Document:

Exhibit 10.6

 

EXECUTION VERSION

 

AMENDMENT TO EMPLOYEE MATTERS AGREEMENT

 

This Amendment (this “Amendment”) to the Employee Matters Agreement, dated as of October 27, 2015, by and among Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation and the sole stockholder of Vistana (“Starwood”), Vistana Signature Experiences, Inc., a Delaware corporation and a wholly-owned Subsidiary of Starwood (“Vistana”), and Interval Leisure Group, Inc., a Delaware corporation (“ILG”) (the “Employee Matters Agreement”), is made as of April 18, 2016 (“Execution Date”).  Capitalized terms used but not defined in this Amendment have the meanings ascribed to them in the Employee Matters Agreement.

 

RECITALS

 

WHEREAS, in connection with the Agreement and Plan of Merger, dated as of October 27, 2015, entered into by and among Starwood, Vistana, ILG, and Iris Merger Sub, Inc., a Delaware corporation and a wholly-owned Subsidiary of ILG (the “Merger Agreement”), the Parties contemporaneously entered into the Employee Matters Agreement; and

 

WHEREAS, the Parties desire to amend certain rights and obligations of the Parties under the Employee Matters Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereof, and intending to be legally bound hereby, the Parties agree as follows:

 

AGREEMENT

 

Section 1.01                             Business Transfer Date.  When used in the Employee Matters Agreement, the term “Business Transfer Date” shall be deemed to be a reference to “Distribution Date,” as such term is defined in the Separation Agreement.

 

Section 1.02                             Retirement Plans.  Notwithstanding the provisions of Section 2.01(e)(iv) of the Employee Matters Agreement to the contrary, for the period from the Closing Date through December 31, 2016, the ILG Retirement Plan shall provide the Vistana Employees with the opportunity to receive the same rate of employer matching contributions and the same vesting schedule as provided under the Starwood Retirement Plan to such employees as of the date hereof; provided, however, that service may be credited for purposes of vesting or eligibility under the ILG Retirement Plan using the methodology currently provided by such ILG Retirement Plan.

 

Section 1.03                             Nonqualified Plans.  Notwithstanding the first two sentences of Section 2.03(b) of the Employee Matters Agreement, ILG shall amend its existing nonqualified deferred compensation plan (the “ILG Deferred Compensation Plan”) as of the Closing Date to provide for participation in the ILG Deferred Compensation Plan by Vistana Employees who were participants in the Starwood Deferred Compensation Plan immediately prior to the Closing Date

 

 

on terms and conditions (other than with respect to investment options) that are substantially similar to what was provided to them under the Starwood Deferred Compensation Plan and pursuant to the remainder of Section 2.03 of the Employee Matters Agreement. Notwithstanding the foregoing, neither ILG nor Vistana shall be under any obligation to offer any employees the opportunity to make future deferral elections under the ILG Deferred Compensation Plan, and if any future deferral elections are offered under the ILG Deferred Compensation Plan, neither ILG nor Vistana shall be under any obligation to make deferral elections available under the same terms as applied under the Starwood Deferred Compensation Plan.  References in the Employee Matters Agreement to the “Vistana Deferred Compensation Plan” shall be deemed to be references to the “ILG Deferred Compensation Plan,” as amended.  References to the actions to be taken “prior to the Closing Date” in the first sentence of each of Sections 2.03(c)(A) and 2.03(c)(B) of the Employee Matters Agreement shall be deemed to mean “as of the Closing Date.”

 

Section 1.04                             Flexible Benefit Plan.  Notwithstanding the provisions of Sections 2.05(a) and 2.05(b) of the Employee Matters Agreement to the contrary, in the event that the Closing Date has not occurred as of April 1, 2016, then effective as of such date Vistana Employees shall cease to participate in the Starwood Flexible Benefit Plan, and Vistana shall establish a new flexible benefit plan (the “Vistana Flexible Benefit Plan”) for the benefit of Vistana Employees.  The Vistana Flexible Benefit Plan shall be similar to the Starwood Flexible Benefit Plan, and shall be subject to the review and approval of ILG prior to its adoption, which consent shall not be unreasonably withheld.  In the event the foregoing applies, references in the Employee Matters Agreement to the “ILG Flexible Benefits Plan” shall be deemed to be references to the new Vistana Flexible Benefits Plan, and the Vistana Flexible Benefits Plan shall be deemed a Vistana Benefit Plan for purposes of the Merger Agreement.  Starwood will be responsible for all liabilities with respect to any Vistana Employee or Former Vistana Employee and their dependents, regardless of when such claims are filed and/or paid under the Starwood Flexible Benefits Plan with respect to all claims incurred on or before March 31, 2016.  The amounts Starwood has previously received for health and welfare coverage under the Starwood Flexible Benefits Plan for Vistana Employees or Former Vistana Employees through March 31, 2016 shall be considered full payment for such coverage and Vistana shall not be obligated to make any further payments toward such coverage.  Vistana will be responsible for all liabilities with respect to any Vistana Employee or COBRA Participant and their dependents, regardless of when such claims are filed and/or paid, under the Vistana Flexible Benefits Plan with respect to all claims incurred on or after April 1, 2016 and Starwood shall not be responsible for any “true up” payment with respect to such claims, including for the period that Vistana remains part of the Starwood controlled group.  Vistana shall not be required to pay Starwood a monthly amount for health and welfare coverage for Vistana Employees or Former Vistana Employees beginning with the month of April, 2016.

 

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Section 1.05                             Dependent Care Flexible Spending Account.  Notwithstanding the provisions of Section 2.05(c) of the Employee Matters Agreement to the contrary, ILG shall not be required to establish nor cause to be established an ILG FSA effective as of or following the Closing Date.  Starwood shall remain liable for all claims and liabilities under the Starwood FSA with respect to any Vistana Employee or Former Vistana Employee.  Furthermore, Vistana Employees shall not be eligible to participate in a dependent care spending account program on or after April 1, 2016; provided, however, that in its sole discretion, ILG may establish a flexible spending account for the benefit of Vistana Employees on or after April 1, 2016.

 

Section 1.06                             Continuation Coverage.  Notwithstanding the provisions of Section 2.05(d) of the Employee Matters Agreement to the contrary, in the event that the Closing Date has not occurred as of April 1, 2016, the Vistana Flexible Benefits Plan shall be solely responsible for providing and meeting the COBRA continuation coverage requirements for all Vistana Employees and all Former Vistana Employees, as well as their “qualified beneficiaries” (as defined in COBRA), with respect to all claims incurred on or after April 1, 2016.  Furthermore, all COBRA premiums for coverage for such individuals beginning on April 1, 2016 shall be paid to Vistana or the Vistana Flexible Benefits Plan.

 

Section 1.07                             Health Reimbursement Account.  Notwithstanding the provisions of Section 2.05(e) of the Employee Matters Agreement to the contrary, in the event that the Closing Date has not occurred as of April 1, 2016, Vistana Employees will cease to participate in the Starwood HRA as of such date, and Vistana shall establish a new health reimbursement account (the “Vistana HRA”) for the benefit of Vistana Employees.  The Vistana HRA shall have similar terms and provide the same level of benefits as the Starwood HRA, and shall be subject to the review and approval of ILG prior to its adoption which consent shall not be unreasonably withheld.  In connection with providing the same level of benefits, to the extent permitted by applicable Law, the Vistana HRA shall provide that the account balances for each Vistana Employee who is a participant under the Vistana HRA shall be increased by any balance that still remains under the Starwood HRA for such participant after the end of the run out period under the Starwood HRA for paying claims incurred in the 2015-2016 plan year to the same extent as such amount would have remained available for such participant’s use under the Starwood HRA during the 2016-2017 plan year.  In the event the foregoing applies, references in the Employee Matters Agreement to the “ILG HRA” shall be deemed to be references to the new Vistana HRA, and the Vistana HRA shall be deemed a Vistana Benefit Plan for purposes of the Merger Agreement.  In the event the Vistana HRA is established pursuant to this Section 1.07, (i) Starwood shall be responsible for all liabilities with respect to any Vistana Employee or Former Vistana Employee and their dependents, regardless of when such claims are filed and/or paid under the Starwood HRA, and (ii) Vistana shall be responsible for all liabilities with respect to any Vistana Employee or Former Vistana Employee and their dependents, regardless of when such claims are filed, under the Vistana HRA with respect to all claims incurred on or after April 1, 2016.

 

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Section 1.08                             Vacation and Sick Pay Liabilities.  Notwithstanding the provisions of Section 2.07 of the Employee Matters Agreement to the contrary, on and after the Closing Date, accrual of vacation and sick leave in respect of each Vistana Employee working in California, shall be according to an accrual schedule that is substantially similar to Starwood’s accrual schedule as in effect immediately prior to the Closing Date, rather than one which is identical.

 

Section 1.09                             Full Force and Effect.  Except as expressly set forth in this Amendment, this Amendment does not, by implication or otherwise, alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Merger Agreement or the Employee Matters Agreement, which are hereby incorporated by reference and shall remain in full force and effect.

 

Section 1.10                             Counterparts.  This Amendment may be executed in two or more counterparts (including by electronic or .pdf transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Delivery of any signature page by facsimile, electronic or .pdf transmission shall be binding to the same extent as an original signature page.

 

Section 1.11                             Updates to Vistana Disclosure Schedule.  If the Vistana Flexible Benefit Plan and Vistana HRA are established pursuant to Sections 1.04 and 1.07 hereof, they will be deemed to be listed as a Vistana Benefit Plan on Section 5.13(a) of the Vistana Disclosure Schedule.

 

Section 1.12                             Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws principles thereof.

 

[Signature pages follow.]

 

4

 

IN WITNESS WHEREOF, the Parties have executed this Amendment as of the Execution Date.

 

	
 
    	
STARWOOD   HOTELS & RESORTS WORLDWIDE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas B.   Mangas
    
	
 
    	
Name:
    	
Thomas B. Mangas
    
	
 
    	
Title:
    	
CEO
    

 

[Signature Page to Amendment to Employee Matters Agreement]

 

 

	
 
    	
VISTANA SIGNATURE   EXPERIENCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas B.   Mangas
    
	
 
    	
Name:
    	
Thomas B. Mangas
    
	
 
    	
Title:
    	
Authorized   Signatory
    

 

[Signature Page to Amendment to Employee Matters Agreement]

 

 

	
 
    	
INTERVAL LEISURE GROUP, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jeanette E.   Marbert
    
	
 
    	
Name:
    	
Jeanette E.   Marbert
    
	
 
    	
Title:
    	
Executive Vice   President and Chief Operating Officer
    

 

[Signature Page to Amendment to Employee Matters Agreement]

 

 

EMPLOYEE MATTERS AGREEMENT

 

by and among

 

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,

 

VISTANA SIGNATURE EXPERIENCES, INC.

 

And

 

INTERVAL LEISURE GROUP, INC.

 

dated as of

 

October 27, 2015

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
ARTICLE I.
    	
 
    
	
 
    	
DEFINITIONS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.02
    	
Other Terms
    	
5
    
	
 
    	
 
    	
 
    
	
Section 1.03
    	
Interpretation;   Construction
    	
6
    
	
 
    	
 
    	
 
    
	
Section 1.04
    	
Survival
    	
6
    
	
 
    	
 
    	
 
    
	
Section 1.05
    	
Termination
    	
7
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE II.
    	
 
    
	
 
    	
EMPLOYEE   BENEFITS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Employment
    	
7
    
	
 
    	
 
    	
 
    
	
Section 2.02
    	
Retirement Plans
    	
9
    
	
 
    	
 
    	
 
    
	
Section 2.03
    	
Nonqualified Plans
    	
11
    
	
 
    	
 
    	
 
    
	
Section 2.04
    	
Annual Bonus
    	
13
    
	
 
    	
 
    	
 
    
	
Section 2.05
    	
Health and Welfare   Benefits
    	
13
    
	
 
    	
 
    	
 
    
	
Section 2.06
    	
Workers’ Compensation
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.07
    	
Vacation and Sick Pay   Liabilities
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.08
    	
Severance
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.09
    	
Preservation of Right   To Amend or Terminate Plans
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.10
    	
No Right to Employment
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.11
    	
Equity Compensation   Awards
    	
16
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE III.
    	
 
    
	
 
    	
LABOR AND   EMPLOYMENT MATTERS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Collective Bargaining   Agreements
    	
18
    
	
 
    	
 
    	
 
    
	
Section 3.02
    	
WARN Obligations
    	
18
    
	
 
    	
 
    	
 
    
	
Section 3.03
    	
Multiemployer Plan
    	
18
    
	
 
    	
 
    	
 
    
	
Section 3.04
    	
Attorney-Client   Privilege
    	
19
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE IV.
    	
 
    
	
 
    	
REMEDIES
    	
 
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Indemnification
    	
20
    
	
 
    	
 
    	
 
    
	
Section 4.02
    	
Enforcement
    	
20
    
	
 
    	
 
    	
 
    
	
 
    	
ARTICLE V.
    	
 
    
	
 
    	
MISCELLANEOUS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Relationship of Parties
    	
20
    

 

i

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
Section 5.02
    	
Assignment
    	
20
    
	
 
    	
 
    	
 
    
	
Section 5.03
    	
Rights of Third Parties
    	
20
    
	
 
    	
 
    	
 
    
	
Section 5.04
    	
Captions
    	
20
    
	
 
    	
 
    	
 
    
	
Section 5.05
    	
Severability of   Provisions
    	
21
    
	
 
    	
 
    	
 
    
	
Section 5.06
    	
Notices
    	
21
    
	
 
    	
 
    	
 
    
	
Section 5.07
    	
Further Assurances
    	
23
    
	
 
    	
 
    	
 
    
	
Section 5.08
    	
Amendment; Waiver
    	
23
    
	
 
    	
 
    	
 
    
	
Section 5.09
    	
Governing Law
    	
23
    
	
 
    	
 
    	
 
    
	
Section 5.10
    	
Consent to   Jurisdiction: Waiver of Jury Trial
    	
23
    
	
 
    	
 
    	
 
    
	
Section 5.11
    	
Entire Agreement
    	
24
    
	
 
    	
 
    	
 
    
	
Section 5.12
    	
Counterparts
    	
24
    
	
 
    	
 
    	
 
    
	
Section 5.13
    	
Expenses
    	
24
    

 

ii

 

SCHEDULES

 

Schedule 2.01(a)     Employees Transferred to Vistana

Schedule 2.01(b)     Employees Transferred to Starwood

Schedule 2.01(d)     Employment Agreements

Schedule 2.01(e)      Severance Guidelines

Schedule 2.11(a)     Starwood Time-Based Awards

Schedule 2.11(b)     Starwood Performance-Based Awards

 

iii

 

EMPLOYEE MATTERS AGREEMENT

 

This EMPLOYEE MATTERS AGREEMENT (this “Agreement”) is made and entered into as of October 27, 2015, by and among STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (“Starwood”), VISTANA SIGNATURE EXPERIENCES, INC., a Delaware corporation (“Vistana”) and INTERVAL LEISURE GROUP, INC., a Delaware corporation (“ILG,” and together with Starwood and Vistana, the “Parties”).

 

RECITALS

 

WHEREAS, pursuant to that certain Separation Agreement dated as of October 27, 2015, between Starwood and Vistana (the “Separation Agreement”), Starwood and Vistana have set out the terms on which, and the conditions subject to which, they wish to implement the Internal Reorganization (as defined in the Separation Agreement) and the Distribution (as defined in the Separation Agreement);

 

WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of October 27, 2015, by and among Starwood, Vistana, ILG and Iris Merger Sub, Inc. a Delaware corporation (the “Merger Agreement”), immediately following the Distribution, a Subsidiary of ILG will merge with and into Vistana, and Vistana Common Stock will be converted into ILG Common Stock on the terms and subject to the conditions of the Merger Agreement (the “Merger”); and

 

WHEREAS, in connection with the foregoing, the Parties have agreed to enter into this Agreement to allocate, among Starwood, Vistana and ILG, Assets, Liabilities and responsibilities with respect to certain employee compensation, benefits, labor and certain other employment matters pursuant to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Starwood, ILG, and Vistana agree as follows:

 

ARTICLE I.
 DEFINITIONS

 

Section 1.01                             Definitions.  As used in this Agreement, the following terms shall have the meanings indicated below:

 

Action:  has the meaning specified in the Merger Agreement.

