Exhibit 10.20

EXECUTION VERSION

SUNSTONE HOTEL PARTNERSHIP, LLC

SUNSTONE HOTEL INVESTORS, INC.

$240,000,000

4.69% Series A Guaranteed Senior Notes due January 10, 2026

4.79% Series B Guaranteed Senior Notes due January 10, 2028

--------------------------------------------------------------------------------

NOTE AND GUARANTEE AGREEMENT

--------------------------------------------------------------------------------

Dated as of December 20, 2016

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

Section

 

Page

 

 

 

SECTION 1.       AUTHORIZATION OF NOTES

1 

 

 

SECTION 2.       SALE AND PURCHASE OF NOTES; GUARANTIES

1 

 

 

 

Section 2.1.

Sale and Purchase of Notes

1 

Section 2.2.

Guaranties

1 

 

 

 

SECTION 3.       EXECUTION; CLOSING

2 

 

 

 

SECTION 4.       CONDITIONS TO CLOSING

2 

 

 

 

Section 4.1.

Representations and Warranties

2 

Section 4.2.

Performance; No Default

2 

Section 4.3.

Compliance Certificates

3 

Section 4.4.

Opinions of Counsel

3 

Section 4.5.

Purchase Permitted By Applicable Law, Etc

3 

Section 4.6.

Sale of Other Notes

4 

Section 4.7.

Payment of Special Counsel Fees

4 

Section 4.8.

Private Placement Numbers

4 

Section 4.9.

Changes in Corporate Structure; Change in Control

4 

Section 4.10.

Funding Instructions

4 

Section 4.11.

Subsidiary Guaranty Agreement

4 

Section 4.12.

Bank Credit Agreement

4 

Section 4.13.

Proceedings and Documents

4 

 

 

 

SECTION 5.       REPRESENTATIONS AND WARRANTIES OF THE CONSTITUENT COMPANIES

5 

 

 

 

Section 5.1.

Organization; Power and Authority

5 

Section 5.2.

Authorization, Etc

5 

Section 5.3.

Disclosure

6 

Section 5.4.

Organization and Ownership of Shares of Subsidiaries; Affiliates

6 

Section 5.5.

Financial Statements; Material Liabilities

7 

Section 5.6.

Compliance with Laws, Other Instruments, Etc

7 

Section 5.7.

Governmental Authorizations, Etc

8 

Section 5.8.

Litigation; Observance of Agreements, Statutes and Orders

8 

Section 5.9.

Taxes; REIT Status

8 

Section 5.10.

Title to Property; Leases

9 

Section 5.11.

Licenses, Permits, Etc

9 

Section 5.12.

Compliance with Employee Benefit Plans

9 

Section 5.13.

Private Offering by the Issuer

10 

Section 5.14.

Use of Proceeds; Margin Regulations

11 

Section 5.15.

Existing Indebtedness; Future Liens

11 

Section 5.16.

Foreign Assets Control Regulations, Etc

12 

Section 5.17.

Status under Certain Statutes

12 

Section 5.18.

Environmental Matters

12 

-i-

--------------------------------------------------------------------------------

 

Section 5.19.

Notes Rank Pari Passu

13 

Section 5.20.

Solvency

13 

Section 5.21.

Unencumbered Properties

14 

 

 

 

SECTION 6.       REPRESENTATIONS OF THE PURCHASERS

14 

 

 

 

Section 6.1.

Purchase for Investment

14 

Section 6.2.

Accredited Investor

14 

Section 6.3.

Source of Funds

14 

 

 

 

SECTION 7.       INFORMATION AS TO CONSTITUENT COMPANIES

16 

 

 

 

Section 7.1.

Financial and Business Information

16 

Section 7.2.

Officer’s Certificate

19 

Section 7.3.

Visitation

19 

Section 7.4.

Electronic Delivery

20 

 

 

 

SECTION 8.       PAYMENT AND PREPAYMENT OF THE NOTES

21 

 

 

 

Section 8.1.

Maturity

21 

Section 8.2.

Optional Prepayments with Make-Whole Amount

21 

Section 8.3.

Allocation of Partial Prepayments

21 

Section 8.4.

Maturity; Surrender, Etc

22 

Section 8.5.

Purchase of Notes

22 

Section 8.6.

Make-Whole Amount

22 

Section 8.7.

Offer to Prepay Notes in the Event of a Change in Control

24 

Section 8.8.

Optional Prepayment at Par

25 

Section 8.9.

Payments Due on Non-Business Days

25 

 

 

 

SECTION 9.       AFFIRMATIVE COVENANTS

25 

 

 

 

Section 9.1.

Compliance with Laws and Material Contracts

25 

Section 9.2.

Insurance

26 

Section 9.3.

Maintenance of Properties

26 

Section 9.4.

Payment of Taxes and Claims

26 

Section 9.5.

Corporate Existence, Etc

27 

Section 9.6.

Books and Records

27 

Section 9.7.

REIT Status

27 

Section 9.8.

Exchange Listing

27 

Section 9.9.

Subsidiary Guarantors

27 

Section 9.10.

Most Favored Lender Provision

28 

 

 

 

SECTION 10.     NEGATIVE COVENANTS

29 

 

 

 

Section 10.1.

Transactions with Affiliates

29 

Section 10.2.

Merger, Consolidation, Sales of Assets and Other Arrangements

30 

Section 10.3.

Line of Business

30 

Section 10.4.

Economic Sanctions, Etc

31 

Section 10.5.

Permitted Liens; Negative Pledge

31 

Section 10.6.

Restrictions on Intercompany Transfers

32 

Section 10.7.

Parent Guarantor Ownership and Management of the Issuer

32 

-ii-

--------------------------------------------------------------------------------

 

Section 10.8.

Financial Covenants

32 

 

 

 

SECTION 11.     EVENTS OF DEFAULT

33 

 

 

 

SECTION 12.     REMEDIES ON DEFAULT, ETC

36 

 

 

 

Section 12.1.

Acceleration

36 

Section 12.2.

Other Remedies

37 

Section 12.3.

Rescission

37 

Section 12.4.

No Waivers or Election of Remedies, Expenses, Etc

37 

 

 

 

SECTION 13.     GUARANTEE

37 

 

 

 

Section 13.1.

The Guarantee

37 

Section 13.2.

Waiver of Defenses

38 

Section 13.3.

Guaranty of Payment

39 

Section 13.4.

Guaranty Unconditional

39 

Section 13.5.

Reinstatement

39 

Section 13.6.

Payment on Demand

39 

Section 13.7.

Stay of Acceleration

40 

Section 13.8.

No Subrogation

40 

Section 13.9.

Marshalling

40 

Section 13.10.

Transfer of Notes

40 

Section 13.11.

Consideration

40 

 

 

 

SECTION 14.     REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

40 

 

 

 

Section 14.1.

Registration of Notes

40 

Section 14.2.

Transfer and Exchange of Notes

41 

Section 14.3.

Replacement of Notes

41 

 

 

 

SECTION 15.     PAYMENTS ON NOTES

42 

 

 

 

Section 15.1.

Place of Payment

42 

Section 15.2.

Payment by Wire Transfer

42 

Section 15.3.

FATCA Information

42 

 

 

 

SECTION 16.     EXPENSES, ETC

43 

 

 

 

Section 16.1.

Transaction Expenses

43 

Section 16.2.

Certain Taxes

43 

Section 16.3.

Survival

44 

 

 

 

SECTION 17.     SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT

44 

 

 

 

SECTION 18.     AMENDMENT AND WAIVER

44 

 

 

 

Section 18.1.

Requirements

44 

Section 18.2.

Solicitation of Holders of Notes

45 

Section 18.3.

Binding Effect, Etc

45 

Section 18.4.

Notes Held by the Constituent Companies, Etc

46 

 

 

 

SECTION 19.     NOTICES

46 

 

 

 

SECTION 20.     REPRODUCTION OF DOCUMENTS

46 

 

 

 

-iii-

--------------------------------------------------------------------------------

 

SECTION 21.     CONFIDENTIAL INFORMATION

47 

 

 

 

SECTION 22.     SUBSTITUTION OF PURCHASER

48 

 

 

 

SECTION 23.     MISCELLANEOUS

48 

 

 

 

Section 23.1.

Successors and Assigns

48 

Section 23.2.

Accounting Terms

48 

Section 23.3.

Severability

49 

Section 23.4.

Construction, Etc

49 

Section 23.5.

Counterparts

49 

Section 23.6.

Governing Law

49 

Section 23.7.

Jurisdiction and Process; Waiver of Jury Trial

50 

 

 

 

-iv-

--------------------------------------------------------------------------------

 

SCHEDULE A

—

Defined Terms

SCHEDULE 1(a)

—

Form of 4.69% Series A Guaranteed Senior Note due January 10, 2026

SCHEDULE 1(b)

—

Form of 4.79% Series B Guaranteed Senior Note due January 10, 2028

SCHEDULE 4.4(a)(1)

—

Form of Opinion of Special Counsel for the Consistent Companies and the
Subsidiary Guarantors

SCHEDULE 4.4(a)(2)

—

Form of Opinion of Maryland Counsel for the Parent Guarantor

SCHEDULE 4.4(b)

—

Form of Opinion of Special Counsel for the Purchasers

SCHEDULE 5.3

—

Disclosure Materials

SCHEDULE 5.4

—

Subsidiaries of the Parent Guarantor and Ownership of Subsidiary Stock

SCHEDULE 5.5

—

Financial Statements

SCHEDULE 5.10

—

Real Estate Assets

SCHEDULE 5.15

—

Existing Indebtedness

SCHEDULE 10.5

—

Certain Permitted Liens

PURCHASER SCHEDULE

—

Information Relating to Purchasers

EXHIBIT SGA

—

Form of Subsidiary Guaranty Agreement

 

 

 

--------------------------------------------------------------------------------

 

SUNSTONE HOTEL PARTNERSHIP, LLC

SUNSTONE HOTEL INVESTORS, INC.

120 Vantis, Suite 300

Aliso Viejo, CA  92656

4.69% Series A Guaranteed Senior Notes due January 10, 2026

4.79% Series B Guaranteed Senior Notes due January 10, 2028

Dated as of December 20, 2016

TO EACH OF THE PURCHASERS LISTED IN

THE PURCHASER SCHEDULE HERETO:

Ladies and Gentlemen:

SUNSTONE HOTEL PARTNERSHIP, LLC, a Delaware limited liability company (the
“Issuer”), and SUNSTONE HOTEL INVESTORS, INC., a Maryland corporation (the
“Parent Guarantor,” and together with the Issuer, the “Constituent Companies”
and individually, a “Constituent Company”), jointly and severally, agree with
each of the Purchasers as follows:

SECTION 1.                  AUTHORIZATION OF NOTES.

The Issuer will authorize the issue and sale of $240,000,000 aggregate principal
of its Guaranteed Senior Notes, of which $120,000,000 aggregate principal amount
shall be its 4.69% Series A Guaranteed Senior Notes due January 10, 2026 (the
“Series A Notes”) and $120,000,000 aggregate principal amount shall be its 4.79%
Series B Guaranteed Senior Notes due January 10, 2028 (the “Series B Notes”; the
Series A Notes and the Series B Notes are hereinafter referred to collectively
as the “Notes”).  The Series A Notes and the Series B Notes shall be
substantially in the forms set out in Schedule 1(a) and Schedule 1(b),
respectively.  Certain capitalized and other terms used in this Agreement are
defined in Schedule A and, for purposes of this Agreement, the rules of
construction set forth in Section 23.4 shall govern.

SECTION 2.                  SALE AND PURCHASE OF NOTES; GUARANTIES.

Section 2.1.     Sale and Purchase of Notes.  Subject to the terms and
conditions of this Agreement, the Issuer will issue and sell to each Purchaser
and each Purchaser will purchase from the Issuer, at the Closing provided for in
Section 3, Notes in the principal amount and of the series specified opposite
such Purchaser’s name in the Purchaser Schedule at the purchase price of 100% of
the principal amount thereof.  The Purchasers’ obligations hereunder are several
and not joint obligations and no Purchaser shall have any liability to any
Person for the performance or non-performance of any obligation by any other
Purchaser hereunder.

Section 2.2.     Guaranties.  The obligations of the Issuer hereunder and under
the Notes are unconditionally and irrevocably guaranteed (a) by the Parent
Guarantor pursuant to Section 13 and (b) by each Subsidiary Guarantor pursuant
to that certain Subsidiary Guaranty Agreement to be dated as of the date of the
Closing (the “Subsidiary Guaranty Agreement”) substantially in the form of
Exhibit SGA.

 

--------------------------------------------------------------------------------

 

SECTION 3.                EXECUTION; CLOSING.

The execution and delivery of this Agreement shall occur on December 20, 2016
(the “Execution Date”).  The sale and purchase of the Notes to be purchased by
each Purchaser shall occur at the offices of Schiff Hardin LLP, 666 Fifth
Avenue, 17th Floor, New York, New York 10103, at 11:00 a.m., New York, New York
time, at a closing (the “Closing”) on January 10, 2017.  At the Closing, the
Issuer will deliver to each Purchaser the Notes of each series to be purchased
by such Purchaser in the form of a single Note of such series (or such greater
number of Notes of such series in denominations of at least $100,000 as such
Purchaser may request) dated the date of the Closing and registered in such
Purchaser’s name (or in the name of its nominee), against delivery by such
Purchaser to the Issuer or its order in the amount of the purchase price
therefor by wire transfer to the account of the Issuer set forth in the funding
instructions delivered by the Issuer pursuant to Section 4.10.  If at the
Closing the Issuer shall fail to tender such Notes to any Purchaser as provided
above in this Section 3, or any of the conditions specified in Section 4 shall
not have been fulfilled to such Purchaser’s satisfaction, such Purchaser shall,
at its election, be relieved of all further obligations under this Agreement,
without thereby waiving any rights such Purchaser may have by reason of such
failure by the Issuer to tender such Notes or any of the conditions specified in
Section 4 not having been fulfilled to such Purchaser’s satisfaction.

SECTION 4.                CONDITIONS TO CLOSING.

Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such
Purchaser at the Closing is subject to the fulfillment to such Purchaser’s
satisfaction, prior to or at the Closing, of the following conditions:

Section 4.1.     Representations and Warranties. 

(a)      Representations of each Constituent Company.  The representations and
warranties of each Constituent Company in this Agreement shall be correct when
made and at the Closing.

(b)     Representations and Warranties of each Subsidiary Guarantor.  The
representations and warranties of each Subsidiary Guarantor in the Subsidiary
Guaranty Agreement shall be correct when made and at the Closing.

Section 4.2.     Performance; No Default.  Each Constituent Company and each
Subsidiary Guarantor shall have performed and complied with all agreements and
conditions contained in this Agreement and the Subsidiary Guaranty Agreement
required to be performed or complied with by it prior to or at the
Closing.  Before and after giving effect to the issue and sale of the Notes (and
the application of the proceeds thereof as contemplated by Section 5.14), no
Default or Event of Default shall have occurred and be continuing.  Neither
Constituent Company or any Subsidiary shall have entered into any transaction
since the date of the Memorandum that would have been prohibited by Section 10
had such Section applied since such date.

-2-

--------------------------------------------------------------------------------

 

Section 4.3.     Compliance Certificates.

(a)     Officer’s Certificate of each Constituent Company.  Each Constituent
Company shall have delivered to such Purchaser an Officer’s Certificate, dated
the date of the Closing, certifying that the conditions specified in Sections
4.1, 4.2 and 4.9 have been fulfilled.

(b)     Secretary’s Certificate of each Constituent Company.  Each Constituent
Company shall have delivered to such Purchaser a certificate of its Secretary or
Assistant Secretary, dated the date of the Closing, certifying as to (1) the
resolutions attached thereto and other corporate or limited liability company
proceedings relating to the authorization, execution and delivery of the Notes
(in the case of the Issuer) and this Agreement (in the case of each Constituent
Company) and (2) such Constituent Company’s organizational documents as then in
effect.

(c)     Officer’s Certificate of each Subsidiary Guarantor.  Each Subsidiary
Guarantor shall have delivered to such Purchaser an Officer’s Certificate, dated
the date of the Closing, certifying as to such Subsidiary Guarantor that the
conditions specified in Sections 4.1(b), 4.2 and 4.9 have been fulfilled.

(d)     Secretary’s Certificate of each Subsidiary Guarantor.  Each Subsidiary
Guarantor shall have delivered to such Purchaser a certificate of its Secretary
or Assistant Secretary, dated the date of the Closing, certifying as to (1) the
resolutions attached thereto and other corporate, limited liability company,
partnership or trust proceedings relating to the authorization, execution and
delivery of the Subsidiary Guaranty Agreement and (2) such Subsidiary
Guarantor’s organizational documents as then in effect.

Section 4.4.     Opinions of Counsel.  Such Purchaser shall have received
opinions in form and substance satisfactory to such Purchaser, dated the date of
the Closing (a) from (1) Latham & Watkins LLP, special counsel for the
Constituent Companies and the Subsidiary Guarantors, and (2) Venable LLP,
Maryland counsel to the Parent Guarantor, covering the matters set forth in
Schedules 4.4(a)(1) and 4.4(a)(2) (and the Constituent Companies hereby instruct
their counsel to deliver such opinions to the Purchasers) and (b) from Schiff
Hardin LLP, the Purchasers’ special counsel in connection with such
transactions, substantially in the form set forth in Schedule 4.4(b) and
covering such other matters incident to such transactions as such Purchaser may
reasonably request.

Section 4.5.     Purchase Permitted By Applicable Law, Etc.  On the date of the
Closing, such Purchaser’s purchase of Notes shall (a) be permitted by the laws
and regulations of each jurisdiction to which such Purchaser is subject, without
recourse to provisions (such as section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including Regulation T, U or X of the Board of Governors of
the Federal Reserve System) and (c) not subject such Purchaser to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the Execution Date.  If requested
by such Purchaser, such Purchaser shall have received an Officer’s Certificate
from the Issuer certifying as to such matters of fact as such Purchaser may
reasonably specify to enable such Purchaser to determine whether such purchase
is so permitted.

-3-

--------------------------------------------------------------------------------

 

Section 4.6.     Sale of Other Notes.  Contemporaneously with the Closing, the
Issuer shall sell to each other Purchaser and each other Purchaser shall
purchase the Notes to be purchased by it at the Closing as specified in the
Purchaser Schedule.

Section 4.7.     Payment of Special Counsel Fees.  Without limiting Section
16.1, the Issuer shall have paid on or before the Execution Date and the date of
the Closing the fees, charges and disbursements of the Purchasers’ special
counsel referred to in Section 4.4(b) to the extent reflected in a statement of
such counsel rendered to the Issuer at least one Business Day prior to such
date.

Section 4.8.     Private Placement Numbers.  A Private Placement Number issued
by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall
have been obtained for each series of the Notes.

Section 4.9.    Changes in Corporate Structure; Change in Control.  Neither
Constituent Company or any Subsidiary Guarantor shall have changed its
jurisdiction of incorporation or organization, as applicable, or been a party to
any merger or consolidation or succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.  No Change in Control
shall have occurred.

Section 4.10.   Funding Instructions.  At least three Business Days prior to the
date of the Closing, each Purchaser shall have received written instructions
signed by a Responsible Officer of the Issuer on letterhead of the Issuer
directing the manner of the payment of the purchase price for the Notes and
setting forth (a) the name and address of the transferee bank, (b) such
transferee bank’s ABA number and (c) the account name and number into which the
purchase price for the Notes is to be deposited.

Section 4.11.   Subsidiary Guaranty Agreement.  Such Purchaser shall have
received a copy of the Subsidiary Guaranty Agreement which shall have been duly
authorized, executed and delivered by each Person then required to be a
Subsidiary Guarantor.

Section 4.12.   Bank Credit Agreement.  Such Purchaser shall have received a
copy of the Bank Credit Agreement as in effect on the date of the Closing, which
copy shall be certified as true, correct and complete and evidences the
amendment of the definition of “Capitalized Lease Obligations” therein to
include a new sentence at the end thereof corresponding to the last sentence in
the definition of Capitalized Lease Obligations in this Agreement, and which
certificate shall identify each Additional Covenant then in effect therein.

Section 4.13.   Proceedings and Documents.  All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
such Purchaser and its special counsel, and such Purchaser and its special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as such Purchaser or such special counsel may
reasonably request.

-4-

--------------------------------------------------------------------------------

 

SECTION 5.                 REPRESENTATIONS AND WARRANTIES OF THE CONSTITUENT
COMPANIES.

Each Constituent Company represents and warrants to each Purchaser that:

Section 5.1.     Organization; Power and Authority. 

(a)     The Issuer is a limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and is duly qualified as a foreign limited liability company and
is in good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  The Issuer has the
limited liability company power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement and
the Notes and to perform the provisions hereof and thereof.

(b)     The Parent Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.  The Parent Guarantor has the corporate power and
authority to own or hold under lease the properties it purports to own or hold
under lease, to transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and to perform the provisions hereof.

(c)     Each Subsidiary Guarantor is a corporation or other legal entity duly
organized, validly existing and, where applicable, in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and, where applicable, is in good standing in
each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  Each Subsidiary Guarantor has the corporate or
other power and authority to own or hold under lease the properties it purports
to own or hold under lease and to transact the business it transacts and
proposes to transact and to execute and deliver the Subsidiary Guaranty
Agreement and to perform the provisions thereof.

Section 5.2.     Authorization, Etc. 

(a)     This Agreement and the Notes have been duly authorized by all necessary
limited liability company action on the part of the Issuer, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Issuer enforceable against the
Issuer in accordance with its terms, except as such enforceability may be
limited by (1) applicable bankruptcy,

-5-

--------------------------------------------------------------------------------

 

insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally and (2) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

(b)     This Agreement has been duly authorized by all necessary corporate
action on the part of the Parent Guarantor, and this Agreement constitutes a
legal, valid and binding obligation of the Parent Guarantor enforceable against
the Parent Guarantor in accordance with its terms, except as such enforceability
may be limited by (1) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and (2) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

(c)     The Subsidiary Guaranty Agreement has been duly authorized by all
necessary corporate or other action on the part of each Subsidiary Guarantor,
and the Subsidiary Guaranty Agreement constitutes a legal, valid and binding
obligation of each Subsidiary Guarantor enforceable against each Subsidiary
Guarantor in accordance with its terms, except as such enforceability may be
limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors’ rights generally and
(2) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

Section 5.3.     Disclosure.  The Constituent Companies, through their agents,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Securities, LLC and
US Bancorp Investments, Inc., have delivered to each Purchaser a copy of a
Private Placement Memorandum, dated September 2016 (the “Memorandum”), relating
to the transactions contemplated hereby.  The Memorandum fairly describes, in
all material respects, the general nature of the business and principal
properties of the Parent Guarantor and its Subsidiaries.  This Agreement, the
Memorandum, the financial statements listed in Schedule 5.5 and the documents,
certificates or other writings delivered to the Purchasers by or on behalf of
the Constituent Companies prior to October 18, 2016 in connection with the
transactions contemplated hereby and identified in Schedule 5.3 (this Agreement,
the Memorandum and such documents, certificates or other writings and such
financial statements delivered to each Purchaser being referred to,
collectively, as the “Disclosure Documents”), taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made.  Except as disclosed in the Disclosure
Documents, since December 31, 2015, there has been no change in the financial
condition, operations, business, properties or prospects of the Parent Guarantor
or any Subsidiary except changes that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  There is
no fact known to either Constituent Company that could reasonably be expected to
have a Material Adverse Effect that has not been set forth herein or in the
Disclosure Documents.

Section 5.4.     Organization and Ownership of Shares of Subsidiaries;
Affiliates. 

(a)      Schedule 5.4 contains (except as noted therein) complete and correct
lists of (1) the Parent Guarantor’s Subsidiaries, showing, as to each
Subsidiary, the name

-6-

--------------------------------------------------------------------------------

 

thereof, the jurisdiction of its organization, the percentage of shares of each
class of its capital stock or similar Equity Interests outstanding owned by the
Parent Guarantor and each other Subsidiary and whether such Subsidiary is a
Subsidiary Guarantor, a Significant Subsidiary and/or an Excluded Subsidiary,
(2) the Parent Guarantor’s Affiliates, other than Subsidiaries and identifying
each Unconsolidated Affiliate, and (3) each Constituent Company’s directors and
senior officers.

(b)     All of the outstanding shares of capital stock or similar Equity
Interests of each Subsidiary shown in Schedule 5.4 as being owned by the Parent
Guarantor and its Subsidiaries have been validly issued, are fully paid and
non-assessable and are owned by the Parent Guarantor or another Subsidiary free
and clear of any Lien that is prohibited by this Agreement.

(c)     Each Subsidiary (other than a Subsidiary Guarantor) is a corporation or
other legal entity duly organized, validly existing and, where applicable, in
good standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and, where applicable,
is in good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  Each such Subsidiary
has the corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the business
it transacts and proposes to transact.

(d)     No Subsidiary is subject to any legal, regulatory, contractual or other
restriction (other than the agreements listed on Schedule 5.4 and customary
limitations imposed by corporate law or similar statutes) restricting the
ability of such Subsidiary to pay dividends out of profits or make any other
similar distributions of profits to the Parent Guarantor or any of its
Subsidiaries that owns outstanding shares of capital stock or similar Equity
Interests of such Subsidiary.

Section 5.5.     Financial Statements; Material Liabilities.  The Constituent
Companies have delivered to each Purchaser copies of the consolidated financial
statements of the Parent Guarantor and its Subsidiaries listed on Schedule
5.5.  All of such financial statements (including in each case the related
schedules and notes) fairly present in all material respects the consolidated
financial position of the Parent Guarantor and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).  The
Parent Guarantor and its Subsidiaries do not have any Material liabilities that
are not disclosed in the Disclosure Documents.

Section 5.6.     Compliance with Laws, Other Instruments, Etc.  The execution,
delivery and performance by (a) the Issuer of this Agreement and the Notes, (b)
the Parent Guarantor of this Agreement and (c) each Subsidiary Guarantor of the
Subsidiary Guaranty Agreement will not (1) contravene, result in any breach of,
or constitute a default under, or result

-7-

--------------------------------------------------------------------------------

 

in the creation of any Lien in respect of any property of the Parent Guarantor
or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase
or credit agreement, lease, corporate charter, regulations or by-laws,
shareholders agreement or any other agreement or instrument to which the Parent
Guarantor or any Subsidiary is bound or by which the Parent Guarantor or any
Subsidiary or any of their respective properties may be bound or affected, (2)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority applicable to the Parent Guarantor or any Subsidiary or
(3) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Parent Guarantor or any Subsidiary.

Section 5.7.     Governmental Authorizations, Etc.  No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by (a) the Issuer of this Agreement or the Notes (b) the Parent Guarantor of
this Agreement or (c) any Subsidiary Guarantor of the Subsidiary Guaranty
Agreement.

Section 5.8.     Litigation; Observance of Agreements, Statutes and Orders. 

(a)     There are no actions, suits, investigations or proceedings pending or,
to the best knowledge of either Constituent Company, threatened against or
affecting the Parent Guarantor or any Subsidiary or any property of the Parent
Guarantor or any Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(b)     Neither the Parent Guarantor nor any Subsidiary is (1) in default under
any agreement or instrument to which it is a party or by which it is bound, (2)
in violation of any order, judgment, decree or ruling of any court, any
arbitrator of any kind or any Governmental Authority or (3) in violation of any
applicable law, ordinance, rule or regulation of any Governmental Authority
(including Environmental Laws, the USA PATRIOT Act or any of the other laws and
regulations that are referred to in Section 5.16), which default or violation
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

Section 5.9.     Taxes; REIT Status. 

(a)      The Parent Guarantor and its Subsidiaries have filed all tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (1) the amount
of which, individually or in the aggregate, is not Material or (2) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Parent Guarantor or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP.  Neither Constituent Company knows of any basis for any other tax or
assessment that could, individually or in the aggregate, reasonably be expected
to have a

-8-

--------------------------------------------------------------------------------

 

Material Adverse Effect.  The charges, accruals and reserves on the books of the
Parent Guarantor and its Subsidiaries in respect of U.S. federal, state or other
taxes for all fiscal periods are adequate.  The U.S. federal income tax
liabilities of the Parent Guarantor and its Subsidiaries have been finally
determined (whether by reason of completed audits or the statute of limitations
having run) for all fiscal years up to and including the fiscal year ended
December 31, 2012.

(b)     The Parent Guarantor has operated, and intends to continue to operate in
a manner so as to permit it to qualify as a REIT.  The Parent Guarantor has
elected treatment as a REIT.  Each Subsidiary of the Parent Guarantor is either
(1) a “qualified REIT subsidiary” within the meaning of Section 856(i) of the
Code, (2) a REIT, (3) a Taxable REIT Subsidiary within the meaning of Section
856(l) of the Code, (4) a partnership under Treasury Regulation Section
301.7701-3 or (5) an entity disregarded as a separate entity from its owner
under Treasury Regulation Section 301.7701-3.

Section 5.10.   Title to Property; Leases.  Schedule 5.10 contains, as of the
Execution Date, a complete and correct listing of all real estate assets of the
Parent Guarantor and its Subsidiaries, setting forth, for each such Property,
the current occupancy status of such Property and whether such Property is (a) a
Development Property and, if such Property is a Development Property, the status
of completion of such Property, (b) a New Property or a Seasoned Property and/or
(c) an Unencumbered Property.  The Parent Guarantor and its Subsidiaries have
good, marketable and legal title to, or a valid leasehold interest in, their
respective assets.

