Document:

exv10w3

 

Exhibit
10.3

ISDA ®

International Swaps and Derivatives Association, Inc.

SCHEDULE

to the

2002 Master Agreement

dated as of December 1, 2005

between

BANK OF AMERICA, N.A.,

a national banking association

organized and existing under the laws of the United States of America,

(“Party A”)

and

AMERICAN PACIFIC CORPORATION,

a corporation

organized and existing under the laws of Delaware,

(“Party B”)

PART 1: Termination Provisions

	(a)	 	“Specified Entity” means in relation to Party A for the purpose of Sections 5(a)(v),
5(a)(vi), 5(a)(vii) and 5(b)(v):
	 
	 	 	None;
	 
	 	 	“Specified Entity” means in relation to Party B for the purpose of Sections 5(a)(v),
5(a)(vi), 5(a)(vii) and 5(b)(v):
	 
	 	 	None.
	 
	(b)	 	“Specified Transaction” will have the meaning specified in Section 14.
	 
	(c)	 	The “Cross-Default” provisions of Section 5(a)(vi) (as amended in Part 5(d))

will apply to Party A and

will apply to Party B.

	 	 	In connection therewith, “Specified Indebtedness” will not have the meaning specified in
Section 14, and such definition shall be replaced by the following: “any obligation in

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	 	 	respect of the payment of moneys (whether present or future, contingent or otherwise, as
principal or surety or otherwise), except that such term shall not include obligations in
respect of deposits received in the ordinary course of a party’s banking business.”
	 
	 	 	“Threshold Amount” means with respect to Party A an amount equal to three percent (3%) of
the Shareholders’ Equity of Bank of America Corporation and with respect to Party B, one
million dollars ($1,000,000).
	 
	 	 	With respect to Party B, the occurrence and continuance (beyond any specified cure periods)
of an “Event of Default” as defined under the Credit Agreement shall be an Event of Default
under this Agreement.
	 
	 	 	“Credit Agreement” means the means the Second Lien Credit Agreement dated as of November
30, 2005, among Party A, Party B, the Guarantors and Lenders named therein, Wachovia Bank
National Association, as Administrative Agent and Wachovia Capital Markets, LLC, as Sole
Lead Arranger and Sole Book Runner (as amended, extended, supplemented or otherwise
modified in writing from time to time).
	 
	 	 	“Shareholders’ Equity” means with respect to an entity, at any time, the sum (as shown in
the most recent annual audited financial statements of such entity) of (i) its capital
stock (including preferred stock) outstanding, taken at par value, (ii) its capital surplus
and (iii) its retained earnings, minus (iv) treasury stock, each to be determined in
accordance with generally accepted accounting principles.
	 
	(d)	 	The “Credit Event Upon Merger” provisions of Section 5(b)(v)

will apply to Party A

will apply to Party B.

	(e)	 	The “Automatic Early Termination” provision of Section 6(a)

will not apply to Party A

will not apply to Party B.

	(f)	 	“Termination Currency” means United States Dollars.
	 
	(g)	 	Additional Termination Event will apply.
	 
	 	 	It shall be an Additional Termination Event hereunder, with respect to which Party B shall
be the sole Affected Party, if for any reason either Party A’s obligation to lend under the
Credit Agreement is terminated or Party A ceases to be a party to the Credit Agreement.

PART 2: Tax Representations

	(a)	 	Payer Tax Representations. For the purpose of Section 3(e) of this Agreement, Party A and
Party B will make the following representation:-
	 
	 	 	It is not required by any applicable law, as modified by the practice of any relevant
governmental revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment (other than interest under
Section 9(h) of this Agreement) to be made by it to the other party under this Agreement.
In making this representation, it may rely on (i) the accuracy of any representations made
by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the

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	 	 	agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and
effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of the other party
contained in Section 4(d) of this Agreement, except that it will not be a breach of this
representation where reliance is placed on clause (ii) above and the other party does not
deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its
legal or commercial position.
	 
	(b)	 	Payee Tax Representations. For the purpose of Section 3(f) of this Agreement, Party A and
Party B will make the following representations specified below, if any:-

	 	(i)	 	The following representations will apply to Party A:
	 
	 	 	 	Party A is a national banking association created or organized under the laws of
the United States of America and the federal taxpayer identification number is
94-1687665.
	 
