation, a real estate investment firm, and for The Palmer
Group, L.P., a private investment firm specializing in corporate acquisitions.
Mr. Eilian is currently a Trustee of Starwood Financial Trust (a specialized
real estate finance company organized as a real estate investment trust (a
"REIT")) ("Starwood Financial") and is a member of the board of the Wharton Real
Estate Center. Mr. Eilian has been a Director of the Company since August 1995
and a Trustee of the Trust since April 1999.
L. DENNIS KOZLOWSKI, 52, has been the Chairman of the Board, President and
Chief Executive Officer of Tyco International, Ltd. ("Tyco") since July 1997.
Mr. Kozlowski has been the Chairman of the Board (since 1993), Chief Executive
Officer (since 1992), President (since 1989) of Tyco's predecessor and current
subsidiary, Tyco International Inc. In addition, Mr. Kozlowski was President of
Grinnell Corporation from January 1984 to February 1997. Mr. Kozlowski is a
director of Applied Power Inc., Raytheon Company and US Office Products and was
a director of Dynatech Corporation from September 1995 to May 1998 and RJR
Nabisco Holdings Corp. from June 1996 to May 1998. Mr. Kozlowski has been a
Director of the Company and a Trustee of the Trust since April 1999.
RICHARD D. NANULA, 38, has been President and Chief Operating Officer of
the Company and President of the Trust since January 1999. Mr. Nanula joined the
Company as its President and Chief Executive Officer in June 1998 and served in
such capacity until January 1999. Prior to joining the Company, Mr. Nanula was
the Chief Financial Officer of The Walt Disney Co. ("Disney") from 1996 through
1998 and from 1991 through 1995. Mr. Nanula was the President of Disney Stores,
a division of Disney, from 1995 through 1996 and a senior executive vice
president of Disney from 1996. Prior to 1991, Mr. Nanula worked in the strategic
planning department at Disney. Mr. Nanula has been a Director of the Company
since June 1998 and a Trustee of the Trust since April 1999.
BARRY S. STERNLICHT, 38, has been the Chairman and Chief Executive Officer
of the Company since September 1997 and January 1999, respectively. Mr.
Sternlicht has served as Chairman and Chief Executive Officer of the Trust since
January 1995. Mr. Sternlicht also has been the President and Chief Executive
Officer of Starwood Capital and its predecessor entities since its formation in
1991. Mr. Sternlicht is currently the Chairman of the Board of Trustees of
Starwood Financial and a Director of U.S. Franchise Systems. Mr. Sternlicht is a
member of the Urban Land Institute and of the National Multi-Family Housing
Council. Mr. Sternlicht is a member of the Board of Directors of the Juvenile
Diabetes Foundation International and the Council for Christian and Jewish
Understanding, is a member of the Young Presidents Organization and is on the
Board of Directors of Junior Achievement for Fairfield County, Connecticut. Mr.
Sternlicht has been a Director of the Company since December 1994 and a Trustee
of the Trust since April 1999.
DIRECTORS WITH TERMS EXPIRING IN 2001
MADISON F. GROSE, 45, has been a Managing Director or Senior Managing
Director and the General Counsel or Co-General Counsel of Starwood Capital
Group, L.L.C. (and its predecessor entities) since July 1992. From November 1983
through June 1992, he was a Partner in the law firm of Pircher, Nichols & Meeks.
Mr. Grose has been a Trustee of the Trust since December 1994 and a Director of
the Company since April 1999.
ERIC HIPPEAU, 47, has been Chairman and Chief Executive Officer of
Ziff-Davis Inc. since 1993. Mr. Hippeau joined Ziff-Davis Inc. in 1989 as
Publisher of PC Magazine, was named Executive Vice President in 1990 and
President and Chief Operating Officer in February 1991. Prior to joining
Ziff-Davis Inc., Mr. Hippeau held a number of positions with International Data
Group ("IDG"), including Vice President of Computer Publications in Latin
America and Publisher of IDG's InfoWorld magazine. Mr. Hippeau is a Director of
Ziff-Davis Inc., GeoCities, Frontier Corporation, SOFTBANK Corp.
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and Yahoo! Inc. Mr. Hippeau has been a Trustee of the Trust and a Director of
the Company since April 1999.
EARLE F. JONES, 72, was the Chairman of the Board of the Company from
February 1989 to September 1997. He has been Co-Chairman since 1988 of MMI Hotel
Group, a hotel company, and is the Co-Chairman of MMI Dining Systems. From 1967
to 1968, Mr. Jones was President of the International Association of Holiday
Inns and served two terms as a director. Mr. Jones is a member of the board of
trustees for each of the National Multiple Sclerosis Society, Mississippi
Chapter, Millsap College and Jackson 2000, and is Co-Chairman of the Mississippi
Olympic Committee. Mr. Jones is a general partner of Orlando Plaza Suite Hotel,
Ltd-A, which filed a petition under Chapter 11 of the U.S. Bankruptcy Code in
May 1996. An order confirming the debtor's plan of restructuring was issued by
the court on January 27, 1997. Mr. Jones has been a Director of the Company
since September 1985 and a Trustee of the Trust since April 1999.
GEORGE J. MITCHELL, 65, has been Special Counsel to the law firm of Verner,
Liipfert, Bernhard, McPherson and Hand since January 1995. Senator Mitchell
served as a United States Senator from January 1980 to January 1995, and was the
Majority Leader from 1989 to 1995. Senator Mitchell serves as a director of The
Walt Disney Company, Federal Express Corporation, Xerox Corporation, UNUM
Corporation, KTI, Inc. and Staples, Inc. In addition, Senator Mitchell serves as
Chairman of the International Crisis Group, a non-profit organization dedicated
to the prevention of crises in international affairs. From 1995 to 1997, Senator
Mitchell served as the Special Advisor to the President of the United States on
economic initiatives in Ireland. At the request of the British and Irish
Governments, he served as Chairman of the International Commission on
Disarmament in Northern Ireland, and as Chairman of the peace negotiations in
Northern Ireland. Senator Mitchell serves as Chairman of the Ethics Committee of
the U.S. Olympic Committee and as Chairman of the National Health Care
Commission created by the Pew Charitable Foundation. Senator Mitchell has been a
Trustee of the Trust since November 1997 and a Director of the Company since
April 1999.
DANIEL W. YIH, 40, has been a general partner of Chilmark Partners, L.P.
since June 1995. Mr. Yih served as interim Chief Financial Officer of Midway
Airlines (from September 1995 to December 1995), President of Merco-Savory,
Inc., a manufacturer of food preparation equipment (from March 1995 to June
1995), and as a senior executive of Welbilt Corporation (from September 1993 to
March 1995). Mr. Yih has been a Director of the Company since August 1995 and a
Trustee of the Trust since April 1999.
BOARD MEETINGS AND COMMITTEES
In 1998, the full Board met 22 times. In addition to meetings of the full
Board, Directors attended meetings of individual Board committees and often
considered issues separate from these meetings. For the incumbent Board as a
whole, attendance in 1998 at full Board and committee meetings exceeded 84%.
Each Director attended at least 75% of the meetings of the full Board and
committees on which he or she served except Messrs. Leven and Bartels.
The Board has established Executive, Audit, Compensation, Option and Gaming
Audit Committees, the principal functions of which are described below.
Executive Committee. To the extent permitted by law, the Executive
Committee is authorized to exercise the power of the Board with respect to the
management of the business and affairs of the Company between meetings of the
Board, except that the Executive Committee may not authorize dividends on stock,
issue stock except in the limited circumstances permitted by statute, recommend
to the stockholders any action which requires stockholder approval, amend the
Company's Bylaws, or approve any merger or share exchange. During 1998, the
Executive Committee of the Company met on an informal basis. The Executive
Committee is currently comprised of Messrs. Sternlicht, Nanula and Eilian.
Audit Committee. The Audit Committee provides oversight regarding
accounting, auditing and financial reporting practices of the Company, as well
as oversight regarding related party transactions. The Audit Committee selects,
subject to the approval of the Board, the firm of independent public accountants
to serve as auditors with whom it discusses the scope and results of their
audit. The Audit Committee also discusses
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with the independent public accountants and with management financial accounting
and reporting principles, policies and practices and the adequacy of the
Company's accounting, financial and operating controls. The Audit Committee met
five times during 1998. The Audit Committee is currently comprised of Messrs.
Yih (chairman), Leven and Jones.
Gaming Audit Committee. The Gaming Audit Committee provides oversight
regarding compliance with applicable gaming laws. The Gaming Audit Committee is
currently comprised of Ms. Barnes and Messrs. Nanula and Leven (chairman).
Compensation Committee. The Compensation Committee makes recommendations
to the Board with respect to the salaries and other compensation to be paid to
the executive officers and administers the Company's employee benefit plans
other than the option plans. The Compensation Committee of the Board met
formally twice and informally at other times during 1998. The Compensation
Committee is currently comprised of Messrs. Jones and Sternlicht (chairman).
Option Committee. The Option Committee administers the Company's 1995
Long-Term Incentive Plan of the Company (the "1995 LTIP"). The Option Committee
of the Board met 13 times during 1998. The Option Committee is currently
comprised of Messrs. Yih (chairman), Leven and Jones.
COMPENSATION OF DIRECTORS AND TRUSTEES
Directors of the Company and Trustees of the Trust who are employees of the
Company receive no fees for their services as Directors or Trustees.
Non-employee Directors and Trustees receive separate (combined) compensation for
their service. That compensation includes:
Annual Fee: $50,000, payable in four equal installments of Starwood Shares
and class B shares of beneficial interest ("Class B Shares") of
the Trust that are attached and traded together as "Units"
(based on the market value of a Unit on the preceding December
31). A Director or Trustee may elect to receive up to one half
of the Annual Fee in cash and may defer (at an annual interest
rate of LIBOR plus 1 1/2% for deferred cash amounts) any or all
of his or her Annual Fee.
Attendance Fees: $750 for each Board meeting ($500 in the case of a telephonic
meeting). $500 for each Committee meeting ($1,000 for the
chairman of the Committee). Expenses related to attendance.
Options: Annual grants of 4,500 Units under the 1995 LTIP or the 1995
Long Term Incentive Plan of the Trust (the "Trust LTIP"), as
applicable, until the Proposed LTIP becomes effective and
thereafter under the Proposed LTIP.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that Directors and executive officers of the Company,
and persons who own more than 10 percent of the outstanding Units, file with the
Securities and Exchange Commission (the "SEC") (and provide a copy to the
Company) certain reports relating to their ownership of Units and other equity
securities of the Company. (As used in this Proxy Statement, the term "Unit"
also refers to the "Paired Shares," which consisted of one Starwood Share and
one common share of beneficial interest of the Trust (a "Trust Share"). On
January 6, 1999, as a consequence of a restructuring (the "Restructuring") of
Starwood, the Trust Shares were converted into Class B Shares, and Paired Shares
became Units.)
To the Company's knowledge, based solely on a review of the copies of these
reports furnished to the Company during the fiscal year ended December 31, 1998,
and written representations that no other reports were required, all Section
16(a) filing requirements applicable to its Directors, executive officers and
greater than 10 percent beneficial owners were complied with for the most recent
fiscal year.
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PROPOSED LONG-TERM INCENTIVE PLAN
The Board is proposing for approval by the stockholders a new Long-Term
Incentive Plan. Reference is made to Annex A to this proxy statement for the
complete text of the Proposed LTIP, which is summarized below. The purposes of
the Proposed LTIP are to aid in maintaining and developing strong management
through encouraging ownership of Units by key employees, consultants and
advisers and to provide an incentive to the continued service of such persons.
The Board adopted the Proposed LTIP in April, 1999, subject to the stockholder
approval solicited by this proxy statement. The Proposed LTIP, if approved, will
replace the 1995 LTIP and the Trust LTIP.
DESCRIPTION OF THE PROPOSED LTIP
General. The Proposed LTIP will be administered by a committee (the
"Option Committee") of two or more Directors, each of whom is a "non-employee
director" within the meaning of Rule 16b-3 of the Exchange Act and an "outside
director" within the meaning of Section 162(m) ("Section 162(m)") of the
Internal Revenue Code of 1986, as amended (the "Code"). The Proposed LTIP may be
amended by the Board at any time so long as any such amendment does not
adversely affect the rights of holders of options granted under the Proposed
LTIP that are outstanding immediately prior to such amendment.
Under the Proposed LTIP, participants may be granted stock options, stock
appreciation rights ("SARs"), restricted stock, restricted stock units and
performance units/shares. The number of Units that may be awarded under the
Proposed LTIP is twenty million, not more than three million of which may be
granted in the form of restricted stock. If Units subject to awards granted
under the 1995 LTIP or the Trust LTIP are not issued or delivered or are
canceled or forfeited, that number of Units shall be added to the number of
Units available for grant under the Proposed LTIP. The maximum number of Units
(or payout, as applicable) that may be awarded one person in any one calendar
year is as follows: (i) in the form of stock options or SARs, five million
Units; (ii) as awards of restricted stock, two million Units; and (iii) as
performance units/shares, the value of two million Units.
Employees of the Company or any subsidiary of the Company, directors of the
Company who are not also employees of the Company or any subsidiary of the
Company, individuals serving at the request of the Company as an employee or
officer of an affiliate of the Company and consultants and advisers to the
Company or a subsidiary of the Company are eligible to be granted awards under
the Proposed LTIP. The determination of the individuals to whom awards are
granted under the Proposed LTIP is within the sole discretion of the Option
Committee.
In the event of a "Change in Control" of the Company, all stock options and
stock appreciation rights granted under the Proposed LTIP would become fully
exercisable for their remaining term; any restriction periods and restrictions
imposed on restricted stock which are not performance-based would lapse; and the
target payout opportunities attainable under all outstanding awards of
performance-based restricted stock, performance units and performance shares
shall be deemed to have been fully earned for the entire performance period as
of the effective date of the Change in Control.
Stock Options. The number of Units subject to a stock option, the exercise
price per Unit (which shall be at least the fair market value of a Unit on the
date of grant) and the period of exercise (including upon termination of
employment) will be determined by the Option Committee; provided that no option
will be exercisable more than ten years after the date of grant.
The Option Committee shall determine the conditions to the exercisability
of stock options granted under the Proposed LTIP. Upon exercise of a stock
option, including one that is an "incentive stock option" within the meaning of
the Code, the purchase price and, if the Option Committee requires, any
withholding tax required by law, may be paid in cash or, with the approval of
the Option Committee, by delivery of previously owned Units. Certain terms of a
stock option (including certain terms relating to the exercisability of a stock
option described below) may be modified in the agreement entered into in
connection with the grant of such option.
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SARs. SARs granted under the Proposed LTIP would entitle the grantee to
receive in the discretion of the Option Committee cash or Units having a fair
market value equal to the appreciation from a base price (which shall not be
less than the market value as of the date of the grant) of a stated number of
Units. SARs under the Proposed LTIP may be granted in tandem with a related
stock option or independently. If a SAR is granted in tandem with a stock
option, the grantee may exercise either the stock option or the SAR, but not
both. SARs are not exercisable more than ten years from the date of grant. The
Option Committee shall determine the extent to which a SAR is exercisable after
termination of employment.
Unless otherwise provided in the award agreement for a particular grant,
stock options and SARs granted under the Proposed LTIP will be exercisable after
termination of the holder's employment or service in accordance with the
following provisions. In the event of termination of employment or service of a
holder by reason of death or disability, each stock option and SAR will become
fully exercisable and will be exercisable for a period of one year after the
date of such termination, but in no event after the expiration of such stock
option or SAR. In the event of the termination of employment or service for
cause, each stock option and SAR will terminate on the date of such termination.
