SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
SUNSTONE HOTEL INVESTORS, INC.
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(Name of Issuer)
COMMON STOCK, par value $0.01 per share
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(Title of Class of Securities)
867933 10 3
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(CUSIP Number)
Robert A. Alter
Sunstone Hotel Properties, Inc.
903 Calle Amanecer
San Clemente, California 92673-6212
With a copy to:
Steven L. Lichtenfeld, Esq.
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, New York 10022
(212) 856-7000
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
April 5, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box |_|.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 14
<PAGE>
CUSIP NO. 867933 10 3 Page 2 of 14 pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
Robert A. Alter
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
NUMBER OF 427,564 (See Item 5)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH
REPORTING 0
PERSON WITH ------------------------------------------------------
9 SOLE DISPOSITIVE POWER
427,564 (See Item 5)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
427,564
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
4,448,914
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.1% (See Item 5)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 867933 10 3 Page 3 of 14 pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
Charles L. Biederman
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
NUMBER OF 462,047 (See Item 5)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH
REPORTING 0
PERSON WITH ------------------------------------------------------
9 SOLE DISPOSITIVE POWER
462,047 (See Item 5)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
462,047 (See Item 5)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
4,414,431
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.2% (See Item 5)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 867933 10 3 Page 4 of 14 pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
Randy C. Hulce
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
NUMBER OF 0 (See Item 5)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH
REPORTING 0
PERSON WITH ------------------------------------------------------
9 SOLE DISPOSITIVE POWER
0 (See Item 5)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (See Item 5)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
4,876,478
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (See Item 5)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 867933 10 3 Page 5 of 14 pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
Douglas C. Sutten
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
NUMBER OF 0 (See Item 5)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH
REPORTING 0
PERSON WITH ------------------------------------------------------
9 SOLE DISPOSITIVE POWER
0 (See Item 5)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (See Item 5)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
4,876,478
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (See Item 5)
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 867933 10 3 Page 6 of 14 pages
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Item 1. Security and Issuer.
-------------------
This statement on Schedule 13D (the "Statement") relates to the shares of
$0.01 par value per share of common stock ("Common Stock") of Sunstone Hotel
Investors, Inc., a Maryland corporation (the "Company"). The address of the
principal executive office of the Company is 903 Calle Amanecer, San Clemente,
California 92673-6212.
Item 2. Identity and Background.
-----------------------
(a)-(b) This Statement is being filed jointly by:
(i) Robert A. Alter ("Mr.Alter"), an individual with his
office at Sunstone Hotel Properties, Inc., a Colorado
corporation (the "Lessee"), 903 Calle Amanecer, San
Clemente, California 92673-6212;
(ii) Charles L. Biederman ("Mr. Biederman"), an individual
with his office at Sunstone Hotel Investors, Inc., 903
Calle Amanecer, San Clemente, California 92673-6212;
(iii) Randy C. Hulce ("Mr. Hulce"), an individual with his
office at Sunstone Hotel Properties, Inc., 903 Calle
Amanecer, San Clemente, California 92673-6212;
(iv) Douglas C. Sutten ("Mr. Sutten"), an individual with
his office at Sunstone Hotel Properties, Inc., 903
Calle Amanecer, San Clemente, California 92673-6212;
(the foregoing clauses (i)-(iv), collectively the
"Reporting Persons").
(c) (i) The principal occupation of Mr. Alter is President,
Chief Executive Officer, Secretary and Chairman of the
Board of the Company. Mr. Alter also serves as
Chairman of the Board of the Lessee.
(ii) The principal occupation of Mr. Biederman is Executive
Vice President and acting Vice Chairman of the Board of
the Company and President of Woodstone Homes, Inc.
(iii) The principal occupation of Mr. Hulce is President and
Chief Executive Officer of the Lessee.
(iv) The principal occupation of Mr. Sutten is Chief
Financial Officer of the Lessee.
(d) None of the Reporting Persons, during the last five
years, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) None of the Reporting Persons, during the last five years, has been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Each of Robert A. Alter, Charles L. Biederman, Randy C. Hulce and
Douglas C. Sutten is a United States citizen.
Each of the Reporting Persons states that he or it, as the case may be, is
included in this filing solely for the purpose of presenting information with
respect to the ownership of the shares of Common Stock and disclaims any
knowledge, except as hereinafter expressly set forth, as to any statements made
herein on behalf of any other Reporting Person. Each Reporting Person is signing
this statement only as to information respecting or furnished by such person,
and makes no representation as to information furnished by any other Reporting
Person.
<PAGE>
CUSIP NO. 867933 10 3 Page 7 of 14 pages
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As described in Items 3 and 4 below, on April 5, 1999, SHP Acquisition,
L.L.C., a Delaware limited liability company ("SHP Acquisition") submitted a
merger proposal to the Company pursuant to which it would acquire the Company
and holders of Common Stock (other than certain holders described in Item 4
below) would receive consideration of $9.50 to $10.00 per share in cash in
exchange for their shares. SHP Acquisition is a Delaware limited liability
company newly formed by Mr. Alter and Westbrook Fund III Acquisitions, L.L.C., a
Delaware limited liability company ("WF III") (which is a wholly owned
subsidiary of Westbrook Real Estate Partners Management III, L.L.C., a Delaware
limited liability company ("WREM III") and Westbrook Real Estate Co-Investment
Partnership III, L.P., a Delaware limited partnership ("WRECIP III").
The Reporting Persons together with WF III, WREM III, WRECIP III and
certain other entities and individuals identified below (collectively, the
"Westbrook Affiliates") may be deemed to constitute a "group" within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Neither the present filing nor anything contained herein shall
be construed as (i) an admission that the Reporting Persons together with any of
the Westbrook Affiliates constitute a "person" or "group" for any purpose or
(ii) an admission that the Reporting Persons are, for the purposes of Section
13(d) or 13(g) of the Exchange Act, the beneficial owners of any of the
securities owned by any of the Westbrook Affiliates. Pursuant to Rule
13d-1(k)(2) under the Exchange Act, the Reporting Persons are filing this
Statement on their own behalf and not on behalf of any other person.
The Reporting Persons have been advised by Westbrook Real Estate Fund III,
L.P. ("WREF III") of the following information with respect to the Westbrook
Affiliates:
The Westbrook Affiliates are defined as (i) WF III, (ii) WREM III, (iii)
WRECIP III, (iv) Westbrook Real Estate Fund I, L.P. ("WREF I"), (v) Westbrook
Real Estate Co-Investment Partnership I, L.P. ("WRECIP I"), (vi) Westbrook Real
Estate Partners Management I, L.L.C. ("WREM I"), (vii) Westbrook Real Estate
Partners, L.L.C., ("WREP"), (viii) Gregory J. Hartman ("Mr. Hartman"), a member
of WREP, (ix) Paul D. Kazilionis ("Mr. Kazilionis"), a member of WREP, (x)
Jonathan H. Paul ("Mr. Paul"), a member of WREP, (xi) William H. Walton III
("Mr. Walton"), a member of WREP, (xii) WREF III and (xiii) SHP Acquisition.
