<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-26304
SUNSTONE HOTEL INVESTORS, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-1891908
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
115 CALLE DE INDUSTRIAS SUITE 201 92672
SAN CLEMENTE, CALIFORNIA (Zip Code)
(Address of Principal Executive Offices)
(714) 361-3900
(Registrant's telephone number, including area code)
300 S. EL CAMINO REAL #203, SAN CLEMENTE, CA 92672
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
The number of shares of Common Stock, par value $.01 per share of
Sunstone Hotel Investors, Inc. outstanding on May 14, 1996, was 6,322,000.
The undersigned Registrant hereby amends the Form 10-Q for the quarter
ended March 31, 1996 to include the exhibits attached hereto.
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<PAGE> 2
PART IV
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------
3.1 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.
3.2 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.
3.3 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.
10.1 Form of First Amended and Restated Agreement of Limited Partnership of
the Partnership, filed as Exhibit 10.1 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this reference.
10.1.1 First Amendment to First Amended and Restated Agreement of Limited
Partnership dated as of December 12, 1995, filed as Exhibit 10.36 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1995 (the "1995 10-K") and incorporated herein by this reference.
10.1.2 Second Amendment to First Amended and Restated Agreement of Limited
Partnership dated as of December 28, 1995, filed as Exhibit 10.1.2 to
the Company's 1995 10-K and incorporated herein by this reference.
10.1.3* Third Amendment to First Amended and Restated Agreement of Limited
Partnership dated as of March 17, 1996.
10.2 Form of Percentage Lease, filed as Exhibit 10.2 to the Company's
Registration Statement No. 33-84346 and incorporated herein by this
reference.
10.2.1 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Hampton Inn Hotel located in Denver S.E., Colorado,
filed as Exhibit 10.2.1 to the Company's 1995 10-K and incorporated
herein by this reference.
2
<PAGE> 3
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------
10.2.2 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Hampton Inn Hotel located in Pueblo, Colorado, filed
as Exhibit 10.2.2 to the Company's 1995 10-K and incorporated herein by
this reference.
10.2.3 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee,for the Courtyard By Marriott Hotel located in Fresno,
California, filed as Exhibit 10.2.3 to the Company's 1995 10-K and
incorporated herein by this reference.
10.2.4 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee,for the Hampton Inn Hotel located in Mesa, Arizona, filed
As Exhibit 10.2.4 to the Company's 1995 10-K and incorporated herein
by this reference.
10.2.5 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Holiday Inn Hotel located in Steamboat Springs,
Colorado, filed as Exhibit 10.2.5 to the Company's 1995 10-K and
incorporated herein by this reference.
10.2.6 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Holiday Inn Hotel located in Craig, Colorado, filed
as Exhibit 10.2.6 to the Company's 1995 10-K and incorporated herein by
this reference.
10.2.7 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Holiday Inn Hotel located in Provo, Utah, filed as
Exhibit 10.2.7 to the Company's 1995 10-K and incorporated herein by
this reference.
10.2.8 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P. as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Hampton Inn Hotel located in Silverthorne, Colorado,
filed as Exhibit 10.2.7 to the Company's 1995 10-K and incorporated
herein by this reference.
10.2.9 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Doubletree Hotel located in Santa Fe, New Mexico,
filed as Exhibit 10.2.9 to the Company's 1995 10-K and incorporated
herein by this reference.
3
<PAGE> 4
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------
10.2.10 Lease Agreement dated as of August 16, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Hampton Inn Hotel located in Arcadia, California,
filed as Exhibit 10.2.10 to the Company's 1995 10-K and incorporated
herein by this reference.
10.2.11 Lease Agreement dated as of December 13, 1995 by and between Sunstone
Hotel Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc.,
as lessee, for the Hampton Inn Hotel located in Oakland, California,
filed as Exhibit 10.2.11 to the Company's 1995 10-K and incorporated
herein by this reference.
10.2.12** Lease Agreement dated February 2, 1996 by and between Sunstone Hotel
Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc., as
lessee, for the Cypress Inn hotel located in Clackamas, Oregon.
10.2.13** Lease Agreement dated February 2, 1996 by and between Sunstone Hotel
Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc., as
lessee, for the Cypress Inn hotel located in Kent, Washington.
10.2.14** Lease Agreement dated February 2, 1996 by and between Sunstone Hotel
Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc., as
lessee, for the Cypress Inn hotel located in Poulsbo, Washington.
10.2.15** Lease Agreement dated February 2, 1996 by and between Sunstone Hotel
Investors, L.P., as lessor, and Sunstone Hotel Properties, Inc., as
lessee, for the Cypress Inn hotel located in Portland, Oregon.
10.3 Form of Right of First Refusal and Option to Purchase, filed as
Exhibit 10.3 to the Company's Registration Statement No. 33-84346 and
incorporated herein by this reference.
10.4 Form of Alter Employment Agreement, filed as Exhibit 10.4 to the
Company's Registration Statement No. 33-84346 and incorporated herein
by this reference.
10.5 Form of Biederman Employment Agreement, filed as Exhibit 10.5 to the
Company's Registration Statement No. 33-84346 and incorporated herein
by this reference.
10.6 Form of Indemnification Agreement to be entered into with officers and
directors of the Company, filed as Exhibit 10.6 to the Company's
Registration Statement No. 33-84346 and incorporated herein by this
reference.
10.7 1994 Stock Incentive Plan, filed as Exhibit 10.7 to the Company's
Registration Statement No. 33-84346 and incorporated herein by this
reference.
4
<PAGE> 5
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------
10.8 Form of Notice of Grant of Stock Option and Form of Stock Option
Agreement (and Addendum thereto) to be generally used in connection
with the Discretionary Option Grant Program of the 1994 Stock
Incentive Plan, filed as Exhibit 10.8 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this reference.
10.9 Form of Stock Purchase Agreement to be generally used in connection
with the Discretionary Option Grant Program of the 1994 Stock
Incentive Plan, filed as Exhibit 10.9 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this reference.
10.10 1994 Directors Plan, filed as Exhibit 10.10 to the Company's
Registration Statement No. 33-84346 and incorporated herein by this
reference.
10.11 Form of Notice of Grant of Automatic Stock Option, Automatic Stock
Option Agreement, Stock Purchase Agreement and Automatic Direct Stock
Issuance Agreement to be generally used in connection with the 1994
Directors Plan, filed as Exhibit 10.11 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this reference.
10.12 Agreement of Purchase and Sale between the Partnership and FBA Hotel
Venture dated as of September 23, 1994, filed as Exhibit 10.12 to the
Company's Registration Statement No. 33-84346 and incorporated herein
by this reference.
10.13 Agreement of Purchase and Sale between the Partnership and M R C Hotel
Partners, Ltd. dated as of September 23, 1994, filed as Exhibit 10.13
to the Company's Registration Statement No. 33-84346 and incorporated
herein by this reference.
10.14 Agreement of Purchase and Sale between the Partnership and Arapahoe
South Hotel Partnership dated as of September 23, 1994, filed as
Exhibit 10.14 to the Company's Registration Statement No. 33-84346 and
incorporated herein by this reference.
10.15 Agreement of Purchase and Sale between the Partnership and C and R
Hotel Venture dated as of September 23, 1994, filed as Exhibit 10.15
to the Company's Registration Statement No. 33-84346 and incorporated
herein by this reference.
10.16 Agreement of Purchase and Sale between the Partnership and Craig Hotel
Partners Limited Liability Co. dated as of September 23, 1994, filed
as Exhibit 10.16 to the Company's Registration Statement No. 33-84346
and incorporated herein by this reference.
10.17 Agreement of Purchase and Sale between the Partnership and Provo Hotel
Partners Limited Liability Co. dated as of September 23, 1994, filed
as Exhibit 10.17 to the Company's Registration Statement No. 33-84346
and incorporated herein by this reference.
5
<PAGE> 6
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------
10.18 Agreement of Purchase and Sale between the Partnership and Steamboat
Hotel Partners, Ltd. dated as of September 23, 1994, filed as Exhibit
10.18 to the Company's Registration Statement No. 33-84346 and
incorporated herein by this reference.
10.19 Hotel Sale Agreement between the Management Company and Western
Hospitality Group, LLC dated as of June 14, 1995, filed as Exhibit
10.19 to the Company's Registration Statement No. 33-84346 and
incorporated herein by this reference.
10.20 Real Property Purchase and Sale Agreement and Joint Escrow
Instructions between the Management Company and Hampton Inns, Inc.,
dated as of June 19, 1995, filed as Exhibit 10.20 to the Company's
Registration Statement No. 33-84346 and incorporated herein by this
reference.
10.21 Hotel Sale Agreement between the Management Company and Sunworld
Properties dated as of June 19, 1995, filed as Exhibit 10.21 to the
Company's Registration Statement No. 33-84346 and incorporated herein
by this reference.
10.22 First Amendment to Agreement of Purchase and Sale between the
Partnership and FBA Hotel Venture dated as of June 19, 1995, filed as
Exhibit 10.22 to the Company's Registration Statement No. 33-84346 and
incorporated herein by this reference.
10.23 First Amendment to Agreement of Purchase and Sale between the
Partnership and M R C Hotel Partners, Ltd. dated as of June 19, 1995,
filed as Exhibit 10.23 to the Company's Registration Statement No. 33-
84346 and incorporated herein by this reference.
10.24 First Amendment to Agreement of Purchase and Sale between the
Partnership and Arapahoe South Hotel Partnership dated as of June 19,
1995, filed as Exhibit 10.24 to the Company's Registration Statement
No. 33-84346 and incorporated herein by this reference.
10.25 First Amendment to Agreement of Purchase and Sale between the
Partnership and C and R Hotel Venture dated as of June 19, 1995, filed
as Exhibit 10.25 to the Company's Registration Statement No. 33-84346
and incorporated herein by this reference.
10.26 First Amendment to Agreement of Purchase and Sale between the
Partnership and Craig Hotel Partners Limited Liability Co. dated as of
June 19, 1995, filed as Exhibit 10.26 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this reference.
10.27 First Amendment to Agreement of Purchase and Sale between the
Partnership and Provo Hotel Partners Limited Liability Co. dated as of
June 19, 1995, filed as Exhibit 10.27 to the Company's Registration
Statement No. 33-84346 and incorporated herein by this reference.
6
<PAGE> 7
EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------
10.28 First Amendment to Agreement of Purchase and Sale between the
Partnership and Steamboat Hotel Partners, Ltd. dated as of June 19,
1995, filed as Exhibit 10.28 to the Company's Registration Statement
No. 33-84346 and incorporated herein by this reference.
10.29 Form of Agreement Respecting Lessee Unit Purchase between the Company,
the Partnership, the Lessee, Robert A. Alter and Charles Biederman,
filed as Exhibit 10.29 to the Company's Registration Statement No.
33-84346 and incorporated herein by this reference.
10.30 Form of Third Party Pledge Agreement among the Partnership, Robert A.
Alter and Charles Biederman, filed as Exhibit 10.30 to the Company's
Registration Statement No. 33-84346 and incorporated herein by this
reference.
10.30.1 Amendment Number One to Third Party Pledge Agreement effective as of
December 13, 1995, filed as Exhibit 10.34 to the Company's 1995 10-K
and incorporated herein by this reference.
10.31 First Amendment to Hotel Sale Agreement between the Management Company
and Sunworld Properties, filed as Exhibit 10.31 to the Company's
Registration Statement No. 33-84346 and incorporated herein by this
reference.
