<PAGE> 1
As filed with the Securities and Exchange Commission on October 11, 1996
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUNSTONE HOTEL INVESTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 52-1891908
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
115 Calle de Industrias
Suite 201
San Clemente, California 92672
(Address of principal executive offices)
Robert A. Alter
Sunstone Hotel Investors, Inc.
115 Calle de Industrias
Suite 201
San Clemente, California 92672
(714) 361-3900
(Name and address of agent for service of process)
COPIES TO:
Roger M. Cohen, Esq.
Brobeck, Phleger & Harrison LLP
4675 MacArthur Court, Suite 1000
Newport Beach, California 92660
(714) 752-7535
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT OFFERING PRICE AGGREGATE AMOUNT
BEING REGISTERED BEING REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
Shares of Benefit Interest,
<S> <C> <C> <C> <C>
$0.01 par value................. 1,000,000 10.3125 10,312,500 3,125
===================================================================================================================================
</TABLE>
(1) Plus such additional number of shares as may be required in the event
of a stock dividend, reverse stock split, split-up recapitalization or
other similar event.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457. Based upon the average of the high ($10.375)
and low ($10.25) sale prices reported on the New York Stock Exchange
for Common Stock on October 4, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
PROSPECTUS
[LOGO]
SUNSTONE HOTEL INVESTORS, INC.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
----------------------------
Sunstone Hotel Investors, Inc. ("Sunstone" or the "Company") hereby
offers participation in its Dividend Reinvestment and Stock Purchase Plan (the
"Plan"). The Plan is designed to provide the Company shareholders and other
investors with a convenient and economical method to purchase shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), and to
reinvest all or a portion of their cash dividends in additional shares of Common
Stock. Some of the significant features of the Plan are as follows:
- Participants may purchase newly issued shares of Common Stock
by automatically reinvesting all or a portion of their cash
dividends.
- Participants may purchase additional Common Stock by making
optional cash investments during permitted investment periods
of $100 to $3,000 per month or by making an initial optional
cash investment of $1,000 to $3,000. Optional cash investments
in excess of $3,000 may be made with permission of the
Company.
- Common Stock will be purchased by the Administrator directly
from the Company or in open market or privately negotiated
transactions, as determined from time to time by the Company
to fulfill requirements for the Plan. At present, the Company
expects that shares usually will be purchased directly from
the Company.
- Common Stock purchased directly from the Company pursuant to
an optional cash investment of more than $3,000 (with
permission of the Company) may be priced at a discount from
recent market prices (determined in accordance with the Plan)
ranging from 0% to 5%. The discount, if offered, may be
adjusted by the Company in its discretion at any time. No
discount will be available for Common Stock purchased in the
open market or in privately negotiated transactions.
- Holders of shares in broker or nominee names may participate
in the Plan, in which case, brokers or nominees will reinvest
dividends and make optional cash investments on behalf of
beneficial owners.
Participation in the Plan is entirely voluntary, and participants may
terminate their participation at any time. Shareholders that do not choose to
participate in the Plan will continue to receive cash dividends, as declared, in
the usual manner.
This Prospectus relates to 1,000,000 shares of Common Stock offered for
purchase under the Plan.
-------------------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS
OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENT AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL
-----------------------------
The date of this Prospectus is October ___, 1996.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information.......................................................................................... 1
Incorporation of Certain Information by Reference.............................................................. 1
The Company.................................................................................................... 2
Summary of the Plan............................................................................................ 3
The Plan....................................................................................................... 5
Purpose............................................................................................... 5
Participation Options................................................................................. 5
Benefits and Disadvantages............................................................................ 5
Administration........................................................................................ 6
Participation......................................................................................... 7
Enrollment............................................................................................ 7
Purchases............................................................................................. 9
Certificates.......................................................................................... 12
Sale of Shares........................................................................................ 13
Reports............................................................................................... 13
Withdrawal............................................................................................ 13
Taxes................................................................................................. 14
Other Provisions...................................................................................... 14
Use of Proceeds................................................................................................ 16
Indemnification Under the Securities Act....................................................................... 16
Plan of Distribution and Underwriters.......................................................................... 16
Legal Matters.................................................................................................. 17
Experts........................................................................................................ 17
Appendix I..................................................................................................... A-1
</TABLE>
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any jurisdiction where, or to any
person to whom, it is unlawful to make any such offer or solicitation. Neither
the delivery of this Prospectus nor any offer or sale made hereunder shall,
under any circumstances, create an implication that there has not been any
change in the facts set forth in this Prospectus or in the affairs of the
Company since the date hereof.
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files, reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Corp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission also maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company, and the address is http://www.sec.gov. The Company's Common Stock
is listed on the New York Stock Exchange, Inc. (the "New York Stock Exchange"),
and reports, proxy statements and other information concerning the Company can
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations promulgated thereunder, with respect to the Common
Stock offered pursuant to this Prospectus. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits. For further information concerning the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith, which may
be examined without charge at, or copies obtained upon payment of prescribed
fees from, the Commission and its regional offices at the locations listed
above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the Commission, are
hereby incorporated by reference:
1. Annual Report (i) on Form 10-K of the Company for the fiscal
year ended December 31, 1995; and (ii) on Form 10-K/A filed
with the Commission on October 11, 1996;
2. Quarterly Reports (i) on Form 10-Q for the quarters ended
March 31, 1996, and June 30, 1996; and (ii) on Form 10-Q/A for
the quarter ended March 31, 1996 filed with the Commission on
May 21, 1996 and June 27, 1996;
3. Current Reports (i) on Form 8-K filed with the Commission on
February 20, 1996, July 13, 1996 and August 28, 1996; and (ii)
on Form 8-K/A filed with the Commission on April 19, 1996 and
August 28, 1996;
4. The description of the Common Stock of the Company included in
the Company's Registration Statement on Form 8-A, filed with
the Commission on June 26, 1995; and on Form 8-A/A, filed with
the Commission on July 17, 1996.
In addition, all reports and other documents subsequently filed by the
Company with the Commission pursuant to Section 13, 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") after the date
of this Prospectus and prior to the termination of the offering shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of the filing of such documents (such documents, and the documents
enumerated above, being herein referred to as "Incorporated Documents,"
provided however, that the documents enumerated above or subsequently filed by
the Company pursuant to Section 13, 14 or 15(d) of the Exchange Act prior to the
filing of the Company's next Annual Report on Form 10-K with the Commission
shall
1
<PAGE> 5
not be Incorporated Documents or be incorporated by reference in this Prospectus
or be a part hereof from and after any such filing of an Annual Report on Form
10-K). Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein) modifies or supersedes such statement. Any
statements so modified or superseded shall not be deemed to constitute a part of
this Prospectus, except as so modified or superseded.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus (other than certain exhibits to
such documents). Requests for such documents should be directed to Sunstone
Hotel Investors, Inc., 115 Calle de Industrias, Suite 201, San Clemente,
California 92672, Attention: Secretary.
THE COMPANY
The Company is a self-administered real estate investment trust
("REIT") that, through Sunstone Hotel Investors, L.P. (the "Partnership"), owns
mid-price and upscale hotels in the western United States. The hotels operate
under nationally recognized franchises, including Courtyard by Marriott,
Doubletree Hotel, Hampton Inn, Holiday Inn, Holiday Inn Hotel & Suites, Holiday
Inn Express, Holiday Inn Select, Comfort Suites and Residence Inn. As of the
date of this Prospectus, the Company owns an approximately 88.2% partnership
interest in the Partnership and the Partnership owns 20 hotels, with an
aggregate of 2,612 rooms in seven states, including Arizona (1 hotel),
California (5), Colorado (6), New Mexico (1), Utah (2), Oregon (2), and
Washington (3). The Company's principal executive office is located at 115 Calle
de Industrias, Suite 201, San Clemente, California 92672; telephone number (714)
361-3900.
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<PAGE> 6
SUMMARY OF THE PLAN
The following summary description of the Sunstone Hotel Investors, Inc.
("Sunstone" or the "Company") Dividend Reinvestment and Stock Purchase Plan (the
"Plan") is qualified by reference to the full text of the Plan which is
contained herein. Terms used in the summary have the meanings attributed to them
in the Plan.
PURPOSES OF THE PLAN The purposes of the Plan are twofold: first, to
provide the Company's shareholders with a convenient
and economical method of purchasing additional shares
of Common Stock with all or a portion of their cash
dividends; and second, to provide the Company a means
of raising additional capital through the direct sale
of Common Stock to shareholders or other investors
making optional cash investments.
DIVIDEND REINVESTMENTS Shareholders may by enrolling in the Plan
automatically reinvest all or a portion of the
dividends paid by the Company in additional shares of
Common Stock. The Plan currently provides no discount
on the purchase price for the additional shares of
Common Stock purchased with reinvested dividends or
with optional cash investments of up to $3,000, but
the Company reserves the right to provide a discount
in the future for shares purchased from the Company
(not to exceed 5% of the average of the high and low
trading prices of the stock on the Investment Date).
PURCHASE PRICE The Plan provides that the shares to be purchased
may be either newly issued shares acquired from the
Company or shares purchased on the open market or in
privately negotiated transactions from third parties.
Under the Plan, the purchase price for newly issued
shares purchased with reinvested dividends will be
the average of the daily high and low sales prices on
the NYSE on the Investment Date (see Question 9 for
definition). The purchase price for newly issued
shares purchased with optional cash investments is
the average of the daily high and low sales prices of
the Common Stock on the NYSE during a Pricing Period
consisting of the twelve Trading Days (see Question
11 for definitions) preceding the Investment Date.