WF III is a Delaware limited liability company whose principal business is
to make direct and indirect investments in real estate and real estate
interests. The principal executive office of WF III is located at 599 Lexington
Avenue, Suite 3800, New York, New York 10022.
WREM III is a Delaware limited liability company whose principal business
is to serve as the general partner of each of WREF III and WRECIP III. The
principal executive office of WREM III is located at 599 Lexington Avenue, Suite
3800, New York, New York 10022.
WRECIP III is a Delaware limited partnership whose principal business is to
make direct and indirect investments in real estate and real estate interests.
The principal executive office of WRECIP III is located at 599 Lexington Avenue,
Suite 3800, New York, New York 10022.
WREF I is a Delaware limited partnership whose principal business is to
make direct and indirect investments in real estate and real estate interests.
The principal executive office of WREF I is located at 599 Lexington Avenue,
Suite 3800, New York, New York 10022.
WRECIP I is a Delaware limited partnership whose principal business is to
make direct and indirect investments in real estate and real estate interests.
The principal executive office of WRECIP I is located at 599 Lexington Avenue,
Suite 3800, New York, New York 10022.
WREM I is a Delaware limited liability company whose principal business is
to serve as the general partner of each of WREF I and WRECIP I. The principal
executive office of WREM I is located at 599 Lexington Avenue, Suite 3800, New
York, New York 10022.
WREP is a Delaware limited liability company whose principal business is to
serve as the managing member of WREM I, WREM III and as the managing member of
similar funds. The principal executive office of WREP is located at 599
Lexington Avenue, Suite 3800, New York, New York 10022.
<PAGE>
CUSIP NO. 867933 10 3 Page 8 of 14 pages
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Mr. Hartman is a United States citizen whose principal occupation is his
activities on behalf of WREP. The principal business address for Mr. Hartman is
11150 Santa Monica Boulevard, Suite 1450, Los Angeles, California 90025.
Mr. Kazilionis is a United States citizen whose principal occupation is his
activities on behalf of WREP. The principal business address for Mr. Kazilionis
is 284 South Beach Road, Hobe Sound, Florida 33455.
Mr. Paul is a United States citizen whose principal occupation is his
activities on behalf of WREP. The principal business address for Mr. Paul is 599
Lexington Avenue, Suite 3800, New York, New York 10022.
Mr. Walton is a United States citizen whose principal occupation is his
activities on behalf of WREP. The principal business address for Mr. Walton is
599 Lexington Avenue, Suite 3800, New York, New York 10022.
WREF III is a Delaware limited partnership whose principal business is to
make direct and indirect investments in real estate and real estate interests.
The principal executive office of WREF III is located at 599 Lexington Avenue,
Suite 3800, New York, New York 10022.
SHP Acquisition is a Delaware limited liability company whose principal
business is to engage in the Proposed Transactions (as defined in Item 4 below).
The principal office address of SHP Acquisition is 903 Calle Amanecer, San
Clemente, California 92673-6212.
WREF III has advised the Reporting Persons that, during the last five
years, to the best knowledge of WREF III, none of the Westbrook Affiliates has
been (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining any future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violations with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
The Proposed Transactions (as defined in Item 4 below) would be funded
through a combination of equity and debt financing. Pursuant to a letter dated
April 5, 1999 between WF III and Mr. Alter (such letter, together with the
"Summary of Terms" attached thereto, the "Letter Agreement") (Exhibit 2 to this
Statement), Mr. Alter has agreed to contribute to SHP Acquisition all shares of
Common Stock and OP Units (as defined in Item 4 below) beneficially owned by
him. In addition, subject to the terms and conditions of the Letter Agreement,
WREF III and WRECIP III are prepared to provide equity for the Proposed
Transactions. WREF III has entered into an agreement with Mr. Alter, dated April
5, 1999 (such letter, the "WREF III Letter") (Exhibit 3 to this Statement), in
which WREF agrees to be bound by certain provisions of the Letter Agreement. SHP
Acquisition has had discussions with an affiliate of PaineWebber, Inc. to
provide debt financing to consummate the Proposed Transactions; however, SHP
Acquisition has not yet received a commitment letter with respect to the debt
financing for the Proposed Transactions, and there is no assurance that one will
be successfully obtained. In addition, the proposed financing of the Proposed
Transactions may change based on availability of such financing and other facts
and circumstances with respect to such Proposed Transactions or financing.
None of the Reporting Persons has contributed any funds or other
consideration toward the purchase of the shares of Common Stock that may be
deemed to be beneficially owned by the Westbrook Affiliates as described in Item
5.
The transactions contemplated by the Letter Agreement are subject to a
number of terms and conditions set forth therein, including, among others, the
approval of the Company's Board of Directors, the execution of mutually
acceptable documentation and the satisfaction of the conditions set forth in the
Proposal Letter (as defined in Item 4 below). The information set forth in
response to this Item 3 is qualified in its entirety by reference to the Letter
Agreement and the WREF III Letter, each of which is expressly incorporated
herein by reference.
<PAGE>
CUSIP NO. 867933 10 3 Page 9 of 14 pages
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Item 4. Purpose of Transaction.
----------------------
As described in a letter, dated April 5, 1999, from SHP Acquisition to the
Company (the "Proposal Letter") (Exhibit 4 to this Statement), SHP Acquisition
has made a proposal with respect to a transaction in which (i) SHP Acquisition
would acquire all of the Company's interests in Sunstone Hotel Investors, L.P.,
a Delaware limited partnership ("Sunstone OP") which is the operating
partnership of the Company, and would acquire or receive a contribution of
certain stock and certain assets of Lessee and Sunstone Hotel Management, Inc.,
a Colorado corporation (the "Management Company") (collectively, the "Subsidiary
Acquisitions") and (ii) a subsidiary of SHP Acquisition would merge with and
into the Company (the "Company Merger"). Pursuant to the proposed terms of the
Company Merger, each holder of Common Stock other than Mr. Alter and dissenting
shares (but including WREF I and WRECIP I) would receive an amount per share in
cash (the "Cash Price"). The Cash Price specified in the Proposal Letter is
$9.50 to $10.00. Pursuant to the proposed terms of the Company Merger, the
holders of outstanding partnership units in Sunstone OP ("OP Units") other than
SHP Acquisition and Mr. Alter would receive, at the election of the holders
thereof, either cash (in an amount per OP Unit equal to the Cash Price) or
redeemable perpetual preferred units (in a face amount per OP Unit equal to the
Cash Price). The Preferred Stock held by WREF I and WRECIP I would be redeemed
in accordance with its terms for a cash amount equal to its liquidation
preference plus accrued and unpaid dividends. The Company Merger and the
Subsidiary Acquisitions are collectively referred to herein as the "Proposed
Transactions." In connection with the Proposed Transactions, the Common Stock
would be delisted from the New York Stock Exchange and would be deregistered
under the Exchange Act.
