Exhibit 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, (“Agreement”) made and entered into as of September 7, 2006 (the
“Effective Date”), by and between LAURENCE S. GELLER (the “Executive”) and
STRATEGIC HOTELS & RESORTS, INC. (the “Company”);

WITNESSETH THAT:

WHEREAS, the Company (f/k/a Strategic Hotel Capital, Inc.) and the Executive are
parties to an Amended and Restated Employment Agreement dated as of June 8, 2004
(the “Prior Agreement”), pursuant to which the terms and conditions of the
Executive’s employment were set forth; and

NOW THEREFORE, the Company and the Executive hereby agree that the Prior
Agreement shall be amended and restated as set forth herein effective as of the
Effective Date:

1.            Performance of Services. The Executive’s employment with the
Company shall be subject to the following:

 

(a)

Subject to the terms of this Agreement, the Company hereby agrees to employ the
Executive as its chief executive officer, with the titles of President and Chief
Executive Officer during the Agreement Term (as defined below), and the
Executive hereby agrees to accept such employment during the Agreement Term.
During the Agreement Term, while he is employed by the Company, the Executive
shall be nominated for election to the Board of Directors of the Company (the
“Board”), so long as he is Chief Executive Officer. If elected to and serving on
the Board, the Executive agrees to resign from the Board effective on his Date
of Termination (as defined in paragraph 3(h)), unless the Executive and the
Board otherwise agree. The “Agreement Term” shall initially be the period
beginning on the Effective Date and ending on December 31, 2009. Thereafter, the
Agreement Term will be automatically extended for 12-month periods, unless
either the Company or the Executive shall give the other party notice of the
intention to not extend the Agreement by October 1, 2009 or by October 1 of any
succeeding year, if applicable, except that upon a Change in Control (as defined
in paragraph 4(d)) the remaining Agreement Term shall be 24 months from the date
the Change in Control occurred.

 

(b)

During the Agreement Term, while the Executive is employed by the Company, the
Executive shall devote his full time, energies and talents to serving as its
President and Chief Executive Officer.

 

 

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(c)

The Executive agrees that he shall perform his duties faithfully and to the best
of his abilities subject to the directions of the Board. The Executive’s duties
may include providing services for both the Company and the Subsidiaries (as
defined below), as determined by the Board; provided, however, that the
Executive shall not, without his consent, be assigned tasks that would be
inconsistent with those of President and Chief Executive Officer of the Company.
The Executive will have such authority, power, responsibilities and duties as
are inherent to his positions (and the undertakings applicable to his positions)
and necessary to carry out his responsibilities and the duties required of him
hereunder. For purposes of this Agreement, the term “Subsidiary” shall mean any
corporation, partnership, joint venture or other entity during any period, in
which at least a majority interest in such entity is owned, directly or
indirectly, by the Company (or a successor to the Company).

 

(d)

Notwithstanding the foregoing provisions of this paragraph 1, during the
Agreement Term, the Executive may devote reasonable time to activities other
than those required under this Agreement, including management of his personal
investments and activities involving professional, charitable, educational,
religious and similar types of organizations, to the extent that such other
activities do not, in the reasonable judgment of the Board, inhibit or prohibit
the performance of the Executive’s duties under this Agreement, or conflict in
any material way with the business of the Company or any Subsidiary; provided,
however, that the Executive shall obtain approval of the Board prior to
nomination or seeking election to the board of directors of any other company,
and such approval shall not be unreasonably withheld.

 

(e)

The Company shall, to the maximum extent permitted by applicable law, protect,
defend, indemnify and hold harmless the Executive against any costs, losses,
expenses, claims, suits, proceedings, investigations, damages or liabilities to
which the Executive may become subject which arise out of, are based upon or
relate to, or are alleged to so arise, be based upon or to relate to the
Executive’s employment by the Company (and any Subsidiary) or the Executive’s
service to the Company (and any Subsidiary) as an employee, officer or member of
the Board, including, without limitation, reimbursement on a current basis, upon
submission of invoices, for any legal or other expenses reasonably incurred by
the Executive in connection with investigation and defending against any such
costs, losses, expenses, claims, suits, proceedings, investigations, damages or
liabilities; provided, however, that the Company shall not be required to pay
any amounts under this paragraph except upon receipt of an unsecured undertaking
by the Executive to repay any such amounts as to which it shall ultimately be
determined by a court of competent jurisdiction that the Executive is not
entitled to indemnification by the Company. The Executive will be covered under
the Company’s directors and officers insurance policy during the Agreement Term
and for such period

 

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following the Date of Termination during which any action may be brought against
the Executive related to the matters above, so long as the Company maintains
such coverage for any director or officer of the Company.

2.            Compensation. Subject to the terms of this Agreement, during the
Agreement Term, while the Executive is employed by the Company, the Company
shall compensate him for his services as follows:

 

(a)

Salary and Bonus.

 

(i)

During the Agreement Term, the Executive shall receive an annual base salary
(the “Salary”) of $750,000, subject to annual review by the Executive
Compensation Committee of the Board (the “Committee”), which, in the discretion
of such Committee, may be increased from time to time. Once increased, such
Salary may not be decreased. Such Salary shall be payable in arrears, in
accordance with the payroll practices of the Company.

 

(ii)

For fiscal year 2006 and each subsequent fiscal year of the Company during the
Agreement Term, the Executive shall be eligible to receive an annual cash
performance-based bonus (the “Bonus”) from the Company, with a target bonus
opportunity of $750,000 (“Target Bonus”) and a maximum bonus opportunity of
$1,500,000 (“Maximum Bonus”). For each fiscal year during the Agreement Term,
the Executive shall have the opportunity to earn a bonus determined by the
Committee which will make such a determination based on the applicable Bonus
goals as set forth in Schedule I. In addition, the Committee may, in its
discretion, award additional incentive compensation from time to time to
Executive during the Agreement Term.

 

(b)

Benefits. The Executive shall be eligible to participate in any employee pension
and welfare benefit plans and programs made available to the Company’s senior
level executives, on terms which are no less favorable than the terms provided
generally for the Company’s senior level executives from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any other pension or
retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded.

 

(c)

Vacation. The Executive shall be entitled to four weeks of paid vacation each
calendar year (or a pro rata portion thereof with respect to any period

 

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during the Agreement Term which does not encompass a full calendar year). Any
unused vacation may be rolled over to the next calendar year, if permitted under
the Company’s regular vacation policy as in effect from time to time.

 

(d)

Business Expenses. The Company will reimburse the Executive for reasonable
expenses incurred by the Executive on company business, pursuant to the
Company’s standard expense reimbursement policy as in effect from time to time,
so long as the Executive provides proper documentation establishing the amount,
date and business purpose of those expenses.

 

(e)

Stock-Based Compensation.

 

(i)

Long-Term Incentive Award

Upon the Effective Date, the Executive shall receive an initial long-term
incentive award pursuant to the Company’s 2004 Stock Incentive Plan (the “Stock
Incentive Plan”), with a target value as of the Effective Date of $6,000,000.
Forty percent (40%) of the value of such award shall be issued in stock options
(“Options”); forty percent (40%) of the value of such award shall be issued in
performance-based restricted share units (“Performance Shares”); and the
remaining twenty percent (20%) of the value of such award shall be issued in
time-based restricted share units (“Restricted Stock Units” or “RSUs”). The
entire award will be earned and vested only to the extent of the achievement of
certain performance and/or service goals, as set forth in Schedule II.
Notwithstanding anything in this Agreement to the contrary, if a Change in
Control occurs: (A) to the extent that any portion of the Long-Term Incentive
Award described in Schedule II is unvested, such portion (and related dividend
equivalent RSUs) shall become immediately vested, and (B) the Performance Shares
and related dividend equivalent RSUs shall be earned upon the Change in Control
such that the sum of the Performance Shares earned as of the Change in Control
and the previously earned Performance Shares equals 100% of Target Shares (as
described in Schedule II) (or if greater, the “Severance Performance Share
Number” (as defined herein)) and shall become immediately vested. In addition,
the Committee may, in its discretion, award additional stock-based compensation
from time to time to Executive during the Agreement Term.