	 	(ii)	 	The following representations will apply to Party B:
	 
	 	 	 	Party B is a corporation created or organized under the laws of the State of
Delaware and the federal taxpayer identification number is 59-6490478.

PART 3: Agreement to Deliver Documents

For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the
following documents:

	(a)	 	Tax forms, documents or certificates to be delivered are: None
	 
	(b)	 	Other documents to be delivered are:-

	 	 	 	 	 	 	 
	Party	 	 	 	 	 	 
	required to	 	 	 	 	 	Covered by
	deliver	 	 	 	Date by which to	 	Section 3(d)
	document	 	Form/Document/Certificate	 	be delivered	 	Representation
	 
	Party B

	 	Financial Statements,
Records and Reports as
specified and detailed in
the Credit Agreement as
may be amended from time
to time
	 	Delivery under
Credit Agreement
satisfies delivery
requirement
hereunder.
	 	Yes
	 
	 	 	 	 	 	 
	Party B

	 	Credit Support Document(s)
	 	Delivery not
required as
previously
delivered.
	 	No
	 
	 	 	 	 	 	 
	Party B

	 	Such other documents as
Party A may reasonably
request from time to time
	 	Upon Request
	 	No

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	Party	 	 	 	 	 	 
	required to	 	 	 	 	 	Covered by
	deliver	 	 	 	Date by which to	 	Section 3(d)
	document	 	Form/Document/Certificate	 	be delivered	 	Representation
	 
	Party A and Party B

	 	Certified copies of all
corporate authorizations
and any other documents
with respect to the
execution, delivery and
performance of this
Agreement and any Credit
Support Document
	 	Upon execution and
delivery of this
Agreement
	 	Yes
	 
	 	 	 	 	 	 
	Party A and Party B

	 	Certificate of authority
and specimen signatures
of individuals executing
this Agreement and any
Credit Support Document
	 	Upon execution and
delivery of this
Agreement and
thereafter upon
request of the
other party
	 	Yes

PART 4: Miscellaneous

	(a)	 	Address for Notices. For the purpose of Section 12(a) of this Agreement:-
	 
	 	 	Address for notice or communications to Party A:

Bank of America, N.A.

Sears Tower

233 South Wacker Drive, Suite 2800

Chicago, IL 60606

Attention: Swap Operations

Telephone No.: 312-234-2732

Facsimile No.: 312-234-3603

	 	 	with a copy to:

Bank of America, N.A.

655 Montgomery Street, CA5-522-17-05

San Francisco, California 94111

Attention: Capital Markets Documentation

Facsimile No.: 415-953-7997

	 	 	Address for financial statements to Party A:

Bank of America, N.A.

530 Lytton Avenue, Suite 101

Palo Alto, California 94301

Attention: Portfolio Management Office, Mail Code: CA5-106-01-05

Facsimile No.: 650.853.4529

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	 	 	Address for notice or communications to Party B:

American Pacific Corporation

3770 Howard Hughes Parkway, Suite 300

Las Vegas, Nevada 89109

Attn: Dana Kelley, Interim Chief Financial Officer

Telephone No.: 702-699-4163

Facsimile No.: 702-699-9465

Email Address: dkelley@apfc.com

	(b)	 	Process Agent. For the purpose of Section 13(c):
	 
	 	 	Party A appoints as its Process Agent: Not applicable.
	 
	 	 	Party B appoints as its Process Agent: Not applicable.
	 
	(c)	 	Offices. The provisions of Section 10(a) will apply to this Agreement.
	 
	(d)	 	Multibranch Party. For the purpose of Section 10(b) of this Agreement:-
	 
	 	 	Party A is a Multibranch Party and may enter into a Transaction through its Charlotte,
North Carolina, Chicago, Illinois, San Francisco, California, New York, New York, Boston,
Massachusetts or London, England Office or such other Office as may be agreed to by the
parties in connection with a Transaction.
	 
	 	 	Party B is not a Multibranch Party.
	 
	(e)	 	Calculation Agent. The Calculation Agent is Party A.
	 
	(f)	 	Credit Support Document. Details of any Credit Support Document:-
	 
	 	 	The following documents are “Credit Support Documents.” Party B agrees that the collateral
securing the obligations of Party B to Party A as described in the Credit Support Documents
shall also secure the obligations of Party B to Party A under this Agreement:

(i) Each Guaranty, as such term is defined in the Credit Agreement.