10.32 First Amendment to Hotel Sale Agreement between the Management Company
and Western Hospitality Group, LLC, filed as Exhibit 10.32 to the
Company's Registration Statement No. 33-84346 and incorporated herein
by this reference.
10.33 Commitment Letter for Revolving Line of Credit issued by Bank One,
Arizona, NA in favor of the Company dated as of July 20, 1995, filed
as Exhibit 10.33 to the Company's Registration Statement No. 33-84346
and incorporated herein by this reference.
10.34 Hampton Inn Oakland Contribution Agreement dated as of December 13,
1995, filed as Exhibit 10.35 to the Company's 1995 10-K and
incorporated herein by this reference.
10.35 Loan Agreement by and between the Company and Bank One, Arizona, N.A.
dated as of October 25, 1995, filed as Exhibit 10.38 to the Company's
1995 10-K and incorporated herein by this reference.
10.36* Purchase and Sale Agreement and Joint Escrow Instructions dated
December 20, 1995 between the Partnership and HL Project I Limited
Liability Company, a Delaware limited liability company.
- ----------
* Filed herewith; All other exhibits previously filed.
** Substantially identical to Exhibit 10.2; full text omitted pursuant to
Instruction 2 to Item 601 of Regulation S-K. The material differences
between this Exhibit and Exhibit 10.2 are set forth in the schedule
filed under this Exhibit.
7
<PAGE> 8
(b) Reports on Form 8-K:
A Current Report on Form 8-K (the "8-K") dated February 2,
1996, was filed in the quarter ended March 31, 1996, with disclosure under Item
2.
A Current Report on Form 8-KA (the "8-KA") dated February 2,
1996 was filed in the quarter ended March 31, 1996, with disclosures under Item
7. The 8-KA contained the financial statements omitted from the 8-K.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Clemente, State of California, on June 24, 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
9
<PAGE> 1
EXHIBIT 10.1.3
Third Amendment to First Amended
and Restated Agreement of Limited Partnership
Dated March 17, 1996
<PAGE> 2
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
This Third Amendment ("Amendment") to the First Amended and
Restated Agreement of Limited Partnership dated as of December 28, 1995, as
amended, is entered into by and among Sunstone Hotel Investors, Inc., a Maryland
corporation, in its individual capacity (the "Company") and in its capacity as
the General Partner of the Partnership (the "General Partner") and each of the
individuals listed on the signature page attached hereto, as newly admitted
limited partners of the Partnership (the "Substitute Limited Partners"). All
defined terms not otherwise defined herein shall have the meaning set forth in
the Agreement (as defined below).
RECITALS
A. WHEREAS, the General Partner and the current Limited Partners
executed that certain First Amended and Restated Agreement of Limited
Partnership dated as of October 16, 1995, amending and restating that certain
Agreement of Limited Partnership dated as of September 22, 1994 (as amended, the
"Agreement"), and the General Partner caused Sunstone Hotel Investors, L.P., a
Delaware limited partnership (the "Partnership"), to file a Certificate of
Limited Partnership with the Delaware Secretary of State on September 23, 1994,
thereby causing the Partnership to be formed for the purposes set forth in the
Agreement.
B. WHEREAS, the Agreement was amended by the First Amendment to
First Amended and Restated Agreement of Limited Partnership dated as of December
12, 1995 (the "First Amendment") to reflect the contribution by Inns Properties
of an additional hotel in exchange for Partnership Units.
C. WHEREAS, the Agreement was amended by the Second Amendment to
the Agreement (the "Second Amendment") to reflect the distribution of
Partnership Units in connection with the dissolution of certain Limited Partners
and thereby admitting additional Substitute Limited Partners.
D. WHEREAS, the Estate of Peter C. Enever, deceased (the
"Estate") desires to transfer the Estate's limited partnership interest from the
Estate to C. Robert Enever and Audrey W. Enever.
E. WHEREAS, in order to evidence the transfer of the Partnership
Units and the admission of C. Robert Enever and Audrey W. Enever as Substitute
Limited Partners into the Partnership, the parties hereto desire to enter into
this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Admission of Substitute Limited Partners. Each of the
Substitute Limited Partners is hereby admitted as a Substituted Limited Partner
pursuant to Section 9.3 of the Agreement effective as of the date of execution
of this Third Amendment. Attached hereto as Exhibit "A" is a revised version of
the Exhibit "A" to the Agreement reflecting transfer of the Partnership Units to
the Substitute Limited Partners and to the Existing Limited Partners and the
allocated Agreed Value of the Hotel contributed in consideration for the
original issuance of the Partnership Units.
2. Agreement to be Bound. Each of the Substitute Limited Partners
hereby agrees to be bound by each of the terms and conditions of the Agreement,
which are hereby incorporated by reference.
3. Power of Attorney. Each Substitute Limited Partner hereby
irrevocably constitutes and appoints the General Partner, any Liquidator, and
authorized officers and attorneys-in-fact of each, and each of those acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name and place
instead to perform any of the acts set forth in Section 8.2 of the Agreement.
<PAGE> 3
4. Effect of Amendment. Except as amended hereby, the Agreement
is hereby confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the 17th day of March, 1996.
GENERAL PARTNER SUBSTITUTE LIMITED PARTNER
SUNSTONE HOTEL INVESTORS, INC., a ESTATE OF PETER C. ENEVER,
Maryland corporation and the sole General DECEASED
Partner, Executing this Amendment without
the need for any consent by any Limited
Partner pursuant to the terms of BY: /s/ C. Robert Enever
Article XI of the Agreement. -----------------------------
C. ROBERT ENEVER, CO-
PERSONAL REPRESENTATIVE
By: /s/ Robert A. Alter
-------------------------------------- BY: /s/ Audrey W. Enever
Robert A. Alter -----------------------------
Its: President AUDREY W. ENEVER, CO-
PERSONAL REPRESENTATIVE
<PAGE> 4
Effective Date: December 31, 1995
EXHIBIT A
TO
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF SUNSTONE HOTEL INVESTORS, L.P.
<TABLE>
<CAPTION>
AGREED VALUE OF
CASH PURCHASE NON-CASH CAPITAL PARTNERSHIP PERCENTAGE
PARTNER AND ADDRESS CONTRIBUTION AGREEMENT CONTRIBUTION UNITS INTEREST
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
GENERAL PARTNER:
1. Sunstone Hotel $727,652.50 N/A N/A 77,099 1.0000000%
Investors, Inc.
Suite 201
115 Calle de Industrias
San Clemente, CA 92672
LIMITED PARTNERS:
2. Sunstone Hotel $59,260,097.50 N/A N/A 6,237,401 80.9988940%
Investors, Inc. Value of Director 7,500
Suite 201 Services
115 Calle de Industrias
San Clemente, CA 92672
3. C. Robert Enever $32,000.00 N/A N/A 3,200 0.0415053%
840 Fox Lane
P. O. Box 239
Steamboat Sprgs, CO 80477
4. Robert A. Alter $123,000.00 N/A $3,494,690.33 390,308.50 5.0624592%
P.O. Box 4240
Suite 201
115 Calle de Industrias
San Clemente, CA 92674
5. Charles L. Biederman $90,000.00 N/A $3,324,048.18 370,176.50 4.8013391%
5 Sunset Drive
Englewood, CO 80110
</TABLE>
EXHIBIT A
page 1 of 3 pages
<PAGE> 5
Effective Date: December 31, 1995
<TABLE>
<CAPTION>
AGREED VALUE OF
CASH PURCHASE NON-CASH CAPITAL PARTNERSHIP PERCENTAGE
PARTNER AND ADDRESS CONTRIBUTION AGREEMENT CONTRIBUTION UNITS INTEREST
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
6. MYPC Partners $245,000.00 N/A $0.00 24,500 0.3177749%
c/o Mr. George W. Yandell
Principal
Montgomery Securities
600 Montgomery Street
San Francisco, CA 94111
7. Steamboat Hotel Partners, N/A Agreement of Purchase $2,081,146.00 219,068 2.8414010%
Ltd. and Sale dated
c/o Mr. Dan Carsello as of 9/23/94
6902 Paiute Drive
Edina, MN 55435
8. Inns Properties, L.P. N/A Capital Contribution $450,658.96 50,359 0.6531766%
Richard M. Moss Agreement dated
Inns Properties, L.P. as of 12/12/95
212 East Mission Street
Santa Barbara, CA 93101
9. Enever Rout Investment Group, N/A N/A $952,413.00 100,254 1.3003350%
Ltd.
P. O. Box 239
Steamboat Springs, CO 80477
Attention: C. Robert Enever
10. Alter Investment Group, Ltd. N/A N/A $952,413.00 100,254 1.3003350%
P.O. Box 4240
Suite 201
115 Calle de Industrias
San Clemente, CA 92674
Attention: Robert A. Alter
</TABLE>
EXHIBIT A
page 2 of 3 pages
<PAGE> 6
Effective Date: December 31, 1995
<TABLE>
<CAPTION>
AGREED VALUE OF
CASH PURCHASE NON-CASH CAPITAL PARTNERSHIP PERCENTAGE
PARTNER AND ADDRESS CONTRIBUTION AGREEMENT CONTRIBUTION UNITS INTEREST
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
11. Ridge Partners N/A N/A $395,333.00 41,614 0.5397504%
P. O. Box 774140
Steamboat Springs, CO 80477
Attention: Kenneth B. Hamlet
San Clemente, CA 92672
12. Anthony VanBaak N/A N/A $197,666.50 20,807 0.2698752%
P. O. Box 771809
Steamboat Springs, CO 80477
13. Les Liman N/A N/A $197,666.50 20,807 0.2698752%
453 Fillmore Street
Denver, CO 80206
14. Thomas R. Sharp, Trustee N/A N/A $107,815.50 11,349 0.1472011%
P.O. Box 4608
Steamboat Springs, CO 8947
15. Thomas R. Sharp N/A N/A $44,222.00 4,655 0.0603772%
P.O. Box 4608
Steamboat Springs, CO 8947
16. C. Robert Enever and N/A N/A $245,601.50 25,853 0.3353239%
Audrey W. Enever
P. O. Box 239
Steamboat Springs, CO 80477
17. Trust Company of America as N/A N/A $44,222.00 4,655 0.0603772%
custodian of the IRA of
Patrick E. Barney
- -------------------------------------------------------------------------------------------------------------------------
TOTAL $60,477,750.00 $12,691,408.96 7,709,859 100.00%
</TABLE>
EXHIBIT A
page 3 of 3 pages
<PAGE> 1
EXHIBIT 10.2.12
Lease Agreement dated February 2, 1996 by and
between Sunstone Hotel Investors, L.P., as lessor, and Sunstone Hotel
Properties, Inc., as lessee, for the Cypress Inn hotel located in
Clackamas, Oregon.
The following lists the material differences between the Percentage
Lease filed as Exhibit 10.2.1 to the Company's Registration Statement No.
33-84346 and the Percentage Lease identifed by the Exhibit number below and is
being filed pursuant to Instruction 2 to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Annual
Exhibit Percentage Lease Base Percentage Rent
Number Description Rent Formula
- ------- ---------------- ------ ---------------
<S> <C> <C> <C>
10.2.12 Lease Agreement dated as of February 2, $437,000 38% of room revenue up
1996 by and between Sunstone Hotel to $1,150,000, plus 63%
Investors, L.P., as lessor, and Sunstone of room revenue in
Hotel Properties, Inc., as lessee, for the excess of $1,150,000,
Cypress Inn Hotel located in Clackamas, plus 100% of sublease
Oregon and concession revenue
and other net revenues
</TABLE>
<PAGE> 1
EXHIBIT 10.2.13
Lease Agreement dated February 2, 1996 by and
between Sunstone Hotel Investors, L.P., as lessor, and Sunstone Hotel
Properties, Inc., as lessee, for the Cypress Inn hotel located
in Kent, Washington.