 

(ii)

Prior Awards

Any stock-based awards granted to Executive prior to the Effective Date (“Prior
RSUs”) shall continue be governed by the terms and conditions of their
respective grant agreements and the Stock

 

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Incentive Plan, as appropriate, provided, however, that paragraphs 3(c), 3(d),
4(b)(v), 4(c)(v) and 4(d) of this Agreement shall govern the treatment of such
Prior RSUs upon the termination of Executive’s employment.

 

(iii)

Dividend Equivalents

Each RSU, Performance Share, and Prior RSU award under this paragraph 2(e) shall
provide for accrual of dividend equivalents until the delivery date, as follows.
As of each dividend date with respect to shares of Common Stock, a dollar amount
equal to the amount of the dividend that would have been paid on the number of
shares of Common Stock equal to the number of RSUs, Prior RSUs or Performance
Shares held by the Executive as of the close of business on the record date for
such dividend shall be converted into a number of RSUs equal to the number of
whole and fractional shares of Common Stock that could have been purchased at
the closing price on the dividend payment date with such dollar amount. In the
case of any dividend declared on shares of Common Stock which is payable in
shares of Common Stock, Executive shall be credited with an additional number of
RSUs equal to the product of (x) the number of his RSUs, Prior RSUs or
Performance Shares then held on the related dividend record date and the (y) the
number of shares of Common Stock (including any fraction thereof) distributable
as a dividend on a share of Common Stock. Such dividend equivalents shall be
paid to the Executive in shares of Common Stock, at such time as shares are
delivered for payment of the RSUs, Prior RSUs or Performance Shares, but with
respect to Performance Shares, only to the extent that Performance Shares are
earned. For avoidance of doubt, dividends equivalents shall be accrued on a
retroactive basis to September 1, 2006 based on Performance Shares as they are
actually earned, as specified in Schedule II.

 

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(iv)

Timing of Delivery of Shares -- Generally. Except as otherwise provided in this
Agreement, (a) Options, RSUs and Performance Shares awarded upon the Effective
Date shall vest and be delivered as described in Schedule II; (b) Prior RSUs
described in paragraph 2(e)(ii) above shall be delivered in accordance with that
paragraph; (c) RSUs delivered pursuant to dividend equivalents described in
paragraph 2(e)(iii) above shall be delivered in accordance with that paragraph;
and (d) except as otherwise provided in a separate agreement, all other equity
awards shall vest and be delivered at the time specified in, and in accordance
with the Company’s standard form of award agreement under the Company’s Stock
Incentive Plan.

 

3.            Termination. The Executive’s employment with the Company during
the Agreement Term may be terminated by the Company or the Executive without any
breach of this Agreement under the circumstances described in paragraphs 3(a)
through 3(g):

 

(a)

Death. The Executive’s employment hereunder will terminate upon his death.

 

(b)

Disability. The Company may terminate the Executive’s employment due to the
Executive’s Disability. For purposes of this Agreement “Disability” means the
absence of the Executive from the Executive’s duties with the Company on a
full-time basis for ninety (90) days (which need not be continuous) during any
consecutive twelve-month period as a result of incapacity due to a physical or
mental illness which, in the opinion of the Board, renders the Executive
incapable, after reasonable accommodation, of performing his duties under this
Agreement. If the Executive disputes the Company’s determination of Disability,
the Executive (or his designated physician) and the Company (or its designated
physician) shall jointly appoint a third-party physician to examine the
Executive and determine whether the Executive has a Disability.

 

(c)

Termination by Company for Cause. The Company may terminate the Executive’s
employment hereunder at any time for Cause (“Termination for Cause”). For
purposes of this Agreement, the term “Cause” shall mean:

 

(i)

the willful and continued failure by the Executive, after reasonable notice and
opportunity to cure, to substantially perform his duties with the Company (other
than any such failure resulting from the Executive’s Disability);

 

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(ii)

willful gross misconduct involving serious moral turpitude, or breach of his
duty of loyalty to the Company;

 

(iii)

conviction (or plea of no contest) of (a) a felony, (b) a crime involving fraud
or (c) other illegal conduct, other than minor traffic violations, and with
respect to clause (c), which is demonstrably injurious to the Company’s
financial position or reputation;

 

(iv)

material breach of any of the Company’s material written policies;

 

(v)

willful dishonesty in connection with the Company’s business;

 

(vi)

the Executive willfully (x) impedes, (y) endeavors to influence, obstruct or
impede or (z) fails to materially cooperate with an investigation authorized by
the Board (an “Investigation”); or

 

(vii)

the Executive willfully withholds, removes, conceals, destroys, alters or by
other means falsifies any material which is requested in connection with an
Investigation, or attempts to do so or solicits another to do so.

For purposes of this provision and paragraph 25, no act or omission on the part
of the Executive shall be considered “willful” unless it is done or omitted in
bad faith and without reasonable belief that such conduct was in the best
interests of the Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board (excluding the
Executive), after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board, finding that, in the good faith opinion of the Board, the Executive is
guilty of conduct described above, and specifying the particulars thereof in
detail.

 

 

(d)

Constructive Termination. The Executive shall be considered to have terminated
his employment as a result of a constructive termination (“Constructive
Termination”) if, without the written consent of the Executive,

 

(i)

the Company reduces Executive’s Salary or bonus opportunity or the Company
materially breaches this Agreement;

 

(ii)

the Company materially reduces the Executive’s duties or authority, fails to
nominate the Executive to the Board, or requires the Executive to report other
than to the Board or a committee of the Board;

 

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(iii)

the Company relocates its principal offices, or the Executive’s principal place
of employment, outside the Chicago metropolitan area; or

 

(iv)

any successor to the Company (or the Company itself, following a Change in
Control as defined in paragraph 4(d)) fails to assume this Agreement or affirm
its obligations hereunder in any material respect.

Notwithstanding the foregoing, at the direction of the Board, certain of the
Executive’s duties may be reassigned to another director or officer for up to 30
days to permit an Investigation of whether there is a basis to terminate the
Executive for Cause. Such reassignment shall not constitute Constructive
Termination as long as the reassigned duties are directly and materially related
to the subject of the Investigation. Further, suspending the Executive’s duties,
with full pay, bonus eligibility, welfare benefits and continued vesting of
equity awards and other benefits, after Executive has provided a notice of
non-renewal of this Agreement shall not constitute Constructive Termination. A
termination by the Executive shall not be deemed to be as a result of a
Constructive Termination unless the Executive shall have provided notice of the
Constructive Termination event within 90 days of its occurrence and the Company
shall have a reasonable opportunity to cure such conduct or event.

 

 

(e)

Voluntary Resignation. The Executive may terminate his employment hereunder at
any time for any reason by giving the Company prior written notice of his
resignation, whether pursuant to the non-renewal provision of paragraph 1(a) or
otherwise, which shall be effective 30 days after receipt (provided, that, the
Company may accelerate the Date of Termination to an earlier date by providing
the Executive with notice of such action, or, alternatively, the Company may
place the Executive on paid leave during such period)(“Voluntary Resignation”).
The Executive shall not be required to specify a reason for any such termination
under this paragraph 3(e) unless the Executive intends for such termination to
be subject to paragraph 3(d).

 

(f)

Mutual Agreement. This Agreement may be terminated at any time by the mutual
agreement of the parties (“Mutual Agreement”). Any termination of the
Executive’s employment by mutual agreement of the parties will be memorialized
by an agreement which is reduced to writing and signed by the Executive and a
duly appointed officer of the Company.

