Exhibit 10.4

Execution Version

 

GUARANTEE AGREEMENT

GUARANTEE AGREEMENT, dated as of December 10, 2015 (as amended, restated,
supplemented, or otherwise modified from time to time, this “Guarantee”), made
by Starwood Property Trust Inc., a Maryland corporation (“Guarantor”) in favor
of JPMorgan Chase Bank, National Association, a national banking association
organized under the laws of the United States (“Buyer”).

RECITALS

Pursuant to that certain Master Repurchase Agreement, dated as of December 10,
2015 (as amended, supplemented or otherwise modified from time to time, the
“Repurchase Agreement”), by and among Buyer and STARWOOD PROPERTY MORTGAGE
SUB-14, L.L.C. and STARWOOD PROPERTY MORTGAGE SUB-14-A, L.L.C. (each a “Seller”
and, collectively, “Sellers”),  each Seller has agreed to sell, from time to
time, to Buyer certain Eligible Assets (as defined in the Repurchase Agreement,
upon purchase by Buyer, each a “Purchased Asset” and, collectively, the
“Purchased Assets”), upon the terms and subject to the conditions as set forth
therein.  Pursuant to the terms of that certain Custodial Agreement dated
December 10, 2015 (the “Custodial Agreement”) by and among Buyer, Sellers and
Wells Fargo Bank, National Association (the “Custodian”), Custodian is required
to take possession of the Purchased Assets, along with certain other documents
specified in the Custodial Agreement, as Custodian of Buyer and any future
purchaser, on several delivery dates, in accordance with the terms and
conditions of the Custodial Agreement.  Pursuant to the terms of that certain
Pledge Agreement dated as of December 10, 2015 (the “SPM Pledge Agreement”) made
by Starwood Property Mortgage, L.L.C. (“SPM”) in favor of Buyer, and that
certain Pledge Agreement dated as of December 10, 2015 (the “SPM BC Pledge
Agreement” and, together with the SPM Pledge Agreement, the “Pledge Agreements”)
made by Starwood Property Mortgage BC, L.L.C. (“SPM BC” and, together with SPM,
each a “Parent” and, collectively, the “Parents”  ) in favor of Buyer, each
Parent has pledged to Buyer all of the Pledged Collateral (as defined in the
Pledge and Security Agreement).  The Repurchase Agreement, the Custodial
Agreement, the Depository Agreement, the Servicing Agreement, the Fee Letter,
this Guarantee and any other agreements executed in connection with the
Repurchase Agreement shall be referred to herein as the “Governing Agreements”.

It is a condition precedent to the purchase by Buyer of the Purchased Assets
pursuant to the Repurchase Agreement that Guarantor shall have executed and
delivered this Guarantee with respect to the due and punctual payment and
performance when due, whether at stated maturity, by acceleration of the
Repurchase Date or otherwise, of all of the following, in each case, subject to
the terms and conditions of this Guarantee: (a) all payment obligations owing by
each Seller to Buyer under the Repurchase Agreement or any other Governing
Agreements; (b) any and all extensions, renewals, modifications, amendments or
substitutions of the foregoing; (c) all fees and expenses, including, without
limitation, reasonable attorneys’ fees and disbursements, that are incurred by
Buyer in the enforcement of any of the foregoing or any obligation of Guarantor
hereunder; and (d) any other obligations of any Seller and any Parent with
respect to Buyer under each of the Governing Agreements (collectively, the
“Obligations”).

 

NOW, THEREFORE, in consideration of the foregoing premises, to induce Buyer to
enter into the Governing Agreements and to enter into the transaction
contemplated thereunder, Guarantor hereby agrees with Buyer, as follows:

1.         Defined Terms.  Unless otherwise defined herein, capitalized terms
used herein shall have the respective meanings given them in the Repurchase
Agreement.

“Cash Liquidity” shall mean, at any time and with respect to any Person and its
consolidated Subsidiaries, the amount of cash and cash equivalents (other than
restricted cash) held by such Person and its consolidated Subsidiaries as of
such date.

“CMBS” shall mean mortgage pass-through certificates or other securities issued
pursuant to a securitization of commercial real estate loans.

“Consolidated Net Income” shall mean, with respect to any Person, for any
period, the amount of consolidated net income (or loss) of such Person and its
consolidated Subsidiaries  for such period determined on a consolidated basis in
accordance with GAAP.