The following lists the material differences between the Percentage Lease
filed as Exhibit 10.2.1 to the Company's Registration Statement No. 33-84346 and
the Percentage Lease identifed by the Exhibit number below and is being filed
pursuant to Instruction 2 to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Annual
Exhibit Percentage Lease Base Percentage Rent
Number Description Rent Formula
- ------- ---------------- ------ ---------------
<S> <C> <C> <C>
10.2.13 Lease Agreement dated as of February 2, 1996 567,000 36% of room revenue up
by and between Sunstone Hotel Investors, L.P. to $1,575,000, plus 63%
as lessor, and Sunstone Hotel Properties, Inc., of room revenue in excess
as lessee, for the Cypress Inn Hotel located in of $1,575,000, plus 100%
Kent, Washington of sublease and concession
revenue and other net
revenues
</TABLE>
<PAGE> 1
EXHIBIT 10.2.14
Lease Agreement dated February 2, 1996 by and
between Sunstone Hotel Investors, L.P., as lessor, and Sunstone Hotel
Properties, Inc., as lessee, for the Cypress Inn hotel located in
Poulsbo, Washington.
The following lists the material differences between the Percentage
Lease filed as Exhibit 10.2.1 to the Company's Registration Statement No.
33-84346 and the Percentage Lease identifed by the Exhibit number below and is
being filed pursuant to Instruction 2 to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Annual
Exhibit Percentage Lease Base Percentage Rent
Number Description Rent Formula
- ------- ---------------- ------ ---------------
<S> <C> <C> <C>
10.2.14 Lease Agreement dated as of February 2, 1996 323,750 35% of room revenue up
by and between Sunstone Hotel Investors, to $925,000, plus 63% of
L.P., as lessor and Sunstone Hotel Properties, room revenue in excess of
Inc., as lessee, for the Cypress Inn Hotel $925,000, plus 100% of
located in Poulsbo, Washington sublease and concession
revenue and other net
revenues
</TABLE>
<PAGE> 1
EXHIBIT 10.2.15
Lease Agreement dated February 2, 1996 by and
between Sunstone Hotel Investors, L.P., as lessor, and Sunstone Hotel
Properties, Inc., as lessee, for the Cypress Inn hotel located
in Portland, Oregon.
The following lists the material differences between the Percentage
Lease filed as Exhibit 10.2.1 to the Company's Registration Statement No.
33-84346 and the Percentage Lease identifed by the Exhibit number below and is
being filed pursuant to Instruction 2 to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Annual
Exhibit Percentage Lease Base Percentage Rent
Number Description Rent Formula
- ------- ---------------- ------ ---------------
<S> <C> <C> <C>
10.2.15 Lease Agreement dated as of February 2, 1996 232,000 29% of room revenue up
by and between Sunstone Hotel Investors, to $800,000, plus 63% of
L.P., as lessor, and Sunstone Hotel Properties, room revenue in excess of
Inc., as lessee, for the Cypress Inn Hotel $800,000, plus 100% of
located in Portland, Oregon sublease and concession
revenue and other net
revenues
</TABLE>
<PAGE> 1
EXHIBIT 10.36
Purchase and Sale Agreement and Joint Escrow Instructions
between the Partnership and HL Project I Limited Liability Company,
dated December 20, 1995
<PAGE> 2
PURCHASE AND SALE
AGREEMENT AND JOINT ESCROW
INSTRUCTIONS
between
SELLER:
HL Project I Limited Liability Company
and
BUYER:
Sunstone Hotel Investors, L.P.
Cypress Inn Hotels
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ARTICLE I - PROPERTY DESCRIPTION................................................................................ 1
Property............................................................................................... 1
ARTICLE II - PURCHASE PRICE..................................................................................... 2
2.1 Purchase Price.............................................................................. 2
2.2 Payment of Purchase Price................................................................... 2
2.2.1 Deposit......................................................................... 2
2.2.2 Balance of Purchase Price....................................................... 2
2.3 Allocation of Purchase Price................................................................ 2
2.4 Adjustment to Purchase Price................................................................ 2
ARTICLE III - ESCROW............................................................................................ 3
3.1 Opening of Escrow........................................................................... 3
3.2 Execution of Additional Instructions........................................................ 3
3.3 Escrow Cancellation Changes................................................................. 3
ARTICLE IV - TITLE CONDITION OF THE PROPERTY.................................................................... 3
4.1 Preliminary Title Report.................................................................... 3
4.2 Title Policies.............................................................................. 4
ARTICLE V - CONTINGENCIES AND CONDITIONS PRECEDENT.............................................................. 4
5.1 Buyer's Contingency Period.................................................................. 4
5.1.1 Property Inspection by Buyer.................................................... 5
5.1.2 Survey of Real Property......................................................... 5
5.1.3 Environmental Audit of Property................................................. 6
5.1.4 Statements of Operation......................................................... 6
5.1.5 Agreements, Permits, Licenses, Schedules........................................ 6
5.1.6 Schedule of Employees........................................................... 6
5.1.7 As-Builts/Plans................................................................. 7
5.1.8 Tax Bills....................................................................... 7
5.1.9 Ground Leases................................................................... 7
5.1.10 Estoppel Certificates........................................................... 7
5.1.11 Miscellaneous................................................................... 7
5.2 Board Approval.............................................................................. 7
5.3 Material Adverse Change..................................................................... 7
5.4 Buyer's Reviews and Seller's Disclaimers.................................................... 8
ARTICLE VI - CLOSE OF ESCROW.................................................................................... 8
6.1 The Closing Date............................................................................ 8
6.2 Closing Costs............................................................................... 9
6.3 Prorations.................................................................................. 9
6.3.1 Prorations through Escrow....................................................... 9
6.3.2 Prorations Outside of Escrow.................................................... 9
6.4 Deliveries to Escrow Holder by Seller Prior to Close of Escrow.............................. 9
6.4.1 Deeds........................................................................... 9
6.4.2 Assignments of Lease............................................................ 10
6.4.3 Bill of Sale.................................................................... 10
6.4.4 Assignment of Intangible Property............................................... 10
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
6.4.5 Miscellaneous................................................................... 10
6.5 Deliveries to Escrow Holder by Buyer Prior to Close of Escrow............................... 10
6.5.1 Balance of Purchase Price....................................................... 10
6.5.2 Miscellaneous................................................................... 10
6.5.3 Assumption of Ground Leases..................................................... 10
6.6 Deliveries to Buyer Upon Close of Escrow.................................................... 11
6.6.1 Service Contracts............................................................... 11
6.6.2 Keys............................................................................ 11
6.6.3 Licenses and Permits............................................................ 11
6.6.4 Personal Property Lease Contracts............................................... 11
6.6.6 Ground Leases................................................................... 11
ARTICLE VII - REMEDIES.......................................................................................... 11
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES................................................................... 12
8.1 Representations or Warranties............................................................... 12
8.1.1 Condition of Property........................................................... 12
8.1.2 Toxic Conditions................................................................ 12
8.1.3 Compliance with Law............................................................. 12
8.1.4 No Adverse Action............................................................... 12
8.1.5 Utility Service................................................................. 13
8.1.6 No Union Contracts; Employment Matters.......................................... 13
8.1.7 Status of Employees............................................................. 13
8.1.8 Ground Leases................................................................... 13
8.1.9 Occupants....................................................................... 13
8.1.10 Liquor Licenses................................................................. 14
8.1.11 Notice Received by Seller....................................................... 14
8.1.12 Disclaimer...................................................................... 14
8.2 Indemnification............................................................................. 15
ARTICLE IX - EMPLOYMENT MATTERS................................................................................. 15
9.1 Claims by Employees......................................................................... 15
9.2 Employment Laws............................................................................. 15
ARTICLE X - RISK OF LOSS........................................................................................ 15
10.1 Notice of Casualty or Condemnation.......................................................... 15
10.2 Termination Upon Damage or Condemnation..................................................... 15
10.3 Non-termination Upon Damage or Condemnation................................................. 16
ARTICLE XI - BOOKINGS........................................................................................... 16
ARTICLE XII - ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.......................................................... 17
12.1 Reservations and Deposits................................................................... 17
12.2 Tray Ledger From Registered Guest; Accounts Receivable...................................... 17
12.3 Receivables Not Conveyed.................................................................... 17
12.4 Accounts Payable Prior to Closing........................................................... 17
ARTICLE XIII - INVENTORY OF PERSONAL PROPERTY................................................................... 18
13.1 Inventory Prior to Closing.................................................................. 18
13.2 Inventory at Closing........................................................................ 18
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
13.3 Food and Beverage Inventory................................................................. 18
ARTICLE XIV - GENERAL PROVISIONS................................................................................ 19
14.1 Real Estate Brokers; Representations and Indemnity.......................................... 19
14.2 No Shop Period.............................................................................. 19
14.3 Attorney's Fees............................................................................. 19
14.4 Notices..................................................................................... 19
14.5 Tax Reassessment; Refunds................................................................... 20
14.6 Cooperation with Ground Lessors............................................................. 20
14.7 Foreign Investment in Real Property Tax Act................................................. 20
14.8 Binding Effect.............................................................................. 21
14.9 Further Actions............................................................................. 21
14.10 Survival.................................................................................... 21
14.11 Authority................................................................................... 21
14.12 Entire Agreement............................................................................ 21
14.13 Modification................................................................................ 21
14.14 No Third Party Beneficiaries................................................................ 22
14.15 Time of Essence............................................................................. 22
14.16 Governing Law............................................................................... 22
14.17 Counterparts................................................................................ 22
14.18 Section Heading............................................................................. 22
14.19 Severability................................................................................ 22
14.20 Exhibits.................................................................................... 22
14.21 Interpretation.............................................................................. 22
14.22 Land Use.................................................................................... 22
14.23 Confidentiality............................................................................. 23
</TABLE>
<PAGE> 6
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
This Purchase and Sale Agreement and Joint Escrow Instructions
("Agreement") is made as of December 28, 1995, by and between HL Project I,
Limited Liability Company, a Delaware limited liability company ("Seller"), and
Sunstone Hotel Investors, L.P., a Delaware limited partnership ("Buyer"), with
reference to the following facts:
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer the "Property," as defined herein, on the terms and conditions set
forth herein.
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE I
PROPERTY DESCRIPTION
Seller hereby agrees to sell and convey to Buyer, and Buyer hereby
agrees to purchase from Seller, subject to the terms and conditions set forth
herein, the following:
Property. The six existing hotels, as described on Exhibit "A,"
attached hereto and incorporated herein by reference (singularly a "Hotel" and
collectively the "Hotels"), together with all rights, title and interest of
Seller in, and to the real property upon which the Hotels are located and all
easements and appurtenances thereto (the "Real Property") all improvements,
buildings, structures, fixtures and parking areas located upon the Real Property
(the "Improvements") together the trade name "Cypress Inn" ("Trade Name") and
the rights of Seller to use such name and any logo related to such name; all
furniture, furnishings, television sets, computers, fixtures, machinery, signage
and equipment; not less than three (3) par of linen and terry for the Hotels;
all opened and unopened inventory as of Close of Escrow (as defined herein) (but
not less than the customary level of inventory for an operating hotel of similar
size and location), all personal property and vehicles utilized in the operation
of the Hotels; all off-site and on-site signs; all assignable contracts, and
leases, including the restaurant lease, which is in effect with respect to the
"Kent" Hotel, to the extent assumed by Buyer in its sole discretion and all
agreements benefitting the Hotels including all deposits and credits thereunder,
to the extent assumed by Buyer in its sole discretion; all assignable permits
benefitting the Hotels including all deposits and credits thereunder, to the
extent assumed by Buyer in its discretion; all assignable tradenames and
goodwill (all of which shall be collectively referred to herein as the "Personal
Property"). Any Personal Property which is subject to a lease or lease/purchase
arrangement (including, without limitation, television sets, computers,
furniture and vehicles) shall be acquired by Seller, and equivalent substitute
provided to Buyer, by Seller at Seller's cost prior to Close of Escrow (as
defined herein). The Hotels, Real Property, Improvements, Trade Name and
Personal Property are herein called the "Property."