The Proposal Letter provides that the Proposed Transactions would be
subject to a number of conditions, including, among others, (i) completion of
the financing arrangements necessary to consummate the Proposed Transactions,
(ii) approval by the Company's Board of Directors and shareholders pursuant to
the requirements of Maryland law and the rules of the New York Stock Exchange,
(iii) any required approval by the holders of the OP Units, (iv) receipt of any
consents of third parties required under material contracts of the Company,
Lessee and the Management Company, (v) the Company having balance sheet
liabilities at the closing of the Proposed Transactions not in excess of those
shown on its consolidated balance sheet dated as of March 31, 1999, (vi)
completion of confirmatory due diligence and (vii) the negotiation and execution
of definitive agreements providing for the Proposed Transactions and the
transactions described in the Letter Agreement and the satisfaction of the
conditions set forth therein, including a mutually satisfactory definitive
merger agreement which would contain customary covenants, representations,
warranties, conditions and other provisions normal to such agreements. Under the
terms of the Proposal Letter, the merger agreement would prohibit the Company
from soliciting indications of interest from other persons with respect to an
acquisition of the Company, although it would permit the Board of Directors of
the Company to respond to inquiries from and provide information to bona fide
interested third parties and, subject to reimbursement of expenses and payment
of a termination fee in the amount of 3% of the total transaction value (which
value shall include the total price to be paid to the Company's shareholders,
all debt to be assumed or refinanced and all fees and expenses), terminate the
merger agreement if it determined to accept an alternative transaction.
SHP Acquisition's proposal contained in the Proposal Letter expires by its
terms at 5:00 p.m. on April 19, 1999. The Reporting Persons expect to evaluate
on an ongoing basis the Company's financial condition, business, operations and
prospects, market price of the Company Common Stock, conditions in securities
markets generally, general economic and industry conditions and other factors.
Accordingly, the Reporting Persons reserve the right to change their plans and
intentions at any time, as they deem appropriate, and may or may not submit a
revised proposal or extend the expiration date of the proposal contained in the
Proposal Letter and reserve the right to terminate, modify or withdraw the
proposal contained in the Proposal Letter. In particular, the Reporting Persons
may at any time and from time to time acquire shares of Common Stock or
securities convertible or exchangeable for Common Stock or dispose of shares of
Common Stock, or exchange OP Units which they have acquired for Common Stock.
Any such transactions may be effected at any time and from time to time subject
to any applicable limitations of the Securities Act of 1933, as amended, and the
Exchange Act.
The Reporting Persons have been advised that each of the Westbrook
Affiliates originally acquired the shares of Common Stock beneficially owned by
each of them for investment purposes pursuant to the terms of a stock purchase
agreement dated as of August 5, 1997.
<PAGE>
CUSIP NO. 867933 10 3 Page 10 of 14 pages
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Other than as described above in Item 3 and this Item 4, none of the
Reporting Persons have, and the Reporting Persons have been advised by WREF III
that none of the Westbrook Affiliates have any plans or proposals which relate
to or would result in any of the matters described in subparagraphs (a) through
(j) of Item 4 of Schedule 13D (although they reserve the right to develop such
plans).
The information set forth in response to this Item 4 is qualified in its
entirety by reference to the Proposal Letter (Exhibit 4 to this Statement),
which is expressly incorporated herein by reference.
Item 5. Interest in Securities of the Issuer.
------------------------------------
Unless otherwise noted, the percentages of Common Stock indicated in this
Item 5 are based on 37,638,427 shares of Common Stock reported outstanding by
the Company as of March 5, 1999 as disclosed in the Company's most recent 10-K
filed with the Securities and Exchange Commission.
(a) (i) Mr. Alter beneficially owns 427,564 shares of Common Stock which
includes (i) 42,000 shares of Common Stock underlying stock options which are
currently exercisable or which become exercisable within 60 days after March 24,
1999 and (ii) 385,564 OP Units, which includes 65,600 OP Units owned by
Riverside Hotel Partners (in which Mr. Alter has an 82% interest) and 1,003 OP
Units owned by Alter Investment Group, Ltd. Pursuant to the limited partnership
agreement of the Sunstone OP, the OP Units are redeemable for cash, or at the
election of the Company, Common Stock. Mr. Alter's holdings constitute
approximately 1.1 percent of the Common Stock. The number of shares of Common
Stock set forth in this Statement for Mr. Alter includes the number he could
receive if he redeemed his OP Units for shares of Common Stock under certain
circumstances. The percentages with respect to beneficial ownership for Mr.
Alter contained in this Item 5 assume that all OP Units held by Mr. Alter, but
no OP Units held by any other person, are redeemed for Common Stock.
(ii) Mr. Biederman beneficially owns 462,047 shares of Common Stock which
includes (i) 38,680 shares of Common Stock, (ii) 26,320 shares of Common Stock
underlying stock options which are currently exercisable or which become
exercisable within 60 days after March 24, 1999 and (iii) 397,047 OP Units,
which includes 14,400 OP Units owned by Riverside Hotel Partners (in which Mr.
Biederman has an 18% interest). Pursuant to the limited partnership agreement of
the Sunstone OP, the OP Units are redeemable for cash, or at the election of the
Company, Common Stock. Mr. Biederman's holdings constitute approximately 1.2
percent of the Common Stock. The number of shares of Common Stock set forth in
this Statement for Mr. Biederman includes the number he could receive if he
redeemed his OP Units for shares of Common Stock under certain circumstances.
The percentages with respect to beneficial ownership for Mr. Biederman contained
in this Item 5 assume that all OP Units held by Mr. Biederman, but no OP Units
held by any other person, are redeemed for Common Stock.
(iii) Mr. Hulce does not beneficially own any shares of Common Stock or OP
Units.
(iv) Mr. Sutten does not beneficially own any shares of Common Stock or OP
Units.
