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STOCK PURCHASE AGREEMENT DATED APRIL 27, 2005

Stock Purchase Agreement

STOCK PURCHASE AGREEMENT DATED APRIL 27, 2005 | Document Parties: Sunstone Hotel Investors, You are currently viewing:
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Sunstone Hotel Investors,

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Title: STOCK PURCHASE AGREEMENT DATED APRIL 27, 2005
Governing Law: New York     Date: 5/3/2005

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EXHIBIT 10.2

EXECUTION COPY

 

STOCK PURCHASE AGREEMENT

 

Stock Purchase Agreement, dated as of April 27, 2005 (this “Agreement”), between BIP REIT Private Limited, a company organized under the laws of the Republic of Singapore (together with its successors and assigns, the “Purchaser”), and Sunstone Hotel Investors, Inc., a corporation organized under the laws of the State of Maryland (the “Company”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, shares of common stock, par value $0.01 per share, of the Company (“Common Stock”) upon the terms and subject to the conditions set forth herein; and

 

WHEREAS, simultaneously with the consummation of the transactions contemplated by this Agreement, the Company is entering into a Purchase and Sale Agreement, dated as of the date hereof, by and between the Company and Marriott International, Inc. (“Marriott”), attached hereto as Exhibit A (the “Acquisition Agreement”), pursuant to which the Company will acquire certain of the hotel properties currently owned by CTF Holdings, Ltd. (the “CTF Acquisition”) pursuant to the terms and conditions thereof;

 

WHEREAS, simultaneously with the consummation of the transactions contemplated by this Agreement, the Company and the Purchaser are entering into an escrow agreement, dated as of the date hereof, among the Company, the Purchaser and Citibank, N.A., as Escrow Agent, attached hereto as Exhibit B (the “Escrow Agreement”), pursuant to which the Purchaser is delivering to the Escrow Agent an amount equal to the Purchase Price (as defined herein) for the Shares by wire transfer of immediately available funds and pursuant to which the Company is delivering to the Escrow Agent one or more certificates evidencing the Shares; and

 

WHEREAS, simultaneously with the consummation of the transactions contemplated by this Agreement, the Company and the Purchaser are entering into a registration rights agreement, dated as of the date hereof, between the Company and the Purchaser, attached hereto as Exhibit C (the “Registration Rights Agreement”).

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements, undertakings and obligations set forth herein and other consideration the sufficiency and adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1. Purchase and Sale .

 

(a) Upon the terms and subject to the conditions set forth in this Agreement, upon the execution of this Agreement, the Company is issuing and selling to the Purchaser, and the Purchaser is purchasing from the Company, 3,750,000 shares (the “Shares”) of Common Stock at a price per share of $20.65 (the “Per Share Price”), for a total purchase price of $77,437,500 (the “Purchase Price”).

 


(b) The closing of the sale to, and purchase by, the Purchaser of the Shares (the “Closing”) is occurring at 7:00 a.m., California time, or as promptly as practicable thereafter, on the date hereof (the “Closing Date”). Delivery of the applicable closing documents and certificates is being made at the offices of Sullivan & Cromwell LLP, 1888 Century Park East, Los Angeles, CA 90067 or such other place as has been agreed upon by the Company and the Purchaser.

 

(c) Upon the earlier of (i) the date of the closing of the CTF Acquisition, (ii) the date that is one business day after receipt of notice from Purchaser or (iii) the date that is two business days prior to the next record date for the payment of dividends on the Common Stock, the Company will deliver to the Escrow Agent one or more certificates (registered in such names and in such denominations as the Purchaser has requested) evidencing all of the Shares purchased hereunder, duly endorsed in blank for transfer, with any transfer taxes payable in connection with the transfer of the Shares to the Purchaser duly paid, to be held by the Escrow Agent pursuant to the Escrow Agreement.

 

(d) Within 5 business days of the Closing, the Purchaser will deliver to the Escrow Agent the Purchase Price in immediately available funds to an account designated by the Escrow Agent, to be held by the Escrow Agent pursuant to the Escrow Agreement.

 

(e) At the Closing, the Company is delivering to the Purchaser legal opinions, dated as of the Closing Date and addressed to the Purchaser, attached hereto as Exhibit D (i) to the effect that the Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, the Shares will be validly issued, fully paid and non-assessable and (ii) to the effect that, commencing with its initial taxable year ended December 31, 2004, the Company has been organized in conformity with the requirements for qualification and taxation as a “real estate investment trust” (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and its method of operation has enabled, and its proposed method of operation will enable, it to meet, the requirements for qualification and taxation as a REIT under the Code.

 

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2. Representations and Warranties of the Company.

 

The Company hereby represents and warrants to the Purchaser as follows as of the Closing Date:

 

(a) Organization of the Company . The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Maryland, has the corporate power and authority to own its properties and to conduct its business as presently conducted as described in the documents filed by the Company under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is duly qualified to transact business and is in good standing in the jurisdictions set forth on Schedule 2(a) hereto, which are the only jurisdictions in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified would not have a material adverse effect on the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”).

