First Letter Amendment dated as of August 14, 2006



 Exhibit 10.3 
 FIRST LETTER AMENDMENT 
 Dated as of August 14, 2006 
 Citicorp North America, Inc., 
 as Administrative Agent 
 Two Penns Way, Suite 110 
 New Castle, Delaware 19720 
  

	 	Re:	Sunstone Hotel Partnership, LLC Revolving Credit Agreement 

 Ladies and Gentlemen: 
 Reference is made to that certain $200,000,000 Revolving Credit Agreement dated as of July 17, 2006 (the “Credit Agreement”) among Sunstone Hotel Partnership, LLC, as borrower (the
“Borrower”), Sunstone Hotel Investors, Inc., the Subsidiary Guarantors identified therein, the initial lenders identified therein (the “Lenders”), the Initial Issuing Bank and Swing Line Bank
identified therein, Citicorp North America, Inc., as the administrative agent (in such capacity, the “Administrative Agent”) for the Lenders Parties (as defined therein), Wachovia Capital Markets, LLC, as syndication agent,
Calyon New York Branch, as co-syndication agent, Keybank National Association, as documentation agent, and Citigroup Global Markets Inc. and Wachovia Capital Markets, LLC, as joint lead arrangers and joint book running managers. Capitalized terms
used but not otherwise defined herein shall have the meanings given to them in the Credit Agreement. 
 It is hereby agreed by you and us as
follows: 
 1. Amendments to Credit Agreement. The Credit Agreement is, effective as of the date of this First Letter Amendment (this
“Amendment”), hereby amended as follows: 
 (a) The following new definitions are hereby added to
Section 1.01 of the Credit Agreement in appropriate alphabetical order: 
 “Available Forward
Proceeds” means the aggregate proceeds available to the Parent from time to time upon settlement of a Forward Sale Agreement, as certified from time to time to the Administrative Agent by the Chief Financial Officer of the Borrower.

 “Forward Sale Agreement” means any forward sale agreement entered into by the Parent with respect
to Equity Interests of the Parent and which specifies (x) a fixed number of shares of the applicable Equity Interests subject to the forward sale agreement that the Parent is required to issue in connection with settlement thereof and
(y) a fixed price per share (subject to customary adjustments) of the applicable Equity Interests due to the Parent upon settlement of the forward sale agreement, as confirmed by the Administrative Agent in its reasonable discretion. In
particular, but not in limitation of the foregoing, the forward sale agreement entered into by the Parent with Citibank, N.A. on July 18, 2006 with respect to 4,000,000 shares of the common stock of the Parent, and any forward sale agreement
entered into by the Parent thereafter which is in substantially the same form and confirmed as such by the Administrative Agent in its reasonable discretion, shall constitute a confirmed Forward Sale Agreement for purposes of this Agreement.








 (b) The definition of “Leverage Ratio” set forth in Section 1.01 of the
Credit Agreement is hereby amended by deleting all text on the first seven lines thereof prior to the words “provided, however,” and substituting therefor the following: 
 “‘Leverage Ratio’ means, at any date of determination, the ratio of (a)(i) Total Debt minus
(ii) the amount, if any, by which (A) the sum of (i) all unrestricted cash and Cash Equivalents on hand of the Parent and its Subsidiaries plus (ii) any Available Forward Proceeds exceeds (B) $10,000,000, to (b) EBITDA
for the consecutive four fiscal quarters of the Parent most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be;” 
 (c) Section 5.04(a)(ii) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 
 “(b) Minimum Tangible Net Worth: Maintain at all times tangible net worth of the Parent and its Subsidiaries, as determined in
accordance with GAAP, of not less than the sum of $645,000,000 plus the product of (A) the sum of (i) the amount of net proceeds of all primary issuances or primary sales of Equity Interests of the Parent or any of its Subsidiaries
consummated after December 31, 2005, plus (ii) any Available Forward Proceeds available pursuant to any Forward Sale Agreements entered into after December 31, 2005, multiplied by (B) 75%.” 
 2. Representations and Warranties. Each Loan Party hereby represents and warrants that the representations and warranties of such Loan Party
contained in each of the Loan Documents are true and correct on and as of the date first above written, before and after giving effect to this Amendment, as though made on and as of such date. 
 3. Effectiveness of Amendment. This Amendment shall become effective as of the date first above written when, and only when, the Administrative
Agent shall have received (a) counterparts of this Amendment executed by the Borrower, the Parent, the Administrative Agent and the Required Lenders (or, as to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender
has executed this Amendment) and (b) an original counterpart of the Consent attached hereto executed by each Subsidiary Guarantor. 
 4.
Costs and Expenses. The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery hereof (including, without limitation, the
reasonable fees and expenses of counsel for the Administrative Agent) in accordance with the terms of Section 9.04 of the Credit Agreement. 
 5. Certain Definitions. Following the effectiveness of this Amendment, 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 Amendment. 
 6. Ratification. The Credit Agreement (as amended by this Amendment) and each of the other
Loan Documents 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 Amendment shall not, except to the extent expressly provided herein,
operate as a waiver of any right, power or remedy of any 