(ii) The Second Lien Security Agreement dated as of November 30, 2005, among Party
B, the Guarantors, as such term is defined in the Credit Agreement, Wachovia Bank
National Association, in its capacity as Administrative Agent and Control Agent, in
favor of Party A

(iii) The Second Lien Pledge Agreement dated as of November 30, 2005, among Party
B, the Guarantors, as such term is defined in the Credit Agreement, Wachovia Bank
National Association, in its capacity as Administrative Agent and Control Agent, in
favor of Party A;

(iv) Each other guaranty of the obligations of Party B under this Agreement or
under the other Credit Support Documents; and

(vii) Each amendment, supplement, modification, renewal, replacement, consolidation,
substitution and extension to the foregoing.

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	(g)	 	Credit Support Provider.

	 	 	 	 	 
	 

	 	Credit Support Provider means in relation to Party A:
	 	Not applicable.
	 
	 	 	 	 
	 

	 	Credit Support Provider means in relation to Party B:
	 	each of the Guarantors, as such term
is defined in the Credit Agreement.

	(h)	 	Governing Law. This Agreement will be governed by and construed in accordance with the laws
of the State of New York (without reference to its conflict of laws provisions, except for
Sections 5-1401 and 5-1402 of the New York General Obligations Law).
	 
	(i)	 	Netting of Payments. Unless the parties otherwise so agree, “Multiple Transaction Payment
Netting” will apply for the purpose of Section 2(c) of this Agreement, starting as of the date
of this Agreement, within the following group of Transactions, and not otherwise:
	 
	 	 	FX Transactions (as defined in the FX Definitions) and Currency Option Transactions (as
defined in the FX Definitions) (but excluding payments with respect to option premiums and
cash settled options); and
	 
	 	 	Transactions (as defined in the 1993 Commodity Derivatives Definitions, published by the
International Swaps and Derivatives Association, Inc.) (but excluding payments with respect
to option premiums).
	 
	(j)	 	“Affiliate” will have the meaning specified in Section 14 of this Agreement.
	 
	(k)	 	Absence of Litigation. For the purpose of Section 3(c):- “Specified Entity” means in relation
to Party A, none;
	 
	 	 	“Specified Entity” means in relation to Party B, any Affiliate of Party B.
	 
	(l)	 	No Agency. The provisions of Section 3(g) will apply to this Agreement.
	 
	(m)	 	Additional Representation will apply. For the purpose of Section 3 of this Agreement, each of
the following will constitute an Additional Representation:-
	 
	 	 	Relationship Between Parties. Each party will be deemed to represent to the other party on
the date on which it enters into a Transaction that (absent a written agreement between the
parties that expressly imposes affirmative obligations to the contrary for that
Transaction):-

	 	(A)	 	Non-Reliance. It is acting for its own account, and it has made its own
independent decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgment and upon
advice from such advisors as it has deemed necessary. It is not relying on any
communication (written or oral) of the other party as investment advice or as a
recommendation to enter into that Transaction, it being understood that information
and explanations related to the terms and conditions of a Transaction shall not be
considered investment advice or a recommendation to enter into that Transaction. No
communication (written or oral) received from the other party will be deemed to be an
assurance or guarantee as to the expected results of that Transaction.

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	 	(B)	 	Assessment and Understanding. It is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice), and
understands and accepts, the terms, conditions and risks of that Transaction. It is
also capable of assuming, and assumes, the risks of that Transaction.
	 
	 	(C)	 	Status of Parties. The other party is not acting as a fiduciary for or an
advisor to it in respect of that Transaction.
	 
	 	(D)	 	Eligible Contract Participant. It is an “eligible contract participant” as
defined in Section 1a(12) of the U.S. Commodity Exchange Act, 7 U.S.C. Section 1a(12).

	(n)	 	Recording of Conversations. Each party (i) consents to the recording of telephone
conversations between the trading, marketing and other relevant personnel of the parties in
connection with this Agreement or any potential Transaction and (ii) agrees, to the extent
permitted by applicable law, that recordings may be submitted in evidence in any Proceedings.

