Document:

Applied Films Corporation Long-Term Incentive Plan

 Exhibit 4.5 
 APPLIED FILMS CORPORATION 
 LONG-TERM INCENTIVE PLAN 
 ARTICLE 1 
 ESTABLISHMENT AND PURPOSE
OF THE PLAN 
 1.1 Establishment of the Plan. Applied Films Corporation, a Colorado corporation (the “Company”),
hereby establishes an incentive compensation plan to be known as the “Applied Films Corporation Long-Term Incentive Plan” (the “Plan”), as set forth in this document. The Plan permits the granting of stock options, stock
appreciation rights, restricted stock, performance shares, and other stock-based awards to key employees of the Company and its Subsidiaries, as well as Directors, Nonemployee Officers and Consultants. Upon approval by the Board of Directors of the
Company, subject to ratification by the affirmative vote of holders of a majority of shares of the Company’s Common Stock present and entitled to vote at the 2003 Annual Meeting of Shareholders, the Plan shall be effective as of
October 22, 2003 (the “Effective Date”). 
 1.2 Purpose of the Plan. The purpose of the Plan is to promote the
long-term success of the Company for the benefit of the Company’s shareholders, through stock-based compensation, by aligning the personal interests of Plan Participants with those of its shareholders. The Plan is designed to allow Plan
Participants to participate in the Company’s future, as well as to enable the Company to attract, retain and award such individuals. 
 1.3 Term of Plan. No Awards shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date (“Termination Date”), provided that Awards granted prior to the Termination Date may extend
beyond that date. 
 ARTICLE 2 
 DEFINITIONS 
 For purposes of this Plan, the following terms shall have the meanings set forth below: 
 2.1 “Administrator” shall mean the Board or any of the Committees designated to administer the Plan in accordance with Section 3.1 of the
Plan. 
 2.2 “Award” shall mean any award under this Plan of any Options, Stock Appreciation Rights, Restricted Stock, Performance
Shares or Other Stock-Based Award. 
 2.3 “Award Agreement” shall mean an agreement evidencing the grant of an Award under this
Plan. Awards under the Plan shall be evidenced by Award Agreements that set forth the details, conditions and limitations for each Award, as established by the Administrator and shall be subject to the terms and conditions of the Plan. 

2.4 “Award Date” shall mean the date that an Award is made, as specified in an Award Agreement. 

 2.5 “Board” shall mean the Board of Directors of the Company. 
 2.6 “Code” shall mean the Internal Revenue Code of 1986, as amended. 
 2.7 “Committee” shall mean one of the Committees, as specified in Article 3, appointed by the Board to administer the Plan. 
 2.8 “Common Stock” shall mean the Common Stock, no par value per share, of the Company. 
 2.9 “Consultant” shall mean any person or entity engaged by the Company or a Subsidiary to render services to the Company or that Subsidiary.

 2.10 “Director” shall mean a member of the Board or a member of the Board of Directors of a Subsidiary. 
 2.11 “Disability” shall mean permanent and total disability as determined under the rules and guidelines established by the Administrator for
purposes of the Plan. 
 2.12 “Employee” shall mean any person employed by the Company or a Subsidiary, Neither service as a
Director nor the payment of a Director’s fee by the Company shall be sufficient to constitute employment by the Company. 
 2.13
“Exchange Act” shall mean the Securities Exchange Act of 1934. 
 2.14 “Fair Market Value” shall be the closing sale
price of the Company’s Common Stock for such date on the NASDAQ. If no sale of shares of Common Stock is reflected on NASDAQ on a date, “Fair Market Value” shall be determined according to the closing sale price on the next preceding
day on which there was a sale of shares of Common Stock reflected on NASDAQ. 
 2.15 “Immediate Family Member” shall mean the
spouse, and/or any child or grandchild of a Participant. 
 2.16 “Incentive Stock Option” or “ISO” shall mean an option
to purchase shares of Common Stock granted under Article 6, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code. 
 2.17 “Insider” shall mean an employee who is an officer (as defined in Rule 16a-l(f) of the Exchange Act) or Director, or holder of
more than 10% of its outstanding shares of the Company’s Common Stock. 
 2.18 “NASDAQ” shall mean the National Association of
Security Dealers Automated Quotation System or any successor then in use. 
 2.19 “Nonemployee Director” shall mean a person who
satisfies (1) the definition of “Nonemployee Director” within the meaning set forth in Rule 16b-3(b)(3), as promulgated by the SEC under the Exchange Act, or any successor definition adopted by the SEC, or (2) the definition
of “outside director” within the meaning of Section 162(m) of the Code. 
  

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 2.20 “Nonemployee Officer” shall mean a person who is not an employee, but who has been elected
as an officer of the Company or of the Board. 
 2.21 “Nonqualified Stock Option” or “NQSO” shall mean an option to
purchase shares of Common Stock, granted under Article 6, which is not an Incentive Stock Option. 
 2.22 “Option” means an
Incentive Stock Option or a Nonqualified Stock Option. 
 2.23 “Option Price” shall mean the price at which a share of Common Stock
may be purchased by a Participant pursuant to an Option, as determined by the Administrator. 
 2.24 “Other Stock-Based Award”
shall mean an Award under Article 10 of this Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock. 
 2.25 “Participant” shall mean an Employee, a Director, a Consultant, or a Nonemployee Officer who holds an outstanding Award granted under the Plan. 
 2.26 “Performance Shares” shall mean an Award granted under Article 9 of this Plan evidencing the right to receive Common Stock or cash of
an equivalent value at the end of a specified performance period. 
 2.27 “Permitted Transferee” means (i) an Immediate Family
Member, (ii) a trust or trusts for the exclusive benefit of the Participant and/or one or more Immediate Family Members, or (iii) a partnership or limited liability company whose only partners or members are the Participant and/or one or
more Immediate Family Members. 
 2.28 “Plan Shares” shall mean the shares of Common Stock which may be issued under this Plan,
which may be either unauthorized and unissued Common Stock or issued Common Stock reacquired by the Company. 
 2.29 “Restricted
Stock” shall mean an Award granted to a Participant under Article 8 of this Plan. 
 2.30 “Retirement” shall mean the
termination of a Participant’s employment with the Company or a Subsidiary after the Participant attains the age of 60. With respect to a Director, Retirement shall mean the termination of a Director’s service as a Director of the Company
or a Subsidiary after serving as a Director of the Company and/or any Subsidiary for a period of at least five (5) consecutive years prior to the date of termination of such service. 
 2.31 “SEC” shall mean the Securities and Exchange Commission of the United States of America. 
  

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 2.32 “Stock Appreciation Right” or “SAR” shall mean an Award granted to a Participant
under Article 7 of this Plan. 
 2.33 “Subsidiary” shall mean any corporation in which the Company owns directly, or
indirectly through subsidiaries, at least 50% of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least 50% of the combined
equity thereof. 
 2.34 “Termination of Service” shall mean the termination of an Employee’s employment with the Company or a
Subsidiary. An Employee employed by a Subsidiary shall also be deemed to incur a Termination of Service if the Subsidiary ceases to be a Subsidiary and the Participant does not immediately thereafter become an employee of the Company or another
Subsidiary. With respect to a Participant that is not an Employee, Termination of Service shall mean the termination of the person’s service as a Director, as a Consultant, or as a Nonemployee Officer. 
 ARTICLE 3 
 ADMINISTRATION

 3.1 The Administrator. The Plan may be administered by different Committees with respect to different groups of
Plan Participants. To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more Non-Employee Directors. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3. Other than as provided above, the Plan shall be administered by (a) the Board, or (b) a Committee, which Committee shall be constituted to satisfy the foregoing conditions. 
 3.2 Administrator Authority. Subject to the Company’s Articles of Incorporation, Bylaws and the provisions of this Plan, the
Administrator shall have full authority to grant Awards to key Employees, as well as Directors, Consultants and Nonemployee Officers. Awards may be granted singly, in combination, or in tandem. The authority of the Administrator shall include the
following: 
 (a) To select the key Employees, Directors, Nonemployee Officers or Consultants to whom Awards may be granted
under the Plan; 
 (b) To determine whether and to what extent Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares and Other Stock-Based Awards, or any combination thereof are to be granted under the Plan; 
 (c) To
determine the number of shares of Common Stock to be covered by each Award; 
 (d) To determine the terms and conditions of
any Award Agreement, including, but not limited to, the Option Price, any vesting restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Award and the shares of Common
Stock relating thereto, based on such factors as the Administrator shall determine in its sole discretion; 
  

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 (e) To determine whether, to what extent and under what circumstances grants of Awards
are to operate on a tandem basis and/or in conjunction with or apart from other cash compensation arrangement made by the Company and/or a subsidiary other than under the terms of this Plan; 
 (f) To determine under what circumstances an Award may be settled in cash, Common Stock, or a combination thereof; and 
 (g) To determine to what extent and under what circumstances shares of Common Stock and other amounts payable with respect to an Award
shall be deferred. 
 The Administrator shall have the authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (including any Award Agreement) and to otherwise supervise the administration of the
Plan. A majority of any Committee or the Board shall constitute a quorum, and the acts of a majority of a quorum at any meeting, or acts reduced to or approved in writing by a majority of the members of any Committee or the Board, shall be the valid
acts of any Committee or the Board. The interpretation and construction by any Committee or the Board of any provisions of the Plan or any Award granted under the Plan shall be final and binding upon the Company, the Board and Participants,
including their respective heirs, executors and assigns. No member of the Board or any Committee shall be liable for any action or determination made in good faith with respect to the Plan or an Award granted hereunder. 
 3.3 No Authority to Reprice. Notwithstanding the authority described in Section 3.2, without the prior approval of the Company’s
shareholders, neither the Committee nor the Board shall have the authority to lower the option exercise price of previously granted Awards, whether by means of the amendment of previously granted Awards or the replacement or regrant, through
cancellation, of previously granted Awards. 
 ARTICLE 4 
 COMMON STOCK SUBJECT TO THE PLAN 
 Subject to adjustment as provided in Section 13.1, the
maximum aggregate number of shares of Common Stock which may be issued under this Plan, which may be either unauthorized and unissued Common Stock or issued Common Stock reacquired by the Company shall be 1,200,000. 
 Determinations as to the number of Plan Shares that remain available for issuance under the Plan shall be made in accordance with such rules and
procedures as the Administrator shall determine from time to time. If an Award expires unexercised or is forfeited, cancelled, terminated or settled in cash in lieu of Common Stock, the shares of Common Stock that were theretofore subject (or
potentially subject) to such Award may again be made subject to an Award Agreement. 