“Contingent Liabilities” shall mean, with respect to any Person as of any date
of determination, all of the following as of such date: (a) liabilities and
obligations (including any Guarantee Obligations) of such Person in respect of
“off-balance sheet arrangements” (as defined in the Off-Balance Sheet Rules
defined below in this definition), (b) obligations, including Guarantee
Obligations, whether or not required to be disclosed in the footnotes to such
Person’s financial statements, guaranteeing in whole or in part any Non-Recourse
Indebtedness, lease, dividend or other obligation, excluding, however,
(i) contractual indemnities (including any indemnity or price-adjustment
provision relating to the purchase or sale of securities or other assets), and
(ii) guarantees of non-monetary obligations that have not yet been called on or
quantified, of such Person or any other Person, and (c) forward commitments or
obligations to fund or provide proceeds with respect to any loan or other
financing that is obligatory and non-discretionary on the part of the
lender.  The amount of any Contingent Liabilities described in the preceding
clause (b) shall be deemed to be (i) with respect to a guarantee of interest or
interest and principal, or operating income guarantee, the sum of all payments
required to be made thereunder (which, in the case of an operating income
guarantee, shall be deemed to be equal to the debt service for the note secured
thereby), through (x) in the case of an interest or interest and principal
guarantee, the stated date of maturity of the obligation (and commencing on the
date interest could first be payable thereunder), or (y) in the case of an
operating income guarantee, the date through which such guarantee will remain in
effect, and (ii) with respect to all guarantees not covered by the preceding
clause (i), an amount equal to the stated or determinable amount of the primary
obligation in respect of which such guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as recorded on the
balance sheet and in the footnotes to the most recent financial statements of
such Person.  “Off-Balance Sheet Rules” means the Disclosure in Management’s
Discussion and Analysis About Off-Balance Sheet Arrangements and Aggregate
Contractual Obligations, Securities Act Release Nos. 33-8182; 34-47264; FR-67
International

-2-

 

Series Release No. 1266 File No. S7-42-02, 68 Fed. Reg. 5982 (Feb. 5, 2003)
(codified at 17 CFR Parts 228, 229 and 249).

“Convertible Debt Securities” shall mean any debt securities of Guarantor, the
terms of which provide for conversion into Capital Stock, cash by reference to
such Capital Stock, or a combination thereof.

“EBITDA” shall mean, with respect to any Person and its consolidated
Subsidiaries, for any period, an amount equal to the sum of (a) Consolidated Net
Income, of such Person (prior to any impact from minority interests or joint
venture net income and before deduction of any dividends on preferred stock of
such Person), plus the following (but only to the extent actually included in
determination of such Consolidated Net Income):  (i) depreciation and
amortization expense, (ii) Interest Expense, (iii) income tax expense, and
(iv) extraordinary or non‑recurring gains and losses, plus (b) such Person’s
proportionate share of Consolidated Net Income of the joint venture investments
and unconsolidated Affiliates of such Person, all with respect to such period,
plus (c) amounts deducted in accordance with GAAP in respect of other non-cash
expenses in determining such Consolidated Net Income for such Person.

“Fixed Charges” shall mean, with respect to any Person and its consolidated
Subsidiaries, for any period, the sum of (a) all debt service, (b) all preferred
dividends, (c) Capitalized Lease Obligations paid or accrued during such period,
(d) capital expenditures (if any), and (e) any amounts payable under any Ground
Lease.

“Guarantee Obligation” shall mean, with respect to any Person (the “guaranteeing
person”), any obligation of (a) the guaranteeing person or (b) another Person
(including any bank under any letter of credit) to induce the creation of the
obligations for which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends, contractual obligation,
derivatives contract or other obligations or Indebtedness (the “primary
obligations”) of any other third Person (the “primary obligor”) in any manner,
whether directly or indirectly, including any obligation of the guaranteeing
person, whether or not contingent, (i) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation, or (2) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided,  however, that the term
“Guarantee Obligation” shall not include endorsements of instruments for deposit
or collection in the ordinary course of business.  The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the maximum stated
amount of the primary obligation relating to such Guarantee Obligation (or, if
less, the maximum stated liability set forth in the instrument embodying such
Guarantee Obligation); and provided,  further, that in the absence of any such
stated amount or stated liability, the amount of such Guarantee Obligation shall
be such

-3-

 

guaranteeing person’s maximum anticipated liability in respect thereof as
reasonably determined by such Person in good faith.

“Interest Expense” shall mean, with respect to any Person and its consolidated
Subsidiaries, for any period, the amount of total interest expense incurred by
such Person, including capitalized or accruing interest (but excluding interest
funded under a construction loan), all with respect to such period.

“Liquidity” shall mean, at any time and with respect to any Person and its
consolidated Subsidiaries, without duplication, the amount equal to the sum of
Cash Liquidity and Near Cash Liquidity of such Person and its consolidated
Subsidiaries.

“Near Cash Liquidity” shall mean, at any time and with respect to any Person and
its consolidated Subsidiaries, the market value of Near Cash Securities held by
such Person and its consolidated Subsidiaries as of such date.