PART 5: Other Provisions

	(a)	 	Delivery of Confirmations. For each Transaction entered into hereunder, Party A shall
promptly send to Party B a Confirmation (which may be via facsimile transmission). Party B
agrees to respond to such Confirmation within two Local Business Days, either confirming
agreement thereto or requesting a correction of any error(s) contained therein. Failure by
Party A to send a Confirmation or of Party B to respond within such period shall not affect
the validity or enforceability of such Transaction. Absent manifest error, there shall be a
presumption that the terms contained in such Confirmation are the terms of the Transaction.
	 
	(b)	 	Furnishing Specified Information. Section 4(a)(iii) is hereby amended by inserting “promptly
upon the earlier of (1)” in lieu of the word “upon” at the beginning thereof and inserting “or
(2) such party learning that the form or document is required” before the word “any” on the
first line thereof.
	 
	(c)	 	Waiver of Right to Trial by Jury. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO
TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY CREDIT SUPPORT DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
	 
	(d)	 	Cross Default. Section 5(a)(vi) of this Agreement is hereby amended adding the following
after the semicolon at the end thereof:

“provided, however, that notwithstanding the foregoing (but subject to any
provision to the contrary contained in any such agreement or instrument), an Event
of Default shall not occur under either (1) or (2) above if the default, event of
default or other similar condition or event referred to in (1) or the failure to
pay referred to in (2) is caused not (even in part) by the unavailability of funds
but is caused solely due to a technical or administrative error which has been
remedied within three Local Business Days after notice of such failure is given to
the party.”

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	(e)	 	2002 Master Agreement Protocol. Annexes 1 to 18 and Section 6 of the ISDA 2002 Master
Agreement Protocol as published by the International Swaps and Derivatives Association, Inc.
on July 15, 2003 are incorporated into and apply to this Agreement. References in those
definitions and provisions to any ISDA Master Agreement will be deemed to be references to
this Master Agreement.

	(f)	 	Consent to Disclosure. Party B consents to Party A effecting such disclosure as Party A may
deem appropriate to enable Party A to transfer Party B’s records and information to process
and execute Party B’s instructions, or in pursuance of Party A’s or Party B’s commercial
interest, to any of its Affiliates. For the avoidance of doubt, Party B’s consent to
disclosure includes the right on the part of Party A to allow access to any intended recipient
of Party B’s information, to the records of Party A by any means.

	(g)	 	USA PATRIOT Act Notice.1 Party A hereby notifies Party B that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that
identifies Party B, which information includes the name and address of Party B and other
information that will allow Party A to identify Party B in accordance with the Act.

IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized officers as of
the date hereof.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	BANK OF AMERICA, N.A.

	 	 	 	AMERICAN PACIFIC CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Name: Susan K. Payunk

	 	 	 	Name: Dana M. Kelley	 	 
	Title: Senior Vice President

	 	 	 	Title: Treasurer and Acting chief Financial Officer	 	 

 

			
	1	 	This provision is included as a means of
compliance with the notice requirements contained in the regulations under the
USA PATRIOT Act.

36exv10w1

 

Exhibit 10.1

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

AMENDED AND RESTATED AUGUST 2, 2006

NONQUALIFIED STOCK OPTION AWARD

LEGAL AWARD AGREEMENT PURSUANT TO THE

2004 LONG-TERM INCENTIVE COMPENSATION PLAN

     This Amended and Restated Non-Qualified Stock Option Agreement (the “Agreement”), is made
as of August 2, 2006, by and between Starwood Hotels & Resorts Worldwide, Inc., a corporation
organized under the laws of Maryland (the “Company”), and the individual (the “Optionee”) named in
the Award Notification (the “Award Notification”) dated as of February 7, 2006, pursuant to the
provisions of the Starwood Hotels & Resorts Worldwide, Inc. 2004 Long-Term Incentive Compensation
Plan (the “Plan”). References to employment by the Company shall include employment by a
subsidiary or affiliate of the Company. Capitalized terms not defined herein shall have the
meanings specified in the Plan.

WITNESSETH

     WHEREAS, the Optionee was granted, as of February 7, 2006 (the “Option Date”), a non qualified
option to purchase from the Company (the “Option”)                      Shares, at the price of $59.635 per
Share upon and subject to the terms and conditions set forth below.

     1. Option Subject to Acceptance of Agreement.

          The Option may be exercised in accordance with Section 2 hereof after the Optionee accepts
this Agreement. The Option shall be accepted by the Participant unless the Participant notifies
the Company in writing by the date specified in the Award Notification. If the Participant chooses
not to accept the Grant Agreement, the Option will be immediately cancelled.