 

Adjustment Ratio:  means a fraction, (x) the numerator of which is the closing sale price of a share of Starwood Common Stock on the New York Stock Exchange immediately preceding the Distribution (as traded on the “regular way” market) as reported by Bloomberg L.P. or any successor thereto, and (y) the denominator of which is the opening sale price of a share of ILG Common Stock on the Nasdaq Stock Market immediately following the Effective Time (as traded on the “regular way” market) as reported by Bloomberg L.P. or any successor thereto.

 

Affiliate:  has the meaning specified in the Separation Agreement.

 

1

 

Assets:  has the meaning specified in the Separation Agreement.

 

Assumed Time-Based Stock Award:  has the meaning specified in Section 2.11(a).

 

Business Day:  has the meaning specified in the Merger Agreement.

 

Business Transfer Date:  has the meaning specified in the Separation Agreement.

 

Business Transfer Time:  has the meaning specified in the Separation Agreement.

 

Closing:  has the meaning specified in the Merger Agreement.

 

Closing Date:  has the meaning specified in the Merger Agreement.

 

Closing Plan Year: means the calendar year in which the Closing Date occurs.

 

COBRA:  has the meaning specified in Section 2.05(d).

 

Code:  means the Internal Revenue Code of 1986, as amended, or any successor federal income tax Law.  Reference to a specific Code provision also includes any temporary or final regulation in force under that provision.

 

Collective Bargaining Agreement:  means any collective bargaining agreement, labor agreement, or other written agreement to which Starwood, ILG, or any of their respective direct or indirect Subsidiaries is a party with any labor union, works council, its predecessors-in-interest, and its constituent local unions.

 

Contract:  has the meaning specified in the Separation Agreement.

 

Converted RSU:  has the meaning specified in Section 2.11(b).

 

Distribution Date:  has the meaning specified in the Separation Agreement.

 

Earned Starwood Performance Shares:  has the meaning specified in Section 2.11(b).

 

Effective Time:  has the meaning specified in the Merger Agreement.

 

Employee:  means with respect to any entity, an individual who is considered, according to the payroll and other records of such entity, to be employed by such entity, whether active or inactive, on disability leave, or on other leave of absence.

 

Employment Agreement:  means any individual employment, offer, retention, consulting, change in control, split dollar life insurance, sale bonus, incentive bonus, severance, restrictive covenant or other employment related or individual compensatory agreement related to the Vistana Business between any current or former employee and Starwood or any of its Affiliates (including Vistana) which is listed on Schedule 2.01(d).

 

Employment Claim:  means any actual or threatened lawsuit, arbitration, ERISA claim, or federal, state, or local judicial or administrative proceeding of whatever kind involving a demand by or on behalf of or relating to an employee, former employee, job applicant, intern or volunteer, independent contractor,  leased employee, or anyone

 

2

 

claiming to be an employee or joint employee, or by or relating to a collective bargaining agent of employees, or by or relating to any federal, state, or local government agency alleging liability against an employer or against an employee pension, welfare or other benefit plan, or an administrator, trustee or fiduciary thereof.

 

ERISA:  means the Employee Retirement Income Security Act of 1974, as amended.  Reference to a specified provision of ERISA also includes any temporary or final regulations in force under that provision.

 

Foreign Service DB Plan:  has the meaning specified in Section 2.02(e)(i).

 

Former Vistana Employee:  means former Employees of Starwood or its Affiliates whose last employment with Starwood or its Affiliates before the Closing Date was with a Vistana Entity.

 

FY ILG AIP Award:  has the meaning specified in Section 2.04(a).

 

Governmental Authority:  has the meaning specified in the Merger Agreement.

 

Hotel Trust Fund:  has the meaning specified in Section 3.03(a).

 

ILG:  has the meaning specified in the preamble of this Agreement.

 

ILG AIP:  has the meaning specified in Section 2.04(a).

 

ILG Common Stock:  means the common stock, par value $0.01 per share, of ILG.

 

ILG Equity Award:  means each Assumed Time-Based Stock Award and Converted RSU.

 

ILG FSA: has the meaning specified in Section 2.05(c).

 

ILG Flexible Benefits Plan:  has the meaning specified in Section 2.05(b).

 

ILG HRA:  means the Plan established or designed and maintained by ILG pursuant to Section 2.05(e).

 

ILG Restricted Share Award:  means an award of restricted ILG Common Stock that is subject only to time-based vesting requirements and granted pursuant to an ILG Stock Plan.

 

ILG Retirement Plan:  means the Plan established or designated and maintained by ILG pursuant to Section 2.02(b).

 

ILG RSU Award:  has the meaning specified in the Merger Agreement.

 

ILG Stock Plans:  has the meaning specified in the Merger Agreement.

 

ILG Time-Based Stock Award:  means an ILG RSU Award or ILG Restricted Share Award granted by ILG under an ILG Stock Plan as described in Section 2.11(a).

 

Law:  has the meaning specified in the Merger Agreement.

 

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Liabilities:  has the meaning specified in the Separation Agreement.

 

Merger:  has the meaning specified in the recitals of this Agreement.

 

Merger Agreement:  has the meaning specified in the recitals of this Agreement.

 

Parties:  has the meaning set forth in the preamble of this Agreement.

 

Person:  has the meaning specified in the Merger Agreement.

 

Plan:  means any plan, policy, arrangement, contract or agreement providing compensation or benefits for any group of Employees or individual Employee, or the dependents or beneficiaries of any such Employee(s), whether formal or informal or written or unwritten, and including, without limitation, any means, whether or not legally required, pursuant to which any benefit is provided by an employer to any Employee or the beneficiaries of any such Employee.  The term “Plan” as used in this Agreement does not include any contract, agreement or understanding relating to settlement of actual or potential Employment Claims.  Notwithstanding the foregoing, no Employment Agreement will constitute a Plan for purposes hereof.

 

Plan Payee:  means an individual who is entitled to payment of Plan benefits in his or her capacity as a beneficiary with respect to the benefits of a deceased participant in the Plan or an alternate payee under a qualified domestic relations order within the meaning of Section 414(p)(1)(A) of the Code and Section 206(d)(3)(B)(i) of ERISA with respect to the benefits of a participant in the Plan.

 

Representative:  has the meaning specified in the Merger Agreement.

 

SEC:  has the meaning specified in the Merger Agreement.

 

Separation Agreement:  has the meaning specified in the recitals of this Agreement.

 

Starwood:  has the meaning specified in the preamble of this Agreement.

 

Starwood AIP:  has the meaning specified in Section 2.04(a).

 

Starwood Common Stock:  has the meaning specified in the Merger Agreement.

 

Starwood Deferred Compensation Plan:  means the Amended and Restated Starwood Hotels & Resorts Worldwide, Inc. Deferred Compensation Plan (effective as of January, 1, 2008).

 

Starwood Equity Award:  means each Starwood Time-Based Stock Award and Starwood Performance Share.

 

Starwood Flexible Benefits Plan:  means the Starwood Hotels & Resorts Worldwide, Inc. Flexible Benefits Plan.

 

Starwood FSA:  has the meaning specified in Section 2.05(c).

 

Starwood HRA:  has the meaning specified in Section 2.05(e).

 

4

 

Starwood Performance Share:  means a performance share award granted by Starwood under the Starwood Stock Plan before the Distribution Date.

 

Starwood Plan:  means any of (i) the Starwood Flexible Benefits Plan, the Starwood Retirement Plan, the Starwood Deferred Compensation Plan, and (ii) any other Plan that, as of the close of business on the day before the Closing Date, is sponsored or maintained solely by Starwood.

 

Starwood Retirement Plan:  means the Starwood Hotels & Resorts Worldwide, Inc. Savings and Retirement Plan, as in effect immediately prior to the Closing Date.

 

Starwood Stock Plan:  means the Starwood Hotels & Resorts Worldwide, Inc. 2013 Long-Term Incentive Compensation Plan.

 

Starwood Time-Based Stock Award:  means an award of Starwood restricted stock or, in the case of certain Employees based outside the United States, restricted stock units, granted by Starwood under the Starwood Stock Plan before the Distribution Date.

 

Subsidiary:  has the meaning specified in the Merger Agreement.

 

Transaction:  means those certain transactions contemplated by the Transaction Documents.

 

Transaction Documents:  has the meaning specified in the Merger Agreement.

 

Vistana:  has the meaning specified in the preamble of this Agreement.

 

Vistana Benefit Plans:  has the meaning specified in the Merger Agreement.

 

Vistana Business:  has the meaning specified in the Separation Agreement.

 

Vistana Common Stock:  has the meaning specified in the Separation Agreement.

 

Vistana Deferred Compensation Plan:  has the meaning specified in Section 2.03(b).

 

Vistana Employee(s):  has the meaning specified in Section 2.01(a).

 

Vistana Entities:  has the meaning specified in the Separation Agreement.

 

Vistana Group:  has the meaning specified in the Separation Agreement.

 

WARN:  has the meaning specified in Section 3.02.

 

Withdrawal Liability:  has the meaning specified in Section 3.03(a).

 

Workers’ Compensation Event:  means the event, injury, illness or condition giving rise to a workers’ compensation claim.

 

Section 1.02                             Other Terms.  Any capitalized terms used herein but not defined herein shall have the meaning specified in the Merger Agreement or Separation Agreement, as applicable.

 

5

 

Section 1.03                             Interpretation; Construction.

 

(a)                                 Unless the context of this Agreement otherwise requires:

 

(i)                                     (A) words of any gender include each other gender and neutral form; (B) words using the singular or plural number also include the plural or singular number, respectively; (C) the terms “hereof,” “herein,” “hereby,” “hereto,” “herewith,” “hereunder” and derivative or similar words refer to this entire Agreement; (D) the terms “Article,” “Section,” “Annex,” “Exhibit,” “Schedule,” and “Disclosure Schedule” refer to the specified Article, Section, Annex, Exhibit, Schedule or Disclosure Schedule of this Agreement and references to “paragraphs” or “clauses” shall be to separate paragraphs or clauses of the section or subsection in which the reference occurs; (E) the word “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation,” and (F) the word “or” shall be disjunctive but not exclusive;

 

(ii)                                  references to Contracts (including this Agreement) and other documents or Laws shall be deemed to include references to such Contract or Law as amended, supplemented or modified from time to time in accordance with its terms and the terms hereof, as applicable, and in effect at any given time (and, in the case of any Law, to any successor provisions);

 

(iii)                               references to any federal, state, local, or foreign statute or Law shall include all regulations promulgated thereunder; and

 

(iv)                              references to any Person include references to such Person’s successors and permitted assigns, and in the case of any Governmental Authority, to any Person succeeding to its functions and capacities.

 

(b)                                 The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent and no rule of strict construction shall be applied against any party hereto.

 

(c)                                  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.  If any action is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action may be deferred until the next Business Day.

 

(d)                                 The word “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.”

 

(e)                                  All monetary figures shall be in United States dollars unless otherwise specified.

 

Section 1.04                             Survival.  If the Merger is consummated, the obligations set forth in this Agreement shall remain in full force and effect and shall survive the Closing Date.

 

6

 

Section 1.05                             Termination.  This Agreement shall terminate automatically without any further action of the Parties upon a termination of the Merger Agreement, and no Party will have any further obligations to the other Parties.

 

ARTICLE II.
 EMPLOYEE BENEFITS

 

Section 2.01                             Employment.

 

(a)                                 Transfer of Employees to Vistana.  At or prior to the Business Transfer Time, Starwood shall take all steps necessary and appropriate so that all of the following Employees are transferred to the Vistana Entities:  (i) each Employee (other than any Employees who are on long-term disability leave as of the Business Transfer Time) whose employment duties immediately prior to the Business Transfer Date relate exclusively to the Vistana Business and (ii) each Employee listed on Schedule 2.01(a) attached hereto (clauses (i) and (ii) collectively, the “Vistana Employees,” and each such Employee a “Vistana Employee”).  Between the date hereof and the Business Transfer Date, Starwood and ILG may mutually agree to update, amend or supplement Schedule 2.01(a) attached hereto to correct any inadvertent inclusions and exclusions thereto.  Starwood shall deliver the final Schedule 2.01(a), as amended, updated or supplemented by mutual agreement of the Parties subject to this Section 2.01(a), to ILG immediately prior to the Business Transfer Time.

 

(b)                                 Employees of the Vistana Entities.  Starwood shall not, and shall cause its Affiliates not to, terminate the employment of any Employees of the Vistana Entities other than in the ordinary course of business and shall not transfer the employment of such Employees prior to the Closing Date except as provided below.  Notwithstanding the foregoing, at or prior to the Business Transfer Time, Starwood shall take all steps necessary and appropriate so that the Employees of the Vistana Entities listed on Schedule 2.01(b) shall be transferred to Starwood.  Between the date hereof and the Business Transfer Date, Starwood and ILG may mutually agree to update, amend or supplement Schedule 2.01(b) attached hereto to correct any inadvertent inclusions and exclusions thereto.  Starwood shall deliver the final Schedule 2.01(b), as amended, updated or supplemented by mutual agreement of the Parties subject to this Section 2.01(b), to ILG immediately prior to the Business Transfer Time.

 

(c)                                  Allocation of Responsibilities as Employer.  At the Business Transfer Time, except as otherwise provided under this Agreement or any other agreement relating to the Transaction, the Vistana Group shall retain or assume, as the case may be, responsibility as employer of the Vistana Employees.

 

(d)                                 Employment Agreements.  At or prior to the Business Transfer Time, Starwood shall cause Vistana to assume and be solely and exclusively responsible for all Employment Agreements entered between the Vistana Employees or Former Vistana Employees and Starwood or any of its Affiliates that are listed on Schedule 2.01(d) and all obligations and liabilities with respect thereto, to be effective as of the Business Transfer Date, and on and after the Business Transfer Date Starwood and its

 

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Affiliates (other than Vistana Entities) shall have no obligations or liabilities with respect to such Employment Agreements.  From and after the Closing Date, ILG shall, or shall cause Vistana to, assume and honor all liabilities and obligations to or in respect of the Vistana Employees or Former Vistana Employees (and any dependents or beneficiaries thereof) under all Vistana Benefit Plans and all Employment Agreements, severance, termination, consulting, retirement and other compensation and benefit plans, arrangements and agreements to which any Vistana Entity is a party, as in effect immediately prior to the Closing.  Starwood shall take all steps necessary to terminate the Employment Agreement between Matthew Avril and Starwood Vacation Ownership, Inc., dated April 13, 2015 prior to the Business Transfer Time without any payment by Starwood Vacation Ownership, Inc. or any of the Vistana Entities, and ILG and the Vistana Entitles shall have no liability with respect to such employment agreement or the Consulting Agreement between MAE Business Enterprises, Inc. and Starwood, dated December 15, 2014, as amended.

 

(e)                                  Comparable Benefits.  For the period from the Closing Date through December 31, 2016, ILG shall or shall cause Vistana to provide to each Vistana Employee (i) annual base salary, target bonus opportunities (as a percentage of base salary) and commission opportunities that are no less than the annual base salary, target bonus opportunities and commission opportunities, respectively, provided to such Vistana Employee immediately prior to the Closing Date, (ii) employee benefits that are comparable in the aggregate to such Vistana Employee to those benefits provided to such Vistana Employee immediately prior to the Closing Date but excluding any defined benefit pension benefits, employer or matching contributions under any defined contribution retirement plan, equity compensation arrangement, stock purchase programs, retiree medical or insurance benefits, any benefits under a nonqualified deferred compensation plan or employee discount program, (iii) severance benefit opportunities that are not less favorable to such Vistana Employee than the greater of (A) the severance benefit opportunities available to such Vistana Employee under such Vistana Employee’s offer letter (if listed on Schedule 2.01(d)) or (B) the severance benefit opportunities available to such Vistana Employee under Starwood’s severance benefit guidelines listed on Schedule 2.01(e), in each case immediately prior to the Closing Date, and (iv) an opportunity to participate in the ILG Retirement Plan on substantially the same terms as similarly situated employees of ILG.