Section 5.11.   Licenses, Permits, Etc. 

(a)     The Parent Guarantor and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, proprietary software,
service marks, trademarks and trade names, or rights thereto, that are necessary
to the conduct of its businesses, without known conflict with the rights of
others.

(b)     To the best knowledge of each Constituent Company, no product or service
of the Parent Guarantor or any of its Subsidiaries infringes in any material
respect any license, permit, franchise, authorization, patent, copyright,
proprietary software, service mark, trademark, trade name or other right owned
by any other Person.

(c)     To the best knowledge of each Constituent Company, there is no Material
violation by any Person of any right of the Parent Guarantor or any of its
Subsidiaries with respect to any license, permit, franchise, authorization,
patent, copyright, proprietary software, service mark, trademark, trade name or
other right owned or used by the Parent Guarantor or any of its Subsidiaries.

Section 5.12.   Compliance with Employee Benefit Plans. 

(a)     The Parent Guarantor and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.  Neither the Parent Guarantor nor any ERISA Affiliate has incurred any
liability pursuant to Title I or IV of

-9-

--------------------------------------------------------------------------------

 

ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could, individually or in the aggregate,
reasonably be expected to result in the incurrence of any such liability by the
Parent Guarantor or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of the Parent Guarantor or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to section
430(k) of the Code or to any such penalty or excise tax provisions under the
Code or federal law or section 4068 of ERISA or by the granting of a security
interest in connection with the amendment of a Plan, other than such liabilities
or Liens as would not be individually or in the aggregate Material.

(b)     The present value of the aggregate benefit liabilities under each of the
Plans (other than Multiemployer Plans), determined as of the end of such Plan’s
most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan’s most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities.  The term “benefit liabilities” has the
meaning specified in section 4001 of ERISA and the terms “current value” and
“present value” have the meaning specified in section 3 of ERISA.

(c)     The Parent Guarantor and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.

(d)     The expected postretirement benefit obligation (determined as of the
last day of the Parent Guarantor’s most recently ended fiscal year in accordance
with Financial Accounting Standards Board Accounting Standards Codification
Topic 715-60, without regard to liabilities attributable to continuation
coverage mandated by section 4980B of the Code) of the Parent Guarantor and its
Subsidiaries is not Material.

(e)     The execution and delivery of this Agreement and the issuance and sale
of the Notes hereunder will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax could be
imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.  The representation
by each Constituent Company to each Purchaser in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of such
Purchaser’s representation in Section 6.2 as to the sources of the funds to be
used to pay the purchase price of the Notes to be purchased by such Purchaser.

(f)     The Parent Guarantor and its Subsidiaries do not have any Non-U.S.
Plans.

Section 5.13.  Private Offering by the Issuer.  Neither Constituent Company or
anyone acting on their behalf has offered the Notes, the Subsidiary Guaranty
Agreement or any similar Securities for sale to, or solicited any offer to buy
the Notes, the Subsidiary Guaranty Agreement or any similar Securities from, or
otherwise approached or negotiated in respect thereof with, any

-10-

--------------------------------------------------------------------------------

 

Person other than the Purchasers and not more than 70 other Institutional
Investors, each of which has been offered the Notes at a private sale for
investment.  Neither Constituent Company or anyone acting on their behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes or the execution and delivery of the Subsidiary Guaranty Agreement to the
registration requirements of section 5 of the Securities Act or to the
registration requirements of any Securities or blue sky laws of any applicable
jurisdiction.

Section 5.14.  Use of Proceeds; Margin Regulations.  The Issuer will apply the
proceeds of the sale of the Notes hereunder as set forth in the Memorandum.  No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
Securities under such circumstances as to involve the Issuer in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220).  Margin stock does not
constitute more than 5% of the value of the consolidated assets of the Issuer
and its Subsidiaries and the Issuer does not have any present intention that
margin stock will constitute more than 5% of the value of such assets.  As used
in this Section, the terms “margin stock” and “purpose of buying or carrying”
shall have the meanings assigned to them in said Regulation U.

Section 5.15.  Existing Indebtedness; Future Liens.

(a)     Except as described therein, Schedule 5.15 sets forth a complete and
correct list of all outstanding Indebtedness of the Parent Guarantor and its
Subsidiaries as of September 30, 2016 (including descriptions of the obligors
and obligees, principal amounts outstanding, any collateral therefor and any
Guaranty thereof), since which date there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities of
the Indebtedness of the Parent Guarantor or its Subsidiaries.  Neither the
Parent Guarantor nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
Indebtedness of the Parent Guarantor or such Subsidiary and no event or
condition exists with respect to any Indebtedness of the Parent Guarantor or any
Subsidiary that would permit (or that with notice or the lapse of time, or both,
would permit) one or more Persons to cause such Indebtedness to become due and
payable before its stated maturity or before its regularly scheduled dates of
payment.

(b)     Except as disclosed in Schedule 5.15, neither the Parent Guarantor nor
any Subsidiary has agreed or consented to cause or permit any of its property,
whether now owned or hereafter acquired, to be subject to a Lien not permitted
by this Agreement.

(c)     Neither the Parent Guarantor nor any Subsidiary is a party to, or
otherwise subject to any provision contained in, any instrument evidencing
Indebtedness of the Parent Guarantor or such Subsidiary, any agreement relating
thereto or any other agreement (including its charter or any other
organizational document) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Indebtedness of either Constituent Company or
any Subsidiary Guarantor, except as disclosed in Schedule 5.15.

-11-

--------------------------------------------------------------------------------

 

Section 5.16.   Foreign Assets Control Regulations, Etc. 

(a)     Neither the Parent Guarantor nor any Controlled Entity (1) is a Blocked
Person, (2) has been notified that its name appears or may in the future appear
on a State Sanctions List or (3) is a target of sanctions that have been imposed
by the United Nations or the European Union.

(b)     Neither the Parent Guarantor nor any Controlled Entity (1) has violated,
been found in violation of, or been charged or convicted under, any applicable
U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws
or (2) to either Constituent Company’s knowledge, is under investigation by any
Governmental Authority for possible violation of any U.S. Economic Sanctions
Laws, Anti-Money Laundering Laws or Anti-Corruption Laws.

(c)     No part of the proceeds from the sale of the Notes hereunder:

(1)     constitutes or will constitute funds obtained on behalf of any Blocked
Person or will otherwise be used by the Parent Guarantor or any Controlled
Entity, directly or indirectly, (i) in connection with any investment in, or any
transactions or dealings with, any Blocked Person, (ii) for any purpose that
would cause any Purchaser to be in violation of any U.S. Economic Sanctions Laws
or (iii) otherwise in violation of any U.S. Economic Sanctions Laws;

(2)     will be used, directly or indirectly, in violation of, or cause any
Purchaser to be in violation of, any applicable Anti-Money Laundering Laws; or

(3)     will be used, directly or indirectly, for the purpose of making any
improper payments, including bribes, to any Governmental Official or commercial
counterparty in order to obtain, retain or direct business or obtain any
improper advantage, in each case which would be in violation of, or cause any
Purchaser to be in violation of, any applicable Anti-Corruption Laws.

(d)     The Parent Guarantor has established procedures and controls which it
reasonably believes are adequate (and otherwise comply with applicable law) to
ensure that the Parent Guarantor and each Controlled Entity is and will continue
to be in compliance with all applicable U.S. Economic Sanctions Laws, Anti-Money
Laundering Laws and Anti-Corruption Laws.

Section 5.17.   Status under Certain Statutes.  Neither the Parent Guarantor nor
any Subsidiary is subject to regulation under the Investment Company Act of
1940, the Public Utility Holding Company Act of 2005, the ICC Termination Act of
1995, or the Federal Power Act.

Section 5.18.   Environmental Matters. 

(a)     Neither the Parent Guarantor nor any Subsidiary has knowledge of any
claim or has received any notice of any claim and no proceeding has been
instituted asserting any claim against the Parent Guarantor or any of its
Subsidiaries or any of their respective real properties or other assets now or
formerly owned, leased or operated by

-12-

--------------------------------------------------------------------------------

 

any of them, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.

(b)     Neither the Parent Guarantor nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.

(c)     Neither the Parent Guarantor nor any Subsidiary has stored any Hazardous
Materials on real properties now or formerly owned, leased or operated by any of
them in a manner which is contrary to any Environmental Law that could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

(d)     Neither the Parent Guarantor nor any Subsidiary has disposed of any
Hazardous Materials in a manner which is contrary to any Environmental Law that
could, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.

(e)     All buildings on all real properties now owned, leased or operated by
the Parent Guarantor or any Subsidiary are in compliance with applicable
Environmental Laws, except where failure to comply could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

Section 5.19.   Notes Rank Pari Passu.

(a)     The obligations of the Issuer under this Agreement and the Notes rank at
least pari passu in right of payment with all other unsecured and unsubordinated
senior Indebtedness (actual or contingent) of the Issuer, including all
unsecured and unsubordinated senior Indebtedness of the Issuer described in
Schedule 5.15(a).

(b)     The obligations of the Parent Guarantor under this Agreement rank at
least pari passu in right of payment with all other unsecured and unsubordinated
senior Indebtedness (actual or contingent) of the Parent Guarantor, including
all unsecured and unsubordinated senior Indebtedness of the Parent Guarantor
described in Schedule 5.15(a).

(c)     The obligations of each Subsidiary Guarantor under the Subsidiary
Guaranty Agreement rank at least pari passu in right of payment with all other
unsecured and unsubordinated senior Indebtedness (actual or contingent) of such
Subsidiary Guarantor, including all unsecured and unsubordinated senior
Indebtedness of such Subsidiary Guarantor described on Schedule 5.15(a).

Section 5.20.   Solvency.  Each Constituent Company and each Subsidiary
Guarantor is Solvent.

-13-

--------------------------------------------------------------------------------

 

Section 5.21.   Unencumbered Properties.  Each Property included in the
calculation of Unencumbered Asset Value satisfies all of the requirements
contained in the definition of Unencumbered Property.

SECTION 6.                 REPRESENTATIONS OF THE PURCHASERS.

Section 6.1.     Purchase for Investment.  Each Purchaser severally represents
that it is purchasing the Notes for its own account or for one or more separate
accounts maintained by such Purchaser or for the account of one or more pension
or trust funds and not with a view to the distribution thereof, provided that
the disposition of such Purchaser’s or their property shall at all times be
within such Purchaser’s or their control.  Each Purchaser understands that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Issuer is not required to register the Notes.

Section 6.2.     Accredited Investor.  Each Purchaser severally represents that
it is an “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) acting for its own account (and not for
the account of others) or as a fiduciary or agent for others (which others are
also “accredited investors”).  Each Purchaser further severally represents that
such Purchaser has had the opportunity to ask questions of the Issuer and
received answers concerning the terms and conditions of the sale of the Notes.

Section 6.3.     Source of Funds.  Each Purchaser severally represents that at
least one of the following statements is an accurate representation as to each
source of funds (a “Source”) to be used by such Purchaser to pay the purchase
price of the Notes to be purchased by such Purchaser hereunder:

(a)     the Source is an “insurance company general account” (as the term is
defined in the United States Department of Labor’s Prohibited Transaction
Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as
defined by the annual statement for life insurance companies approved by the
NAIC (the “NAIC Annual Statement”)) for the general account contract(s) held by
or on behalf of any employee benefit plan together with the amount of the
reserves and liabilities for the general account contract(s) held by or on
behalf of any other employee benefit plans maintained by the same employer (or
affiliate thereof as defined in PTE 95-60) or by the same employee organization
in the general account do not exceed 10% of the total reserves and liabilities
of the general account (exclusive of separate account liabilities) plus surplus
as set forth in the NAIC Annual Statement filed with such Purchaser’s state of
domicile; or

(b)     the Source is a separate account that is maintained solely in connection
with such Purchaser’s fixed contractual obligations under which the amounts
payable, or credited, to any employee benefit plan (or its related trust) that
has any interest in such separate account (or to any participant or beneficiary
of such plan (including any annuitant)) are not affected in any manner by the
investment performance of the separate account; or

-14-

--------------------------------------------------------------------------------

 

(c)     the Source is either (1) an insurance company pooled separate account,
within the meaning of PTE 90-1 or (2) a bank collective investment fund, within
the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the
Issuer in writing pursuant to this clause (c), no employee benefit plan or group
of plans maintained by the same employer or employee organization beneficially
owns more than 10% of all assets allocated to such pooled separate account or
collective investment fund; or

(d)     the Source constitutes assets of an “investment fund” (within the
meaning of Part VI of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified
professional asset manager” or “QPAM” (within the meaning of Part VI of the QPAM
Exemption), no employee benefit plan’s assets that are managed by the QPAM in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an affiliate
(within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or
by the same employee organization and managed by such QPAM, represent more than
20% of the total client assets managed by such QPAM, the conditions of Part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a Person
controlling or controlled by the QPAM maintains an ownership interest in the
Issuer that would cause the QPAM and the Issuer to be “related” within the
meaning of Part VI(h) of the QPAM Exemption and (1) the identity of such QPAM
and (2) the names of any employee benefit plans whose assets in the investment
fund, when combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an affiliate (within the
meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization, represent 10% or more of the assets of such investment
fund, have been disclosed to the Issuer in writing pursuant to this clause (d);
or

(e)     the Source constitutes assets of a “plan(s)” (within the meaning of Part
IV(h) of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset
manager” or “INHAM” (within the meaning of Part IV(a) of the INHAM Exemption),
the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied,
neither the INHAM nor a Person controlling or controlled by the INHAM (applying
the definition of “control” in Part IV(d)(3) of the INHAM Exemption) owns a 10%
or more interest in the Issuer and (1) the identity of such INHAM and (2) the
name(s) of the employee benefit plan(s) whose assets constitute the Source have
been disclosed to the Issuer in writing pursuant to this clause (e); or

(f)     the Source is a governmental plan; or

(g)     the Source is one or more employee benefit plans, or a separate account
or trust fund comprised of one or more employee benefit plans, each of which has
been identified to the Issuer in writing pursuant to this clause (g); or

(h)     the Source does not include assets of any employee benefit plan, other
than a plan exempt from the coverage of ERISA.

-15-

--------------------------------------------------------------------------------

 

As used in this Section 6.2, the terms “employee benefit plan,” “governmental
plan,” and “separate account” shall have the respective meanings assigned to
such terms in section 3 of ERISA.

SECTION 7.                 INFORMATION AS TO CONSTITUENT COMPANIES.

Section 7.1.     Financial and Business Information.  The Constituent Companies
shall deliver to each Purchaser and each holder of a Note that is an
Institutional Investor:

(a)     Quarterly Statements — within 60 days (or such shorter period as is the
earlier of (x) 15 days greater than the period applicable to the filing of the
Parent Guarantor’s Quarterly Report on Form 10-Q (the “Form 10-Q”) with the SEC
regardless of whether the Parent Guarantor is subject to the filing requirements
thereof and (y) the date by which such financial statements are required to be
delivered under any Material Credit Facility or the date on which such
corresponding financial statements are delivered under any Material Credit
Facility if such delivery occurs earlier than such required delivery date) after
the end of each quarterly fiscal period in each fiscal year of the Parent
Guarantor (other than the last quarterly fiscal period of each such fiscal
year), duplicate copies of,

(1)     a consolidated balance sheet of the Parent Guarantor and its
Subsidiaries as at the end of such quarter, and

(2)     consolidated statements of income, changes in shareholders’ equity and
cash flows of the Parent Guarantor and its Subsidiaries, for such quarter and
(in the case of the second and third quarters) for the portion of the fiscal
year ending with such quarter,

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer of the Parent Guarantor as fairly
presenting, in all material respects, the financial position of the companies
being reported on and their results of operations and cash flows, subject to
changes resulting from year-end adjustments;

(b)     Annual Statements — within 105 days (or such shorter period as is the
earlier of (x) 15 days greater than the period applicable to the filing of the
Parent Guarantor’s Annual Report on Form 10-K (the “Form 10-K”) with the SEC
regardless of whether the Parent Guarantor is subject to the filing requirements
thereof and (y) the date by which such financial statements are required to be
delivered under any Material Credit Facility or the date on which such
corresponding financial statements are delivered under any Material Credit
Facility if such delivery occurs earlier than such required delivery date) after
the end of each fiscal year of the Parent Guarantor, duplicate copies of,

(1)     a consolidated balance sheet of the Parent Guarantor and its
Subsidiaries as at the end of such year, and

-16-

--------------------------------------------------------------------------------

 

(2)     consolidated statements of income, changes in shareholders’ equity and
cash flows of the Parent Guarantor and its Subsidiaries for such year,

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion thereon (without a “going concern” or similar
qualification or exception and without any qualification or exception as to the
scope of the audit on which such opinion is based) of independent public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances;

(c)     SEC and Other Reports — promptly upon their becoming available, one copy
of (1) each financial statement, report, notice, proxy statement or similar
document sent by the Parent Guarantor or any Subsidiary (i) to its creditors
under any Material Credit Facility (excluding information sent to such creditors
in the ordinary course of administration of a credit facility, such as
information relating to pricing and borrowing availability) or (ii) to its
public Securities holders generally, and (2) each regular or periodic report,
each registration statement (without exhibits except as expressly requested by
such Purchaser or holder), and each prospectus and all amendments thereto filed
by the Parent Guarantor or any Subsidiary with the SEC and of all press releases
and other statements made available generally by the Parent Guarantor or any
Subsidiary to the public concerning developments that are Material;

(d)     Notice of Default or Event of Default — promptly, and in any event
within five days after a Responsible Officer of either Constituent Company
becoming aware of the existence of any Default or Event of Default or that any
Person has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any action
with respect to a claimed default of the type referred to in Section 11(f), a
written notice specifying the nature and period of existence thereof and what
action the Constituent Companies are taking or propose to take with respect
thereto;

(e)     Employee Benefits Matters — promptly, and in any event within five days
after a Responsible Officer of either Constituent Company becoming aware of any
of the following, a written notice setting forth the nature thereof and the
action, if any, that the Parent Guarantor or an ERISA Affiliate proposes to take
with respect thereto:

(1)     with respect to any Plan, any reportable event, as defined in section
4043(c) of ERISA and the regulations thereunder, for which notice thereof has
not been waived pursuant to such regulations as in effect on the Execution Date;

(2)     the taking by the PBGC of steps to institute, or the threatening by the
PBGC of the institution of, proceedings under section 4042 of ERISA for the

-17-

--------------------------------------------------------------------------------

 

termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Parent Guarantor or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan;

(3)     any event, transaction or condition that could result in the incurrence
of any liability by the Parent Guarantor or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien on any of
the rights, properties or assets of the Parent Guarantor or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if
such liability or Lien, taken together with any other such liabilities or Liens
then existing, could reasonably be expected to have a Material Adverse Effect;
or

(4)     receipt of notice of the imposition of a Material financial penalty
(which for this purpose shall mean any tax, penalty or other liability, whether
by way of indemnity or otherwise) with respect to one or more Non-U.S. Plans;

(f)     Notices from Governmental Authority — promptly, and in any event within
30 days of receipt thereof, copies of any notice to the Parent Guarantor or any
Subsidiary from any Governmental Authority relating to any order, ruling,
statute or other law or regulation that could reasonably be expected to have a
Material Adverse Effect;

(g)     Resignation or Replacement of Independent Auditors — within 10 days
following the date on which the Parent Guarantor’s independent auditors resign
or the Parent Guarantor elects to change independent auditors, as the case may
be, notification thereof, together with such further information as the Required
Holders may reasonably request;

(h)     Operating Summaries for Unencumbered Properties — Within 45 days after
the end of each fiscal quarter of the Parent Guarantor, an operating summary
with respect to each Unencumbered Property, including a quarterly and
year-to-date statement of Net Operating Income;

(i)     Smith Travel Research STAR Reports — with reasonable promptness upon the
request of such Purchaser or holder, the most current Smith Travel Research STAR
Report available, which will compare the individual Unencumbered Properties to
the primary competitive set;

(j)     Calculation of Ownership Share — with reasonable promptness upon the
request of such Purchaser or holder, evidence of the Parent Guarantor’s
calculation of the Ownership Share with respect to a Subsidiary or an
Unconsolidated Affiliate, such evidence to be reasonably satisfactory to such
Purchaser or holder; and

(k)     Requested Information — with reasonable promptness, such other data and
information relating to the business, operations, affairs, financial condition,
assets or properties of the Parent Guarantor or any of its Subsidiaries or
relating to the ability of

-18-

--------------------------------------------------------------------------------

 

either Constituent Company or any Subsidiary Guarantor to perform its
obligations hereunder, under the Notes or under the Subsidiary Guaranty
Agreement as from time to time may be reasonably requested by any such Purchaser
or holder of a Note.

Section 7.2.    Officer’s Certificate.  Each set of financial statements
delivered to a Purchaser or a holder of a Note pursuant to Section 7.1(a) or
Section 7.1(b) shall be accompanied by a certificate of a Senior Financial
Officer of the Parent Guarantor:

(a)     Covenant Compliance — setting forth the information from such financial
statements that is required in order to establish whether the Parent Guarantor
was in compliance with the requirements of Section 10.8 and each Additional
Covenant during the quarterly or annual period covered by the financial
statements then being furnished (including with respect to each such provision
that involves mathematical calculations, the information from such financial
statements that is required to perform such calculations) and detailed
calculations of the maximum or minimum amount, ratio or percentage, as the case
may be, permissible under the terms of such Section or Additional Covenant, and
the calculation of the amount, ratio or percentage then in existence.  In the
event that the Parent Guarantor or any Subsidiary has made an election to
measure any financial liability using fair value (which election is being
disregarded for purposes of determining compliance with this Agreement pursuant
to Section 23.2) as to the period covered by any such financial statement, such
Senior Financial Officer’s certificate as to such period shall include a
reconciliation from GAAP with respect to such election;

(b)     Event of Default — certifying that such Senior Financial Officer has
reviewed the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the Parent
Guarantor and its Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence during
such period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including any such
event or condition resulting from the failure of the Parent Guarantor or any
Subsidiary to comply with any Environmental Law), specifying the nature and
period of existence thereof and what action the Constituent Companies shall have
taken or proposes to take with respect thereto; and

(c)     Subsidiary Guarantors – setting forth a list of (1) all Persons that
have become (or no longer are) a Significant Subsidiary or an Excluded
Subsidiary since the certificate most recently delivered pursuant to this
Section 7.2 and (2) all Subsidiaries that are Subsidiary Guarantors, in each
case, as of the date of such certificate of such Senior Financial Officer.

Section 7.3.     Visitation.  Each Constituent Company shall permit the
representatives of each Purchaser and each holder of a Note that is an
Institutional Investor:

(a)     No Default — if no Default or Event of Default then exists, at the
expense of such Purchaser or holder and upon reasonable prior notice to such
Constituent Company, to visit the principal executive office of such Constituent
Company, to discuss

-19-

--------------------------------------------------------------------------------

 

the affairs, finances and accounts of such Constituent Company and its
Subsidiaries with such Constituent Company’s officers, and (with the consent of
such Constituent Company, which consent will not be unreasonably withheld, and
in the presence of the such Constituent Company) its independent public
accountants, and (with the consent of such Constituent Company, which consent
will not be unreasonably withheld) to visit the other offices and properties of
such Constituent Company and each Subsidiary, all at such reasonable times and
as often as may be reasonably requested in writing; and

(b)     Default — if a Default or Event of Default then exists, at the expense
of the Constituent Companies to visit and inspect any of the offices or
properties of such Constituent Company or any of its Subsidiaries, to examine
all their respective books of account, records, reports and other papers, to
make abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public accountants (and
by this provision each Constituent Company authorizes said accountants to
discuss the affairs, finances and accounts of such Constituent Company and its
Subsidiaries), all at such times and as often as may be requested.

Section 7.4.     Electronic Delivery.  Financial statements, opinions of
independent certified public accountants, other information and Officer’s
Certificates that are required to be delivered by a Constituent Company pursuant
to Sections 7.1(a), (b), (c), (g) or (h) and Section 7.2 shall be deemed to have
been delivered if such Constituent Company satisfies any of the following
requirements with respect thereto:

(a)       such financial statements satisfying the requirements of Section
7.1(a) or (b) and related Officer’s Certificate satisfying the requirements of
Section 7.2 and any other information required under Section 7.1(c), (g) or (h)
are delivered to each Purchaser and each holder of a Note by e-mail at the
e-mail address set forth in such Purchaser’s or holder’s Purchaser Schedule or
as communicated from time to time in a separate writing delivered to the
Constituent Companies;

(b)       the Parent Guarantor shall have timely filed such Form 10–Q or Form
10–K, satisfying the requirements of Section 7.1(a) or Section 7.1(b), as the
case may be, with the SEC on EDGAR and shall have made such form and the related
Officer’s Certificate satisfying the requirements of Section 7.2 available on
its website on the internet, which is located at www.sunstonehotels.com as of
the Execution Date, or on any future website that may take the place of
www.sunstonehotels.com and which has been identified as such to each Purchaser
and each holder of Notes;

(c)       such financial statements satisfying the requirements of Section
7.1(a) or Section 7.1(b) and related Officer’s Certificate satisfying the
requirements of Section 7.2 and any other information required under Section
7.1(c), (g) or (h) are timely posted by or on behalf of such Constituent Company
on IntraLinks or on any other similar website to which each Purchaser and each
holder of Notes has free access; or

(d)       the Parent Guarantor shall have timely filed any of the items referred
to in Section 7.1(c), (g) or (h) with the SEC on EDGAR (including by means of
filing a

-20-

--------------------------------------------------------------------------------

 

Current Report on Form 8-K) and shall have made such items available on its
website on the internet or on IntraLinks or on any other similar website to
which each Purchaser and each holder of Notes has free access;

provided however, that in no case shall access to such financial statements,
other information and Officer’s Certificates be conditioned upon any waiver or
other agreement or consent (other than confidentiality provisions consistent
with Section 21 of this Agreement); provided further, that in the case of each
delivery pursuant to clause (b), (c) or (d), such Constituent Company shall have
given each Purchaser and each holder of a Note (i) email notice of any filing
with the SEC on EDGAR, if such Person shall have registered to receive such
notice on the Parent Guarantor’s website or shall have provided to the Parent
Guarantor its email address on its Purchaser Schedule or any update thereto
pursuant to Section 19, or (ii) in the case of any other filing or posting,
prior written notice thereof, provided further, that upon request of any
Purchaser or any holder to receive paper copies of such forms, financial
statements, other information and Officer’s Certificates or to receive them by
e-mail, such Constituent Company will promptly e-mail them or deliver such paper
copies, as the case may be, to such Purchaser or holder.

SECTION 8.                 PAYMENT AND PREPAYMENT OF THE NOTES.

Section 8.1.     Maturity.  As provided therein, the entire unpaid principal
balance of each Note shall be due and payable on the Maturity Date thereof.

Section 8.2.    Optional Prepayments with Make-Whole Amount.  The Issuer may, at
its option, upon notice as provided below, prepay at any time all, or from time
to time any part of, the Notes, in an amount not less than 5% of the aggregate
principal amount of the Notes then outstanding in the case of a partial
prepayment, at 100% of the principal amount so prepaid, and the Make-Whole
Amount determined for the prepayment date with respect to such principal
amount.  The Issuer will give each holder of Notes written notice of each
optional prepayment under this Section 8.2 not less than 10 days and not more
than 60 days prior to the date fixed for such prepayment unless the Issuer and
the Required Holders agree to another time period pursuant to Section 18.  Each
such notice shall specify such date (which shall be a Business Day), the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid, and shall be accompanied by
a certificate of a Senior Financial Officer of the Issuer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation.  Two Business Days prior to such prepayment, the Issuer
shall deliver to each holder of Notes a certificate of a Senior Financial
Officer of the Issuer specifying the calculation of such Make-Whole Amount as of
the specified prepayment date.

Section 8.3.    Allocation of Partial Prepayments.  In the case of each partial
prepayment of the Notes pursuant to Section 8.2, the principal amount of the
Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.

-21-

--------------------------------------------------------------------------------

 

Section 8.4.     Maturity; Surrender, Etc.     In the case of each prepayment of
Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any.  From and after such date, unless
the Issuer shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue.  Any Note paid or prepaid in
full shall be surrendered to the Issuer and cancelled and shall not be reissued,
and no Note shall be issued in lieu of any prepaid principal amount of any Note.

Section 8.5.     Purchase of Notes.  The Issuer will not, and will not permit
any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except (a) upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and the
Notes or (b) pursuant to an offer to purchase made by the Issuer or an Affiliate
pro rata to the holders of all Notes at the time outstanding upon the same terms
and conditions (except to the extent necessary to reflect differences in
interest rates and maturities of the Notes of the different series).  Any such
offer shall provide each holder with sufficient information to enable it to make
an informed decision with respect to such offer, and shall remain open for at
least 10 Business Days.  If the holders of more than 50% of the principal amount
of the Notes then outstanding accept such offer, the Issuer shall promptly
notify the remaining holders of such fact and the expiration date for the
acceptance by holders of Notes of such offer shall be extended by the number of
days necessary to give each such remaining holder at least 10 Business Days from
its receipt of such notice to accept such offer.  The Issuer will promptly
cancel all Notes acquired by it or any Affiliate pursuant to any payment,
prepayment or purchase of Notes pursuant to this Agreement and no Notes may be
issued in substitution or exchange for any such Notes.

