Exhibit 10.5
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between STARWOOD
HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the “Company”), and
BRUCE W. DUNCAN (“Executive”), and is dated as of August 2, 2007.
     WHEREAS, the Company wishes to employ Executive, and Executive wishes to be
employed by the Company on the terms and conditions hereinafter set forth.
     NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE 1:
EMPLOYMENT AND DUTIES
     1.1 Employment; Effective Date. The Company agrees to employ Executive and
Executive agrees to be employed by the Company on an interim basis, beginning as
of April 1, 2007 (the “Effective Date”) and continuing for the period of time
set forth in Article 2 of this Agreement, subject to the terms and conditions of
this Agreement.
     1.2 Position. From and after the Effective Date, the Company shall employ
Executive in the position of Chief Executive Officer, or in such other position
as the parties mutually may agree. The Executive acknowledges that his
prospective employment will be subject to all policies and practices of the
Company as may currently exist or as may be curtailed, modified or implemented
from time to time. As Chief Executive Officer, Executive shall be the
senior-most executive officer of the Company, reporting directly to the Board,
with the duties, responsibilities and authority customarily associated with and
consistent with such position
     1.3 Duties and Services. Executive agrees to serve in the position referred
to in paragraph 1.2 and to perform diligently and to the best of his abilities
the duties and services appertaining to such offices as well as such additional
duties and services appropriate to such offices which the parties mutually may
agree upon from time to time.
     1.4 Executive Obligations. Executive shall devote his full business time,
attention and best efforts to the performance of his duties under this Agreement
and shall not engage in any other business activities except with the prior
written approval of the Board; provided, however, that Executive may engage in
other activities that do not conflict with or interfere with the performance of
his duties and responsibilities hereunder, including, without limitation, (a)
investing his assets and funds, so long as the business of any such entity in
which he shall make his investments shall not be in direct competition with that
of the Company (except that Executive may invest in an entity in competition
with the Company if its stock is listed for trading on a national stock exchange
or traded in the over-the-counter market and Executive’s holdings have an
original cost less than $5,000,000 and represent less than five percent of its
outstanding stock) and (b) being involved in educational, civic and charitable
activities which do not unreasonably interfere with the services to be rendered
by Executive hereunder. It is acknowledged and agreed that Executive may not
serve during the Term (as defined in Section

 

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2) as a director of any board of which he is not already a member without the
prior written approval of the Board; however, Executive may continue to serve on
any board of which he was already a member as of the Effective Date of this
Agreement.
     1.5 Chicago Office. In addition to Executive’s office at the Company’s
headquarters in White Plains, New York (the “Company’s Headquarters Office”),
the Company agrees to maintain an office in the Chicago area (the “Chicago
Office”), which office shall be in a location reasonably acceptable to
Executive. In addition to Executive, the Chicago Office shall be staffed with an
executive secretary to support Executive. Executive agrees and acknowledges that
the headquarters of the Company shall remain in White Plains, New York and that
no corporate functions, other than those related to Executive as provided
herein, will be moved from the White Plains corporate headquarters, except as
may otherwise be approved by the Board.
ARTICLE 2:
TERM AND TERMINATION OF EMPLOYMENT
     2.1 Term. Unless sooner terminated, the term of this Agreement shall
commence on the Effective Date and shall end on March 31, 2008 (the “Term”). It
is understood and agreed that Executive’s appointment is intended to be on an
interim basis.
     2.2 Company’s Right to Terminate.
     (a) Notwithstanding the provisions of paragraph 2.1 and 4.1, the Company
shall have the right to terminate Executive’s employment under this Agreement at
any time for any of the following reasons:
     (i) upon Executive’s death;
     (ii) upon Executive’s becoming incapacitated for a period of at least
180 days by accident, sickness or other circumstance which renders him mentally
or physically incapable of performing the essential functions of the duties and
services required of him hereunder, with or without reasonable accommodation, on
a full-time basis during such period;
     (iii) for Cause;
     (iv) without Cause, which shall include the Company’s appointment of a
successor Chief Executive Officer, in the sole discretion of the Board.
     (b) As used in this Agreement, the term “Cause” shall mean any one or more
of the following: (i) fraud, misappropriation, embezzlement, or sexual (or other
forms of) harassment in connection with Executive’s duties for the Company or
any affiliate; (ii) the Executive’s (a) intentional misconduct in connection
with the Company’ business, (b) refusal to follow the reasonable directions of
the Company or (c) breach of the terms of this Agreement, provided that the
Company shall notify the Executive of the acts deemed to constitute such
intentional misconduct, refusal or breach in writing; (iii) a conviction or plea
of guilty or nolo contendere to a felony (other than one arising from the
operation of a motor vehicle that does not involve an accident involving injury
to a third party); (iv)