The Reporting Persons may be deemed to beneficially own, an aggregate of
889,611 shares of Common Stock (including 68,320 options to purchase shares of
Common Stock which are currently exercisable or which become exercisable within
60 days after March 24, 1999 owned by the Reporting Persons and 782,611 OP Units
owned by the Reporting Persons), representing approximately 2.3% of the
outstanding Common Stock. The Reporting Persons are direct owners of an
aggregate of 38,680 shares of Common Stock; 68,320 shares of Common Stock
underlying stock options which are currently exercisable or which become
exercisable within 60 days after March 24, 1999 and 782,611 OP Units. The
foregoing percentages with respect to beneficial ownership for Messrs. Alter and
Biederman assume that all OP Units held by Messrs. Alter and Biederman, but no
OP Units held by any other person, are redeemed for Common Stock.
The Reporting Persons have been advised by WREF III that WREF I is the
record owner of 2,049,135 shares of Common Stock (the "WREF I Common Shares")
and 224,266.60 shares of Class A Cumulative Convertible Preferred Stock, par
value $0.01 per share (the "Preferred Stock"). As of the date of this filing,
224,266.6 shares of WREF I's Preferred Stock are presently convertible into
1,524,659 shares of Common Stock
<PAGE>
CUSIP NO. 867933 10 3 Page 11 of 14 pages
- ---------------------- --------------------
(the "WREF I Conversion Shares"). The calculation of the number of WREF I
Conversion Shares was determined by WREF III in accordance with Section 5 of the
Articles Supplementary of the Company.
The Reporting Persons have been advised by WREF III that WRECIP I is the
record owner of 235,127 shares of Common Stock (the "WRECIP I Common Shares")
and 25,733.4 shares of Preferred Stock. As of the date of this filing, 25,733.4
shares of WRECIP I's Preferred Stock are presently convertible into 174,946
shares of Common Stock (the "WRECIP I Conversion Shares"). The calculation of
the number of WRECIP I Conversion Shares was determined by WREF III in
accordance with Section 5 of the Articles Supplementary of the Company.
The Reporting Persons have been advised by WREF III that in his capacity as
a member of the Board of Directors of the Company, Mr. Kazilionis has been
granted stock options, with respect to 3,000 shares of Common Stock which are
currently exercisable (the "Director Options"). Mr. Kazilionis has assigned all
beneficial ownership of all Director Options to WREF I and WRECIP I.
The Reporting Persons have been advised by WREF III that as the sole
general partner of WREF I and WRECIP I, WREM I may be deemed to own beneficially
the WREF I Common Shares, the WRECIP I Common Shares, the WREF I Conversion
Shares, the WRECIP I Conversion Shares and the Director Options pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Act"). As the
sole managing member of WREM I, WREP may be deemed to own beneficially the WREF
I Common Shares, the WRECIP I Common Shares, the WREF I Conversion Shares, the
WRECIP I Conversion Shares and the Director Options pursuant to Rule 13d-3 under
the Act. As the managing members of WREP, Mr. Hartman, Mr. Kazilionis, Mr. Paul
and Mr. Walton may be deemed to own beneficially the WREF I Common Shares, the
WRECIP I Common Shares, the WREF I Conversion Shares and the WRECIP I Conversion
Shares and the Director Options pursuant to Rule 13d-3 under the Act.
The Reporting Persons have been advised by WREF III that Mr. Hartman, Mr.
Kazilionis, Mr. Paul and Mr. Walton each disclaims beneficial ownership of the
WREF I Common Shares, the WRECIP I Common Shares, WREF I Conversion Shares, the
WRECIP I Conversion Shares and the Director Options.
The Reporting Persons have been advised by WREF III that each of WREF I,
WRECIP I, WREM I, WREP, Mr. Hartman, Mr. Kazilionis, Mr. Paul and Mr. Walton
has: sole power to vote or direct the vote of no shares of Common Stock, shared
power to vote or direct the vote of 3,986,867 shares of Common Stock, sole power
to dispose or to direct the disposition of no shares of Common Stock and shared
power to dispose or direct the disposition of 3,986,867 shares of Common Stock.
None of WREF III, WRECIP III, WREM III, WF III and SHP Acquisition
beneficially owns any Common Stock, Preferred Stock or OP Units.
The Reporting Persons have been advised that each of WREF I, WRECIP I, WREM
I, WREP, Mr. Hartman, Mr. Kazilionis, Mr. Paul and Mr. Walton may be deemed to
beneficially own 9.6% of the Common Stock. The percentages with respect to
beneficial ownership for the Westbrook Affiliates contained in this Item 5
assume that all of the shares of Common Stock (1,699,605) issuable upon the
conversion of the Preferred Stock beneficially owned by WREF I and WRECIP I have
been converted and that number of shares of Common Stock (2,072,250) issuable
upon redemption of OP Units have been redeemed.
As a result of the matters described in Items 3 and 4 above, the Reporting
Persons together with the Westbrook Affiliates may be deemed to constitute a
group within the meaning of Section 13(d)(3) of the Exchange Act and the
Reporting Persons may be deemed to have acquired beneficial ownership of the
shares of Common Stock owned or deemed to be beneficially owned by the Westbrook
Affiliates. The Reporting Persons disclaim beneficial ownership of any such
shares of Common Stock and Preferred Stock.
(b) (i) Mr. Alter (i) has the sole power to vote or direct the vote of
427,564 shares of Common Stock; (ii) does not share power to vote or to direct
the vote for the 427,564 shares of Common Stock; (iii) has sole power to dispose
or to direct the disposition of 427,564 shares of Common Stock and (iv) does not
share power to dispose or to direct the disposition of 427,564 shares of Common
Stock. The 427,564 shares of Common Stock noted herein,
<PAGE>
CUSIP NO. 867933 10 3 Page 12 of 14 pages
- ---------------------- -------------------
includes the number of shares of Common Stock Mr. Alter could receive if he
redeemed his OP Units under certain circumstances for shares of Common Stock.
(ii) Mr. Biederman (i) has the sole power to vote or direct the vote of
462,047 shares of Common Stock; (ii) does not share power to vote or to direct
the vote for the 462,047 shares of Common Stock; (iii) has sole power to dispose
or to direct the disposition of 462,047 shares of Common Stock and (iv) does not
share power to dispose or to direct the disposition of 462,047 shares of Common
Stock. The 462,047 shares of Common Stock noted herein, includes the number of
shares of Common Stock Mr. Biederman could receive if he redeemed his OP Units
under certain circumstances for shares of Common Stock.
(iii) Mr. Hulce does not beneficially own any Common Stock or OP Units.
