Exhibit 10.3

LIMITED WAIVER AND AMENDMENT

Dated as of March 3, 2006

Citicorp North America, Inc.,

as Administrative Agent and Collateral Agent

Two Penns Way, Suite 200

New Castle, Delaware 19720

 

  Re: Sunstone Hotel Partnership, LLC Revolving Credit Facility

Ladies and Gentlemen:

Reference is made to that certain Revolving Credit Agreement dated as of
October 26, 2004, as amended, among Sunstone Hotel Partnership, LLC
(“Borrower”); Sunstone Hotel Investors, Inc. (“Parent”) and the subsidiaries of
the Borrower listed therein as subsidiary guarantors, as guarantors; Citicorp
North America, Inc. (“CNAI”), as administrative agent and collateral agent
(“Agent”); the financial institutions identified therein as lenders (the
“Lenders”) or lender parties (the “Lender Parties”); Calyon New York Branch and
Deutsche Bank Securities Inc., as co-documentation agents, and Citigroup Global
Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan
Stanley Senior Funding, Inc., as joint lead arrangers and joint book running
managers (as amended prior to the date hereof, the “Credit Agreement”).
Capitalized terms not otherwise defined herein shall have their respective
meanings set forth in the Credit Agreement.

Borrower desires to cause the Holiday Inn Hotel located at 2005 Highland Avenue,
Hollywood, California (the “Hollywood Asset”) to be released as a Borrowing Base
Asset pursuant to Section 5.02(d)(ii)(C) of the Credit Agreement.
Section 5.04(b)(iv) of the Credit Agreement prohibits any Borrowing Base Asset
other than the Marriott Hotel located at 3425 Solano Avenue, Napa, California
(the “Napa Asset”) to account for greater than 25% of the aggregate Adjusted Net
Operating Income for all Borrowing Base Assets unless approved by the Required
Lenders. Following the release of the Hollywood Asset, the Napa Asset and the
Hyatt Regency Hotel located at 1107 Jamboree Road, Newport Beach, California
(the “Newport Beach Asset”) will each account for greater than 25% of the
aggregate Adjusted Net Operating Income of all Borrowing Base Assets.
Accordingly, Borrower and Parent have requested that Agent and the Lenders waive
compliance with the terms of Section 5.04(b)(iv) of the Credit Agreement solely
to the extent necessary to permit (i) the Napa Asset to account for not greater
than 30% of the aggregate Adjusted Net Operating Income of all Borrowing Base
Assets, and (ii) the Newport Beach Asset to account for not greater than 30% of
the aggregate Adjusted Net Operating Income of all Borrowing Base Assets.
Subject to the terms and conditions of this Limited Waiver and Amendment (this
“Agreement”), Agent and the Lenders are willing to agree to waive such
compliance to such extent.

In addition, on or about December 22, 2005, SHP Ogden, LLC (the “Ogden
Subsidiary”) ceased to be bound by its applicable Excluded Subsidiary Agreement.
Borrower desires that the Ogden Subsidiary continue to be an Excluded Subsidiary
for all purposes under the Credit Agreement and the other Loan Documents, such
that the Ogden Subsidiary shall not be required to execute and deliver a
Guaranty Supplement or otherwise become a Guarantor, whether or not the Ogden
Subsidiary incurs Non-Recourse Debt not prohibited by the Credit Agreement
within the 90 day period set forth in Section 5.01(j)(i) of the Credit
Agreement. Subject to the terms and conditions of this Agreement, Agent and the
Lenders are willing to waive such compliance to such extent.

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Furthermore, Borrower desires that the schedule amendment and document delivery
requirements set forth in the last clause of Section 5.01(j)(i) and in the
proviso of Section 5.01(j)(ii) be modified, effective as of October 26, 2004,
such that (i) to the extent necessary to make such Schedule 4.01(y) to the
Credit Agreement accurate and complete, Borrower shall provide an amended
Schedule 4.01(y) to the Administrative Agent within 15 Business Days after the
end of each calendar quarter, beginning with the calendar quarter ending
March 31, 2006 and (ii) Borrower shall provide copies of any new agreements in
respect of Non-Recourse Debt identified in such amended Schedule 4.01(y) to the
Administrative Agent promptly following any request by the Administrative Agent
therefor. Subject to the terms and conditions of this Agreement, Agent and the
Lenders are willing to agree to the foregoing.