“Near Cash Securities” shall mean (i) CMBS having, at all times, a maturity or
weighted average life of twelve (12) months or less, as determined by the
applicable servicer, (ii) RMBS having a duration of twelve (12) months or less
as determined by Tilden Park Capital Management (and, at Buyer’s request, the
assumptions used in such determination shall be provided to Buyer for Buyer’s
review), in each case, having a rating of Baa3 or BBB (or the equivalent) or
higher by at least one Rating Agency (it being acknowledged that such securities
may also have a lower rating from one or more Rating Agencies) or (iii) other
public or privately placed securities approved by Buyer.

“Non-Recourse Indebtedness” shall mean, with respect to any Person and any date,
indebtedness of such Person as of such date for borrowed money in respect of
which recourse for payment (except for customary exceptions for fraud,
misapplication of funds, environmental indemnities, Acts of Insolvency,
non‑approved transfers or other events) is contractually limited to specific
assets of such Person encumbered by a Lien securing such Indebtedness.

“REIT” shall mean a Person satisfying the conditions and limitations set forth
in Section 856(b), Section 856(c) and Section 857(a) of the Code and qualifying
as a real estate investment trust, as defined in Section 856(a) of the Code.

“RMBS” shall mean mortgage pass-through certificates or other securities issued
pursuant to a securitization of residential mortgage loans.

“Tangible Net Worth” shall mean with respect to any Person and its consolidated
Subsidiaries, and as of a particular date (a) all amounts which would be
included under capital or shareholders’ equity of such Person and its
consolidated Subsidiaries on a balance sheet of such Person and its consolidated
Subsidiaries at such date, determined in accordance with GAAP, less (b) (i)
amounts owing to such Person or any such consolidated Subsidiary from any
Affiliates or from officers, employees, partners, members, directors,
shareholders or other Persons similarly

-4-

affiliated with such Person or any Affiliate thereof, (ii) intangible assets
(other than Hedging Transactions to the extent related to any Purchased Asset
and excluding mortgage loan servicing and/or special servicing rights of such
Person and its consolidated Subsidiaries) of such Person and its consolidated
Subsidiaries, if any, and (iii) prepaid taxes and/or expenses.

“Total Assets” shall mean, with respect to any Person on any date, (i) an amount
equal to the aggregate book value of all assets owned by such Person and its
Subsidiaries on a consolidated basis and the proportionate share of assets owned
by non‑consolidated Subsidiaries of such Person, less (ii) (A) amounts owing to
such Person or any of its Subsidiaries from any Affiliate thereof, or from
officers, employees, partners, members, directors, shareholders or other Persons
similarly affiliated with such Person or any Affiliate thereof, (B) intangible
assets (other than Hedging Transactions specifically related to the Purchased
Assets and excluding mortgage loan servicing and/or special servicing rights of
such Person and its consolidated Subsidiaries) and (C) prepaid taxes and
expenses, plus (iii) the amount of any future funding obligations of such Person
and its Subsidiaries under any loans or financings (including any construction
loans) outstanding as of any date, all on or as of such date and determined in
accordance with GAAP.

“Total Indebtedness” shall mean with respect to any Person and its consolidated
Subsidiaries, and as of a particular date, all amounts of Indebtedness (other
than Contingent Liabilities not reflected on such Person’s consolidated balance
sheet), plus the proportionate share of all Indebtedness (other than Contingent
Liabilities not reflected on such Person’s consolidated balance sheet) of all
non-consolidated Affiliates of such Person, on or as of such date.

2.         Guarantee.  (a)  Guarantor hereby unconditionally and irrevocably
guarantees to Buyer the prompt and complete payment and performance of the
Obligations by each Seller and each Parent when due (whether at the stated
maturity, by acceleration or otherwise).

(b)        Notwithstanding anything in Section 2(a) to the contrary, but subject
in all cases to Sections 2(c),  and (d) below, the maximum liability of the
Guarantor hereunder and under the Transaction Documents as of any date of
determination shall in no event exceed twenty-five percent (25%) of the
then-currently unpaid aggregate Repurchase Price of all Purchased Assets subject
to Transaction as of such date of determination.