<PAGE> 7
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. The purchase price (the "Purchase Price") for
the Property shall be Fifteen Million Dollars and No/100THS Dollars
($15,000,000.00).
2.2 Payment of Purchase Price. The Purchase Price shall be paid as
follows:
2.2.1 Deposit. Upon the execution hereof by the Buyer and
Seller, Buyer shall deposit with Escrow Holder (as defined herein) the amount of
Five Hundred Thousand Dollars ($500,000.00) (the "Deposit"). The Deposit shall
be invested by Escrow Holder in a federally-insured, interest-bearing account
with any interest accruing thereon to be paid or credited to Buyer. At the Close
of Escrow, the Deposit shall be applied and credited toward payment of the
Purchase Price. In the event Buyer does not close the Escrow (as defined herein)
for any reason other than a default by Buyer under this Agreement, the Deposit
shall be returned to Buyer together with all interest accrued thereon.
2.2.2 Balance of Purchase Price. On or before the Close of
Escrow, Buyer shall deposit into Escrow, by wire transfer in currently available
federal funds, in an amount equal to the sum of: (i) the balance of the Purchase
Price plus (ii) all other costs, charges and expenses payable by Buyer pursuant
to this Agreement and in connection with the Escrow.
2.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the various components of the Property (i.e., Real Property,
Improvements, Personal Property, Trade Name, Ground Leases (as defined herein))
in the transfer documents (if required) and in amounts determined by Buyer
(subject to Seller's approval which shall not be delayed or unreasonably
withheld), and the values so determined shall be reflected in any transfer or
excise taxes payable upon Close of Escrow.
2.4 Adjustment to Purchase Price. The parties acknowledge that
Buyer desires to acquire fully operational Hotels and in that regard Buyer's
determination of the Purchase Price was based upon its assumption that each
Hotel would be equipped with not less than three (3) par of linen and terry and
that all Personal Property which is presently located within, or used in
connection with, each Hotel will be conveyed to Buyer or if such Personal
Property is subject to a lease or lease/purchase agreement, it would be acquired
by Seller and conveyed to Buyer or Seller would provide Buyer, at Seller's cost,
with an equivalent substitute. Therefore, the parties agree that if less than
three (3) par of linen or terry is used for any Hotel or if any Personal
Property located within, or used in connection with any Hotel, is leased, and
cannot be conveyed to Buyer, the Purchase Price shall be reduced by an amount
necessary to cover the cost of acquiring any shortfall in linen, terry or
Personal Property.
<PAGE> 8
ARTICLE III
ESCROW
3.1 Opening of Escrow. The parties shall open an escrow (the
"Escrow") with Fidelity National Title Insurance Company ("Escrow Holder" or
"Title Company"), located at 17911 Von Karman Avenue, Suite 300, Irvine, CA
92714, Attention: Patty Beverly. A signed copy of this Agreement shall be
deposited with Escrow Holder in order to open an escrow to complete the purchase
and sale described herein. Escrow shall be deemed opened on the date that a copy
of this Agreement is deposited with Escrow Holder. Escrow Holder shall confirm
the date the Escrow is opened upon written notice to Buyer and Seller. This
Agreement shall constitute joint instructions of Buyer and Seller to Escrow
Holder, provided, however, that each party shall execute such additional
instructions as requested by the Escrow Holder not inconsistent with the
provisions hereof. Escrow Holder shall indicate its acceptance of the escrow
instructions and Agreement to act as escrow agent by executing a copy hereof.
3.2 Execution of Additional Instructions. If any requirements
relating to the duties or obligations of Escrow Holder hereunder are not
acceptable to Escrow Holder, or if Escrow Holder requires additional
instructions, the parties agree to make such deletions, substitutions and
additions to these escrow instructions relating to such duties or obligations of
Escrow Holder or clarification of these instructions as counsel for Seller and
for Buyer shall mutually approve, and which do not substantially change this
Agreement or its intent. Seller and Buyer agree to perform, observe and fulfill
the requirements of this Agreement notwithstanding said deletions, substitutions
or additions to said escrow instructions.
3.3 Escrow Cancellation Changes. If Escrow fails to close because
of Seller's default under this Agreement, Seller shall be liable for all
customary escrow cancellation charges. If escrow fails to close for any other
reason, Buyer shall be liable for all customary escrow cancellation charges.
ARTICLE IV
TITLE CONDITION OF THE PROPERTY
4.1 Preliminary Title Report. Seller shall cause the Title Company
to furnish to Buyer a preliminary title report for the Real Property and
Improvements related to each Hotel (each a "Title Report" or collectively the
"Title Reports"), together with copies of all underlying title documentation
which are referred to as exceptions in said Title Reports and copies of all
recorded deeds to current owners of all land which adjoins each Hotel. The Title
Reports shall be delivered to Buyer within five (5) business days after the date
of this Agreement. Seller shall also deliver to Buyer, to the extent in
existence and in the possession of Seller, copies of existing title insurance
policies for the Property. Buyer shall have until expiration of the Contingency
Expiration Date (as defined herein) within which to notify Seller and Escrow
Holder of any objections to any matters shown on each Title Report. Buyer's
failure to so notify Seller and Escrow Holder within the Contingency Expiration
Date shall constitute approval of all matters contained therein. If Buyer
disapproves of any title matter, Seller shall have until the Closing Date to
remove any such
<PAGE> 9
disapproved matter. If after use of its reasonable efforts, Seller fails to
remove any disapproved title matter from any Title Report, Buyer may cancel the
Escrow and terminate its obligation to purchase the Property and the Deposit
together with all interest earned thereon shall be refunded to Buyer less
Buyer's share of Escrow cancellation fees and costs. Upon the Close of Escrow,
Seller shall, by Bargain and Sale Deed (with respect to the Hotels located in
the State of Washington) convey to Buyer a fee simple interest in the Real
Property and Improvements related to such Hotels and by Special Warranty Deed
with respect to that portion of the Hotel located at 889 S.W. King, Portland,
Oregon (the "Downtown Portland Hotel"), which is held in fee title and by
Assignment (with respect to the other Hotels located in the State of Oregon and
that portion of the Downtown Portland Hotel which is subject to a ground lease),
convey to Buyer a leasehold interest related to such Hotels subject only to the
following:
4.1.1 Non delinquent real property tax liens;
4.1.2 Matters shown in each Title Report which are approved
or deemed approved by Buyer as provided above; and
4.1.3 Such other matters, if any, as may be approved in
writing by Buyer.
4.2 Title Policies. At the Close of Escrow, Seller shall cause the
Title Company to provide to Buyer a standard form extended coverage ALTA
(10-17-92) owner's policy of title insurance acceptable to Buyer and its lender
Bank One, Arizona, NA ("Bank One") for each Hotel (each a "Title Policy" and
collectively the "Title Policies") dated as of the Closing Date. The total
liability under all Title Policies shall equal the Purchase Price and the
liability of each Title Policy shall be in an amount to be determined by Buyer.
The Title Policies shall show title to the Property vested in Buyer, subject
only to the exceptions to title described in paragraph 4.1 above together with
such endorsements as Buyer shall request. Seller agrees to cooperate with Buyer
in obtaining such endorsements, including executing affidavits, as Buyer may
reasonably request, from Seller. The endorsements requested by Buyer for each
Title Policy may include an endorsement deleting the standard printed Title
Company exceptions for parties in possession, inchoate mechanic's liens, survey
exceptions and contiguity with adjoining roads and absence of zoning violations.
ARTICLE V
CONTINGENCIES AND CONDITIONS PRECEDENT
5.1 Buyer's Contingency Period. Buyer shall have until five (5)
business days prior to the Close of Escrow (the "Contingency Expiration Date")
to review, approve and satisfy the contingencies set forth in paragraphs 5.1.1
through 5.1.11 below, which contingencies are for the benefit of Buyer. The
period from the date of this Agreement to and including the Contingency
Expiration Date shall be referred to herein as the "Contingency Period." If in
the sole and absolute discretion of Buyer, Buyer disapproves of any matter
related to any Hotel or the Property (whether or not such matter is specifically
identified in paragraphs 5.1.1 through 5.1.11 below) prior to the expiration of
the Contingency Expiration Date, Buyer may deliver written notice to Seller that
one or more of
<PAGE> 10
the conditions of Buyer to the Close of Escrow has failed and (i) request Seller
to cure the disapproved matter or (ii) notify Seller that Buyer is invoking its
right as provided herein to cancel the Escrow and terminate its obligation to
purchase the Property (the "Cancellation Notice"). If any matter is disapproved
by Buyer, Seller may, at its option, attempt to cure such matter prior to Close
of Escrow, provided, however if Seller is not able to cure such matter prior to
the Close of Escrow, (a) Seller and Buyer may elect, upon mutual agreement, to
extend the Close of Escrow to enable Seller to cure such matter, (b) Buyer may
elect to waive the failed condition precedent and proceed to Close of Escrow for
the Property or (c) Buyer may elect to deliver a Cancellation Notice and
terminate Escrow and this Agreement. In the event that Buyer delivers a
Cancellation Notice, the Escrow shall be canceled and the Deposit together with
all interest earned thereon, shall be refunded to Buyer less Buyer's share of
Escrow cancellation fees and costs. Seller and Buyer acknowledge that Buyer has
incurred and will continue to incur substantial costs in connection with the
negotiation and execution of this Agreement and in conducting the inspections
contemplated by this Agreement and that Buyer would not have entered this
Agreement without the availability of the Contingency Period and Buyer's right
to deliver the Cancellation Notice.
5.1.1 Property Inspection by Buyer. Buyer shall have the
right, at all times during the Contingency Period, upon reasonable advance
notice to Seller, to inspect and investigate the Property, including but not
limited to matters related to (i) its value, zoning, environmental condition,
access and building and parking issues, (ii) its physical condition, including
but not limited to the condition of the roof and the HVAC for each Hotel and the
presence of asbestos and other hazardous materials in the Improvements or within
the Real Property related to any Hotel, and (iii) its suitability for Buyer's
intended use. In connection with such inspection, no later than five (5) days
after the date of this Agreement, Seller shall deliver to Buyer, to the extent
in existence and in the possession or control of Seller or its agents or the
manager of each Hotel, (i) architectural and construction plans for each Hotel,
(ii) as-built plans for the Improvements for each Hotel, (iii) copies of
property tax bills for the Property and any recent reassessments and (iv) such
other information for the Property as is reasonably requested by Buyer. During
the Contingency Period, Seller shall reasonably cooperate with Buyer's
authorized agents, and shall provide reasonable access to the Property and to
Seller's books and records relating to the Property.
