Document:

Stock Option Award Agreement

 Exhibit 10.1 
 SUNSTONE HOTEL INVESTORS, INC. 
 2004 LONG-TERM INCENTIVE PLAN 
 STOCK OPTION AWARD AGREEMENT 
 This Stock Option Award Agreement (this “Agreement”) is made and entered into as of this 28th day of April, 2008 (the “Grant Date”), by and between Sunstone Hotel Investors, Inc., a Maryland
corporation (the “Company”), and Robert A. Alter (the “Grantee”) pursuant to the Sunstone Hotel Investors, Inc. 2004 Long-Term Incentive Plan (the “Plan”). Capitalized terms not
defined in this Agreement have the meanings ascribed to them in the Plan. 
 1. Grant of Stock Option. The Company hereby
grants to the Grantee pursuant to the Plan the right and option (an “Option”) to purchase, subject to the terms of this Agreement and the Plan and subject to the vesting provisions of Section 4, all or any part of the
aggregate of 200,000 shares of the Company’s Common Stock (the “Shares”) at a purchase price per Share of $17.71 (the “Option Exercise Price”). This Option is intended to be a non-qualified stock
option, and is not intended to qualify as an Incentive Stock Option. For the sake of clarity, this Option is granted pursuant to Section 2.10 of the Plan, and the Option Exercise Price is the average closing price per Share for the 20 trading
days commencing on April 1, 2008 and ending on the Grant Date. 
 2. Term of Option. This Option shall expire on
April 27, 2018 (the “Expiration Date”) and must be exercised, if at all, on or before the earlier of the Expiration Date or the date on which this Option is earlier terminated in accordance with the provisions of
Section 4 of this Agreement. 
 3. Vesting. Except as otherwise provided herein, this Option shall vest on April 28,
2009 and shall be exercisable only to the extent that it has vested. This Option shall cease to vest upon Grantee’s Termination of Employment, and may be exercised after Grantee’s date of termination only as set forth below. 
 4. Termination of Employment. 
 4.1 Termination of Employment for Any Reason Other than Dismissal for Cause or Termination without Good Reason. Upon Grantee’s Termination of Employment for any reason (other than dismissal by the Company for Cause or by Grantee
without Good Reason), this Option, to the extent vested on the date of employment termination, shall remain exercisable until the Expiration Date. For purposes of this Agreement, “Cause” and “Good Reason” shall have the meanings
ascribed to them under the employment agreement between the Grantee and the Company, effective as of the closing of the Company’s initial public offering and as amended effective March 19, 2007. 

 4.2 Termination for Cause or without Good Reason. Upon Grantee’s Termination of Employment
by the Company for Cause or by the Grantee without Good Reason, this Option will expire and terminate on the date of such termination. 
 5.
Manner of Exercise. 
 5.1 Stock Option Exercise Agreement. To exercise this Option, Grantee (or in the case of exercise
after Grantee’s death, Grantee’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company an executed stock option exercise agreement in the form attached hereto as Exhibit A, or in such other form
as may be required by the Company from time to time (the “Exercise Agreement”), which shall set forth, inter alia, Grantee’s election to exercise this Option, the number of Shares being purchased, any
restrictions imposed on the Shares and any representations, warranties and agreements regarding Grantee’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other
than Grantee exercises this Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise this Option. 
 5.2 Limitations on Exercise. This Option may not be exercised unless such exercise is in compliance, to the reasonable satisfaction of the
Committee, with all applicable federal and state securities laws, as they are in effect on the date of exercise. This Option may not be exercised as to fewer than 1,000 Shares unless it is exercised as to all Shares as to which this Option is then
exercisable. 
 5.3 Payment. The Exercise Agreement shall be accompanied by full payment for the Shares being purchased (the
“Exercise Price”) in accordance with Section 2.5(c) of the Plan. 
 5.4 Tax Withholding. Prior to the
issuance of the Shares upon exercise of this Option, Grantee must pay, or otherwise provide for to the satisfaction of the Company, any applicable federal or state withholding obligations of the Company. If the Committee permits, Grantee may provide
for payment of withholding taxes upon exercise of this Option by requesting that the Company retain Shares with a Fair Market Value (determined as of the date of exercise) equal to the statutory minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Grantee by deducting the Shares retained from the Shares issuable upon exercise of this Option. 
 5.5 Issuance of Shares. As promptly as is practicable after the receipt of the Exercise Agreement, in form and substance satisfactory to counsel for the Company, payment of the Exercise Price and satisfaction
of applicable withholding requirements, the Company shall issue the Shares registered in the name of Grantee, Grantee’s authorized assignee, or Grantee’s legal representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto. The 

  