(c)        Notwithstanding the foregoing, the limitation on recourse liability
as set forth in Section 2(b) above SHALL BECOME NULL AND VOID and shall be of no
force and effect and the Obligations shall be fully recourse to Guarantor upon
the occurrence of any of the following:

(i)         a voluntary bankruptcy or insolvency proceeding is commenced by any
Seller or any Parent under the Bankruptcy Code or any similar federal or state
law or any law of any other jurisdiction;

(ii)       an involuntary bankruptcy or insolvency proceeding is commenced
against any Seller or any Parent in connection with which any Seller, any Parent
or Guarantor or any Affiliate of any of the foregoing (alone or in any
combination) has or have colluded in any way with the creditors commencing or
filing such proceeding;

-5-

 

(iii)      any material breach of the separateness covenants set forth in
Articles 11(v) or (w) of the Repurchase Agreement that results in a legal or
equitable consolidation of any Seller with Guarantor or any Subsidiary of
Guarantor that is also a direct or indirect parent of such Seller in connection
with any bankruptcy or insolvency proceeding of Guarantor or such parent of
Seller; or

(d)        In addition to the foregoing and notwithstanding the limitation on
recourse liability set forth in Section 2(b) above, Guarantor shall be liable
for any actual losses, costs, claims, expenses or other liabilities actually
incurred by Buyer arising out of or attributable to the following items:

(i)         fraud or intentional misrepresentation by any Seller, any Parent,
Guarantor, or any other Affiliate of any Seller, any Parent or Guarantor in
connection with the execution and the delivery of this Guarantee, the Repurchase
Agreement, or any other Transaction Document, or any certificate, report,
financial statement or other instrument or document furnished to Buyer by any
such parties at the time of the closing of the Repurchase Agreement or during
the term of the Repurchase Agreement;

(ii)       any material breach of the separateness covenants set forth in
Articles 11(v) or (w) of the Repurchase Agreement (other than as set forth in
Section 2(c)(iii) above);

(iii)      any material breach of any representations and warranties relating to
Environmental Laws by any Seller, Guarantor or any of their respective
Affiliates, or any indemnity for costs incurred by Buyer in connection with the
violation of any Environmental Law, the correction of any environmental
condition, or the removal of any Materials of Environmental Concern, in each
case in any way affecting any Seller’s or Guarantor’s properties or any of the
Purchased Assets.

(e)        Guarantor further agrees to pay any and all reasonable out-of-pocket
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) that may be paid or incurred by Buyer in connection with (i)
enforcing any of its rights hereunder, (ii) obtaining advice of counsel with
respect to the enforcement, potential enforcement or analysis of its rights
hereunder, and (iii) collecting any amounts owed to it hereunder.  This
Guarantee shall remain in full force and effect and be fully enforceable against
Guarantor in all respects until the later of (i) the date upon which the
Obligations are paid in full and (ii) the termination of the Repurchase
Agreement, notwithstanding that from time to time prior thereto, Sellers and/or
Parents may be free from any Obligations.

(f)        No payment or payments made by any Seller,  any Parent or any other
Person or received or collected by Buyer from any Seller, any Parent or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application, at any time or from time to time, in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of Guarantor hereunder,  and Guarantor shall,
notwithstanding any such payment or payments, remain liable for the full amount
of the Obligations under this Guarantee until the Obligations are paid in full,
but subject to the limitations on Guarantor’s liability under Section 2(b)
above.

-6-

 

(g)        Guarantor agrees that whenever, at any time, or from time to time,
Guarantor shall make any payment to Buyer on account of any liability hereunder,
Guarantor will notify Buyer in writing that such payment is made under this
Guarantee for such purpose.

3.         Subrogation.  Upon making any payment hereunder, Guarantor shall be
subrogated to the rights of Buyer against any Seller and any Parent and in any
collateral for any Obligations with respect to such payment; provided, that
Guarantor shall not seek to enforce any right or receive any payment by way of
subrogation, or seek any contribution or reimbursement from any Seller, until
all amounts then due and payable by Sellers or Parents to Buyer or any of its
Affiliates under the Governing Agreements have been paid in full; provided,
 further, that such subrogation rights shall be subordinate in all respects to
all amounts owing to Buyer under the Governing Agreements.  If any amount shall
be paid to Guarantor on account of such subrogation rights at any time when all
of the Repurchase Obligations shall not have been paid in full, such amount
shall be held by Guarantor in trust for Buyer, segregated from other funds of
Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over to
Buyer in the exact form received by Guarantor (duly indorsed by Guarantor to
Buyer, if required), to be applied against the Repurchase Obligations, whether
matured or unmatured, in such order as Buyer may determine.

4.         Amendments, etc. with Respect to the Obligations.  Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of
rights against Guarantor, and without notice to or further assent by Guarantor,
any demand for payment of any of the Obligations made by Buyer may be rescinded
by Buyer and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by Buyer, and any
Governing Agreement and any other document in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as Buyer may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by Buyer for the payment of the Obligations may
be sold, exchanged, waived, surrendered or released.  Buyer shall have no
obligation to protect, secure, perfect or insure any lien at any time held by it
as security for the Obligations or for this Guarantee or any property subject
thereto.  When making any demand hereunder against Guarantor, Buyer may, but
shall be under no obligation to, make a similar demand on any Seller,  any
Parent or any other Person, and any failure by Buyer to make any such demand or
to collect any payments from any Seller,  any Parent or any such other Person or
any release of any Seller,  any Parent or such other Person shall not relieve
Guarantor of its Obligations or liabilities hereunder, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
Buyer against Guarantor.  For the purposes hereof “demand” shall include the
commencement and continuance of any legal proceedings.