 

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engaging in an act of gross negligence in connection with the Company’s business
(which term shall not include good faith business judgments made in the normal
course of the Executive’s duties); or (v) the Executive’s failure to observe and
comply with the Company’s policies, codes and/or Executive’s covenants contained
in this Agreement, including, but not limited to, Executive’s confidentiality
and non-solicitation obligations.
     2.3 Executive’s Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Executive shall have the right to terminate his employment under
this Agreement as follows:
     (a) for “Good Reason”, which shall mean a reduction in the Executive’s Base
Salary as provided for under this Agreement, provided that Good Reason shall not
include an act which is cured by the Company within 30 days after receipt by the
Company of written notice from Executive identifying in reasonable detail the
acts or failures allegedly constituting Good Reason hereunder, provided further
that if Executive does not deliver to the Company a notice of termination within
the sixty (60) day period after Executive has knowledge that an event
constituting Good Reason has occurred, such event will no longer constitute Good
Reason.
     (b) without Good Reason, in the sole discretion of Executive.
     2.4 Notice of Termination. If the Company or Executive desires to terminate
Executive’s employment hereunder at any time prior to expiration of the Term as
provided above in this Article 2, it or he shall do so by giving no less than
15 days written notice to the other party that it or he has elected to terminate
Executive’s employment hereunder and stating the effective date (which shall not
be December 31 of any year) and reason for such termination, provided that no
such action shall alter or amend any other provisions hereof or rights arising
hereunder. Upon any termination of Executive’s employment hereunder for whatever
reason, Executive shall, if and to the extent requested to do so by the Board,
forthwith resign any and all positions he may then be holding with the Company
or any subsidiary of the Company other than his position on the Board of
Directors.
ARTICLE 3:
COMPENSATION AND BENEFITS
     3.1 Base Salary. Commencing on the Effective Date, during the period of
this Agreement, Executive shall receive an annual base salary (“Base Salary”)
equal to $1,000,000 (partial years pro rated). Executive’s annual Base Salary
shall be paid in equal installments in accordance with the Company’s standard
policy regarding payment of compensation to executives but no less frequently
than semi-monthly. Executive shall not be eligible to receive any compensation
for his services as a member of the Company’s Board of Directors during the Term
of the Agreement.
     3.2 Annual Incentive Program, Restricted Stock Awards and Stock Option
Grants.
     (a) Annual Incentive Plan. During the Term, Executive also shall be
eligible to receive cash incentive compensation (“Bonus”) as follows: Executive
shall participate in the Starwood Annual Incentive Plan (AIP) or, at the
election of the Board’s

 

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compensation committee, the Annual Incentive Plan for Certain Executives (AIPCE)
maintained by the Company for senior executive officers on and after the
Effective Date. In either case, Executive shall participate at a level which is
not less than the maximum participation level made available to any Company
senior executive (determined without regard to period of service or similar
criteria that might otherwise be necessary to entitle Executive to such level of
participation); provided, however, that conditioned upon attainment of target
performance measure requirements based on one or more performance measures set
forth in the AIP, the target Bonus (“Target Bonus”) for each calendar year
during the Term for which Executive shall be eligible shall be $2,000,000
(partial years pro rated). In the event that changes are made to any of the
incentive plans, the changes will apply to the Executive as they do other
employees of the Company. The Executive acknowledges and agrees that the AIP and
AIPCE provide that a portion of the Executive’s annual bonus will be deferred
and payable in stock or stock units of the Company and that a portion of the
Executive’s annual Bonus will be deferred in accordance with the then current
practices of the Company and shall vest pursuant to plan provisions applicable
to Directors.
The Executive and the Company agree that payment of the Executive’s 2007 bonus
will be delivered according to the regular annual incentive plan payout schedule
and his bonus will assume he was employed with the Company for the full year. An
annual bonus shall not be deemed earned by the Executive until the Company has
determined his entitlement to such bonus. The Executive acknowledges and agrees
that, subject to Paragraph 4.1 below, under no circumstances would the Company
pay a pro-rata bonus upon departure.
     (b) Long Term Incentive Compensation. On May 24, 2007, the Company awarded
Executive, pursuant to the terms of the Company’s 2004 Long-Term Incentive
Compensation Plan (the “2004 LTIP”), 14,742 shares of restricted stock and
44,225 options to purchase shares of common stock. The terms and conditions
governing such awards are set forth in the award agreements delivered to
Executive.
     (c) Nothing in the foregoing provisions of this Paragraph 3.2 shall be
deemed to prevent the Board in its sole discretion from awarding any additional
or other amounts of cash, restricted stock units or options or other equity
based awards in respect of any whole or partial year during the Term.
     3.3 Vacation and Sick Leave. During each year of his employment, Executive
shall be entitled to vacation and sick leave benefits under the Company’s
policies equal to the maximum available to any Company senior executive,
determined without regard to the period of service that might otherwise be
necessary to entitle Executive to such vacation or sick leave under standard
Company policy.
     3.4 Other Benefits.
     (a) Other Company Benefits. The Executive shall be eligible to participate
in the Company’s “StarShare” employee benefit programs and the Company 401(k)
plan on the first day of the month following 90 days of employment. The
Executive and his eligible dependents will be covered by these benefits as per
the Executive’s coverage