 

(f)                                   Service Credit.  From and after the Closing, ILG shall give each Vistana Employee full credit for determining the amount of paid time off, vacation or sick leave, and the level of employer contributions under any defined contribution retirement plan, and for purposes of eligibility to participate and vesting (but not benefit accruals (if applicable)) under any employee benefit plans, arrangements, collective agreements and employment-related entitlements (including under any applicable pension, defined contribution (for example, 401(k)), deferred compensation, savings, medical, dental, life insurance, disability, vacation, long-service leave or other leave entitlements, post-retirement health and life insurance, termination indemnity, severance or separation pay plans) provided, sponsored, maintained or contributed to by ILG or any of its Affiliates (including Vistana and its

 

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Subsidiaries) under which such Vistana Employee is eligible to participate after the Closing for such Vistana Employee’s service with Starwood, Vistana or their Subsidiaries prior to the Effective Time, to the same extent recognized by any of Starwood, Vistana and their Subsidiaries immediately prior to the Effective Time, except to the extent such credit would result in the duplication of benefits for the same period of service.  Notwithstanding the foregoing, to the extent permitted under applicable Law, neither ILG nor Vistana shall be required to provide credit for such service for benefit accrual purposes under any employee benefit plan of ILG that is a defined benefit pension plan.

 

Section 2.02                             Retirement Plans.

 

(a)                                 Starwood Retirement Plan.  Effective on the Closing Date, Vistana Employees shall cease to be eligible to: (A) have elective deferrals contributed on their behalf to the Starwood Retirement Plan with respect to pay paid after the Closing Date, (B) be credited with future employer contributions (for example, matching contributions) in the Starwood Retirement Plan, or (C) make contributions (for example, rollovers or loan repayments) to the Starwood Retirement Plan. Starwood shall contribute to the applicable Vistana Employee or Former Vistana Employee accounts under the Starwood Retirement Plan the employer match true-up pursuant to Section 4.2(b) of such plan with respect to the completed plan year prior to the Closing Plan Year in the ordinary course but no later than the day before the Closing Date.  Such employer match true-up shall be charged to and paid by Vistana pursuant to Starwood’s normal operating rules for the employer match true-up.

 

(b)                                 ILG Retirement Plan.  Prior to the Closing Date, ILG shall take, or cause to be taken, or have taken, all action necessary and appropriate to establish or maintain for the benefit of Vistana Employees (i) a defined contribution plan qualified under Section 401(a) of the Code that includes a cash or deferred arrangement qualified under Section 401(k) of the Code that is a participant-directed individual account plan that complies with Section 404(c) of ERISA, and (ii) a related trust or trusts exempt under Section 501(a) of the Code, each to be effective no later than the Closing Date (such plan and trust(s), the “ILG Retirement Plan”).

 

(c)                                  Spin-Off of the Starwood Retirement Plan and Merger into the ILG Retirement Plan.  Effective on the Closing Date, Starwood shall cause the Starwood Retirement Plan to spin off the portion of the Starwood Retirement Plan attributable to the Vistana Employees and Former Vistana Employees, as well as to any respective Plan Payees, such spinoff to include (but not be limited to) any and all such individual’s accounts, liabilities, related assets, unvested amounts, zero dollar accounts, forfeited accounts, unlocatable participant accounts and outstanding loan balances.  Effective immediately thereafter, ILG or one of its Affiliates shall cause the ILG Retirement Plan to accept the merger of such spun-off portion of the Starwood Retirement Plan.  All assets shall be transferred in cash as soon as administratively practicable thereafter and shall be mapped to appropriate investment options in the ILG Retirement Plan pursuant to Section 404(c)(4) of ERISA or to the appropriate qualified default investment fund under the ILG Retirement Plan pursuant

 

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to Section 404(c)(5) of ERISA.  Such spinoff and merger shall be conducted in accordance with Section 414(l) of the Code, Treasury Regulation Section 1.414(l)-1 and Section 208 of ERISA.  The benefits of the Vistana Employees participating in the Starwood Retirement Plan as of immediately prior to the plan merger described in this Section 2.02(c) shall be preserved in the ILG Retirement Plan effective as of the plan merger described in this Section 2.02(c) to the extent required under the anti-cutback rules of Section 411(d)(6) of the Code.

 

(d)                                 Alternative to Spin-Off and Merger.  Starwood represents that, with respect to the Starwood Retirement Plan (i) the plan is qualified within the meaning of Section 401(a) of the Code, (ii) Starwood has received a favorable determination from the Internal Revenue Service with respect to the qualified status of the plan covering the terms of the plan as currently in effect, (iii) nothing has occurred since the date of such letter that would reasonably be expect to adversely affect the qualified status of the plan, and (iv) the plan has been administered materially in accordance with its terms and all applicable Laws, including ERISA and the Code.  Notwithstanding anything herein to the contrary, if events happen such that the representations made by Starwood set forth in the preceding sentence are not materially true and correct with respect to the Starwood Retirement Plan at any time prior to the Closing Date and have not been fully corrected by the Closing Date, then ILG may elect, in a written notice to Starwood delivered not later than three (3) business days prior to the Closing Date, not to effectuate the transactions described in Section 2.02(c) (which shall be the only consequence of any such breach of Starwood’s representation in this Section 2.02(d)).  In such case, after the Closing Date the Starwood Retirement Plan shall give each Vistana Employee, Former Vistana Employee, and any respective Plan Payee who has a vested account balance under the Starwood Retirement Plan at the Closing Date the opportunity to elect a distribution of the portion of such balance that would be an eligible rollover distribution within the meaning of Section 402(c)(4) of the Code (including any outstanding loan notes that are not in default at the time of the rollover) (“eligible rollover distributions”) in the form of a direct rollover to the ILG Retirement Plan, pursuant to procedures and time frames agreed to by the parties to facilitate this process.  The Starwood Retirement Plan shall arrange for a transfer of these direct eligible rollover distributions to the ILG Retirement Plan in one or more transmissions to occur no later than sixty (60) days following the Closing Date.  ILG shall cause the ILG Retirement Plan and related trust to accept such rollovers (including such outstanding loan notes), except for any for which it has evidence that they are not in fact eligible rollover distributions.  Vistana Employees, Former Vistana Employees, and any respective Plan Payees who do not take advantage of this rollover opportunity retain the right to make direct or indirect rollovers to the ILG Retirement Plan under its usual rules.

 

(e)                                  Foreign Service Defined Benefit Plan.

 

(i)                                     General.  Starwood will, or will cause one of its Affiliates (other than Vistana Entities) to, assume or retain the Starwood Hotels & Resorts

 

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Retirement Plan for Foreign Service Employees (the “Foreign Service DB Plan”), which is a frozen plan.

 

(ii)                                  Foreign Service DB Shortfall.  Notwithstanding Section 2.02(e)(i) above, within seven (7) days following the Closing Date, ILG shall transfer to Starwood $180,000, which Starwood shall immediately contribute to the Foreign Service DB Plan.  ILG and Vistana shall have no liability with respect to the Foreign Services DB Plan, other than as provided in the preceding sentence.

 

(f)                                   Foreign Service Defined Contribution Plan.  Starwood will, or will cause one of its Affiliates (other than Vistana Entities) to, assume or retain the Starwood Hotels & Resorts Defined Contribution Plan for Foreign Service Employees.

 

Section 2.03                             Nonqualified Plans.

 

(a)                                 Starwood Deferred Compensation Plan.  Vistana Employees shall not be permitted to defer compensation to the Starwood Deferred Compensation Plan on or after the Closing Date.

 

(b)                                 Vistana Deferred Compensation Plan.  Effective immediately prior to the Closing Date, Vistana shall take, or cause to be taken, or have taken, all action necessary and appropriate to establish for the benefit of Vistana Employees a nonqualified deferred compensation plan (such plan, the “Vistana Deferred Compensation Plan”).  The Vistana Deferred Compensation Plan shall have terms and features that are substantially similar to the Starwood Deferred Compensation Plan, other than with respect to investment options, such that (for the avoidance of doubt), the Starwood Deferred Compensation Plan shall be substantially replicated by the Vistana Deferred Compensation Plan, except that neither ILG nor Vistana shall be under any obligation to offer any employees the opportunity to make future deferral elections under such Plan, and if it does, neither ILG nor Vistana shall be under any obligation to make deferral elections available under the same terms as applied under the Starwood Deferred Compensation Plan.  However, the Vistana Deferred Compensation Plan shall honor deferral elections made by Vistana Employees in the Starwood Deferred Compensation Plan before the Closing Date.  Vistana shall designate one or more phantom investment options that are commercially reasonable for a nonqualified deferred compensation plan like the Vistana Deferred Compensation Plan, the gains and losses and income and expenses of which shall be used to determine investment return equivalents by which the account of participants in the Vistana Deferred Compensation Plan shall be adjusted.  From and after the Closing Date, Vistana shall be solely and exclusively responsible for all obligations and liabilities with respect to, or in any way related to, the Vistana Deferred Compensation Plan, whether accrued before, on or after the Closing Date.  The Vistana Deferred Compensation Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, and Department of Labor Regulation § 2520.104-23.  The Vistana Deferred Compensation Plan shall not be a funded plan,

 

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and neither Vistana nor any of its Affiliates is under any obligation to set aside any funds for the purpose of making payments under the Vistana Deferred Compensation Plan.

 

(c)                                  Transfer of Interests and Elections as of Closing Date.

 

(A)                               Transfer of Interests.  Prior to the Closing Date, Starwood shall cause the Starwood Deferred Compensation Plan to transfer to the Vistana Deferred Compensation Plan, and Vistana or an Affiliate thereof will cause such Vistana Deferred Compensation Plan to accept the transfer of, the interests of participants in the Starwood Deferred Compensation Plan who are Vistana Employees or Former Vistana Employees, as well as any respective Plan Payees.  Starwood will not transfer to Vistana or an Affiliate thereof any assets that are earmarked for the payment of benefits with respect to these transferred interests.

 

(B)                               Transfer of Elections.  Prior to the Closing Date and as permitted by Section 409A of the Code, Vistana will cause the Vistana Deferred Compensation Plan to recognize and maintain existing elections, including deferral, payment form elections, and beneficiary designations with respect to Vistana Employees and Former Vistana Employees, as well as any respective Plan Payees, under the Starwood Deferred Compensation Plan, but Vistana is under no obligation to recognize or maintain the investment elections and options under the Starwood Deferred Compensation Plan. The transfer of elections contemplated in this Section 2.03(c) shall be expressly conditioned on Starwood providing to ILG, no later than thirty (30) days prior to the Closing Date, a data report of all elections (other than investment elections) made by the Vistana Employees or Former Vistana Employees under the Starwood Deferred Compensation Plan, in a format reasonably acceptable to ILG.

 

(d)                                 Transfer of Liabilities.  Within seven (7) days following the Closing Date, Starwood or one of its Affiliates shall transfer to ILG an amount in cash equal to the sum of the value of each of the existing subaccounts under the Starwood Deferred Compensation Plan with respect to each of the participants in the Starwood Deferred Compensation Plan who are Vistana Employees or Former Vistana Employees, as well as any respective plan payees, determined as of the last “Valuation Date” (as defined therein) immediately before the Closing Date, and after crediting such subaccounts with earnings and gains (and debited for expenses and losses) as specified in Section 6 thereof through such Valuation Date.  The recordkeeper for the Starwood Deferred Compensation Plan, which is MullinTBG as of the execution hereof, shall make this determination pursuant to the terms of the Starwood Deferred Compensation Plan and its customary rules for valuing such subaccounts (to the extent such rules do not conflict with the terms of the Starwood Deferred Compensation Plan), subject to the review and approval of ILG which approval shall not be unreasonably withheld.

 

(e)                                  Section 409A.  The Parties will cooperate in good faith so that the transfers contemplated by this Section 2.03 will not result in adverse Tax consequences under Section 409A of the Code.

 

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Section 2.04                             Annual Bonus.

 

(a)                                 ILG will be responsible for establishing, or causing Vistana to establish, effective as of the Closing Date, a bonus program in which Vistana Employees who participated in Starwood’s Annual Incentive Plan or any other bonus or incentive compensation plan or program maintained by Starwood, Vistana or any of their Affiliates (the “Starwood AIP”) immediately prior to the Closing Date will participate effective on the Closing Date (the “ILG AIP”).  The ILG AIP will be structured so that it provides a bonus opportunity for the Closing Plan Year that preserves to the extent practicable the bonus opportunity that each Vistana Employee would have had if he or she would have remained a participant in the Starwood AIP for the entire Closing Plan Year (the “FY ILG AIP Award”).  The FY ILG AIP Award shall consist of (1) a pro-rated award calculated based upon the achievement of the performance objectives applicable to the related Starwood AIP award and the number of days in the Closing Plan Year that occurs prior to the Closing Date and (2) a pro-rated award calculated based upon performance of ILG and the number of days in the Closing Plan Year that occurs following the Closing Date and including the Closing Date.  ILG will pay all FY ILG AIP Awards.  Starwood shall provide ILG with any necessary performance results for the Closing Plan Year and any other information necessary to enable ILG to meet its obligations under this Section 2.04(a).

 

(b)                                 Starwood will retain all obligations related to bonus compensation earned by Vistana Employees under the Starwood AIP with respect to any calendar year ended prior to the Closing Date that is earned but unpaid as of the Effective Time; provided, however, that, if requested by Starwood, ILG or an Affiliate thereof will make all cash payments in respect of any such bonus compensation so long as Starwood transfers to ILG, prior to the date that such payment is to be made to the applicable Vistana Employee, the amounts payable in respect of such cash payments, including all applicable withholding amounts and the employer’s portion of any employment taxes.

 

Section 2.05                             Health and Welfare Benefits.

 

(a)                                 Starwood Flexible Benefits Plan.  Effective as of the Closing Date, Vistana Employees will cease to participate in the Starwood Flexible Benefits Plan.

 

(b)                                 Establishment of ILG Flexible Benefits Plan.  Prior to the Closing Date, ILG shall or shall cause one of its Affiliates to take, or cause to be taken, or have taken, all action necessary and appropriate to establish or designate and administer a group welfare benefits plan for the benefit of all Vistana Employees effective as of the Closing Date (the “ILG Flexible Benefits Plan”) and to provide benefits thereunder for all eligible Vistana Employees who choose to enroll in such Plan.  ILG will cause such ILG Flexible Benefits Plan to cover those Vistana Employees and their dependents who immediately prior to the Closing Date were participating in, or entitled to present or future benefits under, the Starwood Flexible Benefits Plan, and shall recognize the most recent hire date of such Vistana Employee with Starwood or a member of the controlled group of organizations of which Starwood is a part (as defined by Section 414 of the Code and regulations issued

 

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thereunder) for purposes of determining whether such Vistana Employee has met any otherwise applicable waiting period.  Starwood will be responsible for all liabilities associated with claims incurred prior to the Closing Date by Vistana Employees and Former Vistana Employees and their dependents under the Starwood Flexible Benefits Plan, which are paid on or after the Closing Date, regardless of when such claims are filed and/or paid.