In the event of the voluntary termination of employment or service of a holder,
each stock option and SAR, to the extent exercisable on the effective date of
such holder's termination of employment or service, may thereafter be exercised
for a period of thirty days after the date of such termination, but in no event
after the expiration of such stock option or SAR. In the event of the
termination of employment or service for any other reason, each stock option and
SAR, to the extent exercisable on the termination date, may thereafter be
exercised for a period of three months after the date of such termination, but
in no event after the expiration of such stock option or SAR. If a holder of a
stock option or SAR dies during the one-year period following termination of
employment or service by reason of disability, during the thirty-day period
following the voluntary termination of employment or service, or during the
three-month period following termination of employment or service for any other
reason, each stock option and SAR may thereafter be exercised, to the extent
exercisable on the date of the holder's death, for a period of thirty days, in
the case of voluntary termination, or three months, in any other case, from the
date of death (but no less than one year after termination of employment or
service if the holder's termination was by reason of disability) but in no event
after the expiration of such stock option or SAR.
Restricted Stock. The Option Committee will determine the conditions, if
any, to which a restricted stock award shall be subject. The terms of each such
award, including the restriction period and performance targets applicable to
the award and the extent to which the holder will have the right to receive
unvested restricted stock following termination of employment, will be set forth
in the agreement relating to such award. Unless otherwise set forth in the
agreement relating to a restricted stock award, the holder of Units of
restricted stock shall have all the rights of a stockholder of the Company,
including, but not limited to, voting rights and the right to receive dividends.
Unless otherwise set forth in the award agreement for a restricted stock
award, in the event of termination of employment or service of a holder by
reason of death, disability or involuntary termination by Starwood without
cause, the restriction period terminates and the performance measures, if any,
are to be computed through the date of such termination. In the event of
termination of employment or service for any reason other than death, disability
or involuntary termination without cause, the portion of such award that is
subject to a restriction period on the date of such termination shall be
forfeited.
Performance Awards. Performance units/shares are awards granted in terms
of a stated potential maximum number of units or shares, with the actual number
and value earned to be determined by reference to the satisfaction of
performance targets established by the Option Committee as described below over
a specified performance period. Unless otherwise set forth in the agreement
relating to a performance award, the holder shall have all the rights of a
stockholder of the Company, including, but not limited to, voting rights and the
right to receive dividends with respect to Units in connection with grants of
performance units or performance shares which have been earned, but not yet
distributed to the participant. Unless otherwise specified in the agreement
relating to the performance award, in the event a holder's employment is
terminated by death, disability or retirement during a performance period, the
participant shall receive a prorated payout, and if employment terminates for
any other reason, all performance units/shares shall be forfeited.
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Under the Proposed LTIP, payouts under restricted stock awards and awards
of performance units/shares that are intended to qualify as performance-based
compensation eligible for exclusion from the deduction limit under Section
162(m) described under the caption "Annual Bonus Plan" will be subject to the
satisfaction of specific performance targets established by the Option Committee
within the first 90 days of the applicable performance period, based on one or
more of the following business criteria: earnings before interest, taxes,
depreciation and amortization ("EBITDA"), consolidated pre-tax earnings,
revenues, net earnings, operating income, earnings before interest and taxes,
cash flow measures, return on equity, return on net assets employed or earnings
per share.
Director Options and Unit Awards. On June 30 of each year, each
non-employee Director is automatically granted a stock option to purchase 4,500
Units at an exercise price per Unit equal to the fair market value of a Unit on
the date of grant. Such options are fully exercisable on the date of grant and
expire ten years after the date of grant (notwithstanding termination of service
as a Director for any reason prior to ten years after the date of grant). If a
Director dies while a stock option granted to such Director is outstanding, such
option may be exercised until and including the expiration date of such option.
During each calendar year, each non-employee Director on the last day of
March, June, September and December will be awarded, on a current or deferred
basis at the election of each Director, a number of Units equal to one-quarter
of $50,000 divided by the fair market value of a Unit on the immediately
preceding December 31; provided that the number of Units issued in payment of
such annual fee may be reduced, to the extent that such Director indicates an
advance election to received cash (of no more than $25,000) in lieu of Units.
See "Compensation of Directors and Trustees."
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the U.S. federal income tax
consequences of awards made under the Proposed LTIP.
Stock Options. A participant will not recognize any income upon the grant
of a stock option. A participant will recognize income taxable as ordinary
income (and subject to income tax withholding for Company employees) upon
exercise of a non-qualified stock option equal to the excess of the fair market
value of the Units purchased over the exercise price, and the Company will be
entitled to a corresponding deduction. A participant will not recognize income
(except for purposes of the alternative minimum tax) upon exercise of an
incentive stock option provided that the incentive stock option is exercised
either while the participant is an employee of the Company or within 3 months
(one year if the participant is disabled within the meaning of Section 22(c)(3)
of the Code) following the participant's termination of employment. If Units
acquired by such exercise of an incentive stock option are held for the longer
of two years from the date the option was granted and one year from the date it
was exercised, any gain or loss arising from a subsequent disposition of such
Units will be taxed as long-term capital gain or loss, and the Company will not
be entitled to any deduction. If, however, such Units are disposed of within the
above-described period, then in the year of such disposition the participant
will recognize income taxable as ordinary income equal to the excess of (i) the
lesser of the amount realized upon such disposition and the fair market value of
such Units on the date of exercise over (ii) the exercise price, and the Company
will be entitled to a corresponding deduction.
SARs. A participant will not recognize any income upon the grant of a SAR.
A participant will recognize income taxable as ordinary income (and, with
respect to participants who are employees of Starwood, subject to income tax
withholding) upon exercise of a SAR equal to the fair market value of any Units
delivered and the amount of cash paid by the Company upon such exercise, and the
Company will be entitled to a corresponding deduction.
Restricted Stock Awards. A participant will not recognize taxable income
at the time of the grant of a restricted stock award, and the Company will not
be entitled to a tax deduction at such time, unless the participant makes an
election to be taxed at the time such restricted stock award is granted. If such
election is not made, the participant will recognize taxable income at the time
the restrictions lapse in an amount equal to the excess of the fair market value
of the Units at such time over the amount, if any, paid for such Units. The
amount of ordinary income recognized by a participant by making the
above-described election or upon the
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lapse of the restrictions is deductible by the Company, as compensation expense,
except to the extent the limit of Section 162(m) applies. In addition, a
participant receiving dividends with respect to Units subject to a restricted
stock award for which the above-described election has not been made and prior
to the time the restrictions lapse will recognize taxable compensation (subject
to income tax withholding for Company employees), rather than dividend income,
in an amount equal to the dividends paid and the Company will be entitled to a
corresponding deduction, except to the extent the limit of Section 162(m)
applies.
Performance Awards. A participant will not recognize taxable income upon
the grant of a performance award, and the Company will not be entitled to a tax
deduction at such time. Upon the settlement of a performance award, the
participant will recognize compensation taxable as ordinary income (and subject
to income tax withholding for Company employees) in an amount equal to the cash
paid and the fair market value of the Units delivered to the participant, and
the Company will be entitled to a corresponding deduction, except to the extent
the limit of Section 162(m) applies.
The Board recommends a vote FOR approval of the Proposed LTIP.
ANNUAL INCENTIVE PLAN
In April, 1999, the Board unanimously approved the adoption of the 1999
Annual Incentive Plan for Certain Executives (the "Annual Incentive Plan").
Reference is made to Annex B to this proxy statement for the complete text of
the Annual Incentive Plan, which is summarized below. In order to comply with
the requirements of Section 162(m) and to qualify the compensation payable to
participating Covered Employees (defined below) under the Annual Incentive Plan
as performance-based compensation eligible for exclusion from the deduction
limit under Section 162(m) described below, the Annual Incentive Plan is being
submitted to stockholders for approval at the Annual Meeting. Upon approval by
the Company's stockholders at the Annual Meeting, the Annual Incentive Plan will
become effective as of January 1, 1999.
Section 162(m) generally limits to $1 million the amount that a publicly
held corporation is allowed to deduct each year for the compensation paid to
each of the corporation's chief executive officer and the corporation's four
most highly compensated executive officers other than the chief executive
officer (collectively, the "Covered Employees"). However, "performance-based
compensation" is not subject to the $1 million deduction limit. To qualify as
performance-based compensation, certain criteria must be satisfied and the
material terms under which the compensation is to be paid, including the
performance goals, are disclosed to, and approved by a separate majority vote
of, stockholders before the compensation is paid.
The Annual Incentive Plan will be administered by a committee (the
"Committee") of two or more Directors, each of whom is (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act and (ii) an
"outside director" within the meaning of Section 162(m). Each of the Covered
Employees as are designated by the Committee on or before the 90th day of a
fiscal year are eligible to participate in the Annual Incentive Plan for such
fiscal year. Barry S. Sternlicht, the Company's Chairman and Chief Executive
Officer, and Richard D. Nanula, the Company's President and Chief Operating
Officer, are the only participants in the Annual Incentive Plan for the 1999
fiscal year.
Under the Annual Incentive Plan, payment of annual bonuses to participating
Covered Employees is subject to the satisfaction of specific annual performance
targets established by the Committee within the first 90 days of each fiscal
year, based on one or more of the following business criteria: earnings before
interest, taxes, depreciation and amortization ("EBITDA"), consolidated pre-tax
earnings, revenues, net earnings, operating income, earnings before interest and
taxes, cash flow measures, return on equity, return on net assets employed or
earnings per share for the applicable fiscal year.
Concurrently with the establishment of the annual performance targets, the
Committee will establish an objective formula or standard for calculating the
maximum bonus payable to each participating Covered Employee for the fiscal
year, subject to the requirement that the maximum bonus payable to any
participant for any fiscal year may not exceed $9 million. In addition to this
overall maximum, the Committee has sole discretion to determine whether any or
all of the maximum permissible bonus for any fiscal year will actually
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be paid and to establish additional conditions for the payment of bonuses,
including setting other financial, strategic or individual goals.
Under the Annual Incentive Plan, the Committee may authorize payment of up
to 25% of a participating Covered Employee's bonus in the form of Restricted
Stock Awards, which (i) vest ratably over the three-year period following the
end of the fiscal year for which the bonus is paid, (ii) are distributable to
the participating Covered Employee in the form of whole Units at the end of such
three-year period and (iii) cover the number of Units equal to the amount of the
Bonus to be paid in the form of Restricted Stock Awards, divided by 75% of the
fair market value of a Unit as of the date the bonus was originally paid. The
Committee may also pay any portion of a participating Covered Employee's bonus
for a fiscal year in excess of $3 million in restricted stock or Restricted
Stock Award, in which case no discount from the fair market value of a Unit will
be applied to such restricted stock or Restricted Stock Awards.
All determinations relating to the satisfaction of performance targets or
any cancellation or forfeiture of restricted stock or Restricted Stock Awards
upon a termination of employment with the Company of the holder of such
restricted stock or Restricted Stock Awards shall be made by the Committee.
Since actual amounts will depend on actual performance and the Committee may
award less than the maximum bonus to each participant under the Annual Incentive
Plan, the exact amount of the bonus that may be paid under the Annual Incentive
Plan cannot be determined at this time. In the event of a change in control of
Starwood, the Committee may adjust outstanding awards under the Annual Incentive
Plan as appropriate, including, without limitation, causing outstanding awards
to vest and be distributed or "cashed-out" by Starwood.
The Board recommends a vote FOR approval of the Annual Incentive Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
To the knowledge of Starwood, as of April 1, 1999, no person "beneficially
owned" 5% or more of the Units, except as follows. In general, "beneficial
ownership" includes those shares a person or entity has the power to vote, or
the power to transfer, and stock options or other derivative securities that are
exercisable currently or become exercisable within 60 days.
AMOUNT
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS(1)
- ------------------------------------ ------------ -----------
FMR Corp.................................................... 20,308,376(2) 11.6%(2)
82 Devonshire Street
Boston, Massachusetts 02109
T. Rowe Price Associates.................................... 10,066,555(3) 5.7%(3)
100 East Pratt Street
Baltimore, Maryland 21202
- ---------------
(1) Based on the number of Units outstanding on April 1, 1999.
(2) Based on information contained in Amendment No. 3 to Schedule 13G, dated
February 1, 1999, filed with respect to the Trust, 19,112,308 Units are held
by Fidelity Management & Research Company, a wholly owned subsidiary of FMR
Corp. ("FMR"), 4,500 Units are held by Fidelity International Limited, an
entity voluntarily reporting with FMR pursuant to Item 7 of Schedule 13G and
1,191,568 Units are held by Fidelity Management Trust Company, a wholly
owned subsidiary of FMR. FMR has sole voting power with respect to 1,119,945
Units and dispositive power with respect to 20,308,376 Units. Based on
additional information contained in the Schedule 13G, the Company believes
that various persons have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from
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the sale of, the Units held by FMR, and that no one person's interest in such
Units is more than five percent of the total outstanding Units as of February 1,
1999.
(3) Based on information contained in Schedule 13G dated February 12, 1999,
filed with respect to the Company, 10,066,555 Units are held by T. Rowe
Price Associates, Inc. ("Price"), in its capacity as investment advisor to
certain individual and institutional clients. Price has sole voting power
with respect to 1,709,030 Units and sole dispositive power with respect to
10,066,555 Units.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; TRUSTEES AND EXECUTIVE OFFICERS
OF THE TRUST
The following table sets forth the beneficial ownership of Units, as of the
Record Date, by each Trustee of the Trust, each Director of the Company and each
executive officer of the Trust or the Company named in the Summary Compensation
Table under "Executive Compensation" (other than Mr. Danziger, who resigned in
February 1998) who owns Units and by all Directors, Trustees and current
executive officers of the Company as a group. Except as otherwise provided
below, each beneficial owner has sole voting and investment power with respect
to all Units beneficially owned.
NUMBER OF UNITS PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS(1)
- ------------------------ ------------------ -----------
Brenda C. Barnes............................................ 8,535(2) (3)
Juergen E. Bartels.......................................... 649,499(2) (3)
Susan R. Bolger............................................. 123,275(2) (3)
Ronald C. Brown............................................. 181,806(2) (3)
Jean-Marc Chapus............................................ 32,056(2) (3)
Bruce W. Duncan............................................. 52,499(2) (3)
Jonathan D. Eilian.......................................... 127,500(2) (3)
Steven R. Goldman........................................... 285,449(2)(4) (3)
Madison F. Grose............................................ 221,314(2)(5) (3)
Eric Hippeau................................................ -- --
Thomas C. Janson, Jr........................................ 5,000 (3)
Earle F. Jones.............................................. 37,554(2) (3)
L. Dennis Kozlowski......................................... -- --
Michael A. Leven............................................ 28,556(2) (3)
George J. Mitchell.......................................... 7,410(2) (3)
Richard D. Nanula........................................... 1,124,518(2)(6) (3)
Stephen R. Quazzo........................................... 35,003(2)(7) (3)
Daniel H. Stern............................................. 141,038(2)(8) (3)
Barry S. Sternlicht......................................... 7,928,383(2)(9) 4.4%
Raymond S. Troubh........................................... 15,535(2) (3)
Daniel W. Yih............................................... 32,761(2) (3)
All Directors, Trustees and executive officers as a group
(21 persons).............................................. 11,023,691 5.9%
- ---------------
(1) Based on the number of Units outstanding on the Record Date, including any
exercise of options to purchase Units or any exchange of class A
exchangeable preferred shares of the Trust ("Class A EPS"), class B
exchangeable preferred shares of the Trust ("Class B EPS") or limited
partnership units ("Partnership Units") of SLC Operating Limited
Partnership ("Operating Partnership") or SLT Realty Limited Partnership
("Realty Partnership") for Units.
(2) Includes Units subject to presently exercisable options, as follows: 5,535
Units for each of Ms. Barnes and Mr. Troubh; 83,333 Units for Mr. Bartels;
110,067 Units for Ms. Bolger; 145,500 Units for Mr. Brown; 27,000 Units for
each of Messrs. Chapus, Duncan, Leven, Quazzo, Stern and Yih; 124,500 Units
for Mr. Eilian; 222,333 Units for Mr. Goldman; 124,500 Units for Mr. Grose;
18,000 Units for
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Mr. Jones; 7,410 Units for Senator Mitchell; 812,500 Units for Mr. Nanula
and 3,346,167 Units for Mr. Sternlicht.