5.         Guarantee Absolute and Unconditional.  (a)  Guarantor hereby agrees
that its obligations under this Guarantee constitute a guarantee of payment when
due and not of collection.  Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by Buyer upon this Guarantee or acceptance of this Guarantee; the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Guarantee; and all dealings between

-7-

 

Sellers,  Parents and Guarantor, on the one hand, and Buyer, on the other hand,
shall likewise be conclusively presumed to have been had or consummated in
reliance upon this Guarantee.  Guarantor waives promptness, diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon any Seller,  any Parent or this Guarantee with respect to the
Obligations.  This Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (i) the validity,
regularity or enforceability of any Governing Agreement, any of the Obligations
or any collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by Buyer, (ii) any defense,
set-off or counterclaim (other than a defense of payment or performance) that
may at any time be available to or be asserted by any Seller or any Parent
against Buyer, (iii) any requirement that Buyer exhaust any right to take any
action against any Seller,  any Parent or any other Person prior to or
contemporaneously with proceeding to exercise any right against Guarantor under
this Guarantee or (iv) any other circumstance whatsoever (with or without notice
to, or knowledge of,  any Seller,  any Parent or Guarantor) that constitutes, or
might be construed to constitute, an equitable or legal discharge of any Seller
and/or any Parent for the Obligations or of Guarantor under this Guarantee, in
bankruptcy or in any other instance.  When pursuing its rights and remedies
hereunder against Guarantor, Buyer may, but shall be under no obligation, to
pursue such rights and remedies that Buyer may have against any Seller,  any
Parent or any other Person or against any collateral security or guarantee for
the Obligations or any right of offset with respect thereto, and any failure by
Buyer to pursue such other rights or remedies or to collect any payments from
any Seller,  any Parent or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of any Seller, Parent or any such other Person or any such collateral
security, guarantee or right of offset, shall not relieve Guarantor of any
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of Buyer against
Guarantor.  This Guarantee shall remain in full force and effect and be binding
in accordance with and to the extent of its terms upon Guarantor and its
successors and assigns thereof, and shall inure to the benefit of Buyer, and its
permitted successors, endorsees, transferees and assigns, until all the
Obligations and the obligations of Guarantor under this Guarantee shall have
been satisfied by payment in full, notwithstanding that from time to time during
the term of the Governing Agreements, Sellers  or Parents  may be free from any
Obligations.

(b)        Without limiting the generality of the foregoing, Guarantor hereby
agrees, acknowledges, and represents and warrants to Buyer as follows:

(i)         Guarantor hereby waives any defense arising by reason of, and any
and all right to assert against Buyer any claim or defense based upon, an
election of remedies by Buyer that in any manner impairs, affects, reduces,
releases, destroys and/or extinguishes Guarantor’s subrogation rights, rights to
proceed against any Seller,  any Parent or any other guarantor for reimbursement
or contribution, and/or any other rights of Guarantor to proceed against any
Seller, any Parent, any other guarantor or any other person or security.

(ii)       Guarantor is presently informed of the financial condition of each
Seller and each Parent and of all other circumstances that diligent inquiry
would reveal and that bear upon the risk of nonpayment of the
Obligations.  Guarantor hereby covenants that it will make its own investigation
and will continue to keep itself informed about the financial condition of each
Seller and each Parent and of all other circumstances that bear upon the risk of
nonpayment and that it

-8-

 

will continue to rely upon sources other than Buyer for such information and
will not rely upon Buyer for any such information.  Guarantor hereby waives the
right, if any, to require Buyer to disclose to Guarantor any information that
Buyer may now or hereafter acquire concerning such condition or circumstances.

(iii)      Guarantor has independently reviewed the Governing Agreements and
related agreements and has made an independent determination as to the validity
and enforceability thereof, and in executing and delivering this Guarantee to
Buyer, Guarantor is not in any manner relying upon the validity, and/or
enforceability, and/or attachment, and/or perfection of any liens or security
interests of any kind or nature granted by any Seller or any Parent to Buyer,
now or at any time and from time to time in the future.

6.         Reinstatement.  This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
Buyer upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Seller or any Parent or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for any Seller or any Parent or any substantial part of the property of
any Seller or any Parent, or otherwise, all as though such payments had not been
made.