(iv) Mr. Sutten does not beneficially own any Common Stock or OP Units.
Other than as set forth above, the Reporting Persons have been advised by
WREF III that none of the Westbrook Affiliates beneficially owns any shares of
any class of capital stock of the Company.
(c) None of the Reporting Persons have, and the Reporting Persons have been
advised by the Westbrook Affiliates that none of the Westbrook Affiliates has,
effected any transactions in any shares of Common Stock during the past 60-day
period, except as disclosed in this Statement.
(d) No one other than the Reporting Persons has the right to receive, or
the power to direct the receipt of, dividends from, or the proceeds from the
sale of, any of the securities of the Company acquired by the Reporting Persons
as described in Item 5. The Reporting Persons have been advised that no person
other than the Westbrook Affiliates has the right to receive, or the power to
direct the receipt of, dividends from, or the proceeds from the sale of, any of
the securities of the Company owned by the Westbrook Affiliates as described in
Item 5.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understanding or Relationships
with Respect to Securities of the Issuer.
-------------------------------------------------------
As described in Item 3 of this Statement, the Letter Agreement (Exhibit 2
to this Statement) sets forth certain understandings between WF III and Mr.
Alter with respect to the Proposed Transactions and the rights and obligations
of the members of SHP Acquisition with respect to their interests therein,
including without limitation as to structure, capitalization, distributions,
liquidations, governance, transfers of interests, call rights, rights of first
offer, restrictions on sale of assets and exclusivity. The Letter Agreement also
contains certain proposed terms of Mr. Alter's employment with SHP Acquisition.
Other than with respect to confidentiality, exclusivity, submissions to the
Company's Board of Directors, good faith negotiations, costs and governing law
and attorney's fees, none of the provisions of the Letter Agreement are intended
to be binding between WF III and Mr. Alter. As described in Item 3 of this
Statement, the WREF III Letter (Exhibit 3 to this Statement) contains the
agreement of WREF III to be bound by certain provisions of the Letter Agreement,
including the agreement as to exclusivity contained therein. The descriptions of
the Letter Agreement and the WREF Letter contained in this Statement are
qualified in their entirety by reference to the Letter Agreement (Exhibit 2 to
this Statement) and the WREF III Letter (Exhibit 3 to this Statement),
respectively.
As described in Item 4 of this Statement, the Proposal Letter (Exhibit 4 to
this Statement) contains the proposal by SHP Acquisition to the Company with
respect to the Proposed Transactions. The description of the Proposal Letter
contained in this Statement is qualified in its entirety by reference to the
Proposal Letter (Exhibit 4 to this Statement).
Mr. Alter and Mr. Biederman are parties to a Unit Purchase Agreement, dated
August 16, 1995, with the Company, the Lessee and Sunstone OP (Exhibit 5 to this
Statement) pursuant to which Messrs. Alter and Biederman are obligated to use
distributions from the Lessee, in excess of their tax liability for earnings of
the Lessee, to either accumulate reserves for the Lessee's rental obligations,
or purchase from Sunstone OP additional OP Units at the
<PAGE>
CUSIP NO. 867933 10 3 Page 13 of 14 pages
- ----------------------- -------------------
then current market price of the Common Stock. The description of the Unit
Purchase Agreement contained in this Statement is qualified in its entirety by
reference to the Unit Purchase Agreement (Exhibit 5 to this Statement).
Except as set forth in this Statement, and except for the Joint Filing
Agreement dated April 13, 1999 among the Reporting Persons attached as Exhibit 1
to this Statement, the Reporting Persons do not have any contracts,
arrangements, understandings or relationships (legal or otherwise) with any
person with respect to any securities of the Company, including but not limited
to transfer or voting of any of the securities of the Company, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies,
or a pledge or contingency the occurrence of which would give another person
voting power over the securities of the Company.
Item 7. Material to Be Filed as Exhibits.
--------------------------------
1. Joint-Filing Agreement and Power of Attorney, dated April 13,
1999, among Mr. Alter, Mr. Biederman, Mr. Hulce and Mr. Sutten.
2. Letter Agreement, dated April 5, 1999, between Mr. Alter and WF
III (incorporated by reference from the Westbrook Affiliates'
Schedule 13D, Exhibit 5 thereof, dated April 5, 1999 and filed on
April 6, 1999 relating to the Common Stock of Sunstone Hotel
Investors, Inc. (File No. 005-48477)).
3. Letter Agreement, dated April 5, 1999, between Mr. Alter and WREF
III (incorporated by reference from the Westbrook Affiliates'
Schedule 13D, Exhibit 6 thereof, dated April 5, 1999 and filed on
April 6, 1999 relating to the Common Stock of Sunstone Hotel
Investors, Inc.(File No. 005-48477)).
4. Letter, dated April 5, 1999, from SHP Acquisition, L.L.C. to the
Company (incorporated by reference from the Westbrook Affiliates'
Schedule 13D, Exhibit 7 thereof, dated April 5, 1999 and filed on
April 6, 1999 relating to the Common Stock of Sunstone Hotel
Investors, Inc. (File No. 005- 48477)).
5. Unit Purchase Agreement, dated August 16, 1995, by and among Mr.
Alter, Mr. Biederman, the Company, Sunstone OP and the Lessee.
[Signature pages immediately follow]
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
correct and complete.
Dated: April 15, 1999
/s/ Robert A. Alter
---------------------------------------
Robert A. Alter
*
---------------------------------------
Charles L. Biederman
*
---------------------------------------
Randy C. Hulce
*
---------------------------------------
Douglas C. Sutten
*By: /s/ Robert A. Alter
-----------------------------------
Robert A. Alter, Pro Se and
Attorney-in-Fact
EXHIBIT 1
JOINT FILING AGREEMENT
AND
POWER OF ATTORNEY
-----------------
This Joint Filing Agreement and Power of Attorney, dated as of April
13, 1999, (this "Agreement") is by and among Robert A. Alter, Charles L.
Biederman, Randy C. Hulce and Douglas C. Sutten and each other person or entity
which shall execute and deliver a counterpart of the Agreement after the date
hereof (each such person or entity, a "Reporting Person" and collectively, the
"Reporting Persons"). Certain of the Reporting Persons are or may be in the
future the beneficial owners of $0.01 par value per share of Common Stock (the
"Common Stock") of Sunstone Hotel Investors, Inc., a Maryland corporation (the
"Company").
One or more of the Reporting Persons may now or in the future be
required to file statements or reports with the Securities and Exchange
Commission (the "Commission") in respect of the Common Stock, pursuant to
Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended (the
"Act") and the rules and regulations thereunder (each such statement or report,
an "SEC Filing").