 

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elections. Following the termination of this Agreement by the Company without
cause or by the Executive for good reason, Executive shall be permitted to
participate in the Company’s retiree welfare benefit plans, as may be provided
by the Company to other retired executive employees from time to time pursuant
to the terms and conditions of such welfare benefit plans, as though he had
satisfied any otherwise applicable eligibility provisions of such plans.
     (b) Driver and Car Service. The Company will provide Executive the use of a
driver and car service in New York for business purposes.
     (c) Business and Entertainment Expenses. Subject to the Company’s standard
policies and procedures with respect to expense reimbursement as applied to its
senior executive employees generally, the Company shall reimburse Executive for,
or pay on behalf of Executive, reasonable and appropriate expenses incurred by
Executive for business-related purposes, including reasonable dues and fees to
industry and professional organizations, costs of entertainment and business
development and business-related travel and to other locations on Company
business. The Executive shall be entitled to use first-class travel
accommodations for such business-related travel.
     (d) Company Aircraft. The Company shall make available to Executive a
Company-owned or leased private aircraft for business-related travel, including
for travel to and from Executive’s primary residence in Chicago, Illinois. The
use by Executive of any Company aircraft shall at all times be subject to
Company policies and procedures and to the availability of such aircraft.
     (e) Income Tax. The Company shall reimburse Executive for any additional
personal income tax liability, on a grossed-up basis, related to or resulting
from payments to Executive during the Term to the extent that in executing his
duties under this Agreement, Executive’s tax residency status is deemed changed,
in accordance with applicable law, from Illinois to New York (or Connecticut, if
applicable).
     (f) Temporary Housing. The Company shall provide temporary housing in or
around the New York/Connecticut area during the Term, which may include
accommodations at a hotel that is owned, managed or franchised by the Company.
     3.5 Withholding. The Base Salary and all other payments, grants and awards
to Executive for his services to the Company shall be subject to all withholding
and deductions required by federal, state or other law (including those
authorized by Executive but not otherwise required by law), including but not
limited to state, federal and local income taxes, unemployment tax, Medicare and
FICA, together with such deductions as Executive may from time to time
specifically authorize under any employee benefit program which may be adopted
by the Company for the benefit of its senior executives or Executive.
ARTICLE 4:
EFFECT OF TERMINATION ON COMPENSATION
     4.1 Severance Package.

 

