Alter Robert A, et al. – ‘SC 13D’ on 4/15/99 re: Sunstone Hotel Investors Inc – EX-99.2

As of:  Thursday, 4/15/99   ·   Accession #:  903112-99-661   ·   File #:  5-48477

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General Statement of Beneficial Ownership   —   Schedule 13D
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC 13D      General Statement of Beneficial Ownership             14     73K 
 2: EX-99.1     Joint Filing Agreement                                 2     11K 
 3: EX-99.2     Agreement Respecting Lessee Unit Purchase              8     33K 

EX-99.2   —   Agreement Respecting Lessee Unit Purchase
Exhibit Table of Contents

EX-99.2
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                                                                       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                               

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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)                                     

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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                                                     

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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

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               (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.                          

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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

8 

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