Section 8.6.     Make-Whole Amount.

The term “Make-Whole Amount” means, with respect to any Note, an amount equal to
the excess, if any, of the Discounted Value of the Remaining Scheduled Payments
with respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be less than
zero.  For the purposes of determining the Make-Whole Amount, the following
terms have the following meanings:

“Called Principal” means, with respect to any Note, the principal of such Note
that is to be prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context requires.

“Discounted Value” means, with respect to the Called Principal of any Note, the
amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

-22-

--------------------------------------------------------------------------------

 

“Reinvestment Yield” means, with respect to the Called Principal of any Note,
the sum of (a) 0.50% (50 basis points) plus (b) the yield to maturity implied by
the “Ask Yield(s)” reported as of 10:00 a.m. (New York City time) on the second
Business Day preceding the Settlement Date with respect to such Called
Principal, on the display designated as “Page PX1” (or such other display as may
replace Page PX1) on Bloomberg Financial Markets for the most recently issued
actively traded on-the-run U.S. Treasury securities (“Reported”) having a
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date.  If there are no such U.S. Treasury securities Reported having
a maturity equal to such Remaining Average Life, then such implied yield to
maturity will be determined by (1) converting U.S. Treasury bill quotations to
bond equivalent yields in accordance with accepted financial practice and (2)
interpolating linearly between the “Ask Yields” Reported for the applicable most
recently issued actively traded on-the-run U.S. Treasury securities with the
maturities (i) closest to and greater than such Remaining Average Life and (ii)
closest to and less than such Remaining Average Life.  The Reinvestment Yield
shall be rounded to the number of decimal places as appears in the interest rate
of the applicable Note.

If such yields are not Reported or the yields Reported as of such time are not
ascertainable (including by way of interpolation), then “Reinvestment Yield”
means, with respect to the Called Principal of any Note, the sum of (x) 0.50%
(50 basis points) plus (y) the yield to maturity implied by the U.S. Treasury
constant maturity yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (or any comparable successor publication) for the U.S. Treasury constant
maturity having a term equal to the Remaining Average Life of such Called
Principal as of such Settlement Date.  If there is no such U.S. Treasury
constant maturity having a term equal to such Remaining Average Life, such
implied yield to maturity will be determined by interpolating linearly between
(A) the U.S. Treasury constant maturity so reported with the term closest to and
greater than such Remaining Average Life and (B) the U.S. Treasury constant
maturity so reported with the term closest to and less than such Remaining
Average Life.  The Reinvestment Yield shall be rounded to the number of decimal
places as appears in the interest rate of the applicable Note.

“Remaining Average Life” means, with respect to any Called Principal, the number
of years obtained by dividing (a) such Called Principal into (b) the sum of the
products obtained by multiplying (1) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (2) the number of
years, computed on the basis of a 360-day year comprised of twelve 30-day months
and calculated to two decimal places, that will elapse between the Settlement
Date with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called Principal of
any Note, all payments of such Called Principal and interest thereon that would
be due after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest payments
are due to be made under the Notes, then the amount of the next succeeding
scheduled interest payment will be reduced by the amount of interest accrued to
such Settlement Date and required to be paid on such Settlement Date pursuant to
Section 8.2 or Section 12.1.

-23-

--------------------------------------------------------------------------------

 

“Settlement Date” means, with respect to the Called Principal of any Note, the
date on which such Called Principal is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires.

Section 8.7.    Offer to Prepay Notes in the Event of a Change in Control.

(a)     Notice of Change in Control.  The Constituent Companies will, within
five Business Days after any Responsible Officer of either thereof has knowledge
of the occurrence of any Change in Control, give written notice of such Change
in Control to each holder of Notes and such notice shall contain and constitute
an offer by the Issuer to prepay Notes as described in Section 8.7(b) and shall
be accompanied by the certificate described in Section 8.7(e).

(b)     Offer to Prepay Notes.  The offer to prepay Notes contemplated by
Sections 8.7(a) shall be an offer to prepay, in accordance with and subject to
this Section 8.7, all, but not less than all, Notes held by each holder on a
date specified in such offer (the “Change in Control Proposed Prepayment Date”),
which date shall be a Business Day not less than 20 days and not more than 60
days after the date of such offer (or if the Change in Control Proposed
Prepayment Date shall not be specified in such offer, the Change in Control
Proposed Prepayment Date shall be the Business Day nearest to the 20th day after
the date of such offer).

(c)     Acceptance; Rejection.  A holder of Notes may accept or reject the offer
to prepay made pursuant to this Section 8.7 by causing a notice of such
acceptance or rejection to be delivered to the Issuer at least five Business
Days prior to the Change in Control Proposed Prepayment Date.  A failure by a
holder of Notes to so respond to an offer to prepay made pursuant to this
Section 8.7 shall be deemed to constitute a rejection of such offer by such
holder.

(d)     Prepayment.  Prepayment of the Notes to be prepaid pursuant to this
Section 8.7 shall be at 100% of the principal amount of such Notes, together
with accrued and unpaid interest on such Notes accrued to the date of prepayment
but without any Make-Whole Amount.  The prepayment shall be made on the Change
in Control Proposed Prepayment Date.

(e)     Officer’s Certificate.  Each offer to prepay the Notes pursuant to this
Section 8.7 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Issuer and dated the date of such offer, specifying (1)
the Change in Control Proposed Prepayment Date, (2) that such offer is made
pursuant to this Section 8.7 and that failure by a holder to respond to such
offer by the deadline established in Section 8.7(c) shall result in such offer
to such holder being deemed rejected, (3) the principal amount of each Note
offered to be prepaid, (4) the interest that would be due on each Note offered
to be prepaid, accrued to the Change in Control Proposed Prepayment Date, (5)
that the conditions of this Section 8.7 have been fulfilled and (6) in
reasonable detail, the nature and date of the Change in Control.

(f)     Change in Control Defined.  “Change in Control” means:

-24-

--------------------------------------------------------------------------------

 

(1)     Any “person” or “group” (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person will be deemed to have “beneficial
ownership” of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting power of the then
outstanding voting stock of the Parent Guarantor; or

(2)     A “change in control,” “change in management” or similar event in
respect of the Parent Guarantor under the Bank Credit Agreement.

Section 8.8.     Optional Prepayment at Par.  So long as no Default or Event of
Default then exists, the Issuer may, at its option, upon notice as provided
below, prepay any series of Notes at any time during the 60-day period
immediately preceding the Maturity Date of such series of Notes at 100% of the
principal amount of all Notes of such series then outstanding, together with
interest accrued thereon to the date of prepayment.  The Issuer will give each
holder of Notes of the relevant series (with a copy to each holder of Notes of
the other series) written notice of each optional prepayment pursuant to this
Section 8.8 not less than 10 days and not more than 30 days prior to the date
fixed for such prepayment; provided that any prepayment of Notes under this
Section 8.8 shall not occur prior to the 60th day preceding the Maturity Date of
such series of Notes.  Each such notice shall specifically refer to this Section
8.8 and shall specify the prepayment date (which shall be a Business Day), the
aggregate principal amount of the Notes of the relevant series to be prepaid on
such date, the principal amount of each Note held by such holder to be prepaid,
and the accrued interest to be paid on the prepayment date with respect to such
principal amount being prepaid.

Section 8.9.     Payments Due on Non-Business Days.  Anything in this Agreement
or the Notes to the contrary notwithstanding, (a) except as set forth in clause
(b), any payment of interest on any Note that is due on a date that is not a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day; and (b) any payment of principal of or Make-Whole
Amount on any Note (including principal due on the Maturity Date of such Note)
that is due on a date that is not a Business Day shall be made on the next
succeeding Business Day and shall include the additional days elapsed in the
computation of interest payable on such next succeeding Business Day.

SECTION 9.                AFFIRMATIVE COVENANTS.

From the Execution Date until the Closing and thereafter, so long as any of the
Notes are outstanding, the Constituent Companies covenant that:

Section 9.1.     Compliance with Laws and Material Contracts. 

(a)     Without limiting Section 10.4, each Constituent Company will, and will
cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject (including
ERISA, Environmental Laws,

-25-

--------------------------------------------------------------------------------

 

the USA PATRIOT Act and the other laws and regulations that are referred to in
Section 5.16) and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(b)     Each Constituent Company will, and will cause each of its Subsidiaries
to, duly and punctually perform and comply with any and all representations,
warranties, covenants and agreements expressed as binding upon any such Person
under any Material Contract which if not performed or complied with could
reasonably be expected to result in any party to a Material Contract taking
action to terminate such Material Contract.

Section 9.2.     Insurance.  Each Constituent Company will, and will cause each
of its Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance (on a replacement cost basis) with respect to their respective
properties and businesses against such casualties and contingencies (including
terrorism as applicable), of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if adequate reserves
are maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.

Section 9.3.     Maintenance of Properties.  Each Constituent Company will, and
will cause each of its Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section 9.3 shall not prevent the Parent Guarantor or any Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Parent
Guarantor has concluded that such discontinuance could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 9.4.     Payment of Taxes and Claims.  Each Constituent Company will,
and will cause each of its Subsidiaries to, file all tax returns required to be
filed in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies imposed on them or any of their properties, assets, income or
franchises, to the extent the same have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Parent Guarantor
or any Subsidiary, provided that neither the Parent Guarantor nor any Subsidiary
need pay any such tax, assessment, charge, levy or claim if (a) the amount,
applicability or validity thereof is contested by the Parent Guarantor or such
Subsidiary on a timely basis in good faith and in appropriate proceedings, and
the Parent Guarantor or a Subsidiary has established adequate reserves therefor
in accordance with GAAP on the books of the Parent Guarantor or such Subsidiary
or (b) the nonpayment of all such taxes, assessments, charges, levies and claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

-26-

--------------------------------------------------------------------------------

 

Section 9.5.     Corporate Existence, Etc.  Each Constituent Company will at all
times preserve and keep its limited liability company or corporate existence in
full force and effect.  Subject to Section 10.2, each Constituent Company will
at all times preserve and keep in full force and effect the corporate or other
legal existence of each of its Subsidiaries (unless, except in the case of the
Issuer, merged into a Constituent Company or a Wholly-Owned Subsidiary) and all
rights and franchises of each Constituent Company and its Subsidiaries unless,
in the good faith judgment of the Parent Guarantor, the termination of or
failure to preserve and keep in full force and effect such corporate or other
legal existence, right or franchise could not, individually or in the aggregate,
have a Material Adverse Effect.

Section 9.6.     Books and Records.  Each Constituent Company will, and will
cause each of its Subsidiaries to, maintain proper books of record and account
in conformity with GAAP and all applicable requirements of any Governmental
Authority having legal or regulatory jurisdiction over such Constituent Company
or such Subsidiary, as the case may be.  Each Constituent Company will, and will
cause each of its Subsidiaries to, keep books, records and accounts which, in
reasonable detail, accurately reflect all transactions and dispositions of
assets.  Each Constituent Company and its Subsidiaries have devised a system of
internal accounting controls sufficient to provide reasonable assurances that
their respective books, records, and accounts accurately reflect all
transactions and dispositions of assets and each Constituent Company will, and
will cause each of its Subsidiaries to, continue to maintain such system.

Section 9.7.     REIT Status.  The Parent Guarantor shall maintain its status
as, and election to be treated as, a REIT under the Code.

Section 9.8.     Exchange Listing.  The Parent Guarantor shall maintain at least
one class of common shares of the Parent Guarantor having trading privileges on
the New York Stock Exchange or NYSE Amex Equities or which is subject to price
quotations on The NASDAQ Stock Market’s National Market System.

Section 9.9.     Subsidiary Guarantors.

(a)     The Parent Guarantor will cause each of its Subsidiaries that guarantees
or otherwise becomes liable at any time, whether as a borrower or an additional
or co-borrower or otherwise, for or in respect of any Indebtedness under any
Material Credit Facility to concurrently therewith:

(1)     execute a supplement to the Subsidiary Guaranty Agreement in the form of
Exhibit A thereto (a “Subsidiary Guaranty Supplement”); and

(2)     deliver the following to each holder of a Note:

(i)     an executed counterpart of such Subsidiary Guaranty Supplement;

(ii)     a certificate signed by an authorized Responsible Officer of such
Subsidiary containing representations and warranties on behalf of such
Subsidiary to the same effect, mutatis mutandis, as those contained in Sections
5.1(c), 5.2(c), 5.6(c), 5.7(c) and 5.19(c) of this Agreement (but with

-27-

--------------------------------------------------------------------------------

 

respect to such Subsidiary, such Subsidiary Guaranty Supplement and the
Subsidiary Guaranty Agreement, as the case may be);

(iii)     all documents as may be reasonably requested by the Required Holders
to evidence the due organization, continuing existence and, where applicable,
good standing of such Subsidiary and the due authorization by all requisite
action on the part of such Subsidiary of the execution and delivery of such
Subsidiary Guaranty Supplement and the performance by such Subsidiary of its
obligations under the Subsidiary Guaranty Agreement; and

(iv)     an opinion of counsel reasonably satisfactory to the Required Holders
covering the matters set forth in paragraphs 2, 3, 4 and 5 of Schedule 4.4(a)(1)
but relating to such Subsidiary, such Subsidiary Guaranty Supplement and the
Subsidiary Guaranty Agreement and which opinion may be subject to assumptions,
qualifications and limitations similar to those set forth in said Schedule
4.4(a)(1).

(b)     At the request of the Parent Guarantor and by written notice to each
holder of Notes, any Subsidiary Guarantor that is a party to the Subsidiary
Guaranty Agreement (including any Subsidiary Guarantor that becomes a party
thereto by virtue of a Subsidiary Guaranty Supplement) shall be discharged from
all of its obligations and liabilities under the Subsidiary Guaranty Agreement
and shall be automatically released from its obligations thereunder without the
need for the execution or delivery of any other document by the holders,
provided that (1) if such Subsidiary Guarantor is a guarantor or is otherwise
liable for or in respect of any Material Credit Facility, then such Subsidiary
Guarantor has been released and discharged (or will be released and discharged
concurrently with the release of such Subsidiary Guarantor under the Subsidiary
Guaranty Agreement) under such Material Credit Facility, (2) at the time of, and
after giving effect to, such release and discharge, no Default or Event of
Default shall have occurred and be continuing, (3) no amount is then due and
payable under the Subsidiary Guaranty Agreement, (4) if in connection with such
Subsidiary Guarantor being released and discharged under any Material Credit
Facility, any fee or other form of consideration is given to any holder of
Indebtedness under such Material Credit Facility principally for such release,
the holders of the Notes shall receive equivalent consideration substantially
concurrently therewith and (5) each holder shall have received a certificate of
a Responsible Officer of the Parent Guarantor certifying as to the matters set
forth in clauses (1) through (4).

Section 9.10.    Most Favored Lender Provision.  If at any time the Bank Credit
Agreement or any Additional Note Purchase Agreement or any Guaranty in respect
of any thereof (a “MFL Agreement”) shall include any Financial Covenant and such
provision is not contained in this Agreement (any such provision, together with
any related definitions (including, any term defined therein with reference to
the application of GAAP, as identified in such MFL Agreement), an  “Additional
Covenant”), then the Constituent Companies shall promptly, and in any event
within 10 Business Days thereof, provide a Most Favored Lender Notice with
respect to each such Additional Covenant; provided that a Most Favored Lender

-28-

--------------------------------------------------------------------------------

 

Notice is not required to be given in the case of the Additional Covenants
incorporated herein on the Execution Date.  Thereupon, unless waived in writing
by the Required Holders within 10 days of the Purchasers and holders receipt of
such notice, such Additional Covenant shall be deemed incorporated by reference
into this Agreement, mutatis mutandis, as if set forth fully herein, effective
(a) in the case of any Additional Covenant effective on the Execution Date, as
of the Execution Date, and (b) in the case of any Additional Covenant effective
after the Execution Date, as of the date when such Additional Covenant became
effective under the relevant MFL Agreement.  Any Additional Covenant
incorporated into this Agreement pursuant to this provision, (1) shall be deemed
automatically waived herein to reflect any waiver of such Additional Covenant
under the relevant MFL Agreement, (2) shall be deemed automatically amended
herein to reflect any subsequent amendments agreed and implemented in relation
to such Additional Covenant under the relevant MFL Agreement and (3) shall be
deemed deleted from this Agreement at such time as such Additional Covenant is
deleted or otherwise removed from or is no longer in effect under or pursuant to
the relevant MFL Agreement or if the relevant MFL Agreement has been terminated;
provided in each case that any consideration paid or provided to any holder of
Indebtedness under the relevant MFL Agreement in connection with an event
contemplated by clause (1), (2) or (3) above (other than in connection with the
extension of the term of the relevant MFL Agreement, refinancing or replacing
the relevant MFL Agreement or repayment in full of the relevant MFL Agreement in
connection with its termination) is paid to each holder of Notes at the same
time and on equivalent terms (and for the avoidance of doubt such amounts shall
be proportional to the aggregate principal amount of Notes outstanding as
compared to the aggregate amount of the Indebtedness outstanding under the
relevant MFL Agreement); and provided further that no Additional Covenant shall
be so deemed automatically waived, amended or deleted during any time that a
Default or Event of Default has occurred and is continuing.  In determining
whether a breach of any Financial Covenant incorporated by reference into this
Agreement pursuant to this Section 9.10 shall constitute an Event of Default,
the period of grace, if any, applicable to such Additional Covenant in the
relevant MFL Agreement shall apply.

Although it will not be a Default or an Event of Default if the Constituent
Companies fail to comply with any provision of Section 9 on or after the
Execution Date and prior to the Closing, if such a failure occurs, then any of
the Purchasers may elect not to purchase the Notes on the date of Closing that
is specified in Section 3.

SECTION 10.                 NEGATIVE COVENANTS.

From the Execution Date until the Closing and thereafter, so long as any of the
Notes are outstanding, the Constituent Companies covenant that:

Section 10.1.     Transactions with Affiliates.  The Constituent Companies will
not, and will not permit any Subsidiary to, enter into directly or indirectly
any transaction or group of related transactions (including the purchase, lease,
sale or exchange of properties of any kind or the rendering of any service) with
any Affiliate, except pursuant to the reasonable requirements of such
Constituent Company’s or such Subsidiary’s business and upon fair and reasonable
terms no less favorable to such Constituent Company or such Subsidiary than
would be obtainable in a comparable arm’s-length transaction with a Person not
an Affiliate.

-29-

--------------------------------------------------------------------------------

 

Section 10.2.   Merger, Consolidation, Sales of Assets and Other
Arrangements.  The Constituent Companies will not, and will not permit any
Subsidiary to, (x) enter into any transaction of merger or consolidation,
(y) liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution) or (z) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial part
of its business or assets, or the capital stock of or other Equity Interests in
any of its Subsidiaries, whether now owned or hereafter acquired; provided,
 however, that:

(a)       any of the actions described in the immediately preceding clauses (x)
through (z) may be taken with respect to any Subsidiary (other than the Issuer)
so long as (1) immediately prior to the taking of such action, and immediately
thereafter and after giving effect thereto, no Default or Event of Default is or
would be in existence and (2) if such action includes the sale of all Equity
Interests in a Subsidiary that is a Subsidiary Guarantor owned directly or
indirectly by the Parent Guarantor, such Subsidiary can and will be released
from the Guaranty in accordance with Section 9.9(b);

(b)       the Parent Guarantor and its Subsidiaries may lease and sublease their
respective assets, as lessor or sublessor (as the case may be), in the ordinary
course of their business;

(c)       a Person may merge with the Parent Guarantor, the Issuer or a
Subsidiary Guarantor so long as (1) the survivor of such merger is the Parent
Guarantor, the Issuer or such Subsidiary Guarantor or, solely in the case of a
Subsidiary Guarantor, becomes a Subsidiary Guarantor at the time of such merger,
and (2) immediately prior to such merger, and immediately thereafter and after
giving effect thereto, no Default or Event of Default is or would be in
existence, including a Default or Event of Default resulting from a breach of
Section 10.8 or any Additional Covenant; and

(d)       the Parent Guarantor and its Subsidiaries may sell, transfer or
dispose of assets among themselves.

Further, (i) no Constituent Company or any Subsidiary Guarantor may enter into
any sale-leaseback transactions or other transaction by which such Person shall
remain liable as lessee (or the economic equivalent thereof) of any real or
personal property that it has sold or leased to another Person and (ii) no
Subsidiary that is not the Issuer or a Subsidiary Guarantor may enter into any
sale-leaseback transactions or other transaction by which such Person shall
remain liable as lessee (or the economic equivalent thereof) of any real or
personal property that it has sold or leased to another unless no Default or
Event of Default then exists or would result therefrom.

Section 10.3.     Line of Business.  The Constituent Companies will not, and
will not permit any Subsidiary to, engage in any business if, as a result, the
general nature of the business in which the Parent Guarantor and its
Subsidiaries, taken as a whole, would then be engaged would be substantially
changed from the general nature of the business in which the Parent Guarantor
and its Subsidiaries, taken as a whole, are engaged on the Execution Date as
described in the Memorandum.

-30-

--------------------------------------------------------------------------------

 

Section 10.4.   Economic Sanctions, Etc.  The Constituent Companies will not,
and will not permit any Controlled Entity to (a) become (including by virtue of
being owned or controlled by a Blocked Person), own or control a Blocked Person
or (b) directly or indirectly have any investment in or engage in any dealing or
transaction (including any investment, dealing or transaction involving the
proceeds of the Notes) with any Person if such investment, dealing or
transaction (1) would cause any Purchaser or holder or any affiliate of such
Purchaser or holder to be in violation of, or subject to sanctions under, any
law or regulation applicable to such Purchaser or holder, or (2) is prohibited
by or subject to sanctions under any U.S. Economic Sanctions Laws.

Section 10.5.   Permitted Liens; Negative Pledge.

(a)     The Constituent Companies will not, and will not permit any Subsidiary
to, create, assume, or incur any Lien (other than Permitted Liens) upon any of
its properties, assets, income or profits of any character whether now owned or
hereafter acquired if immediately prior to the creation, assumption or incurring
of such Lien, or immediately thereafter, a Default or Event of Default is or
would be in existence, including a Default or Event of Default resulting from a
violation of any of the covenants contained in Section 10.8.  In addition, the
Constituent Companies will not, and will not permit any Subsidiary to, secure
any Indebtedness outstanding under or pursuant to a Material Credit Facility
unless and until the Notes (and the Subsidiary Guaranty Agreement and any other
Guaranty delivered in connection therewith) shall concurrently be secured
equally and ratably with such Indebtedness pursuant to documentation reasonably
acceptable to the Required Holders in substance and in form, including, an
intercreditor agreement and opinions of counsel to the Constituent Companies
and/or any such Subsidiary, as the case may be, from counsel that is reasonably
acceptable to the Required Holders.

(b)     The Constituent Companies will not, and will not permit any Subsidiary
(other than an Excluded Subsidiary) to, enter into, assume or otherwise be bound
by any Negative Pledge except for (1) a Negative Pledge contained in any
agreement that evidences unsecured Indebtedness which contains restrictions on
encumbering assets that are substantially similar to or less restrictive than
those restrictions contained in this Agreement; (2) a Negative Pledge contained
in any agreement relating to assets to be sold where the restrictions on
encumbering assets relate only to such assets pending such sale; (3) a Negative
Pledge contained in a joint venture agreement applicable solely to the assets or
Equity Interests of such joint venture; and (4) a Negative Pledge contained in
any agreement (i) evidencing Secured Indebtedness of such Person, but only to
the extent that no Default or Event of Default is in existence at the time such
Secured Indebtedness is created, incurred or assumed, nor would result from the
creation, incurrence or assumption of such Secured Indebtedness (including a
Default or Event of Default resulting from a violation of any of the covenants
contained in Section 10.8), (ii) the Lien securing such Secured Indebtedness is
permitted to exist pursuant to this Agreement, and (iii) which prohibits the
creation of any other Lien on only the property securing such Secured
Indebtedness.

-31-

--------------------------------------------------------------------------------

 

Section 10.6.   Restrictions on Intercompany Transfers.  The Constituent
Companies will not, and will not permit any Subsidiary (other than an Excluded
Subsidiary) to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to: (a) pay dividends or make any other distribution on any of such
Subsidiary’s capital stock or other Equity Interests owned by the Parent
Guarantor or any other Subsidiary; (b) pay any Indebtedness owed to the Parent
Guarantor or any other Subsidiary; (c) make loans or advances to the Parent
Guarantor or any other Subsidiary; or (d) transfer any of its property or assets
to the Parent Guarantor or any other Subsidiary, in each case, other than: (1)
with respect to clauses (a) through (d), those encumbrances or restrictions (i)
contained in this Agreement or (ii) contained in any other agreement that
evidences unsecured Indebtedness containing encumbrances or restrictions on the
actions described above that are substantially similar to or less restrictive
than those contained in this Agreement, or (2) with respect to clause (d), (i)
restrictions contained in any agreement relating to the sale of a Subsidiary
(other than the Issuer) or the assets of a Subsidiary pending sale, or relating
to Secured Indebtedness secured by a Lien on assets that the Parent Guarantor or
any Subsidiary may create, incur, assume, or permit or suffer to exist under
this Agreement; provided that in any such case, the restrictions apply only to
the Subsidiary or the assets that are the subject of such sale or Lien, as the
case may be or (ii) customary provisions restricting assignment of any agreement
entered into by the Parent Guarantor or any Subsidiary in the ordinary course of
business.

Section 10.7.   Parent Guarantor Ownership and Management of the Issuer.  The
Constituent Companies will not permit the Parent Guarantor or a Wholly-Owned
Subsidiary of the Parent Guarantor to (a) cease to be the sole managing member
of the Issuer, (b) cease to have the sole and exclusive power to exercise all
management and control over the Issuer or (c) cease to own and control, directly
or indirectly, at least 80% of the outstanding Equity Interests of the Issuer.

Section 10.8.   Financial Covenants. 

(a)     Maximum Leverage Ratio.  The Parent Guarantor will not permit the
Leverage Ratio to exceed 6.50 to 1.00 at any time; provided,  however, that the
Parent Guarantor shall have the option, exercisable one time, to elect that the
Leverage Ratio may exceed 6.50 to 1.00 for a period (such period, the “Surge
Period”) of one or two consecutive fiscal quarters commencing with the fiscal
quarter during which the Issuer delivers the notice referred to below so long as
(1) the Issuer has delivered a written notice to each holder of the Notes that
the Parent Guarantor is exercising its option under this subsection (a) and (2)
the Leverage Ratio does not exceed 7.00 to 1.00 at any time during the Surge
Period.

(b)     Minimum Fixed Charge Coverage Ratio.  The Parent Guarantor will not
permit the ratio of (1) Adjusted EBITDA for the period of four consecutive
fiscal quarters most recently ended to (2) Fixed Charges for such period to be
less than 1.50 to 1.00 as of the last day of such period.

(c)     Maximum Unencumbered Leverage Ratio.  The Parent Guarantor will not
permit the ratio of (1) Unsecured Indebtedness of the Parent Guarantor and its

-32-

--------------------------------------------------------------------------------

 

Subsidiaries determined on a consolidated basis to (2) Unencumbered Asset Value
to exceed 0.60 to 1.00 at any time.

(d)     Maximum Secured Indebtedness Ratio.  The Parent Guarantor will not
permit the ratio of (1) Secured Indebtedness of the Parent Guarantor and its
Subsidiaries determined on a consolidated basis to (2) Total Asset Value to
exceed 0.45 to 1.00 at any time

(e)     Minimum Unencumbered Implied Debt Service Coverage Ratio. The Parent
Guarantor will not permit the ratio of (1) Adjusted NOI from Unencumbered
Properties to (2) Implied Debt Service for all Unsecured Indebtedness of the
Parent Guarantor and its Subsidiaries to be less than 1.20 to 1.00 at any time.

(f)     Minimum Unencumbered Property Requirements.  The Parent Guarantor will
not permit the number of Unencumbered Properties to be less than seven
Properties or the Unencumbered Asset Value to be less than $500,000,000.

Although it will not be a Default or an Event of Default if the Constituent
Companies fail to comply with any provision of Section 10 before or after giving
effect to the issuance of the Notes on a pro forma basis, if such a failure
occurs, then any of the Purchasers may elect not to purchase the Notes on the
date of Closing that is specified in Section 3.

SECTION 11.              EVENTS OF DEFAULT.