Additionally, for optional cash investments the
Company may provide a discount of 0% to 5% from such
twelve-day average for shares purchased directly from
the Company; but, in the case of optional investments
of up to $3,000, the discount shall in no event
exceed 5% of the average of the high and low trading
prices of the stock on the Investment Date. The
purchase price for shares purchased on the open
market or in privately negotiated transactions
(whether to fulfill dividend reinvestments or
optional cash investments) is the weighted average
price paid for such shares by the Administrator with
all Participants' reinvested dividends and optional
cash investments for the month. In addition, each
Participant will be charged a pro rata portion of any
brokerage fee or other charges paid by the
Administrator in connection with such open market or
privately negotiated purchases.
The shares purchased pursuant to an optional cash
investment pursuant to a Request for Waiver will have
Threshold Prices while those purchased within the
$100 to $3,000 price range will not have
Threshold Prices.
The purchase price for shares of Common Stock
purchased pursuant to a Request for Waiver (as
described below) may reflect a discount of 0% to 5%
(the "Waiver Discount") from the market price.
PLAN LIMITATIONS Optional cash investments by existing shareholders
are subject to a minimum investment of $100 and a
maximum investment of $3,000 per month. Initial
optional cash investments by investors that are not
shareholders of the Company are subject to a minimum
of $1,000 and a maximum of $3,000. The $3,000 per
month maximum may be waived only pursuant to a
written request approved by the Company ("Request for
Waiver").
OPTIONAL CASH INVESTMENTS Optional cash investments made pursuant to
PURSUANT TO REQUEST a Request for Waiver may only be made during the
FOR WAIVER months in which quarterly dividends are not being
paid by the Company (each, a "Waiver Month") and are
not subject to a predetermined maximum limit on the
amount of the investment or on the number of shares
that may be purchased. With respect to optional cash
investments in excess of $3,000 made pursuant to a
Request for Waiver, the Company may, in its sole
discretion, establish each Waiver Month a Waiver
Discount
3
<PAGE> 7
and a Threshold Price. The Waiver Discount, which may
vary each month between 0% and 5%, may be adjusted by
the Company after a review of current market
conditions, the level of participation, and current
and projected capital needs. The Threshold Price will
be the minimum price applicable to purchases of
Common Stock in a given month. For each Trading Day
during the Pricing Period on which the Threshold
Price is not satisfied, one-twelfth of a
Participant's optional cash investment made pursuant
to a Request for Waiver will be returned without
interest. The Company reserves the right to allow
optional cash investments pursuant to a Request for
Waiver in the months in which a dividend is paid, but
does not currently intend to do so. If the Company
does allow such optional cash investments in dividend
months in the future, the months in which dividends
are paid will also be considered "Waiver Months" for
purposes of the Plan.
OPTIONAL CASH INVESTMENTS
BETWEEN $100 AND $3,000 Optional cash investments of between $100 and
$3,000 ($1,000 to $3,000 for non-shareholders) may be
made in each month without the need for a Waiver
Request and the Threshold Price shall not apply.
Optional cash investments of less than $100 ($1,000
for non-shareholders) and that portion of any
optional cash investment that exceeds $3,000, unless
such limit has been waived, will be returned to the
Participant without interest.
REQUEST FOR WAIVER In deciding whether to approve a Request for
Waiver, the Company will consider relevant factors
including, but not limited to, the Company's current
and projected capital needs, the alternatives
available to the Company to meet those needs,
prevailing market prices for the Common Stock,
general economic and market conditions, expected
aberrations in the price or trading volume of the
Common Stock, the aggregate amount of optional cash
investments for which such waivers have been
submitted and the administrative constraints
associated with granting such waivers. If Requests
for Waiver are submitted for any Investment Date for
an aggregate amount in excess of the amount the
Company is then willing to accept, the Company may
honor such requests in order of receipt, pro rata or
by any other method the Company in its discretion
determines is appropriate.
Any person who acquires shares of Common Stock
through the Plan and resells them shortly before or
after acquiring them may be considered to be
underwriter within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"). The
Company expects that certain persons will acquire
shares of Common Stock pursuant to a Request for
Waiver and resell such shares in order to obtain the
financial benefit of any Waiver Discount then being
offered under the Plan. The Company has no
arrangements or understandings, formal or informal,
with any person relating to a distribution of shares
to be received pursuant to the Plan. See "Plan of
Distribution and Underwriters."
NUMBER OF SHARES OFFERED Initially, 1,000,000 shares of Common Stock are
authorized to be issued and registered under the
Securities Act for offering pursuant to the Plan.
Because the Company expects to continue the Plan
indefinitely, it expects to authorize for issuance
and register under the Securities Act additional
shares from time to time as necessary for purposes
of the Plan.
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<PAGE> 8
THE PLAN
The following questions and answers explain and constitute the Sunstone
Dividend Reinvestment and Stock Purchase Plan, as in effect beginning October
__, 1996.
PURPOSE
1. WHAT ARE THE PURPOSES OF THE PLAN? The purposes of the Plan are
twofold: first, to provide the Company's shareholders with a convenient and
economical method to purchase shares of Common Stock by reinvesting all or a
portion of their cash dividends; and second, to provide the Company with a means
of raising additional capital through sales of Common Stock under the Plan to
shareholders as other investors making optional cash investments. Whether
significant additional capital is raised may be affected, in part, by the
Company's decision to waive the limitations applicable to optional cash
investments in excess of $3,000 and, in part, by the Company's decision to sell
newly issued shares of Common Stock to fulfill the requirements of the Plan. See
Question 13 regarding the Company's criteria for granting a Request for Waiver.
PARTICIPATION OPTIONS
2. WHAT OPTIONS ARE AVAILABLE UNDER THE PLAN? Registered holders or
beneficial owners of Common Stock and other interested investors may elect to
participate in the Plan (each a "Participant"). Participants may have cash
dividends on all or a portion of their shares automatically reinvested in Common
Stock. Even if they do not reinvest dividends, Participants who are
shareholders may make optional cash investments to purchase Common Stock,
subject to a minimum investment of $100 and a maximum investment of $3,000 per
month. Interested investors that are not shareholders of the Company may make
an initial optional cash investment in Common Stock of not less than $1,000
and not more than $3,000. In certain instances, however, the Company may
permit greater optional cash investments. See Question 12 regarding optional
cash investments and Question 13 regarding a Request for Waiver.
BENEFITS AND DISADVANTAGES
3. WHAT ARE THE BENEFITS AND DISADVANTAGES OF THE PLAN?
Benefits
- The Plan provides Participants the opportunity to
automatically reinvest cash dividends on all or a portion of
their Common Stock in additional shares of Common Stock at the
average market price of the stock on the day of purchase.
- In addition to reinvestment of dividends, eligible
shareholders may purchase additional shares of Common Stock
pursuant to optional cash investments of not less than $100
and not more than $3,000 per month. Optional cash investments
may be made occasionally or at regular intervals, as the
Participants desire. Participants may make optional cash
investments even if dividends on their shares are not being
reinvested under the Plan.
- Persons not presently shareholders of the Company may become
Participants by making an initial cash investment of not less
than $1,000 and not more than $3,000 (except with the consent
of the Company) to purchase shares of Common Stock under the
Plan.
- Shares purchased directly from the Company under the Plan
pursuant to a Request for Waiver may be issued at a discount
to the market price. Initially, shares purchased directly from
the Company pursuant to optional cash investments of up to
$3,000 and dividend reinvestments will not be subject to a
discount, but the Company reserves the right to grant a
discount in the future for such purchases not to exceed 5% of
the average of the high and low trading prices of the stock on
the Investment Date.
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<PAGE> 9
- Dividends and any optional cash investments will be fully
invested because the Plan permits fractional shares to be
credited to Participants' accounts. Dividends on whole and on
fractional shares may be reinvested in additional shares and
such shares will be credited to Participants' accounts. See
Question 7.
- Participants will avoid the need for safekeeping of
certificates for shares of Common Stock credited to their Plan
accounts and may submit for safekeeping certificates held by
them and registered in their name. See Questions 15 and 16.
- Participants that are registered holders may direct the
Administrator to sell or transfer all or a portion of their
shares held in the Plan. See Question 17.
- Periodic statements reflecting all current activity in Plan
accounts, including purchases, sales and latest balances, will
simplify recordkeeping for registered holders. See Question
18.
Disadvantages
- Participants may not be able to depend on the availability of
a market discount regarding shares acquired under the Plan.
Initially, no discount may be established for the purchase of
shares directly from the Company, and the granting of a
discount for one month will not insure the availability of a
discount or the same discount in future months. Each month,
the Company may lower or eliminate the discount without prior
notice to Participants. The Company may also, without prior
notice to Participants, change its determination as to whether
Common Stock will be purchased by the Administrator directly
from Company or in the open market or in privately negotiated
transactions from third parties (although the Company may not
effect such a change more than once in any three-month
period). See Question 13.
- Participants that reinvest cash dividends will be treated for
federal income tax purposes as having received a dividend on
the dividend payment date; such dividend may give rise to a
liability for the payment of income tax without providing
Participants with immediate cash to pay such tax when it
becomes due. See Question 20.
- Participants will not know the actual number of shares
purchased under the Plan until after the Investment Date. See
Question 11 regarding the timing of the purchase of shares.
- The purchase price per share for optional investments will be
an average price over a twelve-day trading period and,
therefore, may exceed the price at which shares are trading on
the Investment Date when the shares are issued. See Questions
11 and 12 regarding the period of time and the purchase price
of the shares.