(3) Less than 1%.
(4) Includes Units subject to presently exercisable options as described in
footnote (2) above and Partnership Units that are exchangeable for 22,616
Units.
(5) Includes Units subject to presently exercisable options as described in
footnote (2) above, Class A EPS and Class B EPS that are exchangeable for
an aggregate of 3,224 Units and Partnership Units that are exchangeable for
an aggregate of 43,301 Units. Also includes Class A EPS and Class B EPS
that are exchangeable for an aggregate of 27,602 Units and Partnership
Units that are exchangeable for an aggregate of 2,531 Units, all owned by
Mr. Grose's wife.
(6) Includes Units subject to presently exercisable options as described in
footnote (2) above, 300,000 Units subject to a grant of Restricted Stock
Awards and 100 Units owned by Mr. Nanula's wife.
(7) Includes Units subject to presently exercisable options as described in
footnote (2) above. Also includes 7,306 Units held by a trust of which Mr.
Quazzo is settlor and over which he shares investment control, and 397
Units owned by a trust of which Mr. Quazzo's wife is settlor and over which
she exercises some investment control.
(8) Includes Units subject to presently exercisable options as described in
footnote (2) above, Class A EPS and Class B EPS exchangeable for an
aggregate of 23,374 Units and Partnership Units exchangeable for an
aggregate of 89,108 Units.
(9) Mr. Sternlicht may be deemed to beneficially own, directly or through
entities controlled by him, 340,529 Units and may be deemed to have either
sole or shared power to vote and dispose of such Units. Mr. Sternlicht may
also be deemed to beneficially own Units subject to presently exercisable
options as described in footnote (2) above and Class A EPS and Class B EPS
that are exchangeable for an aggregate of 428,816 Units. Mr. Sternlicht
holds, directly or through trusts created by him for the benefit of members
of his family, Partnership Units that are exchangeable for an aggregate of
547,425 Units. Entities controlled by Mr. Sternlicht may be deemed to hold
Class A EPS and Class B EPS that are exchangeable for an aggregate of
149,268 Units, and Partnership Units that are exchangeable for an aggregate
of 3,116,178 Units. Mr. Sternlicht has disclaimed beneficial ownership of
all such Units, Class A EPS, Class B EPS and Partnership Units except to
the extent of his actual pecuniary interest therein.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Summary Compensation Table below shows the compensation for Starwood's
past three fiscal years for each person who acted as Chief Executive Officer of
the Company or the Trust during 1998 and for the four other executive officers
of the Company and the Trust who were serving as executive officers on December
31, 1998. In prior years, the Joint Proxy Statement of Starwood has included
separate Summary Compensation Tables for the Company and the Trust. However,
since the Trust has become a subsidiary of the Company pursuant to the
Restructuring, Starwood believes that it is more appropriate to provide a single
Summary Compensation Table for Starwood as a whole. The Restructuring has been
treated as an amalgamation of companies for purposes of reporting executive
compensation in this Proxy Statement, and, accordingly, the reporting of
executive compensation herein has been made on a combined basis, taking into
account both the Company and the Trust before the Restructuring.
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SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION SECURITIES
NAME AND --------------------- RESTRICTED STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARD(S)($)(1) OPTIONS(#)(2) COMPENSATION($)
- ------------------ ---- --------- --------- ---------------- ------------- ---------------
Barry S. Sternlicht.............. 1998 1,000,008 3,500,000 2,500,000(4) 2,551,826(5)
Chairman and Chief 1997 307,500 2,650,000 400,000
Executive Officer 1996 181,252 250,000 956,250(3) 1,554,000
Richard D. Nanula................ 1998 624,163 1,400,000 15,825,000(6) 3,000,000 470,468(5)
President and Chief Operating
Officer
Eric A. Danziger................. 1998 34,627 225,000 395,883(5)
President and Chief 1997 365,000 375,000
Executive Officer 1996 175,711 150,000 2,455,451(6) 300,000 201,312(5)
Susan R. Bolger.................. 1998 304,173 525,000 140,000 527,178(5)
Executive Vice President 1997 196,923 175,000 18,400 93,602(5)
1996 66,026 100,000 350,012(6) 45,000 178,748(5)
Ronald C. Brown.................. 1998 316,671 675,000 140,000 455,813
Executive Vice 1997 200,000 250,000 40,000
President and Chief 1996 175,000 100,000 540,000(6) 85,500 163,963(5)
Financial Officer
Steven R. Goldman................ 1998 316,671 600,000 140,000 873,499(5)
Executive Vice President 1997 200,000 250,000 50,000
1996 175,000 100,000 900,000(6) 90,000 44,112(5)
Thomas C. Janson, Jr............. 1998 112,500 450,000 151,875(6) 100,000
Executive Vice President,
General Counsel and Secretary
- ---------------
(1) Value is calculated by multiplying the number of shares by the closing
market price of the Units on the date of grant. Dividends are paid to the
holders of such Restricted Stock Awards.
(2) For information with respect to options granted in 1998, see "Option/SAR
Grants in Last Fiscal Year" below.
(3) Represents Units purchased in 1997 upon exercise of two warrants granted in
1996 to purchase an aggregate of 45,000 Units at an exercise price of $0.67
per Unit. All such Units had vested in full prior to December 31, 1998. The
value of these Units at December 31, 1998 was $1,020,938, based on the
closing price of a Unit on the NYSE on such date ($22.09375).
(4) Subsequent to the grant of these options to Mr. Sternlicht in February 1998,
Mr. Sternlicht transferred a total of 500,000 options to unrelated third
parties.
(5) Amounts include: (a) taxable reimbursement of relocation expenses,
including, in the case of Mr. Nanula and Ms. Bolger, a related tax gross-up
payment ($175,671, $93,602, $219,425, $466,261, $201,312, $163,963, $50,200
and $44,112, respectively, for Ms. Bolger (in 1996, 1997 and 1998,
respectively) and Messrs. Nanula, Danziger (in 1996), Brown (in 1996), and
Goldman (in 1998 and 1996, respectively)), (b) imputed interest relating to
a five-year, non-interest-bearing loan from Starwood relating to the
purchase of a home in the Fairfield/Westchester area ($31,974 and $28,215
for Ms. Bolger and Mr. Goldman, respectively), (c) severance pay and taxable
reimbursement of accrued vacation for Mr. Danziger in 1998 ($365,000 and
$30,883, respectively) and (d) taxable payments to Ms. Bolger and Messrs.
Sternlicht, Brown and Goldman in 1998 in respect of Restricted Stock Awards
that vested upon consummation of the ITT Merger ($275,167, $2,551,826,
$455,813 and $795,000, respectively).
(6) Mr. Nanula was granted a Restricted Stock Award of 300,000 Units in April
1998; Mr. Danziger was granted a Restricted Stock Award of 100,222 Units in
1996; and Ms. Bolger and Messrs. Brown and Goldman were granted Restricted
Stock Awards of 13,206 Units, 22,500 Units and 37,500 Units, respectively,
in 1996; each of the foregoing Restricted Stock Awards vested in full prior
to December 31, 1998 in accordance with its terms. Mr. Janson was granted a
Restricted Stock Award of 5,000 Units in October 1998. The value of these
Units at December 31, 1998 was $6,806,250, $2,273,787, $299,657, $510,469,
$850,781 and $113,438, respectively, based on the closing price of a Unit on
the NYSE on such date ($22.09375).
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OPTION GRANTS
The following table gives more information on options granted during the
last fiscal year to each of the executive officers named in the Summary
Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES Options/SARs OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED LAST FISCAL YEAR ($/SH.) DATE 5%($) 10%($)
---- ------------ ---------------- -------- ---------- ------------ -------------
Barry S. Sternlicht...... 2,000,000(2) 14.33 54.6250 2/17/08 68,706,798 174,116,364
Richard D. Nanula........ 1,000,000 7.16 53.2875 4/15/08 32,636,692 83,532,415
1,000,000 7.16 55.8250 4/15/08 30,099,192 80,994,915
500,000 3.58 63.4375 4/15/08 11,243,346 36,691,207
500,000 3.58 76.1250 4/15/08 4,899,596 30,347,457
Eric A. Danziger......... -- -- -- -- -- --
Susan R. Bolger.......... 140,000 1.00 49.1875 4/29/08 4,330,726 10,974,909
Ronald C. Brown.......... 140,000 1.00 49.1875 4/29/08 4,330,726 10,974,909
Steven R. Goldman........ 140,000 1.00 49.1875 4/29/08 4,330,726 10,974,909
Thomas C. Janson, Jr..... 100,000 0.72 42.3125 8/12/08 2,661,010 6,743,523
- ---------------
(1) The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the SEC and are not intended to forecast
future price appreciation of the Units. The gains reflect a future value,
based upon the closing market price of a Unit on the applicable grant date,
and assume annual growth at these prescribed rates. Options have value to
recipients, including the named executive officers, only if the price of
Units advances beyond the grant date price shown in the table during the
option term. The current market price of a Unit is substantially lower than
the exercise price of any of the options listed above, and assuming the same
growth rates as set by the SEC are applied to the current market values of
the Units, the potential realizable value of such options for the option
term is substantially lower than that indicated on the table above. The
Company did not use an alternative formula for a grant date valuation, an
approach that would state gains at present, and therefore lower, value. The
Company is not aware of any formula that will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
(2) Excludes 500,000 options issued to Mr. Sternlicht that were subsequently
transferred by him to unrelated third parties as contemplated by the
original grant.
The exercise price of each of the options listed in the table above is
equal to the fair market value of a Unit on the applicable grant date, with the
exception of the options granted to Mr. Nanula, the exercise prices of which are
set at various premiums over fair market value on the grant date. The options
granted to Mr. Nanula vest in equal monthly installments over the 48 months
following the grant date. Each of the other options listed in the table vests in
three or four equal installments commencing on the first anniversary of the
applicable grant date.
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OPTION EXERCISES AND HOLDINGS
The following table shows the number and value of stock options (exercised
and unexercised) during the last fiscal year held by each of the executive
officers named in the Summary Compensation Table.
AGGREGATE OPTION/SAR EXERCISES IN 1998
AND DECEMBER 31, 1998 OPTION VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT Options/SARs at
SHARES Fiscal Year-End(#) Fiscal Year-End($)(1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Barry S. Sternlicht... -- -- 3,246,167(2) 1,333,333(2) 4,239,911 --
Richard D. Nanula..... -- -- 499,998 2,500,002 -- --
Eric A. Danziger...... 300,000 8,596,838 -- -- -- --
Susan R. Bolger....... -- -- 63,400 140,000 -- --
Ronald C. Brown....... 76,347 2,967,691 98,834 166,666 4,500 --
Steven R. Goldman..... -- -- 175,667 173,333 471,393 --
Thomas C. Janson,
Jr.................. -- -- -- 100,000 -- --
- ---------------
(1) Value is calculated by subtracting the exercise price from the fair market
value of the Units underlying the option on the exercise date (in the case
of options exercised) or at December 31, 1998 (in the case of unexercised
"in-the-money" options) and multiplying the result by the number of Units
for which the option was exercised or is in-the-money, as the case may be.
Fair market value at December 31, 1998 was calculated based upon the average
of the high and low sales prices of a Unit as reported by the NYSE for that
date ($22.09375). There is no assurance that if and when any such
in-the-money option is exercised, the option will have this value.
(2) Excludes 500,000 options issued to Mr. Sternlicht which were subsequently
transferred by him to unrelated third parties as contemplated by the
original grant.
EMPLOYMENT AND COMPENSATION AGREEMENTS WITH EXECUTIVE OFFICERS
In February 1998, Barry S. Sternlicht and the Trust entered into an amended
and restated employment agreement pursuant to which Mr. Sternlicht has agreed to
continue to serve as the Chairman and Chief Executive Officer of the Trust until
at least December 31, 1999. In January 1999, Mr. Sternlicht, who had been the
Chairman of the Company since September 1997, became the Chief Executive Officer
of the Company, and his amended and restated employment agreement was assumed by
the Company. Mr. Sternlicht receives a minimum annual base salary of $1,000,000.
In addition, Starwood has agreed to purchase for Mr. Sternlicht a $10,000,000
life insurance policy, and has agreed to pay to Mr. Sternlicht cash in an amount
equal to the amount of any excise tax imposed on him as a result of the
accelerated vesting of certain outstanding stock options. Mr. Sternlicht waived
the accelerated vesting (as a result of either Starwood's acquisition (the "ITT
Merger") of ITT Corporation ("ITT") or Starwood's acquisition of Westin
Worldwide and certain of its affiliates (the "Westin Merger")) of all awards to
him that otherwise would have vested in 1998; such awards accordingly will vest
in accordance with their terms, as modified. In February 1998, Starwood granted
to Mr. Sternlicht an option to purchase 2,500,000 Units, exercisable at $54.6875
per Unit (the market value of a Unit on the date of grant); this option vests in
three equal annual installments, subject generally to Mr. Sternlicht's continued
employment by Starwood. Subsequent to the date of grant, Mr. Sternlicht
transferred options to purchase 500,000 Units, in the aggregate, to unrelated
parties in accordance with the terms of his initial grant. Mr. Sternlicht's
employment is terminable by Starwood with or without cause. In the event Mr.
Sternlicht's employment is terminated by Starwood other than for "cause" or by
Mr. Sternlicht for "good reason," Starwood will pay to Mr. Sternlicht as a
severance benefit an amount equal to two times the sum of his annual base salary
then in effect plus the average of his bonus paid for the
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preceding two years. In addition, all then unvested awards made to Mr.
Sternlicht will vest in full, subject to certain exceptions.
As of April 1998, Richard D. Nanula and the Company entered into an
employment agreement pursuant to which Mr. Nanula has agreed to serve as the
President and Chief Executive Officer of the Company until at least June 1,
2003. In January 1999, Mr. Nanula became the President and Chief Operating
Officer of the Company and President of the Trust. Mr. Nanula receives a minimum
annual base salary of $950,000, with a bonus determined in accordance with
Starwood's bonus plan. In addition, the Company has agreed to purchase for Mr.
Nanula a $10,000,000 life insurance policy. As an inducement to Mr. Nanula's
entering into the employment agreement, Mr. Nanula was granted a Restricted
Stock Award of 300,000 Units, which vested in full on September 28, 1998. In
addition, on April 15, 1998, Mr. Nanula was granted options to purchase (i)
600,000 Units at an exercise price of $53.2875 per Unit (which was in excess of
the market value of a Unit on the date of grant), (ii) 400,000 Units at an
exercise price of $53.2875 per Unit; (iii) 1,000,000 Units at an exercise price
of $55.8250 per Unit; (iv) 500,000 Units at an exercise price of $63.4375 per
Unit; and (v) 500,000 Units at an exercise price of $76.1250 per Unit. These
options vest in 48 equal monthly installments beginning on May 1, 1998, subject
generally to Mr. Nanula's continued employment by the Company. Each option will
terminate one year after the termination of Mr. Nanula's employment by the
Company, except that if his employment is terminated by the Company without
"cause" or by Mr. Nanula for "good reason," each option will terminate two years
after the termination of Mr. Nanula's employment. The grant of these options was
approved by the stockholders of the Company at its 1998 annual meeting. In the
event of a change in control of the Company, the options granted to Mr. Nanula
shall become fully vested. Mr. Nanula's employment is terminable by Starwood
with or without cause. Upon the termination of Mr. Nanula's employment, he will
be entitled to receive all Units subject to the Restricted Stock Award referred
to above and all Units underlying certain incentive compensation awards granted
under his employment agreement. If Mr. Nanula terminates his employment because
Mr. Sternlicht has ceased to be Chairman and Chief Executive Officer of the
Trust and Mr. Nanula has not approved of Mr. Sternlicht's successor, 50% of Mr.
