--------------------------------------------------------------------------------

Exhibit 10.4
 
 
CONSTRUCTION LOAN AGREEMENT
 
MADE BY AND BETWEEN
 
CJUF II STRATUS BLOCK 21 LLC
c/o
Stratus Properties, Inc.
 
98 San Jacinto, Suite 200
 
Austin, Texas 78701
 
AND
 
CORUS BANK, N.A., as Lender
 
3959 North Lincoln Avenue
 
Chicago, Illinois 60613
 
Dated as of May 2, 2008

 
 

--------------------------------------------------------------------------------

 

 
Table of Contents
Page
 
 
Article 1 INCORPORATION OF RECITALS AND EXHIBITS
2
1.1           Incorporation of Recitals
2
1.2           Incorporation of Exhibits
2
Article 2 DEFINITIONS
2
2.1           Defined Terms
2
2.2           Other Definitional Provisions
14
Article 3 BORROWER’S REPRESENTATIONS AND WARRANTIES
14
3.1           Representations and Warranties
14
3.2           Survival of Representations and Warranties
19
Article 4 LOAN AND LOAN DOCUMENTS
19
4.1           Agreement to Borrow and Lend; Lender’s Obligation to Disburse;
Excess Disbursements
19
4.2           Loan Documents
21
4.3           Term of the Loan
21
4.4           Prepayments
23
4.5           Required Principal Payments
23
4.6           Receipt of Payments
23
4.7           Termination of Lender’s Unfunded Commitment
23
4.8           Lender Default
24
Article 5 INTEREST
24
5.1           Interest Rate
24
Article 6 COSTS OF MAINTAINING LOAN
24
6.1           Increased Costs and Capital Adequacy
24
6.2           Borrower Withholding
25
Article 7 LOAN EXPENSE AND ADVANCES
25
7.1           Loan and Administration Expenses
25
7.2           Loan Fee
26
7.3           Draw Fees
26
7.4           Exit Fee
26
7.5           Lender’s Attorneys’ Fees and Disbursements
27
7.6           Time of Payment of Fees and Expenses
27
7.7           Expenses and Advances Secured by Loan Documents
27
7.8           Right of Lender to Make Advances to Cure Borrower’s Defaults
28
Article 8 NON-CONSTRUCTION REQUIREMENTS PRECEDENT
28
8.1           Non-Construction Conditions Precedent
28
Article 9 CONSTRUCTION REQUIREMENTS PRECEDENT
33
9.1           Construction Documents Required as of Closing
33
9.2           Construction Deliveries Required as of Full Loan Opening.
35
Article 10 BUDGET, CONTINGENCY FUND AND CHANGE ORDERS
37
10.1           Budget
37
10.2           Budget Line Items
38
   

 
 
i

--------------------------------------------------------------------------------

 
 

 
Table of Contents
Page
 
 
10.3           Contingency Fund
39
10.4           Optional Method for Payment of Interest
40
10.5           Change Orders
40
Article 11 SUFFICIENCY OF LOAN
41
11.1           Loan In Balance
41
11.2           Additional Equity Investment
43
Article 12 CONSTRUCTION PAYOUT REQUIREMENTS
43
12.1           Applicability of Sections
43
12.2           Monthly Payouts
43
12.3           Documents to be Furnished for Each Disbursement
44
12.4           Retainages
45
12.5           Disbursements for Materials Stored On-Site
46
12.6           Disbursements for Off-site Materials
46
12.7           Specific Limitation on Disbursements
46
12.8           Disbursements Related to Commercial Space Leases
47
12.9           Delivery of Subcontracts
47
Article 13 FINAL DISBURSEMENT FOR CONSTRUCTION
48
13.1           Final Disbursement for Construction
48
Article 14 SALE OF RESIDENTIAL UNITS OR OTHER PORTIONS OF THE PROJECT
49
14.1           Price List Schedule
49
14.2           Sales Agreements
49
14.3           Purchaser Deposits
50
14.4           Residential Unit Sales
51
14.5           Sales Operations and Seller’s Obligations
53
14.6           Delivery of Sales Information and Documents
53
14.7           Borrower’s Acknowledgment Regarding Buyer Financing
54
14.8           Condominium Regime
54
14.9           Release of Residential Units
55
14.10         Application of Sales Proceeds
57
Article 15 OTHER COVENANTS
58
15.1           Borrower further covenants and agrees as follows:
58
15.2           Single Purpose Entity Covenants
68
15.3           Authorized Representative
70
Article 16 CASUALTIES AND CONDEMNATION
70
16.1           Lender’s Election to Apply Proceeds on Indebtedness
70
16.2           Borrower’s Obligation to Rebuild and Use of Proceeds Therefor
71
Article 17 ASSIGNMENTS BY LENDER AND BORROWER
72
17.1           Assignments and Participations
72
17.2           Prohibition of Assignments and Transfers by Borrower
72
17.3           Prohibition of Transfers in Violation of ERISA
72
17.4           Successors and Assigns
73

 
ii

--------------------------------------------------------------------------------

 