5.1.2 Survey of Real Property. Buyer, at its cost, may
retain a licensed civil engineer to prepare a certified ALTA/ASCM Land Title
Survey of the Real Property and Improvements related to each Hotel (each a
"Survey" and collectively the "Surveys"). Each Survey shall be subject to the
review and approval of Buyer, Buyer's lender, Bank One, Arizona, and the Title
Company. The Survey shall reflect any easements burdening the Real Property
related to each Hotel, and showing the physical location of all Improvements,
utility lines, parking areas, easements of record or in existence, and
encroachments, related to each Hotel, and certifying such matters as are
required for ALTA/ASCM minimum standards for urban surveys.
5.1.3 Environmental Audit of Property. Within five (5) days
after the date of this Agreement, Seller shall provide to Buyer for the review
and approval of Buyer and Bank One, Arizona, any environmental reports related
to the Real Property and Improvements for each Hotel, which may be in the
possession or control of Seller, or its agents, or the manager of each Hotel.
Buyer shall also have the right, at its expense to
<PAGE> 11
retain an environmental consultant to prepare a new ASTM Phase I Environmental
Site Assessment related to the Real Property and Improvements for each Hotel,
which may be prepared by a firm acceptable to Buyer and directed to Buyer and
Bank One, Arizona, NA (each and "Environmental Report" and collectively the
"Environmental Reports"). If any such Phase I Environmental Site Assessment
evidences any adverse environmental matter in the Real Property or Improvements
for any Hotel, Buyer shall have the right at its cost to obtain a further Phase
II Environmental Site Assessment including appropriate physical sampling at and
adjacent to the affected Real Property.
5.1.4 Statements of Operation. During the Contingency
Period, Buyer shall have the right to review and approve annual statements of
operations respecting each Hotel for fiscal years 1992, 1993 and 1994 and
current year's budgets and preliminary statements of operations for all of 1995
to date. Within five (5) days after the date of this Agreement, Seller shall
deliver all such information to Buyer. If the operating statements for each
Hotel have been audited from 1992 to the present time, Seller will provide the
complete audited financials for such years. Seller will authorize its
accountants to make available to the accountants of Buyer such financial
information as Buyer's accountants require for investigation of the financial
history of the operations of each Hotel since 1991. Buyer acknowledges the
representation of Seller, that Seller has only owned and been in control of the
Hotels since September of 1995. Seller makes no warranty as to the accuracy of
any information pertaining to operations which occurred prior to September 1995.
5.1.5 Agreements, Permits, Licenses, Schedules. Within five
(5) days after the date of this Agreement, Seller shall provide to Buyer for
Buyer's review and approval during the Contingency Period, a list and legible
copies of all franchise agreements, ground leases, management agreements,
employment contracts, service contracts, leases, and other contracts, and all
licenses, permits, vehicle registrations, and certificates of occupancy relating
to the Property, including all amendments and modifications thereto. Seller
shall, within such five (5) day period of time, also provide its most recent
list or schedule of inventory/supplies and equipment for each Hotel, a list or
schedule of suppliers and vendors for each Hotel and a list of defects in
Property known by Seller to affect any Hotel.
5.1.6 Schedule of Employees. Within five (5) days after
execution of this Agreement, Seller shall provide to Buyer for Buyer's review
and approval during the Contingency Period, a schedule of all current employees
of each Hotel which includes titles, wages, benefits, earned and accrued
vacation and sick pay and a list of employment benefit plans, workers
compensation insurance plans and rating and verification of payment of employee
withholding, taxes, workers compensation insurance premiums and the name of the
legal entity which employs the employees of each Hotel.
5.1.7 As-Builts/Plans. Within five (5) days after the date
of this Agreement, Seller shall provide to Buyer for Buyer's review and approval
during the Contingency Period, all architectural and construction plans, and
as-built documents for each Hotel in the Seller's possession or under Seller's
control, or the possession or control of its agents, or the manager of each
Hotel.
5.1.8 Tax Bills. Within five (5) days after the date of
this Agreement, Seller shall provide to Buyer for Buyer's review and approval
during the
<PAGE> 12
Contingency Period copies of the most recent two property tax bills on the
Property and any recent assessments.
5.1.9 Ground Leases. Within five (5) days after the date of
this Agreement, Seller shall provide to Buyer for Buyer's review and approval,
copies of the ground lease agreements and any amendments thereto which affect
the Hotels located in the State of Oregon (the "Ground Leases"). In addition,
prior to expiration of the Contingency Period, Seller shall obtain, the consent
of the lessor under the ground lease for each Hotel to the conveyance of such
Hotels to Buyer. The ground lessor consents shall be in form and substance
satisfactory to Buyer and Bank One.
5.1.10 Estoppel Certificates. Prior to the expiration of the
Contingency Period, Buyer shall have received an estoppel certificate in form
and substance satisfactory to Buyer and Bank One from (i) the lessor under each
of the ground leases for the Hotels located in Oregon and (ii) the lessee under
the restaurant lease for the Kent Hotel certifying (a) that the applicable lease
is not in default in any respect, or if so, stating the nature of the default,
(b) the applicable lease has not been amended or modified in any manner, or if
so, the nature of the amendment or modification, and (c) such other matters as
Buyer may reasonably request.
5.1.11 Miscellaneous. During the Contingency Period, Seller
shall provide Buyer with such other items of examination and approval as are
agreeable to by the Seller and Buyer.
5.2 Board Approval. In addition to the other contingencies of
Buyer under this Article V, Buyer's obligation to purchase the Property is
subject to, and conditioned upon, Buyer's receipt of an approval of the Board of
Directors of Buyer on or before January 5, 1996 of this Agreement and the
acquisition of the Property by Buyer. If Buyer does not obtain such approval of
its board of directors on or before January 5, 1996, Buyer may terminate Escrow
and its obligations under this Agreement, in which case the Deposit, together
with all interest earned thereon, shall be returned to Buyer, less Buyer's share
of Escrow cancellation costs.
5.3 Material Adverse Change. In addition to the other
contingencies of Buyer under this Article V, Buyer's obligation to purchase the
Property is conditioned upon Seller's conveyance of the Property in the
condition approved by Buyer. In the event of any material adverse change to the
Property or any portion thereof, between the date Buyer approves of same and the
scheduled Closing Date, Buyer shall have the right to terminate this Agreement
and receive a refund of the Deposit together with all interest earned thereon.
5.4 Buyer's Reviews and Seller's Disclaimers.
5.4.1 Seller shall permit Buyer, or Buyer's agents,
reasonable access to the Property during the Contingency Period and shall
generally cooperate with Buyer in the making of the foregoing investigations;
provided, however, Seller shall not be obligated to incur any cost or expense in
connection therewith. In connection with Buyer's inspection of the Property,
prior to Buyer's causing any tests to be performed which may involve digging,
sampling, or any other activity having an actual physical effect, to any
<PAGE> 13
degree, upon the Property, Buyer shall obtain Seller's express written consent.
Seller's consenting to any such test shall in no way operate to limit, modify,
or relieve Buyer of the obligations set forth in subsection 5.4.2 below. Buyer
agrees that Buyer's failure to give Seller notice of termination pursuant to
this Agreement prior to the expiration of the Contingency Period shall
constitute an acknowledgment that Seller has given Buyer every opportunity to
consider, inspect and review, to Buyer's satisfaction, the physical,
environmental, economic and legal condition of the Property and title thereto.
5.4.2 Buyer acknowledges and agrees that any investigations
by Buyer during the Contingency Period, or at any other time, shall be at
Buyer's sole cost, expense and risk unless expressly provided otherwise herein.
Buyer shall indemnify Seller and its affiliates against, defend with counsel
satisfactory to Seller and hold Seller and its affiliates harmless from any and
all damage, loss, cost, claim, judgment, liability and expense (including
attorneys' fees and costs) incurred by Seller to any third party arising out of
Buyer's investigation of the Property, whether during the Contingency Period or
at some other time. Buyer shall, at Buyer's sole cost and expense, repair any
damage done to the Property arising out of Buyer's inspection and investigation
of the Property, including any tests performed by Buyer or on Buyer's behalf and
shall restore the Property to the same condition as it was before Buyer's
inspection. If Buyer fails to close Escrow for its acquisition of the Property,
and such failure does not result from Seller's default under this Agreement,
Buyer shall return to Seller, at no cost to Seller, a complete copy of all
written reports, maps, data, records, surveys and other materials pertaining to
the Property delivered by Seller to Buyer and/or prepared at Seller's request
prior to the Closing Date, including without limitation feasibility or marketing
studies, development, or predevelopment studies and soils reports. If Buyer
terminates this Agreement at any time pursuant to its terms, such copies shall
be delivered to Seller within five (5) days after Buyer's notice of termination.
ARTICLE VI
CLOSE OF ESCROW
6.1 The Closing Date. The Escrow shall close on or before a date
which shall be twenty-five (25) business days after opening of Escrow (the
"Closing Date" and the "Close of Escrow.") The parties agree that the Closing
Date may be extended by one business day for each business day in which Seller
fails to deliver the items set forth in Sections 4.1 and 5.1 beyond the time
required for such delivery. The parties agree that the Closing Date may also be
extended to the extent delays are encountered by reason of events beyond Buyer's
control including governmental requirement, or by reason of delay beyond Buyer's
control associated with obtaining the Surveys or Environmental Reports. The
extension of the Closing Date related to the matter set forth in the preceding
sentence shall be commensurate with the encountered delay. Any extension of the
Closing Date must be evidenced by a writing signed by Buyer and Seller. In the
event that Buyer wishes to close Escrow prior to the scheduled Closing Date, any
closing shall be upon not less than five (5) days notice to Seller. Buyer shall
use its reasonable efforts to avoid any extensions of the Closing Date.
<PAGE> 14
6.2 Closing Costs. The expenses of Escrow shall be paid in the
following manner:
6.2.1 Seller shall pay all costs and expenses of preparing,
acknowledging and recording the Deeds (as defined herein) and Assignments (as
defined herein) and all documentary transfer or real estate excise tax thereon
as well as any sales or use taxes associated with the Personal Property.
6.2.2 Seller shall pay for the Title Policies; however,
Buyer shall pay for the cost of all title endorsements requested by Buyer.
6.2.3 Buyer and Seller shall each pay one-half of the
Escrow fee and all of the other costs and expenses of Escrow Holder.
6.3 Prorations.
6.3.1 Prorations through Escrow. The Escrow Holder, through
Escrow, shall prorate real and personal property taxes, assessments, interest on
assessments, insurance premiums, and utility deposits (which Seller shall leave
in place and receive a credit for) as of the Closing Date.
6.3.2 Prorations Outside of Escrow. Within ninety (90) days
after the Closing Date, Buyer and Seller shall prorate utility charges, payments
on service contracts where Buyer is assuming such contracts, and payments on
equipment leases where Buyer is assuming such leases.
6.4 Deliveries to Escrow Holder by Seller Prior to Close of
Escrow. Seller hereby covenants and agrees to deliver or cause to be delivered
to Escrow Holder at least three (3) business days prior to the Closing Date the
following instruments and documents, the delivery of each of which shall be a
condition to the Close of Escrow:
6.4.1 Deeds. A Bargain and Sale Deed acceptable to Buyer
for the Hotels located in the State of Washington (collectively "the Deeds"),
duly executed and acknowledged in recordable form by Seller, conveying fee
simple title to such Hotels to Buyer and a special warranty deed acceptable to
Buyer for that portion of the Downtown Portland Hotel which is held in fee
title.