Nanula's theretofore unvested options and Units underlying Restricted Stock
Awards shall vest immediately.
As of March 2, 1998, Susan R. Bolger and the Company entered into a new
employment agreement in connection with her becoming the Company's Executive
Vice President of Human Resources. In January 1999, Ms. Bolger also became a
Vice President of the Trust. Ms. Bolger's annual salary is $325,000, with a
bonus to be determined in accordance with Starwood's bonus plan, and an
additional retention bonus equal to one year's salary (at the current base
salary level). Ms. Bolger also received a cash payment in respect of taxes
payable by Ms. Bolger as a result of the vesting of the Restricted Stock Award
granted to Ms. Bolger in August 1996. In April 1998, Ms. Bolger was granted an
option to purchase 140,000 Units at an exercise price per Unit equal to the fair
market value of a Unit on the date of grant. Ms. Bolger's employment is
terminable by Starwood or Ms. Bolger with or without cause. In the event her
employment is terminated by Starwood without cause or by Ms. Bolger due to
breach by Starwood, Ms. Bolger will be entitled to severance benefits of one
year's base salary and the accelerated vesting of all outstanding options.
Starwood also has made a five-year, non-interest-bearing loan to Ms. Bolger in
the amount of $600,000, to be secured by a second mortgage on Ms. Bolger's home.
As of March 10, 1998, Mr. Brown and the Company entered into a new
employment agreement in connection with his becoming the Company's Executive
Vice President and Chief Financial Officer. In January 1999, Mr. Brown also
became Vice President, Chief Financial Officer and Chief Accounting Officer of
the Trust. Mr. Brown's annual salary is $325,000, with a bonus to be determined
in accordance with Starwood's bonus plan. Mr. Brown also received a cash payment
in respect of taxes payable by Mr. Brown as a result of the vesting of the
Restricted Stock Award originally granted to Mr. Brown in August 1996. In April
1998, Mr. Brown was granted options to purchase 140,000 Units at an exercise
price per Unit equal to the fair market value of a Unit on the date of grant.
Mr. Brown's employment is terminable by Starwood or Mr. Brown with or without
cause. In the event his employment is terminated by Starwood without cause or by
Mr. Brown due to breach by Starwood, Mr. Brown will be entitled to severance
benefits of one year's base salary and the accelerated vesting of all
outstanding options.
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As of March 25, 1998, Steven R. Goldman and the Trust entered into a new
employment agreement in connection with his becoming the Trust's Executive Vice
President, Acquisitions and Development. In connection with the Restructuring,
Mr. Goldman's employment agreement was assumed by, and he was elected to the
same position with, the Company. Mr. Goldman's annual salary is $325,000, with a
bonus to be determined in accordance with Starwood's bonus plan, and an
additional retention bonus of one year's salary (at the current base salary
level). Mr. Goldman also received a cash payment in respect of taxes payable by
Mr. Goldman as a result of the vesting of the Restricted Stock Award granted to
Mr. Goldman in August 1996. In April 1998, Mr. Goldman was granted an option to
purchase 140,000 Units at an exercise price per Unit equal to the fair market
value of a Unit on the date of grant. Goldman's employment is terminable by
Starwood or Mr. Goldman with or without cause. In the event his employment is
terminated by Starwood without cause or by Mr. Goldman due to breach by
Starwood, Mr. Goldman will be entitled to severance benefits of one year's base
salary and the accelerated vesting of all outstanding options. The Trust also
has made a five-year, non-interest-bearing loan to Mr. Goldman in the amount of
$525,000, to be secured by a second mortgage on Mr. Goldman's home.
As of October 1, 1998, Thomas C. Janson, Jr. and Starwood entered into an
employment agreement in connection with Mr. Janson's becoming the Company's
Executive Vice President, General Counsel and Secretary. In January 1999, Mr.
Janson also became the Trust's Vice President, General Counsel and Assistant
Secretary. Mr. Janson's annual salary is $450,000, with a bonus to be determined
in accordance with Starwood's bonus plan, and he received an additional $250,000
retention bonus in 1998. Mr. Janson was also granted an option to purchase
100,000 Units at an exercise price per Unit equal the fair market value of a
Unit on the date of grant and a Restricted Stock Award of 5,000 Units; these
options and his Restricted Stock Award vest annually over a four-year period. In
the event his employment is terminated by Starwood without cause or by Mr.
Janson due to breach by Starwood, Mr. Janson will be entitled to severance
benefits of one year's base salary. Starwood also agreed to make a five-year,
non-interest-bearing loan to Mr. Janson in the amount of $500,000, to be secured
by a second mortgage on Mr. Janson's home.
Eric A. Danziger and the Company entered into an employment agreement dated
as of June 27, 1996, pursuant to which Mr. Danziger was employed as President
and Chief Executive Officer of the Company at an annual salary of $365,000. Mr.
Danziger also received an option to purchase up to 187,500 Units at a price of
$24.50 per Unit (the fair market value of the Units on the date of grant) and a
restricted stock award of 100,222 Units. As a result of the termination of Mr.
Danziger's employment in February 1998, Mr. Danziger received severance benefits
comprised of one year's base salary and the immediate vesting of all outstanding
options and Restricted Stock Awards.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Compensation Committee (the "Company Compensation
Committee") of the Board was comprised of Messrs. Sternlicht and Jones. The
Company Compensation Committee met informally during 1998 to discuss
compensation of the Company's executive officers. During 1998, the Compensation
Committee (the "Trust Compensation Committee") of the Trust's Board of Trustees
(the "Trust Board") was comprised of Messrs. Sternlicht and Grose. Based on
informal discussions, the Trust Compensation Committee made recommendations to
the Trust Board regarding the compensation of the Trust's executive officers
other than Mr. Sternlicht. The Option Committee of the Trust Board (which, in
1998, was comprised of Messrs. Duncan, Quazzo and Chapus) made recommendations
during 1998 to the Trust Board regarding Mr. Sternlicht's compensation. Based in
part on the recommendations of the two compensation committees, the Board and
the Trust Board made decisions with respect to the compensation of the Company's
and the Trust's executive officers. Members of the Board and the Trust Board did
not participate at meetings of the Directors or the Trustees in discussions or
votes with respect to their own compensation, and Mr. Grose did not participate
at meetings of the Trustees in discussions or votes with respect to Mr.
Sternlicht's compensation.
Mr. Sternlicht, the Chairman and Chief Executive Officer of the Company and
the Trust, serves as a director of U.S. Franchise Systems, Inc. Michael A.
Leven, a Director of the Company, serves as Chairman of the Board and Chief
Executive Officer of U.S. Franchise Systems, Inc.
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For information on relationships and related transactions involving
Starwood Capital, see "Certain Relationships and Related Transactions."
REPORT ON EXECUTIVE COMPENSATION
During 1998, the Board and the Trust Board made decisions jointly with
respect to executive compensation for executive officers of the Company and the
Trust, based on the recommendations of their respective Compensation Committees.
In addition, although the Board and the Trust Board make independent
compensation decisions with respect to their respective executive officers, as
described herein they follow compensation policies that are similar to one
another and measure the performance of their respective executive officers based
in large part on the performance of Starwood as a whole. Due, in part, to the
make-up of the respective Compensation Committees and, in part, to the emphasis
on, and integral relationship to total compensation of, equity-based
compensation, during the latter half of 1998, the function of the two
Compensation Committees has been carried out jointly by the non-management and
non-Starwood Capital-affiliated members of the two Compensation Committees and
the Option Committees of the Board and the Trust Board. Accordingly, references
herein to the "Compensation Committee" refer to such combined committees.
The primary objective of the Board and the Trust Board with respect to
executive compensation is to establish programs which attract and retain key
managers and align the compensation received by executive officers with the
overall business strategies, values, performance and financial conditions of
Starwood and to the achievement of individual performance goals. However, 1998
was a year of unusual growth and transition for Starwood, particularly in light
of the Westin Merger and the ITT Merger, as well as the integration of the
historic businesses of Starwood, Westin Worldwide and ITT. These activities,
coupled with the need to build a strong leadership team for Starwood, affected
the Compensation Committee's 1998 compensation decisions for Starwood's Chief
Executive Officer and its other executive officers. In 1998, the Compensation
Committee's decisions reflected a number of pragmatic issues related largely to
the transition into a single, integrated enterprise. The primary focus was to
attract and retain key executives by aligning their financial interests with
those of shareholders through equity-based incentive programs, promoting
ownership of Units by key executives and providing cash bonuses as incentive
compensation based upon Starwood's and the individual's performance as evaluated
by the Compensation Committee at its discretion. As shown in the Summary
Compensation table, the primary components of the pay program were base salary,
annual bonus and long-term incentives in the form of options and Restricted
Stock Awards.
In determining competitive compensation levels, the Compensation Committee
used survey data from several major compensation consulting firms that reflected
pay practices for comparable positions in the hotel, hospitality and gaming
industries, as well as general industry. Some of the companies reflected in the
Shareholder Return Performance Graph participated in these surveys. Where
practicable, multiple regression techniques were used to reflect companies of
comparable size and similar characteristics. The Compensation Committee also
considered publicly available data from peer companies' proxy statements. To the
extent appropriate, the Compensation Committee also considered past pay
practices of the three heritage companies.
Commencing in 1999, the Compensation Committee has developed a
comprehensive compensation philosophy and procedures that will serve as a basis
for compensation decisions. Earlier this year, the Board adopted the Proposed
LTIP and, for executive officers subject to Section 162(m), the Annual Incentive
Plan, subject to stockholder approval at the Annual Meeting as described under
"Proposed LTIP" and "Annual Incentive Plan." These plans do not preclude
Starwood from making any payments or granting any awards whether or not such
payments or awards qualify for tax deductibility under Section 162(m).
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1998
Barry S. Sternlicht is the Chairman and Chief Executive Officer of the
Trust and the Company. Mr. Sternlicht's salary, options and other compensation
for 1998 were negotiated with Mr. Sternlicht in connection with the amendment
and restatement of his employment agreement as described above. In
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addition, Mr. Sternlicht received a $3.5 million bonus for 1998. The following
factors contributed to the Compensation Committee's determination of Mr.
Sternlicht's 1998 bonus: (a) his vision and strong leadership as the Chief
Executive Officer of a restructured global company with a wide area of control
and broad duties and responsibilities, (b) his 1998 accomplishments (including
consummation of the Westin Merger and the ITT Merger and the integration of
Starwood's historic operations with those of ITT and Westin Worldwide) and (c)
the amount of his bonus relative to bonuses paid to chief executive officers of
Starwood and its constituent companies in the past.
Mr. Sternlicht's 1998 option grant was based on Starwood's performance over
the preceding several years. The value of the options granted to Mr. Sternlicht
in 1998 depends on Starwood's future success and whether that success is
reflected in the value of Starwood Units. The Compensation Committee considered
the complexity and duties of Mr. Sternlicht's position and his accomplishments
and contributions to the achievement of Starwood's strategic goals.
Richard D. Nanula has been President and Chief Operating Officer of the
Company and President of the Trust since January 1999. Mr. Nanula joined the
Company as its President and Chief Executive Officer in June 1998 and served in
such capacity until January 1999. Mr. Nanula's salary, options, Restricted Stock
Award and other compensation were negotiated with Mr. Nanula in connection with
his employment agreement with Starwood as described above. In addition, Mr.
Nanula received a $1.4 million bonus for 1998. The following factors contributed
to the Compensation Committee's determination of Mr. Nanula's 1999 bonus: (a)
his vision and strong leadership as the Chief Executive Officer of a
restructured global company with a wide area of control and broad duties and
responsibilities, (b) his contribution and leadership with respect to the
successful integration of Starwood's historic operations with those of ITT and
Westin Worldwide and (c) the amount of his bonus relative to bonuses paid to
chief executive officers of Starwood and its constituent companies in the past.
Mr. Nanula's 1998 option grant and Restricted Stock Award reflected
Starwood's need to retain a talented senior executive with certain background,
experience and leadership skills to help Starwood to integrate three diverse
companies as a single, efficient and dynamic enterprise. The Compensation
Committee considered the complexity and duties of Mr. Nanula's position and his
accomplishments and contributions to the achievement of Starwood's strategic
goals. The value of the options granted to Mr. Nanula in 1998 depends on
Starwood's future success and whether that success is reflected in the value of
Starwood Units.
Jean-Marc Chapus
Bruce W. Duncan
Earle Jones
Michael A. Leven
Stephen R. Quazzo
Raymond S. Troubh
Daniel W. Yih
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SHAREHOLDER RETURN PERFORMANCE
Set forth below is a line graph comparing the cumulative total shareholder
return on the Units against the cumulative total return on Standard and Poor's
Corporate Composite -- 500 Stock Index (the "S&P 500") and the Standard & Poor's
Corporation Hotel/Motel Composite Index (the "S&P Hotel/Motel") for the five
fiscal years beginning January 1, 1994 and ending December 31, 1998. The graph
assumes that the value of the investments was 100 on January 1, 1994 and that
all dividends and other distributions were reinvested.
STARWOOD S&P 500 S&P HOTEL/MOTEL
-------- ------- ---------------
'1994' 109.52 98.67 89.19
'1995' 195.18 132.33 104.39
'1996' 380.16 159.15 123.93
'1997' 619.83 208.50 171.99
'1998' 254.83 264.10 138.92
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
POLICIES OF THE BOARD AND THE TRUST BOARD
The policy of the Board and the Trust Board provides that any contract or
transaction between the Company or the Trust, as the case may be, and any other
entity in which one or more of its Directors, Trustees or officers are directors
or officers, or have a financial interest, must be approved or ratified by a
majority of the disinterested Directors or Trustees after the material facts as
to the relationship or interest and as to the contract or transaction are
disclosed or are known to them. Each of the transactions between Starwood and
Starwood Capital described in this Proxy Statement was so approved.
STARWOOD CAPITAL
General. Barry S. Sternlicht, Chairman, Chief Executive Officer and a
Director of the Company, and Chairman, Chief Executive Officer and a Trustee of
the Trust, controls and has been the President and Chief Executive Officer of
Starwood Capital since its formation. In addition, Madison Grose, a Trustee of
the Trust, and Jonathan Eilian, a Director of the Company, are Senior Managing
Directors of, and hold direct or indirect interests in, Starwood Capital. Prior
to joining Starwood, Mr. Goldman was an employee of Starwood Capital, and he
continues to own an interest in certain portfolio investments of Starwood
Capital.
Trademark License. Starwood Capital has granted to Starwood an exclusive,
non-transferable, royalty-free license to use the "Starwood" name and certain
trademarks in connection with the hotel and hospitality services business, and
to use the "Starwood" name in its corporate name, worldwide in perpetuity.
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Starwood Capital Reimbursement Agreement. Starwood Capital and Starwood
agreed that, subject to approval by the independent Directors or Trustees, as
appropriate, until December 31, 1998, Starwood would reimburse Starwood Capital
for its out-of-pocket expenses and internal costs (including allocation of
overhead) for services provided to Starwood, other than internal costs of
Starwood Capital for services of senior management of Starwood Capital
(effective August 12, 1997). During 1998, Starwood reimbursed Starwood Capital
approximately $391,000 for out-of-pocket expenses and approximately $253,000 for
internal costs in accordance with this agreement. Starwood Capital's engagement
to act as financial advisor to Starwood in connection with the ITT Merger was
not subject to this reimbursement limitation.