     2. Time and Manner of Exercise of Option.

          2.1. Maximum Term of Option. In no event may the Option be exercised, in whole or in
part, after the eighth anniversary of the Option Date (the “Expiration Date”).

          2.2. Exercise of Option.

          (a) In General. The Option shall become exercisable pursuant to the vesting schedule
set forth in the attached Award Notification. After the Option has become exercisable, subject to
termination or cancellation of the Option pursuant to the terms of this Agreement or the Plan, the
Option may be exercised in the manner prescribed by Section 2.4 with respect to all or any portion
of the Shares with respect to which the Option has become exercisable but has not yet been
exercised.

          (b) Disability or Death. If the Optionee’s employment by the Company terminates by
reason of Disability or death of the Optionee, the Option shall be fully exercisable with respect
to all of the Shares subject to the Option on the date of Disability or death and may thereafter be
exercised by the Optionee, the Optionee’s Legal Representative or Permitted Transferee, as the case
may be, until and including the earlier to occur of – (i) the date which is one year after the
effective date of the Optionee’s termination of employment or service by

2006 Stock Option Grant

1

 

reason of Disability or
death, or (ii) the Expiration Date. The foregoing notwithstanding, in the case of termination as a
result of Disability, during the period beginning on the date of Disability and ending on the date
applicable under the preceding sentence, all vested but unexercised Options held by Optionee will
be canceled in the event Optionee accepts any employment (including, but not limited to, a position
that is substantially comparable to a position the Optionee held with the Company), any assignment,
any position of responsibility, or acquires any ownership interest (other than holding and making
investments in common equity securities of any corporation, limited partnership or other entity
that has its common equity securities traded in a generally recognized market, provided such equity
interest therein does not exceed 5% of the outstanding shares or equity interests in such
corporation, limited partnership or other entity), which involves the Optionee’s participation in a
hotel and leisure company engaged in the operation of owned hotels, management of hotels,
franchising hotels, development and operation of vacation ownership resorts or the marketing and
selling of vacation ownership interests in each such case (A) in a state within 500 miles of the
Optionee’s last (or immediately prior) worksite for the Company, (B) in the country in which the
Optionee worked for the Company, (C) in such country or any other country in which the Company does
any of the
enumerated acts, or (D) in any country of the world.

          (c) Termination for Cause. If the Optionee’s employment by the Company is terminated
by the Company for Cause, the Option, whether or not then exercisable, shall terminate
automatically on the effective date of the Optionee’s termination of employment or service.

          (d) Voluntary Termination. If the Optionee’s employment with the Company terminates
because of voluntary resignation by the Optionee, the Option shall be exercisable only to the
extent it is exercisable on the effective date of the Optionee’s termination of employment and may
thereafter be exercised by the Optionee, the Optionee’s Legal Representative or Permitted
Transferee until and including the earlier to occur of – (i) the date which is thirty days after
the effective date of the Optionee’s termination of employment or service by voluntary resignation,
or (ii) the Expiration Date.

          (e) Retirement. In the case of an Optionee who is or becomes eligible for Retirement
prior to when the Option is 100% exercisable, the Option shall be 100% exercisable and vested not
later than when the Optionee completes the “Qualifying Service Period,” which is a period of
continuous employment extending from the Option Date until 18 months after the Option Date or, if
later, the first day the Optionee is currently eligible for Retirement. If the Optionee’s
employment with the Company terminates because of Retirement (whether before or after completing
the Qualifying Service Period), the Optionee may exercise any vested portion of the Option until
and including the earlier to occur of – (i) the fifth anniversary of the Optionee’s effective date
of Retirement, or (ii) the Expiration Date. Any portion of an Option that is not vested at
Retirement shall be forfeited. If during the three-year period beginning on the date of
Retirement, unless otherwise determined by the Committee, all vested but unexercised Options held
by the Optionee will be canceled in the event Optionee accepts any employment (including, but not
limited to, a position that is substantially comparable to a position the Optionee held with the
Company), any assignment, any position of responsibility, or acquires any ownership interest (other
than holding and making investments in common equity securities of any corporation, limited
partnership or other entity that has its common equity securities traded in a generally recognized
market, provided such equity interest therein does not exceed 5% of the outstanding shares or
equity interests in such corporation, limited partnership or other entity), which involves

2006 Stock Option Grant

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the Optionee’s participation in a hotel and leisure company engaged in the operation of owned hotels,
management of hotels, franchising hotels, development and operation of vacation ownership resorts
or the marketing and selling of vacation ownership interests in each such case (A) in a state
within 500 miles of the Optionee’s last (or immediately prior) worksite for the Company, (B) in the
country in which the Optionee worked for the Company, (C) in such country or any other country in
which the Company does any of the enumerated acts, or (D) in any country of the world.