  

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Lender Party or the Administrative Agent under the Credit Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the
Credit Agreement or any of the other Loan Documents. 
 7. Execution Instructions. If you agree to the terms and provisions hereof,
please evidence such agreement by executing and returning a counterpart of this Amendment to Malcolm K. Montgomery of Shearman & Sterling LLP by facsimile (646.848.7587), with four duplicate originals by overnight courier. 
 8. Counterparts. This Amendment 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 Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Amendment. 
 [Balance of page intentionally left blank] 
  

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

			
	 Very truly yours,
  
 BORROWER:
  
 SUNSTONE HOTEL PARTNERSHIP, LLC

		
	By:	 	 /s/ Jon D. Kline

		 	Name: Jon D. Kline
		 	Title:   Vice President


  

			
	PARENT:
	
	SUNSTONE HOTEL INVESTORS, INC.
		
	By:	 	 /s/ Jon D. Kline

		 	Name: Jon D. Kline
		 	Title:   Executive Vice President


  

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	Agreed as of the date first above written:
	
	 CITICORP NORTH AMERICA, INC.,
 as
Administrative Agent and a Lender

		
	By:	 	 /s/ Ricardo James

		 	Name: Ricardo James
		 	Title:   Vice President


  

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	 MERRILL LYNCH CAPITAL CORPORATION,
 as a
Lender

		
	By:	 	 /s/ John C. Rowland

		 	Name: John C. Rowland
		 	Title:   Vice President


  

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	 WACHOVIA BANK, NATIONAL ASSOCIATION,
 as a
Lender

		
	By:	 	 /s/ David Blackman

		 	Name: David Blackman
		 	Title:   Managing Director


  

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	 CALYON NEW YORK BRANCH,
 as a
Lender

		
	By:	 	 /s/ Joseph A. Asciolla

		 	Name: Joseph A. Asciolla
		 	Title:   Managing Director
		
	By:	 	 /s/ Linda D. Tulloch

		 	Name: Linda D. Tulloch
		 	Title:   Director


  

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	 DEUTSCHE BANK TRUST COMPANY AMERICAS,
 as a Lender

		
	By:	 	 /s/ Brenda Casey

		 	Name: Brenda Casey
		 	Title:   Director
		
	By:	 	 /s/ Joanne Soliman

		 	Name: Joanne Soliman
		 	Title:   Associate Vice President


  

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	 UBS LOAN FINANCE LLC,
 as a
Lender

		
	By:	 	 /s/ Richard L. Tavrow

		 	Name: Richard L. Tavrow
		 	Title:   Director
		
	By:	 	 /s/ Irja R. Otsa

		 	Name: Irja R. Otsa
		 	Title:   Associate Director


  

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	 BEAR STEARNS CORPORATE LENDING INC.,
 as a
Lender

		
	By:	 	 /s/ Victor Bulzacchelli

		 	Name: Victor Bulzacchelli
		 	Title:   Vice President


  

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	 KEYBANK NATIONAL ASSOCIATION,
 as a
Lender

		
	By:	 	 /s/ Daniel P. Stegemoeller

		 	Name: Daniel P. Stegemoeller
		 	Title: Sr. Banker


  

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	 BANK OF AMERICA, N.A.,
 as a Lender

		
	By:	 	 /s/ Roger C. Davis

		 	Name: Roger C. Davis
		 	Title:   Senior Vice President


  

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 CONSENT 
 Dated as of August 14, 2006 
 Each of the undersigned, as a Subsidiary Guarantor under the Guaranty set forth in Article VII of the Credit Agreement (as defined in the First Letter Amendment to which this Consent is attached), hereby consents to such First Letter
Amendment and hereby confirms and agrees that notwithstanding the effectiveness of such First Letter Amendment, the Guaranty is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on
and after the effectiveness of such First Letter Amendment, each reference in the Article VII of the Credit Agreement to the “Credit Agreement”, “thereunder”, “thereof” or words of like import shall mean and be a
reference to the Credit Agreement, as amended and modified by such First Letter Amendment. 
  

			
	 WB SUNSTONE-BOISE, LLC

		
	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, LLC

		
	By:	 	 /s/ Jon D. Kline

		 	Name: Jon D. Kline
		 	Title:   Vice President


  

			
	 WB SUNSTONE- RIVERSIDE, LLC

		
	By:	 	 /s/ Jon D. Kline

		 	Name: Jon D. Kline
		 	Title:   Vice President


  

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	 SUNSTONE WINDY HILL, L.L.C.

		
	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 JAMBOREE, LLC

		
	By:	 	 /s/ Jon D. Kline

		 	Name: Jon D. Kline
		 	Title:   Vice President


  

			
	 SUNSTONE MACARTHUR, LLC

		
	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


  

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