 
Table of Contents
Page
 
 

Article 18 TIME OF THE ESSENCE
73
18.1           Time is of the Essence
73
Article 19 EVENTS OF DEFAULT
73
19.1           Events of Default
73
Article 20 LENDER’S REMEDIES IN EVENT OF DEFAULT
76
20.1           Remedies Conferred Upon Lender
76
Article 21 GENERAL PROVISIONS
77
21.1           Captions
77
21.2           Modification; Waiver
77
21.3           Governing Law
78
21.4           Acquiescence Not to Constitute Waiver of Lender’s Requirements
78
21.5           Disclaimer by Lender
78
21.6           Partial Invalidity; Severability
79
21.7           Definitions Include Amendments
79
21.8           Execution in Counterparts
79
21.9           Entire Agreement
79
21.10         Waiver of Damages
79
21.11         Claims Against Lender
79
21.12          Jurisdiction
80
21.13          Set-Offs
80
21.14          Binding Effect
81
21.15          Waiver of Accord and Satisfaction
81
Article 22 NOTICES
81
Article 23 WAIVER OF JURY TRIAL
83
Illinois Collateral Protection Act Notice
viii
   

 
EXHIBITS TO LOAN AGREEMENT

Exhibit A                                Legal Description of Land
Exhibit B                                Permitted Exceptions
Exhibit C                                Title Requirements
Exhibit D                                Form of Survey Certification
Exhibit E                                Insurance Requirements
Exhibit F                                Architect’s Certificate
Exhibit G                                Initial Budget
Exhibit H                                Draw Request Forms
Exhibit I                                Partial Plans and Specifications
Exhibit J                                Proposed Finish Standards
Exhibit K                                Bailment Letter (Warehousemen)
Exhibit L                                Bailment Letter (Other Than
Warehousemen)
Exhibit M                                List of Sales Agreements and Price List
Schedule
Exhibit N                                Subcontract Delivery Deadline Dates
Exhibit O                                Approved Form of Sales Agreement

 
iii

--------------------------------------------------------------------------------

 

 
Table of Contents
Page
 

Exhibit P                                Materials Purchases Not Subject to
Retainage
Exhibit Q                                Allowable Tenant Improvements
Exhibit R                                Delivery Schedule for Plans and
Specifications
Exhibit S                                Form of Second Estoppel and Agreement
from City of Austin

 
iv

--------------------------------------------------------------------------------

 
 
 
CONSTRUCTION LOAN AGREEMENT
 
Project Commonly Known as
 
“W Hotel and Residences”
 
Block 21, Austin, Texas
 
THIS CONSTRUCTION LOAN AGREEMENT (“Agreement”) is made as of May 2, 2008, by and
between CJUF II STRATUS BLOCK 21 LLC, a Delaware limited liability company
(“Borrower”), and CORUS BANK, N.A., a national banking association, its
successors and assigns (“Lender”).
 
W I T N E S S E T H:
 
RECITALS
 
A.           Borrower is the owner in fee simple of an approximately 76,176
square foot parcel of land commonly known as “Block 21,” bounded by Second,
Third, Guadalupe and Lavaca Streets, City of Austin, County of Travis, State of
Texas, and legally described in Exhibit A attached hereto (the
“Land”).  Borrower proposes to construct on the Land a mixed use project to be
known as the “W Hotel and Residences,” consisting of a building of thirty-six
(36) stories (the “Building”) and other facilities containing:  (i) one hundred
ninety-eight (198) residential condominium units (each, a “Residential Unit”) on
twenty (20) floors, from floor 18 through floor 37 of the Building, containing
at least 272,272 Saleable Square Feet (with each capitalized term used and not
defined in these Recitals being defined hereinbelow) of interior space and with
interior finished ceiling heights of at least ten (10) feet (outside of areas
containing mechanical runs),  (ii) a “W” flagged hotel with two hundred
fifty-two (252) guest rooms, situated on ten (10) floors, from floor 6 through
floor 16 of the Building, to be furnished and managed pursuant to the Hotel
Operating Agreement (as hereinafter defined), and containing at least 100,408
square feet of interior room space and 88,212 square feet of hotel operating
space, collectively with, on floor 2 through floor 4 of the Building, 9,583
square feet of meeting space, a 8,060 square foot fitness facility, a 9,935
square foot pool and pool deck, and a business center (collectively, the
“Hotel”), (iii) on floor 1 through floor 3 of the Building, 18,341 net rentable
square feet of retail space (the “Retail Space”) and 37,382 net Rentable Square
Feet of office space (the “Office Space”), (iv) a live performance venue, on the
top three (3) floors of an attached 4-story structure, containing at least
50,336 square feet and a minimum capacity of 2,480 people, with seating for
approximately 2,160 people (the “Venue”), (v) 10,995 square feet of storage
space, and (vi) a three (3)-level subterranean parking garage (the “Parking
Garage”), with a direct connection to elevators servicing the Residential Units,
and containing parking spaces for at least 480 automobiles (each, a “Parking
Space”), of which, 306 Parking Spaces shall be allocated for the Residential
Units, and 116 Parking Spaces shall be allocated, collectively, for the Hotel,
the Commercial Space, and the Venue.  The Residential Units shall have a la
carte access to the Hotel amenities on a pay-by-use basis, as provided in the
Hotel Operating Agreement.
 