An “Event of Default” shall exist if any of the following conditions or events
shall occur and be continuing:

(a)     the Issuer defaults in the payment of any principal or Make-Whole
Amount, on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or

(b)     the Issuer defaults in the payment of any interest on any Note for more
than three Business Days after the same becomes due and payable; or

(c)     either Constituent Company defaults in the performance of or compliance
with any term contained in Section 7.1(d) or Section 10 or any Additional
Covenant; or

(d)     either Constituent Company or any Subsidiary Guarantor defaults in the
performance of or compliance with any term contained herein (other than those
referred to in Sections 11(a), (b) and (c)) or in the Subsidiary Guaranty
Agreement and such default is not remedied within 30 days after the earlier of
(1) a Responsible Officer of either Constituent Company obtaining actual
knowledge of such default and (2) either Constituent Company receiving written
notice of such default from any holder of a Note (any such written notice to be
identified as a “notice of default” and to refer specifically to this Section
11(d)); or

(e)     (1) any representation or warranty made in writing by or on behalf of
either Constituent Company or by any officer of either Constituent Company in
this

-33-

--------------------------------------------------------------------------------

 

Agreement or any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any material
respect on the date as of which made, or (2) any representation or warranty made
in writing by or on behalf of any Subsidiary Guarantor or by any officer of such
Subsidiary Guarantor in the Subsidiary Guaranty Agreement or any writing
furnished in connection with the Subsidiary Guaranty Agreement proves to have
been false or incorrect in any material respect on the date as of which made; or

(f)     (1) either Constituent Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is outstanding
in an aggregate principal amount of at least $25,000,000 (or, in the case of
Nonrecourse Indebtedness, $175,000,000) (or its equivalent in the relevant
currency of payment) beyond any period of grace provided with respect thereto,
or (2) either Constituent Company or any Subsidiary is in default in the
performance of or compliance with any term of any evidence of any Indebtedness
in an aggregate outstanding principal amount of at least $25,000,000 (or, in the
case of Nonrecourse Indebtedness, $175,000,000) (or its equivalent in the
relevant currency of payment) or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of such
default or condition such Indebtedness has become, or has (i) been declared due
and payable before its stated maturity or before its regularly scheduled dates
of payment or (ii) one or more Persons are entitled to declare such Indebtedness
to be due and payable before its stated maturity or before its regularly
scheduled dates of payment, provided that in the case of clause (ii), upon the
receipt by each holder of Notes of evidence that such default has been waived in
writing by the requisite Person(s) holding such Indebtedness, so long as the
Required Holders shall not have then exercised any of their rights or remedies
with respect to such default, such event shall automatically cease to constitute
an Event of Default hereunder or (3) as a consequence of the occurrence or
continuation of any event or condition (other than the passage of time or the
right of the holder of Indebtedness to convert such Indebtedness into equity
interests), (i) either Constituent Company or any Subsidiary has become
obligated to purchase or repay Indebtedness before its regular maturity or
before its regularly scheduled dates of payment in an aggregate outstanding
principal amount of at least $25,000,000 (or, in the case of Nonrecourse
Indebtedness, $175,000,000) (or its equivalent in the relevant currency of
payment), or (ii) one or more Persons have the right to require either
Constituent Company or any Subsidiary so to purchase or repay such Indebtedness,
provided that, upon the receipt by each holder of Notes of evidence that such
right has been waived in writing by the requisite Person(s) holding such
Indebtedness, so long as the Required Holders shall not have then exercised any
of their rights or remedies with respect to such right, such event shall
automatically cease to constitute an Event of Default hereunder; or

(g)     either Constituent Company, any Subsidiary Guarantor or any Significant
Subsidiary (1) is generally not paying, or admits in writing its inability to
pay, its debts as they become due, (2) files, or consents by answer or otherwise
to the filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization,

-34-

--------------------------------------------------------------------------------

 

moratorium or other similar law of any jurisdiction, (3) makes an assignment for
the benefit of its creditors, (4) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (5) is adjudicated as
insolvent or to be liquidated, or (6) takes corporate action for the purpose of
any of the foregoing; or

(h)     a court or other Governmental Authority of competent jurisdiction enters
an order appointing, without consent by either Constituent Company, any
Subsidiary Guarantor or any Significant Subsidiary, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of either Constituent Company, any Subsidiary Guarantor or any
Significant Subsidiary, or any such petition shall be filed against either
Constituent Company, any Subsidiary Guarantor or any Significant Subsidiary and
such petition shall not be dismissed within 60 days; or

(i)     any event occurs with respect either Constituent Company, any Subsidiary
Guarantor or any Significant Subsidiary which under the laws of any jurisdiction
is analogous to any of the events described in Section 11(g) or Section 11(h),
provided that the applicable grace period, if any, which shall apply shall be
the one applicable to the relevant proceeding which most closely corresponds to
the proceeding described in Section 11(g) or Section 11(h); or

(j)     one or more final judgments or orders for the payment of money
aggregating in excess of $25,000,000 (or its equivalent in the relevant currency
of payment), including any such final order enforcing a binding arbitration
decision, are rendered against one or more of the Constituent Companies and
their Subsidiaries and which judgments are not, within 60 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within 60 days after the expiration of such stay; or

(k)     if (1) any Plan shall fail to satisfy the minimum funding standards of
ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under
section 412 of the Code, (2) a notice of intent to terminate any Plan shall have
been or is reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Parent
Guarantor or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (3) there is any “amount of unfunded benefit liabilities” (within
the meaning of section 4001(a)(18) of ERISA) under one or more Plans, determined
in accordance with Title IV of ERISA, (4) the aggregate present value of accrued
benefit liabilities under all funded Non-U.S. Plans exceeds the aggregate
current value of the assets of such Non-U.S. Plans allocable to such
liabilities, (5) the Parent Guarantor or any ERISA Affiliate shall have incurred
or is reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, (6) the Parent Guarantor or any ERISA Affiliate

-35-

--------------------------------------------------------------------------------

 

withdraws from any Multiemployer Plan, (7) the Parent Guarantor or any
Subsidiary establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the liability
of the Parent Guarantor or any Subsidiary thereunder, (8) the Parent Guarantor
or any Subsidiary fails to administer or maintain a Non-U.S. Plan in compliance
with the requirements of any and all applicable laws, statutes, rules,
regulations or court orders or any Non-U.S. Plan is involuntarily terminated or
wound up, or (9) the Parent Guarantor or any Subsidiary becomes subject to the
imposition of a financial penalty (which for this purpose shall mean any tax,
penalty or other liability, whether by way of indemnity or otherwise) with
respect to one or more Non-U.S. Plans; and any such event or events described in
clauses (1) through (9) above, either individually or together with any other
such event or events, could reasonably be expected to have a Material Adverse
Effect.  As used in this Section 11(k), the terms “employee benefit plan” and
“employee welfare benefit plan” shall have the respective meanings assigned to
such terms in section 3 of ERISA; or

(l)     the Subsidiary Guaranty Agreement shall cease to be in full force and
effect with respect to any Subsidiary Guarantor, any Subsidiary Guarantor or any
Person acting on behalf of such Subsidiary Guarantor shall contest in any manner
the validity, binding nature or enforceability of the Subsidiary Guaranty
Agreement with respect to such Subsidiary Guarantor, or the obligations of any
Subsidiary Guarantor under the Subsidiary Guaranty Agreement are not or cease to
be legal, valid, binding and enforceable in accordance with the terms of the
Subsidiary Guaranty Agreement.

SECTION 12.               REMEDIES ON DEFAULT, ETC.

Section 12.1.   Acceleration. 

(a)     If an Event of Default with respect to either Constituent Company
described in Section 11(g), (h) or (i) (other than an Event of Default described
in clause (1) of Section 11(g) or described in clause (6) of Section 11(g) by
virtue of the fact that such clause encompasses clause (1) of Section 11(g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.

(b)     If any other Event of Default has occurred and is continuing, the
Required Holders may at any time at their option, by notice or notices to the
Issuer, declare all the Notes then outstanding to be immediately due and
payable.

(c)     If any Event of Default described in Section 11(a) or (b) has occurred
and is continuing, any holder or holders of Notes at the time outstanding
affected by such Event of Default may at any time, at its or their option, by
notice or notices to the Issuer, declare all the Notes held by it or them to be
immediately due and payable.

Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (1) all accrued and unpaid interest
thereon (including interest accrued thereon at the applicable Default Rate) and
(2) the Make-Whole Amount determined in respect of such principal amount, shall
all be immediately due and payable, in each and every case

-36-

--------------------------------------------------------------------------------

 

without presentment, demand, protest or further notice, all of which are hereby
waived.  The Issuer acknowledges, and the parties hereto agree, that each holder
of a Note has the right to maintain its investment in the Notes free from
repayment by the Issuer (except as herein specifically provided for) and that
the provision for payment of a Make-Whole Amount by the Issuer in the event that
the Notes are prepaid or are accelerated as a result of an Event of Default, is
intended to provide compensation for the deprivation of such right under such
circumstances.

Section 12.2.     Other Remedies.  If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note or the Subsidiary Guaranty Agreement, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law or otherwise.

Section 12.3.     Rescission.  At any time after any Notes have been declared
due and payable pursuant to Section 12.1(b) or (c), the Required Holders, by
written notice to the Issuer, may rescind and annul any such declaration and its
consequences if (a) the Issuer has paid all overdue interest on the Notes, all
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the applicable Default Rate, (b) neither the Issuer nor any other
Person shall have paid any amounts which have become due solely by reason of
such declaration, (c) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 18, and (d) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes.  No rescission and annulment under this Section 12.3 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.

Section 12.4.     No Waivers or Election of Remedies, Expenses, Etc.  No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder’s rights, powers or remedies.  No right, power or remedy conferred
by this Agreement, the Subsidiary Guaranty Agreement or any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute or
otherwise.  Without limiting the obligations of the Constituent Companies under
Section 16, the Issuer will pay to the holder of each Note on demand such
further amount as shall be sufficient to cover all costs and expenses of such
holder incurred in any enforcement or collection under this Section 12,
including reasonable attorneys’ fees, expenses and disbursements.

SECTION 13.                 GUARANTEE.

Section 13.1.     The Guarantee.  The Parent Guarantor hereby absolutely,
unconditionally and irrevocably guarantees, as primary obligor and not as
surety, to each holder of a Note (a) the full and punctual payment when due,
whether at maturity, by acceleration, by redemption or

-37-

--------------------------------------------------------------------------------

 

otherwise, of the principal of, Make-Whole Amount, if any, and interest
(including any interest accruing after the commencement of any proceeding in
bankruptcy and any additional interest that would accrue but for the
commencement of such proceeding) on the Notes and all other obligations of the
Issuer under this Agreement and (b) the full and prompt performance and
observance by the Issuer of each and all of the obligations, covenants and
agreements required to be performed or observed by the Issuer under the terms of
this Agreement and the Notes (all the foregoing being hereinafter collectively
called the “Obligations”).  The Parent Guarantor further agrees (to the extent
permitted by applicable law) that the Obligations may be extended or renewed, in
whole or in part, without notice or further assent from it, and that it shall
remain bound under this Section 13 notwithstanding any extension or renewal of
any Obligation.

Section 13.2.     Waiver of Defenses.  The Parent Guarantor waives presentation
to, demand of payment from and protest to the Issuer of any of the Obligations
and also waives notice of protest for nonpayment.  The Parent Guarantor waives
notice of any default under this Agreement, the Notes or the other
Obligations.  The obligation of the Parent Guarantor hereunder shall not be
affected by (a) the failure of any holder of a Note to assert any claim or
demand or to enforce any right or remedy against the Issuer or any other Person
(including any Subsidiary Guarantor) under this Agreement, the Notes, the
Subsidiary Guaranty Agreement or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of this Agreement, the Notes, the
Subsidiary Guaranty Agreement or any other agreement; (d) the acceptance of any
security or Guarantee (including the Subsidiary Guaranty Agreement) by any
holder of a Note for the Obligations or any of them; (e) the release of any
security or Guarantee (including the Subsidiary Guaranty Agreement) held by any
holder of a Note for the Obligations or any of them; (f) the release of the
Issuer, any Subsidiary Guarantor or any other Person from its liability with
respect to the Obligations; (g) any act or failure to act with regard to the
Obligations; (h) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets, marshalling of assets
and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization or arrangement under bankruptcy or similar
laws, composition with creditors or readjustment of, or other similar procedure
affecting the Issuer, any Subsidiary Guarantor or any other Person or any of the
assets of any of them, or any allegation or contest of the validity of this
Agreement, the Notes, the Subsidiary Guaranty Agreement or any other agreement
or the disaffirmance of this Agreement or the Notes or the Subsidiary Guaranty
Agreement or any other agreement in any such proceeding; (i) the invalidity or
unenforceability of this Agreement, the Notes, the Subsidiary Guaranty Agreement
or any other agreement; (j) the impossibility or illegality of performance on
the part of the Issuer, any Subsidiary Guarantor or any other Person of its
obligations under the Notes, this Agreement, the Subsidiary Guaranty Agreement
or any other instrument or agreement; (k) in respect of the Issuer, any
Subsidiary Guarantor or any other Person, any change of circumstances, whether
or not foreseen or foreseeable, whether or not imputable to the Issuer, any
Subsidiary Guarantor or any other Person, or other impossibility of performance
through fire, explosion, accident, labor disturbance, floods, droughts,
embargoes, wars (whether or not declared), acts of terrorists, civil commotions,
acts of God or the public enemy, delays or failures of suppliers or carriers,
inability to obtain materials, action of any Governmental Authority, change of
law or any other causes affecting performance, or other force majeure, whether
or not beyond the control of the Issuer, any Subsidiary Guarantor or any other
Person and whether or not of the kind above specified; or (l) any change in the
ownership of the Issuer. 

-38-

--------------------------------------------------------------------------------

 

It being understood that the specific enumeration of the above-mentioned acts,
failures or omissions shall not be deemed to exclude any other acts, failures or
omissions, though not specifically mentioned above, it being the purpose and
intent of this Section 13.2 that the obligations of the Parent Guarantor shall
be absolute, unconditional and irrevocable to the extent herein specified and
shall not be discharged, impaired or varied except by the payment of the
Obligations and then only to the extent of such payment.

Section 13.3.     Guaranty of Payment.  The Parent Guarantor further agrees that
the Guarantee herein constitutes a guaranty of payment when due (and not a
guaranty of collection) and waives any right to require that any resort be had
by any holder of a Note to any other Person or to any security held for payment
of the Obligations.

Section 13.4.     Guaranty Unconditional.  The obligations of the Parent
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than payment of the Obligations
in full), including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense of setoff, counterclaim,
recoupment or termination whatsoever or by reason of the invalidity, illegality
or unenforceability of the Obligations or otherwise.  Without limiting the
generality of the foregoing, the obligations of the Parent Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
holder of a Note to assert any claim or demand or to enforce any remedy under
this Agreement, the Notes, the Subsidiary Guaranty Agreement or any other
agreement, by any waiver or modification of any thereof, by any default, failure
or delay, willful or otherwise, in the performance of the Obligations, or by any
other act or thing or omission or delay to do any other act or thing which may
or might in any manner or to any extent vary the risk of the Parent Guarantor or
would otherwise operate as a discharge of the Parent Guarantor as a matter of
law or equity.

Section 13.5.     Reinstatement.  The Parent Guarantor further agrees that the
Guarantee herein 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 by any holder of a Note upon the
bankruptcy or reorganization of the Issuer or otherwise.

Section 13.6.     Payment on Demand.  In furtherance of the foregoing and not in
limitation of any other right which any holder of a Note has at law or in equity
against the Parent Guarantor by virtue hereof, upon the failure of the Issuer to
pay any of the Obligations when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, the Parent Guarantor
hereby promises to and shall, upon receipt of written demand by any holder of a
Note, forthwith pay, or cause to be paid, in cash, to the holders an amount
equal to the sum of (a) the unpaid amount of such Obligations then due and owing
and (b) accrued and unpaid interest on such Obligations then due and owing (but
only to the extent not prohibited by applicable law).

The Parent Guarantor acknowledges and agrees that repeated and successive
demands may be made and recoveries may be had hereunder as and when, from time
to time, the Issuer shall default under the terms of a Note or this Agreement
and that notwithstanding recovery hereunder for or in respect of any given
Default or Event of Default, the Guarantee contained in this Section

-39-

--------------------------------------------------------------------------------

 

13 shall remain in full force and effect and shall apply to each and every
subsequent Default or Event of Default. 

Section 13.7.     Stay of Acceleration.  The Parent Guarantor further agrees
that, as between itself, on the one hand, and the holders of the Notes, on the
other hand, (a) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in this Agreement for the purposes of the Guarantee
herein, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed hereby and (b) in the
event of any such declaration of acceleration of such Obligations, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Parent Guarantor for the purposes of this Guarantee.

Section 13.8.     No Subrogation.  Notwithstanding any payment or payments made
by the Parent Guarantor hereunder, the Parent Guarantor shall not be entitled to
be subrogated to any of the rights of any holder of a Note against the Issuer or
any collateral security or Guarantee or right of offset held by any holder for
the payment of the Obligations, nor shall the Parent Guarantor seek or be
entitled to seek any contribution or reimbursement from the Issuer or any
Subsidiary Guarantor in respect of payments made by the Parent Guarantor
hereunder, until all amounts owing to the holders of the Notes by the Issuer on
account of the Obligations are paid in full.  If any amount shall be paid to the
Parent Guarantor on account of such subrogation rights at any time when all of
the Obligations shall not have been paid in full, such amount shall be held by
the Parent Guarantor in trust for the holders of the Notes, segregated from
other funds of the Parent Guarantor, and shall, forthwith upon receipt by the
Parent Guarantor, be turned over to the holders of the Notes in the exact form
received by the Parent Guarantor (duly indorsed by the Parent Guarantor to the
holders of the Notes, if required), to be applied against the Obligations.

Section 13.9.     Marshalling.  No holder of a Note shall be under any
obligation: (a) to marshal any assets in favor of the Parent Guarantor or in
payment of any or all of the liabilities of the Issuer under or in respect of
the Notes and this Agreement or the obligations of the Parent Guarantor
hereunder or (b) to pursue any other remedy that the Parent Guarantor may or may
not be able to pursue itself and that may lighten the Parent Guarantor’s burden,
any right to which the Parent Guarantor hereby expressly waives.

Section 13.10.   Transfer of Notes.  All rights of any holder of a Note under
this Section 13 shall be considered to be transferred or assigned at any time or
from time to time upon the transfer of any Note held by such holder whether with
or without the consent of or notice to the Parent Guarantor under this Section
13 or to the Issuer.

Section 13.11.   Consideration.  The Parent Guarantor has received, or shall
receive, direct or indirect benefits from the making of this Guarantee.

SECTION 14.                 REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

Section 14.1.     Registration of Notes.  The Issuer shall keep at its principal
executive office a register for the registration and registration of transfers
of Notes.  The name and address of each holder of one or more Notes, each
transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register.  If any holder of one or more

-40-

--------------------------------------------------------------------------------

 

Notes is a nominee, then (a) the name and address of the beneficial owner of
such Note or Notes shall also be registered in such register as an owner and
holder thereof and (b) at any such beneficial owner’s option, either such
beneficial owner or its nominee may execute any amendment, waiver or consent
pursuant to this Agreement.  Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes hereof, and the
Issuer shall not be affected by any notice or knowledge to the contrary.  The
Issuer shall give to any holder of a Note that is an Institutional Investor
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.

Section 14.2.     Transfer and Exchange of Notes.  Upon surrender of any Note to
the Issuer at the address and to the attention of the designated officer (all as
specified in Section 19(c)), for registration of transfer or exchange (and in
the case of a surrender for registration of transfer accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
such holder’s attorney duly authorized in writing and accompanied by the
relevant name, address and other information for notices of each transferee of
such Note or part thereof), within 10 Business Days thereafter, the Issuer shall
execute and deliver, at the Issuer’s expense (except as provided below), one or
more new Notes of the same series (as requested by the holder thereof) in
exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note.  Each such new Note shall be payable
to such Person as such holder may request and shall be substantially in the form
of Schedule 1(a) or Schedule 1(b), as applicable.  Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon.  The Issuer may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes.  Notes shall not be transferred (a) to any
Competitor, provided that the limitation contained in this clause (a) shall not
apply during any period when an Event of Default has occurred and is continuing,
and (b) in denominations of less than $100,000, provided that if necessary to
enable the registration of transfer by a holder of its entire holding of Notes
of a series, one Note of such series may be in a denomination of less than
$100,000.  Any transferee, by its acceptance of a Note registered in its name
(or the name of its nominee), shall be deemed to have made the representation
set forth in Section 6.3.

Section 14.3.     Replacement of Notes.  Upon receipt by the Issuer at the
address and to the attention of the designated officer (all as specified in
Section 19(3)) of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any Note (which evidence shall be,
in the case of an Institutional Investor, notice from such Institutional
Investor of such ownership and such loss, theft, destruction or mutilation), and

(a)        in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original Purchaser or another holder of a Note with a minimum net worth
of at least $100,000,000 or a Qualified Institutional Buyer, such Person’s own
unsecured agreement of indemnity shall be deemed to be satisfactory), or

(b)        in the case of mutilation, upon surrender and cancellation thereof,

-41-

--------------------------------------------------------------------------------

 

within 10 Business Days thereafter, the Issuer at its own expense shall execute
and deliver, in lieu thereof, a new Note of the same series, dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid thereon.

SECTION 15.                 PAYMENTS ON NOTES.

Section 15.1.     Place of Payment.  Subject to Section 15.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York, New York at the principal office of Bank of
America, N.A. in such jurisdiction.  The Issuer may at any time, by notice to
each holder of a Note, change the place of payment of the Notes so long as such
place of payment shall be either the principal office of the Issuer in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.

Section 15.2.     Payment by Wire Transfer.  So long as any Purchaser or its
nominee shall be the holder of any Note, and notwithstanding anything contained
in Section 15.1 or in such Note to the contrary, the Issuer will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, interest and
all other amounts becoming due hereunder by the method and at the address
specified for such purpose below such Purchaser’s name in the Purchaser
Schedule, or by such other method or at such other address as such Purchaser
shall have from time to time specified to the Issuer in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Issuer made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, such Purchaser shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Issuer at its principal executive office
or at the place of payment most recently designated by the Issuer pursuant to
Section 15.1.  Prior to any sale or other disposition of any Note held by a
Purchaser or its nominee, such Purchaser will, at its election, either endorse
thereon the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender such Note to the Issuer in exchange for a new
Note or Notes pursuant to Section 14.2.  The Issuer will afford the benefits of
this Section 15.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by a Purchaser under this Agreement and that
has made the same agreement relating to such Note as the Purchasers have made in
this Section 15.2.

Section 15.3.    FATCA Information.  By acceptance of any Note, the holder of
such Note agrees that such holder will with reasonable promptness duly complete
and deliver to the Issuer, or to such other Person as may be reasonably
requested by the Issuer, from time to time (a) in the case of any such holder
that is a United States Person, such holder’s United States tax identification
number or other forms reasonably requested by the Issuer necessary to establish
such holder’s status as a United States Person under FATCA and as may otherwise
be necessary for the Issuer to comply with its obligations under FATCA and (b)
in the case of any such holder that is not a United States Person, such
documentation prescribed by applicable law (including as prescribed by section
1471(b)(3)(C)(i) of the Code) and such additional documentation as may be
necessary for the Issuer to comply with its obligations under FATCA and to
determine that such holder has complied with such holder’s obligations under
FATCA or to determine the amount, if any, to deduct and withhold from any such
payment made to such holder.  Nothing in this Section 15.3 shall require any
holder to provide information that is confidential or

-42-

--------------------------------------------------------------------------------

 

proprietary to such holder unless the Issuer is required to obtain such
information under FATCA and, in such event, the Issuer shall treat any such
information it receives as confidential.

SECTION 16.                  EXPENSES, ETC.

Section 16.1.     Transaction Expenses.  Whether or not the transactions
contemplated hereby are consummated, the Constituent Companies will pay all
costs and expenses (including reasonable attorneys’ fees of a special counsel
and, if reasonably required by the Required Holders, local or other counsel)
incurred by the Purchasers and each other holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement, the Subsidiary Guaranty Agreement or the
Notes (whether or not such amendment, waiver or consent becomes effective),
including: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this
Agreement, the Subsidiary Guaranty Agreement or the Notes or in responding to
any subpoena or other legal process or informal investigative demand issued in
connection with this Agreement, the Subsidiary Guaranty Agreement or the Notes,
or by reason of being a holder of any Note, (b) the costs and the expenses,
including financial advisors’ fees, incurred in connection with the insolvency
or bankruptcy of either Constituent Company or any Subsidiary or in connection
with any work-out or restructuring of the transactions contemplated hereby and
by the Notes and the Subsidiary Guaranty Agreement and (c) the costs and
expenses incurred in connection with the initial filing of this Agreement and
all related documents and financial information with the SVO provided, that such
costs and expenses under this clause (c) shall not exceed $6,500.  If required
by the NAIC, the Issuer shall obtain and maintain at its own cost and expense a
Legal Entity Identifier (LEI).

The Constituent Companies will pay, and will save each Purchaser and each other
holder of a Note harmless from, (1) all claims in respect of any fees, costs or
expenses, if any, of brokers and finders (other than those, if any, retained by
a Purchaser or other holder in connection with its purchase of the Notes), (2)
any and all wire transfer fees that any bank or other financial institution
deducts from any payment under such Note to such holder or otherwise charges to
a holder of a Note with respect to a payment under such Note and (3) any
judgment, liability, claim, order, decree, fine, penalty, cost, fee, expense
(including reasonable attorneys’ fees and expenses) or obligation resulting from
the consummation of the transactions contemplated hereby, including the use of
the proceeds of the Notes by the Issuer, provided that the Constituent Companies
shall have no obligation under this clause (3) to any Purchaser or holder to the
extent resulting from the bad faith, gross negligence or willful misconduct of
such Purchaser or holder as determined by a court of competent jurisdiction by
final and nonappealable judgment.

Section 16.2.     Certain Taxes.  The Constituent Companies agree to pay all
stamp, documentary or similar taxes or fees which may be payable in respect of
the execution and delivery or the enforcement of this Agreement or the
Subsidiary Guaranty Agreement or the execution and delivery (but not the
transfer) or the enforcement of any of the Notes in the United States or any
other jurisdiction where either Constituent Company or any Subsidiary Guarantor
has assets or of any amendment of, or waiver or consent under or with respect
to, this Agreement or the Subsidiary Guaranty Agreement or of any of the Notes,
and to pay any value added tax due and payable in respect of reimbursement of
costs and expenses by the Constituent

-43-

--------------------------------------------------------------------------------

 

Companies pursuant to this Section 16, and will save each holder of a Note to
the extent permitted by applicable law harmless against any loss or liability
resulting from nonpayment or delay in payment of any such tax or fee required to
be paid by the Constituent Companies hereunder.

Section 16.3.     Survival.  The obligations of the Constituent Companies under
this Section 16 will survive the payment or transfer of any Note, the
enforcement, amendment or waiver of any provision of this Agreement, the
Subsidiary Guaranty Agreement or the Notes, and the termination of this
Agreement.

SECTION 17.                 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.

All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any subsequent holder of a Note, regardless
of any investigation made at any time by or on behalf of such Purchaser or any
other holder of a Note.  All statements contained in any certificate or other
instrument delivered by or on behalf of either Constituent Company pursuant to
this Agreement shall be deemed representations and warranties of such
Constituent Company under this Agreement.  Subject to the preceding sentence,
this Agreement, the Notes and the Subsidiary Guaranty Agreement embody the
entire agreement and understanding between each Purchaser and the Constituent
Companies and supersede all prior agreements and understandings relating to the
subject matter hereof.

SECTION 18.                 AMENDMENT AND WAIVER.

Section 18.1.     Requirements.  This Agreement and the Notes may be amended,
and the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), only with the written consent of the
Constituent Companies and the Required Holders, except that:

(a)       no amendment or waiver of any of Sections 1, 2, 3, 4, 5, 6 or 22
hereof, or any defined term (as it is used therein), will be effective as to any
Purchaser unless consented to by such Purchaser in writing; and

(b)       no amendment or waiver may, without the written consent of each
Purchaser and the holder of each Note at the time outstanding, (1) subject to
Section 12 relating to acceleration or rescission, change the amount or time of
any prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of (i) interest on the Notes or (ii) the
Make-Whole Amount, (2) change the percentage of the principal amount of the
Notes the holders of which are required to consent to any amendment or waiver or
the principal amount of the Notes that the Purchasers are to purchase pursuant
to Section 2 upon the satisfaction of the conditions to Closing that appear in
Section 4 or (3) amend any of Sections 8 (except as set forth in the second
sentence of Section 8.2), 11(a), 11(b), 12, 13, 18 or 21.

-44-

--------------------------------------------------------------------------------

 

Section 18.2.   Solicitation of Holders of Notes.

(a)     Solicitation. The Constituent Companies will provide each Purchaser and
each holder of a Note with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such Purchaser or holder to make
an informed and considered decision with respect to any proposed amendment,
waiver or consent in respect of any of the provisions hereof or of the Notes or
the Subsidiary Guaranty Agreement.  The Constituent Companies will deliver
executed or true and correct copies of each amendment, waiver or consent
effected pursuant to this Section 18 or the Subsidiary Guaranty Agreement to
each Purchaser and each holder of a Note promptly following the date on which it
is executed and delivered by, or receives the consent or approval of, the
requisite Purchasers or holders of Notes.

(b)     Payment. The Constituent Companies will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security or provide other
credit support, to any Purchaser or any holder of a Note as consideration for or
as an inducement to the entering into by such Purchaser or holder of any waiver
or amendment of any of the terms and provisions hereof or of the Subsidiary
Guaranty Agreement or any Note unless such remuneration is concurrently paid, or
security is concurrently granted or other credit support concurrently provided,
on the same terms, ratably to each holder of a Note even if such Purchaser or
holder did not consent to such waiver or amendment.