  

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In addition, shares from the following sources shall be added to the number of Plan Shares available for issuance under the Plan: 
 (1) Any shares of the Company’s Common Stock surrendered in payment of the exercise price of Options or to pay the tax withholding
obligations incurred upon the exercise of Options; 
 (2) Options withheld to pay the exercise price or tax withholding
obligations incurred upon the exercise of Options; and 
 (3) The number of shares repurchased by the Company in the open
market or otherwise having an aggregate purchase price no greater than the cash proceeds received by the Company from the sale of shares of the Company’s stock under the Plan. 
 ARTICLE 5 
 ELIGIBILITY 
 The persons who shall be eligible to receive Awards under the Plan shall be selected by the Administrator from time to time. In making such selections,
the Administrator shall consider the nature of the services rendered by such persons, their present and potential contribution to the Company’s success and the success of the particular Subsidiary of the Company by which they are employed or to
whom they provide services, and such other factors as the Administrator in its discretion shall deem relevant. Participants may hold more than one Award, but only on the terms and subject to the restrictions set forth in the Plan and their
respective Award Agreements. No Participant may receive Awards under the Plan covering more than 25% of Plan Shares. 
 ARTICLE 6

 STOCK OPTIONS 
 6.1
Options. Options may be granted alone or in addition to other Awards granted under this Plan. Each Option granted under this Plan shall be either an Incentive Stock Option (ISO) or a Nonqualified Stock Option (NQSO). 
 6.2 Grants. The Administrator shall have the authority to grant to any Participant one or more Incentive Stock Options, Nonqualified Stock
Options, or both types of Options. To the extent that any Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Option or the portion thereof which does not
qualify shall constitute a separate Nonqualified Stock Option. 
 6.3 Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under such Section 422. An Incentive Stock Option shall not be granted to an individual who, on the date of grant, owns
stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. The aggregate Fair Market Value, determined 

  

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on the Award Date of the shares of Common Stock with respect to which one or more Incentive Stock Options (or other incentive stock options within the
meaning of Section 422 of the Code, under all other option plans of the Company) granted on or after January 1, 1987, that are exercisable for the first time by a Participant during any calendar year shall not exceed the $100,000
limitation imposed by Section 422(d) of the Code. 
 6.4 Terms of Options. Options granted under the Plan shall be
evidenced by Award Agreements in such form as the Administrator shall, from time to time approve, which Agreement shall comply with and be subject to the following terms and conditions: 
 (a) Option Price. The Option Price per share of Common Stock purchasable under an Option shall be determined by the Administrator
at the time of grant but shall be not less than 100% of the Fair Market Value of the Common Stock at the Award Date. Once granted, the Option Price may not be modified to provide the Participant with a more favorable price per share unless such
modification is approved by the shareholders of the Company. 
 (b) Option Term. The term of each Option shall be fixed
by the Administrator, provided that no Option shall be exercisable more than ten (10) years after the date the Option is granted. 
 (c) Exercisability. Except as provided in Section 13.2, no Option shall be exercisable either in whole or in part prior to the first anniversary of the Award Date. Thereafter, an Option shall be
exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator and set forth in the Award Agreement. If the Administrator provides that any Option is exercisable only in installments, the
Administrator may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Administrator may determine. 
 (d) Method of Exercise. Subject to whatever installment exercise and waiting period provisions apply under subsection (c) above, Options may be exercised in whole or in part at any time during the term of
the Option, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price in such form as the Administrator may accept, provided that no
officer or director of the Company shall be permitted to make payment by promissory note or other obligation payable in the future. Notwithstanding the foregoing, an Option shall not be exercisable with respect to less than 100 shares of Common
Stock unless the remaining shares covered by an Option are fewer than 100 shares. If and to the extent determined by the Administrator in its sole discretion at or after grant, payment in full or in part may also be made in the form of Common Stock
owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances and with respect to any shares of Common Stock acquired upon the exercise of an Option, has been held by the Optionee for a period of
at least six (6) consecutive months), or by reduction in the number of shares issuable upon such exercise based, in each case, on the Fair Market Value of the Common Stock on the last trading date preceding payment as determined by the 

  

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Administrator. No shares of stock shall be issued until payment has been made. A Participant shall generally have the rights to dividends or other rights of
a shareholder with respect to shares subject to the Option when the person exercising such option has given written notice of exercise, has paid for such shares as provided herein, and, if requested, has given the representation described in
Section 13.1 of the Plan. 
 (e) Transferability of Options. No Option may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than through an agent as approved by the Administrator or by will or by the laws of descent and distribution, provided, however, the Administrator may, in its discretion, authorize all or a
portion of a Nonqualified Stock Option to be granted to an optionee to be on terms which permit transfer by such optionee to a Permitted Transferee, provided that (i) there may be no consideration for any such transfer (other than the receipt
of or interest in a family partnership or limited liability company), (ii) the Award Agreement pursuant to which such Options are granted must be approved by the Administrator, and must expressly provide for transferability in a manner
consistent with this Section 6.4(e), and (iii) subsequent transfers of transferred Options shall be prohibited except those in accordance with Section 6.4(h). Following transfer, any such Options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer. The events of termination of service of Sections 6.4(f), (g) and (h) hereof, and the tax withholding obligations of Section 14.3 shall continue to be applied
with respect to the original optionee, following which the Options shall be exercisable by the Permitted Transferee only to the extent, and for the periods specified in Sections 6(f), (g), and (h). The Company shall not be obligated to notify
Permitted Transferee(s) of the expiration or termination of any Option. Further, all Options shall be exercisable during the Participant’s lifetime only by such Participant and, in the case of a Nonqualified Stock Option, by a Permitted
Transferee. The designation of a person entitled to exercise an Option after a person’s death will not be deemed a transfer. 
 (f) Termination of Service for Reasons other than Retirement, Disability, or Death. Upon Termination of Service for any reason other than Retirement or on account of Disability or death, each Option held by the Participant shall, to
the extent rights to purchase shares under such Option have accrued at the date of such Termination of Service and shall not have been fully exercised, be exercisable, in whole or in part, at any time for a period of no more than three
(3) months following Termination of Service in the case of ISOs or no more than six (6) months following Termination of Service in the case of NQSOs, subject, however, to prior expiration of the term of such Options and any other
limitations on the exercise of such Options in effect at the date of exercise. Whether an authorized leave of absence or absence because of military or governmental service shall constitute Termination of Service for such purposes shall be
determined by the Administrator, which determination shall be final and conclusive. 
 (g) Termination of Service for
Retirement or Disability. Upon Termination of Service by reason of Retirement or Disability, each Option held by such Participant shall, to the extent rights to purchase shares under the Option have accrued at the date of such Retirement or
Disability and shall not have been fully exercised, remain exercisable in whole 

  

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or in part, at any time during the twelve (12) month period following Termination of Service, subject, however, in any case, to the prior expiration of
the term of the Option and any other limitation on the exercise of such Option in effect at the date of exercise. 
 (h)
Termination of Service for Death. Upon Termination of Service due to death, each Option held by such Participant or Permitted Transferee shall, to the extent rights to purchase shares under the Options have accrued at the date of death and
shall not have been fully exercised, be exercisable, in whole or in part, by the personal representative of the estate of the Participant or Permitted Transferee or by any person or persons who shall have acquired the Option directly from the
Participant or Permitted Transferee by bequest or inheritance at any time during the twelve (12) month period following death, subject, however, in any case, to the prior expiration of the term of the Option and any other limitation on the
exercise of such Option in effect at the date of exercise. 
 (i) Termination of Options. Any Option that is not
exercised within whichever of the exercise periods specified in Sections 6.4(f), (g) or (h) is applicable shall terminate upon expiration of such exercise period. 
 (j) Purchase and Settlement Provisions. The Administrator may at any time offer to purchase an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate to the Participant at the time that such offer is made. In addition, if an Award Agreement so provides at the Award Date or is thereafter amended to so provide, the
Administrator may require that all or part of the shares of Common Stock to be issued with respect to the exercise of an Option, in an amount not greater than the Fair Market Value of the shares that is in excess of the aggregate Option Price, take
the form of Performance Shares, which shall be valued on the date of exercise on the basis of the Fair Market Value of such Performance Shares determined without regard to the deferral limitations and/or forfeiture restrictions involved. 