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     (a) In the event Executive’s employment under this Agreement is terminated
either (A) by the Company without Cause under Paragraph 2.2(a)(iv) or (B) by
Executive for Good Reason under Paragraph 2.3(a), then, subject to
Paragraph 4.2, as and for a severance package the Company shall provide to the
Executive (i) Executive’s Base Salary through the date of termination,
(ii) provided that Executive has served as Chief Executive Officer of the
Company for at least three (3) months prior to his termination, a pro rated
portion of Executive’s Target Bonus through the date of termination, payable in
accordance with, and subject to, the terms of the applicable bonus plan and
(iii) 50% of Executive’s then unvested stock options and restricted stock shall
immediately vest as of the date of termination. The remaining 50% of Executive’s
then unvested stock options and restricted stock shall vest in accordance with
the plan provisions applicable to Directors.
     (b) In the event Executive’s employment under this Agreement is terminated
because of the death or permanent disability of the Executive under
Paragraph 2.2(a)(i) or 2.2(a)(ii), then, subject to Paragraph 4.2, as and for a
severance package the Company shall provide to the Executive (i) Executive’s
Base Salary through the date of termination, (ii) Executive’s Base Salary for a
period of three (3) months following the date of termination, (iii) a pro rated
portion of Executive’s then Target Bonus and (iv) all of Executive’s unvested
restricted stock and stock options shall immediately vest as of the date of
termination.
     (c) In the event Executive’s employment under this Agreement is terminated
by the Company without Cause or by Executive for Good Reason within 12 months
after a Change in Control (as defined below), then, subject to Paragraph 4.2, as
and for a severance package the Company shall provide to the Executive
(i) Executive’s Base Salary through the date of termination, (ii) a lump sum
payment equal to one times the sum of Executive’s (a) Base Salary and (b) Target
Bonus and (iii) all of Executive’s unvested restricted stock and stock options
shall immediately vest as of the date of termination.
     (d) As used in this Agreement, “Change in Control” means:
     (i) Any individual, entity or group (a “Person”), including any “person”
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the “Act”), is or becomes the beneficial owner within
the meaning of Rule 13d-3 promulgated under the 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 shares of common stock, par value $.01 per share, of
the Company (“Common Stock”), the “Outstanding Shares”) 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, (A) any acquisition by the Company or (B) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company;

 

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     (ii) 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
solicitation by a Person other than the Board for the purpose of opposing a
solicitation by any other Person with respect to the election or removal of
directors, or any other actual or threatened solicitation of proxies or consents
by or on behalf of any Person other than the Board shall not be deemed a member
of the Incumbent Board;
     (iii) 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 (1) all or substantially all of the individuals or entities
who are the beneficial owners, respectively, of the Outstanding Shares 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 Shares and the Outstanding Company Voting Securities, as the case
may be, (2) 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 Shares 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 (3) 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
     (iv) Approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.

 

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     4.2 Liquidated Damages. The parties agree that the above severance package
shall be Executive’s sole and exclusive monetary remedy under this Agreement by
reason of termination of Executive’s employment by the Company other than for
Cause or by Executive for Good Reason, it being agreed that as his actual
damages under this Agreement would be difficult to measure or quantify and would
be impracticable to determine, such amount shall constitute liquidated damages
under this Agreement for Executive by reason of such termination by Executive or
the Company. Any such payments shall not be reduced or limited by amounts
Executive might earn or be able to earn from other employment or ventures.
Notwithstanding the foregoing, upon any termination of Executive’s employment
and the Company’s payment to Executive of the amounts required to be paid under
Paragraph 4.1, Executive shall execute a release of claims arising out of
Executive’s employment with, and termination of employment from, the Company in
the form attached hereto a Exhibit 4.2 (adjusted as necessary to conform to then
existing legal requirements); and all payments and benefits provided under the
above Paragraph 4.1 shall be subject to Executive’s execution and non-revocation
of such a release.
     4.3 Rights on Termination for Cause or Without Good Reason. No severance
payments shall be due or owing to Executive in the event that the Company shall
fully terminate Executive’s employment for Cause or Executive shall terminate
his employment without Good Reason; provided, however, that Executive shall be
paid all accrued but unpaid Base Salary through the date of such termination of
employment.
     4.4 Certain Additional Payments by the Company. Notwithstanding anything to
the contrary in this Agreement, if any payment, distribution or provision of a
benefit by the Company to or for the benefit of Executive, whether paid or
payable, distributed or distributable or provided or to be provided pursuant to
the terms of Section 4.1(c) of this Agreement (a “Payment”), would be subject to
an excise or other special additional tax that would not have been imposed
absent such Payment (including, without limitation, any excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended), or any interest
or penalties with respect to such excise or other additional tax (such excise or
other additional tax, together with any such interest or penalties, are
hereinafter collectively referred to as the “Excise Tax”), the Company shall pay
to Executive an additional payment (a “Gross-up Payment”) in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any income taxes and Excise Taxes
imposed on any Gross-up Payment, Executive retains an amount of the Gross-up
Payment (taking into account any similar gross-up payments to Executive under
any stock incentive or other benefit plan or program of the Company) equal to
the Excise Tax imposed upon the Payments. The Company and Executive shall make
an initial determination as to whether a Gross-up Payment is required and the
amount of any such Gross-up Payment. Executive shall notify the Company in
writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a Gross-up Payment (or a Gross-up Payment in excess
of that, if any, initially determined by the Company and Executive) within ten
business days after the receipt of such claim. The Company shall notify
Executive in writing at least ten business days prior to the due date of any
response required with respect to such claim if it plans to contest the claim.
If the Company decides to contest such claim, Executive shall cooperate fully
with the Company in such action; provided, however, the Company shall bear and
pay directly or indirectly all costs and expenses (including additional interest
and penalties) incurred in connection with such action and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or income
tax,