(c)     Consent in Contemplation of Transfer.  Any consent given pursuant to
this Section 18 or the Subsidiary Guaranty Agreement by a holder of a Note that
has transferred or has agreed to transfer its Note to (1) a Constituent Company,
(2) any Subsidiary or any other Affiliate or (3) any other Person in connection
with, or in anticipation of, such other Person acquiring, making a tender offer
for or merging with either Constituent Company and/or any of its Affiliates in
each case in connection with such consent, shall be void and of no force or
effect except solely as to such holder, and any amendments effected or waivers
granted or to be effected or granted that would not have been or would not be so
effected or granted but for such consent (and the consents of all other holders
of Notes that were acquired under the same or similar conditions) shall be void
and of no force or effect except solely as to such holder.

Section 18.3.   Binding Effect, Etc.  Any amendment or waiver consented to as
provided in this Section 18 or the Subsidiary Guaranty Agreement applies equally
to all Purchasers and holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Constituent Companies without regard to
whether such Note has been marked to indicate such amendment or waiver.  No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon.  No course of dealing between either Constituent
Company and any Purchaser or any holder of a Note and no delay in exercising any
rights hereunder or under any Note or the Subsidiary Guaranty Agreement shall
operate as a waiver of any rights of any Purchaser or any holder of such Note.

-45-

--------------------------------------------------------------------------------

 

Section 18.4.   Notes Held by the Constituent Companies, Etc.   Solely for the
purpose of determining whether the holders of the requisite percentage of the
aggregate principal amount of Notes then outstanding approved or consented to
any amendment, waiver or consent to be given under this Agreement, the
Subsidiary Guaranty Agreement or the Notes, or have directed the taking of any
action provided herein or in the Subsidiary Guaranty Agreement or the Notes to
be taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by a Constituent Company or any of its Affiliates shall be
deemed not to be outstanding.

SECTION 19.                NOTICES.

Except to the extent otherwise provided in Section 7.4, all notices and
communications provided for hereunder shall be in writing and sent (a) by
telecopy if the sender on the same day sends a confirming copy of such notice by
an internationally recognized overnight delivery service (charges prepaid), (b)
by registered or certified mail with return receipt requested (postage prepaid),
or (c) by an internationally recognized overnight delivery service (charges
prepaid).  Any such notice must be sent:

(1)     if to any Purchaser or its nominee, to such Purchaser or nominee at the
address specified for such communications in the Purchaser Schedule, or at such
other address as such Purchaser or nominee shall have specified to the
Constituent Companies in writing,

(2)     if to any other holder of any Note, to such holder at such address as
such other holder shall have specified to the Constituent Companies in writing,
or

(3)     if to either Constituent Company, to such Constituent Company at its
address set forth at the beginning hereof to the attention of Bryan Giglia, or
at such other address as such Constituent Company shall have specified to the
Purchaser and holders of the Notes in writing.

Notices under this Section 19 will be deemed given only when actually received.

SECTION 20.                 REPRODUCTION OF DOCUMENTS.

This Agreement and all documents relating hereto, including (a) consents,
waivers and modifications that may hereafter be executed, (b) documents received
by any Purchaser on the Execution Date or at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to any Purchaser, may be reproduced by such
Purchaser by any photographic, photostatic, electronic, digital, or other
similar process and such Purchaser may destroy any original document so
reproduced.  Each Constituent Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such Purchaser in the regular course of business) and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.  This Section 20 shall not prohibit either
Constituent Company or any other Purchaser or holder of Notes from contesting
any such reproduction to the same extent that it

-46-

--------------------------------------------------------------------------------

 

could contest the original, or from introducing evidence to demonstrate the
inaccuracy of any such reproduction.

SECTION 21.                 CONFIDENTIAL INFORMATION.

For the purposes of this Section 21, “Confidential Information” means
information delivered to any Purchaser by or on behalf of a Constituent Company
or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
such Purchaser as being confidential information of such Constituent Company or
such Subsidiary, provided that such term does not include information that (a)
was publicly known or otherwise known to such Purchaser prior to the time of
such disclosure, (b) subsequently becomes publicly known through no act or
omission by such Purchaser or any Person acting on such Purchaser’s behalf, (c)
otherwise becomes known to such Purchaser other than through disclosure by a
Constituent Company or any Subsidiary or (d) constitutes financial statements
delivered to such Purchaser under Section 7.1 that are otherwise publicly
available.  Each Purchaser will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by such Purchaser
in good faith to protect confidential information of third parties delivered to
such Purchaser, provided that such Purchaser may deliver or disclose
Confidential Information to (1) its directors, officers, employees, agents,
attorneys, trustees and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by its Notes), (2)
its auditors, financial advisors and other professional advisors who agree to
hold confidential the Confidential Information substantially in accordance with
this Section 21, (3) any other holder of any Note, (4) any Institutional
Investor to which it sells or offers to sell such Note or any part thereof or
any participation therein (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by this Section 21), (5)
any Person from which it offers to purchase any Security of a Constituent
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by this Section 21), (6) any federal or
state regulatory authority having jurisdiction over such Purchaser, (7) the NAIC
or the SVO or, in each case, any similar organization, or any nationally
recognized rating agency that requires access to information about such
Purchaser’s investment portfolio, or (8) any other Person to which such delivery
or disclosure may be necessary or appropriate (i) to effect compliance with any
law, rule, regulation or order applicable to such Purchaser, (ii) in response to
any subpoena or other legal process, (iii) in connection with any litigation to
which such Purchaser is a party or (iv) if an Event of Default has occurred and
is continuing, to the extent such Purchaser may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under such Purchaser’s Notes, this
Agreement or the Subsidiary Guaranty Agreement.  Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 21 as though it were a party to this
Agreement.  On reasonable request by a Constituent Company in connection with
the delivery to any holder of a Note of information required to be delivered to
such holder under this Agreement or requested by such holder (other than a
holder that is a party to this Agreement or its nominee), such holder will enter
into an agreement with the Constituent Companies embodying this Section 21.

In the event that as a condition to receiving access to information relating to
a Constituent Company or its Subsidiaries in connection with the transactions
contemplated by or otherwise

-47-

--------------------------------------------------------------------------------

 

pursuant to this Agreement, any Purchaser or holder of a Note is required to
agree to a confidentiality undertaking (whether through IntraLinks, another
secure website, a secure virtual workspace or otherwise) which is different from
this Section 21, this Section 21 shall not be amended thereby and, as between
such Purchaser or such holder and such Constituent Company, this Section 21
shall supersede any such other confidentiality undertaking.

SECTION 22.                 SUBSTITUTION OF PURCHASER.

Each Purchaser shall have the right to substitute any one of its Affiliates or
another Purchaser or any one of such other Purchaser’s Affiliates (a “Substitute
Purchaser”) as the purchaser of the Notes that it has agreed to purchase
hereunder, by written notice to the Constituent Companies, which notice shall be
signed by both such Purchaser and such Substitute Purchaser, shall contain such
Substitute Purchaser’s agreement to be bound by this Agreement and shall contain
a confirmation by such Substitute Purchaser of the accuracy with respect to it
of the representations set forth in Section 6.  Upon receipt of such notice, any
reference to such Purchaser in this Agreement (other than in this Section 22),
shall be deemed to refer to such Substitute Purchaser in lieu of such original
Purchaser.  In the event that such Substitute Purchaser is so substituted as a
Purchaser hereunder and such Substitute Purchaser thereafter transfers to such
original Purchaser all of the Notes then held by such Substitute Purchaser, upon
receipt by the Constituent Companies of notice of such transfer, any reference
to such Substitute Purchaser as a “Purchaser” in this Agreement (other than in
this Section 22), shall no longer be deemed to refer to such Substitute
Purchaser, but shall refer to such original Purchaser, and such original
Purchaser shall again have all the rights of an original holder of the Notes
under this Agreement.

SECTION 23.                 MISCELLANEOUS.

Section 23.1.    Successors and Assigns.  All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including
any subsequent holder of a Note) whether so expressed or not, except that,
subject to Section 10.2, neither Constituent Company may assign or otherwise
transfer any of its rights or obligations hereunder or under the Notes without
the prior written consent of each holder.  Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the parties
hereto and their respective successors and assigns permitted hereby) any legal
or equitable right, remedy or claim under or by reason of this Agreement.

Section 23.2.    Accounting Terms.  All accounting terms used herein which are
not expressly defined in this Agreement have the meanings respectively given to
them in accordance with GAAP.  Except as otherwise specifically provided herein,
(a) all computations made pursuant to this Agreement shall be made in accordance
with GAAP, and (b) all financial statements shall be prepared in accordance with
GAAP.  For purposes of determining compliance with this Agreement (including
Section 9, Section 10 and the definition of “Indebtedness”), any election by the
Parent Guarantor to measure any financial liability using fair value (as
permitted by Financial Accounting Standards Board Accounting Standards
Codification Topic No. 825-10-25 – Fair Value Option, International Accounting
Standard 39 –

-48-

--------------------------------------------------------------------------------

 

Financial Instruments: Recognition and Measurement or any similar accounting
standard) shall be disregarded and such determination shall be made as if such
election had not been made.

Section 23.3.     Severability.  Any provision of this Agreement 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 (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

Section 23.4.     Construction, Etc.  Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant.  Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.

Defined terms herein shall apply equally to the singular and plural forms of the
terms defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation.”  The word “will” shall be construed to have the same meaning and
effect as the word “shall.”  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein)
and, for purposes of the Notes, shall also include any such notes issued in
substitution therefor pursuant to Section 14, (b) subject to Section 23.1, any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to Sections, Schedules and Exhibits shall be construed to refer to Sections of,
and Schedules and Exhibits to, this Agreement, and (e) any reference to any law
or regulation herein shall, unless otherwise specified, refer to such law or
regulation as amended, modified or supplemented from time to time.

Section 23.5.     Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.  Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.

Section 23.6.     Governing Law.  This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the law
of the State of New York excluding choice-of-law principles of the law of such
State that would permit the application of the laws of a jurisdiction other than
such State.

-49-

--------------------------------------------------------------------------------

 

Section 23.7.   Jurisdiction and Process; Waiver of Jury Trial.  

(a)     Each Constituent Company irrevocably submits to the non-exclusive
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Agreement or the Notes.  To the fullest extent permitted
by applicable law, each Constituent Company irrevocably waives and agrees not to
assert, by way of motion, as a defense or otherwise, any claim that it is not
subject to the jurisdiction of any such court, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.

(b)     Each Constituent Company agrees, to the fullest extent permitted by
applicable law, that a final judgment in any suit, action or proceeding of the
nature referred to in Section 23.7(a) brought in any such court shall be
conclusive and binding upon it subject to rights of appeal, as the case may be,
and may be enforced in the courts of the United States or the State of New York
(or any other courts to the jurisdiction of which it or any of its assets is or
may be subject) by a suit upon such judgment.

(c)     Each Constituent Company consents to process being served by or on
behalf of any holder of Notes in any suit, action or proceeding of the nature
referred to in Section 23.7(a) by mailing a copy thereof by registered,
certified, priority or express mail (or any substantially similar form of mail),
postage prepaid, return receipt or delivery confirmation requested, to it at its
address specified in Section 19 or at such other address of which such holder
shall then have been notified pursuant to said Section.  Each Constituent
Company agrees that such service upon receipt (1) shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding and (2) shall, to the fullest extent permitted by applicable law, be
taken and held to be valid personal service upon and personal delivery to
it.  Notices hereunder shall be conclusively presumed received as evidenced by a
delivery receipt furnished by the United States Postal Service or any reputable
commercial delivery service.

(d)     Nothing in this Section 23.7 shall affect the right of any holder of a
Note to serve process in any manner permitted by law, or limit any right that
the holders of any of the Notes may have to bring proceedings against a
Constituent Company in the courts of any appropriate jurisdiction or to enforce
in any lawful manner a judgment obtained in one jurisdiction in any other
jurisdiction.

(e)     The parties hereto hereby waive trial by jury in any action brought on
or with respect to this Agreement, the Notes or any other document executed in
connection herewith or therewith.

*    *    *    *    *

-50-

--------------------------------------------------------------------------------

 

If you are in agreement with the foregoing, please sign the form of agreement on
a counterpart of this Agreement and return it to the Constituent Companies,
whereupon this Agreement shall become a binding agreement between you and the
Constituent Companies.

 

 

 

 

Very truly yours,

 

 

 

SUNSTONE HOTEL PARTNERSHIP, LLC

 

 

 

 

 

By

/s/ Bryan A. Giglia

 

 

Its   Chief Financial Officer

 

 

 

 

 

SUNSTONE HOTEL INVESTORS, INC.

 

 

 

 

 

By

/s/ Bryan A. Giglia

 

 

Its   Chief Financial Officer

 

-51-

--------------------------------------------------------------------------------

 

This Agreement is hereby

accepted and agreed to as

of the date hereof.

[ADD PURCHASER SIGNATURE BLOCKS]

 

 

-52-

--------------------------------------------------------------------------------

 

DEFINED TERMS

As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:

“Additional Covenant” is defined in Section 9.10.

“Additional Note Purchase Agreement” means any note purchase agreement or
similar agreement entered into by the Issuer and/or the Parent Guarantor after
the Execution Date in connection with a private placement debt financing.

“Adjusted EBITDA” means, for any given period, (a) EBITDA of the Parent
Guarantor and its Subsidiaries determined on a consolidated basis for such
period, minus (b) FF&E Reserves for such period.

“Adjusted NOI” means, for any Property and for any period (or if no applicable
period is stated, the period of 12 consecutive fiscal months then ended), Net
Operating Income for such Property for such period minus an imputed franchise
fee in the amount of 4.00% of the gross revenues for such Property for such
period; provided,  however, for purposes of this definition, no imputed
franchise fee shall be deducted from Net Operating Income with respect to any
Property that is not subject to a Franchise Agreement.

“Affiliate” means, at any time, and with respect to any Person, any other Person
that at such time directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, such first
Person.  Unless the context otherwise clearly requires, any reference to an
“Affiliate” is a reference to an Affiliate of the Parent Guarantor.

“Agreement” means this Note and Guarantee Agreement, including all Schedules and
Exhibits attached to this Agreement.

“Anti-Corruption Laws” means any law or regulation in a U.S. or any non-U.S.
jurisdiction regarding bribery or any other corrupt activity, including the U.S.
Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.

“Anti-Money Laundering Laws” means any law or regulation in a U.S. or any
non-U.S. jurisdiction regarding money laundering, drug trafficking,
terrorist-related activities or other money laundering predicate crimes,
including the Currency and Foreign Transactions Reporting Act of 1970 (otherwise
known as the Bank Secrecy Act) and the USA PATRIOT Act.

“Bank Credit Agreement” means that certain Credit Agreement dated as of April 2,
2015 by and among the Constituent Companies, the financial institutions party
thereto and Wells Fargo Bank, National Association, as administrative agent,
Bank of America, N.A. and JPMorgan Chase Bank, N.A., as syndication agents, and
Citibank, N.A., PNC Bank, National Association, and U.S. Bank National
Association, as documentation agents, including any renewals, extensions,
amendments, supplements, restatements, replacements or refinancings thereof;
provided that if no Bank Credit Agreement then exists, the largest Material
Credit Facility then in effect shall be deemed to be the Bank Credit Agreement.

SCHEDULE A
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

“Blocked Person” means (a) a Person whose name appears on the list of Specially
Designated Nationals and Blocked Persons published by OFAC, (b) a Person,
entity, organization, country or regime that is blocked or a target of sanctions
that have been imposed under U.S. Economic Sanctions Laws or (c) a Person that
is an agent, department or instrumentality of, or is otherwise beneficially
owned by, controlled by or acting on behalf of, directly or indirectly, any
Person, entity, organization, country or regime described in clause (a) or (b).

“Boston Park Plaza Hotel” means the Boston Park Plaza Hotel located in Boston,
Massachusetts.

“Business Day” means (a) for the purposes of Section 8.6 only, any day other
than a Saturday, a Sunday or a day on which commercial banks in New York City
are required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in Los Angeles, California or New York, New York are
required or authorized to be closed.

“Capitalization Rate” means (a) 7.25% for (1) upscale select-service,
upper-upscale or above full-service Properties developed with hotels and located
within the central business districts of Boston, Massachusetts; Chicago,
Illinois; Manhattan, New York City; Washington, D.C.; and San Francisco,
California and (2) the Wailea Beach Marriott or (b) 8.00% for all other
Properties, provided that, if the Bank Credit Agreement provides for a
“capitalization rate” for the Property or types of Properties described in
clause (a) or clause (b) that is higher or lower than the rate set forth in such
clause, then the applicable rate for such Property or types of Properties shall
be such higher or lower rate, provided,  however, that in no event may the
capitalization rate used for the Property or types of Properties described in
clause (a) or clause (b) be less than 6.25% and 7.00%, respectively.

“Capitalized Lease Obligations” means obligations under a lease (or other
arrangement conveying the right to use property) to pay rent or other amounts
that are required to be capitalized for financial reporting purposes in
accordance with GAAP.  The amount of a Capitalized Lease Obligation is the
capitalized amount of such obligation as would be required to be reflected on a
balance sheet of the applicable Person prepared in accordance with GAAP as of
the applicable date.  The obligations of Sunstone St. Clair, LLC, a Delaware
limited liability company and Subsidiary of the Issuer, under the Hyatt Chicago
Capital Lease shall not constitute Capitalized Lease
Obligations.  Notwithstanding the reclassification of ground or building leases
as capitalized leases or lease liabilities under FASB ASC 842, obligations of
the Company or any Subsidiary under a ground or building lease shall not
constitute Capitalized Lease Obligations so long as the lease payments under
such ground or building lease are deducted from EBITDA.

“Change in Control” is defined in Section 8.7(f).

“Change in Control Proposed Prepayment Date” defined in Section 8.7(b).

“Closing” is defined in Section 3.

“Code” means the Internal Revenue Code of 1986 and the rules and regulations
promulgated thereunder from time to time.

A-2

--------------------------------------------------------------------------------

 

“Competitor” means any Person that is a real estate investment trust, real
property fund or a listed property trust; provided, however, that the term
“Competitor” shall exclude any Person that is an Institutional Investor and
that, but for this proviso, would fall within the definition of “Competitor”
solely through the holding of passive investments in a Competitor.

“Confidential Information” is defined in Section 21.

“Constituent Companies” and “Constituent Company” are defined in the first
paragraph of this Agreement.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms “Controlled” and “Controlling” shall have meanings correlative to the
foregoing.

“Controlled Entity” means (a) any of the Subsidiaries of the Parent Guarantor
and any of their or the Parent Guarantor’s respective Controlled Affiliates and
(b) if the Parent Guarantor has a parent company, such parent company and its
Controlled Affiliates.

“Credit Rating” means the rating assigned by S&P or Moody’s to the senior
unsecured long term Indebtedness of a Person.

“Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

“Default Rate” means, with respect to any Note, that rate of interest per annum
that is the greater of (a) 2.00% above the rate of interest stated in clause (a)
of the first paragraph of such Note or (b) 2.00% over the rate of interest
publicly announced by Bank of America, N.A. in New York, New York as its “base”
or “prime” rate.

“Derivatives Contract” means a “swap agreement” as defined in Section 101 of the
United States Bankruptcy Code of 1978.

“Derivatives Termination Value” means, in respect of any one or more Derivatives
Contracts, after taking into account the effect of any legally enforceable
netting agreement or provision relating to such Derivatives Contracts, (a) for
any date on or after the date such Derivatives Contracts have been terminated or
closed out, the termination amount or value(s) determined in accordance
therewith, and (b) for any date prior to the date referenced in clause (a), the
amount(s) determined as the mark-to-market value(s) for such Derivatives
Contracts, as determined based upon one or more mid-market or other readily
available quotations or estimates provided by any recognized dealer in
Derivatives Contracts.

“Development Property” means, as of any date of determination, any Property on
which the existing building or other improvements are undergoing renovation and
redevelopment that will either (a) disrupt the occupancy of at least 10% of the
rentable rooms of such Property or (b) temporarily reduce the Net Operating
Income of such Property by more than 10% as compared to the immediately
preceding comparable prior period.  A Property that satisfies the foregoing
requirements shall constitute a Development Property unless the Issuer in its
discretion notifies

A-3

--------------------------------------------------------------------------------

 

each holder of Notes in writing that such Property shall not constitute a
Development Property.  Notwithstanding the foregoing in the case of the Boston
Park Plaza Hotel or the Wailea Beach Marriott, during planned renovations of
such Property, such Property shall not be treated as a Development Property if
the Issuer has provided written notice to each holder of Notes (a) that such
renovations have commenced, (b) that the Issuer elects to have such Property not
treated as a Development Property and (c) of the date on which such election is
to become effective.  Upon the effective date of such an election, the Operating
Property Value of such Property shall be deemed to be equal to the purchase
price paid by the Issuer (or any applicable Subsidiary) for such Property less
any amounts paid to the Issuer (or such Subsidiary) as a purchase price
adjustment, held in escrow, retained as a contingency reserve, or in connection
with other similar arrangements.  Such election shall cease to be effective upon
the earlier of (1) the date six months following the date all improvements
related to the renovation of such Property have been substantially completed and
(2) June 30, 2017.  Once such election shall cease to be effective, such
Property shall be valued as a Seasoned Property.  A Property shall cease to be a
Development Property once all improvements related to the renovation or
redevelopment of such Property has been substantially completed.

“Disclosure Documents” is defined in Section 5.3.

“EBITDA” means, with respect to a Person for any period (without duplication):
(a) net income (loss) of such Person for such period determined on a
consolidated basis exclusive of the following (but only to the extent included
in determination of such net income (loss)):  (1) depreciation and amortization
expense; (2) Interest Expense; (3) income tax expense; (4) extraordinary or
non-recurring gains, losses, revenues and expenses; and (5) other non-cash
charges including impairment charges (other than non-cash charges that
constitute an accrual of a reserve for future cash payments) plus (b) such
Person’s Ownership Share of EBITDA of its Unconsolidated Affiliates.  EBITDA
shall be adjusted to remove any impact from (i) non-cash amortization of stock
grants to members of the Parent Guarantor’s management, (ii) straight line rent
leveling adjustments required under GAAP and (iii) amortization of intangibles
pursuant to Financial Accounting Standards Board Accounting Standards
Codification Topic 805.  For purposes of determining compliance with the
Leverage Ratio, (A) EBITDA attributable to Properties disposed of by the Issuer
or any Subsidiary during the period of four consecutive fiscal quarters most
recently ended for which financial statements are required to have been
delivered pursuant to Section 7.1(a) or Section 7.2(b), or disposed of after
such period but on or before the applicable date of determination, shall be
excluded and (B) EBITDA attributable to any Property acquired by the Issuer or
any Subsidiary during the period of four consecutive fiscal quarters most
recently ended for which financial statements are required to have been
delivered pursuant to Section 7.1(a) or Section 7.1(b), or acquired after such
period but on or before the applicable date of determination, shall be utilized
regardless of the date such Property was acquired by the Issuer or such
Subsidiary.

“EDGAR” means the SEC’s Electronic Data Gathering, Analysis and Retrieval System
or any successor SEC electronic filing system for such purposes.

“Eligible Property” means a Property which satisfies all of the following
requirements: (a) such Property is fully developed as (1) an upscale,
upper-upscale or luxury (as defined by Smith Travel Research) full-service hotel
with not less than 150 keys or (2) a select-service (as

A-4

--------------------------------------------------------------------------------

 

defined by Smith Travel Research) hotel located in a top 25 market (or major
resort market); (b) such Property is located in a top 50 MSA or a destination
resort; (c) such Property is free of all structural defects, architectural
deficiencies, title defects, environmental conditions or other adverse matters
except for defects, deficiencies, conditions or other matters which,
individually or collectively, are not material to the profitable operation of
such Property; (d) such Property is owned in fee simple, or leased under a
Ground Lease, entirely by the Issuer or a Subsidiary that is a Subsidiary
Guarantor; (e) such Property is located in one of the 48 contiguous states of
the United States or in Hawaii or the District of Columbia; (f) all material
occupancy and operating permits and customary licenses required under applicable
law for such Property are in effect and such Property is covered by insurance in
amounts and upon terms that satisfy the criteria set forth in Section 9.2;  (g)
neither such Property, nor if such Property is owned by a Subsidiary, any of the
Issuer’s direct or indirect ownership interest in such Subsidiary, is subject to
(1) any Lien other than Permitted Liens (but not Permitted Liens described in
clause (g) of the definition of that term) or (2) any Negative Pledge other than
a Negative Pledge described in Section 10.5(b)(1) or (2); (h) regardless of
whether such Property is owned by the Issuer or a Subsidiary, the Issuer has the
right directly, or indirectly through a Subsidiary, to take the following
actions without the need to obtain the consent of any Person: (1) to create
Liens on such Property as security for Indebtedness of the Issuer or such
Subsidiary, as applicable, and (2) to sell, transfer or otherwise dispose of
such Property; (i) such Property is currently open for business to the public
and (j) such Property is (1) branded by a nationally recognized hotel company
(such as Marriott, Hilton, Hyatt, Fairmont, Intercontinental or Starwood) or an
Affiliate of such a company or (2) operated as an independent hotel in a central
business district or in Hawaii or another location not objected to by the
Required Holders acting reasonably.

“Environmental Laws” means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
Hazardous Materials.

“Equity Interest” means, with respect to any Person, any share of capital stock
of (or other ownership or profit interests in) such Person, any warrant, option
or other right for the purchase or other acquisition from such Person of any
share of capital stock of (or other ownership or profit interests in) such
Person, whether or not certificated, any security convertible into or
exchangeable for any share of capital stock of (or other ownership or profit
interests in) such Person or warrant, right or option for the purchase or other
acquisition from such Person of such shares (or such other interests), and any
other ownership or profit interest in such Person (including partnership, member
or trust interests therein), whether voting or nonvoting, and whether or not
such share, warrant, option, right or other interest is authorized or otherwise
existing on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974 and the rules
and regulations promulgated thereunder from time to time in effect.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Parent Guarantor under section
414 of the Code.

A-5

--------------------------------------------------------------------------------

 

“Event of Default” is defined in Section 11.

“Exchange Act” is defined in Section 8.7(h)(1).

“Excluded Subsidiary” means any Subsidiary as to which both of the following
apply (a) such Subsidiary holds title to, or beneficially owns, assets which are
or are intended to become collateral for any Secured Indebtedness of such
Subsidiary, or is a direct or indirect beneficial owner of a Subsidiary holding
title to or beneficially owning such assets (but having no material assets other
than such beneficial ownership interests); and (b) which (1) is, or is expected
to be, prohibited from Guarantying the Indebtedness of any other Person pursuant
to any document, instrument or agreement evidencing such Secured Indebtedness or
(2) is prohibited from Guarantying the Indebtedness of any other Person pursuant
a provision of such Subsidiary’s organizational documents which provision was
included in such Subsidiary’s organizational documents as a condition to the
extension of such Secured Indebtedness.

“Execution Date” is defined in Section 3.

“FATCA” means (a) sections 1471 through 1474 of the Code, as of the Execution
Date (or any amended or successor version that is substantively comparable and
not materially more onerous to comply with), together with any current or future
regulations or official interpretations thereof, (b) any treaty, law or
regulation of any other jurisdiction, or relating to an intergovernmental
agreement between the United States and any other jurisdiction, which (in either
case) facilitates the implementation of the foregoing clause (a), and (c) any
agreements entered into pursuant to section 1471(b)(1) of the Code.

“FF&E Reserves” means, for any period and with respect to a Property, an amount
equal to the greater of (a) 4.00% of total gross revenues for such Property for
such period and (b) the aggregate amount of reserves in respect to furniture,
fixtures and equipment required under any Property Management Agreement or
Franchise Agreement applicable to such Property for such period.  If the term
FF&E Reserves is used without reference to a specific Property, then the amount
shall be determined on an aggregate basis with respect to all Properties of the
Parent Guarantor and its Subsidiaries and the applicable Ownership Share of all
Properties of all Unconsolidated Affiliates of the Parent Guarantor.

“Financial Covenant” means any covenant (whether set forth as a covenant,
undertaking, event of default, restriction, prepayment event or other such
provision) that requires the Parent Guarantor and/or any Subsidiary to:

(a)     maintain a specified level of net worth, shareholders’ equity, total
assets, unencumbered assets, unencumbered properties, cash flow, net income,
occupancy rate or lease term;

(b)     maintain any relationship of any component of its capital structure to
any other component thereof (including the relationship of indebtedness,
subsidiary indebtedness, senior indebtedness, secured indebtedness, unsecured
indebtedness, or subordinated indebtedness to total capitalization, total
assets, unencumbered assets or to net worth);

A-6

--------------------------------------------------------------------------------

 

(c)     maintain any measure of its ability to service its indebtedness
(including exceeding any specified ratio of revenues, cash flow, operating
income or net income to indebtedness, interest expense, rental expense, capital
expenditures and/or scheduled payments of indebtedness);

(d)     restricts the amount of distributions; or

(e)     restrict the amount or type of its investments;

but in all cases excluding any such covenant that amounts to a negative pledge
or a sale of assets limitation.