- Execution of sales of shares held in the Plan may be subject
to delay. See Questions 12 and 17.
- No interest will be paid on funds held by the Company pending
reinvestment or investment. See Questions 12 and 14.
- Shares deposited in a Plan account may not be pledged until
the shares are withdrawn from the Plan. See Question 27.
ADMINISTRATION
4. WHO WILL ADMINISTER THE PLAN? The Plan will be administered by
Mellon Bank, N.A. or such successor administrator as the Company may designate
(the "Administrator"). The Administrator acts as agent for Participants, keeps
records of the accounts of Participants, sends regular account statements to
Participants, and performs other duties relating to the Plan. Shares purchased
for each Participant under the Plan will be held by the
6
<PAGE> 10
Administrator and will be registered in the name of the Administrator or its
nominee on behalf of the Participants, unless and until a Participant requests
that a stock certificate for all or part of such shares be issued, as more fully
described in Question 15. The Administrator also serves as dividend disbursement
agent, transfer agent, and registrar for the Common Stock. Correspondence with
the Administrator should be sent to:
Mellon Bank, N.A.
Shareholder Investment Service
P.O. Box 750
Pittsburgh, Pennsylvania 15230
or, if using overnight courier service:
Mellon Bank, N.A.
Shareholder Investment Service
Commerce Court
4 Station Square
Third Floor
Pittsburgh, Pennsylvania 15219
or call: (800) xxx-xxxx
PARTICIPATION
5. WHO IS ELIGIBLE TO PARTICIPATE? A "registered holder" (which means a
shareholder whose shares of Common Stock are registered in the stock transfer
books of the Company in his or her name) or a "beneficial owner" (which means a
shareholder whose shares of Common Stock are registered in a name other than his
or her name, for example, in the name of a broker, bank or other nominee), may
participate in the Plan. A registered holder may participate in the Plan
directly; a beneficial owner must either become a registered holder by having
such shares transferred into his or her name or by making arrangements with his
or her broker, bank or other nominee to participate in the Plan on the
Participant's behalf. In addition, an interested investor that is not a
shareholder may participate in the Plan by making an initial optional cash
investment in Common Stock of not less than $1,000 or more than $3,000 unless
granted a Request for Waiver (in which case such initial investment may exceed
$3,000). See Question 6 regarding enrollment.
The right to participate in the Plan is not transferable to another
person apart from a transfer of the underlying shares of Common Stock.
Participants residing in jurisdictions in which their participation in
the Plan would be unlawful will not be eligible to participate in the Plan.
ENROLLMENT
6. HOW DOES AN ELIGIBLE HOLDER OF COMMON STOCK OR ANY OTHER INTERESTED
INVESTOR ENROLL IN THE PLAN AND BECOME A PARTICIPANT?
Each eligible registered holder may enroll in the Plan and become a
Participant by completing and signing an Authorization Form (enclosed herein)
and returning it to the Administrator at the address set forth in Question 4. An
Authorization Form may also be obtained at any time upon request from the
Administrator at the same address. If shares are registered in more than one
name (e.g., joint tenants, trustees), all registered holders of such shares must
sign the Authorization Form exactly as their names appear on the account
registration.
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<PAGE> 11
Eligible beneficial owners must instruct their brokers, banks or other
nominees in whose name their shares are held to participate in the Plan on their
behalf. If a broker, bank or other nominee holds shares of beneficial owners
through a securities depository, such broker, bank or other nominee will be
required to provide a Broker and Nominee Form (a "B/N Form") to the
Administrator in order to participate in the optional cash investment portion of
the Plan. See Question 12.
An interested investor that is not presently a shareholder of the
Company, but desires to become a Participant by making an initial investment in
Common Stock, may join the Plan by signing an Authorization Form and forwarding
it, together with such initial investment, to the Administrator at the address
set forth in Question 4. See Question 12 regarding initial optional cash
investments.
7. WHAT DOES THE AUTHORIZATION FORM PROVIDE? The Authorization Form
appoints the Administrator as the Participant's agent for purposes of the Plan
and directs the Administrator to apply to the purchase of additional shares of
Common Stock all of the cash dividends on the specified number of shares of
Common Stock owned by the Participant on the applicable Record Date and
designated by the Participant to be included in the Plan, and to reinvest
automatically cash dividends on whole and fractional shares of Common Stock that
have been credited to the Participant's account pursuant to dividend
reinvestment or optional cash investment that have been designated to be
included in the Plan. The Authorization Form also directs the Administrator to
purchase additional shares of Common Stock with any optional cash investments
that the Participant may elect to make.
The Authorization Form provides for the purchase of additional shares
of Common Stock through the following investment options:
(1) "FULL DIVIDEND REINVESTMENT" -- This option directs the
Administrator to invest in accordance with the Plan all cash
dividends on all whole or fractional shares of Common Stock
then or subsequently registered in the Participant's name.
This option also permits the Participant to make optional cash
investments of up to $3,000 per month and directs the
Administrator to apply such investments towards the purchase
of additional shares of Common Stock in accordance with the
Plan.
(2) "PARTIAL DIVIDEND REINVESTMENT" -- This option directs the
Administrator to invest in accordance with the Plan all cash
dividends on the specified number of whole or fractional
shares of Common Stock then registered in the Participant's
name and so designated in the appropriate space on the
Authorization Form. If this option is selected, the
Participant will continue to receive cash dividends in the
usual manner on all shares of Common Stock that have not been
designated for participation in the Plan. This option also
permits the Participant to make optional cash investments of
up to $3,000 per month and directs the Administrator to apply
such investments towards the purchase of additional shares of
Common Stock in accordance with the Plan.
(3) "OPTIONAL CASH INVESTMENTS ONLY" -- This option permits a
Participant to make optional cash investments of up to $3,000
per month and directs the Administrator to apply such
investments towards the purchase of additional shares of
Common Stock in accordance with the Plan. If this option is
selected, unless the Participant designates such additional
shares for participation in the Plan, the Participant will
continue to receive cash dividends on all shares of Common
Stock registered in his or her name in the usual manner, and
the Administrator will apply only optional cash investments
received from the Participant towards the purchase of
additional shares of Common Stock of up to $3,000 per month.
Any one of the above three options may be selected. IN EACH CASE, CASH
DIVIDENDS WILL BE REINVESTED ON ALL SHARES DESIGNATED FOR PARTICIPATION IN THE
PLAN UNTIL THE PARTICIPANT SPECIFIES OTHERWISE OR WITHDRAWS FROM THE PLAN
ALTOGETHER, OR UNTIL THE PLAN IS TERMINATED.
ANY PARTICIPANT WHO RETURNS A PROPERLY EXECUTED AUTHORIZATION FORM TO
THE ADMINISTRATOR WITHOUT ELECTING AN INVESTMENT OPTION WILL BE ENROLLED AS
HAVING SELECTED FULL DIVIDEND REINVESTMENT.
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8. WHEN WILL PARTICIPATION IN THE PLAN BEGIN? Participation as to
dividend reinvestment will commence with the next Investment Date after receipt
of the Authorization Form, provided it is received by the Administrator on or
before the Record Date for the payment of the dividend. Participation as to
optional cash investments will commence with the next Investment Date, provided
(1) the Authorization Form has been received, for an investment of up to $3,000
(or the waiver has been granted, for investments in excess of $3,000); and (2)
the funds to be invested are received by the close of business on the last
business day immediately preceding the first day of the Pricing Period for the
next succeeding Investment Date. For optional investments pursuant to a Request
for Waiver, however, Plan participation can only begin in the months in which
the Company does not pay a dividend, unless the Company decides to allow such
optional investments in dividend months. See Question 9 below and Appendix I to
determine the applicable Pricing Period and Investment Date. Should the funds to
be invested arrive after the time indicated above and before the next succeeding
Investment Date, such funds will be returned to the Participant, without
interest.
Eligible shareholders and other interested investors may enroll in the
Plan at any time. Once enrolled, a Participant will remain enrolled until the
Participant discontinues participation or until the Company terminates the Plan.
See Question 19 regarding withdrawal from the Plan and Question 29 regarding
termination of the Plan.
PURCHASES
9. WHEN WILL SHARES BE ACQUIRED UNDER THE PLAN? If shares are being
acquired for the Plan directly from the Company, dividends and optional cash
investments (other than those made pursuant to a Request for Waiver) will be
reinvested or invested, as the case may be, on the dividend payment date during
a month in which a cash dividend is paid and, in any other month, on the
fifteenth calendar day of such month. If shares are being acquired for the Plan
directly from the Company, optional cash investments made pursuant to a Request
for Waiver will be invested on the fifteenth calendar day of each Waiver Month
(e.g. months other than those in which a dividend is paid by the Company). Each
such date described in the two preceding sentences is referred to as an
"Investment Date". However, if either the dividend payment date or such
fifteenth calendar day falls on a date when the NYSE is closed, the Investment
Date will be the first day following such date on which the NYSE is open.
If shares are being acquired for the Plan through open market or
privately negotiated transactions, the Company will pay the reinvested dividends
to the Administrator on the subject Investment Date. The Administrator will
apply all such dividends and all optional cash investments the Administrator has
received relating to the Investment Date to the purchase of Common Stock
pursuant to the Plan as soon as practicable on or after the Investment Date, but
in no event later than 10 trading days after the Investment Date.
In no event will an Investment Date for optional cash investments
pursuant to a Request for Waiver occur during the same month in which an
Investment Date relating to reinvested dividends occurs.