At the request of Borrower, and in consideration of the mutual undertakings
herein expressed, Agent and the Lenders hereby waive (a) Parent’s compliance
with the provisions of Section 5.04(b)(iv) of the Credit Agreement solely to the
extent necessary to permit (i) the Napa Asset to account for not greater than
30% of the aggregate Adjusted Net Operating Income of all Borrowing Base Assets,
and (ii) the Newport Beach Asset to account for not greater than 30% of the
aggregate Adjusted Net Operating Income of all Borrowing Base Asset, and (b) any
Default or Event of Default that would occur under the Credit Agreement in the
absence of the waiver set forth in clause (a) above. Also at the request of
Borrower, and in consideration of the mutual undertakings herein expressed,
Agent and the Lenders hereby (x) agree that the Ogden Subsidiary shall continue
to be an Excluded Subsidiary for all purposes under the Credit Agreement and the
other Loan Documents, such that, among other things, the Ogden Subsidiary shall
not be required to execute and deliver a Guaranty Supplement or otherwise become
a Guarantor, whether or not the Ogden Subsidiary incurs Non-Recourse Debt not
prohibited by the Credit Agreement within the 90 day period set forth in
Section 5.01(j)(i) of the Credit Agreement; provided, however, that if the Ogden
Subsidiary does not incur Non-Recourse Debt not prohibited by the Credit
Agreement by December 31, 2006, the Ogden Subsidiary shall cease to be an
Excluded Subsidiary on January 1, 2007 and shall be required to comply with the
provisions of Section 5.01(j)(i) (without reference to the provisions of this
Agreement) within ten (10) Business Days thereafter, and (y) waive
(i) compliance with all contrary provisions of the Credit Agreement solely to
the extent necessary to effect the agreement set forth in clause (x) above, and
(ii) any Default or Event of Default that would occur under the Credit Agreement
in the absence of the amendment set forth in clause (x) above and the waiver set
forth in clause (y)(i) above.

Agent and the Lenders also hereby (a) agree that the Schedule amendment and
document delivery requirements set forth in the last clause of
Section 5.01(j)(i) and in the proviso of Section 5.01(j)(ii) are hereby
modified, effective as of October 26, 2004, such that (i) to the extent
necessary to make Schedule 4.01(y) to the Credit Agreement accurate and
complete, Borrower shall provide an amended Schedule 4.01(y) to the
Administrative Agent within 15 Business Days after the end of each calendar
quarter, beginning with the calendar quarter ending March 31, 2006 and
(ii) Borrower shall provide copies of any new agreements in respect of
Non-Recourse Debt identified in such amended Schedule 4.01(y) to the
Administrative Agent promptly following any request by the Administrative Agent
therefor and (b) waive (i) compliance with all contrary provisions of the Credit
Agreement solely to the extent necessary to effect such amendments set forth in
clause (a) above, and (ii) any Default or Event of Default that would occur
under the Credit Agreement in the absence of the amendments set forth in clause
(a) above and the waiver set forth in clause (b)(i) above.

Borrower and Parent represent and warrant that, following the effectiveness of
this Agreement, the release of the Hollywood Asset as a Borrowing Base Asset
will not otherwise result in a default under Section 5.04 of the Credit
Agreement or any other provision of the Credit Agreement. Borrower and Parent
further represent and warrant that the factual matters described herein are true
and correct in all material respects as of the date hereof.

 

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The waivers, agreements and amendments set forth herein shall be limited
precisely as written, and nothing in this Agreement shall be deemed to
(x) constitute (i) a waiver of any other Default or Event of Default or (ii) a
waiver or amendment of any other term, provision or condition of the Credit
Agreement, any of the other Loan Documents or any other instrument or agreement
referred to therein, or (y) except as set forth herein, prejudice any right or
remedy that Agent or any Lender Party may now have or may have in the future
under or in connection with the Credit Agreement, the other Loan Documents or
any other instrument or agreement referred to in any of them or in equity or at
law.

This Agreement shall become effective as of the date first above written when,
and only when, Agent shall have received (i) counterparts of this Agreement
executed by Borrower, Parent, Agent and the Required Lenders or, as to any of
the Lenders, advice satisfactory to Agent that such Lender has executed this
Agreement, and (ii) the Consent attached hereto executed by each Guarantor.

Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses
of Agent in connection with the preparation, execution, delivery and
administration, modification and amendment of this Agreement and any instruments
and documents to be delivered hereunder (including, without limitation, the
reasonable fees and expenses of counsel for Agent) in accordance with the terms
of Section 9.04 of the Credit Agreement.

On and after the effectiveness of this Agreement, each reference in the Credit
Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement, as amended by this Agreement.

The Credit Agreement (as modified to the extent specifically provided above),
the Notes and each of the other Loan Documents, except to the extent of the
limited waivers specifically provided above, are and shall continue to be in
full force and effect and are hereby in all respects ratified and confirmed. The
execution, delivery and effectiveness of this Agreement shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
any Lender or of Agent under the Credit Agreement or any of the Loan Documents,
nor constitute a waiver of any provision of the Credit Agreement or any of the
Loan Documents. This Agreement shall constitute a Loan Document.