 

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including interest and penalties with respect thereto, imposed as a result of
the Company’s action. If Executive receives a refund of any amount paid by the
Company with respect to such claim, Executive shall promptly pay such refund to
the Company. If the Company fails to timely notify Executive whether it will
contest such claim or the Company determines not to contest such claim, then the
Company shall immediately pay to Executive the portion of such claim, if any,
which it has not previously paid to Executive.
ARTICLE 5:
REPRESENTATIONS AND WARRANTIES;
NON-COMPETE AND NON-SOLICITATION
     5.1 Representations and Warranties.
     (a) Representation and Warranty of Executive. Executive hereby represents
and warrants to the Company that he is not aware of any presently existing fact,
circumstance or event (including, but without limitation, any health condition
or legal constraint) which is not known to the Company which would preclude or
restrict him from providing to the Company the services contemplated by this
Agreement, or which would give rise to any breach of any term or provision
hereof, or which could otherwise result in the termination of his employment
hereunder for Cause (as such term is herein defined).
     (b) Representation and Warranty of the Company. The Company hereby
represents and warrants to Executive that (i) it is not aware of any fact,
circumstance or event which is not known to Executive which would give rise to
any breach of any term or provision of this Agreement, or which would form the
basis for any claim or allegation that Executive’s employment hereunder could be
terminated for Cause hereunder; and (ii) it has received all authorizations and
has taken all actions, necessary or appropriate for the due execution, delivery
and performance of this Agreement, and all options and restricted stock units
described in Article 3.
     5.2 Non-Compete and Non-Solicitation.
     (a) General. Executive acknowledges that in the course of Executive’s
employment with the Company the Executive will become familiar with trade
secrets and other confidential information concerning the Company and its
subsidiaries and that Executive’s services will be of special, unique and
extraordinary value to the Company and its subsidiaries.
     (b) Noncompetition. Executive agrees that during the period of Executive’s
employment with the Company and for a period of one year thereafter (the
“Noncompetition Period”), the Executive shall not, without the express written
consent of the Board of Directors of the Company, directly or indirectly,
whether for his own account or for the account of any other person or entity,
engage, participate or make any financial investment in, become employed by or
render advisory services or otherwise assist in or be interested in any capacity
to any business (a “Competing Business”) in which Executive was involved or had
knowledge was being conducted or planned by the

 

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Company or any of its subsidiaries, as of the termination of Executive’s
employment, in any geographic area in which the Company or any of its
subsidiaries is then conducting such business; provided, however, that after
termination of employment nothing in this paragraph 5.2(b) shall prevent
Executive from being employed as Chief Executive Officer of an enterprise which
is engaged in a Competing Business if such enterprise is not one of those set
forth in Exhibit 5.2.
     (c) Nonsolicitation. Executive further agrees that during the
Noncompetition Period, Executive shall not, without the express written consent
of the Board of Directors of the Company, directly or indirectly, whether for
his own account or for the account of any other person or entity, other than the
Company, hire, employ, retain or solicit the hire, employment or retention of
any employee of the Company or its affiliates, or any person who was such an
employee at any time during the twelve (12) month period preceding the
Executive’s termination of employment with the Company or its affiliates, or
otherwise persuade, induce or encourage, or attempt to persuade, induce or
encourage any such person or consultant to the Company to terminate his, her or
its relationship with the Company.
     (d) Exceptions. Nothing in this Paragraph 5.2 shall prohibit Executive from
being (i) a stockholder in a mutual fund or a diversified investment company;
(ii) an owner of not more than five percent of the outstanding stock of any
class of a corporation whose securities are publicly traded so long as Executive
has no active participation in the business of such corporation.; and (iii) an
owner of any single asset hotels.
     (e) Reformation. If, at any time of enforcement of this Paragraph 5.2 the
Arbitrator (as defined in Paragraph 6.1(a)) holds that the restrictions stated
herein are unreasonable under circumstances then existing, the parties hereto
agree that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the Arbitrator shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law. This Agreement shall
not authorize the Arbitrator to increase or broaden any of the restrictions in
this Paragraph 5.2.
     5.3 Confidentiality. Executive shall not, at any time during the Term or
thereafter, make use of or disclose, directly or indirectly, any (i) trade
secret or other confidential or secret information of the Company or of any of
its subsidiaries or (ii) other technical, business, proprietary or financial
information of the Company or of any of its subsidiaries not available to the
public generally or to the competitors of the Company or to the competitors of
any of its subsidiaries (“Confidential Information”), except to the extent that
such Confidential Information (a) becomes a matter of public record or is
published in a newspaper, magazine or other periodical or on electronic or other
media available to the general public, other than as a result of any act or
omission of Executive, (b) is required to be disclosed by any law, regulation or
order of any court or regulatory commission, department or agency, provided that
Executive gives prompt notice of such requirement to the Company to enable the
Company to seek an appropriate protective order, or (c) is required to be used
or disclosed by Executive to perform properly Executive’s duties under this
Agreement. Promptly following the end of the Term, Executive shall surrender to
the Company all records, memoranda, notes, plans, reports,