 

(b) Organization of Subsidiaries . Each “significant subsidiary” of the Company (as such term is defined in Rule 1-02(w) of Regulation S-X) (collectively, the “Significant Subsidiaries”) has been duly incorporated or organized, is validly existing as a corporation or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority (corporate and otherwise) to own its properties and to conduct its business as presently conducted as described in the documents filed by the Company under the Securities Act and the Exchange Act and is in good standing in each jurisdiction set forth on Schedule 2(b) hereto, which are the only jurisdictions in which the conduct of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or be in good standing would not have a Material Adverse Effect.

 

(c) Authority; Validity . The Company has the requisite corporate power and authority to execute, deliver and perform all of its obligations under this Agreement, the Escrow Agreement and the Registration Rights Agreement and to consummate the transactions contemplated herein and therein. The Company has taken all necessary action, corporate or otherwise, in order to execute, deliver and perform all of its obligations under this Agreement, the Escrow Agreement and the Registration Rights Agreement and to consummate the transactions contemplated herein and therein. Each of this Agreement, the Escrow Agreement and the Registration Rights Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles and except as rights to indemnity and contribution contained in the Registration Rights Agreement may be limited by state or federal securities laws or the public policy underlying such laws.

 

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(d) No Conflicts . Neither the execution and delivery of this Agreement, the Escrow Agreement or the Registration Rights Agreement by the Company, nor the consummation by the Company of the transactions contemplated hereby or thereby, including the issuance and sale of the Shares, nor the compliance by the Company with all of the provisions of this Agreement, the Escrow Agreement or the Registration Rights Agreement and all other transactions herein and therein contemplated by the Company, does or will: (i) conflict with, or result in any breach of, or constitute a default under nor constitute any event which (with notice, lapse of time, or both) would constitute a breach of or default under (A) any provisions of the charter (including, without limitation, the articles supplementary) or bylaws or other organizational documents of the Company or any Significant Subsidiary, (B) any provision of any license, lease, indenture, mortgage, deed of trust, loan, credit, operating agreement, property management agreement or other agreement or instrument to which any of them is a party or by which any of them or their respective properties or assets may be bound or affected, including any agreement or instrument relating to the CTF Acquisition, (C) any law or regulation binding upon or applicable to the Company or any Significant Subsidiary or any of their respective properties or assets or (D) any decree, judgment or order applicable to the Company or any Significant Subsidiary; or (ii) result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or assets of the Company or any Significant Subsidiary.

 

(e) Consents, etc. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any governmental authority or agency or any securities exchange or any other person or entity is necessary or required in connection with the execution and delivery of this Agreement, the Escrow Agreement and the Registration Rights Agreement by the Company or the consummation by the Company of the transactions contemplated hereby or thereby or the enforcement hereof or thereof against the Company, other than the filings with the Securities and Exchange Commission (the “Commission”) required to comply with its obligations under the Registration Rights Agreement. As of the Closing Date the Company does not have assets the aggregate fair market value of which is in excess of $53.1 million that are not “exempt assets” as such term is defined under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated pursuant thereto.

 

(f) CTF Acquisition . Each of the representations and warranties of the Company in the Acquisition Agreement are true and correct in all material respects. The Company has the requisite corporate power and authority to execute, deliver and perform all of its obligations under the Acquisition Agreement and to consummate the transactions contemplated therein. The Company has taken all necessary action, corporate or otherwise, in order to execute, deliver and perform all of its obligations under the Acquisition Agreement and to consummate the transactions contemplated therein. The Acquisition Agreement has been duly executed and delivered by the Company and, to the knowledge of the Company, Marriott, and assuming the due authorization, execution and delivery thereof by Marriott, constitutes a legal, valid and binding agreement of the Company and, to the knowledge of the Company, Marriott, enforceable against the Company and, to the

 

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knowledge of the Company, Marriott in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. Upon the consummation of the transactions contemplated by the Acquisition Agreement, the Company will own, subject to the terms and conditions of the Acquisition Agreement, all of the assets to be acquired pursuant to the Acquisition Agreement free and clear of any Encumbrances (as such term is defined in the Acquisition Agreement).

 

(g) Capitalization .

 

(i) Without giving effect to the transactions contemplated by this Agreement, the authorized capital stock of the Company consists of (i) 500,000,000 shares of Common Stock, of which 34,533,321 shares were issued and outstanding and (ii) 100,000,000 shares of preferred stock, of which (a) 5,000,000 shares are designated as 8% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), of which 4,100,000 are issued and outstanding and (b) 750,000 shares are designated as 8.0% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”), all of which are issued and outstanding. The outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and non-assessable, free and clear of all liens, encumbrances, equities or claims. None of the outstanding shares of capital stock of the Company are entitled to or were issued in violation of preemptive or similar rights of any securityholder in the Company. The authorized capital stock of the Company conforms in all material respects to the description thereof contained or incorporated by reference in the documents filed by the Company under the Securities Act and the Exchange Act.

