EXHIBIT 10.4
ESCROW AGREEMENT
This ESCROW AGREEMENT (this “
Agreement ”) is dated as of April 27, 2005, by and
among (i) Sunstone Hotel Investors, Inc., a corporation organized
under the laws of the State of Maryland (the “ Company
”), (ii) BIP REIT Private Limited, a Singapore corporation
(together with its successors and assigns, the “
Purchaser ”) and (iii) Citibank, N.A., a national
banking institution incorporated under the laws of the United
States of America (the “ Escrow Agent ”). The
Company and the Purchaser are sometimes referred to herein
collectively as the “ Payors .”
WITNESSETH:
WHEREAS, an escrow account shall be
established pursuant to the Stock Purchase Agreement (the “
Escrow Account ”), dated as of April 27, 2005, by and
among the Company and Purchaser (the “ Purchase
Agreement ”); and
WHEREAS, the Purchase Agreement
contemplates (i) the Company delivering to the Escrow Agent one or
more certificates evidencing all of the shares of common stock,
$0.01 par value, of the Company (the “Common Stock”)
purchased by the Purchaser thereunder, to be held by the Escrow
Agent pursuant to this Agreement and (ii) the Purchaser depositing
$77,437,500.00 to the Escrow Agent to be held and disbursed
pursuant to this Agreement.
NOW, THEREFORE, in consideration of
the premises and of the covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as
follows:
1. Appointment of Escrow
Agent . Purchaser and the Company hereby jointly appoint and
designate Citibank, N.A. as the Escrow Agent for the Escrow
Property (as defined in Section 2 below), and direct Citibank, N.A.
as the Escrow Agent to maintain the Escrow Account upon the terms
and conditions set forth in this Agreement. Citibank, N.A. hereby
accepts such appointment as the Escrow Agent for the Escrow
Property (as defined in Section 2 below), and agrees to maintain
the Escrow Account in accordance with this Agreement.
2. Escrow .
(i) Escrowed Cash . Within 5
business days of the execution of this Agreement, Purchaser shall
deposit with the Escrow Agent $77,437,500.00 in cash, by wire
transfer of immediately available funds (the “Cash
Deposit”). The Cash Deposit, plus all interest, dividends and
other distributions and payments thereon (collectively, the
“Earnings”) received by the Escrow Agent, less any
property and/or funds distributed or paid in accordance with this
Agreement are collectively referred to herein as the “Cash
Escrow Fund.” The Escrow Agent shall hold the Cash Escrow
Fund and shall administer the same in accordance with the terms of
this Agreement.
(ii) Escrowed Shares . Upon
the earlier to occur of the date that is (a) one business day after
the Purchaser delivers written notice to the Company pursuant to
this Section 2(ii), (b) one
business day prior to the Closing
and (c) two business days prior to the record date for the next
Distribution (as defined herein), the Company shall deliver to the
Escrow Agent one or more certificates evidencing 3,750,000 shares
(the “Escrowed Shares”) of Common Stock (the
“Stock Escrow Fund”). The Escrow Agent shall hold the
Stock Escrow Fund and shall administer the same in accordance with
the terms of this Agreement. The Cash Escrow Fund and the Stock
Escrow Fund shall be known collectively as the “Escrowed
Property.” Upon receipt of the Cash Deposit, the Escrow Agent
will promptly acknowledge such receipt via facsimile transmission
in the form set forth as Exhibit A-1 . Upon receipt of the
Escrowed Shares, the Escrow Agent will promptly acknowledge such
receipt via facsimile transmission in the form set forth as
Exhibit A-2 .
(iii) Voting of Escrow Shares
. The Purchaser shall be entitled to vote all of the Escrowed
Shares in the Stock Escrow Fund. The Company shall deliver to the
Purchaser all proxy statements and other documents furnished by the
Company to its other stockholders.
(iv) Dividends, etc . Any
cash, securities or other property paid or payable, whether by way
of dividend or otherwise (collectively,
“Distributions”), in respect of or in exchange for any
Escrowed Shares shall be delivered to and held by the Escrow Agent
in the Stock Escrow Fund.
3. Disbursement and Release of
Escrowed Property .
The Escrow Agent shall disburse the
Escrow Property as follows:
(i) Closing Instructions . At
the closing (the “ Closing ”) under the Purchase
and Sale Agreement, dated as of April
, 2005, by and between the Company
and Marriott International, Inc. (“Marriott”), pursuant
to which the Company will acquire certain of the hotel properties
currently owned by CTF Holdings, Ltd. (the “ Acquisition
Agreement ”), the Company and Purchaser shall deliver to
the Escrow Agent joint written instructions in the form attached
hereto as Exhibit B (the “ Closing Instructions
”) authorizing and directing the Escrow Agent to deliver at
the Closing the Cash Escrow Fund to the Company and the Stock
Escrow Fund to the Purchaser, and the Escrow Agent shall so release
the Escrow Property in accordance with such Closing Instructions.