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Company may postpone such delivery until it receives satisfactory proof that the issuance of such Shares will not violate any of the provisions of the
Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended, any rules or regulations of the Securities and Exchange Commission (the “SEC”) promulgated
thereunder, or the requirements of applicable state law relating to authorization, issuance or sale of securities, or until there has been compliance with the provisions of such acts or rules. Grantee understands that the Company is under no
obligation to register or qualify the Shares with the SEC, any state securities commission or any stock exchange to effect such compliance. 
 6. Nontransferability of Option. This Option may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Grantee only by Grantee. The terms of
this Option shall be binding upon the executors, administrators, successors and assigns of Grantee. 
 7. Change in Control.
Upon a Change in Control, this Option will be treated in accordance with Section 3.7 of the Plan. 
 8. Privileges of Stock
Ownership. Grantee shall not have any of the rights of a stockholder of the Company with respect to any Shares until the Shares are issued to Grantee and no adjustment shall be made for cash distributions in respect of such Shares for which
the record date is prior to the date upon which such Grantee or permitted transferee shall become the holder of record thereof. 
 9.
Entire Agreement. The Plan is incorporated herein by reference. This Agreement, the Plan, the Exercise Agreement and such other documents as may be executed in connection with the exercise of this Option constitute the entire agreement
and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior understandings and agreements with respect to such subject matter. Any action taken or decision made by the Committee arising out of or in
connection with the construction, administration, interpretation or effect of this Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Grantee and all persons claiming
under or through the Grantee. 
 10. Amendment. The Committee may amend the Plan and this Agreement in any respect whatsoever,
provided that any such amendment that materially impairs any rights or materially increases any obligations of the Grantee under this Agreement shall be made only with the consent of the Grantee. 
 11. No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Grantee any right to continue in the employ of, or other
relationship with, the Company or any Related Entity, or limit in any way the right of the Company or any Related Entity to terminate Grantee’s employment or other relationship at any time, with or without cause. 
  

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 12. Notices. Any notice required to be given or delivered to the Company under the terms of
this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Grantee shall be in writing and addressed to Grantee at the address
indicated below or to such other address as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after deposit in the United
States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by facsimile. 
 13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Grantee and Grantee’s heirs, executors, administrators, legal representatives,
successors and assigns. 
 14. Choice of Forum. THE COMPANY AND THE GRANTEE HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE CITY OF LOS ANGELES OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO OR CONCERNING THE PLAN OR THIS AGREEMENT THAT IS NOT OTHERWISE RESOLVED ACCORDING TO THIS AGREEMENT.

 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THAT BODY OF LAW PERTAINING TO CHOICE OF LAW OR CONFLICT OF LAW. 
 16. Headings. The headings in
this Agreement are for the purpose of convenience only and are not intended to define or limit the construction of the provisions hereof. 
  

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 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date noted above.

  

			
	SUNSTONE HOTEL INVESTORS, INC.
		
	By:	 	 /s/ Kenneth E. Cruse

	Name:	 	Kenneth E. Cruse
	Title:	 	Chief Financial Officer
		
	By:	 	 /s/ Robert A. Alter

	Name:	 	Robert A. Alter
	Title:	 	Executive Chairman

  

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 Exhibit A 
 SUNSTONE HOTEL INVESTORS, INC. 
 2004 LONG-TERM INCENTIVE PLAN 
 STOCK OPTION EXERCISE AGREEMENT 
 I hereby elect to purchase the number of shares of Common Stock (“Shares”) of Sunstone Hotel Investors, Inc. (the “Company”) as set forth below: 
  

											
	Grantee:	 	 Robert A. Alter
	 		 	Number of Shares Purchased:	 	  

					
	Social Security Number:	 	  
	 		 	Purchase Price per Share:	 	  

					
	Address:	 	  
	 		 	Aggregate Purchase Price:	 	  

					
		 	  
	 		 	Date of Option Award Agreement:	 	 April 28, 2008

					
		 	  
	 		 		 	
				
	Type of Option: Nonqualified Stock Option	 		 	Exact Name of Title to Shares:	 	  

			
		 		 	  

 Delivery of Purchase Price. Grantee hereby delivers to the Company the Exercise Price, to
the extent permitted in the Stock Option Award Agreement as follows (check as applicable and complete): 
  

	[  ]	in cash (by check) in the amount of $            , receipt of which is acknowledged by the Company;

  

	[  ]	by delivery of                      fully-paid, nonassessable and vested
Shares (a) owned by Grantee for at least six (6) months prior to the date hereof (and which have been paid for within the meaning of SEC Rule 144) or obtained by Grantee in the open public market and (b) owned free and clear of all
liens, claims, encumbrances or security interests, valued at the Fair Market Value of $             per share; 

  

	[  ]	through a “same-day-sale” commitment, delivered herewith, from Grantee and the NYSE Dealer named therein, in the amount of
$            ; or 

  

	[  ]	through a “margin” commitment, delivered herewith from Grantee and the NYSE Dealer named therein, in the amount of
$            . 

 Payment of Withholding Tax. Grantee
hereby delivers to the Company the amount necessary to satisfy any withholding tax obligations of the Company, to the extent permitted in the Stock Option Award Agreement as follows (check as applicable and complete): 
  

	[  ]	in cash (by check) in the amount of $            , receipt of which is acknowledged by the Company; or

  

	[  ]	by the Company retaining Shares deliverable pursuant to the exercise of this Agreement with a Fair Market Value equal to the amount of such withholding tax obligation.