1. Joint Filing Agreement. The Reporting Persons hereby agree that any SEC
Filing (including, without limitation, any statement on Schedule 13D), filed
with the Commission by any Reporting Person in respect of the Company is, and
any amendment thereto filed by any Reporting Person will be, filed on behalf of
each Reporting Person named in such SEC Filing or amendment.
2. Power of Attorney. Each Reporting Person hereby constitutes and appoints
Robert A. Alter and Charles L. Biederman (together "Attorney-in-Fact"), and each
of them, its or his true and lawful attorney-in-fact, with full powers of
substitution and resubstitution, for it or him and in its or his name, place and
stead, in any and all capacities, to sign any SEC Filing (including, without
limitation, any statement on Schedules 13D, Schedules 13E-3 and Initial
Statements of Beneficial Ownership of Securities on Forms 3, 4 and 5 with
respect to the Common Stock), relating to the Company, and any and all
amendments thereto, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Commission, granting unto each of
said Attorneys-in-Fact full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as they might or could do in person, hereby
ratifying and confirming all that each of said Attorneys-in-Fact or his or her
substitute may lawfully do or cause to be done by virtue hereof.
3. Miscellaneous. (i) Each Reporting Person shall be responsible for the
timely filing of the SEC Filing and any amendments thereto, and for the
completeness and accuracy of the information concerning him or it contained
therein, but shall not be responsible for the completeness and accuracy of the
information concerning any other Reporting Person contained therein, except to
the extent that he or it knows or has reason to believe that such information is
inaccurate.
(ii) This Agreement shall continue unless terminated by any Reporting
Person hereto. Termination by one Reporting Person shall not constitute
termination of this Agreement by any of the other Reporting Person.
(iii) Each Attorney-in-Fact and Steven L. Lichtenfeld, Esq., of Battle
Fowler, LLP, 75 East 55th Street, New York, New York 10022, is hereby designated
as the person authorized to receive notices and communications with respect to
any SEC Filing and any amendments thereto.
(iv) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
(v) This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature Page immediately follows]
<PAGE>
SIGNATURE PAGE TO JOINT FILING AGREEMENT AND POWER OF ATTORNEY
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
pursuant to the requirements of the Act as of the date first written above.
/s/ Robert A. Alter
---------------------------------------
Robert A. Alter
/s/ Charles L. Biederman
---------------------------------------
Charles L. Biederman
/s/ Randy C. Hulce
---------------------------------------
Randy C. Hulce
/s/ Douglas C. Sutten
---------------------------------------
Douglas C. Sutten
EXHIBIT 5
AGREEMENT RESPECTING LESSEE UNIT PURCHASE
THIS AGREEMENT RESPECTING LESSEE UNIT PURCHASE (the "Agreement"), is made
and executed as of this 16th day of August, 1995 by and among (i) Sunstone Hotel
Investors, Inc., a Maryland corporation (the "Company"), (ii) Sunstone Hotel
Investors, L.P., a Delaware limited partnership of which the Company is the sole
general partner (the "Partnership"), (iii) Robert A. Alter and Charles Biederman
(collectively, the "Lessee Shareholders") and (iv) Sunstone Hotel Properties,
Inc., a Colorado corporation ("Lessee").
WHEREAS, Mr. Alter and Mr. Biederman, respectively, own 80% and 20%,
respectively of the outstanding stock in the Lessee, which is the lessee of all
of the hotels now owned by the Partnership;
WHEREAS, Mr. Alter and Mr. Biederman desire to minimize any potential or
perceived conflict between their interests in the Lessee and their interests in
the Company and/or the Partnership through a commitment to invest, annually, the
net after-tax amount of the cash distributions, if any, received by the Lessee
Shareholders in Units of limited partnership interests in the Partnership
("Units") in compliance with all applicable securities laws, at the then current
Market Price (as defined below); and
WHEREAS, the Independent Directors (as defined below) of the Company
believe that it is in the best interests of the Company and its shareholders,
and of the Partnership and its partners, that the Partnership agrees to sell
Units to the Lessee Shareholders upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements of the parties set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
all parties hereto, the parties hereto do hereby agree as follows:
1. Purchase and Sale.
(a) Except as otherwise provided to the contrary in Sections 1(b) and
5, on April 15, 1996 and on each April 15 thereafter during the term of this
Agreement, the Lessee Shareholders agree to purchase from the Partnership, and
the Partnership agrees to sell to the Lessee Shareholders, that number of Units,
having an aggregate Market Price (as defined below) most nearly equal to the
aggregate Net After-Tax Distributions (as defined below), if any, received by
the Lessee Shareholders from Lessee during the immediately preceding calendar
year.
(b) Notwithstanding anything in this Agreement to the contrary, the Lessee
Shareholders acting together shall have the right to elect at any time upon
prior written notice to the Independent Directors of the Company delivered on or
prior to April 15 of each year not to purchase from the Partnership any such
Units. Such period is referred to as the "Unit
1
<PAGE>
Purchase Exception Period," subject to the following conditions: (i) Lessee
shall be prohibited from making any distributions or paying any dividends to one
or more of the Lessee Shareholders during the Unit Purchase Exception Period
other than the amount necessary to pay taxes calculated in accordance with the
first sentence of Section 3 below, (ii) all such sums which would otherwise be
used by the Lessee Shareholders to acquire Units pursuant to this Agreement
shall be held as reserves for rent payment obligations under the Percentage
Leases executed by the Lessee in favor of the Company and for the payment of
such rental obligations, (iii) such funds shall not be used for any other
purpose or as security for any other obligation or undertaking by Lessee or the
Lessee Shareholders (or either of them), and (iv) such funds are invested in
investments permitted under the Partnership Agreement for the Partnership's
investments.
2. Determination of Market Price. For purposes of this Agreement, the
term "Market Price" shall have the meaning assigned to such term in the Amended
Articles of Incorporation of the Company (the "Articles"), as such Articles are
in effect on the date hereof. For purposes of this Agreement, the Market Price
for Units shall be deemed to be equal to the Market Price (as defined in the
Amended Articles of Incorporation of the Company, as amended from time to time)
for the Common Stock of the Company.