In the past, record dates for dividends on the Common Stock have
preceded the dividend payment dates by approximately two weeks. Dividend
payment dates historically have occurred on or about the fifteenth day of each
February, April, August and November. This past pattern with respect to timing
of dividend record dates and payment dates is expected to be followed generally
in the future. Please see Appendix I for information with respect to Pricing
Periods, Investment Dates, Record Dates, and other market data.
DIVIDENDS ARE PAID AS AND WHEN DECLARED BY THE COMPANY'S BOARD OF
DIRECTORS. THERE CAN BE NO ASSURANCE AS TO THE DECLARATION OR PAYMENT OF A
DIVIDEND, AND NOTHING CONTAINED IN THE PLAN OBLIGATES THE COMPANY TO DECLARE OR
PAY ANY SUCH DIVIDEND ON COMMON STOCK. THE PLAN DOES NOT REPRESENT A GUARANTEE
OF FUTURE DIVIDENDS.
10. WHAT IS THE SOURCE OF SHARES TO BE PURCHASED UNDER THE PLAN? For
any particular Investment Date, all dividends reinvested through the Plan and
all optional cash investments will be used to purchase either newly issued
shares directly from the Company or shares on the open market or in privately
negotiated transactions from third parties, but not a combination of both.
Shares purchased directly from the Company will consist of authorized but
unissued shares of Common Stock.
11. AT WHAT PRICE WILL SHARES BE PURCHASED? The shares purchased
directly from the Company with reinvested dividends will be acquired at a price
equal to the average of the daily high and low sales prices computed up to seven
decimals, if necessary, of the Common Stock as reported on the NYSE on the
Investment Date, subject to a discount in the Company's discretion of up to 5%
of such average price. The shares purchased directly from the Company with
optional cash investments will be acquired at a price to the Participant of the
average of the daily high and low sales prices computed up to seven decimal
places, if necessary, of the Common Stock as reported on the NYSE for the twelve
Trading Days (as defined below) immediately preceding the applicable Investment
Date. Additionally, for optional cash investments the Company may provide a
discount of 0% to 5% from such twelve-day average for shares purchased directly
from the Company; but, in the case of optional investments of up to $3,000, the
discount shall in no event exceed 5% of the average of the high and low trading
prices of the stock on the Investment Date. A "Trading Day" means a day on which
trades in Common Stock are reported on
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<PAGE> 13
the NYSE. The period encompassing the first twelve Trading Days immediately
preceding the next following Investment Date constitutes the relevant "Pricing
Period."
All shares purchased by the Administrator in the open market or in
negotiated transactions with third parties will be acquired as soon as
practicable on or after the applicable Investment Date (but in no event later
than 10 Trading Days after the Investment Date). The purchase price for such
shares to the Participant will be the weighted average purchase price for such
shares, including brokerage fees and commissions, computed up to seven decimal
places, if necessary, paid by the Administrator for the Common Stock.
Shares purchased pursuant to a Request for Waiver may be subject to a
Threshold Price and a Waiver Discount as more fully described in Question 13
below.
12. HOW ARE OPTIONAL CASH INVESTMENTS MADE? All registered holders,
including brokers, banks and nominees with respect to shares registered in their
name on behalf of beneficial owners that have submitted signed Authorization
Forms are eligible to make optional cash investments at any time, except that
any optional cash investment pursuant to a Request for Waiver may be made only
during Waiver Months.
A broker, bank or nominee, as holder on behalf of a beneficial owner,
may utilize an Authorization Form for optional cash investments unless it holds
the shares in the name of a securities depository. In that event, the optional
cash investment must be accompanied by a Broker and Nominee Form ("B/N Form").
The B/N Form provides the sole means whereby a broker, bank or other
nominee holding shares on behalf of beneficial owners in the name of a
securities depository may make optional cash investments on behalf of such
beneficial owners. In such case, the broker, bank or other nominee must use a
B/N Form for transmitting optional cash investments on behalf of the beneficial
owners. A B/N Form must be delivered to the Administrator at the address
specified in Question 4 each time that such broker, bank or other nominee
transmits optional cash investments on behalf of the beneficial owners. B/N
Forms will be furnished by the Administrator upon request.
Other interested investors that are not shareholders of the Company,
but have submitted Authorization Forms, are also eligible to make an initial
investment in Common Stock through an optional cash investment.
The Administrator will apply all optional cash investments for which
good funds are received on or before the first business day before the Pricing
Period to the purchase of shares of Common Stock on the next following
Investment Date, or if shares are acquired on the open market or in privately
negotiated transactions, as soon as practicable on or after such Investment
Date (but in no event later than 10 Trading Days after the Investment Date).
NO INTEREST WILL BE EARNED ON OPTIONAL CASH INVESTMENTS HELD PENDING
INVESTMENT. THE COMPANY SUGGESTS THEREFORE THAT ANY OPTIONAL CASH INVESTMENT A
PARTICIPANT WISHES TO MAKE BE SENT SO AS TO REACH THE ADMINISTRATOR AS CLOSE AS
POSSIBLE TO THE FIRST BUSINESS DAY PRECEDING THE PRICING PERIOD FOR THE NEXT
FOLLOWING INVESTMENT DATE. ANY QUESTIONS REGARDING THESE DATES SHOULD BE
DIRECTED TO THE ADMINISTRATOR AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH IN
QUESTION 4.
All optional cash investments received by the Administrator after the
close of business on the last business day immediately preceding the first day
of the Pricing Period and before the next succeeding Investment Date will
promptly be returned to the Participant without interest.
Participants should be aware that since investments under the Plan are
made as of specified dates, one may lose any advantage that otherwise might be
available from being able to select the timing of an investment. NEITHER THE
COMPANY NOR THE ADMINISTRATOR CAN ASSURE A PROFIT OR PROTECT AGAINST A LOSS ON
SHARES OF COMMON STOCK PURCHASED UNDER THE PLAN.
ALL OPTIONAL CASH INVESTMENTS MADE BY CHECK SHOULD BE MADE PAYABLE TO
MELLON BANK, N.A. AND MAILED TO MELLON AT THE ADDRESS LISTED IN QUESTION 4.
INQUIRIES REGARDING OTHER FORMS OF PAYMENTS AND ALL OTHER WRITTEN INQUIRIES
SHOULD BE DIRECTED TO THE ADMINISTRATOR AT THE ADDRESS LISTED IN QUESTION 4.
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13. WHAT LIMITATIONS APPLY TO OPTIONAL CASH INVESTMENTS?
MINIMUM/MAXIMUM LIMITS. For any Investment Date, optional cash
investments made by shareholders of the Company are subject to a minimum of $100
and a maximum of $3,000, and optional cash investments made by interested
investors who are not then shareholders of the Company are subject to a minimum
initial investment of $1,000 and a maximum of $3,000. See Question 9 regarding
the determination of Investment Dates for optional cash investments. Optional
cash investments of less than the allowable monthly minimum amount and that
portion of any optional cash investment that exceeds the allowable monthly
maximum amount will be returned promptly to Participants without interest,
except as noted below.
REQUEST FOR WAIVER. Unless otherwise specified by the Company, optional
cash investments in excess of $3,000 per month may be made only during the
months in which quarterly dividends are not being made by the Company and only
pursuant to a Request for Waiver accepted by the Company. Participants who wish
to submit an optional cash investment in excess of $3,000 for any Investment
Date during a Waiver Month must obtain the prior written approval of the Company
and a copy of such written approval must accompany any such optional cash
investment. Request for Waiver forms will be furnished at any time upon request
to the Plan Administrator at the address or telephone number specified in
Question 4. A completed Request for Waiver should be directed to the Company via
facsimile at (714) 369-8989. THE COMPANY HAS SOLE DISCRETION TO GRANT ANY
APPROVAL FOR OPTIONAL CASH INVESTMENTS IN EXCESS OF THE $3,000 ALLOWABLE MAXIMUM
AMOUNT. The Company expects to grant Requests for Waiver to financial
intermediaries, including brokers and dealers, and other Participants in the
future. Grants of Requests for Waiver will be made in the sole discretion of the
Company based on a variety of factors, which may include: the Company's current
and projected capital needs, the alternatives available to the Company to meet
those needs, prevailing market prices for the Common Stock, general economic and
market conditions, expected aberrations in the price or trading volume of the
Common Stock, the aggregate amount of optional cash investments for which such
waivers have been submitted and the administrative constraints associated with
granting such waivers. If such Requests for Waiver are granted, a portion of the
shares available for issuance under the Plan will be purchased by Participants
(including brokers or dealers) who, in connection with any resales of such
shares, may be deemed to be underwriters within the meaning of the Securities
Act. To the extent that Requests for Waiver are granted, it is expected that a
greater number of shares will be issued under the optional cash investments
pursuant to the Request for Waiver feature of the Plan as opposed to the
dividend reinvestment feature of the Plan.
Financial intermediaries may purchase a significant portion of the
shares of Common Stock issued pursuant to the optional cash payment feature of
the Plan. The Company does not have any formal or informal understanding with
any such organizations and, therefore, the extent of such financial
intermediaries' participation under the Plan cannot be estimated at this time.
Participants that are financial intermediaries that acquire shares of Common
Stock under the Plan with a view to distribution of such shares or that offer or
sell Shares for the Company in connection with the Plan may be deemed to be
underwriters within the meaning of the Securities Act. If Requests for Waiver
are submitted for any Investment Date during a Waiver Month for an aggregate
amount in excess of the amount the Company is then willing to accept, the
Company may honor such requests in order of receipt, pro rata or by any other
method that the Company determines to be appropriate. With regard to optional
cash investments made pursuant to a Request for Waiver, the Plan does not
provide for a predetermined maximum limit on the amount that a Participant may
invest or on the number of shares that may be purchased pursuant to a Request
for Waiver.