The Company and the Purchaser will provide the Escrow Agent with at
least two Business Days’ prior notice of the anticipated date
and time of the Closing.
(ii) Early Termination
Instructions . If the Acquisition Agreement is terminated
pursuant to any provision thereof on or prior to June 30, 2005, on
the date of such termination, the Company and Purchaser shall
deliver to the Escrow Agent joint written instructions in the form
attached hereto as Exhibit C (the “ Early
Termination Instructions ”) authorizing and directing the
Escrow Agent to release the Cash Escrow Fund to the Purchaser and
the Stock Escrow Fund to the Company, and the Escrow Agent shall,
not later than two Business Days after receipt of the Purchaser
Instructions, so release the Escrow Property to Purchaser and the
Company in accordance with such Early Termination
Instructions.
(iii) Purchaser Instructions
. If the Acquisition Agreement is terminated pursuant to any
provision thereof on or after July 1, 2005 or the Closing shall not
have occurred by September 23, 2005 (the “ Refund Date
”), on the date of such termination or the Refund
Date,
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as applicable, the Company and
Purchaser shall deliver to the Escrow Agent joint written
instructions in the form attached hereto as Exhibit D (the
“ Purchaser Instructions ”) authorizing and
directing the Escrow Agent (1) to release to the Purchaser the Cash
Deposit plus the Earnings that accrued on the Cash Deposit through
and including June 30, 2005 and to the Company the Earnings that
accrued from and after July 1, 2005, and the Escrow Agent shall,
not later than two Business Days after receipt of the Purchaser
Instructions, so release the Cash Escrow Fund to Purchaser and the
Company in accordance with such Purchaser Instructions and (2) on
the date the Company delivers to the Escrow Agent the dividend with
respect to the Escrowed Shares for the quarter in which such
termination or such Refund Date occurs (the “Dividend Payment
Date”) (which the Company presently expects will be on or
about October 15, 2005 with respect to the dividend for the third
quarter of 2005), the Escrow Agent shall release to the Purchaser
the portion of the Distributions attributable to the Escrowed
Shares for the period from July 1, 2005 through the date of
delivery of the Purchaser Instructions and shall release to the
Company (a) the portion of the Distributions attributable to the
Escrowed Shares for the period prior to and including June 30,
2005, (b) the portion of the Distributions attributable to the
Escrowed Shares for the period after the date of delivery of the
Purchaser Instructions through the Dividend Payment Date and (c)
the Escrowed Shares.
4. Fees of Escrow Agent
.
(i) At the time of execution of this
Agreement, the Payors shall pay the Escrow Agent an acceptance fee
of $1,000, which amount shall be paid by the Company, as agreed
solely between the Company and the Purchaser. In addition, the
Payors shall pay the Escrow Agent a fee of $9,000 per annum or part
thereof, which amount shall be paid by the Company, as agreed
solely between the Company and the Purchaser, payable upon
execution of this Agreement and thereafter on each anniversary date
of this Agreement, if applicable. Payors, severally and in equal
proportions, agree to reimburse the Escrow Agent for all reasonable
expenses, disbursements and advances incurred or made by the Escrow
Agent in performance of its duties hereunder (including reasonable
fees, expenses and disbursements of its counsel). It is understood
that the Escrow Agent’s fees may be adjusted from time to
time to conform to its then current guidelines.
(ii) The Payors, severally and in
equal proportions, shall be responsible for and shall reimburse the
Escrow Agent upon demand for all fees, expenses and disbursements
incurred or made by the Escrow Agent in connection with this
Agreement.
5. Rights and Duties of the
Escrow Agent .
(i) The duties, responsibilities and
obligations of the Escrow Agent shall be limited to those expressly
set forth herein, and no other duties, responsibilities or
obligations shall be inferred or implied.
(ii) The Escrow Agent shall not be
subject to, nor required to comply with, any other agreement
between or among any or all of the Payors or to which any Payor is
a party (including but not limited to the Purchase Agreement or the
Acquisition Agreement), even though reference thereto may be made
herein, or to comply with any direction or instruction (other
than
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those contained herein or delivered
in accordance with this Agreement) from any Payor or an entity
acting on the behalf of any Payor.
(iii) The Escrow Agent shall not be
required to expend or risk any of its own funds or otherwise incur
any financial or other liability in the performance of any of its
duties hereunder.