3. Determination of Net After-Tax Distributions. For purposes of this Agreement,
the term "Net After-Tax Distributions," with respect to each calendar year,
shall mean and refer to the aggregate cash dividends and other cash
distributions made by Lessee, on or in respect of the equity interests therein,
to the Lessee Shareholders that are declared during, and are paid during or
within thirty (30) days following the end of, such calendar year (collectively,
the "Distributions") minus the sum of the aggregate federal, state and local
income taxes (or other taxes, however designated, that are based upon income)
payable directly (i) by either of the Lessee Shareholders for such calendar year
in respect of the Distributions and/or the taxable income of Lessee for such
calendar year allocated to such Lessee Shareholder, computed as if such
Distributions and/or allocated taxable income were the only distributions and/or
taxable income received by the Lessee Shareholders during such calendar year, or
(ii) by the Lessee for any calendar year in which the Lessee pays federal, state
or local income taxes. Each of the Lessee Shareholders shall deliver to the
Independent Directors, on or before April 1, 1996 and April 1 of each calendar
year thereafter during the term of this Agreement, a duly notarized certificate
setting forth the computation and amount of Net After-Tax Distributions
applicable to each such Lessee Shareholder. Each of the Lessee Shareholders
shall deliver, and shall cause Lessee to deliver, to the Independence Directors
copies of all federal, state and local income tax returns and reports prepared
and filed by Lessee for each calendar year during the term of this Agreement,
promptly following the filing thereof. The Independent Directors shall be
entitled to conclusively rely upon the information contained in such notarized
certificates and income (or similar) tax returns, but shall have the right to
make such other or further inquiry of the Lessee Shareholders and of Lessee as
they may deem necessary or appropriate and the Lessee Shareholders shall, and
each of the Lessee Shareholders shall cause Lessee, to cooperate in and to
furnish upon demand any other or further documents or information that may be
reasonably requested by the Independent Directors for the purposes of
determining the Net After-Tax Distributions. The information contained in such
notarized certificates, income (or similar)
2
<PAGE>
tax returns and reports, and in any additional documents so furnished shall be
used by the Independent Directors solely for the purpose of determining or
confirming the amount of Net After-Tax Distributions for purposes of this
Agreement and for no other purpose whatsoever, and the Independent Directors
shall not disclose any such notarized certificate, any income (or similar) tax
return or report, or any other document furnished for such purpose by the Lessee
Shareholders or by the Lessee, or any of the contents thereof, to any third
person whatsoever, except pursuant to a subpoena or other order, reasonably
believed to be valid, issued by a court or regulatory body having the power to
issue such subpoenas or orders.
4. Independent Directors. For purposes of this Agreement, the term
"Independent Directors" shall have the meaning set forth in the Amended Articles
of Incorporation of the Company. Any action required or permitted to be taken by
the Independent Directors with respect to this Agreement shall be effective when
taken or approved by a majority of the Independent Directors.
5. Temporary Suspension, Deferral or Termination of Obligations
Hereunder.
(a) The Independent Directors, for any reason whatsoever, may
temporarily suspend the obligation of the Partnership to sell any Units, as of
any given April 15th during the term of this Agreement, upon written notice to
Lessee Shareholders, given not less than five (5) days prior to such April 15th.
In the event of any such suspension with respect to a given April 15th, none of
the Lessee Shareholders thereafter shall have any right or obligation to
purchase Units based upon the Net After-Tax Distributions of Lessee with respect
to that particular calendar year ended immediately preceding such April 15th.
During the term of this Agreement, the Independent Directors may subsequently
reinstate the obligation of the Partnership to sell Units pursuant to the terms
of Section 1 of this Agreement and, in such event, the Lessee Shareholders shall
have the obligations set forth in Section 1 of this Agreement.
(b) If, on or before April 15, 1996, or on or before any April 15th thereafter
during the term of this Agreement (except for any such date as to which the
obligation of the Partnership to sell Units hereunder has been suspended as
provided in Section 5(a) above), the Lessee Shareholders shall have been given
written notice of a default on their part of any provision under this Agreement
or any other agreement entered into by and between the Company (or any
Affiliate, as defined in Section 13 of this Agreement, of the Company) and any
of the Lessee Shareholders (or any Affiliate of a Lessee Shareholder) and such
default shall not have been cured by the Lessee Shareholders (or such
Affiliate), to the reasonable satisfaction of the Independent Directors of the
Company, as of such April 15th, then the obligation of the Partnership to sell
Units to the Lessee Shareholders under this Agreement, and the closing date of
the sale scheduled for such date, shall be deferred, without further notice,
until such default shall have been cured to the satisfaction of the Independent
Directors of the Company, but neither the existence nor continuance of any such
default shall relieve the Lessee Shareholders of the obligation to purchase such
Units pursuant to the terms of this Agreement. In the event that the closing of
any sale of Units under this Section 5 shall be deferred by virtue of a default
by the Lessee Shareholders in accordance with this Section 5(b), the aggregate
Market Price of the Units obligated to be purchased by such defaulting party, as
of the originally scheduled
3
<PAGE>
purchase date, shall be increased by an amount equal to simple interest accruing
on such original aggregate Market Price at a rate equal to the lesser of 12% per
annum or the maximum rate allowable by law from the originally scheduled
purchase date to the date upon which all such defaults have been cured as herein
provided by the Lessee Shareholders by closing on the acquisition of the
applicable Units.
(c) The Independent Directors, in their sole discretion, may
terminate this Agreement, without the payment of any compensation, or the
incurring of any liability (either individually or on the part of the Company
and/or the Partnership), to the Lessee Shareholders (or either of them), upon
written notice to the Lessee Shareholders (or either of them) given not less
than ten (10) days' prior to the effective date of such termination. This
Agreement shall automatically terminate, without notice, upon the tenth
anniversary of the date hereof (or such later period as the Independent
Directors may elect in their discretion in order that the term of this Agreement
shall be coterminous with the term of any Percentage Lease to which the Lessee
is a party). Notwithstanding anything herein to the contrary, no termination of
this Agreement pursuant to this Section 5(c) or otherwise, shall diminish,
terminate or otherwise affect the rights and obligations of the parties hereto
with respect to the closing of any purchase and sale of Units theretofore
deferred pursuant to Section 5(b) hereof.