If you agree to the terms and provisions hereof, please evidence such agreement
by executing and returning a counterpart of this Agreement to Malcolm K.
Montgomery of Shearman & Sterling LLP by facsimile (646-848-7587), with four
duplicate originals by overnight courier.

[Balance of page intentionally left blank.]

 

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This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.

This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York.

 

Very truly yours, SUNSTONE HOTEL PARTNERSHIP, LLC By  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE HOTEL INVESTORS, INC. By  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

(Signatures continued on next page)

 

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Agreed as of the date first above written:

CITICORP NORTH AMERICA, INC.,

as Administrative Agent and Collateral Agent and as a Lender

By  

/s/ Jeanne M. Craig

 

Name: Jeanne M. Craig

Title: Vice President

 

MERRILL LYNCH CAPITAL CORPORATION,

as a Lender

By  

/s/ John C. Rowland

 

Name: John C. Rowland

Title: Vice President

 

MORGAN STANLEY SENIOR FUNDING, INC.

as a Lender

By  

/s/ Eugene F. Martin

 

Name: Eugene F. Martin

Title: Vice President

 

BARCLAYS BANK PLC

as a Lender

By  

/s/ Haejin Baek

 

Name: Haejin Baek

Title: Vice President

 

CALYON NEW YORK BRANCH

as a Lender

By       

Name:

Title:

By       

Name:

Title:

[Signatures continued on next page]

 

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GRAYSON & CO.

as a Lender

By:  

BOSTON MANAGEMENT AND RESEARCH,

as investment advisor

  By:  

/s/ Michael B. Botthof

   

Name: Michael B. Botthof

Title: Vice President

 

DEUTSCHE BANK TRUST COMPANY AMERICAS

as a Lender

By  

/s/ Brenda Casey

 

Name: Brenda Casey

Title: Director

By  

/s/ Joanna Soliman

 

Name: Joanna Soliman

Title: Vice President

 

BEAR STEARNS CORPORATE LENDING INC.

as a Lender

By       

Name:

Title:

 

UBS LOAN FINANCE LLC,

as a Lender

By       

Name:

Title:

By       

Name:

Title:

 

SENIOR DEBT PORTFOLIO (FORMERLY KNOWN AS EATON VANCE PRIME FUND, INC.)

as a Lender

By:

 

BOSTON MANAGEMENT AND RESEARCH

as Investment Advisor

By  

/s/ Michael B. Botthoff

 

Name: Michael B. Botthoff

Title: Vice President

 

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CONSENT

Dated as of March 3, 2006

Each of the undersigned, as Guarantor under the Guaranty set forth in Article
VII of the Revolving Credit Agreement dated as of October 26, 2004, in favor of
Agent and the other Secured Parties identified in the Credit Agreement referred
to in the foregoing Limited Waiver and Amendment (the “Guaranty”), hereby
consents to such Limited Waiver and Amendment and hereby confirms and agrees
that notwithstanding the effectiveness of such Limited Waiver and Amendment, the
Guaranty is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects.

 

BUY EFFICIENT, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

ROCHESTER BEVFLOW, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

ROCHESTER RIBM LESSEE, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

RTS LESSEE, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SHP DT BEVFLOW, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

[Signatures continued on next page]

 

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SUNSTONE HOTEL TRS LESSEE, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE HOTELS, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE NAPA MERLOT LESSEE, INC.

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE NAPA, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE HOTELS ROCHESTER, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE OUTPARCEL, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

[Signatures continued on next page]

 

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SUNSTONE PLEDGECO, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE ROCHESTER OUTPARCEL, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE WINDY HILL, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE WINDY HILLS LESSEE, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

TTS FACILITIES, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WB SUNSTONE-BOISE, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WB SUNSTONE-BOISE, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

[Signatures continued on next page]

 

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SUNSTONE JAMBOREE, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

SUNSTONE JAMBOREE LESSEE, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WB SUNSTONE-LAKE OSWEGO, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WB SUNSTONE-LAKE OSWEGO, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WB SUNSTONE-PORTLAND, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WB SUNSTONE-PORTLAND, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WB SUNSTONE-RIVERSIDE, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

[Signatures continued on next page]

 

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WB SUNSTONE-RIVERSIDE, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WESTBROOK HOTEL CO-INVESTMENT PARTNERS IV, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WESTBROOK HOTEL PARTNERS IV, L.L.C. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WHP BEVFLOW, LLC

By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WHP TEXAS BEVERAGE-1, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

WHP TEXAS BEVERAGE-2, INC. By:  

/s/ Jon D. Kline

 

Name: Jon D. Kline

Title: Vice President

 

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