6.4.2 Assignments of Lease. An Assignment of Ground Lease
acceptable to Buyer and Bank One (which assignment shall include a provision for
notice of default and right to cure under the ground lease, in favor of Bank
One) for the Hotels located in the State of Oregon (each an "Assignment" and
collectively the "Assignments") duly executed by Seller, Buyer and the landlord
or lessor under such ground lease in recordable form which transfers the
leasehold interest in the Real Property for each Hotel to Buyer.
6.4.3 Bill of Sale. A Bill of Sale acceptable to Buyer for
the Personal Property related to each Hotel, duly executed by Seller, conveying
the Personal Property for such Hotel, free and clear of all liens and
encumbrances.
<PAGE> 15
6.4.4 Assignment of Intangible Property. An Assignment of
Intangible Property acceptable to Buyer for the transfer of any intangible
property such as the Trade Name together with any forms, which require Seller's
execution, to be filed with the U.S. Patent and Trademark office and the State
of Oregon and Washington to effectuate such assignment.
6.4.5 Miscellaneous. Such other documents, items and funds
as may be required pursuant to the terms of this Agreement or which Escrow
Holder may reasonably require to consummate this transaction.
6.5 Deliveries to Escrow Holder by Buyer Prior to Close of Escrow.
Buyer hereby covenants and agrees to deliver or cause to be delivered to Escrow
Holder on or prior to the Closing Date the following instruments and documents,
the delivery of each of which shall be a condition to the performance by Seller
of its obligations under the terms of this Agreement:
6.5.1 Balance of Purchase Price. The balance of the
Purchase Price.
6.5.2 Miscellaneous. Such other documents, items and funds
as may be required pursuant to the terms of this Agreement or which Escrow
Holder may reasonably require to consummate this transaction.
6.5.3 Assumption of Ground Leases.
(a) As of the Closing Date, Seller shall assign
and transfer to Buyer all of Seller's right, title and interest in and to the
Ground Leases (as defined in subsection 5.1.9), pursuant to an assignment and
assumption of leases in the form and substance satisfactory to Buyer and Bank
One.
(b) Buyer shall indemnify Seller and its
affiliates against, defend with counsel satisfactory to Seller, and hold Seller
and said affiliates harmless from any and all loss, cost, claim, judgment,
settlement, liability and expense (including, without limitation, attorneys'
fees and costs) arising out of Buyer's failure to perform any of the obligations
of the lessee under the Ground Leases which arise from and after the Closing
Date. Seller shall indemnify Buyer and its affiliates against, defend with
counsel satisfactory to Buyer, and hold Buyer and said affiliates harmless from
any and all loss, cost, claim, judgment, settlement, liability and expense
(including, without limitation, attorneys fees and costs) arising out of any
failure of Seller to perform under the Ground Leases prior to the Closing Date.
6.6 Deliveries to Buyer Upon Close of Escrow. Seller hereby
covenants and agrees to deliver to Buyer, on or prior to the Closing Date (or to
Escrow Holder for delivery to Buyer upon closing), the following items:
6.6.1 Service Contracts. Originals of all service contracts
for the Hotels which are being assumed by Buyer, to the extent an original
service contract is unavailable, a copy thereof.
<PAGE> 16
6.6.2 Keys. Keys to all entrance doors, safe deposit boxes,
storage areas and rooms to each Hotel. Buyer shall take possession of each Hotel
upon Close of Escrow.
6.6.3 Licenses and Permits. Copies of all licenses and
permits in Seller's possession pertaining to each Hotel.
6.6.4 Personal Property Lease Contracts. Originals of all
personal property lease contracts being assumed by Buyer, and to the extent an
original lease contract is unavailable, a copy thereof.
6.6.5 Assumed Contracts. On the Closing Date, Buyer shall
deliver to Seller a list of all service contracts and other agreements which
Buyer intends to assume in connection with its acquisition of the Property. Any
service contract or other agreement which affects the Property but is not
identified on such list shall be deemed a contract which Buyer has elected not
to assume.
6.6.6 Ground Leases. On the Closing Date, Seller shall
deliver to Buyer originals of the Ground Leases.
ARTICLE VII
REMEDIES
Damage as Liquidated Damages. IN THE EVENT THE SALE OF THE PROPERTY AS
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT ON THE PART OF BUYER, THE DEPOSIT (INCLUDING ALL INTEREST EARNED FROM
THE INVESTMENT THEREOF) SHALL BE PAID TO AND RETAINED BY SELLER AS LIQUIDATED
DAMAGES. THE PARTIES ACKNOWLEDGE THAT SELLER'S ACTUAL DAMAGES IN THE EVENT OF A
DEFAULT BY BUYER WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.
THEREFORE, BY PLACING THEIR SIGNATURES BELOW, THE PARTIES ACKNOWLEDGE THAT THE
SUM OF THE DEPOSIT (PLUS INTEREST) HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS
THE PARTIES REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS SELLER'S EXCLUSIVE
REMEDY AGAINST BUYER IN THE EVENT OF A DEFAULT ON THE PART OF BUYER.
SELLER: BUYER:
HL PROJECT I LIMITED LIABILITY SUNSTONE HOTEL INVESTORS, L.P.
COMPANY
By: /s/ J.N. Rider By: /s/ Robert A. Alter
---------------------------- ----------------------------
<PAGE> 17
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Representations or Warranties. Seller hereby makes the
following representations and warranties to Buyer and Buyer acknowledges and
agrees that subject to such representations and warranties, the Property is
being sold in an "As Is" condition.
8.1.1 Condition of Property. To Seller's actual knowledge,
there are no patent or latent defects or deficiencies of any kind in the
Property, normal wear and tear excepted except as set forth on the schedule of
property defects delivered by Seller to Buyer under Section 5.1.5.
8.1.2 Toxic Conditions. To Seller's actual knowledge, the
Real Property upon which each of the Hotels is located and the Improvements for
each Hotel do not contain any toxic or hazardous substances except for customary
hotel supplies and any toxic or hazardous materials which may be identified in
the Environmental Reports.
8.1.3 Compliance with Law. To Seller's actual knowledge,
each of the Hotels is in compliance with all applicable zoning, land use,
building, fire, employment, safety or health laws or codes, and all laws and
regulations regarding employment conditions and practices. Seller has not
received notice from any governmental authority that the Property or any portion
thereof is in violation of any law or code.
8.1.4 No Adverse Action. To Seller's actual knowledge,
there are no pending or threatened condemnation or other similar proceedings
affecting the Property or any portion thereof, or any action or litigation
affecting the Property or any portion thereof.
8.1.5 Utility Service. To Seller's actual knowledge, each
Hotel, as presently operated, is adequately served with all necessary utilities
including sewer, water, gas, electricity, telephone and cable.
8.1.6 No Union Contracts; Employment Matters. Seller
warrants that there are no union contracts in effect with respect to any
employees for each of the Hotels, and to Seller's actual knowledge Seller has
not received any notice that the employees of any Hotel are undertaking efforts
to organize as a union under a collective bargaining agreement. To Seller's
actual knowledge, there are no unfair labor practice or employment
discrimination claims pending or threatened against Seller or the manager of any
of the Hotels and any employee benefit plan referred to in Section 5.1.6 above
shall have been operated through the Closing Date by Seller or its agents in
accordance with the provisions of such plan and applicable law. Seller shall
terminate the manager and any management contract in effect with respect to each
Hotel manager as of the Closing Date and Buyer shall incur no liability to the
employees of any of the Hotels or to any manager arising out of Buyer's purchase
of the Property. Seller warrants that there shall be no outstanding obligations
for payment or provision of compensation to employees of any Hotel or the
manager of any Hotel as of the Closing Date and that all such compensation,
including, without limitation, earned and accrued vacation or sick pay shall be
paid in full or to the benefit or credit of the employees and manager of each
Hotel. Seller shall take all steps necessary to comply with the Worker's
Adjustment and
<PAGE> 18
Retraining Notification Act (the "WARN Act") with respect to terminated
employees, even if some or all of such employees are hired by Buyer after
Closing, but subject to Seller's verification and acceptability of the
provisions of the WARN Act. Seller shall, at its cost, provide COBRA Insurance
coverage to any terminated employee after closing, unless Buyer employs such
employee after Closing. Seller acknowledges, understands and agrees that Buyer
makes no representation as to whether it will employ any employee of any Hotel.
8.1.7 Status of Employees. Seller represents that it
understands that the termination of employees at any of the Hotels by Seller may
require advance notification to such employees pursuant to the requirements of
the WARN Act and if the WARN Act is applicable to this transaction, Seller shall
comply and cause the manager for each Hotel to comply with the WARN Act to such
employees prior to Close of Escrow.
8.1.8 Ground Leases. To Seller's actual knowledge, the
Ground Leases in effect which relate to each of the Hotels located in the State
of Oregon are in full force and effect and Seller has not received notice of,
and is not aware of any, default under any of such leases.
8.1.9 Occupants. There are not now and will not be on the
Closing Date, any tenants (other than the lessee under the restaurant lease
which relates to the Kent Hotel), property managers, employees or other parties
in occupancy of any space within the Property on other than a transitory or
temporary basis.
8.1.10 Liquor Licenses. There are no liquor licenses for any
of the Hotels and no need or requirement to obtain or transfer any license for
the use of beer, wine, liquor or alcoholic beverages of any kind, in connection
with any Hotel.
8.1.11 Notice Received by Seller. In the event Seller
receives any notice from any governmental authority or third party or other
person or entity related to any of the representations or warranties set forth
above or which would make any of the representations and warranties set forth
above not true in any respect, Seller shall immediately provide Buyer with a
copy of any such notice. If Buyer approves of the Property and Seller receives
any notice, or becomes aware of any adverse change in the Property from the
condition which is approved by Buyer, Seller shall notify Buyer of such change
as soon as Seller becomes aware of same.
8.1.12 Disclaimer. Except as expressly set forth herein,
Seller specifically disclaims the making of any representations or warranties,
express or implied, regarding the Property, including, without limitation: the
physical condition of the Property; title to or the boundaries of the Real
Property; income or operating expenses of the Property; matters concerning any
tenants; pest control matters, soil conditions, hazardous waste, toxic
substances or other environmental matters; compliance with building, health,
safety, land use and zoning laws, codes, regulations and orders; structural and
other engineering characteristics; traffic pattern; and all other information
pertaining to the Property. Moreover, Seller has advised Buyer that: (i) the
Property was not developed and the improvements were not constructed by Seller;
(ii) the Property was acquired by Seller or one of its predecessors-in-interest
in partial or full satisfaction of a debt previously contracted and secured by
the Property, and, given the context in which Seller acquired title, Seller did
not make the investigations of
<PAGE> 19
the Property customarily made by a prudent buyer of real property and does not
have sufficient knowledge to enable it to make any representations or warranties
with respect to the Property other than representations based on Seller's actual
knowledge without having performed any investigations; and (iii) Buyer has
entered into this Agreement with the intention of making and relying upon its
own investigation of the physical, environmental, economic and legal condition
of the Property. Buyer acknowledges that except as otherwise set forth herein,
neither Buyer nor any agent of Buyer has received from Seller, or its
affiliates, any accounting, tax, legal, architectural, engineering, property
management, or other advice or representation with respect to this transaction,
and Buyer is relying solely upon the advice of Buyer's own accounting, tax,
legal, architectural, engineering, property management and other advisors.