          (f) Other Termination. If the Optionee’s employment with the Company terminates for
any reason other than Disability, death, Retirement or voluntary resignation by the Optionee or
termination by the Company for Cause, the Option shall be exercisable only to the extent it is
exercisable on the effective date of the Optionee’s termination of employment and may thereafter be
exercised by the Optionee, the Optionee’s Legal Representative or Permitted Transferee until and
including the earlier to occur of – (i) the date which is three months after the effective date of
the Optionee’s termination of employment or service, or (ii) the Expiration Date.

          (g) Certain Deaths. If the Optionee dies (A) during the one-year period following
termination of employment or service by reason of Disability, (B) during the thirty-day period
following voluntary resignation by the Optionee or (C) during the three-month period following
termination of employment or service for any reason other than Disability, Retirement, voluntary
resignation by the Optionee or termination by the Company for Cause, the Option shall be
exercisable only to the extent it is exercisable on the date of death and may thereafter be
exercised by the Optionee’s Legal Representative or Permitted Transferee until and including the
earlier to occur of – (i) the date which is three months (thirty days in the case of voluntary
resignation by the Optionee) after the date of death (but in the case of death following
termination of employment or service by reason of Disability, no less than one year after the date
of such termination of employment or service), or (ii) the Expiration Date. If the Optionee dies
during the five-year period following termination of employment or service by reason of Retirement,
the Option shall be fully exercisable with respect to all of the Shares subject to the Option on
the date of death and may thereafter be exercised by the Optionee’s Legal Representative or
Permitted Transferee until and including the earlier to occur of – (I) the date which is one year
after the date of death, or (II) the Expiration Date.

          (h) Change in Control. In the event of a Change in Control, unless otherwise
prohibited under applicable laws or by the rules and regulations of any governmental agencies or
national securities exchange on which the Shares are traded, the Option shall become immediately
exercisable and shall remain exercisable throughout the remainder of its term. The Committee shall
determine whether a Change in Control has occurred and such determination shall be conclusive and
binding upon the Company and the Optionee.

          2.3. Method of Exercise and Payment. Subject to the limitations set forth in this
Agreement, the Option may be exercised by the Optionee (1) by giving oral, written or electronic
notice to the Company or its designated representative specifying the number of whole Shares to be
purchased and payment therefor in full on or prior to
the Payment Date (as defined below) either
(i) in cash or its equivalent, (ii) by tendering previously owned whole Shares (or delivering a
certification or attestation of ownership of such Shares) having a Fair Market Value, determined as
of the date of exercise, equal to the aggregate purchase price for the Shares being purchased
pursuant to such exercise (which the Optionee has held for at least six months prior to

2006 Stock Option Grant

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the delivery of such Shares and for which the Optionee has good title, free and clear of all liens and
encumbrances), (iii) in a combination of (i) and (ii), or (iv) by means of a cashless exercise as
permitted under Federal Reserve Board’s Regulation T and using a broker-dealer acceptable to the
Company, and (2) by executing such documents as the Company may reasonably request. The Committee
shall have sole discretion to disapprove an election pursuant to any of clauses (ii), (iii) or
(iv). Any fraction of a Share which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate
representing a Share shall be delivered until the full purchase price therefor has been paid.
“Payment Date” shall mean the date on which a sale transaction in connection with a cashless
exercise (whether or not payment is actually made pursuant to a cashless exercise) would have
settled in connection with the subject option exercise.

          2.4 Termination of Option. The Option shall terminate, to the extent not exercised
pursuant to Section 2.3 or earlier terminated or cancelled pursuant to Section 1 or 2.2, at 5:00
p.m. New York time, on the Expiration Date. In no event may the Option be exercised after it
terminates as set forth in this Section 2.4.