7.         Payments. Guarantor hereby agrees that the Obligations will be paid
to Buyer without set-off or counterclaim in U.S. Dollars at the address
specified in writing by Buyer.

8.         Representations and Warranties.  Guarantor represents and warrants as
of the date hereof and as of each Purchase Date under the Repurchase Agreement
that:

(a)        Guarantor is duly organized, validly existing and in good standing
under the laws and regulations of its jurisdiction of incorporation or
organization, as the case may be.  Guarantor is duly licensed, qualified, and in
good standing in every state where such licensing or qualification is necessary
for the transaction of its business.  Guarantor has the power to own and hold
the assets it purports to own and hold, and to carry on its business as now
being conducted and proposed to be conducted, and has the power to execute,
deliver, and perform its obligations under this Guarantee and the other
Governing Agreements.

(b)        This Guarantee has been duly executed and delivered by Guarantor, for
good and valuable consideration.  This Guarantee constitutes the legal, valid
and binding obligations of Guarantor, enforceable against Guarantor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity (whether enforcement is sought in proceedings in equity or
at law).

(c)        Neither the execution and delivery of this Guarantee nor compliance
by Guarantor with the terms, conditions and provisions of this Guarantee will
conflict with or result in a breach of any of the terms, conditions or
provisions of (A) its organizational documents, (B) any contractual obligation
to which it is now a party or constitute a default thereunder, or result
thereunder in the creation or imposition of any lien upon any of its assets, (C)
any judgment or

-9-

 

order, writ, injunction, decree or demand of any court applicable to it, or (D)
any applicable Requirement of Law.

(d)        There is no action, suit, proceeding, investigation, or arbitration
pending or, to the Knowledge of Guarantor, threatened against Guarantor or any
of its assets (A) with respect to any of the Transaction Documents or any of the
transactions contemplated hereby or thereby, or (b) which if adversely
determined with respect to Guarantor, would reasonably be expected to have a
Material Adverse Effect.

(e)        No consent, approval, authorization, or order of any third party
including any Governmental Authority is required that has not already been
obtained in connection with (A) the execution and delivery by Guarantor of this
Guarantee or to consummate the transactions contemplated hereby, (B) the
legality, validity, binding effect or enforceability of this Guarantee against
Guarantor or (C) the consummation of the transactions contemplated by this
Guarantee.

(f)        Guarantor has timely filed (taking into account all applicable
extensions) all required federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
taxes, assessments, fees, and other governmental charges payable by it, or with
respect to any of its properties or assets, that have become due and payable
except to the extent such amounts are being contested in good faith by
appropriate proceedings for which appropriate reserves have been established in
accordance with GAAP, and there is no claim relating to any such taxes now
pending that was made in writing by any Governmental Authority and that is not
being contested in good faith as provided above.

(g)        There are no judgments against Guarantor unsatisfied of record or
docketed in any court located in the United States of America which would
reasonably be expected to have a Material Adverse Effect and no Act of
Insolvency has ever occurred with respect to it.

9.         Financial and other Covenants.  Guarantor (on a consolidated basis,
but adjusted to remove the impact of consolidating any variable interest
entities under the requirements of Accounting Standards Codification (“ASC”)
Section 810 and/or transfers of financial assets accounted for as secured
borrowings under ASC Section 860, as both of such ASC sections are amended,
modified and/or supplemented from time to time) shall satisfy each of the
following financial covenants:

(a)        Guarantor shall not permit its Liquidity to be less than
$125,000,000; of which not less than $50,000,000 shall be comprised of Cash
Liquidity;

(b)        Guarantor shall not permit its Tangible Net Worth to be less than the
sum of (A) $2,967,415,000, plus (B) seventy-five percent (75%) of the aggregate
net cash proceeds (net of underwriting discounts and commissions, and other
out-of-pocket expenses incurred by Guarantor in connection any issuance or sale)
received by Guarantor from any issuance or sale of Capital Stock (other than
Capital Stock constituting Convertible Debt Securities) occurring after the
Closing Date, plus (C) seventy-five percent (75%) of any increase in capital or
shareholders’ equity (or like caption however denominated) on the balance sheet
of Guarantor resulting from the settlement, conversion or repayment of any
Convertible Debt Security occurring after the Closing Date;

-10-

 

(c)        Guarantor shall not permit the ratio of its Total Indebtedness to
Total Assets at any time to be greater than 0.75 to 1.00;

(d)        Guarantor shall not permit the ratio of Guarantor’s EBITDA for any
fiscal quarter to Guarantor’s Interest Expense for such fiscal quarter to be
less than 2.00 to 1.00;

(e)        Guarantor shall not permit the ratio of Guarantor’s EBITDA for any
fiscal quarter to Guarantor’s Fixed Charges for such fiscal quarter to be less
than 1.5 to 1.00; and

(f)        Guarantor shall not permit at any time Guarantor to fail to maintain
its status as a REIT.