Except as otherwise set forth herein, Buyer agrees to purchase the Property in
its "AS IS" condition on the Closing Date, and Buyer expressly assumes the risk
that adverse physical, environmental, legal or economic conditions may not have
been revealed by Buyer's investigation or may arise subsequent to the expiration
of the Contingency Period, however, Buyer does not assume the risk that Seller
has failed to disclose matters which Seller has knowledge of which relate to any
of the due diligence materials delivered to Buyer under Article V hereof or
which relate to the representations and warranties set forth under Article VIII
hereof. Notwithstanding the above, Buyer has relied on the accuracy of all
management and financial records and statements of operation, which have been
prepared by Seller or its agents, or the manager of each Hotel which relate to
the period of time from and after September 1995. Buyer has also relied on the
accuracy of any lists or schedules prepared by Seller or its agents or the
manager of each Hotel which have been delivered to Buyer under Article V of this
Agreement.
8.2 Indemnification. Buyer agrees to defend, indemnify and hold
Seller and Seller's affiliates harmless from and against any and all claims,
liabilities and obligations of every kind and description which arise out of or
relate to the operation of the Hotels from and after the Closing Date and do not
relate to any act or omission of Seller or its agents. Seller agrees to defend,
indemnify, and hold Buyer, and Buyer's affiliates harmless from and against any
and all claims, liabilities, and obligations of every kind and description which
arise out of or result from the operation of the Hotels prior to the Closing
Date. Notwithstanding the foregoing, Seller shall have no obligation to
indemnify, defend or hold Buyer, and Buyer's affiliates harmless from and
against any actions of the prior owners of the Property.
ARTICLE IX
EMPLOYMENT MATTERS
9.1 Claims by Employees. Seller shall indemnify and hold Buyer
harmless from any expense (including attorney's fees and costs), laws, claim,
discrimination, injury, demand, action or award in favor of, or to the benefit
of, any employee or manager relating to employment matters or events arising or
occurring prior to the Close of Escrow. The provisions of this Article shall
survive Close of Escrow and shall continue until either obligations to employees
are paid in full or the final disposition of any action to enforce these
obligations has been completed.
9.2 Employment Laws. Buyer shall not assume any employment
relationship or obligation between Seller and its employees with respect to any
Hotel. Seller will instruct the managers of each Hotel to terminate all
employees of the Hotels as of Close of Escrow and
<PAGE> 20
shall have paid as of the Close of Escrow all compensation and other benefits
due such employees, including accrued vacation and sick pay. Buyer may hire any
or all of the employees of the Hotels upon such terms as Buyer elects. All
obligations of Seller to any employees of the Hotels shall remain obligations of
Seller.
ARTICLE X
RISK OF LOSS
10.1 Notice of Casualty or Condemnation. Seller agrees to give
Buyer prompt written notice of (i) any fire or other casualty affecting all or
any part of the Property occurring between the date of this Agreement and the
Closing Date, and (ii) any taking by condemnation (or sale in lieu thereof) of
all or any part of the Property.
10.2 Termination Upon Damage or Condemnation. If prior to the
Closing Date there shall occur (i) damage to the Property caused by fire or
other casualty the costs of which damage are estimated by Buyer to exceed
$250,000.00 for any Hotel, or the Hotels collectively, to its condition prior to
such occurrence, or any uninsured damage occurs, or (ii) a taking by
condemnation or by sale in lieu thereof of all or any material part of the
Property, then Buyer may in its sole discretion terminate this Agreement by
written notice given to Seller within ten (10) days after Seller has given Buyer
the notice referred in Section 10.1 above. In the event Buyer makes such
election, this Agreement shall terminate, Escrow Agent shall return the Deposit
to Buyer, together with all accrued interest thereon. If the Closing Date is
less than ten (10) days after the date on which Buyer receives a notice given by
Seller pursuant to Section 10.1, Buyer shall be entitled to extend the Closing
Date by an additional ten (10) days so that Buyer can make an informed decision
as to whether to terminate this Agreement.
10.3 Non-termination Upon Damage or Condemnation. If, in the event
of fire or other casualty, Buyer does not elect to terminate this Agreement, or
if the damage is less than $250,000.00, Seller shall, after securing
satisfactory assurances that insurance proceeds will be available for
restoration or repair for all of the estimated cost of such restoration or
repair assign and transfer to Buyer all of such insurance proceeds. Seller shall
cover the cost of any deductible under the policy or policies of insurance for
the Hotels or in the alternative, the parties may agree to reduce the Purchase
Price by the amount of any such deductible. Should Buyer not elect under Section
10.2 to terminate this Agreement in the event of a taking by condemnation,
Seller shall transfer and assign to Buyer at Close of Escrow all condemnation
proceeds or award, if any, which are available or which have not been utilized
to repair or restore the affected portion of the Property.
ARTICLE XI
BOOKINGS
Seller and the manager for each Hotel shall accept and shall not divert
bookings and reservations for room rentals for dates to occur after Close of
Escrow, provided such bookings and reservations are upon the same terms and at
the same rates which the manager of the Hotel would require and charge in the
normal and customary operation of the Hotel. The rates and terms upon which such
bookings may be accepted are the published rates or standard
<PAGE> 21
negotiated rates of the Hotel. Seller shall consult with Buyer regarding any
amendment of the published rates. After the date of this Agreement, Seller shall
not accept any bookings for blocks of rooms in excess of ten (10) rooms for
dates after the Closing Date without obtaining Buyer's prior written consent.
Buyer shall recognize and honor all such bookings and reservations made by
Seller. Seller and the manager for each Hotel shall keep and maintain a complete
and accurate listing of bookings and reservations for room rentals for dates to
occur after Close of Escrow and shall provide such listing and the rates
applicable for such reservations and a certification of the accuracy thereof
(the "Certificate of Reservations") to Buyer within twenty (20) days after the
full execution of this Agreement, and shall update and supplement such
Certificate of Reservations as of the Closing Date.
ARTICLE XII
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
12.1 Reservations and Deposits. A complete and accurate list of
reservations for dates to occur after the Closing Date shall be delivered to
Buyer by Seller at the Close of Escrow. Seller shall certify to all such
reservations and shall certify that such reservations are at the published rates
of each Hotel. Any deposits received by Seller or the manager of each Hotel
prior to the Closing Date on confirmed reservations for dates after the Closing
Date will be paid to Buyer, without setoff, at the Closing Date. Any deposits
received by Seller or each manager after the Closing Date on confirmed
reservations will be forwarded to Buyer by Seller immediately upon Seller's
receipt of same. After the Closing Date if any guest proves that he or she had a
confirmed reservation which was made by the manager of the Hotel at less than
the rates so certified by Seller, then Seller will, within ten (10) days after
notice from Buyer accompanied with verification of such facts, reimburse Buyer
for the difference.
12.2 Tray Ledger From Registered Guest; Accounts Receivable. Buyer
shall receive, as part of the Property purchased, the transient guest room
rentals payable from registered guests who have not checked out and who are
occupying rooms at 12:01 a.m, on the Closing Date, which are herein defined as
the "tray ledger." Payment of such tray ledger is hereby guaranteed by Seller.
If any accounts in the tray ledger are not paid at check-out by the guest, or if
paid at check-out by check or credit card and such payment is dishonored by the
drawer's bank or the credit card company, then Buyer shall give notice of such
unpaid receivables in the tray ledger to Seller, and Seller shall, within ten
(10) days after receipt of such notice, pay to Buyer the face value of such
unpaid accounts receivable of the tray ledger, including credit card service
charges. The full amount of any such unpaid receivable in the tray ledger which
Seller has so paid shall thereupon be assigned by Buyer to Seller for
collection. This obligation of Seller to guarantee payment of the tray ledger
shall terminate with respect to any delinquent accounts for which notice was not
given by Buyer to Seller within ninety (90) days after Close of Escrow.
12.3 Receivables Not Conveyed. All receivables (which excludes the
tray ledger), originating or arising prior to the Closing Date are not a part of
the Property purchased, shall not be assigned or transferred at Close of Escrow
by Seller to Buyer, but shall be retained by Seller. Buyer shall have no
obligation to collect any such accounts receivable for Seller, however, but any
amounts collected or received by Buyer after the Closing Date in payment of any
particular receivable accrued prior to the Closing Date shall be remitted by
Buyer to Seller
<PAGE> 22
on a monthly basis. Buyer agrees to cooperate with Seller with regard to
collection of Seller's receivables which are retained by Seller, but Buyer will
have no liability with regard to failure to collect such Receivables.
12.4 Accounts Payable Prior to Closing. Seller shall pay or cause
to be paid all liabilities and obligations of the Property incurred through the
Closing Date, including but no limited to all accounts payable, trade payables,
rents, taxes, license and permit fees, impositions, and employee compensation,
and Seller shall indemnify, defend and save Buyer harmless from any and all
claims, damages, actions, suits, proceedings, demands, assessments judgments,
costs (including attorneys' fees), and other expenses connected with the
foregoing. Notwithstanding the foregoing, it is understood that Seller or the
manager of a Hotel may postpone payment of an account payable which is the
subject of a bona fide dispute, or in case final bills are not rendered until
after the Closing Date; provided that nothing herein contained shall in any
manner modify or limit the indemnity contained in the prior sentence. Buyer
shall assume no liability for accounts payable, trade payables, rents, taxes,
license and permit fees, impositions or employee compensation or claims which
relate to the period of time prior to the Closing Date.
ARTICLE XIII
INVENTORY OF PERSONAL PROPERTY
13.1 Inventory Prior to Closing. Prior to the Close of Escrow,
Seller shall keep and maintain that normal inventory of supplies and Personal
Property which would be maintained by a prudent owner of first-class hotel of
similar size and location as the Property and its related businesses. Such
inventory shall include 3 par of linen for the Hotels, which means one complete
set of linen in the rooms, and two complete sets of linen in storage or
cleaning. Within ten (10) days after the full execution of this Agreement,
representatives of Seller and Buyer shall conduct an inventory of supplies and
Personal Property. Such inventory shall be listed in form and manner reasonably
satisfactory to Buyer, and shall be signed and initialed by the persons taking
the inventory. Copies of such inventory shall be promptly given to Seller and
Buyer.
13.2 Inventory at Closing. Within three (3) days prior to the
Closing Date, representatives of Seller and Buyer shall conduct a second
inventory of the supplies and Personal Property, satisfactory to Buyer and
Seller, to be conveyed under this Agreement. In the event said second inventory
discloses material deficiencies in the level of inventory required under Section
13.1 above, Seller shall restore said deficiencies prior to the Closing Date or,
alternatively, Buyer shall receive a credit against the Purchase Price equal to
the cost, as reasonably determined by Buyer, to replace such deficiency. For
purposes of this Section 13.2, "material" shall mean $200.00.
13.3 Food and Beverage Inventory. Prior to the Closing Date, Seller
will maintain food and beverage inventories at levels consistent with 90% of
wholesale cost of the maximum level maintained by Seller in November of 1995. As
of the Closing Date, Seller will have on hand at each Hotel, or will have on
order for delivery in the ordinary course of business, food and beverage
inventories equal to 90% of such wholesale cost of such maximum level. All such
food and beverage inventories on hand or on order by Seller shall be paid for
<PAGE> 23
by Seller but shall become the property of Buyer upon the Close of Escrow as
part of the Purchase Price for the Property. In the event of any material
shortage in these inventories as of Close of Escrow, Buyer shall receive a
credit against the Purchase Price equal to the cost, as reasonably determined by
Buyer, to remedy such shortage. For purposes of this Section 13.3, "material"
shall mean $200.00.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Real Estate Brokers; Representations and Indemnity. Seller and
Buyer each represent and warrant that except for Pacific Hotel/Motel Brokers who
notified Buyer of the potential opportunity to acquire the Property and Hodges
Ward Elliot who is Seller's broker, they have dealt with no real estate brokers
in connection with this transaction. The parties each hereby agree, jointly and
severally, to indemnify, defend and hold each other harmless from any other
claims, costs, suits and actions for brokerage commissions, finder's fees or
other commissions relative to this Agreement, incurred by reason of any claim by
any person or broker claiming to have been engaged by or on behalf of the
indemnifying party, or with whom the indemnifying party is claimed to have made
an agreement for compensation. Seller shall pay all real estate brokerage costs
associated with Buyer's acquisition of the Property and shall indemnify Buyer
from and against any claims made against Buyer for such real estate brokerage
commissions.