 

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computer tapes and software and other documents and data which constitute
Confidential Information which Executive may then possess or have under
Executive’s control (together with all copies thereof).
     5.4 Intellectual Property. Executive shall not, at any time, have or claim
any right, title or interest in any trade name, patent, trademark, copyright,
trade secret, intellectual property, methodologies, technologies or other
similar rights relating to the Company’s business (collectively, “Intellectual
Property”) belonging to the Company or any of its affiliates and shall not have
or claim any right, title or interest in or to any material or matter of any
kind prepared for or used in connection with the business or promotion of the
Company or any of its affiliates, whether produced, prepared or published in
whole or in part by Executive or by the Company or any of its affiliates. All
Intellectual Property that is conceived, devised, made, developed or perfected
by Executive, alone or with others, during Executive’s employment that is
related in any way to the Company’s or any of its affiliates’ business or is
devised, made, developed or perfected utilizing equipment or facilities of the
Company or its affiliates shall be promptly disclosed to the Board, are works
for hire and become the sole, absolute and exclusive property of the Company. If
and to the extent that any of such Intellectual Property should be determined
for any reason not to be a work for hire, Executive hereby assigns to the
Company all of Executive’s right, title and interest in and to such Intellectual
Property. At the reasonable request and expense of the Company but without
charge to the Company, whether during or at any time after Executive’s
employment with the Company, Executive shall cooperate fully with the Company
and its affiliates in the securing of any trade name, patent, trademark,
copyright or intellectual property protection or other similar rights in the
United States and in foreign countries, including without limitation, the
execution and delivery of assignments, patent applications and other documents
or papers.
     5.5 Enforcement. The parties hereto agree that the Company and its
subsidiaries would be damaged irreparably in the event that any provision of
Paragraphs 5.2, 5.3 or 5.4 of this Agreement were not performed in accordance
with its terms or were otherwise breached and that money damages would be an
inadequate remedy for any such nonperformance or breach. Accordingly, the
Company and its successors and permitted assigns shall be entitled, in addition
to other rights and remedies existing in their favor, to seek an injunction or
injunctions to prevent any breach or threatened breach of any of such provisions
and to enforce such provisions specifically (without posting a bond or other
security). Executive agrees that Executive will submit to the personal
jurisdiction of the courts of the State of New York in any action by the Company
to enforce an arbitration award against Executive or to obtain interim
injunctive or other relief pending an arbitration decision.
ARTICLE 6:
ARBITRATION
     6.1 Arbitration. In the event of any controversy, dispute or claim arising
out of or related to this Agreement or Executive’s employment by the Company,
the parties shall negotiate in good faith in an attempt to reach a mutually
acceptable settlement of such dispute. If negotiations in good faith do not
result in a settlement of any such controversy, dispute or claim, it shall,
except as otherwise provided for herein be finally settled by expedited
arbitration conducted by a single arbitrator selected as hereinafter provided
(the “Arbitrator”) in accordance

 