 

(g)

Termination by Company without Cause. The Company may terminate the Executive’s
employment hereunder at any time for any reason, by giving the Executive prior
written notice of his termination, which shall be effective immediately or as of
such later time as is specified in such notice (“Termination without Cause”).
Termination of the Executive’s

 

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employment by the Company shall be deemed to have occurred under this paragraph
3(g) unless the notice of termination provided to the Executive by the Company
specifies that the Executive’s termination is for reasons described in
paragraphs 3(b), 3(c) or 3(f).

 

(h)

Date of Termination. “Date of Termination” means the last day the Executive is
employed by the Company, whether by reason of the expiration of the Agreement
Term, termination of employment in accordance with the foregoing provisions of
this paragraph 3, or under any other circumstances.

4.            Rights Upon Termination. The rights and obligations of the Company
and the Executive with respect to compensation and benefits under this Agreement
for periods after his Date of Termination shall be determined in accordance with
the following provisions of this paragraph 4:

 

(a)

Termination for Cause; Voluntary Resignation; Mutual Agreement; Non-Renewal by
Either Party. If the Executive’s employment terminates under circumstances
described in paragraph 3(c), 3(e) or 3(f) or if the Executive’s employment with
the Company terminates at the end of the Agreement Term due to non-renewal of
the Agreement Term by either party, then, except as otherwise expressly provided
in this Agreement or otherwise agreed in writing between the Executive and the
Company, the Company’s only obligation to Executive after the Executive’s Date
of Termination is payment of the following:

 

(i)

The Executive’s Salary for the period ending on the Date of Termination and, if
applicable, any earned but unpaid Bonus for the fiscal year ending on or before
the Date of Termination;

 

(ii)

Payment for unused vacation days, as determined in accordance with the Company
policy as in effect from time to time; and

 

(iii)

Any other payments or benefits to be provided to the Executive by the Company
pursuant to any employee benefit plans or arrangements adopted by the Company,
to the extent such amounts are due from the Company (with paragraphs 4(a)(i),
(ii) and this subsection (iii) referred to collectively herein as “Accrued
Benefits”).

 

(b)

During the Agreement Term, Termination due to Death or Disability; Prior to or
more than 24 months following a Change in Control, Constructive Termination or
Termination by the Company without Cause . If the Executive’s employment
terminates under circumstances described in paragraph 3(a) or 3(b) at any time
during the Agreement Term, or if the Executive’s employment terminates under
circumstances described in 3(d) or 3(g) either prior to a Change in Control (as
defined herein) or more than

 

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twenty-four (24) months following a Change in Control, the Executive (or, in the
event of his death, his estate) shall be entitled to the following from the
Company:

 

(i)

Accrued Benefits;

 

(ii)

An amount equal to one-twelfth (1/12) of the sum of (w) the current Salary then
in effect, plus (x) the higher of his Target Bonus or the average of the most
three recent annual Bonuses earned, which sum is multiplied by the greater of
(y) twelve (12), or (z) the number of full and partial months remaining on the
then current Agreement Term as of the Date of Termination (“Severance Term”).
Such amount shall be payable in equal monthly installments during the Severance
Term;

 

(iii)

A pro-rata Target Bonus for the elapsed portion of the calendar year through the
Date of Termination, payable in twelve equal monthly installments commencing
upon the Date of Termination;

 

(iv)

Continued medical coverage under the Company’s medical plan for the Executive
and his family during the Severance Term, with benefits no less favorable in any
material respect than the level of coverage applicable to them immediately prior
to such Date of Termination, and the Company shall pay all premium amounts
thereto. The continued medical coverage during the Severance Term at the
Company’s expense shall run concurrently with the time period for which the
Executive and his family members are entitled to continued medical coverage
under the provisions of section 4980B of the Internal Revenue Code of 1986, as
amended (the “Code”), and section 601 of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), if applicable, or any similar state law
continuation coverage requirements; and

 

(v)

The Executive’s RSUs and Prior RSUs shall become immediately payable, all
restrictions on any restricted stock and any other share-based awards shall
lapse; all Options shall become immediately vested and continue to be
exercisable for the Severance Term; and the Performance Shares and related
dividend equivalent RSUs shall be earned as of the Date of Termination such that
the sum of the Performance Shares earned as of the Date of Termination and the
previously earned Performance Shares equals 100% of Target Shares (as described
in Schedule II) (or if greater, the number of shares calculated pursuant to the
following sentence (“Severance Performance Share Number”)) and all earned
Performance Shares shall become immediately vested. Severance Performance Share
Number is such number equal to the sum of (i) if Performance Shares were earned
at more than 100% of the applicable Target

 

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Shares for any Earning Date, the total number of Performance Shares earned for
such Earning Date and (ii) 100% of the applicable Target Shares for any Earning
Date which has not yet occurred or for which no more than 100% of the applicable
Target Shares were earned.

 

(c)

Termination due to Constructive Termination or Termination by the Company
without Cause on or after a Change in Control. If the Executive’s employment
terminates on or within twenty-four months following a Change in Control under
circumstances described in paragraphs 3(d) or 3(g), the Executive (or, in the
event of his death, his estate) shall be entitled to the following from the
Company:

 

(i)

Accrued Benefits;

 

(ii)

A lump sum amount equal to three (3) times the sum of (x) the current Salary
then in effect, plus (y) the higher of his Target Bonus or the average of the
most three recent annual Bonuses earned;

 

(iii)

A pro-rata Target Bonus for the elapsed portion of the calendar year through the
Date of Termination, payable in lump sum;

 

(iv)

Continued medical coverage under the Company’s medical plan for the Executive
and his family during the thirty-six (36) months following the Date of
Termination, with benefits no less favorable in any material respect than the
level of coverage applicable to them immediately prior to such Date of
Termination, and the Company shall pay all premium amounts thereto. The
continued medical coverage during such thirty-six months at the Company’s
expense shall run concurrently with the time period for which the Executive and
his family members are entitled to continued medical coverage under the
provisions of section 4980B the Code, and section 601 of ERISA, if applicable,
or any similar state law continuation coverage requirements; and

 

(v)

The Executive’s RSUs and Prior RSUs shall become immediately payable, all
restrictions on any restricted stock and any other share-based awards shall
lapse; all Options shall become immediately vested and continue to be
exercisable for thirty-six (36) months following the Date of Termination; and
the Performance Shares and related dividend equivalent RSUs shall be earned as
of the Date of Termination such that the sum of the Performance Shares earned as
of the Date of Termination and the previously earned Performance Shares equals
100% of Target Shares (as described in Schedule II) (or if greater, the
Severance Performance Share Number) and shall become immediately vested.

 

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(d)

Change in Control. For purposes of this Agreement the term “Change in Control”
means the happening of any of the following:

 

(i)

Any “Person” (having 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”
within the meaning of Section 13(d)(3)) has or acquires Beneficial Ownership of
thirty (30%) percent or more of the combined voting power of the Company’s then
outstanding voting securities entitled to vote generally in the election of
directors (“Voting Securities”); provided, however, that in determining whether
a Change in Control has occurred, Voting Securities which are held or acquired
by the following: (i) the Company or any of its Related Companies (as defined in
paragraph 4(d)(iv) below) or (ii) an employee benefit plan (or a trust forming a
part thereof) maintained by the Company or any of its Related Companies (the
persons or entities described in (i) and (ii) shall collectively be referred to
as the “Excluded Group”), shall not constitute a Change in Control. For purposes
of this Agreement, “Beneficial Ownership” shall mean beneficial ownership within
the meaning of Rule 13d-3 promulgated under the Exchange Act.

 

(ii)

The individuals who are members of the Incumbent Board cease for any reason to
constitute more than fifty (50%) percent of the Board. For purposes of this
Agreement, “Incumbent Board” shall mean the individuals who, as of the beginning
of the period commencing two years prior to the determination date, constitute
the Board; provided, however, that for purposes of this definition, any
individual who becomes a member of the Board subsequent to the beginning of such
two-year period, whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of those individuals
who are members of the Board and who were also members of the Incumbent Board
(or deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; and provided further,
however, that any such individual whose initial assumption of office occurs as a
result of or in connection with an actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board shall not be
considered a member of the Incumbent Board.