ARTICLE 7 
 STOCK APPRECIATION
RIGHTS 
 7.1 Grant of SARs. The Administrator may approve the grant of Stock Appreciation Rights (SARs) that are related to
Options only. A SAR may be granted only at the time of grant of the related Option. A SAR will entitle the holder of the related Option, upon exercise of the SAR, to surrender such Option, or any portion thereof to the extent unexercised, with
respect to the number of shares as to which such SAR is exercised, and to receive payment of an amount computed pursuant to Section 7.2. Such Option will, to the extent surrendered, then cease to be exercisable. Subject to Section 6.4, a
SAR granted hereunder will be exercisable at such time or times, and only to the extent that a related Option is exercisable, and will not be transferable except to the extent that such related Option may be transferable. 
 7.2 Payment of SAR Amount. Upon the exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount
determined by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the Option Price, by (ii) the number of shares of Common Stock with respect to which the SAR is exercised.
At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in shares of Common Stock of equivalent value, or in some combination thereof. 
  

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 7.3 Nontransferability. Except as provided in Section 7.1 above, no SAR may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, and also except as provided for in Section 7.1 above, all SARs shall be exercisable, during the
Participant’s lifetime, only by such Participant. 
 ARTICLE 8 
 RESTRICTED STOCK 
 8.1 Awards of Restricted Stock. Shares of
Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan. The Administrator shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be made, the number of
shares to be awarded, the price (if any) to be paid by the Participant, the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the
Awards. The Administrator may condition the grant of Restricted Stock upon the achievement of specific business objectives, measurements of individual, business unit, Company or Subsidiary performances, or such other factors as the Administrator may
determine. The provisions of Restricted Stock awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years. 
 8.2 Awards and Certificates. A Participant selected to receive a Restricted Stock Award shall not have any rights with respect to such Award,
unless and until such Participant has executed an Award Agreement evidencing the Award and has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of such Award. Further, such
Award shall be subject to the following conditions: 
 (a) Acceptance. Awards of Restricted Stock must be accepted
within a period of thirty (30) days (or such shorter period as the Administrator may specify at grant) after the Award Date, by executing an Award Agreement and by paying whatever price (if any) the Administrator has designated for such shares
of Restricted Stock. 
 (b) Legend. Each Participant receiving a Restricted Stock Award shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award,
substantially in the following form: 
 “The transferability of this certificate and the shares of stock represented hereby are subject
to the terms and conditions (including forfeiture) of the Applied Films Corporation Long-Term Incentive Plan and related Award Agreement entered into between the registered owner and the Company, dated
                        . Copies of such Plan and Agreement are on file in the offices of the Company, 9586 I-25 Frontage
Road, Suite 200, Longmont, Colorado 80504.” 
  

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 (c) Custody. The Administrator may require that the stock certificates evidencing
such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to
the Common Stock covered by such Award. 
 8.3 Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to
this Plan shall be subject to the following restrictions and conditions: 
 (a) Restriction Period. Subject to the
provisions of this Plan and the Award Agreement, during a period set by the Administrator commencing with the Award Date (the “Restriction Period”), the Participant shall not be permitted to sell, transfer, pledge, or assign shares of
Restricted Stock awarded under this Plan. Subject to these limits, the Administrator, in its sole discretion, may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the Administrator may determine. 
 (b) Rights as
Shareholder. Except as provided in this subsection (b) and subsection (a) above, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company
including the right to vote and to receive any dividends. The Administrator, in its sole discretion, as determined at the time of Award, may permit or require the payment of dividends to be deferred. If any dividends or other distributions are paid
in shares of Common Stock, such shares shall be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. 
 (c) Termination of Service. Subject to the applicable provisions of the Award Agreement and this Article 8, upon Termination
of Service for any reason during the Restriction Period, all Restricted Stock still subject to restriction will vest or be forfeited in accordance with the terms and conditions established by the Administrator as specified in the Award Agreement.

 (d) Lapse of Restrictions. If and when the Restriction Period expires without a prior forfeiture of the Restricted
Stock, the certificates for such shares shall be delivered to the Participant. 
 (e) Waiver of Limitation. In the
event of the Participant’s Retirement, Disability or death, or in cases of special circumstances, the Administrator may, in its sole discretion, waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to
any or all of an Award under this Article 8. 
  

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 ARTICLE 9 
 PERFORMANCE SHARES 
 9.1 Award of Performance Shares. Performance Shares may be awarded
either alone or in addition to other Awards granted under this Plan. The Administrator shall determine the eligible persons to whom and the time or times at which Performance Shares shall be awarded, the number of Performance Shares to be awarded to
any person, the duration of the period (the “Performance Period”) during which, and the conditions under which, receipt of the Performance Shares will be deferred, and the other terms and conditions of the Award in addition to those set
forth in Section 9.2, as specified in the Award Agreement. The Administrator may condition the grant of Performance Shares upon the achievement of specific business objectives, measurements of individual, business unit, Company or Subsidiary
performance, or such other factors or criteria as the Administrator shall determine. The provisions of the award of Performance Shares need not be the same with respect to each Participant, and such Awards to individual Participants need not be the
same in subsequent years. 
 9.2 Terms and Conditions. Performance Shares awarded pursuant to this Article 9 shall be
subject to the following terms and conditions: 
 (a) Nontransferability. Subject to the provisions of this Plan and
the related Award Agreement, Performance Shares may not be sold, assigned, transferred, pledged or otherwise encumbered during the Performance Period. At the expiration of the Performance Period, share certificates or cash of an equivalent value (as
the Administrator may determine in its sole discretion) shall be delivered to the Participant, or his legal representative, in a number equal to the shares covered by the Award Agreement. 
 (b) Dividends. Unless otherwise determined by the Administrator at the time of Award, amounts equal to any cash dividends declared
during the Performance Period with respect to the number of shares of Common Stock covered by a Performance Share Award will not be paid to the Participant. 
 (c) Termination of Employment. Subject to the provisions of the Award Agreement and this Article 9, upon Termination of
Service for any reason during the Performance Period for a given Award, the Performance Shares in question will vest or be forfeited in accordance with the terms and conditions established by the Administrator at or after grant. 
 (d) Accelerated Vesting. Based on service, performance and/or such other factors or criteria as the Administrator may determine and
set forth in the Award Agreement, the Administrator may, at or after grant, accelerate the vesting of all or any part of any award of Performance Shares and/or waive the deferral limitations for all or any part of such Award. 
  

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 ARTICLE 10 
 OTHER STOCK-BASED AWARDS 
 10.1 Other Awards. Other Awards of Common Stock and other
Awards that are valued in whole or in part by reference to, or are payable in or otherwise based on, Common Stock (“Other Stock-Based Awards”), may be granted either alone or in addition to or in tandem with other Awards under the Plan.
Subject to the provisions of this Plan, the Administrator shall have authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such awards, and
all other conditions of the Awards. The Administrator may also provide for the grant of Common Stock under such Awards upon the completion of a specified performance period. The provisions of Other Stock-Based Awards need not be the same with
respect to each Participant and such Awards to individual Participants need not be the same in subsequent years. 
 10.2 Terms and
Conditions. Other Stock-Based Awards made pursuant to this Article 10 shall be set forth in an Award Agreement and shall be subject to the following terms and conditions: 
 (a) Nontransferability. Subject to the provisions of this Plan and the Award Agreement, shares of Common Stock subject to Awards
made under this Article 10 may not be sold, assigned, transferred, pledged, or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period
lapses. 
 (b) Dividends. Unless otherwise determined by the Administrator at the time of Award, subject to the
provisions of this Plan and the Award Agreement, the recipient of an Award under this Article 10 shall be entitled to receive, currently or on a deferred stock basis, dividends or other distributions with respect to the number of shares of
Common Stock covered by the Award. 
 (c) Vesting. Any Award under this Article 10 and any Common Stock covered by
any such Award shall vest or be forfeited to the extent so provided in the Award Agreement, as determined by the Administrator, in its sole discretion. 
 (d) Waiver of Limitation. In the event of the Participant’s Retirement, Disability or death, or in cases of special circumstances, the Administrator may, in its sole discretion, waive in whole or in part
any or all of the limitations imposed hereunder (if any) with respect to any or all of an Award under this Article 10. 
 (e) Price. Common Stock issued or sold under this Article 10 may be issued or sold for no cash consideration or such consideration as the Administrator shall determine and specify in the Award Agreement. 
  