 

(c)                                  Dependent Care Flexible Spending Account.  Notwithstanding anything contained in Section 2.05(b), to the extent Vistana Employees participate in a dependent care spending account under the Starwood Flexible Benefits Plan (the “Starwood FSA”) during the Closing Plan Year, ILG shall establish (or cause its Affiliate, if applicable, to establish) one or more comparable plans (the “ILG FSA”) that will recognize the elections that such Vistana Employees had in effect for purposes of the Closing Plan Year under the Starwood FSA.  The ILG FSA shall (1) assume the assets and obligations of the Starwood FSA with respect to Vistana Employees as of the Closing Date and (2) provide the same level of dependent care spending account benefits as those provided under the Starwood FSA at least through the end of the Closing Plan Year.  After the Closing Date, the ILG FSA will be responsible for reimbursement of all previously unreimbursed reimbursable dependent care claims incurred by Vistana Employees, regardless of when the claims were incurred.

 

(d)                                 Continuation Coverage.  As of the Closing Date, ILG and the ILG Flexible Benefits Plan shall assume or retain and shall be solely responsible for providing and meeting the continuation coverage requirements imposed by Section 4980B of the Code and Sections 601 through 608 of ERISA (“COBRA”) for all Vistana Employees and all Former Vistana Employees, as well as their “qualified beneficiaries” (as defined under COBRA), regardless of whether such liabilities arose before, on or after the Closing Date.

 

(e)                                  Health Reimbursement Account.  Notwithstanding anything contained in Section 2.05(b), ILG shall or shall cause one of its Affiliates to adopt a health reimbursement account (the “ILG HRA”), effective as of the Closing Date.  The ILG HRA shall have similar terms and provide the same level of benefits as Starwood’s health reimbursement account in effect immediately prior to the Closing Date (the “Starwood HRA”).  Effective as of the Closing Date, ILG shall assume the liabilities and obligations with respect to the account balances for all Vistana Employees and Former Vistana Employees under the Starwood HRA and shall pay all benefits with respect thereto to such Vistana Employees and Former Vistana Employees on and after the Closing Date.

 

(f)                                   6055/6056 Reporting.  ILG shall be solely responsible for ensuring that Vistana complies with the reporting obligations under Section 6056 of the Code (Reporting of Offers of Coverage) with respect to Vistana Employees for the Closing Plan Year (including while Vistana was owned by Starwood) and periods after the Closing Date, for which Vistana has a reporting obligation, provided that Starwood shall be responsible for complying with all reporting obligations with respect to the year prior to the Closing Plan Year.  In this regard, Vistana shall be responsible for

 

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distributing IRS Form 1095-C to applicable individuals and filing IRS Forms 1094-C and 1095-C with the IRS, all according to the applicable rules and regulations governing such forms.  ILG shall also be solely responsible for ensuring that Vistana complies with the reporting obligations under Section 6055 of the Code (Reporting of Enrollment in Minimum Essential Coverage) with respect to all Vistana Employees who are enrolled in a self-insured medical plan under the Starwood Flexible Benefits Plan.  Vistana may meet this obligation either through IRS Forms 1094-C and 1095-C or IRS Forms 1094-B and 1095-B, all in accordance with applicable rules and regulations.  The reporting obligations under Section 6055 of the Code for Vistana Employees who are enrolled in a fully insured medical plan under the Starwood Flexible Benefits Plan shall be met by the applicable insurance carrier or HMO.  Starwood shall work with ILG to provide all necessary, pre-Closing Date information for Vistana to meet its reporting obligation, which information shall be complete, accurate and provided to Vistana no later than thirty (30) days prior to the date that such reporting obligation is due; provided, however, that to the extent reasonably necessary such time frame shall be reduced to fifteen (15) days for any data related to the four (4) month period ending on the date such reporting obligation is due.

 

(g)                                  Credit for Benefits.  ILG shall (1) waive for each Vistana Employee and his or her dependents, any waiting period provision, payment requirement to avoid a waiting period, pre-existing condition limitation, actively-at-work requirement and any other restriction that would prevent immediate or full participation under the welfare plans of ILG or any of its Affiliates applicable to (or was previously satisfied by) such Vistana Employee to the extent such waiting period, pre-existing condition limitation, actively-at-work requirement or other restriction would not have been applicable to such Vistana Employee under the terms of the welfare plans of Vistana and its Affiliates (including Starwood) immediately prior to the Effective Time, and (2) give full credit under the welfare plans of ILG and its Affiliates applicable to each Vistana Employee and his or her dependents for all co-payments and deductibles satisfied prior to the Effective Time in the Closing Plan Year, and for any lifetime maximums, as if there had been a single continuous employer.

 

Section 2.06                             Workers’ Compensation.  Starwood will be solely responsible for all United States (including its territories) workers’ compensation claims for all Employees and former Employees of Starwood or its Affiliates other than the Vistana Employees, regardless of when the Workers’ Compensation Events to which such claims relate occur.  Effective as of the Closing Date, ILG and its Affiliates will be solely responsible for all United States (including its territories) workers’ compensation claims of Vistana Employees with respect to Workers’ Compensation Events, regardless of when such Workers Compensation Events to which such claims relate occur except to the extent claims related to events occurring prior to the Closing Date are covered under an applicable Starwood’s workers’ compensation insurance policy.

 

Section 2.07                             Vacation and Sick Pay Liabilities.  On and after the Closing Date, ILG shall provide the Vistana Employees with the same vested and unvested balances of vacation and sick leave as credited to the Vistana Employees on Starwood’s or its Affiliate’s payroll system immediately prior to the Closing Date.  On and after the Closing Date, ILG shall continue to

 

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accrue vacation and sick leave in respect of each Vistana Employee according to Starwood’s accrual schedule as in effect immediately prior to the Closing Date.

 

Section 2.08                             Severance.  Effective as of the Effective Time, ILG shall assume all severance obligations under any Starwood Plan with respect to any Former Vistana Employee.

 

Section 2.09                             Preservation of Right To Amend or Terminate Plans.  Except as otherwise expressly provided in this Agreement, the Separation Agreement or the Merger Agreement, no provisions of this Agreement, shall be construed as a limitation on the right of Starwood, Vistana or ILG or any Affiliate thereof to amend any Plan or terminate its participation therein which Starwood, Vistana or ILG or any Affiliate thereof would otherwise have under the terms of such Plan or otherwise, and no provision of this Agreement shall be construed to create a right in any Employee or former Employee, or dependent or beneficiary of such Employee or former Employee, or any Plan Payee under a Plan which such person would not otherwise have under the terms of the Plan itself.

 

Section 2.10                             No Right to Employment.  Notwithstanding anything to the contrary set forth in this Agreement, no provisions of this Agreement shall be deemed to guarantee employment for any period of time for, or preclude the ability of Vistana, ILG or any of its or their Affiliates (as defined in the Merger Agreement) to terminate any employee or individual service provider for any reason.

 

Section 2.11                             Equity Compensation Awards.  Each Starwood Equity Award granted in 2014 or later and held by a Vistana Employee that is outstanding immediately prior to the Effective Time will be converted as described in subsections (a) and (b) below, so that each such Starwood Equity Award will become an ILG Equity Award.  Starwood shall provide all information or documentation reasonably requested by ILG to fulfill such obligation within seven (7) days of receiving such request. From and after the Closing Date, ILG will retain, pay, perform, fulfill and discharge all liabilities arising out of or relating to the ILG Equity Awards.

 

(a)                                 Starwood Time-Based Stock Awards.  Each Starwood Time-Based Stock Award granted in 2014 or later and held by a Vistana Employee and listed on Schedule 2.11(a) will be assumed by ILG and converted, effective as of the Effective Time, into an ILG Time-Based Stock Award of the same type (the “Assumed Time-Based Stock Award”).  Each such Assumed Time-Based Stock Award will be subject to substantially the same terms, vesting conditions and other restrictions, if any, that were applicable to the related Starwood Time-Based Stock Award immediately prior to the Closing Date, except that such terms, conditions and restrictions will be modified to the extent necessary to reflect that the holder of such Assumed Time-Based Stock Award provides services to ILG or its Affiliates (and not Starwood or its Affiliates) and the issuer of the common stock underlying the Assumed Time-Based Stock Award is ILG (and not Starwood).  The number of shares of ILG Common Stock covered by each Assumed Time-Based Stock Award for each Vistana Employee will be equal to the product (rounded up to the nearest whole share) of (1) the number of shares of Starwood Common Stock covered by such Starwood Time-Based Stock Award immediately prior to the Effective Time and (2) the Adjustment Ratio.  For the avoidance of doubt, the holder of any Starwood Time-Based Stock

 

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Award that consists of restricted shares will not be entitled to receive any shares of Vistana Common Stock to which such holder may have been entitled with respect to such restricted shares as a stockholder at the Record Date.  As soon as reasonably practicable following the Effective Time, ILG will issue each Person who holds an Assumed Time-Based Stock Award a document evidencing the foregoing assumption of such Assumed Time-Based Stock Award by ILG.

 

(b)                                 Starwood Performance Shares.  Each Starwood Performance Share award granted in 2014 or later and held by a Vistana Employee and listed on Schedule 2.11(b) will be deemed to have been earned (the “Earned Starwood Performance Shares”) at the greater of (1) the target level of achievement of the applicable management objectives or (2) the actual level of achievement of the applicable management objectives measured as of the Closing Date and reasonably determined by Starwood in accordance with the terms of the Starwood Stock Plan using a methodology consistent with the methodology used in Starwood’s past practice in the ordinary course of business.  For the avoidance of doubt, although the amount of Earned Starwood Performance Shares may be affected as a result of determining the achievement of the applicable management objectives as of the Closing Date rather than as of the end of the original performance period, such Earned Starwood Performance Shares shall not be further reduced or pro-rated based on the Vistana Employee ceasing to be employed by Starwood or its Affiliates as of such date.  The Earned Starwood Performance Shares will be assumed by ILG and converted, effective as of the Effective Time, into a restricted stock units award covering ILG Common Stock (the “Converted RSUs”) and subject to substantially the same terms as the related Starwood Performance Shares, except that (y) such restricted stock units awards will vest in full on the third anniversary of the grant date of the original Starwood Performance Share award (generally subject to continued employment or service with ILG or an Affiliate thereof through such date) and will not be subject to any additional performance objectives and (z) the other terms and conditions will be modified to the extent necessary to reflect that the holder of such Converted RSU provides services to ILG or its Affiliates (and not Starwood or its Affiliates) and the issuer of the common stock underlying the Converted RSU is ILG (and not Starwood).  The number of such Converted RSUs for each such Vistana Employee will be equal to the product (rounded up to the nearest whole share) of (1) the number of Earned Starwood Performance Shares, as determined in accordance with the above, and (2) the Adjustment Ratio.  Any portion of the Starwood Performance Share awards that is not earned as of the Closing Date will be cancelled and forfeited.  As soon as reasonably practicable following the Effective Time, ILG will issue each Person who holds a Converted RSU a document evidencing the foregoing assumption of such Converted RSU by ILG.

 

(c)                                  Miscellaneous.  Starwood and ILG shall take any and all actions reasonably necessary to effectuate the transactions contemplated by this Section 2.11.  Without limiting the generality of the foregoing, as soon as practicable after the Effective Time, to the extent necessary, ILG shall prepare and file with the SEC a registration statement registering the number of shares of ILG Common Stock necessary to fulfill ILG’s obligations under this Section 2.11.

 

17

 

ARTICLE III.
  LABOR AND EMPLOYMENT MATTERS

 

Notwithstanding any other provision of this Agreement or any other agreement between ILG, Vistana and/or Starwood to the contrary, the Parties understand and agree that:

 

Section 3.01                             Collective Bargaining Agreements.

 

(a)                                 With regard to Employees of Starwood and its Subsidiaries covered by a Collective Bargaining Agreement immediately prior to the Closing Date, the Parties covenant to cooperate with each other to avoid any action which could, on a reasonably foreseeable basis, disrupt or otherwise negatively impact the labor relations of any other Party.

 

(b)                                 Effective as of the Business Transfer Date, Vistana or an Affiliate of Vistana shall retain or assume each Collective Bargaining Agreement covering Vistana Employees, and Starwood shall have no further liability thereunder.  Prior to the Business Transfer Date, Starwood agrees that it will comply and will cause any Affiliate of Starwood to comply, in all material respects, with all of the terms and conditions set forth in each such Collective Bargaining Agreement and with applicable Law covering Starwood and any Starwood Affiliate’s Employees, including but not limited to, the fulfillment of any labor or employment-related notice, information or consultation requirements relating to the matters contemplated hereby.

 

Section 3.02                             WARN Obligations.  Before and after the Closing Date, each party shall comply in all material respects with the Worker Adjustment and Retraining Notification Act and similar state and local laws (“WARN”).  As of the Closing Date, ILG and its Affiliates shall be responsible for all obligations and liabilities under WARN relating to the Vistana Employees arising from mass layoffs or plant closings (each as defined under WARN) occurring on or after the Closing Date, and Starwood shall be responsible for all obligations and liabilities under WARN relating to the Vistana Employees arising from mass layoff or plant closings (each as defined under WARN) occurring prior to the Closing Date and all obligations and liabilities under WARN relating to Former Vistana Employees.

 

Section 3.03                             Multiemployer Plan.

 

(a)                                 In the event the Hotel Union And Hotel Industry Of Hawaii Pension Trust Fund (the “Hotel Trust Fund”) assesses withdrawal liability under Section 4201(a) of ERISA against Starwood, and/or its Affiliates as the result of a complete or partial withdrawal from the Hotel Trust Fund that is caused by actions taken by either Vistana or ILG without the consent of Starwood with respect to Employees at the resort currently known as the Sheraton Kauai Resort (“Withdrawal Liability”) (examples would include, but are not limited to, Withdrawal Liability that is caused by ILG closing the Sheraton Kauai Resort or converting it to timeshares, or terminating its management contract with Starwood), ILG shall indemnify Starwood for such Withdrawal Liability as follows:

 

18

 

(i)                                     in the event Withdrawal Liability is assessed against Starwood or its Affiliates with respect to a withdrawal event that occurs on or after the Closing Date and prior to the first anniversary of the Closing Date, ILG shall not indemnify Starwood for any portion of such Withdrawal Liability;

 

(ii)                                  in the event Withdrawal Liability is assessed against Starwood or its Affiliates with respect to a withdrawal event that occurs on or after the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date, ILG shall indemnify Starwood for one-third of such Withdrawal Liability;

 

(iii)                               in the event Withdrawal Liability is assessed against Starwood or its Affiliates with respect to a withdrawal event that occurs on or after the second anniversary of the Closing Date and prior to the third anniversary of the Closing Date, ILG shall indemnify Starwood for two-thirds of such Withdrawal Liability; and

 

(iv)                              in the event Withdrawal Liability is assessed against Starwood or its Affiliates on or after the third anniversary of the Closing Date, ILG shall indemnify Starwood for the full amount of such Withdrawal Liability.

 

Starwood shall remain fully responsible, with no right to any indemnification or reimbursement from ILG, for any Withdrawal Liability for which ILG does not expressly agree to indemnify Starwood pursuant to this Section 3.03(a).

 

(b)                                 Notwithstanding anything herein to the contrary, Starwood shall have no right to any indemnification against ILG for any Withdrawal Liability pursuant to Section 3.03(a) above until Starwood or an Affiliate satisfies any of its required ongoing obligations to make contributions under the Hotel Trust Fund that remain unpaid at the time of the withdrawal triggering such indemnification right under Section 3.03(a).

 

(c)                                  In the event that Starwood incurs any Withdrawal Liability for which Starwood is entitled to indemnification from ILG pursuant to this Section 3.03, then with respect to such Withdrawal Liability, ILG shall have the right to direct Starwood to challenge such assessment of Withdrawal Liability to the full extent permitted by applicable Law and the Hotel Trust Fund, including, without limitation, a proceeding under Section 4221 of ERISA provided that ILG pays (or reimburses Starwood for) the costs of such defense in proportion to its obligation to indemnify Starwood for such Withdrawal Liability pursuant to Section 3.03(a).