B.           Borrower has applied to Lender for a loan in the aggregate amount
of up to One Hundred Sixty-Five Million Dollars ($165,000,000) to fund
construction, development and marketing costs of the Project, and Lender is
willing to make the Loan on the terms and conditions hereinafter set forth.
 

 
 

--------------------------------------------------------------------------------

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
 
 
Article 1
 
 
INCORPORATION OF RECITALS AND EXHIBITS
 
1.1 Incorporation of Recitals.
 
The foregoing preambles and all other recitals set forth herein are made a part
hereof by this reference.
 
1.2 Incorporation of Exhibits.
 
Exhibits A through S to this Agreement, attached hereto, are incorporated in
this Agreement and expressly made a part hereof by this reference.
 
 
Article 2
 
 
DEFINITIONS
 
2.1 Defined Terms.
 
The following terms as used herein shall have the following meanings:
 
Additional Equity Investment:  As such term is defined in Section 11.2.
 
Affiliate:  With respect to a specified person or entity, any individual,
partnership, corporation, limited liability company, trust, unincorporated
organization, association or other entity that, directly or indirectly, through
one or more intermediaries, controls or is controlled by or is under common
control with such person or entity, including, without limitation, any general
or limited partnership in which such person or entity is a partner.
 
Agreement:  This Construction Loan Agreement.
 
Allowable Tenant Improvements:  As such term defined in Section 12.8.
 
Appraisal:  An MAI certified appraisal of the Project performed in accordance
with FIRREA and Lender’s appraisal requirements by an appraiser selected and
retained by Lender.
 
Approved Finish Standards:  As such term is defined in Section 9.2(f).
 
Approved Lease:  As such term is defined in Section 15.1(m).
 
Approved Plans and Specifications:  As such term is defined in Section 9.2(e).
 
Architect:  BOKA Powell, L.L.C.
 
Architect’s Certificate:  A certificate in the form of Exhibit F attached hereto
executed by the Architect in favor of Lender.
 

 
2

--------------------------------------------------------------------------------

 

Authorized Representative:  William H. Armstrong, an individual, or such other
individual that is designated in accordance with Section 15.3 of this Agreement.
 
Available Sources of Funds:  As such term is defined in Section 11.1(c).
 
Bankruptcy Code:  Title 11 of the United States Code entitled “Bankruptcy” as
now or hereafter in effect, or any successor thereto or any other present or
future bankruptcy or insolvency statute.
 
Bonds:  As such term is defined in Section 9.1(d).
 
Borrower:  As such term is defined in the opening paragraph of this Agreement.
 
Budget:  The budget for the Project specifying all costs and expenses of every
kind and nature whatsoever to be incurred by Borrower in connection with the
Project prior to the Maturity Date, as approved by Lender as set forth in
Section 10.1.
 
Budget Line Item:  As such term is defined in Section 10.2.
 
Building:  As such term is defined in Recital A.
 
Business Day:  Any Monday through Friday, excluding days on which Lender is
closed for business.
 
Change Order:  Shall mean any of the following: (i) a request for changes in the
Approved Plans and Specifications (other than minor field changes involving no
extra cost) or for a change to the General Contract Price, (ii) an amendment to
the General Contract, (iii) a construction change directive or (iv) a written
order for a minor change in the work issued by the architect.
 
CJUF:  Canyon-Johnson Urban Fund II L.P., a Delaware limited partnership.
 
Closing: The date of the Closing Funding.
 
Closing Funding: The first disbursement of Loan proceeds in an amount of
$2,000,000, which shall be advanced on or about the date hereof.
 
Collateral Assignment of Hotel Documents:  That certain Assignment of Hotel
Documents collaterally assigning Borrower’s interests in the Hotel Documents
(and related documents) to Lender.
 
Commercial Space:  Together, the Office Space and the Retail Space.
 
Commitment:  Lender’s maximum aggregate funding obligation hereunder of up to
One Hundred Sixty-Five Million Dollars ($165,000,000), less any reduction
thereof in accordance with the terms of this Agreement.
 