 

(iii)

A consummation of a merger, consolidation or reorganization or similar event
involving the Company, whether in a single transaction or in a series of
transactions (“Business Combination”), unless, following such Business
Combination:

 

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(a)         the Persons with Beneficial Ownership of the Company, immediately
before such Business Combination, have Beneficial Ownership of more than fifty
(50%) percent of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of  directors of the
corporation (or in the election of a comparable governing body of any other type
of entity) resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets either directly or through one
or more subsidiaries) (the “Surviving Company”) in substantially the same
proportions as their Beneficial Ownership of the Voting Securities immediately
before such Business Combination;

(b)          the individuals who were members of the Incumbent Board immediately
prior to the execution of the initial agreement providing for such Business
Combination constitute more than fifty (50%) percent of the members of the board
of directors (or comparable governing body of a noncorporate entity) of the
Surviving Company; and

(c)          no Person (other than a member of the Excluded Group or any Person
who immediately prior to such Business Combination had Beneficial Ownership of
thirty percent (30%) or more of the then Voting Securities) has Beneficial
Ownership of thirty (30%) percent or more of the then combined voting power of
the Surviving Company’s then outstanding voting securities.

 

(iv)

The assignment, sale, conveyance, transfer, lease or other disposition of all or
substantially all of the assets of the Company to any Person (other than the
Company, any Related Company or an employee benefit plan (or related trust)
sponsored or maintained by the Company or any Related Company) unless,
immediately following such disposition, the conditions set forth in paragraph
(iii)(a), (b) and (c) above will be satisfied with respect to the entity which
acquires such assets. For purposes of this Agreement, “Related Company” shall
mean any entity that is directly or indirectly controlled by, in control of or
under common control with the Company.

 

(v)

The occurrence of a liquidation or dissolution of the Company.

Notwithstanding the provisions of this paragraph (d), a Change in Control that
results from a transaction consummated by a Person in which the

 

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Executive has an equity or debt interest (other than passive ownership of the
securities of a publicly traded company acquired in the open market with
personal funds) or with which the Executive is associated as a director,
officer, employee, consultant or advisor, shall not be considered a Change in
Control unless the Executive’s duties and responsibilities following such
transaction are substantially and materially different from the duties and
responsibilities contemplated by this Agreement for the role of a chief
executive officer.

 

(e)

In the event of the Executive’s death before payment of any amount that had
become due and payable to or on behalf of the Executive pursuant to the terms of
this Agreement, payment of that amount shall be made to the Executive’s estate.

 

(f)

The Company shall not be required to make the payments and provide the benefits
specified in paragraphs 4(a), 4(b) or 4(c) unless the Executive executes and
delivers to the Company an agreement releasing the Company, its affiliates and
its officers, directors and employees from all liability (other than the
payments and benefits under this Agreement) substantially in the form set forth
attached hereto as Exhibit A and such agreement has become effective and
irrevocable.

 

(g)

Except as may otherwise be expressly provided to the contrary in this Agreement,
nothing in this Agreement shall be construed as requiring the Executive to be
treated as employed by the Company for purposes of any employee benefit plan or
arrangement following the date of the Executive’s Date of Termination.

 

(h)

Timing of Severance Payments. Notwithstanding anything in this Agreement to the
contrary, if Executive is deemed to be a “key employee” for purposes of Internal
Revenue Code Section 409A (“Code Section 409A”), no severance or other payments
pursuant to this paragraph 4 shall be made to Executive by the Company until the
amount of time has passed that is necessary to avoid incurring excise taxes
under Code Section 409A. Should this paragraph 4(h) result in a delay of
payments to Executive, on the first day any such payments may be made without
incurring a penalty pursuant to Section 409A (the “409A Payment Date”), the
Company shall begin to make such payments as described in this paragraph 4,
provided that any amounts that would have been payable earlier but for the
application of this paragraph 4(h), shall be paid in lump-sum on the 409A
Payment Date.

 

(i)

Offset. To the extent Executive becomes entitled to any payments, benefits or
other entitlements pursuant to any severance payable in connection with a
severance or change in control severance plan, program or policy made available
to other employees of the Company, any amounts

 

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payable by the Company pursuant to this paragraph 4 shall be offset by such
severance payments.

 

(j)

Nonrenewal. Notwithstanding anything in this Agreement to the contrary, if the
Company (or its successor) notifies Executive of its intention not to extend the
Agreement Term to December 31, 2010 and a Date of Termination occurs after the
Agreement Term under circumstances described in paragraphs 3(a), 3(b), 3(d) or
3(g), to the extent that any portion of the options and restricted stock units
which are part of the Long-Term Incentive Award described in Schedule II are
unvested, such portion (and related dividend equivalent RSUs) shall become
vested as of the Date of Termination; to the extent that any portion of the
Performance Shares which are part of the Long-Term Incentive Award described in
Schedule II have been earned but have not yet vested, such portion (and related
dividend equivalent RSUs) shall become vested as of the Date of Termination; and
the Options under the Long-Term Incentive Award shall in addition to becoming
immediately vested shall continue to be exercisable for thirty-six (36) months
following the Date of Termination.

 

5.            Duties on Termination. Subject to the terms and conditions of this
Agreement, during the period beginning on the date of delivery of a notice of
resignation by the Executive or notice of termination of the Executive’s
employment by the Company, and ending on the Date of Termination, the Executive
shall continue to perform his duties as set forth in this Agreement, and during
such period shall also perform such reasonable services for the Company as are
necessary and appropriate for a smooth transition to the Executive’s successor,
if any. Notwithstanding the foregoing provisions of this paragraph 5, the
Company may suspend the Executive from performing his duties under this
Agreement following the delivery of any such notice of resignation or
termination; provided, however, that during the period of suspension (which
shall end on the Date of Termination), the Executive shall continue to be
treated as employed by the Company for other purposes, and his rights to
compensation or benefits shall not be reduced by reason of the suspension.

6.

      Non-competition and Non-solicitation.

 

(a)

Except as otherwise permitted under paragraph 1(d) of this Agreement, while the
Executive is employed by the Company, he agrees that he will not directly or
indirectly (without prior written consent of the Company) engage in, assist,
perform services for, establish or open, or have any equity interest (other than
ownership of 5% or less of the outstanding stock of any corporation listed on
the New York or American Stock Exchange or included in the National Association
of Securities Dealers Automated Quotation System) in any person, firm,
corporation, or business entity (whether as an employee, officer, director,
agent, security holder, creditor, consultant, or otherwise) that engages in any
activity which is directly competitive with the business of the Company. In

 

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addition, for a 12-month period after the Executive’s Date of Termination
(except in the event of a Termination without Cause by the Company pursuant to
paragraph 3(g) or a Constructive Termination pursuant to paragraph 3(d)), the
Executive agrees that he will not actively engage in the business of the
acquisition of hotel properties by acting as an investor, principal, broker or
intermediary with respect to hotel property acquisitions or by soliciting or
otherwise identifying specific acquisition opportunities, but the provisions of
this sentence are not to be construed so as to otherwise prevent the Executive
from engaging in hotel asset management or consulting activities. The
restrictions in this paragraph 6(a) are intended to apply on a worldwide basis.
Nothing in this paragraph 6 or paragraph 7 shall be construed as limiting the
Executive’s duty of loyalty to the Company while he is employed by the Company,
or any other duty he may otherwise have to the Company while he is employed by
the Company.