 

(d)                                 ILG shall not be considered or deemed to be a participating employer in the Hotel Trust Fund and shall have no liability to the Hotel Trust Fund.

 

Section 3.04                             Attorney-Client Privilege.  The provisions herein requiring the Parties to cooperate shall not be deemed to be a waiver of the attorney-client privilege for the Parties nor shall it require the Parties to waive their attorney-client privilege.  In the event of any conflict between the applicable terms of the Separation Agreement or the Merger Agreement and the terms of this Agreement with respect to matters relating to attorney-client privilege, the work product doctrine and all other evidentiary privileges and non-disclosure doctrines, the applicable

 

19

 

terms of the Merger Agreement or the Separation Agreement, as applicable (including Sections 7.06 and 7.07 of the Merger Agreement and Section 6.8 of the Separation Agreement), shall prevail.

 

ARTICLE IV.
 REMEDIES

 

Section 4.01                             Indemnification.  Any breach of this Agreement by any party hereto or any indemnification obligation under this Agreement shall be subject to the provisions set forth in Article V of the Separation Agreement which shall apply to this Agreement as if incorporated in their entirety herein.

 

Section 4.02                             Enforcement.  The Parties agree that irreparable damage would occur, and that the Parties would not have any adequate remedy at Law, in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement, without proof of actual damages or otherwise, in addition to any other remedy to which any party hereto is entitled at Law or in equity.  Each party hereto agrees to waive any requirement for the securing or posting of any bond in connection with such remedy.  The Parties further agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, nor to assert that a remedy of monetary damages would provide an adequate remedy.  In furtherance of the foregoing, the Parties hereby further acknowledge and agree that prior to the Closing, Starwood and Vistana shall be entitled to specific performance to enforce specifically the terms and provisions of and to prevent or cure breaches of this Agreement by ILG.

 

ARTICLE V.
 MISCELLANEOUS

 

Section 5.01                             Relationship of Parties.  Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the Parties, it being understood and agreed that no provision contained herein, and no act of the Parties, shall be deemed to create any relationship between the Parties other than the relationship set forth herein.

 

Section 5.02                             Assignment.  No party hereto shall assign this Agreement or any part hereof without the prior written consent of the other Parties.  Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns.

 

Section 5.03                             Rights of Third Parties.  Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person, other than the Parties, any right or remedies under or by reason of this Agreement.

 

Section 5.04                             Captions.  The captions in this Agreement are inserted for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

 

20

 

Section 5.05                             Severability of Provisions.  If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect.  The Parties further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the Laws governing this Agreement, they shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law and, to the extent necessary, shall amend or otherwise modify this Agreement to replace any provision contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the intent of the Parties.

 

Section 5.06                             Notices.  All notices, consents, approvals and other communications among the Parties shall be in writing and shall be deemed to have been duly given (a) when delivered in person, (b) when after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (c) when delivered by FedEx or other nationally recognized overnight delivery service, (d) when delivered by facsimile (solely if receipt is confirmed) or (e) or by email (so long as the sender of such email does not receive an automatic reply from the recipient’s email server indicating that the recipient did not receive such email), addressed as follows:

 

if to Starwood

 

	
 
    	
Starwood Hotels & Resorts   Worldwide, Inc.
    
	
 
    	
One StarPoint
    
	
 
    	
Stamford, Connecticut 06902
    
	
 
    	
Attention: Chief Financial Officer
    
	
 
    	
Facsimile: (203) 351-2519
    
	
 
    	
Email: thomas.mangas@starwoodhotels.com
    
	
 
    	
with a copy (which shall not constitute notice) to   the same address:
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
Kenneth S. Siegel
    
	
 
    	
Facsimile No.:
    	
(203) 351-2401
    
	
 
    	
Email:
    	
kenneth.siegel@starwoodhotels.com
    
	
 
    	
 
    	
 
    
	
 
    	
with a copy (which shall not constitute notice) to:
    
	
 
    	
 
    
	
 
    	
Latham & Watkins LLP
    
	
 
    	
885 Third Avenue
    
	
 
    	
New York, New York 10022
    
	
 
    	
Attention:
    	
Jennifer Perkins
    
	
 
    	
Facsimile No.:
    	
(212) 751-4864
    
	
 
    	
Email:
    	
jennifer.perkins@lw.com
    

 

21

 

	
 
    	
with a copy (which shall not constitute notice) to:
    
	
 
    	
 
    
	
 
    	
Jones Day
    
	
 
    	
North Point
    
	
 
    	
901 Lakeside Avenue
    
	
 
    	
Cleveland, OH 44114-1190
    
	
 
    	
Attention:
    	
Stephen Coolbaugh
    
	
 
    	
Facsimile No.:
    	
(216) 579-0212
    
	
 
    	
Email:
    	
spcoolbaugh@jonesday.com
    
	
 
    	
 
    	
 
    
	
 
    	
with a copy (which shall not constitute notice) to:
    
	
 
    	
 
    
	
 
    	
Kilpatrick Townsend & Stockton LLP
    
	
 
    	
607 14th Street, NW Suite 900
    
	
 
    	
Washington, DC 20005-2018
    
	
 
    	
Attention:
    	
Devon Miller
    
	
 
    	
Facsimile No.:
    	
(202) 253-1967
    
	
 
    	
Email:
    	
dmiller@kilpatricktownsend.com
    
	
 
    	
 
    	
 
    
	
if to ILG
    
	
 
    	
 
    	
 
    
	
 
    	
Interval Leisure Group, Inc.
    
	
 
    	
6262 Sunset Drive
    
	
 
    	
Miami, Florida 33143
    
	
 
    	
Attention: Victoria J. Kincke, General Counsel
    
	
 
    	
Facsimile: 305-667-2072
    
	
 
    	
 
    	
 
    
	
 
    	
with a copy (which shall not constitute notice) to:
    
	
 
    	
 
    
	
 
    	
Weil, Gotshal & Manges LLP
    
	
 
    	
767 Fifth Avenue
    
	
 
    	
New York, NY 10153
    
	
 
    	
Attention: Michael E. Lubowitz
    
	
 
    	
Facsimile No.: (212) 310-8007
    
	
 
    	
Email: michael.lubowitz@weil.com
    
	
 
    	
 
    	
 
    
	
if to Vistana
    
	
 
    	
 
    	
 
    
	
 
    	
Vistana Signature Experiences, Inc.
    
	
 
    	
9002 San Marco Court
    
	
 
    	
Orlando, Florida 32819
    
	
 
    	
Attention:
    	
President and Chief Executive Officer
    
	
 
    	
Facsimile No.: (407) 417-7110
    
	
 
    	
 
    
	
 
    	
with a copy (which shall not constitute notice) to:
    
	
 
    	
 
    
	
 
    	
Weil, Gotshal & Manges LLP
    
	
 
    	
767 Fifth Avenue
    
	
 
    	
New York, NY 10153
    
	
 
    	
Attention: Michael E. Lubowitz
    
	
 
    	
Facsimile No.: (212) 310-8007
    
	
 
    	
Email: michael.lubowitz@weil.com
    

 

22

 

or to such other address or addresses as the Parties may from time to time designate in writing.

 

Section 5.07                             Further Assurances.  Each party hereto agrees that it will execute and deliver or cause its respective Affiliates to execute and deliver such further instruments, and take (or cause their respective Affiliates to take) such other action, as may be reasonably necessary to carry out the purposes and intents of this Agreement.

 

Section 5.08                             Amendment; Waiver.  This Agreement may be amended or modified in whole or in part, only by a duly authorized agreement in writing executed by the Parties in the same manner as this Agreement and which makes reference to this Agreement.  Any party hereto may waive any of the terms or conditions of this Agreement in writing executed in the same manner (but not necessarily by the same Persons) as this Agreement.  No waiver by any of the Parties of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party hereto sought to be charged with such waiver.  No waiver by any of the Parties of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

 

Section 5.09                             Governing Law.  This Agreement, and all claims or causes of action based upon, arising out of, or related to this Agreement or the transactions contemplated hereby, shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction.

 

Section 5.10                             Consent to Jurisdiction:  Waiver of Jury Trial.

 

(a)                                 Any Action based upon, arising out of or related to this Agreement or the transactions contemplated hereby shall be brought exclusively in the Court of Chancery of the State of Delaware, or, if it cannot acquire jurisdiction, in any federal court of the United States of America sitting in Delaware, and, in each case, appellate courts therefrom, and each of the Parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in such courts and agrees not to bring any Action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court.  Nothing herein contained shall be deemed to affect the right of any party hereto to serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed against any other party hereto in any other jurisdiction, in each case, to enforce judgments obtained in any action, suit or proceeding brought pursuant to this Section 5.10(a).

 

(b)                                 Each party hereto hereby waives, to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in respect of any suit, action or other proceeding arising out of this Agreement or the transactions contemplated

 

23

 

hereby.  Each party hereto (i) certifies that no Representative of any other party hereto has represented, expressly or otherwise, that such party would not, in the event of any action, suit or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other Parties have been induced to enter into this Agreement, by, among other things, the mutual waiver and certifications in this Section 5.10.

 

Section 5.11                             Entire Agreement.  This Agreement, the Separation Agreement and the Merger Agreement constitute the entire agreement among the Parties relating to the transactions contemplated hereby and supersede any other agreements, whether written or oral, that may have been made or entered into by or among any of the Parties or any of their respective Subsidiaries relating to the transactions contemplated hereby.  No representations, warranties, covenants, understandings, agreements, oral or otherwise, relating to the transactions contemplated by this Agreement exist between the Parties, except as expressly set forth in this Agreement, the Separation Agreement and the Merger Agreement.

 

Section 5.12                             Counterparts.  This Agreement may be executed in two or more counterparts (including by electronic or .pdf transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Delivery of any signature page by facsimile, electronic or .pdf transmission shall be binding to the same extent as an original signature page.

 

Section 5.13                             Expenses.  Each party hereto shall bear its own expenses incurred in connection with this Agreement and the transactions herein contemplated whether or not such transactions shall be consummated, including all fees of its legal counsel, financial advisers and accountants.

 

24

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

 

	
 
    	
STARWOOD   HOTELS & RESORTS WORLDWIDE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas B.   Mangas
    
	
 
    	
Name: 
    	
Thomas B. Mangas
    
	
 
    	
Title:
    	
Executive Vice   President, 

Chief Financial   Officer
    

 

[Signature Page to Employee Matters Agreement]

 

 

	
 
    	
VISTANA SIGNATURE   EXPERIENCES, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Sergio D.   Rivera
    
	
 
    	
Name: 
    	
Sergio D. Rivera
    
	
 
    	
Title:
    	
Chief Executive   Officer & President
    

 

[Signature Page to Employee Matters Agreement]

 

 

	
 
    	
INTERVAL   LEISURE GROUP, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jeanette E.   Marbert
    
	
 
    	
Name: 
    	
Jeanette E.   Marbert
    
	
 
    	
Title:
    	
Executive Vice   President and Chief Operating Officer
    

 

[Signature Page to Employee Matters Agreement]Exhibit 4.1

 

 

 

SIXTY-EIGHTH SUPPLEMENTAL 
 INDENTURE

 

TO

 

INDENTURE DATED SEPTEMBER 1, 1939

 

 

DUKE ENERGY INDIANA, LLC

 

TO

 

DEUTSCHE BANK NATIONAL TRUST COMPANY 
 AS TRUSTEE

 

 

DATED AS OF MAY 12, 2016

 

 

CREATING 
 FIRST MORTGAGE BONDS, SERIES XXX, 3.75%, DUE MAY 15, 2046

 

AND

 

OTHERWISE SUPPLEMENTING AND AMENDING THE INDENTURE

 

 

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
PARTIES:
    	
 
    
	
 
    	
 
    
	
Company   (Duke Energy Indiana, LLC, formerly named Duke Energy Indiana, Inc., formerly   named each of PSI Energy, Inc. and Public Service Company of Indiana, Inc.,   and successor by consolidation to Initial Mortgagor (Public Service Company   of Indiana)), and Trustee
    	
1
    
	
 
    	
 
    
	
RECITALS:
    	
 
    
	
 
    	
 
    
	
Indenture   of the Initial Mortgagor, dated September 1, 1939, and First Supplemental   Indenture thereto of the Initial Mortgagor, dated as of March 1, 1941
    	
1
    
	
 
    	
 
    
	
Consolidation   of Initial Mortgagor (and four other companies) into the Company
    	
1
    
	
 
    	
 
    
	
Execution   by Company of Second Supplemental Indenture to the original Indenture
    	
1
    
	
 
    	
 
    
	
Company   substituted for Initial Mortgagor under Indenture
    	
1
    
	
 
    	
 
    
	
Execution   by Company of Third through the Sixty-Seventh Supplemental Indentures to the   original Indenture
    	
2
    
	
 
    	
 
    
	
LaSalle   Bank National Association appointed as Successor Trustee
    	
2
    
	
 
    	
 
    
	
Resignation   of Bank of America, N.A., as successor by merger to LaSalle Bank National   Association, and appointment of Deutsche Bank National Trust Company as   Successor Trustee
    	
2
    
	
 
    	
 
    
	
Change of   name of Company from Public Service Company of Indiana, Inc. to PSI Energy,   Inc., to Duke Energy Indiana, Inc., and thereafter to Duke Energy Indiana,   LLC
    	
3
    
	
 
    	
 
    
	
Amount of   bonds presently outstanding under the Indenture
    	
3
    
	
 
    	
 
    
	
Sixty-Eighth   Supplemental Indenture and Bonds of Series XXX authorized
    	
3
    
	
 
    	
 
    
	
Conditions   precedent performed
    	
3
    
	
 
    	
 
    
	
EXECUTING   CLAUSE
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE I.
    
	
 
    
	
FIRST MORTGAGE BONDS, SERIES XXX,   3.75%, DUE MAY 15, 2046
    
	
 
    	
 
    	
 
    
	
Section 1.
    	
Creation and designation of Bonds   of Series XXX
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
Bonds of Series XXX to be in   registered form only
    	
4
    
	
 
    	
 
    	
 
    
	
 
    	
Form of Face of Bond Of Series   XXX
    	
7
    
	
 
    	
 
    	
 
    
	
 
    	
Form of Reverse of Bond of Series   XXX
    	
9
    
	
 
    	
 
    	
 
    
	
 
    	
Form of Trustee’s Certificate
    	
12
    
	
 
    	
 
    	
 
    
	
Section 3.
    	
Date of Bonds of Series XXX
    	
13
    
	
 
    	
 
    	
 
    
	
Section 4.
    	
Maturity dates, interest rates   and payment dates, and principal payments of Bonds of Series XXX
    	
13
    
	
 
    	
 
    	
 
    
	
Section 5.
    	
Place and manner of payment of   Bonds of Series XXX
    	
13
    
	
 
    	
 
    	
 
    
	
Section 6.
    	
Denominations and numbering of   definitive Bonds of Series XXX
    	
13
    
	
 
    	
 
    	
 
    
	
 
    	
Temporary Bonds of Series XXX and   exchange thereof for definitive bonds
    	
13
    
	
 
    	
 
    	
 
    
	
Section 7.
    	
Maintenance and Renewal Fund   shall not apply to Bonds of Series XXX
    	
13
    

 

ii

 

	
Section 8.
    	
Inspection requirements shall not   apply to Bonds of Series XXX
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.
    	
Company’s right to further amend   the original Indenture
    	
14
    
	
 
    	
 
    	
 
    
	
Section 10.
    	
No sinking fund for Bonds of   Series XXX
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE II.
    
	
 
    
	
ISSUANCE OF BONDS OF SERIES XXX.
    
	
 
    	
 
    	
 
    
	
Section 1.
    	
Aggregate principal amount of   Bonds of Series XXX issuable at once
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
Issuance of additional Bonds of   Series XXX
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE III.
    
	
 
    
	
INDENTURE AMENDMENTS.
    