“Fixed Charges” means, for any period, the sum of the following (without
duplication): (a) Interest Expense of the Parent Guarantor and its Subsidiaries
determined on a consolidated basis for such period, (b) all regularly scheduled
principal payments made with respect to Indebtedness of the Parent Guarantor and
its Subsidiaries during such period, other than any balloon, bullet or similar
principal payment due upon the stated maturity of such Indebtedness, (c) all
Preferred Dividends paid during such period on Preferred Equity Interests not
owned by the Parent Guarantor or any of its Subsidiaries and (d) payments in
respect of Capitalized Lease Obligations.  The Parent Guarantor’s Ownership
Share of the Fixed Charges of Unconsolidated Affiliates of the Parent Guarantor
shall be included in determinations of Fixed Charges.

“Form 10-K” is defined in Section 7.1(b).

“Form 10-Q” is defined in Section 7.1(a).

“Franchise Agreement” means an agreement permitting the use of the applicable
hotel brand name, hotel system trademarks, trade names and any related rights in
connection with the ownership or operation of a Property. 

“GAAP” means (a) generally accepted accounting principles as in effect from time
to time in the United States and (b) for purposes of Section 9.6, with respect
to any Subsidiary, generally accepted accounting principles (including
International Financial Reporting Standards, as applicable) as in effect from
time to time in the jurisdiction of organization of such Subsidiary.

“Governmental Authority” means

(a)     the government of

(1)     the United States or any state or other political subdivision thereof,
or

(2)     any other jurisdiction in which the Parent Guarantor or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction over any
properties of the Parent Guarantor or any Subsidiary, or

A-7

--------------------------------------------------------------------------------

 

(b)     any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.

“Governmental Official” means any governmental official or employee, employee of
any government-owned or government-controlled entity, political party, any
official of a political party, candidate for political office, official of any
public international organization or anyone else acting in an official capacity.

“Ground Lease” means a ground lease containing terms and conditions customarily
required by mortgagees making a loan secured by the interest of the holder of
the leasehold estate demised pursuant to a ground lease, including the
following: (a) a remaining term (inclusive of any unexercised extension or
renewal options that are exercisable without condition (other than a condition
that no default exists under such ground lease at the time of exercise of such
extension or renewal option)) of 50 years or more from the Execution Date or, in
the event that such remaining term is less than 50 years, such ground lease
either (1) contains an unconditional end-of-term purchase option in favor of the
lessee for consideration that is de minimus or (2) provides that the lessee’s
leasehold interest therein automatically becomes a fee-owned interest at the end
of the term; (b) the right of the lessee to mortgage and encumber its interest
in the leased property, and to amend the terms of any such mortgage or
encumbrance, in each case, without the consent of the lessor or, if consent is
required, such consent has been obtained or is required to be given upon the
satisfaction of customary conditions; (c) the obligation of the lessor to give
the holder of any mortgage Lien on such leased property written notice of any
defaults on the part of the lessee and agreement of such lessor that such lease
will not be terminated until such holder has had a reasonable opportunity to
cure or complete foreclosures, and fails to do so; (d) acceptable
transferability of the lessee’s interest under such lease, including ability to
sublease; (e) acceptable limitations on the use of the leased property; and (f)
clearly determinable rental payment terms which in no event contain profit
participation rights.  So long as the ground lease for the Hyatt Regency Newport
Beach located in Newport Beach, California satisfies the requirements of the
preceding clauses (b) through (f), such ground lease shall be deemed to be a
Ground Lease.

“Guaranty,” “Guaranteed,” “Guarantying” or to “Guarantee” as applied to any
obligation means and includes: (a) a guaranty (other than by endorsement of
negotiable instruments for collection or deposit in the ordinary course of
business), directly or indirectly, in any manner, of any part or all of such
obligation, or (b) an agreement, direct or indirect, contingent or otherwise,
and whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation whether by: (1) the
purchase of securities or obligations, (2) the purchase, sale or lease (as
lessee or lessor) of property or the purchase or sale of services primarily for
the purpose of enabling the obligor with respect to such obligation to make any
payment or performance (or payment of damages in the event of nonperformance) of
or on account of any part or all of such obligation, or to assure the owner of
such obligation against loss, (3) the supplying of funds to or in any other
manner investing in the obligor with respect to such obligation, (4) repayment
of amounts drawn down by beneficiaries of letters of credit, or (5) the
supplying of funds to or investing in a Person on account of all or any part of
such Person’s obligation under a Guaranty of any obligation or indemnifying or
holding harmless, in any way, such Person against any part or all of such
obligation.  Obligations in

A-8

--------------------------------------------------------------------------------

 

respect of customary performance guaranties and Guaranties constituting
Nonrecourse Indebtedness shall not be deemed to give rise to Indebtedness or
otherwise constitute a Guaranty except as otherwise provided in the definition
of “Nonrecourse Indebtedness.”

“Hazardous Materials” means any and all pollutants, toxic or hazardous wastes or
other substances that might pose a hazard to health and safety, the removal of
which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage or filtration of which is or
shall be restricted, prohibited or penalized by any applicable law, including
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum, petroleum products, lead based paint, radon gas or similar
restricted, prohibited or penalized substances.

“holder” means, with respect to any Note, the Person in whose name such Note is
registered in the register maintained by the Issuer pursuant to Section 14.1,
provided, however, that if such Person is a nominee, then for the purposes of
Sections 7, 8.7, 12, 18.2 and 19 and any related definitions in this Schedule A,
“holder” shall mean the beneficial owner of such Note whose name and address
appears in such register.

“Hyatt Chicago Capital Lease” means that certain Lease dated December 15, 1997
between Chicago Title Land Trust Company, as trustee, as successor trustee to
LaSalle Bank National Association, as successor trustee to American National
Bank and Trust Company of Chicago, and Sunstone St. Clair, LLC, a Delaware
limited liability company, as assignee of Patriot Mortgage Borrower, L.L.C., as
assignee of Oxford Wyn 633 Investment Company, L.L.C.

“Implied Debt Service” means (a) a given principal balance of Unsecured
Indebtedness multiplied by (b) the greatest of (1) 10% per annum, (2) the
highest per annum interest rate then applicable to any of the outstanding
principal balance of any form of loan then outstanding under the Bank Credit
Agreement and (3) a mortgage debt constant for a loan calculated using a per
annum interest rate equal to the yield on a 10-year United States Treasury Note
at such time plus 3.50% and amortizing in full in a 25-year period.

“Indebtedness” means, with respect to a Person, at the time of computation
thereof, all of the following (without duplication):  (a) all obligations of
such Person in respect of money borrowed or for the deferred purchase price of
property or services (other than trade debt incurred in the ordinary course of
business which is not more than 180 days past due); (b) all obligations of such
Person, whether or not for money borrowed (1) represented by notes payable, or
drafts accepted, in each case representing extensions of credit, (2) evidenced
by bonds, debentures, notes or similar instruments, or (3) constituting purchase
money indebtedness, conditional sales contracts, title retention debt
instruments or other similar instruments, upon which interest charges are
customarily paid or that are issued or assumed as full or partial payment for
property or for services rendered; (c) Capitalized Lease Obligations of such
Person; (d) all reimbursement obligations (contingent or otherwise) of such
Person under or in respect of any letters of credit or acceptances (whether or
not the same have been presented for payment); (e) all Off-Balance Sheet
Obligations of such Person; (f) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any
Mandatorily Redeemable Stock issued by such Person or any other Person, valued
at the greater of its

A-9

--------------------------------------------------------------------------------

 

voluntary or involuntary liquidation preference plus accrued and unpaid
dividends; (g) all obligations of such Person in respect of any (1) purchase
obligation, repurchase obligation or takeout commitment, in each case evidenced
by a binding agreement and to the extent such obligation is to acquire Equity
Interests of another Person, assets of another Person that constitute the
business or a division or operating unit of such Person, real estate, bonds,
debentures, notes or similar instruments or (2) forward equity commitment
evidenced by a binding agreement (provided,  however that this clause (g) shall
exclude (i) any such obligation to the extent the obligation can be satisfied by
the issuance of Equity Interests (other than Mandatorily Redeemable Stock) and
(ii) in the case of the Parent Guarantor, obligations incurred in the ordinary
course of the business of the Issuer and its Subsidiaries to acquire developed
Properties within 6 months of the incurrence of such obligations); (h) net
obligations under any Derivatives Contract not entered into as a hedge against
interest rate risk in respect of existing Indebtedness, in an amount equal to
the Derivatives Termination Value thereof at such time (but in no event less
than zero); (i) all Indebtedness of other Persons which such Person has
Guaranteed or is otherwise recourse to such Person (except for Guaranties
constituting Nonrecourse Indebtedness); and (j) all Indebtedness of another
Person secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property or assets
owned by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness or other payment obligation.  Indebtedness
of any Person shall include Indebtedness of any partnership or joint venture in
which such Person is a general partner or joint venturer to the extent of such
Person’s Ownership Share of the ownership of such partnership or joint venture
(except if such Indebtedness, or portion thereof, is recourse (other than in
respect of exceptions referred to in the definition of Nonrecourse Indebtedness)
to such Person, in which case the greater of such Person’s Ownership Share of
such Indebtedness or the amount of such recourse portion of the Indebtedness,
shall be included as Indebtedness of such Person).  The Notes shall constitute
Indebtedness of the Issuer.

“INHAM Exemption” is defined in Section 6.3(e).

“Interest Expense” means, with respect to a Person and for any period, and
without duplication (a) all paid, accrued or capitalized interest expense
(including capitalized interest expense) other than (1) capitalized interest
funded from a construction loan interest reserve account held by another lender
and not included in the calculation of cash for balance sheet reporting purposes
and (2) interest expense attributable to Capitalized Lease Obligations of such
Person, and in any event shall include all letter of credit fees and all
interest expense with respect to any Indebtedness in respect of which such
Person is wholly or partially liable whether pursuant to any repayment, interest
carry, performance guarantee or otherwise, plus (b) to the extent not already
included in the foregoing clause (a), such Person’s Ownership Share of all paid,
accrued or capitalized interest expense for such period of Unconsolidated
Affiliates of such Person.  The term “Interest Expense” shall exclude all costs
and expenses, including any prepayment penalties, of defeasing, or otherwise
paying or prepaying, any Indebtedness encumbering any Property or amortization
of deferred financing fees or the write-off of any deferred financing fees
following the acquisition, disposition or refinancing thereof.

“Institutional Investor” means (a) any Purchaser of a Note, (b) any holder of a
Note holding (together with one or more of its affiliates) more than $2,000,000
of the aggregate principal amount of the Notes then outstanding, (c) any bank,
trust company, savings and loan

A-10

--------------------------------------------------------------------------------

 

association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form, and (d) any Related
Fund of any holder of any Note.

“Investment” means, with respect to any Person, any acquisition or investment
(whether or not of a controlling interest) by such Person, by means of any of
the following:  (a) the purchase or other acquisition of any Equity Interest in
another Person, (b) a loan, advance or extension of credit to, capital
contribution to, Guaranty of Indebtedness of, or purchase or other acquisition
of any Indebtedness of, another Person, including any partnership or joint
venture interest in such other Person, or (c) the purchase or other acquisition
(in one transaction or a series of transactions) of assets of another Person
that constitute the business or a division or operating unit of another
Person.  Any commitment to make an Investment in any other Person, as well as
any option of another Person to require an Investment in such Person, shall
constitute an Investment.  Except as expressly provided otherwise, for purposes
of determining compliance with any covenant contained this Agreement, the amount
of any Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.

“Issuer” is defined in the first paragraph of this Agreement.

“Lien” as applied to the property of any Person means: (a) any security
interest, encumbrance, mortgage, deed to secure debt, deed of trust, assignment
of leases and rents, pledge, lien, hypothecation, assignment, charge or lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security title or encumbrance of any kind in
respect of any property of such Person, or upon the income, rents or profits
therefrom; (b) any arrangement, express or implied, under which any property of
such Person is transferred, sequestered or otherwise identified for the purpose
of subjecting the same to the payment of Indebtedness or performance of any
other obligation in priority to the payment of the general, unsecured creditors
of such Person; (c) the filing of any financing statement under the UCC or its
equivalent in any jurisdiction, other than any precautionary filing not
otherwise constituting or giving rise to a Lien, including a financing statement
filed (1) in respect of a lease not constituting a Capitalized Lease Obligation
pursuant to Section 9-505 (or a successor provision) of the UCC or its
equivalent as in effect in an applicable jurisdiction or (2) in connection with
a sale or other disposition of accounts or other assets not prohibited by this
Agreement in a transaction not otherwise constituting or giving rise to a Lien;
and (d) any agreement by such Person to grant, give or otherwise convey any of
the foregoing.

“Leverage Ratio” means, as of a given date, the ratio of (a)(1) Total
Indebtedness as of such date minus (2) the lesser of (i) the amount, if any, by
which Unrestricted Cash exceeds $25,000,000 on such date and (ii) the lowest
maximum amount, if any, of Unrestricted Cash then permitted to be subtracted
from “total indebtedness” for purposes of determining the leverage ratio
covenant under any Material Credit Facility to (b) EBITDA of the Parent
Guarantor and its Subsidiaries for the period of four consecutive fiscal
quarters most recently ended for which financial statements are required to have
been delivered pursuant to Section 7.1(a) or Section 7.1(b).

“Make-Whole Amount” is defined in Section 8.6.

A-11

--------------------------------------------------------------------------------

 

“Mandatorily Redeemable Stock” means, with respect to any Person, any Equity
Interest of such Person which by the terms of such Equity Interest (or by the
terms of any security into which it is convertible or for which it is
exchangeable or exercisable), upon the happening of any event or otherwise, (a)
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise (other than an Equity Interest to the extent redeemable in exchange
for common stock or other equivalent common Equity Interests at the option of
the issuer of such Equity Interest), (b) is convertible into or exchangeable or
exercisable for Indebtedness or Mandatorily Redeemable Stock, or (c) is
redeemable at the option of the holder thereof, in whole or in part (other than
an Equity Interest which is redeemable solely in exchange for common stock or
other equivalent common Equity Interests), in the case of each of clauses (a)
through (c), on or prior to the Maturity Date of the Series B Notes.

“Marketable Securities” means: (a) common or preferred Equity Interests of
Persons located in, and formed under the laws of, any State of the United States
or the District of Columbia, which Equity Interests are subject to price
quotations (quoted at least daily) on The NASDAQ Stock Market’s National Market
System or have trading privileges on the New York Stock Exchange, the American
Stock Exchange or another recognized national United States Securities exchange
and (b) Securities evidencing Indebtedness issued by Persons located in, and
formed under the laws of, any State of the United States or the District of
Columbia, which Persons have a Credit Rating of “BBB-” or “Baa3” or better.

“Material” means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Parent Guarantor
and its Subsidiaries taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Parent
Guarantor and its Subsidiaries taken as a whole, (b) the ability of either
Constituent Company to perform its obligations under this Agreement and/or the
Notes, (c) the ability of any Subsidiary Guarantor to perform its obligations
under the Subsidiary Guaranty Agreement, or (d) the validity or enforceability
of this Agreement, the Notes or the Subsidiary Guaranty Agreement.

“Material Contract” means any contract or other arrangement (other than this
Agreement, the Notes or the Subsidiary Guaranty Agreement), whether written or
oral, to which either Constituent Company or any Subsidiary is a party as to
which the breach, nonperformance, cancellation or failure to renew by any party
thereto could reasonably be expected to have a Material Adverse Effect.

“Material Credit Facility” means, as to the Constituent Companies and their
Subsidiaries,

(a)     the Bank Credit Agreement;

(b)     that certain Term Loan Agreement dated as of December 17, 2015 by and
among the Constituent Companies, the financial institutions party thereto, PNC
Bank, National Association, as administrative agent, PNC Bank, National
Association and U.S. Bank National Association, as joint lead arrangers and
joint bookrunners, and U.S. Bank

A-12

--------------------------------------------------------------------------------

 

National Association, as syndication agent, including any renewals, extensions,
amendments, supplements, restatements, replacements or refinancings thereof; and

(c)     any other agreement(s) creating or evidencing indebtedness for borrowed
money (excluding any Nonrecourse Indebtedness) entered into on or after the
Execution Date by either Constituent Company or any Subsidiary, or in respect of
which either Constituent Company or any Subsidiary is an obligor or otherwise
provides a guarantee or other credit support (other than a guaranty of customary
recourse exceptions) (“Credit Facility”), in a principal amount outstanding or
available for borrowing equal to or greater than $100,000,000 (or the equivalent
of such amount in the relevant currency of payment, determined as of the date of
the closing of such facility based on the exchange rate of such other currency);
and if no Credit Facility or Credit Facilities equal or exceed such amounts,
then the largest Credit Facility shall be deemed to be a Material Credit
Facility.

“Maturity Date” with respect to any Note is defined in the first paragraph of
such Note.

“Memorandum” is defined in Section 5.3.

“MFL Agreement” is defined in Section 9.10.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means a mortgage, deed of trust, deed to secure debt or similar
security instrument made by a Person owning an interest in real property
granting a Lien on such interest in real property as security for the payment of
Indebtedness of such Person or another Person.

“Mortgage Receivable” means a promissory note secured by a Mortgage of which the
Parent Guarantor or a Subsidiary is the holder and retains the rights of
collection of all payments thereunder.

“Most Favored Lender Notice” means, in respect of any Additional Covenant, a
written notice from the Constituent Companies giving notice of such Additional
Covenant, including therein a verbatim statement of such Additional Covenant,
together with any definitions incorporated therein.

“MSA” means a Metropolitan Statistical Area as listed in Budget Bulletin No.
09-01 issued by the Executive Office of the President of the United States of
America, Office of Management and Budget.

“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term
is defined in section 4001(a)(3) of ERISA).

“NAIC” means the National Association of Insurance Commissioners.

“Negative Pledge” means, with respect to a given asset, any provision of a
document, instrument or agreement (other than this Agreement) which prohibits or
purports to prohibit the creation or assumption of any Lien on such asset as
security for Indebtedness of the Person

A-13

--------------------------------------------------------------------------------

 

owning such asset or any other Person; provided,  however, that an agreement
that conditions a Person’s ability to encumber its assets upon the maintenance
of one or more specified ratios that limit such Person’s ability to encumber its
assets but that do not generally prohibit the encumbrance of its assets, or the
encumbrance of specific assets, shall not constitute a Negative Pledge.

“Net Operating Income” or “NOI” means, for any Property and for a given period,
the sum of the following (without duplication and determined on a consistent
basis with prior periods): (a) gross revenues received in the ordinary course
from such Property minus (b) all expenses paid (excluding interest but including
an appropriate accrual for property taxes and insurance) related to the
ownership, operation or maintenance of such Property, including property taxes,
assessments and the like, insurance, utilities, payroll costs, maintenance,
repair and landscaping expenses, marketing expenses, and general and
administrative expenses (including an appropriate allocation for legal,
accounting, advertising, marketing and other expenses incurred in connection
with such Property, but specifically excluding general overhead expenses of the
Issuer or any Subsidiary and any property management fees) minus (c) the FF&E
Reserves for such Property as of the end of such period minus (d) an imputed
management fee in the amount of 3.00% of the gross revenues for such Property
for such period.  For purposes of determining Adjusted NOI, Operating Property
Value, Total Asset Value and Unencumbered Asset Value, (1) NOI from Properties
disposed of by the Issuer or any Subsidiary during the period of four
consecutive fiscal quarters most recently ended for which financial statements
are required to have been delivered pursuant to Section 7.1(a) or Section 7.1(b)
shall be excluded and (2) NOI for the period of four consecutive fiscal quarters
most recently ended for which financial statements are required to have been
delivered pursuant to Section 7.1(a) or Section 7.1(b) for any Property acquired
by the Issuer or any Subsidiary during such period shall be utilized regardless
of the date such Property was acquired by the Issuer or such Subsidiary.

“New Property” means each Property on which a hotel is located acquired by the
Parent Guarantor, any Subsidiary or any Unconsolidated Affiliate from the date
of acquisition until the Seasoned Date in respect thereof; provided,  however,
that, upon the Seasoned Date for any New Property, such New Property shall be
converted to a Seasoned Property and shall cease to be a New Property.

“Nonrecourse Indebtedness” means, with respect to a Person, (a) Indebtedness for
borrowed money in respect of which recourse for payment (except for customary
exceptions for fraud, misapplication of funds, environmental indemnities,
voluntary bankruptcy, collusive involuntary bankruptcy and other similar
exceptions to nonrecourse liability) is contractually limited to specific assets
of such Person encumbered by a Lien securing such Indebtedness or (b) if such
Person is a Single Asset Entity, any Indebtedness for borrowed money of such
Person.

“Non-U.S. Plan” means any plan, fund or other similar program that (a) is
established or maintained outside the United States by the Parent Guarantor or
any Subsidiary primarily for the benefit of employees of the Parent Guarantor or
one or more Subsidiaries residing outside the United States, which plan, fund or
other similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon termination of
employment, and (b) is not subject to ERISA or the Code.

A-14

--------------------------------------------------------------------------------

 

“Notes” is defined in Section 1.

“Obligations” is defined in Section 13.1.

“OFAC” means the Office of Foreign Assets Control of the United States
Department of the Treasury.

“OFAC Sanctions Program” means any economic or trade sanction that OFAC is
responsible for administering and enforcing.  A list of OFAC Sanctions Programs
may be found at
http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.

“Off-Balance Sheet Obligations” means, in the case of the Parent Guarantor or
any of its Subsidiaries, liabilities and obligations of the Parent Guarantor,
any such Subsidiary or any other Person in respect of “off-balance sheet
arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated
under the Securities Act) which the Parent Guarantor would be required to
disclose in the “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” section of the Parent Guarantor’s report on Form 10-Q or
Form 10-K (or their equivalents) which the Parent Guarantor is required to file
with the SEC.

“Officer’s Certificate” means, with respect to any Person, a certificate of a
Senior Financial Officer or of any other officer of such Person whose
responsibilities extend to the subject matter of such certificate.

“Operating Property Value” means, at any date of determination, (a) for each New
Property (until the Seasoned Date), or Development Property (that is not a
Seasoned Property), the purchase price of the Property less any amounts paid to
the Issuer (or such Subsidiary) as a purchase price adjustment, held in escrow,
retained as a contingency reserve, or in connection with other similar
arrangements; or (b) for each Seasoned Property, (1) the Adjusted NOI of such
Property for the period of four consecutive fiscal quarters most recently ended
for which financial statements are required to have been delivered pursuant to
Section 7.1(a) or Section 7.1(b) divided by (2) the applicable Capitalization
Rate.  Notwithstanding the forgoing, the Operating Property Value of the Wailea
Beach Marriott and the Boston Park Plaza Hotel may be determined in accordance
with the applicable provisions of the definition of “Development Property.”

“Ownership Share” means, with respect to any Subsidiary of a Person (other than
a Wholly-Owned Subsidiary) or any Unconsolidated Affiliate of a Person, the
greater of (a) such Person’s relative nominal direct and indirect ownership
interest (expressed as a percentage) in such Subsidiary or Unconsolidated
Affiliate or (b) such Person’s relative direct and indirect economic interest
(calculated as a percentage) in such Subsidiary or Unconsolidated Affiliate
determined in accordance with the applicable provisions of the declaration of
trust, articles or certificate of incorporation, articles of organization,
partnership agreement, joint venture agreement or other applicable
organizational document of such Subsidiary or Unconsolidated Affiliate.

“Parent Guarantor” is defined in the first paragraph of the Agreement.

A-15

--------------------------------------------------------------------------------

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA.

“Permitted Liens” means, with respect to any asset or property of a Person, (a)
Liens securing taxes, assessments and other charges or levies imposed by any
Governmental Authority (excluding any Lien imposed pursuant to any of the
provisions of ERISA or pursuant to any Environmental Laws) which, in each case,
are not at the time required to be paid or discharged under Section 9.4, (b) the
claims of materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of business,
which, in each case, are not at the time required to be paid or discharged under
Section 9.4; (c) Liens consisting of deposits or pledges made, in the ordinary
course of business, in connection with, or to secure payment of, obligations
under workers’ compensation, unemployment insurance or similar applicable laws;
(d) Liens consisting of encumbrances in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property,
which do not materially detract from the value of such property or impair the
intended use thereof in the business of such Person; (e) the rights of tenants
under leases or subleases not interfering with the ordinary conduct of business
of such Person; and (f) Liens in favor of the holders of the Notes and (g) Liens
in existence on the Execution Date and set forth on Schedule 10.5.

“Person” means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, business entity or
Governmental Authority.

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA)
subject to Title I of ERISA that is or, within the preceding five years, has
been established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Parent
Guarantor or any ERISA Affiliate or with respect to which the Parent Guarantor
or any ERISA Affiliate may have any liability.

“Preferred Dividends” means, for any period and without duplication, all
Restricted Payments paid during such period on Preferred Equity Interests issued
by the Parent Guarantor or a Subsidiary.  Preferred Dividends shall not include
dividends or distributions (a) paid or payable solely in Equity Interests (other
than Mandatorily Redeemable Stock) payable to holders of such class of Equity
Interests, (b) paid or payable to the Parent Guarantor or a Subsidiary, or (c)
constituting or resulting in the redemption of Preferred Equity Interests, other
than scheduled redemptions not constituting balloon, bullet or similar
redemptions in full.

“Preferred Equity Interests” means, with respect to any Person, Equity Interests
in such Person which are entitled to preference or priority over any other
Equity Interest in such Person in respect of the payment of dividends or
distribution of assets upon liquidation or both.

“Property” means any parcel (or group of related parcels) of real property owned
or leased (in whole or in part) or operated by the Parent Guarantor, any
Subsidiary or any Unconsolidated Affiliate of the Parent Guarantor.

“property” or “properties” means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.

A-16

--------------------------------------------------------------------------------

 

“Property Management Agreement” means, collectively, all agreements entered into
by a Constituent Company or a Subsidiary Guarantor pursuant to which such Person
engages a Person to advise it with respect to the management of an Unencumbered
Property or to provide management services with respect to the same.

“PTE” is defined in Section 6.3(a).

“Purchaser” or “Purchasers” means each of the purchasers that has executed and
delivered this Agreement to the Constituent Companies and such Purchaser’s
successors and assigns (so long as any such assignment complies with Section
14.2), provided, however, that any Purchaser of a Note that ceases to be the
registered holder or a beneficial owner (through a nominee) of such Note as the
result of a transfer thereof pursuant to Section 14.2 shall cease to be included
within the meaning of “Purchaser” of such Note for the purposes of this
Agreement upon such transfer.

“Purchaser Schedule” means the Purchaser Schedule to this Agreement listing the
Purchasers of the Notes and including their notice and payment information.

“QPAM Exemption” is defined in Section 6.3(d).

“Qualified Institutional Buyer” means any Person who is a “qualified
institutional buyer” within the meaning of such term as set forth in Rule
144A(a)(1) under the Securities Act.

“REIT” means a Person qualifying for treatment as a “real estate investment
trust” under the Code.

“Related Fund” means, with respect to any holder of any Note, any fund or entity
that (a) invests in Securities or bank loans, and (b) is advised or managed by
such holder, the same investment advisor as such holder or by an affiliate of
such holder or such investment advisor.

“Required Holders” means at any time (a) prior to the Closing, the Purchasers
and (b) on or after the Closing, the holders of more than 50% in principal
amount of the Notes at the time outstanding (exclusive of Notes then owned by
either Constituent Company or any of its Affiliates).

“Responsible Officer” means, with respect to any Person, any Senior Financial
Officer and any other officer of such Person with responsibility for the
administration of the relevant portion of this Agreement.

“Restricted Payment” means (a) any dividend or other distribution, direct or
indirect, on account of any Equity Interest of the Parent Guarantor or any
Subsidiary now or hereafter outstanding, except a dividend payable solely in
Equity Interests; (b) any redemption, conversion, exchange, retirement, sinking
fund or similar payment, purchase or other acquisition for value, direct or
indirect, of any Equity Interest of the Parent Guarantor or any Subsidiary now
or hereafter outstanding; and (c) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire any
Equity Interests of the Parent Guarantor or any Subsidiary now or hereafter
outstanding.

A-17

--------------------------------------------------------------------------------

 

“Seasoned Date” means the first day on which an acquired Property on which a
hotel is located has been owned for four full fiscal quarters following the date
of acquisition by the Parent, a Subsidiary or an Unconsolidated Affiliate of the
Parent Guarantor.

“Seasoned Property” means Property on which a hotel is located that is not a New
Property.

“SEC” means the Securities and Exchange Commission of the United States of
America.

“Secured Indebtedness” means, with respect to a Person as of a given date, the
aggregate principal amount of all Indebtedness of such Person outstanding on
such date that is secured in any manner by any Lien on any property and, in the
case of the Parent Guarantor, shall include the Parent Guarantor’s Ownership
Share of the Secured Indebtedness of its Unconsolidated Affiliates.

“Securities Act” means the Securities Act of 1933 and the rules and regulations
promulgated thereunder from time to time in effect.

“Securities” or “Security” shall have the meaning specified in section 2(1) of
the Securities Act.

“Senior Financial Officer” means, with respect to any Person, the chief
financial officer, principal accounting officer, treasurer or comptroller of
such Person.

“Series A Notes” is defined in Section 1.

“Series B Notes” is defined in Section 1.

“Significant Subsidiary” means any Subsidiary to which more than $10,000,000 of
Total Asset Value is attributable.