 

(b)

While the Executive is employed by the Company, and for a period of 12 months
after the Executive’s Date of Termination, the Executive agrees that he will not
in any manner, directly or indirectly (without prior written consent of the
Company) employ or solicit for employment for himself or any other business
entity (other than the Company and its Subsidiaries) any individual who was,
during the period of the Executive’s employment with the Company or the 12-month
period following the Executive’s Date of Termination, an employee, officer,
agent or representative of the Company (or any successor corporation into which
the Company may be merged or consolidated).

7.            Confidential Information and Non-Disparagement. The Executive
agrees that:

 

(a)

Except as may be required by the lawful order of a court or agency of competent
jurisdiction, or except to the extent that the Executive has express
authorization from the Company, the Executive agrees to keep secret and
confidential indefinitely all non-public information (including, without
limitation, information regarding litigation and pending litigation) concerning
the Company and the Subsidiaries which was acquired by or disclosed to the
Executive during the course of his employment with or negotiations for
employment with the Company, or during the course of any consultation with the
Company following his termination of employment pursuant to paragraph 8, and not
to disclose the same, either directly or indirectly, to any other person, firm,
or business entity, or to use it in any way.

 

(b)

To the extent that any court or agency seeks to have the Executive disclose
confidential information, he shall promptly inform the Company, and he shall
take such reasonable steps to prevent disclosure of confidential information
until the Company has been informed of such requested disclosure, and the
Company has an opportunity to respond to such court

 

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or agency. To the extent that the Executive obtains information on behalf of the
Company or any of the Subsidiaries that may be subject to attorney-client
privilege as to the Company’s attorneys, the Executive shall take reasonable
steps to maintain the confidentiality of such information and to preserve such
privilege.

 

(c)

Nothing in the foregoing provisions of this paragraph 7 shall be construed so as
to prevent the Executive from using, in connection with his employment for
himself or an employer other than the Company or any of the Subsidiaries,
knowledge which is generally known (other than by reason of a violation of this
paragraph 7) to persons of his experience in other companies in the same
industry.

 

(d)

During the Agreement Term and thereafter (including following Executive’s
termination of employment for any reason) he will not make statements or
representations, or otherwise communicate, directly or indirectly, in writing,
orally, or otherwise, or take any action which may, directly or indirectly,
disparage the Company or its respective officers, directors, employees,
advisors, businesses or reputations. The Company agrees that, during the
Agreement Term and thereafter, (including following Executive’s termination of
employment for any reason) the Company (including, but not limited to any
executives, officers, Directors or employees of the Company) will not make
statements or representations, or otherwise communicate, directly or indirectly,
in writing, orally, or otherwise, or take any action which may directly or
indirectly, disparage Executive or his business or reputation. Notwithstanding
the foregoing, nothing in this Agreement shall preclude either Executive or the
Company from making truthful statements or disclosures that are required by
applicable law, regulation, or legal process.

8.            Defense of Claims. The Executive agrees that, for the period
beginning the Effective Date, and continuing for a reasonable period after the
Executive’s termination of employment with the Company, the Executive will
cooperate with the Company in defense of any claims that may be made against the
Company, and will cooperate with the Company in the prosecution of any claims
that may be made by the Company, to the extent that such claims may relate to
services performed by the Executive for the Company. The Executive agrees to
promptly inform the Company if he becomes aware of any lawsuits involving such
claims that may be filed against the Company. The Company agrees to reimburse
the Executive, for all of the Executive’s reasonable out-of-pocket expenses and,
if any such cooperation is requested after Executive’s termination of employment
with the Company, to compensate the Executive for his time associated with such
cooperation at an hourly rate based on the Executive’s Salary in effect
immediately prior to the Date of Termination divided by 2,000. The Executive
also agrees to promptly inform the Company if he is asked to assist in any
investigation of the Company (or its actions) that may relate to services
performed by the Executive for the

 

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Company, regardless of whether a lawsuit has then been filed against the Company
with respect to such investigation.

9.            Equitable Remedies. The Executive acknowledges that the Company
would be irreparably injured by a violation of paragraphs 6, 7 or 8, and he
agrees that the Company, in addition to any other remedies available to it for
such breach or threatened breach, shall be entitled to a preliminary injunction,
temporary restraining order, or other equivalent relief, restraining the
Executive from any actual or threatened breach of any of paragraphs 6, 7 or 8.
If a bond is required to be posted in order for the Company to secure an
injunction or other equitable remedy, the parties agree that said bond need not
be more than a nominal sum. The parties hereto acknowledge that the potential
restrictions on the Executive’s future employment imposed by paragraphs 6, 7 and
8 are reasonable in duration and all other respects. If for any reason any court
of competent jurisdiction shall find paragraphs 6, 7, or 8 unreasonable in
duration or otherwise, the Executive and the Company agree that the restrictions
and prohibitions contained herein shall be effective to the fullest extent
allowed under applicable law in such jurisdiction.

10.

      Certain Additional Payments by the Company.

 

(a)

Anything in this Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this paragraph 10) (a “Payment”) would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
and employment taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.

 

(b)

Subject to the provisions of paragraph 10(a), all determinations required to be
made under this paragraph 10, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a certified public
accounting firm reasonably acceptable to the Executive as may be designated by
the Company (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is

 

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requested by the Company. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall furnish the Executive with a written
opinion, based on “substantial authority” (within the meaning of Section 6662 of
the Code), that the failure to report the Excise Tax on the Executive’s
individual income tax return would not result in the imposition of a negligence
or other accuracy-related penalty. All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this paragraph 10, shall be paid by the Company to the Executive
within five days of the earlier of (i) the due date for the payment of any
Excise Tax or (ii) the issuance by the Internal Revenue Service (the “IRS”) of
notice to the effect that an Excise Tax is due in connection with a Payment.
Subject to a determination by the IRS, any determination by the Accounting Firm
shall be binding upon the Company and the Executive, absent manifest error.

11.          Non-alienation. The interests of the Executive under this Agreement
are not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Executive or the Executive’s estate.

12.          Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
earned by the Executive in other employment after termination of his employment
with the Company, or any amounts which might have been earned by the Executive
in other employment had he sought such other employment.

13.          Amendment. This Agreement may be amended or canceled only by mutual
agreement of the parties in writing. So long as the Executive lives, no person,
other than the parties hereto, shall have any rights under or interest in this
Agreement or the subject matter hereof.

14.          Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS.

15.          Severability. The invalidity or non-enforceability of any provision
of this Agreement will not affect the validity or enforceability of any other
provision of this Agreement, and this Agreement will be construed as if such
invalid or unenforceable provision were omitted (but only to the extent that
such provision cannot be appropriately reformed or modified).

16.          Waiver of Breach. No waiver by either party hereto of a breach of
any provision of this Agreement by the other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a

 

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waiver of any subsequent breach by such other party or any similar or dissimilar
provisions and conditions at the same or any prior or subsequent time. The
failure of any party hereto to take any action by reason of such breach will not
deprive such party of the right to take action at any time while such breach
continues.

17.          Successors. This Agreement shall be binding upon, and inure to the
benefit of, the Company and its successors and assigns and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company’s assets and business.

18.          Notices. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid, or sent
by facsimile or prepaid overnight courier to the parties at the addresses set
forth below (or such other addresses as shall be specified by the parties by
like notice). Such notices, demands, claims and other communications shall be
deemed given: (x) when received if given in person or by courier service, (y) on
the date of transmission if sent by telex, facsimile or other wire transmission
or (z) three business days after being deposited in the U.S. mail, certified or
registered mail, postage prepaid:

 

(a)

If to the Company, addressed as follows:

Strategic Hotels & Resorts, Inc.

77 South Wacker Drive, Suite 4600

Chicago, Illinois 60601

Attention: General Counsel

Facsimile No.: (312) 658-5799

 

(b)

If to the Executive, addressed as follows:

Laurence S. Geller

77 South Wacker Drive, Suite 4600

Chicago, Illinois 60601

 

Facsimile No.:

(312) 658-5799

19.          Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

20.          Costs of Disputes. The Company shall reimburse the Executive’s
reasonable expenses, including legal fees (i) to negotiate and prepare this
Agreement up to a maximum of $50,000; (ii) in any dispute under this Agreement
in which the Executive prevails on at least one material claim.