	
 
    	
 
    	
 
    
	
Section 1.
    	
Amendments to Article I of the   original Indenture
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
Amendments to Article VII of the   original Indenture
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE IV.
    
	
 
    
	
CONCERNING THE TRUSTEE.
    
	
 
    	
 
    	
 
    
	
Acceptance   of trusts by Trustee
    	
17
    
	
 
    	
 
    
	
Trustee   not responsible for validity or sufficiency of Sixty-Eighth Supplemental   Indenture, etc.
    	
17
    
	
 
    	
 
    
	
Terms   and conditions of Article XVII of the original Indenture to be applied to the   Sixty-Eighth Supplemental Indenture
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE V.
    
	
 
    
	
MISCELLANEOUS PROVISIONS.
    
	
 
    	
 
    	
 
    
	
Section 1.
    	
References in any article or   section of the original Indenture refer to such article or section as amended   by all Sixty-Eight Supplemental Indentures thereto
    	
17
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
Operation and construction of   amendments to the original Indenture
    	
17
    
	
 
    	
 
    	
 
    
	
Section 3.
    	
All covenants, etc., for sole   benefit of parties to the Sixty-Eighth Supplemental Indenture and holders of   bonds
    	
17
    
	
 
    	
 
    	
 
    
	
Section 4.
    	
Table of contents and headings of   articles not part of Sixty-Eighth Supplemental Indenture
    	
18
    
	
 
    	
 
    	
 
    
	
Section 5.
    	
Execution of Sixty-Eighth   Supplemental Indenture in counterparts
    	
18
    
	
 
    	
 
    	
 
    
	
Section 6.
    	
Payments due on non-Business Days
    	
18
    
	
 
    	
 
    	
 
    
	
SIGNATURES
    	
19
    
	
 
    	
 
    
	
ATTESTATION   CLAUSE
    	
19
    
	
 
    	
 
    
	
ACKNOWLEDGMENT   BY COMPANY
    	
21
    
	
 
    	
 
    
	
ACKNOWLEDGMENT   BY TRUSTEE
    	
22
    

 

iii

 

SIXTY-EIGHTH SUPPLEMENTAL INDENTURE dated as of the 12th day of May, 2016, made and entered into by and between DUKE ENERGY INDIANA, LLC (hereinafter commonly referred to as the “Company”), a limited liability company organized and existing under the laws of the State of Indiana, formerly named Duke Energy Indiana, Inc., and formerly named each of PSI Energy, Inc. and Public Service Company of Indiana, Inc., and the successor by consolidation to Public Service Company of Indiana, an Indiana corporation, party of the first part, and DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association organized and existing under the laws of the United States and having its office or place of business in the City of Chicago, State of Illinois, successor trustee to Bank of America, N.A., as successor by merger to LaSalle Bank National Association, which was the successor trustee to The First National Bank of Chicago (hereinafter commonly referred to as the “Trustee”), party of the second part, PARTIES:

 

WITNESSETH:

 

WHEREAS, Public Service Company of Indiana (hereinafter commonly referred to as the “Initial Mortgagor”), prior to its consolidation with certain other corporations to form the Company, executed and delivered to the Trustee a certain indenture of mortgage or deed of trust (hereinafter called the “original Indenture” when referred to as existing prior to any amendment thereto, and the “Indenture” when referred to as heretofore, now or hereafter amended), dated September 1, 1939, and a First Supplemental Indenture thereto, dated as of March 1, 1941, to secure the bonds of the Initial Mortgagor, its successors and assigns, issued from time to time under the Indenture in series for the purposes of and subject to the limitations specified in the Indenture; and

 

WHEREAS, the Company on September 6, 1941, became, through a consolidation, the successor of the Initial Mortgagor (and four other companies) and succeeded to all the rights and became liable for all the obligations of the Initial Mortgagor (and such other companies); and

 

WHEREAS, after said consolidation, the Company executed and delivered a Second Supplemental Indenture, dated as of November 1, 1941, to the original Indenture for the purposes, among others, of (i) the making by the Company of an agreement of assumption and adoption by it of the Indenture, (ii) the assumption by the Company of the bonds (and interest and premium, if any, thereon) issued or to be issued under the Indenture, and of all terms, covenants and conditions binding upon it under the Indenture, and the agreeing by the Company to pay, perform and fulfill the same, and (iii) the conveying to the Trustee upon the trusts declared in the Indenture, but subject to any outstanding liens and encumbrances, all the property which the Company then owned or which it might thereafter acquire, except property of a character similar to the property of the Initial Mortgagor which is excluded from the lien of the Indenture; and

 

WHEREAS, all conditions have been met and all acts and things necessary have been done and performed to make the Indenture the valid and binding agreement of the Company and to substitute the Company for the Initial Mortgagor under the Indenture, and to vest the Company with each and every right and power of the Initial Mortgagor, including the right and power to issue bonds thereunder; and

 

WHEREAS, the Company has subsequently executed and delivered, for purposes authorized under the Indenture, a Third Supplemental Indenture dated as of March 1, 1942, a Fourth Supplemental Indenture dated as of May 1, 1943, a Fifth Supplemental Indenture dated as of August 1, 1944, a Sixth Supplemental Indenture dated as of September 1, 1945, a Seventh Supplemental Indenture dated as of November 1, 1947, an Eighth Supplemental Indenture dated as of January 1, 1949, a Ninth Supplemental Indenture dated as of May 1, 1950, a Tenth Supplemental Indenture dated as of July 1, 1952, an Eleventh Supplemental Indenture dated as of January 1, 1954, a Twelfth Supplemental Indenture dated as of October 1, 1957, a Thirteenth Supplemental Indenture dated as of February 1, 1959, a Fourteenth

 

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Supplemental Indenture dated as of July 15, 1960, a Fifteenth Supplemental Indenture dated as of June 15, 1964, a Sixteenth Supplemental Indenture dated as of January 1, 1969, a Seventeenth Supplemental Indenture dated as of March 1, 1970, an Eighteenth Supplemental Indenture dated as of January 1, 1971, a Nineteenth Supplemental Indenture dated as of January 1, 1972, a Twentieth Supplemental Indenture dated as of February 1, 1974, a Twenty-First Supplemental Indenture dated as of August 1, 1974, a Twenty-Second Supplemental Indenture dated as of August 1, 1975, a Twenty-Third Supplemental Indenture dated as of January 1, 1977, a Twenty-Fourth Supplemental Indenture dated as of October 1, 1977, a Twenty-Fifth Supplemental Indenture dated as of September 1, 1978, a Twenty-Sixth Supplemental Indenture dated as of September 1, 1978, a Twenty-Seventh Supplemental Indenture dated as of March 1, 1979, a Twenty-Eighth Supplemental Indenture dated as of May 1, 1979, a Twenty-Ninth Supplemental Indenture dated as of March 1, 1980, a Thirtieth Supplemental Indenture dated as of August 1, 1980, a Thirty-First Supplemental Indenture dated as of February 1, 1981, a Thirty-Second Supplemental Indenture dated as of August 1, 1981, a Thirty-Third Supplemental Indenture dated as of December 1, 1981, a Thirty-Fourth Supplemental Indenture dated as of December 1, 1982, a Thirty-Fifth Supplemental Indenture dated as of March 30, 1984, a Thirty-Sixth Supplemental Indenture dated as of November 15, 1984, a Thirty-Seventh Supplemental Indenture dated as of August 15, 1985, a Thirty-Eighth Supplemental Indenture dated as of October 1, 1986, a Thirty-Ninth Supplemental Indenture dated as of March 15, 1987, a Fortieth Supplemental Indenture dated as of June 1, 1987, a Forty-First Supplemental Indenture dated as of June 15, 1988, a Forty-Second Supplemental Indenture dated as of August 1, 1988, a Forty-Third Supplemental Indenture dated as of September 15, 1989, a Forty-Fourth Supplemental Indenture dated as of March 15, 1990, a Forty-Fifth Supplemental Indenture dated as of March 15, 1990, a Forty-Sixth Supplemental Indenture dated as of June 1, 1990, a Forty-Seventh Supplemental Indenture dated as of July 15, 1991, a Forty-Eighth Supplemental Indenture dated as of July 15, 1992, a Forty-Ninth Supplemental Indenture dated as of February 15, 1993, a Fiftieth Supplemental Indenture dated as of February 15, 1993, a Fifty-First Supplemental Indenture dated as of February 1, 1994, a Fifty-Second Supplemental Indenture dated as of April 30, 1999, a Fifty-Third Supplemental Indenture dated as of June 15, 2001, a Fifty-Fourth Supplemental Indenture dated as of September 1, 2002, a Fifty-Fifth Supplemental Indenture dated as of February 15, 2003, a Fifty-Sixth Supplemental Indenture dated as of December 1, 2004, a Fifty-Seventh Supplemental Indenture dated as of August 21, 2008, a Fifty-Eighth Supplemental Indenture dated as of December 19, 2008, a Fifty-Ninth Supplemental Indenture dated as of March 23, 2009, a Sixtieth Supplemental Indenture dated as of June 1, 2009, a Sixty-First Supplemental Indenture dated as of October 1, 2009, a Sixty-Second Supplemental Indenture dated as of July 9, 2010, a Sixty-Third Supplemental Indenture dated as of September 23, 2010, a Sixty-Fourth Supplemental Indenture dated as of December 1, 2011, a Sixty-Fifth Supplemental Indenture dated as of March 15, 2012, a Sixty-Sixth Supplemental Indenture dated as of July 11, 2013, and a Sixty-Seventh Supplemental Indenture dated as of January 1, 2016, each supplementing and amending the Indenture; and

 

WHEREAS, the Thirty-Fifth Supplemental Indenture authorized and appointed LaSalle Bank National Association, a national banking association duly organized and existing under the laws of the United States of America with its principal office in Chicago, Illinois and formerly named LaSalle National Bank, as Successor Trustee to The First National Bank of Chicago, which appointment was accepted, and all trust powers under the Indenture were thereby transferred from The First National Bank of Chicago to LaSalle Bank National Association; and

 

WHEREAS, by an Instrument of Resignation, Appointment and Acceptance dated as of December 15, 2008, Bank of America, N.A., as successor by merger to LaSalle Bank National Association, resigned as trustee and the Company appointed the Trustee as Successor Trustee thereto, which appointment was thereby accepted by the Trustee effective as of that date, and all trust powers were thereby transferred from Bank of America, N.A. to the Trustee; and

 

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WHEREAS, the Forty-Sixth Supplemental Indenture amended the Indenture to reflect a change in the name of the Company from Public Service Company of Indiana, Inc. to PSI Energy, Inc. effective as of April 20, 1990, the Fifty-Seventh Supplemental Indenture amended the Indenture to reflect a change in the name of the Company from PSI Energy, Inc. to Duke Energy Indiana, Inc., effective as of October 1, 2006, and the Sixty-Seventh Supplemental Indenture amended the Indenture to reflect the Company’s conversion of its form of organization effective January 1, 2016 from an Indiana corporation to an Indiana limited liability company named “Duke Energy Indiana, LLC”; and

 

WHEREAS, as of May 12, 2016, the only bonds that have been heretofore issued under the Indenture which are now outstanding are $28,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series WW, Due August 22, 2022” and $53,055,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022” and $38,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032” and $500,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series LLL, 6.35%, Due August 15, 2038” and $45,940,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, 2005A Pledge Series, Due July 1, 2035” and $450,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series MMM, 6.45%, Due April 1, 2039” and $55,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series NNN, 6%, Due August 1, 2039” and $50,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series OOO, 4.95%, Due October 1, 2040” and $500,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series PPP, 3.75%, Due July 15, 2020” and $10,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series QQQ, 33/4%, Due April 1, 2022” and $59,600,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series RRR, 3 /8%, Due March 1, 2019” and $44,025,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series SSS, Due May 1, 2035” and $23,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series TTT, Due March 1, 2031” and $250,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series UUU, 4.20%, Due March 15, 2042” and $150,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series VVV, Floating Rate, Due July 11, 2016” and $350,000,000 aggregate principal amount of “Duke Energy Indiana, Inc. First Mortgage Bonds, Series WWW, 4.90%, Due July 15, 2043”; and

 

WHEREAS, in accordance with the provisions of Section 1 of Article XVIII of the Indenture, the Board of Directors has authorized the execution and delivery by the Company of a Sixty-Eighth Supplemental Indenture, substantially in the form of this Sixty- Eighth Supplemental Indenture, for the purpose of creating a sixty-ninth series of bonds to be issued under the Indenture, to be known as “Duke Energy Indiana, LLC First Mortgage Bonds, Series XXX, 3.75%, Due May 15, 2046” (such bonds being hereinafter referred to as the “Bonds of Series XXX”), and prescribing the form and substance of the Bonds of Series XXX and the terms, provisions and characteristics thereof, and for the purpose of adding to the covenants and agreements of the Company for the protection of the bondholders and of the trust estate, of providing the terms and conditions for the redemption of the Bonds of Series XXX, of adding certain other covenants and undertakings with respect to the Bonds of Series XXX and of making such changes in the Indenture as are deemed necessary or desirable and as are permitted by the Indenture; and

 

WHEREAS, all conditions and requirements necessary to make this Sixty-Eighth Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized:

 

NOW, THEREFORE, in consideration of the premises, and of the acceptance and purchase of the Bonds of Series XXX by the holders and registered owners thereof, and of the sum of One Dollar ($1.00)

 

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duly paid by the Trustee to the Company, the receipt whereof is hereby acknowledged, and in accordance with and subject to the terms and provisions of the Indenture, the Company and the Trustee, respectively, have entered into, executed and delivered this Sixty-Eighth Supplemental Indenture for the uses and purposes hereinafter expressed, that is to say:

 

ARTICLE I.

 

FIRST MORTGAGE BONDS, SERIES XXX, 3.75%, DUE MAY 15, 2046

 

Section 1.  There are hereby created a sixty-ninth series of bonds to be issued under and secured by the Indenture, to be designated as “Duke Energy Indiana, LLC First Mortgage Bonds, Series XXX, 3.75%, Due May 15, 2046” (such series being the Bonds of Series XXX hereinbefore referred to).

 

Section 2.  The following provisions shall apply to the Bonds of Series XXX.

 

(a)                                 The Bonds of Series XXX shall be issued in fully registered form only. However, except as provided elsewhere in this Section, the registered owner of all of the Bonds of Series XXX initially shall be The Depository Trust Company (“DTC”) or its nominee, and such Bonds of Series XXX initially shall be registered in the name of DTC or its nominee. Payment of the principal of or interest on Bonds registered in the name of DTC or its nominee shall be made in the manner specified in DTC’s rules and by-laws. DTC (and any successor securities depository) and its (or their) participating institutions (each, a “Participant”) shall maintain a book-entry registration and transfer system with respect to ownership of beneficial interests in the Bonds of Series XXX (the “Book-Entry System”).

 

(b)                                 The Bonds of Series XXX initially shall be issued in the form of one or more authenticated, fully registered bonds for such series (each, a “Global Security”) which (i) need not be in the form of a lithographed or engraved certificate, but may be typewritten or printed on ordinary paper or such paper as the Trustee may reasonably request, (ii) shall represent and be denominated in an amount equal to 100% of the aggregate principal amount of the Bonds of Series XXX issued under this Supplemental Indenture, (iii) shall be executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture, (iv) shall be registered in the name of DTC or its nominee, and delivered to DTC or its nominee or a custodian therefor, and (v) shall contain the following legend on the face thereof:

 

Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an interest herein.

 

Unless and until it is exchanged in whole or in part for Bonds of Series XXX in definitive certificated form, each Global Security representing the Bonds of Series XXX may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor securities depository or a nominee of any such successor securities depository.