Starwood Capital Noncompete. In connection with a restructuring of
Starwood in 1995, Starwood Capital agreed (the "Starwood Capital Noncompete")
that, with certain exceptions, it would not compete within the United States
directly or indirectly with the Company, the Trust, Realty Partnership or
Operating Partnership and would present to such partnerships all acquisitions of
(i) fee or ground interests or other equity interests in hotels in the United
States and (ii) debt interests in hotels in the United States where it is
anticipated that the equity will be acquired by the debt holder within one year
from the acquisition of such debt. During the term of the Starwood Capital
Noncompete, neither Starwood Capital nor any of its affiliates is to acquire any
such interest. The Starwood Capital Noncompete continues until no officer,
director, general partner or employee of Starwood Capital is on either the Board
or the Trust Board (subject to exception for certain restructurings, mergers or
other combination transactions with unaffiliated parties). During 1998, Starwood
declined to invest and granted a waiver of the Starwood Capital Noncompete in
connection the acquisition by a Starwood Capital affiliate of a mixed use
property in Chevy Chase, Maryland that included a hotel that is leased under a
long-term lease to a third party.
The Westin Merger. Prior to the Westin Merger, Starwood Capital owned an
interest in Westin Worldwide. Starwood Capital and certain of its affiliates had
interests in Westin Worldwide as follows:
(i) Starwood Capital, through certain of its affiliates, was the
general partner of Woodstar Investor Partnership, which held an
approximately 50% voting interest (an approximately 35.23% interest in
profits) in W&S LLC (the "LLC"), which owned in excess of 99% of the
outstanding equity securities of Westin Worldwide and certain of its
subsidiaries acquired in the Westin Merger (the "Westin Subsidiaries").
Starwood Capital and, therefore, Mr. Sternlicht, may be deemed to have been
the beneficial owner of the shares held by Woodstar Investor Partnership, a
privately held real property investment partnership.
(ii) Messrs. Sternlicht, Grose and Eilian were investors in, and Mr.
Sternlicht was an affiliate of, an investor in a partner in Woodstar
Investor Partnership.
In connection with the Westin Merger and the contributions of the Westin
Subsidiaries to the Partnerships, all of the outstanding shares of Westin
Worldwide were canceled and the members of the LLC received their proportionate
shares (which approximated their respective profit interests in the LLC) of (a)
the shares of Class A EPS and Class B EPS that were issued in the Westin Merger
and (b) the Partnership Units that were issued in connection with such
contributions.
Other Westin Relationships. Starwood Capital and its affiliates hold a 37%
interest in a golf course management company that currently manages golf courses
associated with two Westin hotels and, until March 1999, Starwood Capital held a
20% interest in a Mexican company that operates timeshare resorts adjacent to
the three Westin hotels in Mexico. Individuals affiliated with Starwood Capital,
including individuals who are Directors of the Corporation and Trustees of the
Trust, and certain other affiliates of Starwood Capital, collectively,
indirectly own the Tamarron Sheraton and the golf course and two condominium
units at the Westin Innisbrook Resort.
ITT Merger. Starwood engaged Starwood Capital to act as its financial
advisor in connection with the ITT Merger and related transactions for which
Starwood Capital received a fee of $10.5 million in cash and 131,388 Units plus
a tax gross-up payment of $5 million upon the closing of the ITT Merger.
Other. In February 1999, the Company purchased in the open market from
unaffiliated third-parties debt securities of an issuer in which Starwood
Capital had a non-controlling equity interest for $23 million.
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Aircraft Lease. In February 1998, a subsidiary of the Company leased a
Gulfstream III Aircraft from Starflight LLC, an affiliate of Starwood Capital.
The term of the lease is one year and automatically renews for additional
one-year terms thereafter unless either party terminates the lease upon 90 days'
written notice. The rent for the aircraft, which was set at approximately 90% of
fair market value (based on two competitive bids from unrelated third parties),
is (i) a monthly payment equal to 1.25% of the lessor's total costs relating to
the aircraft (approximately $123,000 at the beginning of the lease), which
increases accordingly for additional costs incurred by the lessor, plus (ii)
$300 for each hour that the aircraft is in use.
OTHER
During 1998 and 1999, Starwood made non-interest-bearing loans to Susan R.
Bolger, Executive Vice President of Human Resources, Steven R. Goldman,
Executive Vice President, Acquisitions and Development, and Thomas C. Janson,
Jr., Executive Vice President, General Counsel and Secretary. Each of these
loans was made in connection with such executive's employment and is or will be
secured by a second mortgage on such executive's home. These loans had initial
principal amounts of $600,000, $525,000 and $500,000, respectively, all of which
was outstanding as of April 7, 1999.
Russell Sternlicht, the brother of Barry S. Sternlicht, has been serving as
Senior Vice President, Corporate Development of Starwood since February 1999.
From February 1998 through February 1999, Russell Sternlicht served as a
consultant to Starwood in connection with the disposition of certain non-core
assets and the analysis of strategic corporate acquisition and investment
opportunities. Prior to February 1998, Russell Sternlicht was a Managing
Director of NationsBank Montgomery Securities Inc., an investment banking firm,
in New York, where he focused on the branded consumer products and retail
industries. Russell Sternlicht was paid a $30,000 monthly consulting fee in
exchange for such services.
The wife of Steven R. Goldman provides legal services to the Company and
was paid approximately $69,000 for such services during 1998.
In 1998, Starwood retained the law firm Verner, Liipfert, Bernhard,
McPherson and Hand, of which Senator George Mitchell, a Trustee of the Trust, is
Special Counsel.
OTHER MATTERS
The Board is not aware of any matters not referred to in the enclosed proxy
that will be presented for action at the Annual Meeting. If any other matters
properly come before the Annual Meeting, it is the intention of the persons
named in the enclosed proxy to vote the shares represented thereby in accordance
with their best judgment.
INDEPENDENT PUBLIC ACCOUNTANTS
On the recommendation of the Audit Committee, the firm of Arthur Andersen
LLP ("Arthur Andersen"), certified public accountants, has been selected as
Starwood's principal independent public accountants for 1999, a capacity in
which it has served since April 1998. Prior to the ITT Merger and the Westin
Merger, Arthur Andersen had served in a similar capacity for ITT and Westin
Worldwide. Representatives of Arthur Andersen are expected to be present at the
Annual Meeting and may, if they wish, make a statement. Such representatives are
also expected to be available to respond to appropriate questions.
SOLICITATION COSTS
The cost of soliciting proxies in the accompanying form will be borne by
Starwood. The solicitation is being made by mail and may also be made by
telephone or in person using the services of a number of regular employees of
the Company at nominal cost. Banks, brokerage firms and other custodians,
nominees and fiduciaries will be reimbursed by Starwood for expenses incurred in
sending proxy materials to beneficial owners of Units. The Company has engaged
D.F. King & Co., Inc. to solicit proxies and to assist with the distribution of
proxy materials for a fee of $17,500, plus reasonable out-of-pocket expenses.
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STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
In order to be considered for inclusion in the proxy solicitation material
for the 2000 Annual Meeting of Stockholders of the Company, a stockholder
proposal must be received by the Company not later than December 24, 1999. In
addition, the Bylaws of the Company establish an advance notice procedure for
stockholder proposals to be brought before any meeting, including proposed
nominations of persons for election to the Board. A stockholder nomination or
proposal intended to be brought before the Annual Meeting must have been
received by the Company on or after March 12, 1999 and on or prior to April 6,
1999. No such nominations or proposals were received by the Company. The
Company's 2000 Annual Meeting of Stockholders is expected to be held on May 24,
1999. A stockholder proposal or nomination intended to be brought before the
2000 Annual Meeting (whether or not such proposal is included in the proxy
solicitation material as described above) must be received by the Company on or
after February 16, 2000 and on or prior March 12, 2000. All proposals and
nominations should be directed to Starwood Hotels & Resorts Worldwide, Inc., 777
Westchester Avenue, White Plains, New York 10604, Attention: Secretary. The fact
that the Company may not insist upon compliance with these requirements should
not be construed as a waiver by the Company of its right to do so at any time in
the future.
By Order of the Board of Directors
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
/s/ Thomas C. Janson,Jr.
Thomas C. Janson, Jr.
Secretary
April 20, 1999
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ANNEX A
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
1999 LONG-TERM INCENTIVE COMPENSATION PLAN
ARTICLE 1
ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. Establishment of the Plan. Starwood Hotels & Resorts Worldwide,
Inc., a Maryland corporation (hereinafter referred to as the "Company"), hereby
establishes an incentive compensation plan to be known as the "Starwood Hotels &
Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits the
grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares and Performance Units.
1.2. Objectives of the Plan. The objectives of the Plan are to (i)
attract and retain employees by providing compensation opportunities that are
competitive with other companies; (ii) provide incentives to those employees who
contribute significantly to the long-term performance and growth of the Company
and its Subsidiaries; and (iii) align employees' long-term financial interests
with those of the Company's stockholders. The Plan is intended to supersede and
replace the Company's 1995 Long-Term Incentive Plan, as amended and restated
(the "1995 Plan"). Notwithstanding the foregoing, nothing in this Plan is
intended to abridge, modify or otherwise alter the rights of any person in
respect of nonqualified stock options, incentive stock options, stock
appreciation rights, restricted stock, performance shares or performance units
granted under the 1995 Plan or the Starwood Hotels & Resorts 1995 Long-Term
Incentive Compensation Plan.
1.3. Effective Date; Duration of the Plan. Subject to approval by the
Company's stockholders, the Plan shall become effective as of May 26, 1999 (the
"Effective Date") and shall remain in effect, subject to the right of the Board
of Directors to amend or terminate the Plan at any time pursuant to Article 16
hereof, until all Units subject to it shall have been purchased or acquired
according to the Plan's provisions. However, in no event may an Award be granted
under the Plan on or after the tenth (10th) anniversary of the Effective Date.
ARTICLE 2
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Performance Units.
2.2 "Award Agreement" shall mean the document evidencing an Award granted
under this Plan.
2.3. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4. "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.5. "Cause" shall mean embezzlement or misappropriation of the Company's
funds or other assets, other act deemed by the Committee in the good faith
exercise of its sole discretion to be an act of dishonesty with respect to the
Company, significant activities materially harmful to the reputation of the
Company, willful and repeated refusal to perform or substantial disregard of the
duties properly assigned to the holder by the Company (other than as a result of
Disability), material violation of any statutory or common law duty of loyalty
to the Company or a material breach by the holder of the holder's employment
agreement with the Company, if any (subject to any cure period therein
provided).
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2.6. "Change in Control" means:
(a) Any Person is or becomes the beneficial owner within the meaning
of Rule 13d-3 promulgated under the Exchange Act (but without regard to any
time period specified in Rule 13d-3(d)(1)(i), of 33 1/3 percent or more of
either (i) then outstanding Units, including for this purpose Partnership
Units of SLT Realty Limited Partnership and SLC Operating Limited
Partnership (the "Outstanding Units") or (ii) the combined voting power of
then outstanding securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
excluding, however, (1) any acquisition by the Company or (2) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company.
(b) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided that any individual who becomes a director
of the Company subsequent to the Effective Date whose election, or
nomination for election by the Company's stockholders, was approved by the
vote of at least a majority of the directors then comprising the Incumbent
Board shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other then the Board shall not be
deemed a member of the Incumbent Board:
(c) Consummation by the Company of a reorganization, merger, or
consolidation or sale of all or substantially all of the assets of the
Company (a "Corporate Transaction"); excluding, however, a Corporate
Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Units and the Outstanding Company Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 66 2/3 percent of, respectively, the outstanding
shares of common stock, and the combined voting power of the outstanding
securities of such corporation entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or indirectly) in substantially
the same proportions relative to each other as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Units and the
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(other than: the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, the corporation resulting from such Corporate Transaction, and any
Person which beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly 33 1/3 percent or more of the
Outstanding Units or the Outstanding Company Voting Securities, as the case
may be) will beneficially own, directly or indirectly, 33 1/3 percent or
more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled to
vote generally in the election of directors and (iii) individuals who were
members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from such
Corporate Transaction; or
(d) Approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
2.7. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.8. "Committee" means the committee appointed by the Board to administer
the Plan, consisting of two or more Directors, each of whom shall be (i) a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act,
and (ii) an "outside director" within the meaning of Code Section 162(m).
2.9. "Company" means Starwood Hotels & Resorts Worldwide, Inc., a Maryland
corporation and any successor thereto as provided in Article 23 herein.
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2.10. "Covered Employee" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is a "covered employee," as
defined in Section 162(m) of the Code or the regulations promulgated thereunder,
or any successor statute.
2.11. "Director" means any individual who is a member of the Board of
Directors of the Company; provided, however, that any Director who is employed
by the Company or any Subsidiary shall be considered an Employee under the Plan.
2.12. "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, as
determined in the discretion of the Committee.
2.13. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.14. "Employee" means any employee of the Company or any of its
Subsidiaries or any person serving at the request of the Company as an employee
or officer of any affiliate of the Company. Directors who are employed by the
Company shall be considered Employees under this Plan.
2.15. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.16. "Fair Market Value" shall mean the fair market value of the Units,
as determined by the Committee, which, unless otherwise specified shall be the
closing sale price of a Unit as reported in the New York Stock Exchange
Composite Transactions on the business day immediately preceding the date as of
which such value is being determined, or, if there is no such sale on the
relevant date, then on the next preceding business day on which a sale was
reported.
2.17. "Freestanding SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
2.18. "Incentive Stock Option" or "ISO" means an option to purchase Units
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.19. "Insider" shall mean an individual who is, on the relevant date,
subject to the reporting requirements of Section 16(a) of the Exchange Act.
2.20. "Nonqualified Stock Option" or "NQSO" means an option to purchase
Units granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.21. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.22. "Option Price" means the price at which a Unit may be purchased by a
Participant pursuant to an Option.
2.23. "Participant" means an individual who has been granted an Award
under the Plan.
2.24. "Performance Share" means an Award granted to a Participant, as
described in Article 9 herein.
2.25. "Performance Unit" means an Award granted to a Participant, as
described in Article 9 herein.
2.26. "Period of Restriction" means the period during which the transfer
of Restricted Stock is limited in some way (based on the passage of time, the
achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, in its discretion), and the Restricted Stock is
subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.27. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.28. "Restricted Stock" means Units granted to a Participant pursuant to
Article 8 herein.
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2.29. "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 7 herein.
2.30. "Subsidiary" shall mean any entity that is directly or indirectly
controlled by the Company or any entity, including an acquired entity, in which
the Company has a significant equity interest, as determined by the Committee,
in its discretion.
2.31. "Tandem SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Unit under the related Option (and when a
Unit is purchased under the Option, the Tandem SAR shall similarly be canceled).
2.23. "Units" means the units each consisting of one share of common
stock, par value $.01 per share, of the Company and one class B share of
beneficial interest, par value $.01 per share, of Starwood Hotels & Resorts.
ARTICLE 3
ADMINISTRATION
3.1. General. The Plan shall be administered by the Committee. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors. The Committee shall have the
authority to delegate administrative duties to officers of the Company.
3.2. Committee Authority. The Committee shall have full and exclusive
power to administer and interpret the Plan, to grant Awards and to adopt such
administrative rules, regulations, procedures and guidelines governing the Plan
and the Awards as it may deem necessary in its discretion, from time to time.
The Committee's authority shall include, but not be limited to the authority to
(i) determine the type of Awards to be granted under the Plan; (ii) select Award
recipients and determine the extent of their participation; (iii) determine the
method or formula for establishing the Fair Market Value of the Units for
various purposes under the Plan; and (iv) establish all other terms, conditions,
restrictions and limitations applicable to Awards and the Units issued pursuant
to Awards, including, but not limited to those relating to a Participant's
retirement, death, disability, leave of absence or termination of employment.
The Committee may take such further action and make any and all other
determinations which it deems necessary with respect to the administration of
the Plan, subject to the provisions of Section 162(m) of the Code in the case of
Awards granted to Covered Employees that are intended to qualify for the
performance-based compensation exception from the tax deductibility limitations
of Section 162(m) of the Code.