(iv) If at any time the Escrow Agent
is served with any judicial or administrative order, judgment,
decree, writ or other form of judicial or administrative process
which in any way affects the Escrow Property (including but not
limited to orders of attachment or garnishment or other forms of
levies or injunctions or stays relating to the transfer of the
Escrow Property), the Escrow Agent is authorized to comply
therewith in any manner it or legal counsel of its own choosing
deems appropriate; and if the Escrow Agent complies with any such
judicial or administrative order, judgment, decree, writ or other
form of judicial or administrative process, the Escrow Agent shall
not be liable to any of the parties hereto or to any other person
or entity even though such order, judgment, decree, writ or process
may be subsequently modified or vacated or otherwise determined to
have been without legal force or effect.
(v) The Escrow Agent shall not be
liable for any action taken or omitted by it in good faith and with
due care or for any loss or injury resulting from its actions or
its performance or lack of performance of its duties hereunder in
the absence of gross negligence or willful misconduct on its part.
In no event shall the Escrow Agent be liable (A) for acting in good
faith in accordance with or relying upon any instruction, notice,
demand, certificate or document from any Payor or any entity acting
on behalf of any Payor, (B) for any indirect, consequential,
punitive or special damages, regardless of the form of action and
whether or not any such damages were foreseeable or contemplated,
(C) for the acts or omissions of its nominees, correspondents,
designees, agents, subagents or subcustodians appointed with due
care by the Escrow Agent, (D) for the investment or reinvestment of
any cash held by it hereunder, in each case in good faith, in
accordance with the terms hereof, including without limitation any
liability for any delays (not resulting from its gross negligence
or willful misconduct) in the investment or reinvestment of the
Escrow Property, or any loss of interest incident to any such
delays, or (E) for an amount in excess of the value of the Deposit,
but only to the extent of direct money damages.
(vi) If the Escrow Agent is
instructed to make a distribution pursuant to Section 3 of this
Agreement and any reasonable fees, expenses or costs incurred by,
or any obligations owed to, the Escrow Agent or its counsel
hereunder have not been promptly paid when due, the Escrow Agent
may reimburse itself therefore from the Escrow Property and may
sell, convey or otherwise dispose of any Escrow Property for such
purpose. The Escrow Agent may in its sole discretion withhold from
any distribution of Escrow Property an amount of Escrow Property it
believes would, upon sale or liquidation, produce proceeds equal to
any unpaid amounts to which the Escrow Agent is entitled to
hereunder.
(vii) The Escrow Agent may consult
with legal counsel of its own choosing in the event of any dispute
or question as to the meaning or construction of any of the
provisions hereof or its duties under this Agreement, and the
Escrow Agent shall not incur any liability in acting in good faith
in accordance with any advice from such counsel. Payors, severally
and in equal proportions,
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agree to reimburse the Escrow Agent
on demand for such reasonable legal fees, disbursements and
expenses.
(viii) The Escrow Agent shall not
incur any liability for not performing any act or fulfilling any
duty, obligation or responsibility hereunder by reason of any
occurrence beyond the control of the Escrow Agent (including but
not limited to any act or provision of any present or future law or
regulation or governmental authority, any act of God or war, or the
unavailability of the Federal Reserve Bank wire or facsimile or
other wire or communication facility).
(ix) The Escrow Agent shall be
entitled to rely upon any order, judgment, certification, demand,
notice, instrument or other writing delivered to it hereunder
without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity
or the service thereof. The Escrow Agent may act in reliance upon
any instrument or signature believed by it in good faith and with
due care to be genuine and may assume that any person purporting to
give receipt or advice to make any statement or execute any
document in connection with the provisions hereof has been duly
authorized to do so.
(x) Unless otherwise specifically
set forth herein, the Escrow Agent shall proceed as soon as
practicable to collect any checks or other collection items at any
time deposited hereunder. Should the Escrow Agent in its sole
discretion or otherwise credit Earnings before the same are finally
collected, such credits shall be provisional and may be reversed by
the Escrow Agent without notice until such time as the same shall
be finally collected. All such collections shall be subject to the
Escrow Agent’s usual collections practices or terms regarding
items received by the Escrow Agent for deposit or collection. The
Escrow Agent shall not be required, or have any duty, to notify
anyone of any payment or maturity under the terms of any instrument
deposited hereunder, nor to take any legal action to enforce
payment of any check, note or security deposited hereunder or to
exercise any right or privilege which may be afforded to the holder
of any such security.