 

(c)                                  The Trustee and the Company may treat Cede & Co. or its nominee, or any successor securities depository or nominee thereof (collectively, the “Depository”) as the sole and

 

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exclusive owner of the Bonds of Series XXX, registered in its name for the purposes of payment of the principal or redemption price of or interest on the Bonds of Series XXX, giving any notice permitted or required to be given to holders of the Bonds of Series XXX under the Indenture or this Supplemental Indenture, registering the transfer of the Bonds of Series XXX, obtaining any consent or other action to be taken by holders of the Bonds of Series XXX, and for all other purposes whatsoever and neither the Trustee nor the Company shall be affected by any notice to the contrary. Neither the Company nor the Trustee nor any registrar nor any paying agent shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in the Bonds of Series XXX under or through the Depository or any Participant, or any other person which is not shown on the registration books as being a holder of the Bonds of Series XXX with respect to (i) the accuracy of any records maintained by the Depository or any Participant; (ii) the payment by the Depository to any Participant of any amount in respect of the principal or interest on the Bonds of Series XXX or the redemption price of the Bonds of Series XXX; (iii) the payment by any Participant to any owner of a beneficial ownership interest in the Bonds of Series XXX, in respect of the principal of or interest on the Bonds of Series XXX or (iv) any consent or other action taken by the Depository as owner of the Bonds of Series XXX. The Trustee shall pay all principal of and interest on the Bonds of Series XXX only to or upon the order of the registered holder or holders of the Bonds of Series XXX, as shown on the registration books, and all such payments shall be valid and effective to fully satisfy and discharge the Company’s obligations with respect to the principal or redemption price of and interest on the Bonds of Series XXX, to the extent of the sum or sums so paid. No person other than a holder of the Bonds of Series XXX, as shown on the registration books of DTC, shall receive an authenticated Bond evidencing the obligation of the Company to make payment of the principal of and interest on the Bonds of Series XXX, pursuant to the Indenture and this Supplemental Indenture. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee for Cede & Co, and subject to the provisions of the Indenture and this Supplemental Indenture, the word “Cede & Co.”, as used in this Supplemental Indenture, shall refer to each new nominee of DTC.

 

(d)                                 In the event that after the occurrence of an event of default relating to the Bonds of Series XXX that has not been cured or waived, holders of a majority in aggregate principal amount of the beneficial interests in the Bonds of Series XXX, as reflected in the books and records of the Depository, notify the Trustee, through the Depository or any Participant, that the continuation of the Book-Entry System is no longer in the best interests of such holders of beneficial interests in the Bonds of Series XXX, then the Trustee shall notify the Depository and the Company, and the Depository will notify each Participant of the availability through the Depository of definitive certificated Bonds of Series XXX.

 

In such event, the Company shall execute, and the Trustee, upon receipt of a written order of the Company, signed by its President or a Vice President and by its Treasurer, Assistant Treasurer, Secretary or Assistant Secretary (an “Issuer Order”), for the authentication and delivery of definitive certificated Bonds of Series XXX, will authenticate and deliver Bonds of Series XXX in definitive certificated form, in any authorized denominations, all pursuant to the provisions of the Indenture, to the person or persons specified to the Trustee in writing by the Depository in the aggregate principal amount of the Global Security or Securities and in exchange for such Global Security or Securities.

 

(e)                                  If at any time the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Bonds of Series XXX, or if at any time the Depository shall no longer be registered as a clearing agency in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Company may appoint a successor Depository with respect to the Bonds of Series XXX. If a successor Depository for the Bonds of Series XXX is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, the Company will execute, and the Trustee, upon receipt of an Issuer Order for the

 

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authentication and delivery of definitive certificated Bonds of Series XXX, will authenticate and deliver Bonds of Series XXX in definitive certificated form, in any authorized denominations, all pursuant to the provisions of the Indenture, to the person or persons specified to the Trustee in writing by the Depository in the aggregate principal amount of the Global Security or Securities and in exchange for such Global Security or Securities.

 

(f)                                   The Company may at any time and in its sole discretion determine that the Bonds of Series XXX shall no longer be represented by a Global Security or Securities. In such event the Company will execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive certificated Bonds of Series XXX, will authenticate and deliver the Bonds of Series XXX in definitive certificated form, in any authorized denominations, all pursuant to the provisions of the Indenture, to the person or persons specified to the Trustee in writing by the Depository in the aggregate principal amount of the Global Security or Securities and in exchange for such Global Security or Securities.

 

(g)                                  Upon the exchange of any Global Security for the Bonds of Series XXX in definitive certificated form, in authorized denominations, the Global Security or Securities shall be cancelled by the Trustee.

 

(h)                                 Whenever the Depository requests the Company and the Trustee to do so, the Trustee and the Company will cooperate with the Depository in taking appropriate action after reasonable notice to (i) make available one or more separate Global Securities evidencing the Bonds of Series XXX to any Participant having Bonds of Series XXX credited to its account at the Depository, or (ii) arrange for another Depository to maintain custody of the Global Security or Securities evidencing the Bonds of Series XXX.

 

(i)                                     In connection with any notice or other communication to be provided to holders of the Bonds of Series XXX pursuant to the Indenture and this Supplemental Indenture by the Company or the Trustee with respect to any consent or other action to be taken by holders of the Bonds of Series XXX, the Company or the Trustee, as the case may be, shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Such notice to the Depository shall be given only so long as a Depository or its nominee is the sole holder of the Bonds of Series XXX.

 

The Bonds of Series XXX and the Trustee’s certificate to be endorsed thereon shall be substantially in the following forms, respectively:

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]

 

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(FORM OF FACE OF BOND OF SERIES XXX)

 

[Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an interest herein.](1)

 

	
No.   XXX-R-
    	
$                
    
	
CUSIP No:   26443T AA4
    	
 
    
	
ISIN:   US26443TAA43
    	
 
    

 

DUKE ENERGY INDIANA, LLC
 FIRST MORTGAGE BOND, SERIES XXX, 3.75%, 
 DUE MAY 15, 2046

 

Duke Energy Indiana, LLC, an Indiana limited liability company (hereinafter called the “Company”), for value received, hereby promises to pay to                                     , or registered assigns, the principal sum of                                  Dollars ($             ) on the fifteenth day of May, 2046 and to pay interest on said sum from the date hereof, until said principal sum is paid, at the rate of 3.75% per annum, payable semi-annually on the fifteenth day of May and November in each year, beginning on November 15, 2016. Both the principal of and the interest on this bond shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts at the office or agency of the Company in Plainfield, Indiana, or, at the option of the registered owner hereof, at the office or agency of the Company in the Borough of Manhattan, The City of New York, State of New York, except that interest on this bond may be paid, at the option of the Company, by check or draft mailed to the address of the person entitled thereto as it appears on the books of the Company maintained for that purpose.

 

REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.

 

This bond shall not be valid or become obligatory for any purpose unless and until it shall have been authenticated by the execution by the Trustee, or its successor in trust under the Indenture, of the certificate endorsed hereon.

 

(1) This should be included only if the Bonds of Series XXX are being issued in global form.

 

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IN WITNESS WHEREOF, Duke Energy Indiana, LLC has caused this bond to be executed in its name by the manual or facsimile signature of its President or an Executive Vice President or one of its Vice Presidents, and its company seal or a facsimile thereof to be hereto affixed and attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.

 

Dated as of:

 

	
 
    	
DUKE ENERGY INDIANA, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 President
    
				

 

	
ATTEST:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 Secretary
    	
 
    
			

 

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(FORM OF REVERSE OF BOND OF SERIES XXX)

 

This bond is one of the bonds of the Company issued and to be issued from time to time under and in accordance with and all secured by an indenture of mortgage or deed of trust, dated September 1, 1939, from Public Service Company of Indiana (predecessor of the Company) to The First National Bank of Chicago, as Trustee, to which Deutsche Bank National Trust Company is successor trustee (which indenture as amended by all supplemental indentures is hereinafter referred to as the “Indenture”). Said Trustee or its successor in trust under the Indenture is hereinafter sometimes referred to as the “Trustee.” Reference is hereby made to the Indenture for a description of the property mortgaged and pledged and the nature and extent of the security for said bonds. By the terms of the Indenture, the bonds secured thereby are issuable in series which may vary as to date, amount, dates of maturity, rate of interest and in other respects as in the Indenture provided.

 

This bond is one of a series designated as “Duke Energy Indiana, LLC First Mortgage Bonds, Series XXX, 3.75%, Due May 15, 2046” (hereinafter referred to as the “Bonds of Series XXX”) of the Company issued under and secured by the Indenture and created by a Sixty-Eighth Supplemental Indenture, dated as of May 12, 2016 (the “Sixty-Eighth Supplemental Indenture”), which also amends the Indenture.

 

The rights and obligations of the Company and of the bearers and registered owners of bonds may be modified or amended with the consent of the Company by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of the bonds then outstanding at a meeting of bondholders called for the purpose (and by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of bonds of any series affected by such modification or amendment in case one or more, but less than all, series of bonds are so affected), all in the manner and subject to the limitations set forth in the Indenture, any consent by the bearer or registered owner of any bond being conclusive and binding upon such bearer or registered owner and upon all future bearers or registered owners of such bond, irrespective of whether or not any notation of such consent is made on such bond; provided that no such modification or amendment shall, among other things, extend the maturity or reduce the amount of, or reduce the rate of interest on, or otherwise modify the terms of the payment of the principal of, or interest or premium (if any) on this bond, which obligations are absolute and unconditional, or permit the creation of any lien ranking prior to or equal with the lien of the Indenture on any of the mortgaged property. The Sixty-Eighth Supplemental Indenture provides that at any time when no bonds issued under the Indenture prior to the issuance of the “PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009” are outstanding, the Company reserves the right to amend the Indenture, without the consent or other action by the holders of the bonds outstanding at that time, to decrease the seventy-five per centum (75%) vote requirement referred to above to sixty-six and two-thirds per centum (66-2/3%).

 

At any time before November 15, 2045 (the “Par Call Date”), the Bonds of Series XXX will be redeemable in whole or in part, at the option of the Company at any time, at a redemption price equal to the greater of (1) 100% of the principal amount of the Bonds of Series XXX being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Bonds of Series XXX being redeemed that would be due if the Bonds of Series XXX matured on the Par Call Date (exclusive of interest accrued to the redemption date), discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 0.20% (20 basis points), plus, in each case, accrued and unpaid interest on the principal amount of the Bonds of Series XXX being redeemed to, but excluding, such redemption date.  For the avoidance of doubt, interest that is due and payable on an interest payment date falling on or prior to a redemption date will be payable on such interest payment date in accordance with the Bonds of Series XXX and the Indenture. The Company shall notify the Trustee of the redemption price with respect to any redemption pursuant to

 

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this paragraph promptly after the calculation thereof. The Trustee shall not be responsible for calculating said redemption price.

 

At any time on or after the Par Call Date, the Bonds of Series XXX will be redeemable in whole or in part, at the option of the Company at any time, at a redemption price equal to 100% of the principal amount of such Bonds of Series XXX being redeemed plus accrued and unpaid interest on the principal amount of the Bonds of Series XXX being redeemed to, but excluding, such redemption date.

 

For purposes of the redemption provisions of the Bonds of Series XXX, the following terms have the following meanings:

 

“Business Day” means a day other than (i) a Saturday or Sunday, (ii) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on which the Trustee’s corporate trust office is closed for business.

 

“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the Bonds of Series XXX to be redeemed (assuming, for this purpose, that the Bonds of Series XXX matured on the Par Call Date), that would be utilized at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of the Bonds of Series XXX.

 

“Comparable Treasury Price” means, with respect to any redemption date for the Bonds of Series XXX, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Quotation Agent” means one of the Reference Treasury Dealers appointed by the Company.

 

“Reference Treasury Dealer” means each of Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., Mizuho Securities USA Inc., and a Primary Treasury Dealer (as defined below) selected by U.S. Bancorp Investments, Inc., plus one other financial institution appointed by the Company at the time of any redemption, or their respective affiliates or successors, each of which is a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”); provided, however, that if any of the foregoing or their affiliates or successors shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.

 

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

 

Notice of any redemption by the Company will be mailed at least 30 days but not more than 60 days before any redemption date to each holder of Bonds of Series XXX to be redeemed. If less than all

 

10

 

the Bonds of Series XXX are to be redeemed at the option of the Company, and if the Bonds of Series XXX are not Global Securities, the Trustee shall select, in such manner as it shall deem fair and appropriate, the Bonds of Series XXX to be redeemed in whole or in part.

 

Unless the Company defaults in payment of the redemption price, on and after any redemption date, interest will cease to accrue on the Bonds of Series XXX or portions thereof called for redemption.

 

In the case of any of certain events of default specified in the Indenture, the principal of this bond may be declared or may become due and payable prior to the stated date of maturity hereof in the manner and with the effect provided in the Indenture.

 

No recourse shall be had for the payment of the principal of or interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, to or against any incorporator, shareholder, officer or director, past, present or future, of the Company or of any predecessor or successor company, either directly or through the Company or such predecessor or successor company, under any constitution or statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, shareholders, directors and officers being waived and released by the registered owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Indenture.

 

The Bonds of Series XXX are issuable only in registered form without coupons. This bond is transferable by the registered owner hereof, in person or by an attorney duly authorized, at the principal office or place of business of Deutsche Bank National Trust Company, the Trustee, or its successor in trust under the Indenture, or, if the Bonds of Series XXX are not Global Securities, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, The City of New York, State of New York, upon the surrender and cancellation of this bond, and upon any such transfer a new registered bond or bonds of the same series and maturity date and for the same aggregate principal amount will be issued to the transferee in exchange herefor.

 

The Bonds of Series XXX are issuable in denominations of $2,000 and integral multiples of $1,000 in excess thereof as shall from time to time be determined and authorized by the Board of Directors of the Company. In the manner and subject to the limitations provided in the Indenture, Bonds of Series XXX are exchangeable as between authorized denominations, upon presentation thereof for such purpose by the registered owner, at the principal office or place of business of Deutsche Bank National Trust Company, the Trustee, or its successor in trust under the Indenture, or, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, The City of New York, State of New York.

 

No service charge will be made for any transfer or exchange of this bond, but the Company may require a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

11

 

(FORM OF TRUSTEE’S CERTIFICATE)

 

TRUSTEE’S CERTIFICATE

 

This bond is one of the Bonds of Series XXX designated therein referred to and described in the within mentioned Indenture and Sixty-Eighth Supplemental Indenture.

 

	
 
    	
DEUTSCHE   BANK NATIONAL TRUST COMPANY, AS TRUSTEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Authorized Officer
    

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]

 

12

 

Section 3.  The Bond of Series XXX issued prior to the first interest payment date shall be dated as of May 12, 2016, and otherwise shall be dated as provided in Section 1 of Article II of the Indenture.

 

Section 4.  All Bonds of Series XXX shall be due and payable on May 15, 2046, and shall bear interest from the date thereof at the rate of 3.75% per annum, payable semi-annually on the fifteenth day of May and November in each year, commencing on November 15, 2016, to each holder of record at the close of business on the first day of May and November (whether or not a Business Day) preceding the applicable interest payment date until the principal amount of the Bonds of Series XXX has been paid or made available for payment. Interest on the Bonds of Series XXX shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

Section 5.  Subject to agreements with or the rules of the Depository or any successor book-entry security system or similar system with respect to Global Securities, both the principal of and the interest on the Bonds of Series XXX shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, at the office or agency of the Company in Plainfield, Indiana, or, at the option of the holder thereof, at the office or agency of the Company in the Borough of Manhattan, The City of New York, State of New York, except that interest on the Bonds of Series XXX may be paid, at the option of the Company, by check or draft mailed to the address of the person entitled thereto as it appears on the books of the Company maintained for that purpose.

 

Section 6.  Definitive Bonds of Series XXX shall be issuable in denominations of $2,000 and integral multiples of $1,000 in excess thereof, numbered consecutively from “XXX-R-1” upward.