3.3 Administration of the Plan. The Committee shall have the power to
prescribe and modify, as necessary, the form of Award Agreement, to correct any
defect, supply any omission or clarify any inconsistency in the Plan and/or in
any Award Agreement. The administration of the Plan with respect to Insiders and
Covered Employees, to the extent required or appropriate under the Exchange Act
and/or Section 162(m) of the Code, shall be managed by the Committee.
3.4 Delegation of Authority. The Committee may at any time delegate to
one or more officers or directors of the Company some or all of its authority
over the administration of the Plan with respect to persons who are not Insiders
or Covered Employees.
3.5. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive and binding on all
persons, including the Company, its stockholders, Directors, Employees,
Participants, and their estates and beneficiaries.
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ARTICLE 4
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Units hereby reserved for Awards
under the Plan shall be twenty million (20,000,000). Not more than three million
(3,000,000) of the Units reserved under the Plan may be granted in the form of
Awards other than options or SARs. Upon approval of this Plan by the
stockholders of the Company, no further grants may be made under the 1995 Plan.
To the extent that Units subject to an Award granted under the Plan, the 1995
Plan or the Starwood Hotels & Resorts 1995 Long-Term Incentive Plan are not
issued or delivered or are canceled or forfeited by reason of the expiration,
termination, cancellation, forfeiture or repurchase of any Award or by reason of
the delivery or withholding of Units to pay all or a portion of the exercise
price of an Award, if any, or to satisfy all or a portion of the tax withholding
obligations relating to an Award, then the number of Units that are not issued
or delivered or are canceled or forfeited as described above shall be added to
the number of Units available for grant under the Plan.
Unless and until the Board determines that an Award to a Covered Employee
shall not be designed to comply with the performance-based compensation
exception from the tax deductibility limitations of Code Section 162(m), the
following rules shall apply to grants of such Awards under the Plan:
(a) Stock Options and SARs: The maximum aggregate number of Units
that may be granted in the form of Stock Options pursuant to Awards granted
in any one fiscal year to any one single Participant and the maximum
aggregate number of Units that may be granted in the form of Stock
Appreciation Rights pursuant to Awards granted in any one fiscal year to
any one single Participant shall be five million (5,000,000).
(b) Restricted Stock and Performance Shares/Units: The maximum
aggregate grant with respect to Awards of Restricted Stock granted in any
one fiscal year to any one single Participant shall be two million
(2,000,000) and the maximum aggregate payout (determined as of the end of
the applicable performance period) with respect to Awards of Performance
Shares or Performance Units granted in any one fiscal year to any one
single Participant shall be equal to the value of two million (2,000,000)
Units.
4.2. Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of securities which may be delivered under
Section 4.1, in the number and class of and/or price of securities subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1 (a) and 4.1 (b), as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Units subject to
any Award shall always be a whole number.
ARTICLE 5
ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. The Committee shall determine which Employees,
Directors, consultants and advisers shall be eligible to receive Awards under
the Plan.
5.2. Participation by Subsidiaries. Employees, directors, consultants and
advisers of Subsidiaries may participate in the Plan upon approval of the Awards
by the Committee. A Subsidiary's participation in the Plan may be terminated at
any time by the Committee. If a Subsidiary's participation in the Plan shall
terminate, such termination shall not relieve it of any obligations theretofore
incurred by it under the Plan, except with the approval of the Committee.
5.3 Participation Outside of the United States. The Committee or its
designee shall have the authority to amend the Plan and/or the terms and
conditions relating to an Award to the extent necessary to permit
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participation in the Plan by eligible individuals who are located outside of the
United States on terms and conditions comparable to those afforded to eligible
individuals located within the United States, provided that any such action
taken with respect to a Covered Employee shall be taken in compliance with
Section 162(m) of the Code.
ARTICLE 6
STOCK OPTIONS
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Units to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code Section
422.
6.3. Option Price. The Committee shall determine the Option Price, which
shall be at least equal to one hundred percent (100%) of the Fair Market Value
of a Unit on the date the Option is granted.
6.4. Duration of Options. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant,
provided, however, that no Option shall be exercisable later than the tenth
(10th) anniversary date of its grant.
6.5. Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6. Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Units with respect to which the Option is to be exercised, accompanied
by full payment for the Units.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Units having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Units which are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price), or (c) by a combination of
(a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, certificates in an
appropriate amount based upon the number of Units purchased under the Option(s).
6.7. Restrictions on Share Transferability. The Committee may impose such
restrictions on any Units acquired pursuant to the exercise of an Option granted
under this Article 6 as it may deem advisable.
6.8 Termination of Employment or Service.
(a) Disability or Death. Unless otherwise specified in the Award
Agreement relating to an Option, if the optionee's employment with the
Company or service as a consultant, adviser or Director terminates by
reason of Disability or death, each Option held by such optionee shall be
fully exercisable and may thereafter be exercised by such optionee (or such
optionee's executor, administrator, legal representative, beneficiary or
similar person, as the case may be) until and including the earliest to
occur of (i) the date which is one year (or such other period as set forth
in the Award Agreement relating to such Option)
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36
after the effective date of such optionee's termination of employment or
service or date of death, as the case may be, and (ii) the expiration date
of the term of such Option.
(b) Termination for Cause. Unless otherwise specified in the Award
Agreement relating to an Option, if the optionee's employment with the
Company or service as a consultant, adviser or Director terminates for
Cause, each Option held by such optionee, whether or not then exercisable,
shall terminate automatically on the effective date of such optionee's
termination of employment or service.
(c) Voluntary Termination by Optionee. Unless otherwise specified in
the Award Agreement relating to an Option, if optionee's employment with
the Company or service as a consultant, adviser or Director terminates
because of the voluntary resignation by the optionee, each Option held by
such optionee shall be exercisable only to the extent that such Option is
exercisable on the effective date of such optionee's termination of
employment or service and may thereafter be exercised by such optionee (or
such optionee's legal representative or similar person) until and including
the earliest to occur of (i) the date which is 30 days (or such other
period as set forth in the Award Agreement relating to such Option) after
the effective date of such optionee's termination of employment or service
and (ii) the expiration date of the term of such Option.
(d) Other Termination. Unless otherwise specified in the Award
Agreement relating to an Option, if the optionee's employment with the
Company or service as a consultant, adviser or Director terminates for any
reason other than Disability, death, voluntary termination by the optionee
or termination by the Company for Cause, each Option held by such optionee
shall be exercisable only to the extent that such Option is exercisable on
the effective date of such optionee's termination of employment or service
and may thereafter be exercised by such optionee (or such optionee's legal
representative or similar person) until and including the earliest to occur
of (i) the date which is three months (or such other period as set forth in
the Award Agreement relating to such Option) after the effective date of
such optionee's termination of employment or service and (ii) the
expiration date of the term of such Option.
(e) Death Following Termination of Employment or Service. Unless
otherwise specified in the Award Agreement relating to an Option, if an
optionee dies during the one-year period following termination of
employment or service by reason of Disability, if an optionee dies during
the thirty-day period following voluntary termination of employment or
service by the optionee, or if an optionee dies during the three-month
period following termination of employment or service for any reason other
than voluntary termination by the optionee, Disability or Cause (or, in
each case, such other period as the Committee may specify in the Award
Agreement relating to an Option), each Option held by such optionee may
thereafter be exercised by such optionee's executor, administrator, legal
representative, beneficiary or similar person, as the case may be, until
and including the earliest to occur of (i) the date which is three months
(thirty days in the case of voluntary termination of employment or service
by the optionee) (or such other period as set forth in the Award Agreement
relating to such Option) after the date of death (but in the case of death
following termination of employment or service by reason of Disability, no
less than one year (or such other period as set forth in the Award
Agreement relating to such Option) after the date of termination of
employment or service), and (ii) the expiration date of the term of such
Option.
6.9. Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.
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6.10. Reload Options. Without in any way limiting the authority of the
Committee to grant Awards hereunder, the Committee shall have the authority to
grant additional Options ("Reload Option") for a number of Units equal to the
number of Units surrendered by the Participant upon exercise of the original
Option as provided in this Section 6.10. Any such Reload Option shall be subject
to such other terms and conditions as the Committee may determine.
Notwithstanding the above, (i) the Committee shall have the right, in its sole
discretion, to withdraw a Reload Option to the extent that the grant thereof
will result in any adverse accounting consequences to the Company and (ii) no
additional Reload Options shall be granted upon the exercise of a Reload Option.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1. Grant of SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as determined
by the Committee. The Committee may grant Freestanding SARS, Tandem SARS, or any
combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARS.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Unit on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2. Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the Units subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Units for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Units subject to the underlying ISO at the time
the Tandem SAR is exercised, and (iii) the Tandem SAR may be exercised only when
the Fair Market Value of the Units subject to the ISO exceeds the Option Price
of the ISO.
7.3. Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them.
7.4. SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.5. Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6. Payment of SAR Amount. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Unit on the date
of exercise over the grant price; by
(b) The number of Units with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Units of equivalent value, or in some combination thereof. The
Committee's determination regarding the form of SAR payout shall be set forth in
the Award Agreement pertaining to the grant of the SAR.
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7.7 Termination of Employment or Service.
(a) Disability or Death. Unless otherwise specified in the Award
Agreement relating to an SAR, if the grantee's employment with the Company
or service as a consultant, adviser or Director terminates by reason of
Disability or death, each SAR held by such grantee shall be fully
exercisable and may thereafter be exercised by such grantee (or such
grantee's executor, administrator, legal representative, beneficiary or
similar person, as the case may be) until and including the earliest to
occur of (i) the date which is one year (or such other period as set forth
in the Award Agreement relating to such SAR) after the effective date of
such grantee's termination of employment or service or date of death, as
the case may be, and (ii) the expiration date of the term of such SAR.
(b) Termination for Cause. Unless otherwise specified in the Award
Agreement relating to an SAR, if the grantee's employment with the Company
or service as a consultant, adviser or Director terminates for Cause, each
SAR held by such grantee, whether or not then exercisable, shall terminate
automatically on the effective date of such grantee's termination of
employment or service.
(c) Voluntary Termination by Grantee. Unless otherwise specified in
the Award Agreement relating to an SAR, if grantee's employment with the
Company or service as a consultant, adviser or Director terminates because
of the voluntary resignation by the grantee, each SAR held by such grantee
shall be exercisable only to the extent that such SAR is exercisable on the
effective date of such grantee's termination of employment or service and
may thereafter be exercised by such grantee (or such grantee's legal
representative or similar person) until and including the earliest to occur
of (i) the date which is 30 days (or such other period as set forth in the
Award Agreement relating to such SAR) after the effective date of such
grantee's termination of employment or service and (ii) the expiration date
of the term of such SAR.
(d) Other Termination. Unless otherwise specified in the Award
Agreement relating to an SAR, if the grantee's employment with the Company
or service as a consultant, adviser or Director terminates for any reason
other than Disability, death, voluntary termination by the grantee or
termination by the Company for Cause, each SAR held by such grantee shall
be exercisable only to the extent that such SAR is exercisable on the
effective date of such grantee's termination of employment or service and
may thereafter be exercised by such grantee (or such grantee's legal
representative or similar person) until and including the earliest to occur
of (i) the date which is three months (or such other period as set forth in
the Award Agreement relating to such SAR) after the effective date of such
grantee's termination of employment or service and (ii) the expiration date
of the term of such SAR.
(e) Death Following Termination of Employment or Service. Unless
otherwise specified in the Award Agreement relating to an SAR, if an
grantee dies during the one-year period following termination of employment
or service by reason of Disability, if an grantee dies during the
thirty-day period following voluntary termination of employment or service
by the grantee, or if an grantee dies during the three-month period
following termination of employment or service for any reason other than
voluntary termination by the grantee, Disability or Cause (or, in each
case, such other period as the Committee may specify in the Award Agreement
relating to an SAR), each SAR held by such grantee may thereafter be
exercised by such grantee's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until and including the
earliest to occur of (i) the date which is three months (thirty days in the
case of voluntary termination of employment or service by the grantee) (or
such other period as set forth in the Award Agreement relating to such SAR)
after the date of death (but in the case of death following termination of
employment or service by reason of Disability, no less than one year (or
such other period as set forth in the Award Agreement relating to such SAR)
after the date of termination of employment or service), and (ii) the
expiration date of the term of such SAR.
7.8. Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
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ARTICLE 8
RESTRICTED STOCK
8.1. Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Awards of
Restricted Stock to Participants in such amounts as the Committee shall
determine. Such Awards may at the discretion of the Committee be either current
grants of Restricted Stock or deferred grants of Restricted Stock units.
8.2. Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Units of Restricted Stock granted, and such other
provisions as the Committee shall determine.
8.3. Transferability. Except as provided in this Article 8, the Units of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
8.4. Other Restrictions. Subject to Article 10 herein, the Committee
shall impose such other conditions and/or restrictions on any Units of
Restricted Stock granted pursuant to the Plan as it may deem advisable
including, without limitation, a requirement that Participants pay a stipulated
purchase price for each Unit of Restricted Stock, restrictions based upon the
achievement of specific performance goals (Company-wide, divisional, and/or
individual), time-based restrictions on vesting following the attainment of the
performance goals, and/or restrictions under applicable federal or state
securities laws.
The Company may retain the certificates representing Units of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Units have been satisfied.
Except as otherwise provided in this Article 8, Units of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
8.5. Voting Rights. Except as otherwise provided in the Participant's
Restricted Stock Award Agreement, a Participant holding Units of Restricted
Stock granted hereunder shall have the right to exercise full voting rights with
respect to those Units during the Period of Restriction.
8.6. Dividends and Other Distributions. Except as otherwise provided in
the Participant's Restricted Stock Award Agreement, during the Period of
Restriction, a Participant holding Units of Restricted Stock granted hereunder
shall be credited with regular cash dividends paid with respect to the
underlying Units while they are so held. The Committee may apply any
restrictions to the dividends that the Committee deems appropriate. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Restricted Stock granted to a Covered Employee is designed to comply with the
requirements of the performance-based compensation exception from the tax
deductibility limitations of Code Section 162(m), the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with
respect to such Restricted Stock, such that the dividends and/or the Restricted
Stock maintain eligibility for such performance-based compensation exception.
8.7 Termination of Employment or Service.
(a) Disability, Death and Involuntary Termination Without
Cause. Except to the extent otherwise set forth in the Award Agreement
relating to a Restricted Stock Award, if the employment of the holder of a
Restricted Stock Award or his or her service as a consultant, adviser or
Director terminates by reason of Disability, death or involuntary
termination by the Company without Cause, the Period of Restriction shall
terminate as of the effective date of such holder's termination of
employment or service, and any applicable Performance Measures shall be
computed through such date.
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(b) Other Termination. Except to the extent otherwise set forth in
the Award Agreement relating to a Restricted Stock Award, if the holder's
employment with the Company or service as a consultant, adviser or Director
terminates for any reason other than Disability, death or involuntary
termination without Cause, the portion of such Award which is subject to a
Period of Restriction on the effective date of such holder's termination of
employment or service shall be forfeited to and canceled by the Company.
ARTICLE 9
PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1. Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
9.2. Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Unit on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Participant. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a "Performance Period."
9.3. Earning of Performance Units/Shares. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive a payout of the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.
9.4. Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following the
close of the applicable Performance Period. Subject to the terms of this Plan,
the Committee, in its sole discretion, may pay earned Performance Units/ Shares
in the form of cash or in Units (or in a combination thereof) which have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares at the close of the applicable Performance Period. Such Units may
be granted subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement pertaining to the grant of the Award.
Except as otherwise provided in the Participant's Award Agreement, a
Participant shall be entitled to receive any dividends declared with respect to
Units which have been earned in connection with grants of Performance Units
and/or Performance Shares which have been earned, but not yet distributed to the
Participant (such dividends shall be subject to the same accrual, forfeiture,
and payout restrictions as apply to dividends earned with respect to Units of
Restricted Stock, as set forth in Section 8.6 herein). In addition, unless
otherwise provided in the Participant's Award Agreement, a Participant shall be
entitled to exercise full voting rights with respect to such Units.