(xi) The Escrow Agent shall not be
responsible in any respect for the form, execution, validity, value
or genuineness of documents or securities deposited hereunder, or
for any description therein, or for the identity, authority or
rights of persons executing or delivering or purporting to execute
or deliver any such document, security or endorsement. The Escrow
Agent shall not be called upon to advise any party as to the wisdom
in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited
hereunder.
(xii) The Escrow Agent shall not be
under any duty to give the Escrow Property held by it hereunder any
greater degree of care than it gives its own similar property and
shall not be required to invest any funds held hereunder except as
directed in this Agreement. Uninvested funds held hereunder shall
not earn or accrue interest.
(xiii) When the Escrow Agent is
instructed in writing to deliver securities against payment, or to
effect payment against delivery, delivery and receipt of payment
may not be completed simultaneously, and each Payor agrees that the
Escrow Agent shall incur no liability for any credit risk involved,
and that the Escrow Agent may deliver and receive securities, and
arrange
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for payments to be made and
received, in accordance with customs prevailing from time to time
among brokers or dealers in such securities.
(xiv) At any time the Escrow Agent
may request an instruction in writing in English from the Payors,
and may, at its own option, include in such request the course of
action it proposes to take and the date on which it proposes to
act, regarding any matter arising in connection with its duties and
obligations hereunder. The Escrow Agent shall not be liable for
acting in accordance with such a proposal on or after the date
specified therein, provided that the specified date shall be at
least one Business Day after the Payor(s) receive the Escrow
Agent’s request for instructions and its proposed course of
action, and provided further that, prior to so acting, the Escrow
Agent has not received the written instructions
requested.
(xv) The Payors, severally and in
equal proportions, shall be liable for and shall reimburse and
indemnify the Escrow Agent (and any predecessor Escrow Agent) and
hold the Escrow Agent harmless from and against any and all claims,
losses, actions, liabilities, costs, damages or expenses (including
reasonable attorneys’ fees and expenses) (collectively
“ Losses ”) arising from or in connection with
its administration of this Agreement, provided, however, that
nothing contained herein shall require the Escrow Agent to be
indemnified for Losses caused by its own gross negligence or own
willful misconduct. In addition, when the Escrow Agent acts on any
information, instructions, communications (including, but not
limited to, communications with respect to the delivery of
securities or the wire transfer of funds) sent by telephone, telex
or facsimile, the Escrow Agent, absent gross negligence or willful
misconduct, shall not be responsible or liable in the event such
communication is not an authorized or authentic communication of
the Payor(s) or is not in the form the Payor(s) sent or intended to
send (whether due to fraud, distortion or otherwise). The Payor(s)
shall severally indemnify the Escrow Agent against any loss,
liability, claim or expense (including reasonable legal fees and
expenses) it may incur with its acting in accordance with any such
communication. This paragraph shall survive the termination of this
Agreement or the removal of the Escrow Agent.
(xvi) In the event of any ambiguity
or uncertainty hereunder or in any notice, instruction or other
communication received by the Escrow Agent hereunder, the Escrow
Agent may, in its sole discretion, refrain from taking any action
other than retain possession of the Escrow Property, unless the
Escrow Agent receives written instructions, signed by all Payors,
which eliminates such ambiguity or uncertainty.
(xvii) In the event of any dispute
between or conflicting claims by or among the Payors and/or any
other person or entity with respect to any Escrow Property, the
Escrow Agent shall be entitled, in its sole discretion, to refuse
to comply with any and all claims, demands or instructions with
respect to such Escrow Property so long as such dispute or conflict
shall continue, and the Escrow Agent shall not be or become liable
in any way to the Payors for failure or refusal to comply with such
conflicting claims, demands or instructions. The Escrow Agent shall
be entitled to refuse to act until, in its sole discretion, either
(A) such conflicting or adverse claims or demands shall have been
determined by a final order, judgment or decree of a court of
competent jurisdiction, which order, judgment or decree is not
subject to appeal, or settled by agreement between the conflicting
parties as evidenced in a writing reasonably satisfactory to the
Escrow Agent or (B) the Escrow
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Agent shall have received security
or an indemnity satisfactory to it sufficient to hold it harmless
from and against any and all Losses which it may incur by reason of
so acting. Any court order, judgment or decree shall be accompanied
by a legal opinion by counsel for the presenting party, reasonably
satisfactory to the Escrow Agent, to the effect that said order,
judgment or decree represents a final adjudication of the rights of
the parties by a court of competent jurisdiction, and that the time
for appeal from such order, judgment or decree has expired without
an appeal having been perfected. The Escrow Agent shall act on such
court order and legal opinions without further question. The Escrow
Agent may, in addition, elect, in its sole discretion, to commence
an interpleader action or seek other judicial relief or orders
a