 

The Bonds of Series XXX shall be executed on behalf of the Company by the manual or facsimile signature of its President or an Executive Vice President or one of its Vice Presidents and shall have affixed thereto the seal of the Company or a facsimile thereof attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries and shall be authenticated by the execution by the Trustee of the certificate endorsed on said bonds.

 

No service charge will be made by the Company for the transfer or for the exchange of Bonds of Series XXX except, in the case of transfer, a charge sufficient to reimburse the Company for any tax or other governmental charge payable in connection therewith.

 

Pursuant to the provisions of Section 11 of Article II of the Indenture, the Bonds of Series XXX may be issued in temporary form, and if temporary bonds be issued, the Company shall, with all reasonable dispatch, at its own expense and without charge to the holders of the temporary bonds, prepare and execute definitive Bonds of Series XXX and exchange the temporary bonds for such definitive bonds in the manner provided for in said section, provided, however, no presentation or surrender of temporary Bonds of Series XXX shall be necessary in order for the holders entitled to interest thereon to receive such interest.

 

Section 7.  Article IX of the Indenture, “Maintenance and Renewal Fund and Sinking Fund Provisions”, as heretofore amended or supplemented shall not apply to the “PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009” (such bonds being hereinafter referred to as the “Bonds of Series BBB”) or to any subsequently created series of bonds (which includes the Bonds of Series XXX) from and after the date on which no series of bonds created under the Indenture prior to the Bonds of Series BBB are outstanding.

 

13

 

Section 8.  Section 22 of Article V of the Indenture as heretofore amended or supplemented which, among other things, requires an inspection of the mortgaged property every two years by an independent engineer, shall not apply to the Bonds of Series BBB or to any subsequently created series of bonds (which includes the Bonds of Series XXX), from and after the date on which no series of bonds created under the Indenture prior to the Bonds of Series BBB are outstanding.

 

Section 9.  The Company reserves the right, without consent or other action by the holders of the Bonds of Series BBB or of any subsequently created series of bonds (which includes the Bonds of Series XXX), to amend the Indenture, as heretofore amended or supplemented, at any time after all bonds of any series created prior to the Bonds of Series BBB are no longer outstanding under the Indenture, as follows:

 

(a)                                 by substituting for the words “in principal amount not greater than sixty per centum (60%) of” in Section 3 of Article IV thereof the following:

 

“in principal amount not greater than sixty-six and two-thirds per centum (66-2/3%) of”.

 

(b)                                 by substituting for the words “shall exceed sixty per centum (60%) of the value of bondable property so acquired” in Section 9 of Article V thereof the following:

 

“shall exceed sixty-six and two-thirds per centum (66-2/3%) of the value of bondable property so acquired”.

 

(c)                                  by substituting for the words “shall be deemed to be paid within the meaning of this article; provided, that the date for the payment or redemption of such bonds shall be not more than one (1) year after such moneys shall have been so set apart or paid.” in the first paragraph of Article XIV thereof the following:

 

“shall be deemed to be paid within the meaning of this article.”.

 

(d)                                 by substituting for the words “with the consent of holders of at least seventy-five per centum (75%) in aggregate principal amount of the bonds at the time outstanding;” in sub-section (a) of Section 3 of Article XVIII thereof the following:

 

“with the consent of holders of at least sixty-six and two-thirds per centum (66-2/3%) in aggregate principal amount of the bonds at the time outstanding;”.

 

(e)                                  by substituting for the words “holders (or persons entitled to vote the bonds) of not less than seventy-five per centum (75%) in aggregate principal amount of the bonds entitled to be voted” in subsection (l) of Section 3 of Article XVIII thereof the following:

 

“holders (or persons entitled to vote the bonds) of not less than sixty-six and two-thirds per centum (66-2/3%) in aggregate principal amount of the bonds entitled to be voted”.

 

(f)                                   by substituting for the words “holders (or persons entitled to vote the bonds) of at least seventy-five per centum (75%) in principal amount of the bonds outstanding” in sub-section (m) of Section 3 of Article XVIII thereof the following:

 

“holders (or persons entitled to vote the bonds) of at least sixty-six and two-thirds per centum (66-2/3%) in principal amount of the bonds outstanding”.

 

14

 

Section 10.  The Bonds shall not be entitled to the benefit of a sinking fund.

 

ARTICLE II.

 

ISSUANCE OF BONDS OF SERIES XXX.

 

Section 1.  An initial issue of the Bonds of Series XXX, in the aggregate principal amount not exceeding five hundred million dollars ($500,000,000) may be executed by the Company and delivered to the Trustee for authentication, and shall be authenticated and delivered by the Trustee to or upon the order of the Company (which authentication and delivery may be made without awaiting the filing or recording of this Sixty-Eighth Supplemental Indenture), upon receipt by the Trustee of the resolutions, certificates, orders, opinions and other instruments required by the provisions of Section 3 of Article IV of the Indenture to be received by the Trustee as a condition to the authentication and delivery by the Trustee of bonds pursuant to said Section 3.

 

Section 2.  Subject to the limitations provided in Section 24 of Article V of the Indenture, additional Bonds of Series XXX may be issued by the Company under the provisions of Sections 2, 3 or 4 of Article IV of the Indenture.

 

ARTICLE III.

 

INDENTURE AMENDMENTS.

 

Section 1.  Article I of the Indenture, as heretofore amended, is hereby further amended (i) by adding immediately after subdivision “(106)” thereof an additional subdivision numbered “(107)” and reading as follows:

 

“(107) The term ‘Sixty-Eighth Supplemental Indenture’ shall mean the Sixty-Eighth Supplemental Indenture executed by the Company and the Trustee, dated as of May 12, 2016, supplementing and amending the Indenture; and the term ‘Bonds of Series XXX’ shall mean the ‘Duke Energy Indiana, LLC First Mortgage Bonds, Series XXX, 3.75%, Due May 15, 2046’ created by the Sixty-Eighth Supplemental Indenture.”

 

and (ii) by changing the numbering of the present subdivision “(107)” thereof to “(108)”.

 

Section 2.  Article VII of the Indenture, as heretofore amended, is hereby further amended by inserting therein immediately after Section 52 thereof, a new section designated “Section 53” and reading as follows:

 

“Section 53. At any time before November 15, 2045 (the “Par Call Date”), the Bonds of Series XXX will be redeemable in whole or in part, at the option of the Company at any time, at a redemption price equal to the greater of (1) 100% of the principal amount of such Bonds of Series XXX being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Bonds of Series XXX being redeemed that would be due if the Bonds of Series XXX matured on the Par Call Date (exclusive of interest accrued to the redemption date), discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 0.20% (20 basis points), plus in each case, accrued and unpaid interest on the principal amount of the Bonds of Series XXX being redeemed to, but excluding, such redemption date. For the avoidance of doubt, interest that is due and payable on an interest payment date falling on or prior to a redemption date will be payable on such interest payment date in accordance with the Bonds of Series XXX and the

 

15

 

Indenture. The Company shall notify the Trustee of the redemption price with respect to any redemption pursuant to this paragraph promptly after the calculation thereof. The Trustee shall not be responsible for calculating said redemption price.

 

At any time on or after the Par Call Date, the Bonds of Series XXX will be redeemable in whole or in part, at the option of the Company at any time, at a redemption price equal to 100% of the principal amount of the Bonds of Series XXX being redeemed plus accrued and unpaid interest on the principal amount of the Bonds of Series XXX being redeemed to, but excluding, such redemption date.

 

‘Business Day’ means a day other than (i) a Saturday or Sunday, (ii) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on which the Trustee’s corporate trust office is closed for business.

 

‘Comparable Treasury Issue’ means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the Bonds of Series XXX to be redeemed (assuming, for this purpose, that the Bonds of Series XXX matured on the Par Call Date), that would be utilized at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of the Bonds of Series XXX.

 

‘Comparable Treasury Price’ means, with respect to any redemption date for the Bonds of Series XXX, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if the Quotation Agent obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.

 

‘Quotation Agent’ means one of the Reference Treasury Dealers appointed by the Company.

 

‘Reference Treasury Dealer’ means each of Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., Mizuho Securities USA Inc., and a Primary Treasury Dealer (as defined below) selected by U.S. Bancorp Investments, Inc., plus one other financial institution appointed by the Company at the time of any redemption, or their respective affiliates or successors, each of which is a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”); provided, however, that if any of the foregoing or their affiliates or successors shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer.

 

‘Reference Treasury Dealer Quotations’ means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.

 

‘Treasury Rate’ means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

 

16

 

Notice of any redemption by the Company will be mailed at least 30 days but not more than 60 days before any redemption date to each holder of Bonds of Series XXX to be redeemed. If less than all the Bonds of Series XXX are to be redeemed at the option of the Company, and if the Bonds of Series XXX are not Global Securities, the Trustee shall select, in such manner as it shall deem fair and appropriate, the Bonds of Series XXX to be redeemed in whole or in part.

 

Unless the Company defaults in payment of the redemption price, on and after any redemption date, interest will cease to accrue on the Bonds of Series XXX or portions thereof called for redemption.

 

The Company shall indemnify and hold harmless the Trustee from any and all losses, costs, damages, expenses, fees (including attorneys’ fees), court costs, judgments, penalties, obligations, suits, disbursements and liabilities of any kind or character whatsoever which may at any time be imposed upon, incurred by or asserted against the Trustee by reason of or arising out of or caused, directly or indirectly by any act or omission of the Trustee with respect to this Section 53, except for such that would arise out of the willful misconduct or gross negligence of the Trustee and except for costs and expenses arising in the ordinary course of the Trustee’s business.”

 

ARTICLE IV.

 

CONCERNING THE TRUSTEE.

 

The Trustee hereby accepts the trusts hereby declared and agrees to perform the same upon the terms and conditions in the Indenture and in this Sixty-Eighth Supplemental Indenture set forth. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Sixty-Eighth Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article XVII of the Indenture shall apply to this Sixty-Eighth Supplemental Indenture.

 

ARTICLE V.

 

MISCELLANEOUS PROVISIONS.

 

Section 1.  Wherever in the original Indenture or in any of the sixty-eight supplemental indentures thereto reference is made to any article or section of the original Indenture, such reference shall be deemed to refer to such article or section as amended by such supplemental indentures.

 

Section 2.  Upon the execution and delivery hereof, the Indenture shall thereupon be deemed to be amended as hereinabove set forth as fully and with the same effect as if the amendments made hereby were set forth in the original Indenture and each of the sixty-eight supplemental indentures to the Indenture shall henceforth be read, taken and construed as one and the same instrument; but such amendments shall not operate so as to render invalid or improper any action heretofore taken under the original Indenture or said supplemental indentures.

 

Section 3.  All the covenants, stipulations and agreements in this Sixty-Eighth Supplemental Indenture contained are and shall be for the sole and exclusive benefit of the parties hereto, their successors and assigns, and of the holders from time to time of the bonds.

 

17

 

Section 4.  The table of contents to, and the headings of the different articles of, this Sixty-Eighth Supplemental Indenture are inserted for convenience of reference, and are not to be taken to be any part of the provisions hereof, nor to control or affect the meaning, construction or effect of the same.

 

Section 5.  This Sixty-Eighth Supplemental Indenture may be simultaneously executed in any number of counterparts, and all such counterparts shall constitute but one and the same instrument.

 

Section 6.  Whenever a payment of principal or interest in respect of the Bonds of Series XXX are due on any day other than a Business Day (as hereinafter defined), such payment shall be payable on the first Business Day next following such date, and, in the case of a principal payment, interest on such principal payment shall accrue to the date of such principal payment. For the purposes of this Section 6 the term Business Day shall mean any day other than a day on which the Trustee is authorized by law to close.

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]

 

18

 

IN WITNESS WHEREOF, said Duke Energy Indiana, LLC has caused this instrument to be executed in its limited liability company name by its President or one of its Vice Presidents and to be attested by its Secretary or one of its Assistant Secretaries and said Deutsche Bank National Trust Company has caused this instrument to be executed in its corporate name by, and to be attested by, its authorized officers, in several counterparts, all as of the day and year first above written.

 

	
 
    	
 
    	
DUKE   ENERGY INDIANA, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(COMPANY   SEAL)
    	
 
    	
By
    	
/s/   Stephen G. De May
    
	
 
    	
 
    	
 
    	
Stephen   G. De May
    
	
 
    	
 
    	
 
    	
Senior   Vice President, Tax and Treasurer
    
	
 
    	
 
    	
 
    
	
ATTEST:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   Robert T. Lucas III
    	
 
    	
 
    
	
Robert T.   Lucas III
    	
 
    	
 
    
	
Assistant   Secretary
    	
 
    	
 
    

 

19

 

	
 
    	
 
    	
DEUTSCHE   BANK NATIONAL TRUST COMPANY, as Trustee and not in its individual capacity
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(CORPORATE   SEAL)
    	
 
    	
By
    	
/s/ Chris   Niesz
    
	
 
    	
 
    	
 
    	
Name:   Chris Niesz
    
	
 
    	
 
    	
 
    	
Title:   Assistant Vice President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By
    	
/s/ Debra   A. Schwalb
    
	
 
    	
 
    	
 
    	
Name:   Debra A. Schwalb
    
	
 
    	
 
    	
 
    	
Title:   Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
ATTEST:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   Kenneth R. Ring
    	
 
    	
 
    
	
Name:   Kenneth R. Ring
    	
 
    	
 
    
	
Title:   Director
    	
 
    	
 
    

 

20

 

	
STATE OF   NORTH CAROLINA
    	
)
    
	
 
    	
) ss:
    
	
COUNTY OF   MECKLENBURG
    	
)
    

 

BE IT REMEMBERED, that on this 12th day of May, 2016, before me, the undersigned, a notary public in and for the County and State aforesaid, duly commissioned and qualified, personally appeared Stephen G. De May and Robert T. Lucas III, personally known to me to be the same persons whose names are subscribed to the foregoing instrument, and personally known to me to be the Senior Vice President, Tax and Treasurer and an Assistant Secretary, respectively, of Duke Energy Indiana, LLC, an Indiana limited liability company, and acknowledged that they signed and delivered said instrument as their free and voluntary act as such Senior Vice President and Treasurer and Assistant Secretary, respectively, and as the free and voluntary act of said Duke Energy Indiana, LLC, for the uses and purposes therein set forth; in pursuance of the power and authority granted to them by resolution of the Board of Directors of said Company.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year aforesaid.

 

(NOTARIAL SEAL)

 

	
 
    	
/s/   Patricia C. Ross
    
	
 
    	
Patricia   C. Ross, Notary Public
    
	
 
    	
Commission   expires: Oct. 17, 2019
    

 

21

 

	
STATE OF   NEW JERSEY
    	
)
    
	
 
    	
) ss:
    
	
COUNTY OF   HUDSON
    	
)
    

 

BE IT REMEMBERED, that on this 12th day of May, 2016, before me, the undersigned, a notary public in and for the County and State aforesaid, duly commissioned and qualified, personally appeared Chris Niesz and Debra A. Schwalb personally known to me to be the same persons whose names are subscribed to the foregoing instrument, and personally known to me to be a/an Assistant Vice President and a/an Vice President, respectively, of Deutsche Bank National Trust Company, a national banking association, and acknowledged that they signed and delivered said instrument as their free and voluntary act as such Assistant Vice President and Vice President, respectively, and as the free and voluntary act of said Deutsche Bank National Trust Company, for the uses and purposes therein set forth; in pursuance of the power and authority granted to them by the bylaws of said association.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year aforesaid.

 

(NOTARIAL SEAL)

 

 

	
 
    	
/s/   Robert S. Peschler
    
	
 
    	
Robert S.   Peschler, Notary Public
    
	
 
    	
Commission   expires: Dec. 11, 2017
    

 

This instrument was prepared by:

 

Peter K. O’Brien, Esq.*

Hunton & Williams LLP

200 Park Avenue

New York, New York 10166

 

*Admitted in New York; not admitted in Indiana

 

22

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