9.5. Termination of Employment Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment of a Participant is
terminated by reason of death, Disability, or retirement after attaining the
normal retirement age then in effect under the Company's tax-qualified
retirement plan during a Performance Period, the Participant shall receive a
payout of the Performance Units/Shares which is prorated, as specified by the
Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time
specified by the Committee in its sole discretion and set forth in the
Participant's Award Agreement. Notwithstanding the foregoing, with respect to
Covered Employees who retire during a Performance Period, payments shall be made
at the same time as payments are made to Participants who did not terminate
employment during the applicable Performance Period.
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9.6. Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 9.5 herein, all Performance Units/ Shares shall be forfeited by
the Participant to the Company unless determined otherwise by the Committee, as
set forth in the Participant's Award Agreement.
9.7. Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.
ARTICLE 10
PERFORMANCE MEASURES
Unless and until the Committee proposes for stockholder vote and
stockholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Covered Employees which are designed to
qualify for the performance-based compensation exception from the deductibility
limitations of Code Section 162(m), the performance measure(s) to be used for
purposes of such grants shall be chosen from among:
(a) earnings before interest, taxes, depreciation and amortization
("EBITDA");
(b) consolidated pre-tax earnings;
(c) revenues;
(d) net earnings;
(e) operating income;
(f) earnings before interest and taxes;
(g) cash flow measures;
(h) return on equity;
(i) return on net assets employed; and
(j) earnings per share.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided, however,
that Awards which are designed to qualify for the performance-based compensation
exception from the deductibility limitations of Code Section 162(m), and which
are held by Covered Employee, may not be adjusted upward (the Committee shall
retain the discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the performance-based compensation
exception from the deductibility limitations of Code Section 162(m), the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
ARTICLE 11
AWARDS TO DIRECTORS
11.1. Stock Options. On June 30 of each calendar year (or, if later than
June 30, on the date on which a person is first elected as a Director) each
Director shall be granted an NQSO to purchase 4,500 Units,
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which amount shall be prorated for the first such grant if such person is first
elected to serve as a Director on a date other than June 30 of a calendar year,
at an Option Price equal to one hundred percent (100%) of the Fair Market Value
of a Unit on the date the Option is granted. Each Option granted under this
Article 11 shall be fully exercisable on and after its date of grant, shall
expire ten (10) years after its date of grant (notwithstanding termination of
service as a Director for any reason prior to such ten-year anniversary date)
and may be exercised in whole or in part in accordance with Section 6.6. If a
Director dies while an Option is outstanding, such Option may be exercised by
the Director's beneficiary until and including the expiration date of the term
of such Option.
11.2. Grants of Units. On the last day of March, June, September and
December of each calendar year each Director shall be awarded, on a current
basis or at the prior election of the Director on a deferred basis, a number of
Units (rounded to the nearest whole share) equal to one-quarter of $50,000
divided by the Fair Market Value of a Unit on the immediately preceding December
31; provided that such $50,000 shall be reduced, but not below $25,000, to the
extent a Director elects (prior to such immediately preceding December 31, or
with respect to any person who became a Director subsequent to such date, within
30 days of becoming a Director) to receive cash in lieu of Units under this
Section 11.2 (a "Cash Election"). The Units awarded pursuant to this Section
11.2 shall not be Restricted Stock. On or before each December 31 (or in the
case of a person who first becomes a Director subsequent to December 31, within
30 days of becoming a Director), a Director may, by written notice to the
Company, elect to defer receipt (a "Deferral Election") of any or all of the
Units to be granted to the Director under this Section 11.2 (or cash to the
extent of his or her Cash Election) which would otherwise be thereafter payable
to him or her in the manner prescribed by the Company for such deferrals.
ARTICLE 12
BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
ARTICLE 13
DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Units that would
otherwise be due to such Participant by virtue of the exercise of an Option or
SAR, the lapse or waiver of restrictions with respect to Restricted Stock, or
the satisfaction of any requirements or goals with respect to Performance
Units/Shares. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
ARTICLE 14
RIGHTS OF EMPLOYEES
14.1. Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ of
the Company.
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14.2. Participation. No Employee, consultant, adviser or, except as set
forth in Article 11, Director shall have the right to be selected to receive an
Award under this Plan, or, having been so selected, to be selected to receive a
future Award.
ARTICLE 15
CHANGE IN CONTROL
15.1. Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their
entire term;
(b) Any restriction periods and restrictions imposed on Restricted
Stock which are not performance-based shall lapse;
(c) The target payout opportunities attainable under all outstanding
Awards of performance-based Restricted Stock, Performance Units and
Performance Shares shall be deemed to have been fully earned for the entire
Performance Period(s) as of the effective date of the Change in Control.
The vesting of all Awards denominated in Units shall be accelerated as of
the effective date of the Change in Control, and there shall be paid out to
Participants within thirty (30) days following the effective date of the
Change in Control the number of shares based upon an assumed achievement of
all relevant targeted performance goals. Awards denominated in cash shall
be paid to participants in cash within thirty (30) days following the
effective date of the Change in Control based on an assumed achievement of
all relevant targeted performance goals.
Any good faith determination by the Committee as to whether a Change in
Control with the meaning of the Plan has occurred shall be conclusive and
binding upon the Company and all Participants.
15.2. Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan (but subject to
the limitations of Section 15.3 hereof) or any Award Agreement provision, the
provisions of this Article 15 may not be terminated, amended, or modified on or
after the date of a Change in Control to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's outstanding Awards; provided, however, the
Committee may terminate, amend, or modify this Article 15 at any time and from
time to time prior to the date of a Change in Control.
15.3. Pooling of Interests Accounting. Notwithstanding any other
provision of the Plan to the contrary, in the event that the consummation of a
Change in Control is contingent on using pooling of interests accounting
methodology, the Committee may, prior to the date of the Change in Control, take
any action necessary to preserve the use of pooling of interests accounting.
ARTICLE 16
AMENDMENT, MODIFICATION, AND TERMINATION
16.1. Amendment, Modification, and Termination. Subject to the terms of
the Plan, the Board may at any time and from time to time, alter, amend, suspend
or terminate the Plan in whole or in part.
16.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
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intended to be made available under the Plan; provided that, unless otherwise
determined by the Committee, no such adjustment shall be authorized to the
extent that such authority would be inconsistent with the Plan's meeting the
requirements of Section 162(m) of the Code, as from time to time amended.
16.3. Awards Previously Granted. Notwithstanding any other provision of
the Plan to the contrary (but subject to Section 15.3 hereof), no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant holding such Award.
16.4. Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162 (m) will not be required. In addition, in the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award or Awards available under the Plan, the Committee may, subject to this
Article 16, make any adjustments it deems appropriate.
ARTICLE 17
WITHHOLDING
17.1. Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
17.2. Share Withholding. With respect to withholding required upon the
exercise of Options or SARS, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Units having a Fair Market Value on the date the tax is to be determined equal
to not more than the minimum amount of tax required to be withheld with respect
to the transaction. All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 18
INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or incurred by
him or her in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall have given the Company a reasonable opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation of Bylaws, as a
matter of law, or otherwise or any power that the Company may have to indemnify
them or hold them harmless.
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ARTICLE 19
OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise determined by the Committee, Awards received by
Participants under the Plan shall not be deemed a part of a Participant's
regular, recurring compensation for purposes of calculating payments or benefits
from any Company benefit plan or severance program. No Employee, consultant,
adviser or, except as set forth in Article 11, Director shall have any claim or
right to be granted an Award under the Plan. There shall be no obligation of
uniformity of treatment of Participants under the Plan. Further, the Company and
its Subsidiaries may adopt other compensation programs, plans or arrangements as
it deems appropriate or necessary. The adoption of the Plan shall not confer
upon any Employee any right to continued employment in any particular position
or at any particular rate of compensation, nor shall it interfere in any way
with the right of the Company or a Subsidiary to terminate the employment of its
Employees at any time, free from any claim or liability under the Plan.
ARTICLE 20
UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Company and any Participant or other person. To the extent any Participant holds
any rights by virtue of an Award granted under the Plan, such rights shall
constitute general unsecured liabilities of the Company and shall not confer
upon any participant any right, title or interest in any assets of the Company.
ARTICLE 21
EXPENSES OF THE PLAN
The expenses of the administration of the Plan shall be borne by the
Company and its Subsidiaries. The Company may require Subsidiaries to pay for
the Units issued under the Plan.
ARTICLE 22
RIGHTS AS A STOCKHOLDER
Unless the Committee determines otherwise, a Participant shall not have any
right as a stockholder with respect to Units covered by an Award until the date
the Participant becomes the holder of record with respect to such shares. No
adjustment will be made for dividends or other rights for which the record date
is prior to such date, except as provided in Articles 8 and 9.
ARTICLE 23
SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 24
LEGAL CONSTRUCTION
Except where otherwise indicated by the context, any masculine term used
herein also shall include the feminine; the plural shall include the singular
and the singular shall include the plural.
16
46
24.2. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
24.3. Requirements of Law. The granting of Awards and the issuance of
Units under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
24.4. Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Board or Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the Board.
24.5. Governing Law. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Maryland.
17
47
ANNEX B
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
1999 ANNUAL INCENTIVE PLAN
FOR CERTAIN EXECUTIVES
1. Definitions. When the following terms are used herein with initial
capital letters, they shall have the following meanings:
Code -- the Internal Revenue Code of 1986, as it may be amended from
time to time, and any proposed, temporary or final Treasury Regulations
promulgated thereunder.
Committee -- a committee comprised solely of two or more members of
the Board of Directors of the Company, each of whom is an "outside
director" within the meaning of Section 162(m) of the Code and a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange
Act.
Company -- Starwood Hotels & Resorts Worldwide, Inc., a Maryland
corporation.
Deferred Unit Account -- shall mean a book reserve maintained by the
Company for the purpose of measuring the amount payable to a Participant
with respect to the deferred portion of the Participant's bonus payment for
a Performance Period.
Designated Beneficiary -- shall mean the person or persons entitled to
receive the remaining Distributable Balance in a Participant's Deferred
Stock Account at the Participant's death.
Distributable Balance -- shall mean the balance in a Participant's
Deferred Stock Account that is distributable to the Participant upon
termination of the Participant's employment.
Exchange Act -- shall mean the Securities Exchange Act of 1934, as
amended.
Fair Market Value -- shall mean the fair market value of a Unit, as
determined by the Committee, which, unless otherwise specified, shall be
the closing sale price of a Unit as reported in the New York Stock Exchange
Composite Transactions on the business day immediately preceding the date
as of which such value is being determined, or, if there is no such sale on
the relevant date, then on the next preceding business day on which a sale
was reported.
Legal Representative -- shall mean a guardian, legal representative or
other person acting in a similar capacity with respect to a Participant.
Participant -- Shall mean the Chairman and Chief Executive Officer,
the President and Chief Operating Officer, and any other executive officer
of the Company who is designated by the Committee at any time ending on or
before the 90th day of each Performance Period as a Participant in this
Plan.
Performance Measure -- The Performance Measure shall be directly and
specifically tied to one or more of the following business criteria,
determined with respect to the Company: earnings before interest, taxes,
depreciation and amortization ("EBITDA"), consolidated pre-tax earnings,
net revenues, net earnings, operating income, earnings before interest and
taxes, cash flow measures, return on equity, return on net assets employed
or earnings per share for the applicable Performance Period, subject to
such other special rules and conditions as the Committee may establish at
any time ending on or before the 90th day of the applicable Performance
Measures.
Performance Period -- shall mean the twelve consecutive month period
which coincides with the Company's fiscal year.
Plan -- shall mean the Starwood Hotels & Resorts Worldwide, Inc. 1999
Annual Incentive Plan for Certain Executives as set forth herein and as
from time to time amended.
48
Unit -- shall mean a Unit consisting of one share of common stock, par
value $.01 per share, of the Company and one Class B share of beneficial
interest, par value $.01 per share, of Starwood Hotels & Resorts.
2. Administration.
2.1 Committee. The Plan shall be administered by the Committee.
2.2 Determinations Made Prior to Each Performance Period. At any
time ending on or before the 90th day of each Performance Period, the
Committee shall:
(a) Designate Participants for that Performance Period.
(b) Establish the Performance Measures for the Performance Period.
(c) Determine the formula for determining each Participant's bonus
payment for the Performance Period.
2.3 Certification. Following the close of each Performance Period
and prior to payment of any bonus under the Plan, the Committee must
certify in writing that the applicable Performance Measure targets and all
other factors upon which a bonus is based have been attained.
2.4 Stockholder Approval. The material terms of this Plan shall be
disclosed to and approved by stockholders of the Company in accordance with
Section 162(m) of the Code. No bonus shall be paid under this Plan unless
such stockholder approval has been obtained.
3. Bonus Payment.
3.1 Formula. Each Participant shall be eligible to receive a bonus
payment for a Performance Period in an amount established by, or determined
under a bonus formula established by, the Committee for the Performance
Period based on the attainment of the Performance Measure targets for the
Performance Period.
3.2 Limitations.
(a) No payment if Performance Measure threshold not achieved. In
no event shall any Participant receive a bonus payment hereunder if the
minimum threshold Performance Measure requirement applicable to the
bonus payment is not achieved during the Performance Period.
(b) No payment in excess of preestablished amount. No Participant
shall receive a bonus payment under this Plan for any Performance Period
in excess of $9 million.
(c) Committee may reduce bonus payment. The Committee retains sole
discretion to reduce the amount of or eliminate any bonus otherwise
payable to a Participant under this Plan. The Committee may exercise
such discretion by establishing conditions for the payment of bonuses in
addition to the Performance Measure targets, including the achievement
of financial, strategic or individual goals, which may be objective or
subjective, as it deems appropriate.
4. Bonus Payments.
4.1 Time and Form of Payments. Not less than 75% of the bonus
payment in addition to the Performance Measure targets payable to a
Participant under the Plan for a Performance Period shall be paid to the
Participant in one or more cash payments as soon as determined by the
Committee after it has certified that the Performance Measure targets and
all other factors upon which the bonus payment for the Participant is based
have been attained.
4.2 Nontransferability. Participants and beneficiaries shall not
have the right to assign, encumber or otherwise anticipate the payments to
be made under this Plan, and the benefits provided hereunder
2
49
shall not be subject to seizure for payment of any debts or judgments
against any Participant or any beneficiary.
4.3 Tax Withholding. In order to comply with all applicable federal
or state income tax laws or regulations, the Company may take such action
as it deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of a Participant, are withheld or collected from
such Participant.
5. Deferred Unit Accounts.
5.1 Deferred Unit Accounts.
(a) An amount equal to 25%, unless the Committee determines to
defer a smaller portion of a Participant's bonus payment, determined in
the sole discretion of the Compensation Committee, of the gross bonus
payment payable to a Participant under the Plan for a Performance Period
may be credited to the Participant's Deferred Unit Account as of the
date on which the first cash bonus payment for the Performance Period is
paid to the Participant pursuant to Section 4.1. The amount so credited
to a Participant's Deferred Unit Account (as adjusted for deemed
investment returns hereunder) shall become vested ratably over the
three-year period beginning at the end of the Performance Period.
(b) An amount equal to no more than the amount of the bonus payment
payable to a Participant for a Performance Period in excess of $3
million may be credited to the Participant's Deferred Unit Account as of
the date on which the first cash bonus payment for the Performance
Period is paid to the Participant pursuant to Section 4.1. The amount so
credited to a Participant's Deferred Unit Account shall become vested
ratably over the remaining term of any applicable employment agreement
and shall vest in full upon the Participant's termination of employment
for any reason.