“Single Asset Entity” means a Person (other than an individual) that (a) only
owns a single Property; (b) is engaged only in the business of owning,
developing and/or leasing such Property; and (c) receives substantially all of
its gross revenues from such Property.  In addition, if the assets of a Person
consist solely of (1) Equity Interests in one or more Single Asset Entities that
directly or indirectly own such single Property and (2) cash and other assets of
nominal value incidental to such Person’s ownership of the other Single Asset
Entity, such Person shall also be deemed to be a Single Asset Entity for
purposes of this Agreement.

“Smith Travel Research” means Smith Travel Research or, if Smith Travel Research
shall no longer exist, any other Person that provides competitive benchmarking,
information services and research to the hotel industry and is acceptable to the
Required Holders.

“Source” is defined in Section 6.3.

“Solvent” means, when used with respect to any Person (or group of Persons),
that (a) the fair value and the fair salable value of its (or their) assets
(excluding any Indebtedness due from any Affiliate of such Person (or group of
Persons)) are each in excess of the fair valuation

A-18

--------------------------------------------------------------------------------

 

of its (or their) total liabilities (including all contingent liabilities
computed at the amount which, in light of all facts and circumstances existing
at such time, represents the amount that could reasonably be expected to become
an actual and matured liability); (b) such Person is (or group of Persons are)
able to pay its (or their) debts or other obligations in the ordinary course as
they mature; and (c) such Person (or group of Persons) has capital not
unreasonably small to carry on its (or their) business and all business in which
it proposes (or they propose) to be engaged

“State Sanctions List” means a list that is adopted by any state Governmental
Authority within the United States pertaining to Persons that engage in
investment or other commercial activities in Iran or any other country that is a
target of economic sanctions imposed under U.S. Economic Sanctions Laws.

“Subsidiary” means, as to any Person, any other Person in which such first
Person or one or more of its Subsidiaries or such first Person and one or more
of its Subsidiaries owns sufficient equity or voting interests to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
second Person, and any partnership or joint venture if more than a 50% interest
in the profits or capital thereof is owned by such first Person or one or more
of its Subsidiaries or such first Person and one or more of its Subsidiaries
(unless such partnership or joint venture can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries).  Unless the context otherwise clearly requires, any reference to
a “Subsidiary” is a reference to a Subsidiary of the Parent Guarantor.

“Subsidiary Guarantor” means each Subsidiary that has executed and delivered the
Subsidiary Guaranty Agreement or a Subsidiary Guaranty Supplement and has not
been released from the Subsidiary Guaranty Agreement pursuant to Section 9.9(b).

“Subsidiary Guaranty Agreement” is defined in Section 2.2(b).

“Subsidiary Guaranty Supplement” is defined in Section 9.9(a)(1).

“Substitute Purchaser” is defined in Section 22.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial
Services LLC.

“Surge Period” is defined in Section 10.8(a).

“SVO” means the Securities Valuation Office of the NAIC.

“Total Asset Value” means the sum of all of the following of the Parent
Guarantor and its Subsidiaries on a consolidated basis determined in accordance
with GAAP applied on a consistent basis: (a) Unrestricted Cash and Marketable
Securities, plus (b) the Operating Property Value of all Properties of the
Parent Guarantor and its Subsidiaries on which a hotel is located, plus (c) the
book value of Unimproved Land, Mortgage Receivables and other promissory notes,
plus (d) the Parent’s Guarantor Ownership Share of the preceding items for its
Unconsolidated Affiliates (excluding assets of the type described in the
immediately preceding clause (a)), plus (e) in the case of any property subject
to a purchase obligation, repurchase

A-19

--------------------------------------------------------------------------------

 

obligation or takeout commitment which at such time (1) could not be
specifically enforced by the seller of such property, the aggregate amount of
due diligence deposits, earnest money payments and other similar payments made
under the applicable contract which, at such time, would be subject to
forfeiture upon termination of the contract or (2) could be specifically
enforced by the seller of such property, the contractual purchase price of such
property, but, in either case, only to the extent the amount of the applicable
purchase obligation, repurchase obligation or takeout commitment is included in
the Indebtedness of the Issuer and its Subsidiaries on a consolidated
basis.  Notwithstanding the foregoing, for purposes of determining Total Asset
Value, the amount, if any, by which the value of Marketable Securities included
under the immediately preceding clause (a) would account for more than 15% of
Total Asset Value shall be excluded.  The percentage of Total Asset Value
attributable to a given Subsidiary shall be equal to the ratio expressed as a
percentage of (x) an amount equal to Total Asset Value calculated solely with
respect to assets owned directly by such Subsidiary to (y) Total Asset Value.

“Total Indebtedness” means without duplication: (a) all Indebtedness of the
Parent Guarantor and its Subsidiaries determined on a consolidated basis plus
(b) the Parent Guarantor’s Ownership Share of the Indebtedness of all
Unconsolidated Affiliates of the Parent Guarantor.

“UCC” means the Uniform Commercial Code as in effect in any applicable
jurisdiction.

“Unconsolidated Affiliate” means, with respect to any Person, any other Person
in whom such Person holds an Investment, which Investment is accounted for in
the financial statements of such Person on an equity basis of accounting and
whose financial results would not be consolidated under GAAP with the financial
results of such Person on the consolidated financial statements of such Person.

“Unencumbered Asset Value” means at any time the sum of (a) the aggregate
Operating Property Values of the Unencumbered Properties at such time and (b)
the lesser of (1) the amount, if any, by which Unrestricted Cash exceeds
$25,000,000 and (2) the lowest amount, if any, of Unrestricted Cash then
permitted to be added to “operating property values” for purposes of determining
the “unencumbered asset value” under any Material Credit Facility.  For purposes
of this definition, the Adjusted NOI for any Unencumbered Property shall be
reduced by an amount equal to (i) the amount by which the Adjusted NOI of such
Unencumbered Property would exceed 30% of the aggregate Adjusted NOI of all
Unencumbered Properties and (ii) the amount by which the Adjusted NOI of
Unencumbered Properties located in the same MSA as such Property would exceed
40% of the aggregate Adjusted NOI of all Unencumbered Properties.  In addition
(A) to the extent that Unencumbered Asset Value attributable to Properties
leased under Ground Leases would exceed 25% of Unencumbered Asset Value, such
excess shall be excluded and (B) if the Wailea Beach Marriott or the Boston Park
Plaza Hotel is an Unencumbered Property and the Issuer has elected that such
Property not be treated as a Development Property in accordance with the
applicable provisions of the definition of such term, then to the extent that
the Unencumbered Asset Value attributable to such Property would exceed 25% of
Unencumbered Asset Value, such excess shall be excluded.

“Unencumbered Property” means an Eligible Property that is included in the
calculation of Unencumbered Asset Value.  A Property shall cease to be an
Unencumbered

A-20

--------------------------------------------------------------------------------

 

Property if at any time such Property shall (a) cease to be an Eligible Property
(unless such Property has been approved or been deemed to have been approved as
an Unencumbered Property by the Required Holders) or (b) for any reason be
excluded as an “unencumbered property” under any Material Credit Facility.

“Unimproved Land” means land on which no development (other than improvements
that are not material and are temporary in nature) has occurred.  Unimproved
Land shall not include any undeveloped parcels of a Property that has been
developed unless and until the Issuer provides written notice to the holders of
Notes that the Issuer intends to develop such parcel.

“United States” or “U.S.” means the United States of America.

“United States Person” has the meaning set forth in Section 7701(a)(30) of the
Code.

“Unrestricted Cash” means cash and cash equivalents held by the Issuer and its
Subsidiaries other than tenant deposits and other cash and cash equivalents that
are subject to a Lien or a Negative Pledge or the disposition of which is
restricted in any way.

“Unsecured Indebtedness” means with respect to a Person as of any given date,
the aggregate principal amount of all Indebtedness of such Person outstanding at
such date that is not Secured Indebtedness and, in the case of the Parent
Guarantor, shall include the Parent Guarantor’s Ownership Share of Unsecured
Indebtedness of its Unconsolidated Affiliate.

“USA PATRIOT Act” means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 and the rules and regulations
promulgated thereunder from time to time in effect.

“U.S. Economic Sanctions Laws” means those laws, executive orders, enabling
legislation or regulations administered and enforced by the United States
pursuant to which economic sanctions have been imposed on any Person, entity,
organization, country or regime, including the Trading with the Enemy Act, the
International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan
Accountability and Divestment Act and any other OFAC Sanctions Program.

“Wailea Beach Marriott” means the Wailea Beach Marriott Resort & Spa located in
Maui, Hawaii.

“Wholly-Owned Subsidiary” means, at any time, any Subsidiary all of the Equity
Interests (except directors’ qualifying shares) and voting interests of which
are owned by any one or more of the Parent Guarantor and the Parent Guarantor’s
other Wholly-Owned Subsidiaries at such time.

 

 

A-21

--------------------------------------------------------------------------------

 

FORM OF SERIES A NOTE

SUNSTONE HOTEL PARTNERSHIP, LLC

4.69% Series A Guaranteed Senior Notes due January 10, 2026

 

 

No. AR- _____

_____ __, 20   

$_______     

PPN 86801F A*7

 

FOR VALUE RECEIVED, the undersigned, SUNSTONE HOTEL PARTNERSHIP, LLC (herein
called the “Issuer”), a limited liability company organized and existing under
the laws of the State of Delaware, hereby promises to pay to ____________, or
registered assigns, the principal sum of _____________________ DOLLARS (or so
much thereof as shall not have been prepaid) on January 10, 2026 (the “Maturity
Date”), with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance hereof at the rate of 4.69% per annum from the
date hereof, payable semiannually, on the tenth day of January and July in each
year, commencing with the January 10 or July 10 next succeeding the date hereof,
and on the Maturity Date, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law, (1) on any overdue payment of
interest and (2) during the continuance of an Event of Default, on such unpaid
balance and on any overdue payment of any Make-Whole Amount, at a rate per annum
from time to time equal to the greater of (i) 6.69% or (ii) 2.00% over the rate
of interest publicly announced by the principal office of Bank of America, N.A
from time to time in New York, New York as its “base” or “prime” rate, payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand).

Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in lawful money of the United States of America at Bank
of America, N.A. in New York, New York or at such other place as the Issuer
shall have designated by written notice to the holder of this Note as provided
in the Note and Guarantee Agreement referred to below.

This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to the Note and Guarantee Agreement dated as of December 20, 2016 (as
from time to time amended, the “Note and Guarantee Agreement”) between the
Issuer, Sunstone Hotel Investors, Inc., a corporation organized and existing
under the laws of the State of Maryland, and the respective Purchasers named
therein and is entitled to the benefits thereof.  Each holder of this Note will
be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality
provisions set forth in Section 21 of the Note and Guarantee Agreement and (ii)
made the representation set forth in Section 6.3 of the Note and Guarantee
Agreement.  Unless otherwise indicated, capitalized terms used in this Note
shall have the respective meanings ascribed to such terms in the Note and
Guarantee Agreement.

This Note is a registered Note and, as provided in the Note and Guarantee
Agreement, upon surrender of this Note for registration of transfer accompanied
by a written instrument of

SCHEDULE 1(a)
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

transfer duly executed, by the registered holder hereof or such holder’s
attorney duly authorized in writing, a new Note for a like principal amount will
be issued to, and registered in the name of, the transferee.  Prior to due
presentment for registration of transfer, the Issuer may treat the Person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Issuer will not be
affected by any notice to the contrary.

This Note is subject to optional prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note and Guarantee
Agreement, but not otherwise.

If an Event of Default occurs and is continuing, the principal of this Note may
be declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount) and with the effect provided in the
Note and Guarantee Agreement.

This Note shall be construed and enforced in accordance with, and the rights of
the Issuer and the holder of this Note shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would permit the application of the laws of a jurisdiction other than such
State.

 

SUNSTONE HOTEL PARTNERSHIP, LLC

 

 

 

 

 

 

 

By

 

 

 

Its

 

 

S-1(a)-2

--------------------------------------------------------------------------------

 

FORM OF SERIES B NOTE

SUNSTONE HOTEL PARTNERSHIP, LLC

4.79% Series B Guaranteed Senior Notes due January 10, 2028

 

 

No. BR- _____

_____  __, 20   

$_______

PPN 86801F A@5

 

FOR VALUE RECEIVED, the undersigned, SUNSTONE HOTEL PARTNERSHIP, LLC (herein
called the “Issuer”), a limited liability company organized and existing under
the laws of the State of Delaware, hereby promises to pay to ____________, or
registered assigns, the principal sum of _____________________ DOLLARS (or so
much thereof as shall not have been prepaid) on January 10, 2028 (the “Maturity
Date”), with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance hereof at the rate of 4.79% per annum from the
date hereof, payable semiannually, on the tenth day of January and July in each
year, commencing with the January 10 or July 10 next succeeding the date hereof,
and on the Maturity Date, until the principal hereof shall have become due and
payable, and (b) to the extent permitted by law, (1) on any overdue payment of
interest and (2) during the continuance of an Event of Default, on such unpaid
balance and on any overdue payment of any Make-Whole Amount, at a rate per annum
from time to time equal to the greater of (i) 6.79% or (ii) 2.00% over the rate
of interest publicly announced by the principal office of Bank of America, N.A.
in New York, New York from time to time in New York, New York as its “base” or
“prime” rate, payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand).

Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in lawful money of the United States of America at Bank
of America, N.A. in New York, New York or at such other place as the Issuer
shall have designated by written notice to the holder of this Note as provided
in the Note and Guarantee Agreement referred to below.

This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to the Note and Guarantee Agreement dated as of December 20, 2016 (as
from time to time amended, the “Note and Guarantee Agreement”) between the
Issuer, Sunstone Hotel Investors, Inc., a corporation organized and existing
under the laws of the State of Maryland, and the respective Purchasers named
therein and is entitled to the benefits thereof.  Each holder of this Note will
be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality
provisions set forth in Section 21 of the Note and Guarantee Agreement and (ii)
made the representation set forth in Section 6.3 of the Note and Guarantee
Agreement.  Unless otherwise indicated, capitalized terms used in this Note
shall have the respective meanings ascribed to such terms in the Note and
Guarantee Agreement.

SCHEDULE 1(b)
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

This Note is a registered Note and, as provided in the Note and Guarantee
Agreement, upon surrender of this Note for registration of transfer accompanied
by a written instrument of transfer duly executed, by the registered holder
hereof or such holder’s attorney duly authorized in writing, a new Note for a
like principal amount will be issued to, and registered in the name of, the
transferee.  Prior to due presentment for registration of transfer, the Issuer
may treat the Person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the Issuer
will not be affected by any notice to the contrary.

This Note is subject to optional prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note and Guarantee
Agreement, but not otherwise.

If an Event of Default occurs and is continuing, the principal of this Note may
be declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount) and with the effect provided in the
Note and Guarantee Agreement.

This Note shall be construed and enforced in accordance with, and the rights of
the Issuer and the holder of this Note shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would permit the application of the laws of a jurisdiction other than such
State.

 

SUNSTONE HOTEL PARTNERSHIP, LLC

 

 

 

 

 

 

 

By

 

 

 

Its

 

 

S-1(b)-2

--------------------------------------------------------------------------------

 

FORM OF OPINION OF SPECIAL COUNSEL

FOR THE CONSTITUENT COMPANIES AND THE SUBSIDIARY GUARANTORS

[LETTERHEAD OF LATHAM AND WATKINS LLP]

 

January 10, 2017

The Purchasers listed on Schedule A hereto

Re:  Sunstone Hotel Investors, Inc. / Note and Guarantee Agreement dated
December 20, 2016

Ladies and Gentlemen:

We have acted as special counsel to Sunstone Hotel Partnership, LLC, a Delaware
limited liability company (the “Issuer”), Sunstone Hotel Investors, Inc., a
Maryland corporation (the “Parent”), and each of the subsidiaries of the Issuer
listed on Schedule B hereto (collectively, the “Initial Subsidiary Guarantors”
and, together with the Issuer and the Parent, the “Note Parties”) in connection
with (i) that certain Note and Guarantee Agreement, including the Parent
Guaranty contained therein (the “Note Agreement”), dated as of December 20,
2016, by and among the Issuer, the Parent and the purchasers party thereto (the
“Purchasers”), pursuant to which the Issuer is issuing on the date hereof
$120,000,000 aggregate principal amount of its 4.69% Series A Guaranteed Senior
Notes due January 10, 2026 (the “Series A Notes”) and $120,000,000 aggregate
principal amount of its 4.79% Series B Guaranteed Senior Notes due January 10,
2028 (the “Series B Notes”; the Series A Notes and the Series B Notes are
hereinafter referred to collectively as the “Notes”) and (ii) the other Note
Documents (as defined below). This letter is being delivered to you pursuant to
Section 4.4(a)(1) of the Note Agreement.

As such counsel, we have examined such matters of fact and questions of law as
we have considered appropriate for purposes of this letter, except where a
specific fact confirmation procedure is stated to have been performed (in which
case we have with your consent performed the stated procedure).  We have
examined, among other things, the following:

(a)       the Note Agreement;

(b)       the Subsidiary Guaranty Agreement, dated as of the date hereof (the
“Subsidiary Guaranty”), executed and delivered by the Initial Subsidiary
Guarantors in favor of the Purchasers and each other holder of Notes;

(c)       specimen copies of the Notes listed on Schedule C hereto;

(d)       the third Amended and Restated Limited Liability Company Agreement of
the Issuer, dated as of April 6, 2011 (the “Operating LLC Agreement”);

(e)       the certificate of formation of the Issuer and any amendments thereto;

SCHEDULE 4.4(a)(1)
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

(f)       the limited liability company agreement of each Initial Subsidiary
Guarantor, as amended or restated to the date hereof (collectively, the “Initial
Subsidiary Guarantor Operating Agreements”);

(g)       the certificate of formation of each Initial Subsidiary Guarantor and
any amendments thereto;

(h)       each agreement described on Schedule 5.15 of the Note Agreement (the
“Specified Agreements”); and

(h)       the written consent of (a) the Board of Directors of the Parent; (b)
the Parent, as managing member of the Issuer; and (c) the Issuer, as sole member
of each Initial Subsidiary Guarantor that is a limited liability company.

The documents described in subsections (a) through (c) above are referred to
herein collectively as the “Note Documents.”

We call your attention to the fact that with your consent, we have assumed that
each of the Operating LLC Agreement and the Initial Subsidiary Guarantor
Operating Agreements is (i) a valid and binding agreement of the parties
thereto, enforceable in accordance with the plain meaning of its terms; (ii) in
full force and effect; and (iii) the entire agreement of the parties pertaining
to the subject matter thereof.  We have further assumed, with your consent, the
Parent has duly taken such internal actions as may be necessary to enable it to
act in its corporate capacity as managing member of the Issuer.

Except as otherwise stated herein, as to factual matters, we have, with your
consent, relied upon the foregoing and upon oral or written statements and
representations of officers and other representatives of the Note Parties and
others, including the representations and warranties of the Note Parties in the
Note Documents. We have not independently verified such factual matters.

Except as otherwise stated herein, we are opining as to the effect on the
subject transaction only of the federal laws of the United States, the internal
laws of the State of New York, in numbered paragraphs 1, 2, 3, 4 and 5 of this
letter, the Delaware Limited Liability Company Act (the “DLLCA”), and we express
no opinion with respect to the applicability thereto, or the effect thereon, of
the laws of any other jurisdiction or, in the case of Delaware, any other laws,
or as to any matters of municipal law or the laws of any local agencies within
any state.  Except as otherwise stated herein, our opinions are based upon our
consideration of only those statutes, rules and regulations that, in our
experience, are normally applicable to private placements of debt
securities.  Various matters concerning the laws of Maryland are addressed in
the opinion of Venable LLP, which has been separately provided to you.  We
express no opinion with respect to those matters, and to the extent elements of
those opinions are necessary to the conclusions expressed herein, we have, with
your consent, assumed such matters. We express no opinion as to any state or
federal laws or regulations applicable to the subject transaction because of the
legal or regulatory status of any parties to the Note Documents or the legal or
regulatory status of any of their affiliates.

Subject to the foregoing and the other matters set forth herein, as of the date
hereof:

S-4.4(a)(1)-2

--------------------------------------------------------------------------------

 

1.    The Issuer is a limited liability company under the DLLCA with limited
liability company power and authority to enter into the Note Agreement and the
Notes and to perform its obligations thereunder.  With your consent, based
solely on certificates from public officials, we confirm that the Issuer is
validly existing and in good standing under the laws of the State of Delaware.

2.    Each Initial Subsidiary Guarantor is a limited liability company under the
DLLCA, with the limited liability company power and authority to enter into the
Subsidiary Guaranty Agreement and to perform its obligations thereunder.  With
your consent, based solely on certificates from public officials, we confirm
that each Initial Subsidiary Guarantor is validly existing and in good standing
under the laws of the State of Delaware.

3.    The execution, delivery and performance of the Note Documents to which
each of the Issuer and the Initial Subsidiary Guarantors is a party have been
duly authorized by all necessary limited liability company action of the Issuer
and the Initial Subsidiary Guarantors, as the case may be, and each of the Note
Documents to which each of the Issuer and the Initial Subsidiary Guarantors is a
party has been duly executed and delivered by each of the Issuer and the Initial
Subsidiary Guarantors, as the case may be.

4.    Each of the Note Documents is the legally valid and binding agreement of
each Note Party that is a party thereto, enforceable against each such Note
Party in accordance with its terms.

5.    (a) The execution and delivery by each Note Party of the Note Documents to
which it is a party does not on the date hereof and (b) the issuance and sale of
the Notes by the Issuer, and the issuance of any guarantee thereof by the
Initial Subsidiary Guarantors pursuant to the Note Documents do not, and the
performance of the obligations under the Note Documents will not, on the date
hereof:

(i)        violate the Operating LLC Agreement or Certificate of Formation of
the Issuer or the Subsidiary Guarantor Operating Agreements or Certificates of
Formation of the Initial Subsidiary Guarantors, as applicable;

(ii)       result in the breach of or a default under any of the Specified
Agreements;

(iii)     violate any federal or New York statute, rule or regulation applicable
to the Note Parties (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System, assuming the Issuer complies
with the provisions of the Note Documents relating to the use of proceeds) or
the DLLCA; or

(iv)     require any consents, approvals or authorizations to be obtained by the
Note Parties from, or any registrations, declarations or filings to be made by
the Note Parties with, any governmental authority under any federal or New York
statute, rule or regulation applicable to the Note Parties or the DLLCA, as
applicable, that have not been obtained or made.

 

S-4.4(a)(1)-3

--------------------------------------------------------------------------------

 

6.    None of the Parent, the Issuer or any Initial Subsidiary Guarantor is
required to be registered as an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

7.    No registration of the Notes or any guarantee thereof pursuant to the Note
Documents under the Securities Act of 1933, as amended, and no qualification of
an indenture under the Trust Indenture Act of 1939, as amended, is required for
the purchase of the Notes by the Purchasers. We express no opinion, however, as
to when or under what circumstances any Notes initially purchased by you may be
reoffered or resold.

Our opinions are subject to: (i) the effect of bankruptcy, insolvency,
reorganization, preference, fraudulent transfer, moratorium or other similar
laws relating to or affecting the rights and remedies of creditors; (ii) the
effect of general principles of equity, whether considered in a proceeding in
equity or at law (including the possible unavailability of specific performance
or injunctive relief), concepts of materiality, reasonableness, good faith and
fair dealing, and the discretion of the court before which a proceeding is
brought; (iii) the invalidity under certain circumstances under law or court
decisions of provisions providing for the indemnification or exculpation of or
contribution to a party with respect to a liability where such indemnification
or exculpation or contribution is contrary to public policy; and (iv) we express
no opinion with respect to (a) any provision for liquidated damages, default
interest, late charges, monetary penalties, make-whole premiums or other
economic remedies to the extent such provisions are deemed to constitute a
penalty, (b) consents to, or restrictions upon, governing law (except for the
validity under the laws of the State of New York, but subject to mandatory
choice of law rules and constitutional limitations, of provisions in the Note
Documents which expressly choose New York as the governing law for the Note
Documents), jurisdiction, venue, service of process, arbitration, remedies or
judicial relief, (c) any provision requiring the payment of attorneys’ fees,
where such payment is contrary to law or public policy, (d) provisions
purporting to make a guarantor primarily liable rather than as a surety, (e)
provisions purporting to waive modifications of any guaranteed obligation to the
extent such modification constitutes a novation and (f) the severability, if
invalid, of provisions to the foregoing effect.  We express no opinion with
respect to (i) advance waivers of claims, defenses, rights granted by law, or
notice, opportunity for hearing, evidentiary requirements, statutes of
limitation, trial by jury or at law, or other procedural rights; (ii) waivers of
broadly or vaguely stated rights and restrictions upon non-written modifications
and waivers; (iii) covenants not to compete; (iv) provisions for exclusivity,
election or cumulation of rights or remedies; (v) provisions authorizing or
validating conclusive or discretionary determinations; (vi) grants of setoff
rights; (vii) proxies, powers and trusts; and (viii) provisions prohibiting,
restricting, or requiring consent to assignment or transfer of any right or
property. We express no opinion or confirmation as to federal or state
securities laws (except as expressly set forth in numbered paragraphs 6 and 7 of
this letter as to federal securities laws), tax laws, antitrust or trade
regulation laws, insolvency or fraudulent transfer laws, antifraud laws,
compliance with fiduciary duty requirements, pension or employee benefit laws,
usury laws (other than any statute, rule or regulation of the State of New
York), environmental laws, margin regulations (except as set forth in numbered
paragraph 5(iii) of this letter), the rules of the Financial Industry Regulatory
Authority or stock exchange rules (without limiting other laws excluded by
customary practice).

S-4.4(a)(1)-4

--------------------------------------------------------------------------------

 

With your consent, for purposes of the opinion rendered in numbered paragraph 7
of this letter, we have assumed that the representations and agreements made by
each of you and each of the Note Parties contained in the Note Documents are
accurate and have been and will be complied with.

With your consent, we have assumed (i) that the Note Documents have been duly
authorized, executed and delivered by the parties thereto other than the Issuer
and the Initial Subsidiary Guarantors; (ii) that the Note Documents constitute
legally valid and binding obligations of the parties thereto other than the Note
Parties, enforceable against each of them in accordance with their respective
terms; and (iii) that the status of the Note Documents as legally valid and
binding obligations of the parties is not affected by any (a) breaches of, or
defaults under, agreements or instruments, (b) violations of statutes, rules,
regulations or court or governmental orders or (c) failures to obtain required
consents, approvals or authorizations from, or make required registrations,
declarations or filings with, governmental authorities, provided that we make no
such assumption to the extent we have specifically opined as to such matters
with respect to the Note Parties herein.

With your consent, we have also assumed (a) that the Parent is duly incorporated
and validly existing under the laws of the State of Maryland and is in good
standing with the State Department of Assessments and Taxation of Maryland, and
has the power and authority to execute, deliver and perform its obligations
under the Note Documents to which it is a party, and (b) that such Note
Documents have been duly authorized by all necessary corporate action of the
Parent, and duly executed and delivered by the Parent.

This letter is furnished only to you in your capacity as purchasers under the
Note Agreement and is solely for the benefit of the Purchasers in connection
with the transactions referenced in the first paragraph. This letter may not be
relied upon by you for any other purpose, or furnished to, assigned to, quoted
to, or relied upon by any other person, firm or other entity for any purpose
(including any person, firm or other entity that acquires Notes or any interest
therein from you) without our prior written consent, which may be granted or
withheld in our sole discretion.  We hereby consent to reliance hereon by any
future transferee of your interest in any Note pursuant to a transfer that is
made and consented to in accordance with the express provisions of Section 14.2
of the Note Agreement, on the condition and understanding that (i) this letter
speaks only as of the date hereof, (ii) we have no responsibility or obligation
to update this letter, to consider its applicability or correctness to other
than its addressee(s), or to take into account changes in law, facts or any
other developments of which we may later become aware, and (iii) any such
reliance by a future transferee must be actual and reasonable under the
circumstances existing at the time of transfer, including any changes in law,
facts or any other developments known to or reasonably knowable by the
transferee at such time.  In addition, we also hereby consent to your furnishing
a copy of this letter to:  (i) governmental regulatory agencies having
jurisdiction over any person permitted to rely on this letter (including the
National Association of Insurance Commissioners), (ii) to attorneys as needed in
connection with any legal action arising out of the transactions contemplated by
the Note Documents to which a person permitted to rely on this letter is a
party, (iii) to your counsel and auditors and (iv) as required by any order of
any court or governmental authority; provided,  however, that no such person
shall be entitled to rely on this letter.

S-4.4(a)(1)-5

--------------------------------------------------------------------------------

 

 

 

Very truly yours,

 

 

 

DRAFT

 

S-4.4(a)(1)-6

--------------------------------------------------------------------------------

 

SCHEDULE A

PURCHASERS

AMERICAN REPUBLIC INSURANCE COMPANY

BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC.