 

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21.          Survival of Agreement. Except as otherwise expressly provided in
this Agreement, the rights and obligations of the parties to this Agreement
shall survive the termination of the Executive’s employment with the Company.

22.          Entire Agreement. Except as otherwise noted herein this Agreement
constitutes the entire agreement between the parties concerning the subject
matter hereof and supersedes all prior and contemporaneous agreements,
(including but not limited to the Prior Agreement), if any, between the parties
relating to the subject matter hereof.

23.          Acknowledgement by Executive. The Executive represents to the
Company that he is knowledgeable and sophisticated as to business matters,
including the subject matter of this Agreement, that he has read this Agreement
and that he understands its terms. The Executive acknowledges that, prior to
assenting to the terms of this Agreement; he has been given a reasonable time to
review it, to consult with counsel of his choice, and to negotiate at
arm’s-length with the Company as to the contents. The Executive and the Company
agree that the language used in this Agreement is the language chosen by the
parties to express their mutual intent, and that no rule of strict construction
is to be applied against any party hereto. The Executive represents and warrants
that he is not, and will not become a party to any agreement, contract,
arrangement or understanding, whether of employment or otherwise, that would in
any way restrict or prohibit him from undertaking or performing his duties in
accordance with this Agreement.

24.          Inconsistency. In the event of any inconsistency between this
Agreement and any plan, program or practice of the Company, the terms of this
Agreement shall control.

25.          Effect of Restatement of Financial Results. Notwithstanding
anything in this Agreement to the contrary, to the extent any financial results
are misstated as a result of Executive’s willful misconduct or gross negligence,
and as a result such financial results are subsequently restated downward
resulting in lower levels of performance-based vesting or award earnouts
pursuant to paragraph 2 and the accompanying Schedules, offsets shall be made
against future awards and/or payments. For purposes of the preceding sentence,
“willful” shall have the meaning ascribed to it in paragraph 3(c) and the
procedural requirements set forth in the second sentence of the last paragraph
of paragraph 3(c) shall apply with respect to any determination pursuant to the
preceding sentence. If such future awards and/or payments are insufficient to
offset the full difference between award values or earnouts and restated award
values or earnouts and/or if such restatement occurs at the end of the Agreement
Term, awards or award values previously earned and/or delivered may be
clawed-back.

 

 

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                IN WITNESS THEREOF, the Executive has hereunto set his hand, and
the Company has caused these presents to be executed in its name and on its
behalf, all as of the day and year first written above.

 

 

/s/ Laurence S. Geller

 

Executive

STRATEGIC HOTELS & RESORTS, INC.

 

By: /s/ Janice J.
Peterson                                                       

Name:  Janice J. Peterson

 

Title:  Vice President, Human Capital

 

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EXHIBIT A

RELEASE AND WAIVER OF CLAIMS

THIS RELEASE is made as of this ___ day of __________, ____, by and between
Strategic Hotels & Resorts, Inc. (the “Company”) and Laurence S. Geller
(“Executive”).

WHEREAS, Executive and the Company entered into that certain Amended and
Restated Employment Agreement, dated _______________, 2006 (“Agreement”);

WHEREAS, Executive’s employment with the Company as President and Chief
Executive Officer has terminated; and

WHEREAS, in connection with the termination of Executive’s employment, under the
Agreement, Executive is entitled to certain payments and other benefits.

NOW, THEREFORE, in consideration of the severance payments and other benefits
due Executive under the Agreement (“Severance Payments”):

1.            Executive hereby for himself, and his heirs, agents, executors,
successors, assigns and administrators (collectively, the “Related Parties”),
intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE
the Company, its affiliates, subsidiaries, parents, joint ventures, and its and
their officers, directors, shareholders, employees, predecessors, and partners,
and its and their respective successors and assigns, heirs, executors, and
administrators (collectively, “Releasees”) from all causes of action, suits,
debts, claims and demands whatsoever in law or in equity, which Executive ever
had, now has, or hereafter may have, or which the Related Parties may have, by
reason of any matter, cause or thing whatsoever, from the beginning of his
initial dealings with the Company to the date of this Release, and particularly,
but without limitation of the foregoing general terms, any claims arising from
or relating in any way to his employment relationship with Company, the terms
and conditions of that employment relationship, and the termination of that
employment relationship, including, but not limited to, any claims arising under
the Age Discrimination in Employment Act (“ADEA”), as amended, 29 U.S.C. § 621
et seq., the Older Worker’s Benefit Protection Act, 29 U.S.C. § 626(f)(1), Title
VII of The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., the
Civil Rights Act of 1871, the Civil Rights Act of 1991, the Americans with
Disabilities Act, 42 U.S.C. § 12101-12213, the Rehabilitation Act, the Family
and Medical Leave Act of 1993 (“FMLA”), 29 U.S.C. § 2601 et seq., the Fair Labor
Standards Act, and any other claims under any federal, state or local common
law, statutory, or regulatory provision, now or hereafter recognized, and any
claims for attorneys’ fees and costs, but not including such claims to payments,
benefits and other rights provided Executive under the Agreement and any
employee benefit plan of the Company in which Executive is a participant. This
Release is effective without regard to the legal nature of the claims raised and
without regard to whether any such claims are based upon tort, equity, implied
or express contract or discrimination of any sort. Except as specifically
provided herein, it is expressly understood and agreed that this Release

 

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shall operate as a clear and unequivocal waiver by Executive of any claim for
accrued or unpaid wages, benefits or any other type of payment other than as
provided under the Agreement and any employee benefit plan of the Company in
which Executive is a participant. It is the intention of the parties to make
this release as broad and as general as the law permits as to the claims
released hereunder.

2.            Executive further agrees and recognizes that he has permanently
and irrevocably severed his employment relationship with the Company, that he
shall not seek employment with the Company or any affiliated entity at any time
in the future, and that the Company has no obligation to employ him in the
future.

3.            The parties agree and acknowledge that the Agreement, and the
settlement and termination of any asserted or unasserted claims against the
Releasees pursuant to the Agreement, are not and shall not be construed to be an
admission of any violation of any federal, state or local statute or regulation,
or of any duty owed by any of the Releasees to Executive.

 

4.

Executive certifies and acknowledges as follows:

a.            That he has read the terms of this Release, and that he
understands its terms and effects, including the fact that he has agreed to
RELEASE AND FOREVER DISCHARGE all Releasees from any legal action or other
liability of any type related in any way to the matters released pursuant to
this Release other than as provided in the Agreement and in this Release;

b.            That he has signed this Release voluntarily and knowingly in
exchange for the consideration described herein, which he acknowledges is
adequate and satisfactory to him and which he acknowledges is in addition to any
other benefits to which he is otherwise entitled;

c.            That he has been and is hereby advised in writing to consult with
an attorney prior to signing this Release;

d.            That he does not waive rights or claims that may arise after the
date this Release is executed;

e.            That he has been informed that he has the right to consider this
Release and Waiver of Claims for a period of 21 days from receipt, and he has
signed on the date indicated below after concluding that this Release and Waiver
of Claims is satisfactory to him; and

f.             That neither the Company, nor any of its directors, employees, or
attorneys, has made any representations to him concerning the terms or effects
of this Release and Waiver of Claims other than those contained herein.

g.            That he has not filed, and will not hereafter file, any claim
against the Company relating to his employment and/or cessation of employment
with the Company, or otherwise involving facts that occurred on or prior to the
date that Executive has

 

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signed this Release and Waiver of Claims, other than a claim that the Company
has failed to pay Executive the Severance Payments or benefits due under any
employee benefit plan of the Company in which Executive is a participant.

h.           That if he commences, continues, joins in, or in any other manner
attempts to assert any claim released herein against the Company, or otherwise
violates the terms of this Release and Waiver of Claims, (i) the Executive will
cease to have any further rights to Severance Payments from the Company, and
(ii) the Executive shall be required to return any Severance Payments made to
the Executive by the Company (together with interest thereon).

i.            Executive acknowledges that he may later discover facts different
from or in addition to those which he knows or believes to be true now, and he
agrees that, in such event, this Release and Waiver of Claims shall nevertheless
remain effective in all respects, notwithstanding such different or additional
facts or the discovery of those facts.