 -13- 

 ARTICLE 11 
 TERMINATION OR AMENDMENT OF THE PLAN 
 The Board may at any time amend, discontinue or terminate this
Plan or any part thereof (including any amendment deemed necessary to ensure that the Company may comply with any applicable regulatory requirement); provided, however, that, unless otherwise required by law, the rights of a Participant with respect
to Awards granted prior to such amendment, discontinuance or termination, may not be impaired without the consent of such Participant and, provided further, without the approval of the Company’s shareholders, no amendment may be made which
would (i) increase the aggregate number of shares of Common Stock that may be issued under this Plan (except by operation of Article 4 or of Section 13.1 of the Plan); (ii) decrease the option price of any Option to less than
100% of the Fair Market Value on the dale of grant for an Option; or (iii) extend the maximum option period under Section 6.4(b) of the Plan. The Administrator may amend the terms of any Award theretofore granted, prospectively or
retroactively, but, subject to Section 13.2 of the Plan, no such amendment or other action by the Administrator shall impair the rights of any Participant without the Participant’s consent. Awards may not be granted under the Plan after
the Termination Date, but Awards granted prior to such date shall remain in effect or become exercisable pursuant to their respective terms and the terms of this Plan. 
 ARTICLE 12 
 UNFUNDED PLAN 
 This Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payment not yet made to a
Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. 
 ARTICLE 13 
 ADJUSTMENT PROVISIONS 
 13.1 Antidilution. Subject to the provisions of this Article 13, if the outstanding shares of Common Stock are increased, decreased, or
exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock or
other securities, an appropriate and proportionate adjustment may be made in (i) the maximum number and kind of shares provided in Article 4 of the Plan, (ii) the number and kind of shares or other securities subject to the then
outstanding Awards, and (iii) the price for each share or other unit of any other securities subject to the then outstanding Awards. 
 13.2 Change in Control. In the event of a merger or consolidation of the Company with or into another corporation or any other entity or the exchange of substantially all of the outstanding stock of the Company for shares of
another entity in which, after either transaction, the prior shareholders of the Company own less than 50% of the voting shares of the continuing or surviving entity, or in the event of the sale of all or substantially all of the assets of the
Company, (either event, 

  

 -14- 

 
a “Change of Control”), then each outstanding Award shall be assumed or an equivalent option or award substituted by the successor corporation or a
parent or subsidiary of the successor corporation, with appropriate adjustments as to the number and kind of shares and prices. In the event that the Administrator determines that the successor corporation or a parent or a subsidiary of the
successor corporation has refused to assume or substitute an equivalent option or award for each outstanding Award, then all Awards then outstanding under the Plan will be fully vested and exercisable and all restrictions will immediately cease. If
an Award becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change of Control, the Administrator shall notify all Participants that all outstanding Options shall be fully exercisable for a period of fifteen
(15) days from the date of such notice and that any Options that are not exercised within such period shall terminate upon the expiration of such period. 
 13.3 Adjustments by Administrator. Any adjustments pursuant to this Article 13 will be made by the Administrator, whose determination as to what adjustments will be made and the extent thereof will be
final, binding, and conclusive. No fractional interest will be issued under the Plan on account of any such adjustments. Only cash payments will be made in lieu of fractional shares. 
 ARTICLE 14 
 GENERAL PROVISIONS 
 14.1 Legend. The Administrator may require each person purchasing shares pursuant to an Award under the Plan to represent to and agree with
the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Administrator deems
appropriate to reflect any restrictions on transfer. 
 All certificates for shares of Common Stock delivered under the Plan shall be subject
to such stock transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations and other requirements of the SEC, any stock exchange upon which the Common Stock is then listed, any applicable Federal or
state securities law, and any applicable corporate law, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 
 14.2 No Right to Employment. Neither this Plan nor the grant of any Award hereunder shall give any Participant or other employee, director or
consultant any right with respect to continuance of employment, or any arrangement for services with the Company or any Subsidiary, nor shall there be a limitation in any way on the right of the Company or any Subsidiary by which an employee is
employed to terminate his or her employment or for any director or consultant to terminate his or her relationship with the Company or its subsidiary at any time. 
 14.3 Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise require, prior to the issuance or delivery of any shares of Common
Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld. Unless otherwise prohibited by the Administrator, each Participant may satisfy any such withholding tax
obligation by any of the following means or by a combination of such means: (a) tendering a cash payment; (b) authorizing 

  

 -15- 

 
the Company to withhold from the shares otherwise issuable to the Participant a number of shares having a Fair Market Value as of the “Tax Date,”
less than or equal to the amount of the withholding tax obligation; or (c) delivering to the Company unencumbered shares owned by the Participant having a Fair Market Value, as of the Tax Date, less than or equal to the amount of the
withholding tax obligation. The “Tax Date” shall be the date that the amount of tax to be withheld is determined. 
 14.4 No
Assignment of Benefits. No Award or other benefit payable under this Plan shall, except as otherwise specifically provided by law, be subject in any manner to anticipation, alienation, attachment, sale, transfer, assignment, pledge,
encumbrance or charge. Any attempt to anticipate, alienate, attach, sell, transfer, assign, pledge, encumber or charge, any such benefits shall be void, and any such benefit shall not in any manner be subject to the debts, contracts, liabilities,
engagements or torts of any person who shall be entitled to such benefit, nor shall such benefit be subject to attachment or legal process for or against such person. 
 14.5 Governing Law. This Plan and actions taken in connection herewith shall be governed, construed and enforced in accordance with the laws and in the courts of the state of Colorado. 
 14.6 Application of Funds. The proceeds received by the Company from the sale of shares of Common Stock pursuant to Awards granted under this
Plan will be used for general corporate purposes. 
 14.7 Rights as a Shareholder. Except as otherwise provided in an Award
Agreement, a Participant shall have no rights as a shareholder of the Company until he or she becomes the holder of record of Common Stock. 
 14.8 Non-US Awards. The Administrator may grant Awards to Participants who are subject to the laws of nations other than the United States, which Awards may have terms and conditions that differ from the terms provided elsewhere
in this plan for the purpose of complying with the laws or practices of nations other than the United States. 
  

 -16-Forward Sale Agreement, dated July 18, 2006

 Exhibit 10.1 
 EXECUTION VERSION 
 CONFIRMATION 
  

			
	Date:	  	July 18, 2006
		
	To:	  	Sunstone Hotel Investors, Inc.
		  	903 Calle Amanecer, Suite 100
		  	San Clemente, California 92673
		
	Telefax No.:	  	(949) 369-3102
		  	(949) 369-3179
		
	Attention:	  	Andrew W. Gross
		
	From:	  	Citibank, N.A.
		
	Telefax No.:	  	212-615-8985
	
	Transaction Reference Number: ____________________

 The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Sunstone Hotel Investors, Inc. (“Counterparty”) and Citibank, N.A. (“Citibank”) on the Trade Date specified below (the “Transaction”).
This Confirmation constitutes a “Confirmation” as referred to in the ISDA Agreement specified below. 
 This Confirmation evidences
a complete binding agreement between you and us as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the 1992 ISDA Master Agreement
(Multicurrency-Cross Border) (“ISDA Agreement”) as if we had executed an agreement in such form on the Trade Date of the first such Transaction between you and us, and such agreement shall be considered the “Agreement”
hereunder. 
 The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “Definitions”)
as published by ISDA are incorporated into this Confirmation. 
 THIS CONFIRMATION WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS. 
 1. In the event of any inconsistency between this Confirmation, on the one hand, and the Definitions or the ISDA Agreement, on the other hand, this
Confirmation will govern. 
 2. Each party will make each payment specified in this Confirmation as being payable by such party, not later
than the due date for value on that date in the place of the account specified below or otherwise specified in writing, in freely transferable funds and in a manner customary for payments in the required currency. 
  

 1 

 3. Confirmations: 
 This Confirmation and the ISDA Agreement shall constitute the written agreement between Counterparty and Citibank with respect to the Transaction.

 The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

			
	Trade Date:	  	July 18, 2006
		
	Seller:	  	Counterparty
		
	Buyer:	  	Citibank
		
	Shares:	  	The common stock, $0.01 par value per share, of Counterparty (Symbol: “SHO”).
		
	Number of Shares:	  	4,000,000
		
	Initial Forward Price:	  	$27.75 per Share
		
	Forward Price:	  	On the third Scheduled Trading Day following the Trade Date, the Initial Forward Price, and on any other day the Forward Price as of the immediately preceding calendar day multiplied
by the sum of (i) 1 plus (ii) the Daily Rate for such day.
		
		  	For each Specified Amount with a Specified Amount Record Date (as defined below) occurring on or before the relevant Settlement Date or Cash Settlement Payment Date, as applicable, on the
related Specified Amount Payment Date (as defined below) such Specified Amount shall be subtracted from the Forward Price on such day.
		
	WHERE:	  	
		
		  	“Daily Rate” means, for any day, (i)(A) the Federal Funds Open Rate for such day minus (B) the Fixed Charge divided by (ii) 360.
		
		  	“Specified Amount” means (i) in the case of the first Specified Amount, USD 0.30 per Share; and (ii) in the case of all subsequent Specified Amounts, USD 0.33 per Share,
based on an expected quarterly payment date deemed to occur on every 15th day of January, April, July and October (or, if not a Business Day, the next preceding Business Day) (each a “Specified Amount Payment Date”) with a record
date deemed to occur on the last calendar day of March, June,

  

 2 

			
		  	September and December (each a “Specified Amount Record Date”).
		
		  	“Federal Funds Open Rate” means with respect to any day, the opening federal funds rate quoted on Bloomberg Financial Markets as of such day (or, if that day is not a
Business Day, the next preceding Business Day); provided that if no such rate appears on such Business Day, the Calculation Agent shall determine the rate in a commercially reasonable manner from any publicly available source (including any
Federal Reserve Bank).
		