THRESHOLD PRICE. The Company may establish for any Pricing Period a
minimum price (the "Threshold Price") applicable to optional cash investments
made pursuant to Requests for Waiver. At least three business days prior to the
first day of the applicable Pricing Period, the Company will determine whether
to establish a Threshold Price, and if a Threshold Price is established, its
amount, and will so notify the Administrator. This determination will be made by
the Company in its discretion after a review of current market conditions, the
level of participation in the Plan, and current and projected capital needs.
If established for any Pricing Period, the Threshold Price will be
stated as a dollar amount that the average of the high and low sale prices of
the Common Stock on the NYSE for each Trading Day of the relevant Pricing Period
must equal or exceed. In the event that the Threshold Price is not satisfied for
a Trading Day in the Pricing Period, then that Trading Day will be excluded from
the Pricing Period and all trading prices for that day will be excluded from the
determination of the Purchase Price. A day will also be excluded if no trades of
Common Stock are made on the NYSE for that day. Thus, for example, if the
Threshold Price is not satisfied for three of the twelve Trading Days in a
Pricing Period, then the purchase price will be based upon the remaining nine
Trading Days in which the Threshold Price was satisfied.
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<PAGE> 15
In addition, a portion of each optional cash investment made pursuant
to a Request for Waiver will be returned for each Trading Day of a Pricing
Period in which the Threshold Price is not satisfied or for each day in which
no trades of Common Stock are reported on the NYSE. The returned amount will
equal one-twelfth of the total amount of such optional cash investment (not
just the amount exceeding $3,000) for each Trading Day that the Threshold Price
is not satisfied. Thus, for example, if the Threshold Price is not satisfied
or no such sales are reported for three of the twelve Trading Days in a Pricing
Period, 3/12 (i.e., 25%) of such optional cash investment will be returned to
the Participant without interest.
The establishment of the Threshold Price and the possible return of a
portion of the investment applies only to optional cash investments made
pursuant to a Request for Waiver. Setting a Threshold Price for a Pricing Period
shall not affect the setting of a Threshold Price for any subsequent Pricing
Period. For any particular Waiver Month, the Company may waive its right to set
a Threshold Price. Neither the Company nor the Administrator shall be required
to provide any written notice to Participants as to the Threshold Price for any
Pricing Period. Participants may, however, ascertain whether a Threshold Price
has been set or waived for any given Pricing Period by telephoning the Company
at (714) 361-3900.
WAIVER DISCOUNT. Each Waiver Month, at least three business days prior
to the first day of the applicable Pricing Period, the Company may establish a
discount from the market price applicable to optional cash investments made
pursuant to a Request for Waiver. Such discount (the "Waiver Discount") may be
between 0% and 5% of the purchase price and may vary each Waiver Month, but once
established will apply uniformly to all optional cash investments made pursuant
to a Request for Waiver for that Waiver Month. The Waiver Discount will apply to
the entire optional cash investment for such month and not just the portion of
such investment that exceeds $3,000. The Waiver Discount will be established in
the Company's sole discretion after a review of, current market conditions, the
level of participation in the Plan, and current and projected capital needs and
the other factors listed under Question 13. Participants may obtain the Waiver
Discount applicable to the next Pricing Period by telephoning the Company at
(714) 361-3900. Setting a Waiver Discount for a particular Waiver Month shall
not affect the setting of a Waiver Discount for any subsequent Waiver Month. The
Waiver Discount will apply only to optional cash investments of $3,000 or more,
but the Company reserves the right to establish, in the future, a discount from
the market price for reinvestment of cash dividends and optional cash
investments of $3,000 or less, provided such discount will not exceed 5% of the
fair market value of the Common Stock on the Investment Date.
14. WHAT IF A PARTICIPANT HAS MORE THAN ONE ACCOUNT? For the purpose of
the limitations discussed in Question 13, the Company may aggregate all dividend
reinvestments and optional cash investments for Participants with more than one
account using the same social security or taxpayer identification number. For
Participants unable to supply a social security or taxpayer identification
number, their participation may be limited by the Company to only one Plan
account.
Also for the purpose of such limitations, all Plan accounts that the
Company believes to be under common control or management or to have common
ultimate beneficial ownership may, in the Company's discretion, be aggregated.
Unless the Company has determined that reinvestment of dividends and optional
cash investments for each such account would be consistent with the purposes of
the Plan, the Company will have the right to aggregate all such accounts and to
return, without interest, within thirty days of receipt, any amounts in excess
of the investment limitations applicable to a single account received in respect
of all such accounts.
CERTIFICATES
15. WILL CERTIFICATES BE ISSUED FOR SHARE PURCHASES? All shares
purchased pursuant to the Plan will be held together in the name of the
Administrator or its nominee and credited to each individual account in "book
entry" form. This service protects against the loss, theft, or destruction of
certificates evidencing shares. Upon written request of a Participant or upon
withdrawal of a Participant from the Plan or upon termination of the Plan, the
Administrator will have certificates issued and delivered for all full shares
credited to that Participant's account. Certificates will be issued only in the
same names as those enrolled in the Plan. In no event will certificates for
fractional shares be issued. See Questions 16 and 17.
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16. MAY A PARTICIPANT ADD SHARES OF COMMON STOCK TO HIS OR HER ACCOUNT
BY TRANSFERRING STOCK CERTIFICATES THAT THE PARTICIPANT POSSESSES? Any
Participant may send to the Plan for safekeeping all Common Stock certificates
which such Participant holds. The safekeeping of shares offers the advantage of
protection against loss, theft or destruction of certificates as well as
convenience, if and when shares are sold through the Plan. All shares
represented by such certificates will be kept for safekeeping in "book entry"
form and combined with any full and fractional shares then held by the Plan for
the Participant.
To deposit certificates for safekeeping under the Plan, a Participant
should submit his or her share certificates, in non-negotiable form, to the
Administrator by insured mail at the address listed in Question 4.
Shares deposited for safekeeping may be withdrawn by the Participant by
submitting a written request to the Administrator.
SALE OF SHARES
17. CAN PARTICIPANTS SELL SHARES HELD UNDER THE PLAN? Participants may
request that all or a portion of the shares held in their accounts under the
Plan (including shares held for safekeeping) be sold. Following receipt of
written instructions from a Participant, the Administrator will sell, through an
independent broker or institution, those shares and will remit a check for the
proceeds of such sale, less applicable brokerage commissions, service charges
and any taxes. Prior written instructions from the Participant must be received
at least 48 hours preceding the sale. Shares will be sold at least once per week
by the Plan at then current market prices in transactions carried out through
one or more brokerage firms. This procedure for selling shares may be
particularly attractive to holders of small amounts of Common Stock because the
Plan can combine odd lots and small numbers of shares into larger blocks to be
sold, and thereby take advantage of lower brokerage costs that otherwise might
not be available to individual Participants in the sale of their shares.
HOWEVER, THE ADMINISTRATOR WILL NOT PROCESS A SALE OF SHARES RESULTING IN A
TERMINATION IN THE PLAN BETWEEN THE FOURTH BUSINESS DAY PRIOR TO A DIVIDEND
RECORD DATE AND THE FOLLOWING DIVIDEND PAYMENT DATE.
REPORTS
18. WHAT REPORTS WILL BE SENT TO PARTICIPANTS IN THE PLAN? Unless a
Participant participates in the Plan through a broker, bank or nominee, each
Participant will receive from the Administrator a detailed statement of the
Participant's account following each dividend payment and account transaction.
These detailed statements will show total cash dividends received, total
optional cash investments received, total shares purchased (including fractional
shares), price paid per share, and total shares held in the Plan. THESE
STATEMENTS SHOULD BE RETAINED BY THE PARTICIPANT TO DETERMINE THE TAX COST BASIS
FOR SHARES PURCHASED PURSUANT TO THE PLAN. Any Participant that participates in
the Plan through a broker, bank or nominee, should contact such party for such a
statement.
WITHDRAWAL
19. HOW MAY PARTICIPANTS WITHDRAW FROM THE PLAN? A Participant may
terminate enrollment in the Plan by giving written notice to the Administrator,
and thereafter all cash dividends on shares owned by such Participant will be
sent to the Participant. In order to terminate participation prior to the usual
dividend payment dates in February, April, August and November, written notice
must be received by the Record Date for the payment of such dividend. Upon
termination, stock certificates for any full shares will be issued in the
Participant's name or, upon receipt of written instructions, shares will be sold
for the Participant. See Question 17. Any fractional shares held in the Plan at
the time of termination will be converted to cash on the basis of the then
current market price of the Common Stock. HOWEVER, THE ADMINISTRATOR WILL NOT
PROCESS A WITHDRAWAL OF SHARES RESULTING IN A TERMINATION IN THE PLAN BETWEEN
THE FOURTH BUSINESS DAY PRIOR TO A DIVIDEND RECORD DATE AND THE FOLLOWING
DIVIDEND PAYMENT DATE.
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TAXES
20. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATING IN
THE PLAN? Reinvestment of dividends in the Plan will not avoid the tax that
would otherwise apply to the dividends. With respect to shares purchased from
the Company with reinvested dividends, a Participant will be treated for federal
income tax purposes as having received a distribution from the Company equal to
the fair market value on the Investment Date of the shares acquired with the
reinvested dividends. A Participant's tax basis in such shares received will
equal their fair market value on the Investment Date.