     3. Additional Terms and Conditions of Option.

          3.1. Nontransferability of Option. The Option may not be transferred by the Optionee
other than by will or the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the foregoing sentence,
during the Optionee’s lifetime the Option is exercisable only by the Optionee or the Optionee’s
Legal Representative. Except as permitted by the foregoing, the Option may not be sold,
transferred, assigned, pledged, hypothecated, voluntarily encumbered or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, voluntarily encumber
or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become
null and void.

          3.2. Withholding Taxes.

          (a) Required Withholding. As a condition precedent to the delivery of Shares upon
exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in
addition to the purchase price of the Shares, such amount of cash as the Company may be required,
under all applicable federal, state, local or other laws or regulations, to withhold and pay over
as income or other withholding taxes (the “Required Tax Payments”) with respect to such exercise of
the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the
Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then
or thereafter payable by the Company to the Optionee.

          (b) Withholding Alternatives. The Optionee may elect to satisfy his or her obligation
to advance the Required Tax Payments by any of the following means: (1) a cash payment to the
Company pursuant to Section 3.2(a), (2) delivery to the Company of previously owned whole Shares
(which the Optionee has held for at least six months prior to the delivery of such Shares and for
which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair
Market Value, determined as of the date the obligation to withhold or pay taxes first arises in
connection with the Option (the “Tax Date”), equal to the Required

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Tax Payments, (3) subject to the
remaining provisions of this Section 3.2(b), by having the Company withhold Shares having a Fair
Market Value as of the Tax Date equal to the Required Tax Payments, (4) a cash payment by a
broker-dealer acceptable to the Company pursuant to a cashless exercise permitted by Federal
Reserve Board’s Regulation T or (5) any combination of (1), (2) or (3). The Committee shall have
the sole discretion to disapprove of an election pursuant to any of
clauses (1), (2), (4) or (5). Shares to be delivered to or withheld by the Company may not have a
Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a
Share which would be required to satisfy any such obligation shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a Share shall be
delivered until the Required Tax Payments have been satisfied in full.

          3.3 Adjustment. In the event of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or
other similar change in capitalization or event, or any distribution to holders of Shares other
than a regular cash dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee; provided that the
number of Shares subject to the Option shall always be a whole number. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.

          3.4. Compliance with Applicable Law. The Option is subject to the condition that if
the listing, registration or qualification of the Shares subject to the Option upon any securities
exchange or under any law, or the consent or approval of any governmental body, or the taking of
any other action is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of Shares hereunder, the Option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have been effected or obtained,
free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts
to effect or obtain any such listing, registration, qualification, consent or approval. As a
further condition precedent to any exercise of the Option, the Optionee – (i) shall comply with all
regulations and requirements of any regulatory authority having control of or supervision over the
issuance or delivery of the Shares, (ii) shall comply with all laws, rules and regulations
applicable to the ownership of stock options and stock and the exercise of stock options,
including, without limitation, currency and exchange laws, rules and regulations and (iii) in
connection therewith, shall execute any documents which the Board or the Committee shall deem
necessary or advisable in its sole discretion.

          3.5. Delivery of Certificates. Upon the exercise of the Option, in whole or in part,
and the satisfaction of all requirements of this Agreement related to such exercise, the Company
shall deliver or cause to be delivered one or more certificates representing the number of Shares
purchased against full payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section
3.2.

          3.6. Option Confers No Rights as Stockholder. The Optionee shall not be entitled to
any privileges of ownership with respect to Shares subject to the Option unless and until purchased
and delivered upon the exercise of the Option, in whole or in part, and the Optionee becomes a
stockholder of record with respect to such delivered Shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such Shares not so purchased and
delivered.

2006 Stock Option Grant

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          3.7. Option Confers No Rights to Continued Employment; Agreement Survival. In no
event shall the granting of the Option or its acceptance by the Optionee give or be deemed to give
the Optionee any right to continued employment by the Company or any affiliate of the Company.
This Agreement shall survive the termination of the Optionee’s employment for any reason.

          3.8. Decisions of Board or Committee. The Board or the Committee shall have the
exclusive right to resolve all questions that may arise in connection with the Option or its
exercise. Any interpretation, determination or other action made or taken by the Board or the
Committee regarding the Plan or this Agreement shall be final, binding and conclusive.

          3.9. Company to Reserve Shares. The Company shall at all times prior to the
expiration or termination of the Option reserve or cause to be reserved and keep or cause to be
kept available, either in its treasury or out of its authorized but unissued Shares, the full
number of Shares subject to the Option from time to time.