		  	“Fixed Charge” means the sum of the Spread and the Borrow Cost.
		
		  	“Spread” means 75 basis points per annum.
		
		  	“Borrow Cost” means 25 basis points per annum.
		
		  	“Business Day” means any day on which the commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in New York
City.
		
	Prepayment:	  	Not Applicable
		
	Variable Obligation:	  	Not Applicable
		
	Exchange:	  	New York Stock Exchange
		
	Related Exchanges:	  	All Exchanges
		
	Calculation Agent:	  	Citibank, which shall make all calculations, adjustments and determinations required pursuant to the Transaction in a commercially reasonable manner. All such calculations, adjustments and
determinations shall be binding absent manifest error. The Calculation Agent shall provide, upon request of Counterparty, a schedule of all calculations, adjustments and determinations in reasonable detail and in a timely manner, and consult with
Counterparty prior to making calculations, adjustments and determinations where reasonably practicable.

  

 3 

 4. Valuation: 
  

			
	Initial Pricing Date:	  	Subject to “Accelerated Unwind” below, July 18, 2007.
		
	Pricing Periods:	  	Each period commencing on an Initial Pricing Date and ending on the Scheduled Trading Day on which the aggregate number of Priced Shares for all days in such Pricing Period equals the Number
of Shares.
		
		  	For any day in a Pricing Period, “Priced Shares” means (i) where Cash Settlement is applicable to such Pricing Period, the number of Shares purchased by or on behalf of
Citibank (or its agent or affiliate) to close out its hedge of the Transaction that would customarily settle on such day and (ii) where Net Share Settlement is applicable to such Pricing Period, the number of Shares purchased by or on behalf of
Citibank (or its agent or affiliate) to close out its hedge of the Transaction that would customarily settle on such day multiplied by the Settlement Price for such day divided by the Forward Price for such
day.
		
	Accelerated Unwind:	  	Subject to Section 12(b), Counterparty may, by providing Citibank at least 3 Scheduled Trading Days’ notice (a “Settlement Notice”), irrevocably elect to accelerate the
Initial Pricing Date or Settlement Date, as the case may be, for all or a portion of the Number of Shares (such portion of the Number of Shares specified in such Settlement Notice, the “Unwind Shares”) to a Scheduled Trading Day
specified by Counterparty in such Settlement Notice, which Settlement Notice shall also specify the applicable Settlement Method. Counterparty may not designate an Initial Pricing Date that occurs during a Pricing Period relating to another Initial
Pricing Date designated pursuant to this paragraph.
		
		  	Upon the acceleration of the Initial Pricing Date or Settlement Date as described above with respect to a portion but not all of the Number of Shares, the Transaction shall be treated as if
it were two transactions with terms identical to those of the Transaction, except that (i) the first such transaction shall have a Number of Shares equal to the number of Unwind Shares and an Initial Pricing Date or Settlement Date, as the case may
be, as specified in the relevant Settlement Notice and (ii) the second such transaction shall have a Number of Shares equal to the Number of Shares for the Transaction, minus the number of Unwind Shares.

  

 4 

			
	Unwind Activities:	  	During each Pricing Period, Citibank (or its agent or affiliate) shall purchase Shares to close out its hedge of the portion of the Transaction subject to such Pricing Period. The times and
prices at which Citibank (or its agent or affiliate) purchases any Shares during any Pricing Period shall be at Citibank’s sole discretion (it being understood that Citibank may exercise such discretion after considering whether and in what
quantity or manner purchasing Shares would be permitted or appropriate under applicable securities laws).

 5. Settlement Terms: 
  

			
	Settlement Currency:	  	USD
		
	Settlement Method Election:	  	Applicable with respect to a Settlement Date or all Cash Settlement Payment Dates for a Pricing Period; provided that (i) for purposes of this Confirmation, Section 7.1 of the
Definitions is hereby amended by adding the phrase “, Net Share Settlement” after “Cash Settlement” in the sixth line thereof and (ii) if Counterparty elects Cash Settlement or Net Share Settlement, it shall be deemed, on the
date of notice of such election, to have repeated the representations contained in Section 11(b)(vi) and (ix) below and to represent that it does not expect a Suspension Condition to exist during the Pricing Period.
		
	Electing Party:	  	Counterparty
		
	Settlement Method Election Date:	  	The fifth Scheduled Trading Day immediately preceding the relevant Settlement Date or Initial Pricing Date, as the case may be.
		
	Default Settlement Method:	  	Physical Settlement
		
	Settlement Date:	  	Subject to “Accelerated Unwind” above, July 18, 2007.
		
	Cash Settlement Payment Date:	  	In respect of a day on which Shares are purchased by or on behalf of Citibank (or its agent or affiliate) to close out its hedge of the Transaction, the day such purchases would customarily
settle.
		
	Settlement Price:	  	In respect of a Cash Settlement Payment Date, the weighted average purchase price (including brokerage costs) for the purchases by or on behalf of Citibank (or its agent or affiliate) to
close out its hedge of the Transaction that would customarily settle on such day.

  

 5 

			
	Forward Cash Settlement Amount:	  	In respect of a Cash Settlement Payment Date, an amount equal to (i) the Priced Shares for such Cash Settlement Payment Date multiplied by (ii) an amount equal to (A) the
Settlement Price for such Cash Settlement Payment Date minus (B) the Forward Price for such Cash Settlement Payment Date.
		
	Net Share Settlement:	  	If applicable, on the related Cash Settlement Payment Date, (i) if the Forward Cash Settlement Amount is a positive number, then Seller shall deliver to Buyer the Net Share Settlement Amount
and (ii) if the Forward Cash Settlement Amount is a negative number, then Buyer shall deliver to Seller the absolute value of the Net Share Settlement Amount. For these purposes, the provisions of Sections 9.8, 9.9, 9.10, 9.11 and 9.12 of the
Definitions will be applicable.
		
	Net Share Settlement Amount:	  	In respect of a Cash Settlement Payment Date, a number of Shares (rounded down to the nearest whole Share) equal to the Forward Cash Settlement Amount for such Cash Settlement Payment Date
divided by the Settlement Price for such Cash Settlement Payment Date, plus cash (at the Settlement Price) for any fractional Share.
		
	Representation and Agreement:	  	Notwithstanding Section 9.11 of the Definitions, the parties acknowledge that any Shares delivered to Counterparty will be subject to restrictions and limitations arising from Counterparty or
its affiliates or out of Counterparty’s status under applicable securities laws.

 6. Adjustments: 
  

			
	Method of Adjustment:	  	Subject to Section 12(b), Calculation Agent Adjustment

 7. Extraordinary Events: 
  

			
	New Shares:	  	In the definition of New Shares in Section 12.1(i) of the Definitions, the text in (i) shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the
New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market (or their respective successors)”.

  

 6 

			
	Consequences of Merger Events (in each case, subject to Section 12(b)):	  	
		
	(a) Share-for-Share:	  	Alternative Obligation
		
	(b) Share-for Other:	  	Cancellation and Payment
		
	(c) Share-for-Combined:	  	Component Adjustment
		
	Tender Offer:	  	Applicable
		
	Consequences of Tender Offers (in each case, subject to Section 12(b)):	  	
		
	(a) Share-for-Share:	  	Calculation Agent Adjustment
		
	(b) Share-for-Other:	  	Calculation Agent Adjustment
		
	(c) Share-for-Combined:	  	Calculation Agent Adjustment
		
		  	provided that for all Consequences of Tender Offers where Calculation Agent Adjustment is specified, Section 12.3(c) of the Definitions is hereby amended by deleting the words
“the Issuer and the Shares will not change, but” immediately following the words “Tender Offer Date” in the first line thereof.
		
	Composition of Combined Consideration:	  	Not Applicable
		
	Nationalization, Insolvency or Delisting:	  	Subject to Section 12(b), Cancellation and Payment
		
		  	In addition to the provisions of Section 12.6(a)(iii) of the Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not
immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any
such exchange or quotation system, such exchange or quotation system shall be deemed to be the Exchange.
		
	Determining Party:	  	For all applicable Extraordinary Events, Citibank

 8. Additional Disruption Events (in each case, subject to Section 12(b)):

  

			
	Change in Law:	  	Applicable; provided that Section 12.9(a)(ii) of the Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof
with

  

 7 

			
		  	the phrase “or public announcement of the formal or informal interpretation” and (ii) immediately following the word “Transaction” in clause (X) thereof, adding the phrase
“in the manner contemplated by the Hedging Party on the Trade Date”.
		
	Failure to Deliver:	  	Applicable
		
	Insolvency Filing:	  	Notwithstanding anything to the contrary herein, in the ISDA Agreement or in the Definitions, upon any Insolvency Filing or any Event of Default with respect to Counterparty pursuant to
Section 5(a)(vii)(4) of the ISDA Agreement as a result of any proceeding under the U.S. Bankruptcy Code in respect of the Issuer, the Transaction shall automatically terminate on the date thereof without further liability of either party to this
Confirmation to the other party (except for any liability in respect of any breach of representation or covenant by a party under this Confirmation prior to the date of such Insolvency Filing or other proceeding), it being understood that the
Transaction is a contract for the issuance of Shares by the Issuer.
		