With respect to shares purchased in open market or privately
negotiated transactions with reinvested dividends, a Participant will be
treated as having received a distribution equal to the cash paid to the
Administrator on behalf of the Participant (which will be used to acquire
shares and pay brokerage commissions and other fees incurred in the
acquisition). A Participant's aggregate tax basis in the acquired shares will
have the same basis as the amount deemed to be received as a distribution.
Under Internal Revenue Service rulings, a shareholder Participant will
be treated as having received a distribution from the Company upon the purchase
of shares from the Company with an optional cash investment in an amount equal
to the excess, if any, of the fair market value of the acquired shares on the
Investment Date over the optional cash investment. Such shares will have a tax
basis equal to such fair market value of the shares purchased to the extent of
the Participant's basis in his Company Common Stock.
For federal income tax purposes, distributions deemed to be made to a
Participant under the rules prescribed above will be treated as dividends to the
extent of the Company's current or accumulated earnings and profits, with any
excess being treated as a nontaxable return of capital.
When a Participant receives certificates for whole shares credited to
the Participant's account under the Plan, the Participant will not realize any
taxable income. However, a Participant that receives a cash adjustment for a
fraction of a share may realize a gain or loss with respect to such fraction. A
gain or loss may also be realized by the Participant whenever whole shares are
sold, either pursuant to the Participant's request, upon withdrawal from the
Plan or after withdrawal from the Plan. The amount of such gain or loss will be
the difference between the amount that the Participant realizes for the shares
or fraction of a share and the tax basis of the Participant in the shares.
In the case of corporate shareholders, dividends will not be eligible
for the dividends-received tax deduction.
THE FOREGOING IS ONLY A SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES
OF PARTICIPATION IN THE PLAN AND DOES NOT CONSTITUTE TAX ADVICE. THIS SUMMARY
DOES NOT REFLECT EVERY POSSIBLE OUTCOME THAT COULD RESULT FROM PARTICIPATION IN
THE PLAN AND, THEREFORE, PARTICIPANTS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES APPLICABLE TO THEIR PARTICULAR
SITUATION.
21. HOW ARE INCOME TAX WITHHOLDING PROVISIONS APPLIED TO SHAREHOLDERS
WHO PARTICIPATE IN THE PLAN? If a Participant fails to provide certain federal
income tax certifications in the manner required by law, dividends on shares of
Common Stock, proceeds from the sale of fractional shares and proceeds from
the sale of shares held for a Participant's account will be subject to federal
income tax withholding at the rate of 31%. If withholding is required for any
reason, the appropriate amount of tax will be withheld from the Participant.
Certain shareholders (including most corporations) are, however, exempt from
the above withholding requirements.
If a Participant is a foreign shareholder whose dividends are subject
to federal income tax withholding at the 30% rate (or a lower treaty rate), the
appropriate amount will be withheld from the Participant and the balance in
shares will be credited to such Participant's account.
OTHER PROVISIONS
22. WHAT HAPPENS IF A PARTICIPANT SELLS OR TRANSFERS SHARES OF STOCK OR
ACQUIRES ADDITIONAL SHARES OF STOCK? If a Participant has elected to have
dividends automatically reinvested in the Plan and subsequently sells or
transfers all or any part of the shares registered in the Participant's name,
automatic reinvestment will continue as long as shares are registered in the
name of the Participant or held for the Participant by the Administrator or
until termination of enrollment. Similarly, if a Participant has elected the
"Full Dividend Reinvestment" option under the Plan and subsequently acquires
additional shares registered in the Participant's name, dividends paid on such
shares will automatically be reinvested until termination of enrollment. If,
however, a Participant has elected the "Partial Dividend Reinvestment" option
and subsequently acquires additional shares that are registered in the
Participant's name, dividends paid on such shares will not be automatically
reinvested under the Plan. See Question 7. A Participant may, however, change
his or her dividend reinvestment election by submitting a new Authorization
Form.
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23. HOW WILL A PARTICIPANT'S SHARES BE VOTED? For any meeting of
shareholders, each Participant will receive proxy materials in order to vote all
shares held by the Plan for the Participant's account. If a proxy is returned
properly signed and marked for voting, all the shares covered by the proxy will
be voted as marked. If a proxy is returned properly signed but no voting
instructions are given, all of the Participant's shares will be voted in
accordance with recommendations of the Board of Directors of the Company,
unless applicable laws require otherwise. If the proxy is not returned, or if
it is returned unexecuted or improperly executed, shares registered in a
Participant's name may be voted only by the Participant in person at the
meeting of shareholders.
24. WHO PAYS THE EXPENSES OF THE PLAN? Participants will have to pay
their pro rata share of any brokerage fees or commissions on shares of Common
Stock purchased for their account in the open market or in privately negotiated
transactions, which sums will first be deducted before determining the number of
shares to be purchased. Participants will not incur brokerage commissions or
service charges in connection with the reinvestment of dividends or for optional
cash investments to purchase Common Stock directly from the Company. However,
the Administrator will charge an administrative fee on sales of shares made
pursuant to the Plan. This fee will vary depending on whether the transaction is
initiated by a registered holder or through a broker, bank or other nominee that
holds shares through a securities depository. These fees, as well as any related
brokerage commissions and applicable stock transfer taxes must be paid to the
Administrator at the time of the transaction, and will be deducted from the
funds received by the Administrator from the proceeds of sale of shares. The
Administrator may also charge Participants for additional services not provided
under the Plan or for other specified charges. Any of such administrative fees
may be changed by the Administrator at any time, without notice to Participants.
Participants may obtain a current listing of all applicable administrative fees
by contacting the Administrator at the address or telephone number listed in
Question 4 above. Brokers or nominees that participate on behalf of beneficial
owners for whom they are holding shares may also charge such beneficial owners
fees in connection with such participation, for which neither the Administrator
nor the Company will be responsible.
25. WHAT ARE THE RESPONSIBILITIES OF THE COMPANY OR THE ADMINISTRATOR
UNDER THE PLAN? Neither the Company nor the Administrator will be liable for any
act done in good faith or for any good faith omission to act, including, without
limitation, any claims of liability arising out of a failure to terminate a
Participant's account upon such Participant's death or adjudication of
incompetence prior to the receipt of notice in writing of such death or
adjudication of incompetence, the prices at which shares are purchased for the
Participant's account, the times when purchases are made or fluctuations in the
market value of the Common Stock. Neither the Company nor the Administrator has
any duties, responsibilities or liabilities except as expressly set forth in the
Plan or as imposed by applicable laws, including, without limitation, federal
securities laws.
THE PARTICIPANT SHOULD RECOGNIZE THAT THE COMPANY CANNOT ASSURE A
PROFIT OR PROTECT AGAINST A LOSS ON THE SHARES PURCHASED BY A PARTICIPANT UNDER
THE PLAN.
26. WHAT HAPPENS IF THE COMPANY ISSUES A STOCK DIVIDEND OR DECLARES A
STOCK SPLIT? Any Common Stock distributed by the Company as a result of a stock
dividend or a stock split on shares held under the Plan for a Participant will
be credited to the Participant's account, but the Administrator may curtail or
suspend any other transaction processing for a short period of time following
the record date for such action to permit the Administrator to calculate the
number of shares to be added to each account.
27. IF THE COMPANY HAS A RIGHTS OFFERING RELATED TO THE COMMON STOCK,
HOW WILL A PARTICIPANT'S ENTITLEMENT BE COMPUTED? A Participant's entitlement in
a rights offering related to the Common Stock will be based upon the number of
whole shares credited to the Participant's account. Rights based on a fraction
of a share credited to a Participant's Plan account will be sold for that
account and the net proceeds will be invested as an optional cash payment on the
next Investment Date. In the event of a rights offering, transaction processing
may be curtailed or suspended by the Administrator for a short period of time
following the record date for such action to permit the Administrator to
calculate the rights allocable to each account.
28. MAY SHARES IN A PARTICIPANT'S ACCOUNT BE PLEDGED? None of the
shares credited to a Participant's account may be pledged and any such purported
pledge will be void. If a Participant wishes to pledge shares, those shares must
be withdrawn from the Plan.
15
<PAGE> 19
29. MAY A PARTICIPANT TRANSFER ALL OR A PART OF THE PARTICIPANT'S
SHARES HELD IN THE PLAN TO ANOTHER PERSON? A Participant may transfer ownership
of all or part of his or her shares held in the Plan through gift, private sale
or otherwise, by mailing to the Administrator at the address in Question 4 a
properly executed stock assignment, along with a letter with specific
instructions regarding the transfer and both an Authorization Form and a Form
W-9 (Certification of Taxpayer Identification Number) completed by the
transferee. Requests for transfer of shares held in the Plan are subject to the
same requirements as the transfer of Common Stock certificates, including the
requirement of a medallion signature guarantee on the stock assignment. The
Administrator will provide Participants with the appropriate forms upon request.
If any stock certificates bearing a restrictive legend are contained in the
Participant's Plan account, the Administrator will comply with the provisions of
such restrictive legend before effecting a sale or transfer of such restricted
shares.
A Participant may also transfer all or a portion of his or her shares
into an account established for another person within the Plan. In order to
effect such a "book-to-book" transfer, the transferee must complete an
Authorization Form to open a new account within the Plan. (See Question 7). The
Authorization Form should be sent to the Administrator along with a written
request to effect the "book-to-book" transfer indicating the number of shares to
be transferred to the new account.
30. MAY THE PLAN BE CHANGED OR TERMINATED? While the Plan is intended
to continue indefinitely, the Company reserves the right to amend, modify,
suspend or terminate the Plan at any time. Participants will be notified in
writing of any modifications made to the Plan.