 

5.            This Release and Waiver of Claims may not be introduced in any
legal or administrative proceeding, or other similar forum, except one
concerning a breach of this Release and Waiver of Claims.

6.            This Release and Waiver of Claims and the Agreement constitute the
complete understanding between Executive and the Company concerning the subject
matter hereof. No other promises or agreements will be binding unless signed by
Executive and the Company.

7.            In the event that any provision or portion of this Release and
Waiver of Claims shall be determined to be invalid or unenforceable for any
reason, the remaining provisions or portions of this Release and Waiver of
Claims shall be unaffected thereby and shall remain in full force and effect to
the fullest extent permitted by law.

8.            The respective rights and obligations of the parties hereunder
shall survive termination of this Release and Waiver of Claims to the extent
necessary for the intended preservation of such rights and obligations.

9.            This Release and Waiver of Claims shall be governed by and
construed and interpreted in accordance with the laws of the State of Delaware
without reference to the principles of conflict of law.

10.          Executive also understands that he has the right to revoke this
Release and Waiver of Claims within 7 days after execution, and that this
Release and Waiver of Claims will not become effective or enforceable until the
revocation period has expired, by giving written notice to the following:

Strategic Hotels & Resorts, Inc.

77 South Wacker Drive, Suite 4600

Chicago, Illinois 60601

 

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Attention: General Counsel

Facsimile No.: (312) 658-5799

IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
execute the foregoing Release and Waiver of Claims:

 

 

                                                                                  

Laurence S. Geller

 

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SCHEDULE I

 

Bonus Performance Goals

 

For fiscal years during the Agreement Term, Executive’s Bonus under paragraph
2(a) of the Employment Agreement shall be determined based on the Company’s
achievement of certain levels of budgeted funds from operations (“Budgeted FFO”)
per share, as described below:

 

For Fiscal 2006:

 

Amount of Budgeted FFO Per Share

Amount of Bonus Paid

Less than $1.28

Award, if any, only made at Committee discretion

$1.28

$500,000

$1.28-$1.48

Additional $50,000 for each $.01 above $1.28 (i.e., up to an additional
$1,000,000)

$1.49+

Capped at $1,500,000 (i.e., Maximum Bonus)

 

 

For Fiscal 2007 and fiscal years thereafter:

 

Budgeted FFO for these years shall be as approved by the Board.

 

Amount of Budgeted FFO Per Share

Amount of Bonus Paid

Below 90% of Budgeted FFO per share

Award, if any, only made at Committee discretion

90% of Budgeted FFO per share

$500,000

Above 90% of Budgeted FFO per share

Additional $50,000 for each $.01 above 90% of Budgeted FFO per Share, up to
$1,000,000 in additional Bonus

(90% of Budgeted FFO per share + $.20) and above

Capped at $1,500,000 (i.e., Maximum Bonus)

 

 

27

 

 

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SCHEDULE II

 

Long-Term Incentive Award

 

Executive’s long-term incentive award to be granted on the Effective Date (“LTIP
Award”) described in paragraph 2(e)(i) of the Agreement shall be vested and
earned only during the Executive's employment with the Company as follows:

 

(1)

Options. 40% of the value of the LTIP Award shall be granted in the form of
time-vesting Options, which shall result in 669,797 Options being granted on the
Effective Date. The Options will have an exercise price equal to the closing
price per share of the Company as of the Effective Date. Unless the vesting of
Options is otherwise accelerated pursuant to the Agreement, such Options shall
vest as follows:

1/3 of the Options shall vest on December 31, 2008

1/3 of the Options shall vest on December 31, 2009

1/3 of the Options shall vest on December 31, 2010

 

Vested Options will remain exercisable for up to ten years after the Effective
Date unless a shorter exercise period is otherwise specified pursuant to this
Agreement or the Stock Option Agreement.

 

(2)

Restricted Stock Units. 20% of the value of the LTIP Award shall be granted in
the form of time-vesting Restricted Stock Units, which shall result in 58,824
shares of Restricted Stock Units being granted on the Effective Date. Unless
otherwise accelerated pursuant to the Agreement, the restrictions shall lapse on
the Restricted Stock Unit grant as follows and the underlying shares of the
Company shall be deliverable in accordance with the Company’s standard form of
restricted stock unit award agreement (other than vesting provisions) in effect
as of the Effective Date under the Stock Incentive Plan:

1/3 of the Restricted Stock Unit grant shall vest on December 31, 2008

1/3 of the Restricted Stock Unit grant shall vest on December 31, 2009

1/3 of the Restricted Stock Unit grant shall vest on December 31, 2010

 

(3)

Performance Shares. 40% of the value of the LTIP Award shall be granted in the
form of a target number of Performance Shares (“Target Shares”), which shall
result in 117,647 Target Shares being granted on the Effective Date.

Performance Measures – Sixty-seven percent (67%) of the Performance Shares shall
be earned based on achievement of Budgeted FFO (as defined in Schedule I and
below), and thirty-three percent (33%) of the Performance Shares shall be earned
based on achievement of Relative Total Shareholder Return (“Relative TSR”), as
described below.

 

28

 

 

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Earning Dates -- Unless otherwise provided in the Agreement, one-third of the
Performance Shares will be earned on each of December 31, 2007, December 31,
2008 and December 31, 2009 ("Earning Dates") based on performance determined as
of each Earning Date.

 

Vesting Dates – Unless otherwise provided in the Agreement, Performance Shares
will vest one year after they are earned (i.e., shares earned on 12/31/09 would
vest on 12/31/10) based on continued employment by the Company and the
underlying shares of the Company shall be deliverable in accordance with the
Company’s standard form of restricted stock unit award agreement (other than
performance and vesting provisions) in effect as of the Effective Date under the
Stock Incentive Plan.

 

Upside and Downside Opportunities: Upside opportunity of 150% of Target Shares
(except under exceptional TSR results, described below); downside opportunity of
zero (0) if threshold performance measures are not met.

 

FFO Performance Goals

 

Budgeted FFO for the fiscal years 2007, 2008 and 2009 shall be as approved by
the Board (i.e., the same Budgeted FFO described above in Schedule I).