  

							
	Date:	 	  
	 		 	  

		 		 		 	Signature of GranteeEmployment Offer Letter

 Exhibit 10.2 
 Mr. Christopher M. Lal 
 C/O The Portfolio Group 
 3415 S. Sepulveda Boulevard 
 Suite 450 
 Los Angeles,
California 
 90034 
 March 20, 2007 
 Dear Chris: 
 We are pleased to extend to you this offer of employment as
Vice President – Legal with Sunstone Hotel Investors, Inc. located in San Clemente, California, beginning on April 2, 2007. You will report directly to Steven Goldman, Chief Executive Officer. Your bi-weekly base compensation will be at
the rate of $7,307.70 which equates to $190,000 on an annualized basis. Your base pay compensation will be reviewed annually each year beginning in February 2008 with a documented Performance Review. Any applicable base salary change will be based
on the Sunstone pay increase grid currently in effect at that time. 
 Beginning in 2007 for review in February 2008, you will be eligible to participate in
the Sunstone Bonus Program, and you will have a target bonus payment of 50% of your actual base salary earnings for each calendar year. Half of the bonus will be based on company-level financials (which are the same goals applicable to other
officers), and the remaining half will be based on your individual performance. In addition, you will be eligible for future restricted stock awards which will be subject to approval by the Board of Directors. I will assist you in identifying
specific bonus criteria that will enable you to meet your goals. 
 In addition to your base salary
and annual bonus, you will receive a sign-on restricted stock award of $200,000 which shall vest in equal amounts over three (3) years. The restricted stock award is subject to the approval of our Board of Directors, which we expect will occur
at the May 2, 2007 meeting. Once approved, vesting will occur annually beginning on February 7, 2008 and ending with the final vesting on February 7, 2010. In order to receive a vested benefit from this stock award, you must be
employed by the Company on the vesting date of February 7th of each year. You will also be entitled to receive the anticipated dividend
distributions against the unvested portion of the award throughout each year, beginning with the Second Quarter dividend payable in July 2007. 
 In the
event a Change of Control occurs (Change of Control defined as in the Company’s current executive officer employment agreements) and your employment is terminated by the Company without cause or by you for good reason (“cause” and
“good reason” defined as in the Company’s current executive officer employment agreements), you will receive a one-time severance amount equal to the sum of nine (9) months salary at the salary rate in effect at the time of the
Change of Control and your prior year bonus. In addition, all of your remaining unvested restricted stock grants shall vest immediately. 
 In connection
with your capacity as Vice President – Legal, the Company will enter into an Indemnification Agreement with you. The Indemnification Agreement shall be similar in substance and form to the agreement attached hereto as Exhibit A. 
 You will be eligible to participate in the Company’s health, dental, life, vision, accidental death and dismemberment and disability plans, subject to the terms,
conditions, and limitations contained in the applicable plan documents and insurance policies. Further information regarding the plan will be provided 

 
to you. In addition, on the first of the month following the completion of your sixth month of employment, you will be eligible to participate in the
Company’s 401(k) program of which Sunstone contributes 3% of your annual base compensation (exclusive of any bonuses or incentives received during the year). 
 You will accrue vacation time at the rate of twenty (20) days per year. Our interest is that all associates take their accrued vacation time as needed in accordance with our current vacation policy, appropriate business patterns and
prior approval from your supervisor. Our vacation policy currently allows a vacation accrual bank up to 1.5 times the current vacation accrual rate at which time it is capped from any future accruals until earned vacation time has been taken to
lower the bank below the 1.5 accrual rate. 
 Chris, all associates of Sunstone, even those assuming a new position within the Company, start with an initial
employment period of three months, at which point a performance review will be conducted. 
 This offer is conditional upon (a) your completing the
Sunstone Application for Employment; (b) your producing documents for the Company’s review that are sufficient to establish your identity and status as either a citizen of the United States or an authorized alien worker, prior to the
commencement of your employment; and (c) verification of references which you have supplied. 
 As with most companies, employment with Sunstone is at
the mutual consent of each employee and the Company. Accordingly, while the Company has every hope that employment relationships will be mutually beneficial and rewarding, employees and the Company retain the right to terminate the employment
relation at will, at any time, with our without cause. Please note that no individual, other than the CEO or President of Sunstone Hotel Investors, Inc., has the authority to make any contrary agreement or representation. Accordingly, this
constitutes a final and fully binding integrated agreement with respect to the at-will nature of the employment relationship. 
 As confirmation of this
employment offer, please sign the attached offer letter and return it to me for our files. You will be completing other necessary documents at the Human Resources Department on your first day of employment. 
 Chris, we are confident of your ability to make a valuable contribution to the operation of Sunstone Hotel Investors, Inc., and we are equally confident of our ability
to make a valuable contribution to your career development. 
  

	
	Very truly yours,
	
	 /s/ Steven R. Goldman

	Steven R. Goldman
	Chief Executive Officer

 This will acknowledge my acceptance of this offer of employment. 
  

											
	By:	 	 /s/ Christopher M. Lal
	 		 	Date:	 	 3/29/2007
	 	
		 	Christopher M. Lal

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