          3.10. Prospectus. The Optionee will be provided a copy of the Prospectus relating to
the Plan, the Option and the Shares covered thereby. The Optionee agrees that he or she has
reviewed the Prospectus, and fully understands his or her rights under the Plan.

          3.11. Agreement Subject to the Plan. This Agreement is subject to the provisions of
the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges
receipt of a copy of the Plan.

     4. Miscellaneous Provisions.

          4.1. Designation as Nonqualified Stock Option. The Option is hereby designated as not
constituting an Incentive Stock Option; this Agreement shall be interpreted and treated
consistently with such designation.

          4.2. Meaning of Certain Terms. As used herein, the term “Legal Representative” shall
include an executor, administrator, beneficiary or person legally authorized to act on behalf of
the Optionee, and the term “Permitted Transferee” shall include any transferee designated pursuant
to beneficiary designation procedures which may be approved by the Company. References in this
Agreement to sections of the Code shall be deemed to refer to any successor section of the Code or
any successor internal revenue law.

          4.3. Successors. This Agreement shall (i) be binding upon the Company and its
successors and assigns and (ii) inure to the benefit of any person or persons who shall, upon the
death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan.

          4.4. Notices. All notices, requests or other communications provided for in this
Agreement shall be made, if to the Company, to the Company or its designated representative at
corporate headquarters in White Plains, New York, Attention: Human Resources, or such other
address specified by the Company, and if to the Optionee, to the address set forth for the Optionee
on the records of the Company. All notices, requests or other communications provided for in this
Agreement shall be made in writing either (i) by personal

2006 Stock Option Grant

6

 

delivery to the party entitled thereto,
(ii) by facsimile with confirmation of receipt, (iii) by mailing in the United States mails to the
last known address of the party entitled thereto or (iv) by express courier service. The notice,
request or other communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if
by United States mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be deemed to be
received on the next succeeding business day of the Company.

          4.5. Reform by Court or Severability. In the event that any provision of this
Agreement is deemed by a court to be broader than permitted by applicable law, then such provision
shall be reformed (or otherwise revised or narrowed) so that it is enforceable to the fullest
extent permitted by applicable law. If any provision of this Agreement shall be declared by a
court to be invalid or unenforceable to any extent, the validity or enforceability of the remaining
provisions of this Agreement shall not be affected.

          4.6. Amendment; Waiver. No provision of this Agreement may be amended or waived
unless agreed to in writing and signed by the Chief Human Resources Officer of the Company. The
failure to exercise, or any delay in exercising, any right, power or remedy under this Agreement
shall not waive any right, power or remedy which the Company has under this Agreement.

          4.7. Section 409A. This Agreement shall be interpreted and applied so that the Option
will not be subject to Code Section 409A. In addition, this Agreement shall be interpreted and
applied as if it contained any additional provisions that it is required to contain in order for
the Option to be exempt from Code Section 409A.

          4.8
Personal Data. By accepting the Option, Optionee has voluntarily consented to the
collection, use, processing and transfer of personal data about Optionee, including Optionee’s
name, home address and telephone number, date of birth, social security number or other employee
identification number, salary, nationality, job title, and other details of the Option for the
purpose of managing and administering the Plan (“Data”). Company and/or its Subsidiaries will
transfer Data amongst themselves as necessary for the purpose of implementation, administration and
management of Optionee’s participation in the Plan, and Company and/or any of its Subsidiaries may
each further transfer Data to any third parties assisting Company in the implementation,
administration and management of the Plan, including the transfer of Data within and outside of the
Optionee’s country of residence.

          4.9. Governing Law. Subject to the next sentence, the Option and this Agreement, and
all determinations made and actions taken pursuant hereto and thereto, to the extent not governed
by the laws of the
United States, shall be governed by the laws of the State of Maryland (or such other state as may
apply under the Plan) and construed in accordance therewith without giving effect to principles of
conflicts of laws. However, the enforceability of the provisions of Section 2.3 shall be
determined and governed by the laws of the State of New York without giving effect to conflicts of
laws principles.

2006 Stock Option Grant

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	 	 	STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
	 
	 	 	 	 
	 

	 	 	 	
	 
	 	 	 	 
	 

	 	By:
	 	Michelle Crosby, Senior Vice President, Human Resources

2006 Stock Option Grant

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