USE OF PROCEEDS
The net proceeds from the sale of the original issue shares of Common
Stock issued under the Plan will be contributed by the Company to Sunstone Hotel
Investors, L.P. (the "Partnership") in exchange for additional units of
partnership interests. The Partnership will use these proceeds for working
capital and for other general purposes. The Company will not receive any funds
under the Plan from the purchase for a Participant's account of shares of Common
Stock in the open market by the Plan Administrator. The Company has no basis for
estimating either the number of shares of Common Stock that ultimately will be
sold pursuant to the Plan or the prices at which such shares will be sold.
INDEMNIFICATION UNDER THE SECURITIES ACT
The Certificate of Incorporation and Bylaws of the Company contain
certain provisions to indemnify its directors and officers against liability
incurred by them as a result of their service in those capacities. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
PLAN OF DISTRIBUTION AND UNDERWRITERS
Pursuant to the Plan, the Company may be requested to approve optional
cash investments in excess of the allowable $3,000 maximum amounts pursuant to
Requests for Waiver on behalf of Participants that may be engaged in the
securities business. In deciding whether to approve such a request, the Company
will consider relevant factors including, but not limited to, whether the Plan
is then acquiring newly issued shares of Common Stock or acquiring shares
through open market purchases or privately negotiated transactions, the
Company's need for additional funds, the attractiveness of obtaining such funds
by the sale of Common Stock under the Plan in comparison to other sources of
funds, the purchase price likely to apply to any sale of Common Stock, and the
aggregate number of Requests for Waiver that have been submitted by all
Participants. Persons who acquire shares of Common Stock through the Plan and
resell them shortly after acquiring them, including coverage of short positions,
under certain circumstances, may be participating
16
<PAGE> 20
in a distribution of securities that would require compliance with Rule 10b-6
under the Exchange Act and may be considered to be underwriters within the
meaning of the Securities Act. The Company will not extend to any such person
any rights or privileges other than those to which it would be entitled as a
Participant, nor will the Company enter into any agreement with any such person
regarding such person's purchase of such shares or any resale or distribution
thereof.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
pursuant to this Prospectus will be passed upon for the Company by Ballard Spahr
Andrews & Ingersoll.
EXPERTS
The following financial statements have been audited by Coopers &
Lybrand L.L.P., independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference: (1) the consolidated
financial statements of Sunstone Hotel Investors, Inc. as of December 31, 1995
and 1994, and for the period August 16, 1995 (inception) through December 31,
1995, and the combined financial statements of Sunstone Initial Hotels
(Predecessor) as of December 31, 1994, and for the period January 1, 1995
through August 15, 1995, and for the years ended December 31, 1994 and 1993,
the financial statements of Sunstone Hotel Properties, Inc. (the Lessee) as of
December 31, 1995 and for the period August 16, 1995 (inception) through
December 31, 1995, all appearing in the Company's Annual Report (Form 10-K) for
the year ended December 31, 1995; (2) the combined financial statements of The
Cypress Inns, Acquisition Hotels as of December 31, 1995 and 1994 and for each
of the years then ended, appearing in the Company's Current Report (Form 8-K/A)
filed April 19, 1996; and (3) the financial statements of Renton Joint Venture
as of December 31, 1995, and for the year then ended, and the combined
financial statements of Bay City Hospitality, Inc. and Price Hospitality, Inc.
as of October 31, 1995 and for the year then ended appearing in the Company's
Prospectus filed pursuant to Rule 424(b)(4) on August 8, 1996 (which were in
turn incorporated by reference into the Company's Current Reports (Form 8-K and
8-K/A) filed August 28, 1996). Such financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
17
<PAGE> 21
APPENDIX I
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
(C) (D) (E) (F) (G)
- ------------------------------------------------------------------------------------------------------------------------
THRESHOLD PRICE
AND WAIVER OPTIONAL CASH OPTIONAL INVESTMENT
DISCOUNT, IF ANY, INVESTMENTS MUST PRICING PERIOD EXPECTED DIVIDEND INVESTMENT
CYCLE WILL BE SET BY BE RECEIVED BY START DATE RECORD DATE DATE
----- ----------------- ------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C>
A N/A October 29, 1996 October 30, 1996 November 1, 1996 November 15, 1996
B November 22, 1996 November 26, 1996 November 27, 1996 N/A December 16, 1996
B December 23, 1996 December 26, 1996 December 27, 1996 N/A January 15, 1997
A N/A January 29, 1997 January 30, 1997 February 1, 1997 February 18, 1997
B February 24, 1997 February 26, 1997 February 27, 1997 N/A March 17, 1997
B March 24, 1997 March 26, 1997 March 27, 1997 N/A April 15, 1997
A N/A April 28, 1997 April 29, 1997 May 1, 1997 May 15, 1997
B May 23, 1997 May 28, 1997 May 29, 1997 N/A June 16, 1997
B June 23, 1997 June 25, 1997 June 26, 1997 N/A July 15, 1997
A N/A July 29, 1997 July 30, 1997 August 1, 1997 August 15, 1997
B August 22, 1997 August 26, 1997 August 27, 1997 N/A September 15, 1997
B September 24, 1997 September 26, 1997 September 29, 1997 N/A October 15, 1997
A N/A October 29, 1997 October 30, 1997 November 1, 1997 November 17, 1997
B November 21, 1997 November 25, 1997 November 26, 1997 N/A December 15, 1997
B December 24, 1997 December 29, 1997 December 30, 1997 N/A January 15, 1998
A N/A January 28, 1998 January 29, 1998 February 1, 1998 February 17, 1998
B February 23, 1998 February 25, 1998 February 26, 1998 N/A March 16, 1998
B March 24, 1998 March 26, 1998 March 27, 1998 N/A April 15, 1998
A N/A April 28, 1998 April 29, 1998 May 1, 1998 May 15, 1998
B May 22, 1998 May 27, 1998 May 28, 1998 N/A June 15, 1998
B June 24, 1998 June 26, 1998 June 29, 1998 N/A July 15, 1998
N/A July 29, 1998 July 30, 1998 August 1, 1998 August 17, 1998
August 24, 1996 August 26, 1998 August 27, 1998 N/A September 15, 1998
September 24, 1998 September 28, 1998 September 29, 1998 N/A October 15, 1998
N/A October 28, 1998 October 29, 1998 November 1, 1998 November 16, 1998
</TABLE>
- -------------------
A. Optional cash investments without Requests for Waiver and reinvestment
of dividends.
B. Only optional cash investments, including Requests for Waiver.
C. The Threshold Price and the Waiver Discount, if any, which may be
applied to optional cash investments pursuant to Requests for Waiver
will be established no later than three business days prior to the
first day of the Pricing Period. A separate discount may be applied at
any time and for any duration to optional investments of $3,000 or less
and to dividend reinvestments.
D. Optional cash investments are due by the close of business on the last
business day immediately preceding the first day of the Pricing Period.
E. The Pricing Period will be the twelve consecutive Trading Days ending
on the Trading Day immediately preceding the Investment Date. The
Pricing Period does not apply to dividend reinvestments.
F. The actual Record Date for dividend reinvestment months (indicated by
the letter "A" in the Cycle column) will be established by the Board of
Directors.
G. The Investment Date will be the dividend payment date during a month in
which a cash dividend is paid (as determined by the Board of Directors)
and in any other month will be the fifteenth calendar day of such
month, provided, however, that if either the dividend payment date or
such fifteenth calendar day falls on a date when the NYSE is closed,
the Investment Date will be the next succeeding day on which the NYSE
is open.
A-1
<PAGE> 22
U.S. EQUITY MARKETS CLOSED IN 1996
Thanksgiving Day November 28
Christmas Day December 25
U.S. EQUITY MARKETS CLOSED IN 1997
New Years Day January 1
Presidents Day February 17
Good Friday March 28
Memorial Day May 26
Independence Day July 4
Labor Day September 1
Thanksgiving Day November 27
Christmas Day December 25
U.S. EQUITY MARKETS CLOSED IN 1998
New Years Day January 1
Presidents Day February 16
Good Friday April 10
Memorial Day May 25
Independence Day July 4
Labor Day September 7
Thanksgiving Day November 26
Christmas Day December 25
A-2
<PAGE> 23
================================================================================
No persons have been authorized to give any information or to make any
representations other than those contained or incorporated in this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other than those to
which it relates, or an offer or solicitation with respect to those securities
to which it relates to any persons in any jurisdiction where such offer or
solicitation would be unlawful. The delivery of this Prospectus at any time does
not imply that the information contained or incorporated herein at its date is
correct as of any time subsequent to its date.
-------------------------
================================================================================
================================================================================
SUNSTONE HOTEL INVESTORS, INC.
COMMON STOCK
($0.01 PAR VALUE)
-----------------
PROSPECTUS
-----------------
DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
----------------
OCTOBER __, 1996
================================================================================
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the offering are as follows:
<TABLE>
<CAPTION>
AMOUNT PAID
OR TO
BE PAID
-------
<S> <C>
SEC Registration fee $ 3,125
New York Stock Exchange listing fees 3,500
Legal fees and expenses of the Company 25,000
Printing and Engraving Costs 20,000
Accounting fees and expenses 1,000
Blue sky fees and expenses 2,500
Transfer Agent and Registrar fees 7,500
Miscellaneous 5,000
-------
Total $67,625
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 2-418 of the Maryland General Corporation Law (the "MGCL")
empowers the Company to indemnify, subject to the standards set forth therein,
any person who is a party in any action in connection with any action, suit or
proceeding brought or threatened by reason of the fact that the person was a
director, officer, employee or agent of such company, or is or was serving as
such with respect to another entity at the request of such company. The MGCL
also provides that the Company may purchase insurance on behalf of any such
director, officer, employee or agent.