	Hedging Disruption:	  	Applicable
		
	Increased Cost of Stock Borrow:	  	Applicable
		
	Initial Stock Loan Rate:	  	25 basis points per annum
		
	Hedging Party:	  	For all applicable Additional Disruption Events, Citibank
		
	Determining Party:	  	For all applicable Additional Disruption Events, Citibank

 9. Non-Reliance: 
  

			
	Non-Reliance:	  	Applicable
		
	Agreements and Acknowledgments Regarding Hedging Activities:	  	Applicable
		
	Additional Acknowledgments:	  	Applicable

 10. Matters relating to the Purchase of Shares and Related Matters: 
 (a) Conditions to Effectiveness. (i) The effectiveness of this Confirmation shall be subject to the satisfaction or waiver by Citibank of the
following conditions: 
 (1) the representations and warranties of Counterparty contained in the Purchase Agreement dated the
date hereof among Counterparty, Citibank and Citigroup Global Markets Inc. as Representative of the several Underwriters named therein (the “Purchase Agreement”) and any certificate delivered pursuant thereto by Counterparty shall
be true and correct at the Closing Time as if made as of the Closing Time; 
  

 8 

 (2) Counterparty shall have performed all of the obligations required to be performed by
it under the Purchase Agreement on or prior to the Closing Time; 
 (3) all of the conditions set forth in Section 5 of
the Purchase Agreement shall have been satisfied; 
 (4) no event that constitutes a Hedging Disruption shall have occurred;

 (5) no event that constitutes an Increased Cost of Stock Borrow shall have occurred; 
 (6) all of the representations and warranties of Counterparty hereunder and under the ISDA Agreement shall be true and correct at the
Closing Time as if made as of the Closing Time; and 
 (7) Counterparty shall have performed all of the obligations required
to be performed by it hereunder and under the ISDA Agreement at or prior to the Closing Time. 
 If delivery and payment for Citibank’s Securities (as
such term is defined in the Purchase Agreement) shall not have occurred by the Closing Time, the parties shall have no further obligations in connection with the Transaction, other than in respect of breaches of representations or covenants on or
prior to such date. 
 (ii) If, for any reason, the prospectus contemplated by the Purchase Agreement ceases to be current and available for
use prior to the completion by Citibank, its affiliates or the other underwriters of the sale of the Number of Shares, Citibank may reduce the Number of Shares hereunder to the number of Shares sold prior to such time. 
 (b) Interpretive Letter. Each party intends for this Confirmation to constitute a “Contract” as described in the letter dated
October 6, 2003 submitted by Robert W. Reeder and Leslie N. Silverman to Paula Dubberly of the staff of the Securities and Exchange Commission (the “Staff”) to which the Staff responded in an interpreted letter dated
October 9, 2003 (the “Interpretive Letter”) and agrees to take all actions, and omit to take any actions, reasonably requested by the other party for this Transaction to comply with the Interpretive Letter. 
 (c) Agreements and Acknowledgments of Counterparty Regarding Shares. 
 (i) Counterparty agrees and acknowledges that, in respect of any Shares delivered to Citibank hereunder, such Shares shall be, upon such
delivery, duly and validly authorized, issued and outstanding, fully paid and nonassessable, free of any lien, charge, claim, any preemptive or similar rights or other encumbrance and shall, upon such issuance, be accepted for listing or quotation
on the Exchange; 
 (ii) Counterparty agrees and acknowledges that Citibank will hedge its exposure to the Transaction by
selling Shares borrowed from third party securities lenders or other Shares pursuant 

  

 9 

 
to a registration statement, and that, pursuant to the terms of the Interpretive Letter, the Shares (up to the Number of Shares) delivered, pledged or loaned
by Counterparty to Citibank in connection with the Transaction may be used by Citibank to return to securities lenders without further registration under the Securities Act of 1933, as amended (the “Securities Act”). Accordingly,
Counterparty agrees that the Shares that it delivers, pledges or loans to Citibank on or prior to the Settlement Date or Cash Settlement Payment Date will not bear a restrictive legend and that such Shares will be deposited in, and the delivery
thereof shall be effected through the facilities of, the Clearance System; and 
 (iii) Counterparty agrees not to take any
action to reduce or decrease the number of authorized and unissued Shares below the sum of the Number of Shares plus the total number of Shares issuable upon settlement (whether by net share settlement or otherwise) of any other transaction
or agreement to which it is a party. 
 (d) Alternative Procedures. If Counterparty is unable to comply with the provisions of
sub-paragraph (ii) of “Agreements and Acknowledgments of Counterparty Regarding Shares” above because of a change in law or a change in interpretation or the policy of the Securities and Exchange Commission or its staff, or Citibank
otherwise determines that in its reasonable opinion any Shares to be delivered to Citibank by Counterparty may not be freely returned by Citibank to securities lenders as described under such sub-paragraph (ii), then Counterparty may elect that any
Shares delivered hereunder either be (x) registered pursuant to an effective registration statement covering public resale of such Shares (“Registered Shares”), in which case clause (i) of this Section 10(e) shall
apply, or (y) issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof (the “Restricted Shares”) , in which case clauses (ii) and (iii) of this
Section 10(e) shall apply,. 
 (i) Delivery of Registered Shares by Counterparty to Citibank (a “Registered
Settlement”) shall be effected in accordance with customary procedures with respect to such Registered Shares reasonably acceptable to Citibank. If Counterparty has elected to deliver Registered Shares, Counterparty shall have afforded
Citibank and its counsel and other advisers a reasonable opportunity to conduct a due diligence investigation of Counterparty customary in scope for underwritten equity offerings, the results of which must have been satisfactory to Citibank, and
Counterparty and Citibank shall execute an agreement containing customary terms, covenants, conditions, representations, warranties, indemnities to Citibank, due diligence rights for Citibank, opinions and certificates, and such other documentation
as is customary for underwriting agreements, all reasonably acceptable to Citibank. In the case of a Registered Settlement, Citibank shall, in its good faith discretion, adjust the number of Registered Shares to be delivered to Citibank hereunder in
a commercially reasonable manner to reflect any additional costs, expenses and fees incurred by Citibank and its affiliates as a result of settlement of the Transaction via Registered Settlement and not by return of Shares to securities lenders as
described under such sub-paragraph (ii). 
 (ii) Delivery of Restricted Shares by Counterparty to Citibank (a “Private
Placement Settlement”) shall be effected in accordance with customary private placement procedures with respect to such Restricted Shares reasonably acceptable to Citibank. On the date of such delivery, Counterparty shall not have taken, or
caused to be taken, any action that would make unavailable either (x) the exemption pursuant to Section 4(2) of the Securities Act for the sale or deemed sale by Counterparty to Citibank (or any affiliate designated by Citibank) of the
Restricted Shares or (y) the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the 

  

 10 

 
Restricted Shares by Citibank (or any such affiliate of Citibank). Counterparty and Citibank shall execute an agreement containing customary representations,
covenants, blue sky and other governmental filings and/or registrations, indemnities to Citibank, due diligence rights (for Citibank or any designated buyer of the Restricted Shares by Citibank), opinions and certificates, and such other
documentation as is customary for private placement agreements, all reasonably acceptable to Citibank. In the case of a Private Placement Settlement, Citibank shall, in its good faith discretion, adjust the number of Restricted Shares to be
delivered to Citibank hereunder in a commercially reasonable manner to reflect the fact that such Restricted Shares may not be freely returned to securities lenders by Citibank and may only be saleable by Citibank at a discount to reflect the lack
of liquidity in Restricted Shares. Notwithstanding the ISDA Agreement or this Confirmation, the date of delivery of such Restricted Shares shall be the Clearance System Business Day following notice by Citibank to Counterparty of the number of
Restricted Shares to be delivered pursuant to this clause (i). For the avoidance of doubt, delivery of Restricted Shares shall be due as set forth in the previous sentence and not be due on the date that would otherwise be applicable. 
 (iii) If Counterparty delivers any Restricted Shares in respect of the Transaction, Counterparty agrees that (A) such Shares may be
transferred freely among Citibank and a wholly owned subsidiary of Citigroup Inc. and (B) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed, Counterparty shall promptly remove,
or cause the transfer agent for the Shares to remove, any legends referring to any transfer restrictions from such Shares upon delivery by Citibank (or such subsidiary of Citigroup Inc.) to Counterparty or such transfer agent of seller’s and
broker’s representation letters customarily delivered by Citibank or its affiliates in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act, each without any further requirement for the delivery of any
certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Citibank (or such subsidiary of Citigroup Inc.). 
 (e) Indemnity. Counterparty agrees to indemnify Citibank and its affiliates and their respective directors, officers, employees, agents and
controlling persons (Citibank and each such affiliate or person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint and several, incurred by or asserted against such Indemnified
Party arising out of, in connection with, or relating to, the execution or delivery of this Confirmation, the performance by the Counterparty of its obligations under, or the exercise by the Counterparty of any of its rights to elect Cash Settlement
or Net Share Settlement of, the Transaction or to accelerate the Initial Pricing Date or Settlement Date for all or a portion of the Number of Shares, or any breach of any covenant or representation made by Counterparty in this Confirmation or the
ISDA Agreement and will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened
claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. Counterparty will not be liable under this Indemnity sub-paragraph to the extent that any loss, claim, damage, liability or expense is
found in a final and nonappealable judgment by a court to have resulted from Citibank’s gross negligence or willful misconduct. 
  