CATHOLIC UNITED FINANCIAL

CATHOLIC FINANCIAL LIFE

CINCINNATI LIFE INSURANCE COMPANY

FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN

GLEANER LIFE INSURANCE SOCIETY

GREAT WESTERN INSURANCE COMPANY

MINNESOTA LIFE INSURANCE COMPANY

UNITEDHEALTHCARE INSURANCE COMPANY

UNITED INSURANCE COMPANY OF AMERICA

WESTERN FRATERNAL LIFE ASSOCIATION

USAA LIFE INSURANCE COMPANY

USAA CASUALTY INSURANCE COMPANY

UNITED SERVICES AUTOMOBILE ASSOCIATION

AXA EQUITABLE LIFE INSURANCE COMPANY

AB US DIVERSIFIED CREDIT BM FUND

THRIVENT FINANCIAL FOR LUTHERANS

TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY

TRANSAMERICA LIFE INSURANCE COMPANY

TRANSAMERICA LIFE (BERMUDA) LTD

PACIFIC LIFE INSURANCE COMPANY

BANKERS LIFE AND CASUALTY COMPANY

S-4.4(a)(1)-7

--------------------------------------------------------------------------------

 

WASHINGTON NATIONAL INSURANCE COMPANY

LIFE INSURANCE COMPANY OF THE SOUTHWEST

NATIONAL LIFE INSURANCE COMPANY

AMERICO FINANCIAL LIFE & ANNUITY INSURANCE COMPANY

TRAVELERS CASUALTY AND SURETY COMPANY

THE STANDARD FIRE INSURANCE COMPANY

AMERICAN FAMILY LIFE INSURANCE COMPANY

PRIMERICA LIFE INSURANCE COMPANY

AMERICAN HEALTH AND LIFE INSURANCE COMPANY

SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA

S-4.4(a)(1)-8

--------------------------------------------------------------------------------

 

SCHEDULE B

INITIAL SUBSIDIARY GUARANTORS

SUNSTONE CENTURY, LLC

SUNSTONE JAMBOREE, LLC

SUNSTONE LA AIRPORT, LLC

SUNSTONE MACARTHUR, LLC

SUNSTONE QUINCY, LLC

SUNSTONE RED OAK, LLC

WB SUNSTONE-PORTLAND, LLC

SUNSTONE EAST GRAND, LLC

SUNSTONE ST. CHARLES, LLC

SUNSTONE EC5, LLC

SUNSTONE HAWAII 3-0, LLC

SUNSTONE HOLDCO 5, LLC

SUNSTONE HOLDCO 6, LLC

SUNSTONE HOLDCO 8, LLC

SUNSTONE SAINT CLAIR, LLC

SUNSTONE HOLDCO 4, LLC

SUNSTONE OCEAN, LLC

BOSTON 1927 OWNER, LLC

S-4.4(a)(1)-9

--------------------------------------------------------------------------------

 

SCHEDULE C

NOTES

 

S-4.4(a)(1)-10

--------------------------------------------------------------------------------

 

FORM OF OPINION OF MARYLAND COUNSEL

FOR THE PARENT GUARANTOR

[LETTERHEAD OF VENABLE LLP]

January 10, 2017

The Purchasers party to the

Agreement referred to below

                  Re:          Sunstone Hotel Investors, Inc.

Ladies and Gentlemen:

We have served as Maryland counsel for Sunstone Hotel Investors, Inc., a
Maryland corporation (the “Company”), in connection with certain matters of
Maryland law arising out of the sale and issuance by Sunstone Hotel Partnership
LLC, a Delaware limited liability company (the “Issuer”), of the following
series of its notes (collectively, the “Senior Notes”): (a)  $120,000,000
aggregate principal amount of the 4.69% Series A Guaranteed Senior Notes, due
January 10, 2026 and (b) $120,000,000 aggregate principal amount of the 4.79%
Series B Guaranteed Senior Notes, due January 10, 2028, pursuant to the Note and
Guarantee Agreement, dated as of December 20, 2016 (the “Agreement”), by and
among the Issuer, the Company and the purchasers of the Senior Notes listed in
the Purchaser Schedule thereto (the “Purchasers”).  This opinion is being
delivered to you at the request of the Company in connection with Section
4.4(a)(2) of the Agreement.  This firm did not participate in the negotiation or
drafting of the Agreement.

In connection with our representation of the Company, and as a basis for the
opinion hereinafter set forth, we have examined originals, or copies certified
or otherwise identified to our satisfaction, of the following documents
(hereinafter collectively referred to as the “Documents”):

1.     The charter of the Company (the “Charter”), certified by the State
Department of Assessments and Taxation of Maryland (the “SDAT”);

2.     The Amended and Restated Bylaws of the Company, as amended (the
“Bylaws”), certified as of the date hereof by an officer of the Company;

3.     A certificate, as of January __, 2017, of the SDAT as to the good
standing of the Company;

4.     Resolutions adopted by the Board of Directors of the Company (the
“Board”), or a duly authorized committee of the Board, relating to the
authorization of the execution, delivery and performance by the Company and the
Issuer of the Agreement, certified as of the date hereof by an officer of the
Company;

5.     The Agreement;

SCHEDULE 4.4(a)(2)
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

6.     A certificate executed by an officer of the Company, dated as of the date
hereof; and

7.     Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth below, subject to the assumptions,
limitations and qualifications stated herein.

In expressing the opinion set forth below, we have assumed the following:

1.     Each individual executing any of the Documents, whether on behalf of such
individual or another person, is legally competent to do so.

2.     Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.

3.     Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party’s obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms.

4.     All Documents submitted to us as originals are authentic.  All Documents
submitted to us as certified or photostatic copies conform to the original
documents.  All signatures on all Documents are genuine.  All public records
reviewed or relied upon by us or on our behalf are true and complete.  All
representations, warranties, statements and information as to factual maters
(other than those facts constituting conclusions of law on matters on which we
opine herein) contained in the Documents are true and complete.  There has been
no oral or written modification of or amendment to any of the Documents, and
there has been no waiver of any provision of any of the Documents, by action or
omission of the parties or otherwise.

Based upon the foregoing, and subject to the assumptions, limitations and
qualifications stated herein, it is our opinion that:

1.     The Company is a corporation duly incorporated and validly existing under
and by virtue of the laws of the State of Maryland and is in good standing with
the SDAT.

2.     The Company has the corporate power to execute and deliver the Agreement
and to perform its obligations thereunder.

3.     The execution and delivery of the Agreement, and the performance by the
Company and the Issuer of each of its obligations thereunder, have been duly
authorized by all necessary corporate action of the Company, in its own capacity
and in its capacity as managing member of the Issuer.  The Agreement has been
duly executed and delivered by the Company.

4.     The execution and delivery by the Company, in its own capacity and in its
capacity as managing member of the Issuer, of the Agreement and the performance
by the Company of its obligations thereunder, did not and will not conflict with
or constitute a breach of

S-4.4(a)(2)-2

--------------------------------------------------------------------------------

 

(a) the Charter or the Bylaws, or (b) any Maryland law, rule or regulation or
any order of any Maryland governmental authority (other than any law, rule,
regulation or order in connection with the securities laws of the State of
Maryland, as to which no opinion is hereby expressed).

5.     No consent, approval, authorization, or order of or filing with any
Maryland governmental authority was required to be made or obtained by the
Company in connection with the execution and delivery by the Company, in its own
capacity and in its capacity as managing member of the Issuer, of the Agreement
or will be required for the performance of its obligations under the Agreement,
except such consents, approvals, authorizations, orders and filings as may have
been made, waived or obtained, if any (except that no opinion is expressed
herein with respect to the applicability or effect of the securities laws of the
State of Maryland).

The foregoing opinion is limited to Maryland law and we do not express any
opinion herein concerning any other law.  We express no opinion as to the
applicability or effect of federal or state securities laws, including the
securities laws of the State of Maryland, or as to federal or state laws
regarding fraudulent transfers or the laws, codes or regulations of any
municipality or other local jurisdiction. We express no opinion with respect to
the actions which might be required under the organizational documents of the
Issuer for the Issuer to authorize, execute, deliver or perform the Agreement or
issue the Senior Notes.   We note that the Agreement provides that it shall be
governed by the laws of a state other than the State of Maryland.  To the extent
that any matter as to which our opinion is expressed herein would be governed by
the laws of any jurisdiction other than the State of Maryland, we do not express
any opinion on such matter.  Our opinion expressed in paragraph 4(b) above is
based upon our consideration of only those Maryland laws, rules or regulations
and orders of Maryland governmental authorities, if any, which, in our
experience, are normally applicable to transactions of the type referred to in
such paragraph.  Our opinion expressed in paragraph 5 above is based upon our
consideration of only those consents, approvals, authorizations and orders of
and filings with Maryland governmental authorities, if any, which, in our
experience, are normally applicable to transactions of the type referred to in
such paragraph.  We call your attention to the fact that, in connection with the
delivery of this opinion, we have not ordered or reviewed judgment, lien or any
other searches of public or private records of the Company or its
properties.   The opinion expressed herein is subject to the effect of any
judicial decision which may permit the introduction of parol evidence to modify
the terms or the interpretation of agreements.

The opinion expressed herein is limited to the matters specifically set forth
herein and no other opinion shall be inferred beyond the matters expressly
stated.  We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.

S-4.4(a)(2)-3

--------------------------------------------------------------------------------

 

This opinion is being furnished to you solely for your benefit.  Accordingly,
subject to the following sentences, this opinion may not be relied upon by,
quoted in any manner to, or delivered to any other person or entity (other than
Latham & Watkins LLP, counsel to the Company and the Issuer, in connection with
the opinion to be issued by it of even date herewith relating to the sale and
issuance of the Senior Notes) without, in each instance, our prior written
consent.  This opinion may also be relied upon by your permitted successors and
assigns (collectively, the “Future Recipients”), and such Future Recipients may
rely on this opinion as if it were addressed to them and had been delivered to
them on the date hereof; provided, however, that any such reliance by a Future
Recipient must be actual and reasonable under the circumstances existing at the
time, including any changes in law or facts or any other developments known to
or reasonably knowable by such Future Recipient at such time.  This opinion may
be delivered (but may not be relied upon by any recipient pursuant to this
sentence) (i) to potential successors and assigns, (ii) in connection with any
judicial or arbitration process, (iii) to your counsel and to your independent
auditors, and (iv) to any governmental or regulatory authority having
jurisdiction over you, including, without limitation, the National Association
of Insurance Commissioners, in each case, without our prior written consent.

 

Very truly yours,

 

 

S-4.4(a)(2)-4

--------------------------------------------------------------------------------

 

FORM OF OPINION OF SPECIAL COUNSEL

FOR THE PURCHASERS

The closing opinion of Schiff Hardin LLP, special counsel to the Purchasers,
called for by Section 4.4(b) of the Agreement, shall be dated the date of the
Closing and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:

1.      The Issuer is a limited liability company in good standing under the
laws of the State of Delaware.

2.      The Parent Guarantor is a corporation in good standing under the laws of
the State of Maryland.

3.      The Agreement and the Notes being delivered on the date hereof
constitute the legal, valid and binding contracts of the Issuer enforceable
against the Issuer in accordance with their respective terms.

4.      The Agreement constitutes the legal, valid and binding contract of the
Parent Guarantor enforceable against the Parent Guarantor in accordance with its
terms.

5.      The issuance, sale and delivery of the Notes being delivered on the date
hereof under the circumstances contemplated by this Agreement do not, under
existing law, require the registration of such Notes under the Securities Act or
the qualification of an indenture under the Trust Indenture Act of 1939.

The opinion of Schiff Hardin LLP shall also state that the opinions of Latham &
Watkins LLP and Venable LLP are satisfactory in scope and form to Schiff Hardin
LLP and that, in its opinion, the Purchasers are justified in relying thereon.

The opinion of Schiff Hardin LLP is limited to the laws of the State of New York
and the federal laws of the United States.

With respect to matters of fact upon which such opinion is based, Schiff Hardin
LLP may rely on appropriate certificates of public officials and officers of the
Constituent Companies and upon representations of the Constituent Companies and
the Purchasers delivered in connection with the issuance and sale of the Notes.

 

 

SCHEDULE 4.4(b)
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

DISCLOSURE MATERIALS

None.

 

 

SCHEDULE 5.3
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

SUBSIDIARIES OF THE PARENT GUARANTOR AND
OWNERSHIP OF SUBSIDIARY STOCK

(1)     Subsidiaries:

 

 

 

 

Entity

Jurisdiction of
Organization

Ownership

Subsidiary
Classification

Boston 1927 Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Boston 1927 Owner, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary Guarantor

EP Holdings, LLC

Delaware

100% Sunstone East Pratt, LP

Significant Subsidiary

One Park Boulevard, LLC

Delaware

75% Sunstone Park, LLC; 25% HHC One Park Boulevard, LLC

Excluded Subsidiary

Sun CHP I, Inc.

Delaware

100% Sunstone Hotel Investors, Inc.

Significant Subsidiary

Sun SHP II, LLC

Delaware

90.9092% Sunstone Hotel Investors, Inc.; 9.0908% Sun CHP I, Inc.

Significant Subsidiary

Sunstone 42nd Street Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone 42nd Street, LLC

Delaware

100% Sunstone Holdco 5, LLC

Excluded Subsidiary

Sunstone Broadway, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary

Sunstone Canal Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Canal, LLC

Delaware

100% Sunstone Holdco 9, LLC

Excluded Subsidiary

Sunstone Center Court, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary

Sunstone Center Court Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Century, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary Guarantor

Sunstone Century Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Cowboy, LP

Delaware

99.5% Sunstone Holdco 3, LLC, 0.5% Sunstone Cowboy GP, LLC

Significant Subsidiary

Sunstone Cowboy GP, LLC

Delaware

100% Sunstone Holdco 3, LLC

Significant Subsidiary

Sunstone Cowboy Lessee, LP

Delaware

99.5% Sunstone Hotel TRS Lessee, Inc.; 0.5% Sunstone Cowboy Lessee GP, LLC

Subsidiary

Sunstone Cowboy Lessee GP, LLC

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Significant Subsidiary

Sunstone East Grand, LLC

Delaware

100% Sunstone Holdco 6, LLC

Subsidiary Guarantor

Sunstone East Grand Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

 

SCHEDULE 5.4
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

 

 

 

 

 

Entity

Jurisdiction of
Organization

Ownership

Subsidiary
Classification

Sunstone East Pratt, LP

Delaware

99% Sunstone Holdco 4, LLC; 1% Sunstone East Pratt GP, LLC

Significant Subsidiary

Sunstone East Pratt GP, LLC

Delaware

100% Sunstone Holdco 4, LLC

Significant Subsidiary

Sunstone East Pratt Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone EC5, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary Guarantor

Sunstone EC5 Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Hawaii 3-0, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary Guarantor

Sunstone Hawaii 3-0 Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Holdco 3, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Holdco 4, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary Guarantor

Sunstone Holdco 5, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary Guarantor

Sunstone Holdco 6, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary Guarantor

Sunstone Holdco 8, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary Guarantor

Sunstone Holdco 9, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Holdco 10, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Hotel Acquisitions, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Hotel Partnership, LLC

Delaware

98.9% Sunstone Hotel Investors, Inc., 1.1% Sun SHP II, LLC

Issuer

Sunstone Hotel TRS Lessee, Inc.

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Jamboree, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary Guarantor

Sunstone Jamboree Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone K9, LLC

Delaware

100% Sunstone Holdco 5, LLC

Excluded Subsidiary

Sunstone K9 Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone LA Airport, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary Guarantor

Sunstone LA Airport Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Leesburg, LLC

Delaware

100% Sunstone Holdco 3, LLC

Significant Subsidiary

Sunstone Leesburg Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Longhorn, LP

Delaware

99.5% Sunstone Pledgeco, LLC; 0.5% Sunstone Longhorn GP, LLC

Significant Subsidiary

 

S-5.4-2

--------------------------------------------------------------------------------

 

 

 

 

 

 

Entity

Jurisdiction of
Organization

Ownership

Subsidiary
Classification

Sunstone Longhorn GP, LLC

Delaware

100% Sunstone Pledgeco, LLC

Significant Subsidiary

Sunstone Longhorn Holdco, LLC

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Significant Subsidiary

Sunstone Longhorn Lessee, LP

Delaware

99.5% Sunstone Longhorn Holdco, LLC; 0.5% Sunstone Longhorn Lessee GP, LLC

Subsidiary

Sunstone Longhorn Lessee GP, LLC

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Significant Subsidiary

Sunstone MacArthur, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary Guarantor

Sunstone MacArthur Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone North State Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone North State, LLC

Delaware

100% Sunstone Pledgeco, LLC

Excluded Subsidiary

Sunstone Ocean, LLC

Delaware

100% Sunstone Holdco 4, LLC

Subsidiary Guarantor

Sunstone Ocean Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Outparcel, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Subsidiary

Sunstone Park, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Park Lessee, LLC

Delaware

75% Sunstone Hotel TRS Lessee, Inc.; 25% HLT JV Acquisition, LLC

Subsidiary

Sunstone Philly, LP

Delaware

99.5% Sunstone Holdco 3, LLC; 0.5% Sunstone Philly GP, LLC

Significant Subsidiary

Sunstone Philly GP, LLC

Delaware

100% Sunstone Holdco 3, LLC

Significant Subsidiary

Sunstone Philly Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Pledgeco, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Quincy, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary Guarantor

Sunstone Quincy Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Red Oak, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary Guarantor

Sunstone Red Oak Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Saint Clair, LLC

Delaware

100% Sunstone Holdco 6, LLC

Subsidiary Guarantor

Sunstone Saint Clair Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Sea Harbor Holdco, LLC

Delaware

100% Sunstone Holdco 4, LLC

Significant Subsidiary

 

S-5.4-3

--------------------------------------------------------------------------------

 

 

 

 

 

 

Entity

Jurisdiction of
Organization

Ownership

Subsidiary
Classification

Sunstone Sea Harbor Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Sea Harbor, LLC

Delaware

100% SWW No. 1, LLC

Excluded Subsidiary

Sunstone Sidewinder, LLC

Delaware

100% Sunstone Holdco 3, LLC

Significant Subsidiary

Sunstone Sidewinder Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone St. Charles, LLC

Delaware

100% Sunstone Holdco 10, LLC

Subsidiary Guarantor

Sunstone St. Charles Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Top Gun Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Top Gun, LLC

Delaware

100% Sunstone Holdco 5, LLC

Excluded Subsidiary

Sunstone Von Karman, LLC

Delaware

100% Sunstone Hotel Partnership, LLC

Significant Subsidiary

Sunstone Westwood, LLC

Delaware

100% Sunstone Holdco 8, LLC

Significant Subsidiary

Sunstone Wharf Lessee, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

Sunstone Wharf, LLC

Delaware

100% Sunstone Holdco 6, LLC

Excluded Subsidiary

SWW No. 1, LLC

Delaware

85% Sunstone Sea Harbor Holdco, LLC; 15% HSH of Orlando, Inc.

Excluded Subsidiary

WB Sunstone-Portland, LLC

Delaware

100% Sunstone Holdco 8, LLC

Subsidiary Guarantor

WB Sunstone-Portland, Inc.

Delaware

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

WHP Bevflow, LLC

Texas

100% Sunstone Longhorn Lessee, LP

Subsidiary

WHP Texas Beverage 1, Inc.

Texas

100% Sunstone Hotel TRS Lessee, Inc.

Subsidiary

WHP Texas Beverage 2, Inc.

Texas

100% WHP Bevflow, LLC

Subsidiary

 

(2)          Affiliates:

None other than as listed above.

(3)          Issuer’s Directors and Senior Officers:

Sunstone Hotel Investors, Inc., managing member

John Arabia, President & Chief Executive Officer

Bryan Giglia, Chief Financial Officer

Robert C. Springer, Senior Vice President & Treasurer

S-5.4-4

--------------------------------------------------------------------------------

 

(4)         Parent Guarantor’s Directors and Senior Officers:

John V. Arabia, President & Chief Executive Officer and Director

Marc A. Hoffman, Executive Vice President & Chief Operating Officer

Bryan Giglia, Executive Vice President & Chief Financial Officer

Robert C. Springer, Executive Vice President & Chief Investment Officer

Douglas M. Pasquale, Chairman of the Board of Directors

Andrew Batinovich, Director

Keith P. Russell, Director

Z. Jamie Behar, Director

W. Blake Baird, Director

Thomas A. Lewis, Jr., Director

Murray J. McCabe, Director

Keith M. Locker, Director

 

S-5.4-5

--------------------------------------------------------------------------------

 

FINANCIAL STATEMENTS

Financial statements included in the Parent Guarantor’s Form 10-K for the year
ended December 31, 2015, filed with the SEC on February 23, 2016

Financial statements included in the Parent Guarantor’s Form 10-K for the year
ended December 31, 2014, filed with the SEC on February 19, 2015

Financial statements included in the Parent Guarantor’s Form 10-K for the year
ended December 31, 2013, filed with the SEC on February 25, 2014

Financial statements included in the Parent Guarantor’s Form 10-K for the year
ended December 31, 2012, filed with the SEC on February 25, 2013

Financial statements included in the Parent Guarantor’s Form 10-K for the year
ended December 31, 2011, filed with the SEC on February 28, 2012

Financial statements included in the Parent Guarantor’s Form 10-Q for the
quarter ended June 30, 2016, filed with the SEC on August 8, 2016

Supplemental Financial Information of the Parent Guarantor for the quarter ended
June 30, 2016

Consolidated Monthly STR Report for the Parent Guarantor for the month of June
2016

Consolidated Monthly STR Report for the Parent Guarantor for the month of
December 2015

 

 

SCHEDULE 5.5
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

REAL ESTATE ASSETS

 

 

 

 

 

 

PROPERTY
NAME

ADDRESS

FEE AND/OR
LEASEHOLD
OWNER

OCCUPANCY
STATUS1

Property
Classification

Encumbered

Hilton Garden Inn Chicago

10 E. Grand Ave., Chicago, IL 60611

Sunstone East Grand, LLC

79.9%

Seasoned

No

Courtyard LAX

6161 W Century Blvd., Los Angeles, CA 90045

Sunstone Century, LLC

97.4%

Seasoned

No

Hilton New Orleans

333 St. Charles Ave., New Orleans, LA 70130

Sunstone St. Charles, LLC

84.1%

Seasoned

No

Hyatt Chicago

633 N St. Clair St, Chicago, IL 60611

Sunstone Saint Clair, LLC

79.7%

Seasoned

No

Marriott Portland

520 SW Broadway, Portland, Oregon 97205

WB Sunstone-Portland, LLC

89.1%

Seasoned

No

Marriott Boston Quincy

1000 Marriott Dr., Quincy, MA 02169

Sunstone Quincy, LLC

80.3%

Seasoned

No

Hyatt Newport Beach

1107 Jamboree Rd., Newport Beach, CA 92660

Sunstone Jamboree, LLC

83.9%

Seasoned

No

Renaissance Long Beach

111 E. Ocean Blvd., Long Beach, CA 90802

Sunstone Ocean, LLC

80.5%

Seasoned

No

Fairmont Newport Beach

4500 MacArthur Blvd., Newport Beach, CA 92660

Sunstone MacArthur, LLC

79.6%

Seasoned

No

Renaissance LAX

9620 Airport Blvd, Los Angeles, CA 90045

Sunstone LA Airport, LLC

90.4%

Seasoned

No

 

 

--------------------------------------------------------------------------------

1 Occupancy percentages as shown reflect the average occupancy rates for each
property for the nine months ended September 30, 2016.

 

SCHEDULE 5.10
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

 

 

 

 

 

 

 

PROPERTY
NAME

ADDRESS

FEE AND/OR
LEASEHOLD
OWNER

OCCUPANCY
STATUS1

Property
Classification

Encumbered

Renaissance Westchester

80 W Red Oak Ln., West Harrison, NY 10604

Sunstone Red Oak, LLC

77.7%

Seasoned

No

Hyatt Regency SF

5 Embarcadero Center, San Francisco, CA 94111

Sunstone EC5, LLC

91.1%

Seasoned

No

Marriott Maui (Wailea)

3700 Wailea Alanui Drive, Maui, HI 96753

Sunstone Hawaii 3-0, LLC

73.8%

Development

No

Marriott Tysons Corner

8028 Leesburg Pike, Tysons Corner, VA 22182

Sunstone Leesburg, LLC

81.9%

Seasoned

No

Marriott Philadelphia

111 Crawford Avenue, West Conshohocken, PA 19428

Sunstone Philly, LP

73.0%

Seasoned

No

Marriott Park City

1895 Sidewinder Dr., Park City, UT 84060

Sunstone Sidewinder, LLC

69.8%

Seasoned

No

Marriott Houston

255 N. Sam Houston Pkwy. East, Houston, TX 77060

Sunstone Cowboy, LP

84.6%

Seasoned

No

Renaissance Harborplace

202 E. Pratt Street, Baltimore, MD 21202

Sunstone East Pratt, LLC

77.4%

Seasoned

No

Boston Park Plaza

50 Park Plaza, Boston, MA 02116

Boston 1927 Owner, LLC

78.1%

Seasoned

No

Marriott Boston Long Wharf

296 State Street, Boston, MA 02109

Sunstone Wharf, LLC

87.1%

Seasoned

Yes

Embassy Suites Chicago

600 North State Street, Chicago, IL 60654

Sunstone North State, LLC

87.7%

Seasoned

Yes

Hilton North Houston

12400 Greenspoint, Houston, TX 77060

Sunstone Longhorn, LP

79.7%

Seasoned

No

Embassy Suites La Jolla

4550 La Jolla Village Drive, San Diego, CA 92122

Sunstone Top Gun, LLC

86.2%

Seasoned

Yes

 

S-5.10-2

--------------------------------------------------------------------------------

 

 

 

 

 

 

 

 

PROPERTY
NAME

ADDRESS

FEE AND/OR
LEASEHOLD
OWNER

OCCUPANCY
STATUS1

Property
Classification

Encumbered

JW Marriott New Orleans

614 Canal Street, New Orleans, LA 70130

Sunstone Canal, LLC

83.3%

Seasoned

Yes

Renaissance Orlando at SeaWorld

6677 Sea Harbor Drive, Orlando, FL 32821

Sunstone Sea Harbor, LLC

81.6%

Seasoned

No

Hilton San Diego Bayfront

One Park Blvd., San Diego, CA 92101

One Park Boulevard, LLC

89.3%

Seasoned

Yes

Hilton Times Square

234 West 42nd St., New York, NY 10036

Sunstone 42nd Street, LLC

99.2%

Seasoned

Yes

Renaissance Washington D.C.

999 9th Street NW, Washington, DC 20001

Sunstone K9, LLC

82.5%

Seasoned

Yes

 

 

S-5.10-3

--------------------------------------------------------------------------------

 

EXISTING INDEBTEDNESS OF THE PARENT GUARANTOR AND ITS SUBSIDIARIES

 

 

 

 

Mortgage Loans Payable

Borrower

Lender

Outstanding2

Mortgage loan (fixed) secured by Embassy Suites Chicago

Sunstone North State, LLC

Bear Sterns Commercial Mortgage

$66,507,000

Mortgage loan (fixed) secured by Marriott Boston Long Wharf

Sunstone Wharf, LLC

Wells Fargo Bank

$176,000,000

Mortgage loan (fixed) secured by Hilton Times Square

Sunstone 42nd Street, LLC

Bank of America

$83,734,000

Mortgage loan (fixed) secured by Renaissance Washington D.C.

Sunstone K9, LLC

TIAA-CREF

$120,076,000

Mortgage loan (fixed) secured by JW Marriott New Orleans

Sunstone Canal, LLC

Wells Fargo Bank

$87,360,000

Mortgage loan (fixed) secured by Embassy Suites La Jolla

Sunstone Top Gun, LLC

Deutsche Bank

$63,173,000

Mortgage loan (variable) secured by Hilton San Diego Bayfront

One Park Boulevard, LLC

MUFG Union Bank, Compass Bank, CIBC Inc.

$223,124,000

 

 

 

 

 

Term Loans Payable3

 

 

Outstanding

Unsecured term loan (fixed) #1

Sunstone Hotel Partnership, LLC

Wells Fargo Bank, PNC Bank, U.S. Bank, BB&T

$85,000,000

Unsecured term loan (fixed) #2

Sunstone Hotel Partnership, LLC

PNC Bank, U.S. Bank, BB&T

$100,000,000

Bank Credit Agreement

Sunstone Hotel Partnership, LLC

Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and J.P. Morgan Securities LLC

$0

 

 

 

--------------------------------------------------------------------------------

2 Loan balances as of September 30, 2016.

3 Loan swapped to fixed interest rate.

 

 

SCHEDULE 5.15
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

CERTAIN PERMITTED LIENS

None.

 

 

SCHEDULE 10.5
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

INFORMATION RELATING TO PURCHASER

 

 

 

 

NAME AND ADDRESS OF PURCHASER

PRINCIPAL AMOUNT OF
NOTES TO BE PURCHASED

 

 

 

 

[NAME OF PURCHASER]

$

 

 

 

(1)

All payments by wire transfer of immediately available
     funds to:

 

 

 

 

     with sufficient information to identify the source and application of such
funds.

 

 

 

 

 

 

 

(2)

All notices of payments and written confirmations of
     such wire transfers:

 

 

 

 

(3)

E-mail address for Electronic Delivery:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4)

All other communications:

 

 

 

 

 

 

 

 

 

 

(5)

U.S. Tax Identification Number:

 

 

 

PURCHASER SCHEDULE
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------

 

FORM OF SUBSIDIARY GUARANTY AGREEMENT

(See Attached)

 

 

EXHIBIT SGA
(to Note and Guarantee Agreement)

--------------------------------------------------------------------------------