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with the National Rules of the American Arbitration Association (“National
Rules”), subject to the following (the parties hereby agreeing that,
notwithstanding the provisions of Rule 1 of the National Rules, in the event
that there is a conflict between the provisions of the National Rules and the
provisions of this Agreement, the provisions of this Agreement shall control):
     (a) The Arbitrator shall be determined from a list of names of five
impartial arbitrators each of whom shall be an attorney experienced in
arbitration matters concerning executive employment disputes, supplied by the
AAA chosen by Executive and the Company each in turn striking a name from the
list until one name remains (with the Company being the first to strike a name).
     (b) The expenses of the arbitration shall be borne by the Company; and the
Company shall bear its own legal fees and expenses and pay, at least monthly,
all of Executive’s legal fees and expenses incurred in connection with such
arbitration, except that Executive shall have to reimburse the Company for his
legal fees and expenses if the arbitrator finds that Executive brought an action
in bad faith.
     (c) The Arbitrator shall determine whether and to what extent any party
shall be entitled to damages under this Agreement; provided that no party shall
be entitled to punitive or consequential damages (including, in the case of the
Company, any claim for alleged lost profits or other damages that would have
been avoided had Executive remained an employee), and each party waives all such
rights, if any.
     (d) The Arbitrator shall not have the power to add to nor modify any of the
terms or conditions of this Agreement. The Arbitrator’s decision shall not go
beyond what is necessary for the interpretation and application of the
provision(s) of this Agreement in respect of the issue before the Arbitrator.
The Arbitrator shall not substitute his or her judgment for that of the parties
in the exercise of rights granted or retained by this Agreement. The
Arbitrator’s award or other permitted remedy, if any, and the decision shall be
based upon the issue as drafted and submitted by the respective parties and the
relevant and competent evidence adduced at the hearing.
     (e) The Arbitrator shall have the authority to award any remedy or relief
(including provisional remedies and relief) that a court of competent
jurisdiction could order or grant. The Arbitrator’s written decision shall be
rendered within sixty days of the closing of the hearing. The decision reached
by the Arbitrator shall be final and binding upon the parties as to the matter
in dispute. To the extent that the relief or remedy granted by the Arbitrator is
relief or remedy on which a court could enter judgment, a judgment upon the
award rendered by the Arbitrator shall be entered in any court having
jurisdiction thereof (unless in the case of an award of damages, the full amount
of the award is paid within 10 days of its determination by the Arbitrator).
Otherwise, the award shall be binding on the parties in connection with their
continuing performances of this Agreement and, in any subsequent arbitral or
judicial proceedings between the parties.
     (f) The arbitration shall take place in New York, New York.

 

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     (g) The arbitration and all filing, testimony, documents and information
relating to or presented during the arbitration proceeding shall be disclosed
exclusively for the purpose of facilitating the arbitration process and in any
court proceeding relating to the arbitration, and for no other purpose, and
shall be deemed to be information subject to the confidentiality provisions of
this Agreement.
     (h) The parties shall continue performing their respective obligations
under this Agreement notwithstanding the existence of a dispute while the
dispute is being resolved unless and until such obligations are terminated or
expire in accordance with the provisions hereof.
     (i) The parties may obtain a pre-hearing exchange of information including
depositions, interrogatories, production of documents, exchange of summaries of
testimony or exchange of statements of position, and the Arbitrator shall limit
such disclosure to avoid unnecessary burden to the parties and shall schedule
promptly all discovery and other procedural steps and otherwise assume case
management initiative and control to effect an efficient and expeditious
resolution of the dispute. At any oral hearing of evidence in connection with an
arbitration proceeding, each party and its counsel shall have the right to
examine its witness and to cross-examine the witnesses of the other party. No
testimony of any witness, or any evidence, shall be introduced by affidavit,
except as the parties otherwise agree in writing.
     (j) Notwithstanding the dispute resolution procedures contained in this
Paragraph 6.1, either party may apply to any court sitting in the County, City
and State of New York (i) to enforce this agreement to arbitrate, (ii) to seek
provisional injunctive relief so as to maintain the status quo until the
arbitration award is rendered or the dispute is otherwise resolved, (iii) to
confirm any arbitration award, or (iv) to challenge or vacate any final
judgment, award or decision of the Arbitrator that does not comport with the
express provisions of this Article 6.
ARTICLE 7:
MISCELLANEOUS
     7.1 Notices. All notices, requests or other communications provided for in
this Agreement shall be made, if to the Company, to the Secretary of the Company
at the Company’s principal executive office, and if to Executive, to his address
on the books of the Company (or to such other address as the Company or
Executive may give to the other in writing for purposes of notice hereunder).
Copies of all notices given to Executive shall be sent to:
Mark S. Weisberg
Winston & Strawn LLP
35 W. Wacker Drive
Chicago, IL 60601-9703
Direct: 312-558-8070
Fax: 312-558-5700