The Company's Articles of Incorporation provide for indemnification of
the officers and directors of the Company substantially identical in scope to
that permitted under Section 2-418 of the MGCL. The Bylaws of the Company also
provide that the expenses of officers and directors incurred in defending any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, must be paid by the Company as they are incurred and in advance
of the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay all amounts so
advanced if it is ultimately determined by a court of competent jurisdiction
that the officer or director is not entitled to be indemnified by the Company,
The Company has entered into indemnification agreements with each of
its directors and executive officers. In addition, the Company maintains a
directors' and officers' liability policy.
The Company's Charter limits the liability of the Company's directors
and officers for money damages to the Company and its shareholders to the
fullest extent permitted from time to time by Maryland law. Maryland law
presently permits the liability of directors and officers to a corporation or
its shareholders for money damages to be limited, except (i) to the extent that
it is proved that the director or officer actually received an improper benefit
or profit or (ii) if a judgment or other final adjudication is entered in a
proceeding based on a finding that the director's or officer's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. This provision
does not limit the ability of the Company or its shareholders to obtain other
relief, such as an injunction or rescission.
II-1
<PAGE> 25
ITEM 16. EXHIBITS.
EXHIBIT
NO. DESCRIPTION
4.1 Amended Articles of Incorporation of the Company, as further
amended by the Articles of Amendment of the Company, as filed
with the State Department of Assessments and Taxation of
Maryland on November 9, 1994, filed as Exhibit 3.1 to the
Company's Registration Statement No. 33-84346 and incorporated
herein by this reference.
4.2 Bylaws of the Company, as currently in effect, filed as
Exhibit 3.2 to the Company's Registration Statement No.
33-84346 and incorporated herein by this reference.
4.3 Articles of Amendment of the Company, as filed with the State
Department of Assessments and Taxation of Maryland on June 19,
1995, filed as Exhibit 3.3 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this
reference.
5.1* Opinion of Ballard Spahr Andrews & Ingersoll as to legality of
the shares being registered.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Ballard Spahr Andrews & Ingersoll (Included with
opinion filed as Exhibit 5.1).
24.1* Power of Attorney(included in signature page).
* Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
Provided, however, that paragraphs (i) and (ii) do not apply
if the information is required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this Registration Statement.
II-2
<PAGE> 26
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
Annual Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference into this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Clemente, State of California, on October 4, 1996.
SUNSTONE HOTEL INVESTORS, INC.
By:/s/ Robert A. Alter
---------------------
Robert A. Alter
President, Chief Financial Officer, Secretary
and Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Sunstone Hotel
Investors, Inc., a Maryland corporation, do hereby constitute and appoint Robert
A. Alter and Charles L. Biederman and each of them, the lawful attorneys-in-fact
and agents with full power and authority to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, and any one
of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933 this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert A. Alter
- --------------------
Robert A. Alter President, Chief Financial October 4, 1996
Officer, Secretary and Chairman
of the Board of Directors
(Principal Executive, Financial
and Accounting Officer)
/s/ Charles L. Biederman
- ------------------------
Charles L. Biederman Executive Vice President and October 4, 1996
Director
/s/ M. Raymond Bingham
- ------------------------
M. Raymond Bingham Director October 4, 1996
/s/ Fredric M. Gould
- ------------------------
Fredric M. Gould Director October 4, 1996
</TABLE>
II-4
<PAGE> 28
<TABLE>
<S> <C> <C>
/s/ David Lambert
- -----------------
David Lambert Director October 4, 1996
/s/Edward H. Sondker
- --------------------
Edward H. Sondker Director October 4, 1996
</TABLE>
II-5
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
--- ----------- ----
<S> <C> <C>
4.1 Amended Articles of Incorporation of the Company, as further
amended by the Articles of Amendment of the Company, as filed
with the State Department of Assessments and Taxation of
Maryland on November 9, 1994, filed as Exhibit 3.1 to the
Company's Registration Statement No. 33-84346 and incorporated
herein by this reference.
4.2 Bylaws of the Company, as currently in effect, filed as Exhibit
3.2 to the Company's Registration Statement No. 33-84346 and
incorporated herein by this reference.
4.3 Articles of Amendment of the Company, as filed with the State
Department of Assessments and Taxation of Maryland on June 19,
1995, filed as Exhibit 3.3 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this
reference.
5.1* Opinion of Ballard Spahr Andrews & Ingersoll as to legality of
the shares being registered.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Ballard Spahr Andrews & Ingersoll (Included with
opinion filed as Exhibit 5.1).
24.1* Power of Attorney (included in signature page).
</TABLE>
* Filed herewith
II-6
<PAGE> 1
EXHIBIT 5.1
Law Offices
BALLARD SPAHR ANDREWS & INGERSOLL
300 EAST LOMBARD STREET, 19TH FLOOR
BALTIMORE, MARYLAND 21202-3268
410-528-5600
FAX 410-528-5650
October 4, 1996
Sunstone Hotel Investors, Inc.
115 Calle de Industrias
Suite 201
San Clemente, California 92672
Re: Sunstone Hotel Investors, Inc., a Maryland corporation (the
"Corporation") - Registration Statement on Form S-3 pertaining
to One Million (1,000,000) Shares of Common Stock, par value
One Cent ($.01) per Share (the "Shares")
Ladies and Gentlemen:
In connection with the registration of the Shares under the Securities
Act of 1933, as amended (the "Act"), by the Corporation on Form S-3 filed or to
be filed with the Securities and Exchange Commission (the "Commission") on or
about October 11, 1996 (the "Registration Statement"), you have requested our
opinion with respect to the matters set forth below.
We have acted as special Maryland corporate counsel for the Corporation
in connection with the matters described herein. In our capacity as special
Maryland corporate counsel to the Corporation, we have reviewed and are familiar
with the proceedings taken by the Corporation in connection with the
authorization of the Shares. In addition, we have relied upon certificates and
advice from the officers of the Corporation upon which we believe we are
justified in relying and on various certificates from, and documents recorded
with, the State Department of Assessments and Taxation of Maryland (the "SDAT"),
including the charter of the Corporation (the "Charter"), consisting of Articles
of Incorporation of the Corporation filed with the SDAT on September 21, 1994,
Amended Articles of Incorporation filed with the SDAT on September 23, 1994,
Articles of Amendment filed with the SDAT on November 9, 1994, Articles of
Amendment filed with the SDAT on June 19, 1995 and Articles of Amendment filed
with the SDAT on August 14, 1995. We have also examined Bylaws of the
Corporation adopted as of September 23, 1994 and resolutions of the Board of
Directors of the Corporation adopted on or before the date hereof and are in
full force and effect on the date hereof; and such laws, records, documents,
certificates, opinions and instruments as we deem necessary to render this
opinion.
<PAGE> 2
BALLARD SPAHR ANDREWS & INGERSOLL
Sunstone Hotel Investors, Inc.
October 4, 1996
Page 2
We have assumed the genuineness of all signatures, and the authenticity
of all documents submitted to us as originals and the conformity of the
originals of all documents submitted to us as certified, photostatic or
conformed copies. In addition, we have assumed that each person executing any
instrument, document or certificate referred to herein on behalf of any party is
duly authorized to do so.
Based on the foregoing and subject to the assumptions and
qualifications set forth herein, it is our opinion that, as of the date of this
letter, the Shares have been duly authorized by all necessary corporate action
on the part of the Corporation, and the Shares will, upon issuance and delivery
in accordance with the terms and conditions described in the Registration
Statement against payment of the purchase price therefore as determined by the
Board of Directors of the Corporation or a committee thereof, be validly issued,
fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement, and further consent to the filing of this opinion as an
exhibit to the applications to securities commissioners for the various states
of the United States for registration of the Shares. We also consent to the
identification of our firm as Maryland counsel to the Corporation in the section
of the Prospectus (which is part of the Registration Statement) entitled "Legal
Matters."
The opinions set forth herein are limited to the current laws of the
State of Maryland and we express no opinion with respect to any laws other than
the laws of the State of Maryland. Furthermore, the opinions presented in this
letter are limited to the matters specifically set forth herein and no other
opinion shall be inferred beyond the matters expressly stated.
The opinions expressed in this letter are solely for your use and may
not be relied upon by any other person without our prior written consent.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Sunstone Hotel Investors, Inc. on Form S-3 being filed under the Securities Act
of 1933, as amended, of our report dated March 28, 1996 on our audits of the
financial statements and financial statement schedule of Sunstone Hotel
Investors, Inc. and Sunstone Initial Hotels (the Predecessor), of our report
dated March 22, 1996 on our audit of the financial statements of Sunstone Hotel
Properties, Inc. (the Lessee) appearing in the Annual Report on Form 10-K, as
amended, of Sunstone Hotel Investors, Inc. (the "Company") for the year ended
December 31, 1995, of our report dated January 31, 1996 on our audit of the
combined financial statements of The Cypress Inns, Acquisition Hotels, appearing
in the Company's Current Report on Form 8-K/A filed April 19, 1996, of our
report dated June 7, 1996 on our audit of the financial statements of Renton
Joint Venture and of our report dated July 2, 1996 on our audit of the combined
financial statements of Bay City Hospitality, Inc. and Price Hospitality, Inc.
appearing in the Prospectus filed pursuant to Rule 424(b)(4) on August 8, 1996.
We also consent to the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Los Angeles, California
October 7, 1996