 

(ii) Except for the shares of Common Stock reserved for issuance (i) upon conversion of the Common Units issued to the Contributing Entities in connection with the Formation and Structuring Transactions and (ii) in connection with the Company’s 2004 long-term incentive plan and senior management incentive plan described in the SEC Documents, no shares of Common Stock of the Company are reserved for any purpose.

 

(h) Validity of the Shares . The Shares have been duly authorized for issuance and sale to the Purchaser pursuant to this Agreement and, when issued and delivered in accordance with this Agreement, will be validly issued, fully paid and non-assessable, free and clear of all liens, encumbrances, equities or claims and free of restrictions on transfer other than restrictions on transfer set forth under this Agreement, the Company’s charter or the Escrow Agreement. The issuance of the Shares to the Purchaser pursuant to this Agreement will not be subject to any preemptive or similar rights. The certificates to be

 

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used to evidence the Shares are in proper form and comply in all material respects with all applicable legal requirements and the requirements of the charter and bylaws of the Company.

 

(i) Subsidiary Securities . All of the issued and outstanding shares of capital stock or other ownership interests of each Significant Subsidiary have been duly and validly authorized and issued, are fully paid and are non-assessable and are owned directly or indirectly by the Company or Sunstone Hotel Partnership, LLC, a Delaware limited liability company (the “Operating Partnership”) (other than the common membership interests (the “Common Units”) of the Operating Partnership issued to Sunstone Hotel Investors, L.L.C., Sunstone/WB Hotel Investors IV, LLC, WB Hotel Investors, LLC and Sunstone/WB Manhattan Beach, LLC (collectively, the “Contributing Entities”) in connection with the transactions contemplated by the Structuring and Contribution Agreement dated as of July 2, 2004, by and among the Operating Partnership, the Company, the Contributing Entities and Alter SHP, LLC (the “Formation and Structuring Transactions”)).

 

(j) Registration Rights . Except as disclosed in the Company’s definitive Proxy Statement for the 2005 Annual Meeting of Stockholders filed with the Commission on April 8, 2005 under “Certain Relationships and Related Transactions” or on Schedule 2(j) hereto, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company and there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to include such securities with any shares of Common Stock registered pursuant to a registration statement filed by the Company.

 

(k) No Violations . Neither the Company nor any of its Significant Subsidiaries is in (i) violation of its organizational documents, or (ii) default (whether with or without the giving of notice or passage of time or both) in the performance or observance of any obligation, agreement, covenant or condition contained in any lease, indenture, mortgage, deed of trust, loan agreement, operating agreement, property management agreement, franchise agreement or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, except in the case of clause (ii) to the extent that such default would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(l) SEC Documents . Since October 27, 2004, the Company has timely filed, and as of the Closing the Company will have timely filed, all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the Closing and after October 27, 2004, and all exhibits included therein and financial

 

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statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As of their respective filing dates, the SEC Documents complied with the requirements of the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the Commission promulgated thereunder applicable to the SEC Documents and none of the SEC Documents, at the time they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements and schedules, including the notes thereto, filed with the Commission as a part of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 present fairly in all material respects the combined financial position of the entities presented therein, as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements and schedules have been prepared in conformed with accounting principles generally accepted in the United States applied on a consistent basis through the periods specified, except as may be expressly stated in the related notes thereto.

 

(m) Changes . Except as disclosed in the SEC Documents or on Schedule 2(k) hereto:

 

(i) since December 31, 2004, there has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the SEC Documents; and

 

(ii) neither the Company nor any Significant Subsidiary has sustained since the date of the latest audited financial statements included in the SEC Documents any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the SEC Documents.

 

(n) Properties .

 

(i) The Company and its subsidiaries have good and marketable title in fee simple to, or a valid leasehold interest in, all real property described in the SEC Documents as owned by them (the “Company Properties”), and good and marketable title to all personal property owned by them that are material to the business of the Company, in each case free and clear of all liens, encumbrances, security interests and defects except such as are described in the SEC Documents or such as do not materially affect the value of such property and do not materially

 

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interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any Company Property, buildings and equipment held under lease by the Company and its subsidiaries and described in the SEC Documents are held by them under valid, subsisting and enforceable leases (such leases, the “Company Leases”) with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries. Neither the Company nor any of its subsidiaries is in default under any of the Company Leases, relating to, or any of the mortgages or other security documents or other agreements encumbering or otherwise recorded against, the Company Properties that would reasonably be expected to have a Material Adverse Effect, and neither the Company nor any of its subsidiaries knows of any event, which but for the passage of time or the giving of notice, or both, would constitute a default under any of such documents or agreements that would reasonably be expected to have a Material Adverse Effect.

 

(ii) The Company or its subsidiaries have either (i) an owner’s or leasehold title insurance policy, from a nationally recognized title insurance company licensed to issue such policy, on each Company Property located, as the case may be, by the Company or its subsidiaries, that insures the fee or leasehold interest, as the case may be, in


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