10.       Further Covenants of Guarantor.

(a)        Taxes.  As of the date hereof and as of each Purchase Date, each
Future Funding Date and each Additional Advance Date under the Repurchase
Agreement, no liens for material amounts of Taxes have been filed against
Guarantor or any of Guarantor’s assets, and no claims have been asserted in
writing with respect to any such Taxes (except for liens and with respect to
Taxes not yet due and payable, liens or claims with respect to Taxes that are
being contested in good faith and for which adequate reserves have been
established in accordance with GAAP).(b)   PATRIOT Act.

(i)         Guarantor is in compliance, in all material respects, with (A) the
Trading with the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other applicable enabling legislation or
executive order relating thereto, and (B) the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
Patriot Act of 2001).  No part of the proceeds of any Transaction will be used,
directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

(ii)       Guarantor agrees that, from time to time upon the prior written
request of Buyer, it shall (A) execute and deliver such further documents,
provide such additional information and reports and perform such other acts as
Buyer may reasonably request in order to insure compliance with the provisions
hereof (including, without limitation, compliance with the USA PATRIOT Act of
2001 and to fully effectuate the purposes of this Guarantee and (B) provide such
opinions of counsel as Buyer may reasonably request due to any change in
Requirements of Law or Buyer Compliance Policy concerning matters described in
this Section 10(b) or in Article 9(b)(xxxi) or Article 9(b)(xxxiii) of the
Repurchase Agreement;  provided,  however, that nothing in this Section 10(b)
shall be construed as requiring Buyer to conduct any inquiry or decreasing
Guarantor’s responsibility for its statements, representations, warranties or
covenants hereunder.  In order to enable Buyer and its Affiliates to comply with
any anti-money laundering program and related responsibilities including, but
not limited to, any obligations under the USA Patriot Act of 2001 and
regulations thereunder, Guarantor on behalf of itself and its Affiliates
represents to Buyer and its Affiliates that neither Guarantor, nor any of its
Affiliates, is a Prohibited Investor, and

-11-

 

Guarantor is not acting on behalf of or for the benefit of any Prohibited
Investor.  Guarantor agrees to promptly notify Buyer or a person appointed by
Buyer to administer their anti-money laundering program, if applicable, of any
change in information affecting this representation and covenant.

(c)        Financial Reporting.  Guarantor shall provide, or cause to be
provided, to Buyer the following financial and reporting information:

(i)         Within forty-five (45) calendar days after the last day of each of
the first three fiscal quarters in any fiscal year, a quarterly reporting
package substantially in the form of Exhibit III-B attached to the Repurchase
Agreement;

(ii)       Within ninety (90) calendar days after the last day of its fiscal
year, an annual reporting package substantially in the form of Exhibit III-C
attached to the Repurchase Agreement; and

(iii)      Upon Buyer’s request, copies of Guarantor’s consolidated Federal
Income Tax returns, if any, delivered within thirty (30) days after the filing
thereof.

11.       Right of Set-off.  Guarantor hereby irrevocably authorizes Buyer and
its Affiliates,  without notice to Guarantor, any such notice being expressly
waived by Guarantor, to set‑off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by Buyer to or for the credit or the account of Guarantor, or any
part thereof in such amounts as Buyer may elect, against and on account of the
obligations and liabilities of Guarantor to Buyer hereunder and claims of every
nature and description of Buyer against Guarantor, in any currency, arising
under any Governing Agreement, as Buyer may elect, whether or not Buyer has made
any demand for payment.  Buyer shall notify Guarantor promptly of any such
set‑off and the application made by Buyer, provided that the failure to give
such notice shall not affect the validity of such set‑off and application.  The
rights of Buyer under this Section 11 are in addition to other rights and
remedies (including, without limitation, other rights of set‑off) that the Buyer
may have.

12.       Severability.  Any provision of this Guarantee that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

13.       Section Headings.  The section headings used in this Guarantee are for
convenience of reference only and shall not affect the interpretation or
construction of this Guarantee.

14.       No Waiver; Cumulative Remedies.  Buyer shall not by any act (except by
a written instrument pursuant to Section 15 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or

-12-

 

event of default or in any breach of any of the terms and conditions hereof.  No
failure to exercise, nor any delay in exercising, on the part of Buyer, any
right, power or privilege hereunder shall operate as a waiver thereof.  No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  A waiver by Buyer of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy that
Buyer would otherwise have on any future occasion.  The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.