5.2 Deemed Investment of Deferred Unit Accounts. Amounts credited to
a Participant's Deferred Unit Account pursuant to subsection 5.1(a) shall
be deemed to be invested in whole and fractional Units at a price equal to
75% of the Fair Market Value thereof on the date as of which the amount is
credited to the Deferred Unit Account. Amounts credited to a Participant's
Deferred Unit Account pursuant to subsection 5.1(b) shall be deemed to be
invested in whole and factional Units at a price equal to 100% of the Fair
Market Value thereof on the date as of which the amount is credited to the
Deferred Unit Account.
5.3 Distribution of Deferred Unit Accounts. On the earlier of (a)
the third anniversary of the end of the applicable Performance Period or
(b) the date the Participant terminates his/her employment for whatever
reason, the Company shall compute the "Distributable Balance" in a
Participant's Deferred Unit Account on such date. This Distributable
Balance shall include (i) if the Participant's employment has terminated
for a reason other than retirement, disability, or death, all vested
amounts credited to the Deferred Unit Account (as adjusted for deemed
investment returns hereunder), or, (ii) if the Participant's employment has
not terminated, all amounts credited to the Deferred Unit Account that are
distributable to the Participant on such date (as adjusted for deemed
investment returns hereunder), or (iii) if the Participant's employment has
terminated by reason of retirement, disability or death, all amounts
credited to the Deferred Unit Account (as adjusted for deemed investment
returns hereunder). In the event that the Participant becomes disabled,
his/her employment shall for these purposes be deemed to terminate on the
first day of the month in which he/she begins to receive long-term
disability payments under the Company's long-term disability plan. For
purposes of this Section 5.3, "disability" shall mean a total physical
disability which, in the Company's judgment, prevents the Participant from
performing substantially his/her employment duties and responsibilities for
a continuous period of at least six months, and "retirement" shall mean
retirement as then defined in the Company's tax-qualified retirement plan.
All distributions under this Section 5.3 will be made in whole Units and
cash equal to the Fair Market Value of any fractional Unit. If a
Participant dies before his/her entire Distributable Balance
3
50
has been paid, the Company shall pay the then undistributed remainder of
the Distributable Balance to the Participant's Designated Beneficiary.
5.4 Designation of Beneficiaries. A Participant may designate a
Designated Beneficiary by executing and filing with the Company during
his/her lifetime, a beneficiary designation. The Participant may change or
revoke any such designation by executing and filing with the Company during
his/her lifetime a new beneficiary designation. If any Designated
Beneficiary predeceases the Participant, or if any corporation,
partnership, trust or other entity which is a Designated Beneficiary is
terminated, dissolved, becomes insolvent, is adjudicated bankrupt prior to
the date of the Participant's death, or if the Participant fails to
designate a beneficiary, then the following persons in the following order
shall receive the entire amount which the previous Designated Beneficiary
would have been entitled to receive: (i) Participant's spouse, if living;
(ii) Participant's then living descendants, per stirpes; and (iii)
Participant's estate.
5.5 Tax Withholding. The Company shall have the right to require,
prior to the issuance or delivery of any Units, payment by the Participant
of any federal, state, local or other taxes which may be required to be
withheld or paid in connection with the distribution of Units. In the
alternative, the Company may withhold whole Units which would otherwise be
delivered to a Participant, having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with a distribution (the "Tax Date") in the amount necessary to
satisfy any such obligation. Any fraction of a Unit which would be required
to satisfy such an obligation shall be disregarded and the remaining amount
due shall be paid in cash by the Participant.
5.6 Restrictions on Units. If at any time the Company determines
that the listing, registration or qualification of the Units allocated to
the Deferred Unit Accounts of Participants upon any securities exchange or
under any law, or the consent or approval of any governmental body, or the
taking of any other action is necessary or desirable as a condition of, or
in connection with, the delivery of Units hereunder, such Units shall not
be delivered unless such listing, registration, qualification, consent,
approval or other action shall have been effected or obtained, free of any
conditions not acceptable to the Company. The Company may require that
certificates evidencing Units delivered to any Participant hereunder bear a
legend indicating that the sale, transfer or other disposition thereof by
the holder is prohibited except in compliance with the Securities Act of
1933, as amended, and the rules and regulations thereunder.
5.7 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Units other than
a regular cash dividend, the number and class of securities deemed to be
held in each Deferred Unit Account shall be appropriately adjusted by the
Committee. The decision of the Committee regarding any such adjustment
shall be final, binding and conclusive.
5.8 Change in Control.
(a) (1) Notwithstanding any provision in the Plan, in the event of a
Change in Control, the Committee may, but shall not be required to, make
such adjustments to outstanding awards hereunder as it deems appropriate,
including, without limitation, causing the unvested amount in a
Participant's Deferred Unit Account to vest, or electing that each
outstanding Deferred Unit Account shall be canceled by the Company, and
that each Participant shall receive, within a specified period of time from
the occurrence of the Change in Control, a cash payment from the Company in
an amount equal to the number of Units then deemed to be in the
Participant's Deferred Unit Account, multiplied by the greater of (x) the
highest per Unit price offered to stockholders of the Company in any
transaction whereby the Change in Control takes place or (y) the Fair
Market Value of a Unit on the date of occurrence of the Change in Control.
(2) In the event of a Change in Control pursuant to subsection (b)(3)
or (4) below in connection with which the holders of Units receive shares
of common stock that are registered under Section 12 of
4
51
the Exchange Act, the Committee may, but shall not be required to,
substitute for each Unit available under this Plan, whether or not then
subject to an outstanding award, the number and class of shares into which
each outstanding Unit shall be converted pursuant to such Change in
Control.
(b) For purposes of the Plan, "Change in Control" shall mean:
(1) Any person (as defined in Section 3(a)(9) of the Exchange Act
and used in Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d) thereof, "Person") is or becomes the beneficial
owner within the meaning of Rule 13d-3 promulgated under the Exchange
Act (but without regard to any time period specified in Rule
13d-3(d)(1)(i), of 33 1/3 percent or more of either (i) then outstanding
Units, including for this purpose Partnership Units of SLT Realty
Limited Partnership and SLC Operating Limited Partnership (the
"Outstanding Units") or (ii) the combined voting power of then
outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
excluding, however, (1) any acquisition by the Company or (2) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company.
(2) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided that any individual who becomes a
director of the Company subsequent to the Effective Date whose election,
or nomination for election by the Company's stockholders, was approved
by the vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board; and
provided further, that any individual who was initially elected as a
director of the Company as a result of an actual or threatened election
contest, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other
then the Board shall not be deemed a member of the Incumbent Board:
(3) Consummation by the Company of a reorganization, merger, or
consolidation or sale of all or substantially all of the assets of the
Company (a "Corporate Transaction"); excluding, however, a Corporate
Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of
the Outstanding Units and the Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own,
directly or indirectly, more than 66 2/3 percent of, respectively, the
outstanding shares of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either
directly or indirectly) in substantially the same proportions relative
to each other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Units and the Outstanding Company Voting
Securities, as the case may be, (ii) no Person (other than: the Company,
any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, the
corporation resulting from such Corporate Transaction, and any Person
which beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly 33 1/3 percent or more of the
Outstanding Units or the Outstanding Company Voting Securities, as the
case may be) will beneficially own, directly or indirectly, 33 1/3
percent or more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding securities of such corporation
entitled to vote generally in the election of directors and (iii)
individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(4) Approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company.
5
52
6. Amendment and Termination. Subject to the provisions of Section 162(m)
of the Code, the Committee may amend this Plan prospectively at any time and for
any reason deemed sufficient by it without notice to any person affected by this
Plan and may likewise terminate or curtail the benefits of this Plan both with
regard to persons expecting to receive benefits hereunder in the future and
persons already receiving benefits at the time of such action.
7. Miscellaneous.
7.1 Effective Date. Subject to approval by the Company's
stockholders, the effective date of the Plan shall be January 1, 1999.
7.2 Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any ways material or relevant to the construction or
interpretation of the Plan or any provision thereof.
7.3 Applicability to Successors. This Plan shall be binding upon and
inure to the benefit of the Company and each Participant, the successors
and assigns of the Company, and the beneficiaries, personal representatives
and heirs of each Participant. If the Company becomes a party to any
merger, consolidation or reorganization, this Plan shall remain in full
force and effect as an obligation of the Company or its successors in
interest.
7.4 Employment Rights and Other Benefits Programs. The provisions of
this Plan shall not give any Participant any right to be retained in the
employment of the Company. In the absence of any specific agreement to the
contrary, this Plan shall not affect any right of the Company, or of any
affiliate of the Company, to terminate, with or without cause, the
participant's employment at any time. This Plan shall not replace any
contract of employment, whether oral, or written, between the Company and
any Participant, but shall be considered a supplement thereto. This Plan is
in addition to, and not in lieu of, any other employee benefit plan or
program in which any Participant may be or become eligible to participate
by reason of employment with the Company. Receipt of benefits hereunder
shall have such effect on contributions to and benefits under such other
plans or programs as the provisions of each such other plan or program may
specify.
7.5 No Trust Fund Created. This Plan shall not create or be
construed to create a trust or separate fund of any kind or fiduciary
relationship between the Company or any affiliate and a Participant or any
other person. To the extent that any person acquires a right to receive
payments from the Company or any affiliate pursuant to this Plan, such
right shall be no greater than the right of any unsecured general creditor
of the Company or of any affiliate.
7.6 Governing Law. The place of administration of the Plan shall be
in the State of New York. The corporate law of the State of Maryland shall
govern issues relating to the validity and issuance of Units. Otherwise,
the Plan shall be construed and administered in accordance with the laws of
the State of New York, without giving effect to principles relating to
conflict of laws.
7.7 Severability. If any provision of the Plan is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction such
provision shall be construed or deemed amended to conform to applicable
laws, or if it cannot be so construed or deemed amended without, in the
determination of the Committee, materially altering the purpose or intent
of the Plan, such provision shall be stricken as to such jurisdiction, and
the remainder of the Plan shall remain in full force and effect.
7.8 Qualified Performance-Based Compensation. All of the terms and
conditions of the Plan shall be interpreted in such a fashion as to qualify
all compensation paid hereunder to the maximum extent possible as qualified
performance-based compensation within the meaning of Section 162(m) of the
Code.
6
53
PROXY
[STARWOOD LOGO]
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING TO BE HELD AT 10:00 A.M. MAY 26, 1999
THE WESTIN FAIRFAX
2100 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C.
The undersigned hereby appoints Barry S. Sternlicht and Richard D. Nanula
and either of them, proxies to represent the undersigned at the Annual Meeting
of Stockholders, and at any adjournment thereof, and thereat to vote all the
shares of stock which the undersigned would be entitled to vote, with all the
power the undersigned would possess if personally present, with full power of
substitution, upon the following items as set forth in the Notice of Annual
Meeting and Proxy Statement, each dated April 20, 1999 (receipt of which is
hereby acknowledged), and in their discretion upon such other matters, if any,
as may properly come before the meeting.
Said proxies are instructed to vote for or against proposals, as indicated
by the undersigned (or, if no indication is given, for Proposals 1, 2 and 3).
You are encouraged to voice your preference by marking the appropriate
boxes on the other side. However, you need not mark any boxes if you wish to
vote in accordance with the directors' recommendations; just sign on the other
side.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
DETACH HERE AND MAIL IN THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
FROM THE NORTH: Take I-95 South to the Capital Beltway (I-495). Access I-495
West toward Silver Spring. Proceed approximately six miles to exit 33
(Connecticut Avenue South, Route 185) toward Chevy Chase. Continue on
Connecticut Avenue south approximately eight miles to Dupont Circle. Stay in
right lane. DO NOT GO UNDER THE CIRCLE. Merge into the circle. Stay in the right
lane and take the first right onto Massachusetts Avenue, N.W. The Westin Fairfax
is one and one-half blocks on the left.
FROM THE SOUTH: Take I-95 North to I-395 North to the 14th Street Bridge. As the
lanes split, stay to the left and follow sign to Route 1 North crossing the
bridge. Route 1 becomes 14th Street, N.W. Continue on 14th Street, N.W.
approximately 12 blocks and turn left onto K Street, N.W. Continue six blocks to
20th Street, N.W. Turn right on 20th Street, N.W. and continue approximately
five and one-half blocks to Massachusetts Avenue, N.W. Turn left on
Massachusetts Avenue, N.W. The Westin Fairfax is one block ahead on the left.
FROM THE EAST: Follow Route 50 East to New York Avenue, N.W. Stay on New York
Avenue, N.W. to L Street, N.W. Turn right on L Street, N.W. and continue two and
one-half blocks to Massachusetts Avenue, N.W. Bear right on Massachusetts
Avenue, N.W. Follow Massachusetts Avenue, N.W. through Dupont Circle. The Westin
Fairfax will be one and one-half blocks past Dupont Circle.
FROM THE WEST: Take Route 66 East. After you pass the beltway, proceed
approximately 11 miles to the Theodore Roosevelt Bridge. As you cross the
bridge, stay in the left lane and take the E Street exit. Go through the tunnel.
At the first intersection you come to, turn left onto 20th Street, N.W. Continue
ten blocks to Massachusetts Avenue, N.W. and turn left. Proceed one block and
The Westin Fairfax will be on the left at the corner of 21st Street, N.W. and
Massachusetts Avenue, N.W.
On the proxy cards sent to certain stockholders, one of the following three
messages has been added:
THE SHARE BALANCE STATED ON THIS PROXY CARD REPRESENTS YOUR UNEXCHANGED SHARES
OF HOTEL INVESTORS TRUST.
THE SHARES BALANCE STATED ON THIS PROXY CARD REPRESENTS YOUR UNEXCHANGED PAIRED
SHARES OF STARWOOD HOTELS & RESORTS WORLDWIDE, INC. AND STARWOOD HOTELS &
RESORTS.
THE SHARE BALANCE STATED ON THIS PROXY CARD REPRESENTS YOUR UNEXCHANGED SHARES
OF ITT CORPORATION.
54
Please mark
your votes as
indicated in [X]
this example.
The Directors Recommend a Vote "FOR"
Proposals 1, 2 and 3.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below) listed below
1-Election of
Directors: [ ] [ ] 2-Approval of the Starwood
Hotels & Resorts Worldwide, Inc. FOR AGAINST ABSTAIN
1999 Long-Term Incentive [ ] [ ] [ ]
Compensation Plan.
NOMINEES: Barnes, Duncan, Leven, Quazzo, Stern and Troubh
(Instruction: To withhold authority to vote for any individual 3-Approval of the Starwood
nominee, print that nominee's name in the space provided below.) Hotels & Resorts Worldwide, Inc. FOR AGAINST ABSTAIN
1999 Annual Incentive Plan [ ] [ ] [ ]
for Certain Executives.
CHECK HERE IF YOU PLAN TO ATTEND THE MEETING. [ ]
Signature(s)__________________________ Dated _____________, 1999
______________________________________ Dated _____________, 1999
In case of joint owners, EACH joint owner should sign. When
signing as attorney, executor, administrator, trustee, guardian,
corporate officer, etc., give full title.
DETACH HERE AND MAIL IN THE ENCLOSED ENVELOPE
- ------------------------------------------------------------------------------------------------------------------------------------
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE BRING THIS ENTIRE LOWER PORTION
OF THIS CARD (SPEAKER CARD AND ADMISSION CARD) WITH YOU.
IF YOU PLAN TO SPEAK AT THE ANNUAL MEETING, PLEASE COMPLETE THE FOLLOWING:
Stockholder Name_____________________________________________________________________________ SPEAKER
(Please print clearly) CARD
City__________________________________________________ State ________________________________
PLEASE DO NOT DETACH
- ------------------------------------------------------------------------------------------------------------------------------------
[STARWOOD LOGO]
1999 ANNUAL MEETING OF STOCKHOLDERS
May 26, 1999 -- 10:00 A.M.
The Westin Fairfax ADMISSION
2100 Massachusetts Avenue, N.W. CARD
Washington, D.C.
Please bring this card with you
to the meeting. Its presentation
will assure your prompt admittance.
This card in not transferable.