6. Representations, Warranties and Agreements. Each of the Lessee
Shareholders does hereby represent and warrant to, and agree with, the Company
that:
(a) such person is an "Accredited Investor," as that term is
defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"), that it has such knowledge, experience and
information relating to an investment in the Partnership that such person
is capable of evaluating the merits and risks of such investment, that such
investment is suitable for such person, and that such person shall acquire
the Units to be purchased by such person hereunder for such person's own
account and without any view of the distribution thereof;
(b) such person will furnish to the Company and/or the
Partnership, at any time and from time to time, any and all information
reasonably requested by the Company and/or the Partnership for purposes of
satisfying the Company and/or the Partnership that any sale of Units by the
Partnership hereunder may be effected in reliance upon one or more
exemptions from the registration requirements of the Securities Act and
applicable state securities laws;
(c) such person is aware that the Company and/or the Partnership
will be relying upon one or more exemptions from the registration
requirements of the Securities Act and applicable state securities laws in
effecting the sale of securities to such person pursuant hereto, that
neither the Company nor the Partnership shall be under any obligation to
register any Units, or take any other action to permit the sale thereof to
the Lessee Shareholders, or to permit or facilitate any resale thereof by
any of the Lessee Shareholders and that such person may be required to hold
any Units purchased pursuant hereto for an indefinite period of time; and
4
<PAGE>
(d) such person acknowledges and agrees not to sell, assign,
transfer or otherwise dispose of any Units acquired pursuant to this
Agreement (i) for a period of two years following the original purchase
thereof in each instance, except that such person may transfer such Units
among the Lessee Shareholders, provided that the acquiring Lessee
Shareholder consents in writing to be bound by the provisions of this
Section 6 and provides the Independent Directors with prior written notice
thereof, or (ii) in contravention of the Securities Act or any applicable
state securities laws. Each of the Lessee Shareholders further agrees that
any and all certificates issued to evidence the Units will bear, in
addition to any other required legend, the following legend, or such
comparable legend as may then be reasonably required by the Company and/or
the Partnership, until the restrictions to which it is applicable shall
have expired:
This securities evidenced hereby (i) are subject to
resale restrictions set forth in the Agreement
Respecting Lessee Unit Purchase, dated as of August 16,
1995, pursuant to which they were acquired and (ii)
have not been registered under the Securities Act or
any state securities laws, and may not be sold,
transferred or assigned by the holder hereof absent
such registration, unless an opinion of counsel
satisfactory to the issuer thereof shall have been
received by such issuer, to the effect that such sale,
transfer or assignment will not be in violation of the
Securities Act and the rules and regulations
promulgated thereunder, or any applicable state
securities laws. Any certificate issued to the holder
thereof, or to any permitted transferee hereof,
evidencing all or any portion of the securities
evidenced hereby may bear a legend to the foregoing
effect.
7. Amendment. This Agreement shall not be amended or modified, except by an
instrument in writing duly executed by the Lessee Shareholders (or the
applicable Lessee Shareholder), the Company and the Partnership. For purposes of
this Agreement, no person shall be duly authorized on behalf of the Company or
the Partnership to execute any such instrument amending or modifying this
Agreement unless such amendment or modification shall have been approved by the
Independent Directors.
8. Notices. All notices and other communications required or permitted to
be made or given in connection with this Agreement shall be in writing and shall
be deemed to have been given when hand delivered or deposited in the United
States Mail, as registered or certified mail, addressed (i) if to the Company
and/or the Partnership, to Sunstone Hotel Investors, Inc., 300 South El Camino
Real, Suite 203, San Clemente, California, 92672, Attention: Corporate
Secretary, (ii) if to Mr. Robert Alter, to 2 Via Cancha, San Clemente,
California, 92673, (iii) if to Charles Biederman, to 5 Sunset Drive, Englewood,
Colorado, 80110, and (iv) if to the Lessee, to Sunstone Hotel Properties, Inc.,
P.O. Box 4240, San Clemente, CA 92674-4240, Attention Mr. Robert Alter. Any
party may change the notice address of such party hereunder by notice given to
each other party hereto in the manner herein provided.
5
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9. Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
10. Governing Law. This Agreement and the rights and obligations of all
parties hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California.
11. Attorneys' Fees. If any party to this Agreement shall bring any action,
suit, counterclaim or appeal for any relief against the other, declaratory or
otherwise, to enforce the terms hereof or to declare rights hereunder
(collectively, an "Action"), the Prevailing Party shall be entitled to recover
as part of any such Action its reasonable attorneys' fees and costs, including
any fees and costs incurred in bringing and prosecuting such Action and/or
enforcing any order, judgment, ruling or aware granted as part of such Action.
"Prevailing Party" within the meaning of this Section 11 includes, without
limitation, a party who agrees to dismiss an Action upon the other party's
payment of all or a portion of the sums allegedly due or performance of the
covenants allegedly breached, or who obtains substantially the relief sought by
it.
12. No Additional Liability of Independent Directors. Any and all action
taken by the Independent Directors pursuant to the terms of this Agreement shall
be deemed to be actions taken by the Company, and no liability shall attach to
the Independent Directors for such actions beyond the liability such Independent
Directors normally have in their capacity as directors of the Company.
13. Affiliate. As used in this Agreement, the term "Affiliate" shall mean
(i) any person that, directly or indirectly, controls or its controlled by or is
under common control with such person, (ii) any other person that owns,
beneficially, directly or indirectly, five percent (5%) or more of the
outstanding capital shares, shares or equity interests of such person, or (iii)
any officer, director, employee, partner or trustee of such person or any person
controlling, controlled by or under common control with such person (excluding
trustees and persons serving in similar capacities who are not otherwise an
Affiliate of such person). The term "person" means and includes individuals,
corporations, general and limited partnerships, shares companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof. For the purposes of such
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interest or other equity
interests.
14. Default by Lessee Shareholders. The Lessee Shareholders shall be in
default under this Agreement if either Lessee Shareholder fails to perform his
obligations as and when required and such failure is not cured within 15 days
after written notice thereof is delivered by the Company to each Lessee
Shareholder.
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15. Cross-Default. At the Company's election, a default under this
Agreement by (a) either Lessee Shareholder shall be deemed a default by both of
the Lessee Shareholders, and (b) a default by Lessee under this Agreement shall
be deemed a default by either or both of the Lessee Shareholders.
16. No Dividend Policy. At no time during the term of this Agreement shall
Lessee have the right to make any distributions or pay any dividends (or make
loans in lieu thereof) to one or more of the Lessee Shareholders, except as
provided in Section 1.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be executed in its name, by an officer thereunto duly authorized, as of the day
and year first above written.
Company: SUNSTONE HOTEL INVESTORS, INC.
By: /s/Robert A. Alter
---------------------------------------
Robert A. Alter
President
Partnership: SUNSTONE HOTEL INVESTORS, L.P.
By: Sunstone Hotel Investors, Inc.
its General Partner
By: /s/Robert A. Alter
--------------------------------
Robert A. Alter
President
Lessee Shareholders:
/s/Robert A. Alter
-------------------------------------------
Robert A. Alter
/s/ Charles Biederman
-------------------------------------------
Charles Biederman
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Lessee: SUNSTONE HOTEL PROPERTIES, INC.
a Colorado corporation
By: /s/Robert J. Yeager
---------------------------------------
Robert J. Yeager
Its: President and Secretary
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