14.2 No Shop Period. For the term of this Agreement, including any
extensions thereof, Seller agrees not to market the Property nor enter into any
binding commitment with any party other than Buyer or Buyer's assignee for the
purchase and sale of the Property.
14.3 Attorney's Fees. If either party files any action or brings
any proceeding against the other arising from this Agreement, or is made a party
to any action or proceeding brought by the Escrow Holder, then the prevailing
party shall be entitled to recover as an element of its costs of suit, and not
as damages, reasonable attorney's fees to be fixed by the court, including fees
on appeal.
14.4 Notices. Any notices and demands to either party or to Escrow
Holder shall be given in writing either by personal deliver, overnight courier
or by registered or certified mail, postage prepaid, return receipt requested,
and addressed as follows:
To Seller: HL Project I Limited Liability Company
c/o HongkongBank
140 Broadway, 4th Floor
New York, NY 10005-1196
Attn: Ms. J.N. Rider, Senior Vice President
<PAGE> 24
With Copy To: Miller, Nash, Wiener, Hager & Carlsen
3500 U.S. Bancorp Tower
111 S.W. Fifth Avenue, Suite 3500
Portland, Oregon 97204-3699
Attn: Jonathon L. Goodling
To Buyer: Sunstone Hotel Investors, L.P.
115 Calle de Industrias, Suite 201
San Clemente, CA 92672
With Copy To: Brobeck, Phleger & Harrison
4675 MacArthur Court, Suite 1000
Newport Beach, CA 92660
Attn: R. Terrence Crowley
To Escrow Holder: Fidelity National Title Insurance Company
17911 Von Karman Avenue, Suite 540
Irvine, CA 92714
Attn: Patty Beverly
Either party may, from time to time, by written notice to the other
party and Escrow Holder, designate a different address which shall be
substituted for the one specified above. If any notice or other document shall
be sent by mail as aforesaid, the same shall be deemed to have been effectively
served or delivered at the expiration of forty-eight (48) hours following the
deposit of said notice in the United States mail in the manner set forth above.
14.5 Tax Reassessment; Refunds.
14.5.1 Seller shall be solely responsible for real property
special tax assessments (and related interest) for improvements already made to
the Property for periods prior to the Close of Escrow.
14.5.2 Buyer and Seller understand that the Real Property
and Improvements may be reassessed for real property tax purposes upon change of
ownership, that a supplemental tax bill may be issued, reflecting any increase
or decrease in real property taxes upon the reassessed value of the Real
Property and Improvements, and that Buyer shall be solely responsible to pay
such taxes. In the event of any reassessment, appeal, tax protest or similar
matter resulting in a refund of property taxes attributable to the period prior
to the Close of Escrow, then Seller shall be entitled to any such refund and, if
received by Buyer, Buyer agrees to pay Seller the refund attributable to the
period prior to the Close of Escrow upon receipt thereof.
14.6 Cooperation with Ground Lessors. Seller understands that Buyer
desires to acquire fee title to the Hotels located in the State of Oregon. In
that regard, Seller shall assist Buyer and cooperate with Buyer's efforts to
acquire the fee title to the Real Property for such Hotels. Notwithstanding the
above, Buyer's acquisition of fee title to such Hotels is not a condition to
Buyer's acquisition of the Property.
<PAGE> 25
14.7 Foreign Investment in Real Property Tax Act. The Seller and
Buyer understand that the Foreign Investment in Real Property Tax Act
("FIRPTA"), Internal Revenue Code section 445, requires that every purchaser of
United States real property must, unless an exemption applies, deduct and
withhold from Seller's proceeds ten percent (10%) of the gross sales price. The
primary exemptions which might be applicable are: (a) Seller provides Buyer with
an affidavit under penalty of perjury, that Seller is not a "foreign person," as
defined in FIRPTA, or, (b) Seller provides Buyer with a "qualifying statement,"
as defined in FIRPTA, issued by the Internal Revenue Service. Seller and Buyer
agree to execute and deliver as appropriate, any instrument, affidavit and
statement, and to perform any acts reasonably necessary to carry out the
provisions of FIRPTA and regulations promulgated thereunder.
14.8 Binding Effect. This Agreement is binding on the heirs,
executors, administrators, successors, and assigns of the respective parties
hereto.
14.9 Further Actions. Each party agrees to take such actions and to
execute and deliver such documents as may be reasonably necessary to effectuate
the purposes and terms of this Agreement.
14.10 Survival. This Agreement shall survive the Close of Escrow and
shall remain a binding contract between the parties hereto. All representations
and warranties made in this Agreement shall survive the closing of this
Agreement except that any party to whom a representation or warranty has been
made in this Agreement shall be deemed to have waived any claims for breach of
representation or warranty where such party had knowledge that such
representation or warranty was not true when made. Any party learning of a
misrepresentation or breach of representation or warranty under this Agreement
shall immediately give written notice thereof to all other parties to this
Agreement. The representations and warranties in this Agreement shall terminate
one year from the Closing Date and such representations or warranties shall
thereafter be without force or effect, except any claim under such
representation or warranties which is made prior to such termination date, and
with respect to which notice has been given to the party to be charged, shall
not terminate, and shall survive such termination date.
14.11 Authority. Any individual signing this Agreement on behalf of
a corporation, partnership, trust or other entity, represents and warrants that
they have full authority to do so.
14.12 Entire Agreement. This Agreement, including the exhibits
attached hereto, contains the entire agreement between Buyer and Seller with
respect to the subject matter hereof. All prior agreements, representations,
understandings, and writings concerning the subject matter herein are expressly
superseded hereby and are of no further force or effect.
14.13 Modification. This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived, except
by written instrument signed by the party to be charged or by its agent duly
authorized in writing or as otherwise permitted herein.
<PAGE> 26
14.14 No Third Party Beneficiaries. This Agreement does not create,
and it shall not be construed as creating, any rights enforceable by any person
not a party to this Agreement.
14.15 Time of Essence. Seller and Buyer hereby acknowledge and agree
that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a breach of and a default under this Agreement by the party so
failing to perform.
14.16 Governing Law. This Agreement shall be deemed to have been
made in California, and shall be governed by, interpreted under and construed
and enforceable in accordance with the laws of the State of California except to
the extent Oregon or Washington law may apply on a mandatory basis as a result
of the location of the Property. The parties hereby agree that the courts of the
State of California shall have sole and exclusive jurisdiction with respect to
the resolution of any dispute or controversy arising out of this Agreement or
the transactions contemplated herein except to the extent the venue for any such
dispute must take place in the courts of the State of Oregon or Washington on a
mandatory basis.
14.17 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A copy of this Agreement
sent by telecopier with facsimile signatures shall be deemed an original, but an
executed original shall follow by mail or overnight courier.
14.18 Section Heading. The headings and captions of the various
paragraphs of this Agreement have been inserted only for the purpose of
convenience, and shall be given no effect in the construction or interpretation
of this Agreement.
14.19 Severability. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of the Agreement shall remain in effect
at the option of the party for whose benefit such provision was made.
14.20 Exhibits. Any exhibits attached hereto are an integral part of
this Agreement and are incorporated herein by reference.
14.21 Interpretation. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative drafted such provision.
14.22 Land Use. THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE
WITHIN A FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS SUBJECT
TO LAND USE LAWS AND REGULATIONS, WHICH, IN FARM OR FOREST ZONES, MAY NOT
AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE AND WHICH LIMIT LAWSUITS AGAINST
FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930 IN ALL ZONES. BEFORE
SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE
PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING
<PAGE> 27
DEPARTMENT TO VERIFY APPROVED USES AND EXISTENCE OF FIRE PROTECTION FOR
STRUCTURES.
14.23 Confidentiality. As a condition to being furnished the
information regarding the business, operations and financial condition of the
Property, Buyer shall treat the information as confidential, shall refrain from
disclosing the information to any person other than Buyer's representatives
having a need to know the information, and shall use the information exclusively
for evaluating the proposed acquisition.
Buyer shall cause its representatives receiving any of the information
to comply with the obligations imposed on Buyer by this letter. Buyer and its
representatives shall continue to be bound indefinitely by the obligations set
forth in this confidentiality clause unless the acquisition is consummated.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"SELLER" "BUYER"
HL PROJECT I LIMITED LIABILITY SUNSTONE HOTEL INVESTORS, L.P.,
COMPANY, a Delaware limited liability a Delaware limited partnership
company
By: Sunstone Hotel Investors, Inc.,
Its General Partner
By: /s/ Robert Patton
----------------------------------
By: /s/ Robert A. Alter
Its: Secretary ----------------------------
--------------------------------- Robert A. Alter, President
By: /s/ J.N. Rider
----------------------------------
Its: Executive Vice President
---------------------------------
<PAGE> 28
EXHIBIT A
Cypress Inn - Kent, Washington
This three-story interior-corridor conunercial hotel, consisting of
four buildings around an inner courtyard, opened in 1987. The property
contains 120 guest rooms, including 24 king suites with kitchens,
outdoor swimming pool and five meeting rooms. The hotel improvements
are in relatively good condition. The adjacent Mitzel's restaurant is
leased from the hotel. The property is located at 22218 84th Avenue
South in the City of Kent, Washington.
Cypress Inn - Everett, Washington
This three-story interior-corridor commercial hotel, consisting of one
building, opened in 1986. The property contains 70 guest rooms, two
meeting rooms and an outdoor swimming pool. The hotel improvements are
in moderately good condition. The property is located at 12619 4th
Avenue NW in the City of Everett, Washington.
Cypress Inn - Poulsbo, Washington
This two-story interior-corridor commercial hotel, consisting of one
building, opened in 1987. The property contains 63 guest rooms, one
meeting room and an outdoor swimming pool. The hotel improvements are
in moderately good condition. The property is located at 19801 NE 7th
in the City of Poulsbo, Washington.
Cypress Inn - Downtown-Portland, Oregon
This two- and five-story exterior-corridor commercial hotel, consisting
of two buildings, opened prior to 1970. The property contains 83 guest
rooms and one meeting room. The hotel improvements are in poor
condition. The property is located at 809 SW King in the City of
Portland, Oregon.
Cypress Inn - Clackamas, Oregon
This four-story interior-corridor commercial hotel, consisting of one
building, opened in approximately 1987. The property contains 78 guest
rooms and three meeting rooms. The hotel improvements are in moderately
good condition. The property is located at 9040 SE Adams in the City of
Clackamas, Oregon.
<PAGE> 29
Cypress Inn - Stark-Portland, Oregon
This three-story interior-corridor commercial hotel, consisting of one
building, opened in 1988. The property contains 105 guest rooms, two
meeting rooms, and an outdoor swimming pool. The hotel improvements are
in moderately good condition. The property is located at 9707 SE Stark
in the City of Portland, Oregon.