 11 

 11. Representations and Covenants: 
 (a) In connection with this Confirmation and the Transaction and any other documentation relating to the ISDA Agreement, each party to this Confirmation
represents and acknowledges to the other party that: 
 (i) it is an “accredited investor” as defined in
Section 2(a)(15)(ii) of the Securities Act; and 
 (ii) it is an “eligible contract participant” as defined in
Section 1a(12) of the Commodity Exchange Act, as amended (the “CEA”), and this Confirmation and the Transaction hereunder are subject to individual negotiation by the parties and have not been executed or traded on a
“trading facility” as defined in Section 1a(33) of the CEA. 
 (b) Counterparty represents to Citibank on the Trade Date (in
the case of clauses (vi) and (ix) below, on the date that Counterparty notifies Citibank that Cash Settlement or Net Share Settlement applies to the Transaction) that: 
 (i) its financial condition is such that it has no need for liquidity with respect to its investment in the Transaction and no need to
dispose of any portion thereof to satisfy any existing or contemplated undertaking or indebtedness; 
 (ii) its investments in
and liabilities in respect of the Transaction, which it understands are not readily marketable, is not disproportionate to its net worth, and it is able to bear any loss in connection with the Transaction, including the loss of its entire investment
in the Transaction; 
 (iii) it understands that Citibank has no obligation or intention to register the Transaction under the
Securities Act or any state securities law or other applicable federal securities law; 
 (iv) it understands that no
obligations of Citibank to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any Affiliate of Citibank or any governmental agency; 
 (v) IT UNDERSTANDS THAT THE TRANSACTION IS SUBJECT TO COMPLEX RISKS WHICH MAY ARISE WITHOUT WARNING AND MAY AT TIMES BE VOLATILE AND THAT
LOSSES MAY OCCUR QUICKLY AND IN UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND CONDITIONS AND ASSUME (FINANCIALLY AND OTHERWISE) SUCH RISKS; 
 (vi) each of its filings under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
or other applicable securities laws that are required to be filed have been filed and that, as of the respective dates thereof and as of the date of this representation, there is no misstatement of material fact contained therein or omission of a
material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; 
 (vii) it has reserved and will keep available, free from preemptive rights, out of its authorized but unissued Shares, solely for the
purpose of issuance upon settlement of the 

  

 12 

 
Transaction as herein provided, the full number of Shares as shall then be issuable upon settlement of the Transaction; 
 (viii) it is not entering into this Confirmation to create actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares); 
 (ix) it is not in possession of any material non-public information regarding itself or the Shares; 
 (x) it is, and shall be as of the date of any payment or delivery by it hereunder, solvent and able to pay its debts as they come due,
with assets having a fair value greater than liabilities and with capital sufficient to carry on the businesses in which it engages; 
 (xi) it is not and, after giving effect to the transactions contemplated hereby, will not be required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended; 
 (xii) it is eligible to conduct a primary offering of Shares on Form S-3, the offering contemplated by the Purchase Agreement complies
with Rule 415 under the Securities Act, and the Shares are “actively traded” as defined in Rule 101(c)(1) of Regulation M (“Regulation M”) promulgated under the Exchange Act. 
 (c) In connection with this Confirmation and the Transaction, Counterparty agrees and acknowledges that: 
 (i) it shall, upon obtaining knowledge of the occurrence of any event that constitutes an Event of Default or a Potential Event of Default
in respect of it, a Termination Event in respect of which it is an Affected Party, a Potential Adjustment Event, an Extraordinary Event or an Additional Disruption Event, notify Citibank within one Scheduled Trading Day of the occurrence of
obtaining such knowledge; 
 (ii) neither it nor any of its affiliates shall take any action that would cause any purchases of
Shares by Citibank or any of its affiliates in connection with any Cash Settlement or Net Share Settlement of the Transaction not to meet the requirements of the safe harbor provided by Rule 10b-18 under the Exchange Act if such purchases were made
by it; 
 (iii) it shall not engage in any “distribution” (as defined in Regulation M) during the period starting on
the first day of any Pricing Period and ending on the first Exchange Business Day immediately following the last day of such Pricing Period (inclusive); 
 (iv) in addition to any other requirements set forth herein, it shall not have the right to elect Cash Settlement or Net Share Settlement if Citibank notifies it that, in the reasonable judgment of Citibank, such Cash
Settlement or Net Share Settlement or the related purchases of Shares by Citibank (or its agent or affiliate) may raise material risks under applicable securities laws, including without limitation because such purchases, if effected by it, would
not qualify for applicable safe harbors under applicable securities laws (including, without limitation, the safe harbor provided by Rule 10b-18 under the Exchange Act); 
  

 13 

 (v) if it becomes aware of the existence of any Suspension Condition, it shall
immediately notify Citibank that a Suspension Condition exists without specifying the nature of such Suspension Condition; a “Suspension Condition” exists if Counterparty becomes aware at any time during any Pricing Period
that any representation or warranty set forth in clause (vi), (viii), (ix) or (x) of Section 11(b) above would be untrue if made as of such time; and 
 (vi) without limiting any of the foregoing, neither it nor any “affiliated purchaser” (as defined in Regulation M) will,
directly or indirectly, bid for, purchase or attempt to induce any person to bid for or purchase, the Shares or securities that are convertible into, or exchangeable or exercisable for, Shares during any “restricted period” (as such term
is defined in Regulation M) relating to this Transaction, including in respect of Citibank’s initial hedging activities with respect hereto. 
 12. Miscellaneous: 
 (a) Early Termination. The parties agree that, notwithstanding the definition of Settlement
Amount in the ISDA Agreement, for purposes of Section 6(e) of the ISDA Agreement, Second Method and Loss will apply to the Transaction. 
 (b) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. 
 (i) In
lieu of (A) designating an Early Termination Date as the result of an Event of Default or Termination Event as to which the Counterparty is the Defaulting Party or Affected Party, (B) terminating the Transaction and determining a
Cancellation Amount as the result of an Additional Disruption Event, or (C) terminating the Transaction and determining an amount payable in connection with an Extraordinary Event to which Cancellation and Payment would otherwise be applicable,
Citibank shall be entitled to designate an early settlement date (the “Citibank Early Settlement Date”), in which case the Settlement Date shall be accelerated to the Citibank Early Settlement Date and Physical Settlement shall
apply; provided that Citibank may in its sole discretion elect to permit Counterparty to elect Cash Settlement or Net Physical Settlement, in which event the Initial Pricing Date would be accelerated to the Citibank Early Settlement Date.

 For the avoidance of doubt, if the Citibank Early Settlement Date occurs during a Pricing Period, then settlement in respect of the Priced
Shares for all days in such Pricing Period occurring on or prior to the date one regular settlement cycle following the Citibank Early Settlement Date (the aggregate number of such Priced Shares, the “Number of Unwound Shares”)
shall occur as provided in Section 5 above, and the acceleration of the Settlement Date (or Initial Pricing Date) described in the immediately preceding sentence shall be in respect of a Number of Shares equal to the Number of Shares,
minus the Number of Unwound Shares. 
 (ii) If, subject to Section 12(c) below, one party owes the other party any
amount in connection with the Transaction pursuant to Section 12.7 or 12.9 of the Definitions (except in the case of an Extraordinary Event in which the consideration or proceeds to be paid to holders of Shares as a result of such event
consists solely of cash) or pursuant to Section 6(d)(ii) of the ISDA Agreement (a “Payment Obligation”), Counterparty shall have the right, in its sole discretion, to (A) if the amount is owed by Citibank, require Citibank
to satisfy any such Payment Obligation or (B) if the amount is owed by Counterparty to satisfy any such Payment 

  

 14 

 
Obligation, in either case by delivery of Termination Delivery Units (as defined below) by giving irrevocable telephonic notice to Citibank, confirmed in
writing within one Scheduled Trading Day, between the hours of 9:00 a.m. and 4:00 p.m. New York time on the Closing Date or Early Termination Date, as applicable (“Notice of Termination Delivery”). Upon Notice of Termination
Delivery, the party with the Payment Obligation shall deliver to the other party a number of Termination Delivery Units having a cash value equal to the amount of such Payment Obligation (such number of Termination Delivery Units to be delivered to
be determined by the Calculation Agent acting in a commercially reasonable manner). Settlement relating to any delivery of Termination Delivery Units pursuant to this provision shall occur within three Scheduled Trading Days if Counterparty has the
Payment Obligation and within a reasonable period of time if Citibank has the Payment Obligation. 
 “Termination Delivery
Unit” means (A) in the case of a Termination Event, an Event of Default or an Extraordinary Event (other than an Insolvency, Nationalization, Merger Event or Tender Offer), one Share or (B) in the case of an Insolvency,
Nationalization, Merger Event or Tender Offer, a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional
amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If a Termination Delivery Unit consists of property other than cash or New Shares and Counterparty provides irrevocable written notice to the Calculation
Agent on or prior to the Closing Date that it elects to deliver cash, New Shares or a combination thereof (in such proportion as Counterparty designates) in lieu of such other property, the Calculation Agent will replace such property with cash, New
Shares or a combination thereof as components of a Termination Delivery Unit in such amounts, as determined by the Calculation Agent in its discretion by commercially reasonable means, as shall have a value equal to the value of the property so
replaced. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash. 
 (c) Set-Off and Netting. Citibank agrees not to set-off or net amounts due from Counterparty with respect to the Transaction against amounts due
from Citibank to Counterparty under obligations other than Equity Contracts. Section 2(c) of the ISDA Agreement as it applies to payments due with respect to the Transaction shall remain in effect and is not subject to the first sentence of
this provision. In addition, upon the occurrence of an Event of Default or Termination Event with respect to either party as the Defaulting Party or the Affected Party (“X”), the other party (“Y”) will have the right (but not be
obliged) without prior notice to X or any other person to set-off or apply any obligation of X under an Equity Contract owed to Y (whether or not matured or contingent and whether or not arising under this Confirmation, and regardless of the
currency, place of payment or booking office of the obligation) against any obligation of Y under an Equity Contract owed to X (whether or not matured or contingent and whether or not arising under this Confirmation, and regardless of the currency,
place of payment or booking office of the obligation). Y will give notice to X of any set-off or application effected under this provision. “Equity Contract” shall mean for purposes of this provision any transaction relating to
Shares between X and Y that qualifies as ‘equity’ of Counterparty under applicable accounting rules. Amounts (or the relevant portion of such amounts) subject to set-off may be converted by Y into the Termination Currency at the rate of
exchange at which Y would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If any obligation is unascertained, Y may in good faith estimate that obligation and set-off in respect of the
estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this provision shall be effective to create a charge or other security interest. This provision shall be 