 

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Copies of all notices given to the Company shall be sent to:
Starwood Hotels & Resorts Worldwide, Inc.
1111 Westchester Avenue
White Plains, New York 10604
Attention: Chief Administrative Officer and General Counsel
Facsimile: (914) 640-8240
     All notices, requests or other communications required or permitted by this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by mailing via certified mail, postage prepaid, return
receipt requested, in the United States mails to the last known address of the
party entitled thereto, (c) by reputable overnight courier service, or (d) by
facsimile with confirmation or receipt. The notice, request or other
communication shall be deemed to be received upon actual receipt by the party
entitled thereto; provided, however, that if a notice, request or other
communication is received after regular business hours, it shall be deemed to be
received on the next succeeding business day of the Company.
     7.2 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of New York.
     7.3 No Waiver. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
     7.4 Severability. If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement and all other provisions
shall remain in full force and effect.
     7.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
     7.6 Headings. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
     7.7 Gender and Plurals. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
     7.8 Successors. This Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company, including without
limitation any person, association or entity which may hereafter acquire or
succeed to all or substantially all of the business or assets of the Company by
any means whether direct or indirect, by purchase, merger,

 

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consolidation, or otherwise. The Company shall require any such successor to the
Company to expressly assume, in writing, satisfaction in form and substance to
Executive all of the Company’s obligations to Executive hereunder and otherwise.
Except as provided in the preceding sentences, this Agreement and the rights and
obligations of the parties hereunder are personal, and neither this Agreement
nor any right, benefit or obligation of either party hereto shall be subject to
voluntary or involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.
     7.9 Entire Agreement. Any modification of this Agreement shall be effective
only if it is in writing and signed by the party to be charged.
     7.10 Deemed Resignations. Except as provided in the last sentence of this
paragraph with respect to service on the Company’s Board of Directors, any
termination of Executive’s employment shall constitute an automatic resignation
of Executive as an officer of the Company and each affiliate of the Company, and
from the board of directors or any similar governing body of any corporation,
trust, limited liability company or other entity in which the Company or any
affiliate holds an equity interest and with respect to which board or similar
governing body Executive serves as the Company’s or such affiliate’s designee or
other representative. Executive shall cooperate with the Company and execute all
such formal resignations and other documents as the Company may reasonably
request in furtherance of the foregoing. Notwithstanding the foregoing, upon any
termination of Executive’s employment hereunder (unless termination shall be for
Cause), Executive agrees to continue to serve on the Company’s Board of
Directors, subject to the Company’s customary procedures and requirements of
Board membership, including nomination and election.
     7.11 Indemnification.
     (a) In addition to any additional benefits provided under applicable state
law, as a Director and officer of the company, Executive shall be entitled to
the benefits of: (1) those provisions of the Articles of Incorporation of the
Company, as amended, and of the by-laws of the Company as amended, which provide
for indemnification of officers and Directors of the Company (and no such
provision shall be amended in any way to limit or reduce the extent of
indemnification available to Executive as an officer of the Company), (ii) the
Indemnification Agreement between the Company and Executive (the
‘Indemnification Agreement”).
     (b) The rights of Executive under such indemnification obligations shall
survive the termination of this Agreement and be applicable for so long as
Executive may be subject to any claim, demand, liability, cost or expense, which
the indemnification obligations referred to in this Paragraph 7.11 are intended
to protect and indemnify him against.
     (c) The Company shall, at no cost to Executive, use its reasonable best
efforts to at all times include Executive, during the term of Executive’s
employment hereunder and for so long thereafter as Executive may be subject to
any such claim, as an insured under any directors’ and officers’ liability
insurance policy maintained by the Company,

 

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which policy shall provide such coverage in such amounts as the Board shall deem
appropriate for coverage for all directors and officers of the Company.
     IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by
its duly authorized officer and Executive has signed this Agreement as of the
day and year first above written.

              STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation
 
       
 
       
 
  By:   /s/ Kenneth S. Siegel
 
       
 
      Name: Kenneth S. Siegel
 
      Its: Chief Administrative Officer and General Counsel
 
       
 
            EXECUTIVE
 
       
 
            /s/ Bruce W. Duncan           Bruce W. Duncan