15.       Waivers and Amendments; Successors and Assigns; Governing Law.  None
of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
Guarantor and Buyer, except that any provision of this Guarantee may be waived
by Buyer in a letter or agreement specifically waiving such terms and executed
solely by Buyer. This Guarantee shall be binding upon Guarantor’s successors and
assigns and shall inure to the benefit of Buyer, and Buyer’s permitted
successors and assigns.  THIS GUARANTEE AND ANY CLAIM, CONTROVERSY OR DISPUTE
ARISING UNDER OR RELATED TO THIS GUARANTEE, THE RELATIONSHIP OF THE PARTIES TO
THIS GUARANTEE, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND
DUTIES OF THE PARTIES TO THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF.  THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS GUARANTEE.

16.       Notices.  Notices by Buyer to Guarantor shall be given in writing,
addressed to Guarantor at the address or transmission number set forth under its
signature below and shall be effective for all purposes if hand delivered or
sent by (a) hand delivery, with proof of delivery, (b) certified or registered
United States mail, postage prepaid, (c) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of delivery or (d)
by email, provided that such email notice must also be delivered by one of the
means set forth above, to the address or transmission number set forth under its
signature below or at such other address and person as shall be designated from
time to time by Guarantor, as the case may be, in a written notice to Buyer.  A
notice shall be deemed to have been given: (w) in the case of hand delivery, at
the time of delivery, (x) in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day, (y) in the case of
expedited prepaid delivery upon the first attempted delivery on a Business Day,
or (z) in the case of email, upon receipt of confirmation, provided that such
email notice was also delivered as required in this Section 16.  If Guarantor
receives a notice that does not comply with the technical requirements for
notice under this Section 16 it may elect to waive any deficiencies and treat
the notice as having been properly given.  Notice by Guarantor to Buyer shall be
given in the manner set forth in Article 15 of the Repurchase Agreement.

17.       SUBMISSION TO JURISDICTION; WAIVERS.  GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:

(A)      SUBMITS IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT

-13-

 

OF OR RELATING TO THIS GUARANTEE OR THE OTHER LOAN DOCUMENTS TO WHICH GUARANTOR
IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK,
THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND APPELLATE COURTS FROM ANY THEREOF;

(B)      CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;

(C)      AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO GUARANTOR AT ITS
ADDRESS SET FORTH UNDER GUARANTOR’S SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF
WHICH BUYER SHALL HAVE BEEN NOTIFIED IN WRITING BY GUARANTOR; AND

(D)      AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
ANY OTHER JURISDICTION.

18.       Integration.  This Guarantee represents the agreement of Guarantor
with respect to the subject matter hereof and there are no promises or
representations by Buyer relative to the subject matter hereof not reflected
herein.

19.       Execution.  This Guarantee may be executed in counterparts, each of
which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same
instrument.  Delivery by telecopier or other electronic transmission (including
a .pdf e-mail transmission) of an executed counterpart of a signature page to
this Guarantee shall be effective as delivery of an original executed
counterpart of this Guarantee.

20.       Acknowledgments.  Guarantor hereby acknowledges that:

(a)        it has been advised by counsel in the negotiation, execution and
delivery of this Guarantee and the related documents;

(b)        Buyer has no fiduciary relationship to Guarantor, and the
relationship between Buyer and Guarantor is solely that of surety and creditor;
and

(c)        no joint venture exists between or among any of Buyer, on the one
hand, and Sellers, Parents and/or Guarantor on the other hand.

21.       Intent.  Guarantor intends for this Guarantee to be a credit
enhancement

-14-

 

related to a repurchase agreement, within the meaning of Section 101(47) of the
Bankruptcy Code and, therefore, for this Guarantee to be itself a repurchase
agreement, within the meaning of Section 101(47) and Section 559 of the
Bankruptcy Code.

22.       WAIVERS OF JURY TRIAL.  EACH OF GUARANTOR AND BUYER HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS GUARANTEE OR ANY RELATED DOCUMENT AND FOR ANY
COUNTERCLAIM HEREIN OR THEREIN.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

-15-

 

IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly
executed and delivered as of the date first above written.

 

 

 

 

 

STARWOOD PROPERTY TRUST INC., a

 

Maryland corporation

 

 

 

 

 

 

 

By:

_ /s/ Andrew J. Sossen______________________

 

 

Name:

Andrew J. Sossen

 

 

Title:

Chief Operating Officer

 

 

 

 

Address:

 

 

 

Starwood Property Trust, Inc.

 

591 West Putnam Avenue

 

Greenwich, Connecticut 06830

 

Attention:  Mr. Andrew Sossen

 

 

 

with a copy to:

 

 

 

Sidley Austin LLP

 

787 Seventh Avenue

 

New York, New York 10019

 

Attention:  Robert L. Boyd, Esq.

 

-16-