 

Amount of Budgeted FFO Per Share for each fiscal year 2007, 2008 and 2009

Number of Performance Shares Earned on each Earning Date (i.e., 12/31/07,
12/31/08 and 12/31/09)

Below 90% of Budgeted FFO per share

Zero, unless otherwise determined at the discretion of the Committee

90% of Budgeted FFO per share

50% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.01

60% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.02

70% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.03

80% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.04

90% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.05

100% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.06

103.3% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.07

106.6% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.08

110% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.09

113.3% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.10

116.6% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.11

120% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.12

123.3% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.13

126.6% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.14

130% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.15

133.3% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.16

136.6% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.17

140% x 67% x 33 1/3% of Target Shares

90% of Budgeted FFO per share + $.18

143.3% x 67% x 33 1/3% of Target Shares

 

 

29

 

 

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90% of Budgeted FFO per share + $.19

146.6% x 67% x 33 1/3% of Target Shares

(90% of Budgeted FFO per share + $.20) and above

150% x 67% x 33 1/3% of Target Shares

 

 

30

 

 

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For any Earning Date at which performance achievement is less than 90% of
Budgeted FFO per Share ("Missed FFO Earning Date"), Executive may still earn the
Performance Shares associated with such Missed FFO Earning Date ("Missed FFO
Performance Shares") at a future Earning Date at a performance achievement level
of “threshold” (i.e., 90% of Cumulative Budgeted FFO per share) or greater if
cumulative FFO performance for the Missed FFO Earning Date and the future
Earning Date(s), as the case may be, is achieved. For example, if 12/31/07 is a
Missed FFO Earning Date, then the Missed FFO Performance Shares associated with
12/31/07 could be earned on 12/31/08 as follows, where "Cumulative Budgeted FFO"
equals 2007 Budgeted FFO plus 2008 Budgeted FFO:

 

Amount of Budgeted FFO Per Share for fiscal year 2007 and 2008

Number of Missed FFO Performance Shares Earned on 12/31/08

Below 90% of Cumulative Budgeted FFO

Zero, unless otherwise determined at the discretion of the Committee

90% of Cumulative Budgeted FFO

50% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.02

60% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.04

70% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.06

80% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.08

90% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.10

100% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.12

103.3% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.14

106.6% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.16

110% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.18

113.3% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.20

116.6% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.22

120% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.24

123.3% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.26

126.6% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.28

130% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.30

133.3% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.32

136.6% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.34

140% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.36

143.3% x 67% x 33 1/3% of Target Shares

90% of Cumulative Budgeted FFO + $.38

146.6% x 67% x 33 1/3% of Target Shares

(90% of Cumulative Budgeted FFO + $.40) and above

150% x 67% x 33 1/3% of Target Shares

 

 

31

 

 

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Relative TSR Goals

 

Relative TSR will be based on performance relative to the equally-weighted TSRs
of each of the companies included in the Bloomberg Hotel REIT Index ("Index") as
of the Earning Date ("Index Company TSRs"), excluding the Company if it is part
of the Index, as follows:

 

Company’s TSR Percentile Rank Relative to the Index Company TSRs at each Earning
Date

Number of Performance Shares Earned at each Earning Date

Below 25th percentile (Below Threshold)

Zero, unless otherwise determined at the discretion of the Committee

At 25th percentile (Threshold)

50% x 33% x 33 1/3% of Target Shares

At 50th percentile (Target)

100% x 33% x 33 1/3% of Target Shares

At 75th percentile (Maximum) or higher

150% x 33% x 33 1/3% of Target Shares

At 100th percentile (rank #1), but only if Company TSR is positive (Super
Maximum)

200% x 33% x 33 1/3% of Target Shares

 

Number of Performance Shares earned would be interpolated on a straight line
basis between the 25th percentile and the 75th percentile (i.e., between 50% and
150% x 33% x 33 1/3% of Target Shares), provided, however, no interpolation is
permissible between the 75th percentile and the 100th percentile (rank #1).

 

TSR for the Company and each Index company will be calculated as follows1:

 

(a) "Start Date" is 9/01/06 for all Earning Dates

(b) "Start Date Stock Price" for each company equals the average of each
company's closing stock price on each trading day during the month of August
2006

(c) "Earning Date Stock Price" as of 12/31/07, 12/31/08 and 12/31/09 for each
company equals the average of each company's closing stock price on each trading
day during the months of December 2007, December 2008 and December 2009,
respectively

(d) TSR for each company equals the change in value between Start Date Stock
Price and Earning Date Stock Price, plus dividends reinvested as of each
dividend ex-date between Start Date and each Earning Date, as a percentage of
the Start Date Stock Price

(e) Performance Shares are earned on:

 

•

12/31/07 based on 16-month TSR;

 

•

12/31/08 based on 28-month cumulative TSR; and

 

•

12/31/09 based on 40-month cumulative TSR.

_________________________

1 For an illustrative example of the mechanics of computing this goal, see
attached Example 1.

 

32

 

 

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For any Earning Date at which the Company’s TSR Percentile Rank Relative to the
Index Company TSRs is less than 25th percentile ("Missed TSR Earning Date"),
Executive may still earn the Performance Shares associated with such Missed TSR
Earning Date ("Missed TSR Performance Shares") at a future Earning Date at a
performance achievement level of “threshold” (i.e., 25th percentile) or greater
if cumulative TSR performance at one or more future Earning Date(s), as the case
may be, is achieved. For example, if 12/31/07 is a Missed TSR Earning Date, then
the Missed TSR Performance Shares associated with 12/31/07 could be earned on
12/31/08 as follows:

 

 

Company’s 28-Month Cumulative TSR Percentile Rank Relative to the Index Company
28-Month Cumulative TSRs at 12/31/08 Earning Date

Number of Missed TSR Performance Shares Earned at 12/31/08 Earning Date

Below 25th percentile (Below Threshold)

Zero, unless otherwise determined at the discretion of the Committee

At 25th percentile (Threshold)

50% x 33% x 33 1/3% of Target Shares

At 50th percentile (Target)

100% x 33% x 33 1/3% of Target Shares

At 75th percentile (Maximum) or higher

150% x 33% x 33 1/3% of Target Shares

At 100th percentile (rank #1), but only if Company TSR is positive (Super
Maximum)

200% x 33% x 33 1/3% of Target Shares

 

 

33

 

 

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Example 1

 

Example of One-Year TSR Calculation for the Company

From Illustrative 1/1/05 Start Date to 12/31/05 Earning Date

 

Calculation of Earning Date Stock Price and Start Date Stock Price:

 

12/30/05

$20.58

 

12/30/04

$16.55

12/29/05

$20.19

 

12/29/04

$16.40

12/28/05

$20.44

 

12/28/04

$16.50

12/27/05

$20.44

 

12/27/04

$16.45

12/23/05

$20.59

 

12/23/04

$16.49

12/22/05

$20.69

 

12/22/04

$16.30

12/21/05

$20.54

 

12/21/04

$16.25

12/20/05

$20.00

 

12/20/04

$16.37

12/19/05

$19.78

 

12/17/04

$15.67

12/16/05

$20.35

 

12/16/04

$15.19

12/15/05

$20.48

 

12/15/04

$15.50

12/14/05

$20.60

 

12/14/04

$15.65

12/13/05

$20.35

 

12/13/04

$15.82

12/12/05

$20.21

 

12/10/04

$15.90

12/9/05

$20.19

 

12/9/04

$15.80

12/8/05

$19.90

 

12/8/04

$15.91

12/7/05

$19.06

 

12/7/04

$15.72

12/6/05

$19.19

 

12/6/04

$15.90

12/5/05

$18.91

 

12/3/04

$15.66

12/2/05

$18.92

 

12/2/04

$15.52

12/1/05

$19.06

 

12/1/04

$15.75

 

 

 

 

 

Average

 

 

Average

 

12/31/05 Price

$20.02

 

1/1/05 Price

$15.97

Illustrative Earning Date Stock Price

 

 

Illustrative Start Date Stock Price

 

 

Calculation of historical 2005 one-year TSR for the Company:

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

Dividends

 

Including

 

 

 

 

 

 

Stock

 

Per

 

Dividends

 

 

 

 

Date

 

Price

 

Share

 

Reinvested

 

Index

 

TSR

 

 

 

 

 

 

 

 

 

 

 

1/1/05 Avg.

 

$15.97

 

 

 

6.2630

 

$100.00

 

 

3/29/05 Close

 

$14.30

 

$0.22

 

6.3594

 

$90.94

 

 

6/28/05 Close

 

$17.96

 

$0.22

 

6.4373

 

$115.61

 

 

9/28/05 Close

 

$17.70

 

$0.22

 

6.5173

 

$115.36

 

 

12/28/05 Close

 

$20.44

 

$0.22

 

6.5875

 

$134.65

 

 

12/31/05 Avg.

 

$20.02

 

 

 

6.5875

 

$131.90

 

31.90%

 

 

34

 

 

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