  

 15 

 
without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled
(whether by operation of law, contract or otherwise). 
 (d) Maximum Share Delivery. Notwithstanding any other provision of this
Confirmation, in no event will Counterparty be required to deliver hereunder, whether pursuant to Physical Settlement, Net Share Settlement, Private Placement Settlement or otherwise, more than 9,000,000 Shares to Citibank in the aggregate.

 (e) Status of Claims in Bankruptcy. Citibank acknowledges and agrees that this Confirmation shall not convey to Citibank rights
with respect to the transactions contemplated hereby that are senior to the claims of common stockholders in any U.S. bankruptcy or other insolvency or winding up proceedings with respect to Counterparty; provided, however, that
nothing herein shall limit or shall be deemed to limit Citibank’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to this Confirmation and the ISDA Agreement; and,
provided, further, that nothing herein shall limit or shall be deemed to limit Citibank’s rights in respect of any transaction other than the Transaction. 
 (f) No Collateral. Notwithstanding any provision of this Confirmation or the ISDA Agreement, or any other agreement between the parties, to the
contrary, none of the obligations of Counterparty under the Transaction is secured by any collateral. Without limiting the generality of the foregoing, if the ISDA Agreement or any other agreement between the parties includes an ISDA Credit Support
Annex or other agreement pursuant to which Counterparty collateralizes obligations to Citibank, then the obligations of Counterparty hereunder will not be considered to be obligations under such Credit Support Annex or other agreement pursuant to
which Counterparty collateralizes obligations to Citibank, and the Transaction shall be disregarded for purposes of calculating any Exposure or similar term thereunder. 
 (g) Additional Termination Event. The occurrence of an Increased Dividend Event (as defined below) will constitute an Additional Termination Event under Section 5(b)(v) of the ISDA Agreement, with the
Transaction as the sole Affected Transaction and Counterparty as the sole Affected Party. An “Increased Dividend Event” shall occur if 100% of the aggregate gross cash dividends per Share (including any cash Extraordinary Dividends)
declared by the Issuer at any time during the period from and including the Trade Date to but excluding the final Cash Settlement Payment Date or Settlement Date, as applicable, exceeds the Specified Amount for the relevant calendar quarter,
determined based on record date. 
 (h) Transfer. Citibank has the right to assign any or all of its rights and obligations under the
Transaction to deliver or accept delivery of Shares to any of its affiliates; provided that such assignment shall only occur in respect of the Transaction when it has become obligatory that the Transaction be settled by the transfer of
Shares; and provided, further, that Counterparty shall have recourse to Citibank in the event of failure by the assignee to perform any of such obligations hereunder. Notwithstanding the foregoing, the recourse to Citibank shall be
limited to recoupment of Counterparty’s monetary damages and Counterparty hereby waives any right to seek specific performance by Citibank of its obligations hereunder. Such failure after any applicable grace period shall be deemed to be an
Additional Termination Event, such Transaction shall be the only Affected Transaction and Citibank shall be the only Affected Party. 
 (i)
Severability; Illegality. If compliance by either party with any provision of the Transaction would be unenforceable or illegal, (i) the parties shall negotiate in good faith to resolve such 

  

 16 

 
unenforceability or illegality in a manner that preserves the economic benefits of the transactions contemplated hereby and (ii) the other provisions of
the Transaction shall not be invalidated, but shall remain in full force and effect. 
 (j) Waiver of Trial by Jury. EACH OF
COUNTERPARTY AND CITIBANK HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF CITIBANK OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF. 
 (k) Confidentiality. Citibank and Counterparty agree that (i) Counterparty is not obligated to Citibank to keep confidential from any and all persons or otherwise limit the use of any element of
Citibank’s descriptions relating to tax aspects of the Transaction and any part of the structure necessary to understand those tax aspects, and (ii) Citibank does not assert any claim of proprietary ownership in respect of such
descriptions contained herein of the use of any entities, plans or arrangements to give rise to significant U.S. federal income tax benefits for Counterparty. 
 (l) Securities Contract. The parties hereto intend for: 
 (i) the Transaction to be a
“securities contract” and a “swap agreement” as defined in the Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”), and the parties hereto to be entitled to the protections afforded by,
among other Sections, Sections 362(b)(6), 555 and 560 of the Bankruptcy Code; 
 (ii) the rights given to Citibank hereunder
upon an Event of Default, Termination Event or Early Termination Date to constitute “contractual rights” to cause the liquidation of a “securities contract” or a “swap agreement” and to set off mutual debts and claims
in connection with a “securities contract” or a “swap agreement”, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy Code; 
 (iii) any cash, securities or other property provided as performance assurance, credit support or collateral with respect to a Transaction
to constitute “margin payments” and “transfers” under a “securities contract” or a “swap agreement” as defined in the Bankruptcy Code; 
 (iv) all payments for, under or in connection with a Transaction, all payments for the Shares and the transfer of such Shares to
constitute “settlement payments” and “transfers” under a “securities contract” or a “swap agreement” as defined in the Bankruptcy Code; and 
 (v) any or all obligations that either party has with respect to the Transaction to constitute property held by or due from such party to
margin, guaranty or settle obligations of the other party with respect to the Transaction. 
 (m) Beneficial Ownership.
Notwithstanding anything to the contrary in the ISDA Agreement or this Confirmation, in no event shall Citibank be entitled to receive, or shall be deemed to receive, any Shares if, upon such receipt of such Shares by Citibank, (i) its
“beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder) would be 

  

 17 

 
equal to or greater than 4.9% or more of the outstanding Shares or (ii) its ownership of Shares exceeding the several ownership limitations set forth in
Counterparty’s Articles of Incorporation (as of the Trade Date). If any delivery owed to Citibank hereunder is not made, in whole or in part, as a result of this provision, Counterparty’s obligation to make such delivery shall not be
extinguished and Counterparty shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Citibank gives notice to Counterparty that such delivery would not result in Citibank directly or
indirectly so beneficially owning in excess of 4.9% of the outstanding Shares. 
 13. Addresses for Notice: 
  

			
	 If to Citibank:
	  	Citibank, N.A.
		  	390 Greenwich Street
		  	New York, NY 10013
		  	Attention:        Corporate Equity Derivatives
		  	Facsimile:       (212) 723-8328
		  	Telephone:      (212) 723-7357
		
	 with a copy to:
	  	Citibank, N.A.
		  	250 West Street, 10th Floor
		  	New York, NY 10013
		  	Attention:        GCIB Legal Group—Derivatives
		  	Facsimile:       (212) 816-7772
		  	Telephone:      (212) 816-2211
		
	 If to Counterparty:
	  	Sunstone Hotel Investors, Inc.
		  	903 Calle Amanecer, Suite 100
		  	San Clemente, California 92673
		  	Attention:        Jon Kline
		  	Facsimile:       (949) 369-3179
		  	Telephone:      (949) 369-4252

 14. Accounts for Payment: 
  

			
	 To Citibank:
	  	Citibank, N.A.
		  	ABA #021000089
		  	DDA 00167679
		  	Ref: Equity Derivatives
		
	 To Counterparty:
	  	To an account designated by Counterparty to Buyer

 15. Delivery Instructions: 
 Unless otherwise directed in writing, any Share to be delivered hereunder shall be delivered as follows: 
  

			
	 To Citibank:
	  	To be advised.
	 To Counterparty:
	  	To be advised.

  

 18 

			
	Yours sincerely,
	
	CITIBANK, N.A.
		
	By:	 	 /s/ Herman Hirsch

		 	Name: Herman Hirsch
		 	Title: Authorized Representative

  

			
	 Confirmed as of the
 date first above
written:

	
	SUNSTONE HOTEL INVESTORS, INC.
		
	By:	 	 /s/ Jon D. Kline

		 	Name: Jon D. Kline
		 	Title: Executive Vice President and Chief Financial Officer

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