Completion Date:  With respect to the Residential Units, July 25, 2011; with
respect to the Hotel, January 7, 2011; with respect to the Venue May 25, 2011;
with respect to the
 

 
3

--------------------------------------------------------------------------------

 

Commercial Space, January 7, 2011; and with respect to the entire Project, the
Initial Maturity Date.
 
Completion and Carveout Guaranty:  A guaranty of performance and completion,
executed by Guarantor and pursuant to which Guarantor guarantees the lien-free
and timely completion of the Project in accordance with all provisions of this
Agreement and Borrower’s obligation to keep the Loan In Balance and to pay for
all cost overruns, subject to the limits stated therein, and guarantees
specified non-recourse carve-out obligations.
 
Condominium Documents:  As such term is defined in Section 8.1(s).
 
Condominium Marketing License Agreement:  That certain Condominium Marketing
License Agreement dated as of October 26, 2006 by and between Stratus Block 21
Investments, L.P. (predecessor in interest to Borrower), and Starwood Hotels &
Resorts Worldwide, Inc.
 
Construction or construction:  The construction and equipping of the
Improvements in accordance with the Approved Plans and Specifications, and
related improvements required to be performed by Borrower under Sales Agreements
(including all off-site improvements reasonably required for use and operation
of the Improvements) and the installation of all personal property, fixtures and
equipment required for the operation of the Project or required under Sales
Agreements.
 
Construction Disbursement:  As such term is defined in Section 7.3.
 
Construction Schedule:  A schedule reasonably satisfactory to Lender,
establishing a timetable for completion of the Construction, showing, on a
monthly basis, the anticipated progress of the Construction, and showing that
the Improvements can be completed on or before the Completion Date and that the
Residential Units will be delivered prior to any outside dates, if any, provided
for in the Sales Agreements.
 
Contingency Fund:  As such term is defined in Section 10.3.
 
Contractor’s Contingency:  As such term is defined in Section 10.3.
 
Control:  As such term is used with respect to any person or entity, including
the correlative meanings of the terms “controlled by” and “under common control
with,” shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of such person or entity,
whether through the ownership of voting securities, by contract or otherwise.
 
Declaration of Condominium:  The Master Condominium Declaration and the
Residential Condominium Declaration, individually or collectively, as the
context shall infer.
 
Deed of Trust:  A construction deed of trust, assignment of rents, security
agreement and fixture filing executed by Borrower for the benefit of Lender
securing this Agreement, the Note, and all obligations of Borrower in connection
with the Loan, granting a first priority lien on Borrower’s fee interest in the
Project, subject only to the Permitted Exceptions.
 

 
4

--------------------------------------------------------------------------------

 

Default or default:  Any event, circumstance or condition, which, if it were to
continue uncured, would, with notice or lapse of time or both, constitute an
Event of Default hereunder.
 
Default Rate:  As such term is defined in the Note.
 
Deficiency Deposit:  As such term is defined in Section 11.1(b).
 
Deposits:  The Earnest Money Deposits and the Upgrade Deposits.
 
Design Professionals:  As such term is defined in Section 9.1(a).
 
Earnest Money Deposits:  As such term is defined in Section 14.3 (a).
 
Environmental Indemnity:  An environmental indemnity from Borrower and
Guarantor, jointly and severally, indemnifying Lender with regard to all matters
related to Hazardous Material and other environmental matters.
 
Environmental Proceedings:  Any environmental proceedings, whether civil
(including actions by private parties), criminal, or administrative proceedings,
relating to the Project.
 
Environmental Report:  An environmental report prepared at Borrower’s expense by
a qualified environmental consultant approved by Lender in its sole discretion
addressed to Lender (or subject to separate letter agreement permitting Lender
to rely on such environmental report), which complies with the USEPA “all
appropriate inquiry” rule contained in 40 CRF Part 312.
 
Equity Investment:  As such term is defined in Section 11.2.
 
ERISA:  The Employee Retirement Income Security Act of 1974, as amended, and the
regulations promulgated thereunder from time to time.
 
Escrow Agent:  As such term is defined in Section 14.3(a).
 
Escrow Agreement:  As such term is defined in Section 8.1(v).
 
Event of Default:  As such term is defined in Article 19.
 
Excess Parking Spaces: As such term is defined in Section 14.1.
 
Exit Fee:  As such term is defined in Section 7.4.
 
Extended Maturity Date:  The date that is forty-six (46) months after the date
of this Agreement, as the Initial Maturity Date may be extended by Borrower
subject to the conditions contained in Section 4.3.
 
Extension Fee:  As such term is defined in Section 4.3(b)(iii).
 
Extension Option:  As such term is defined in Section 4.3(a).
 

 
5

--------------------------------------------------------------------------------

 

FIRREA:  The Financial Institutions Reform, Recovery and Enforcement Act of
1989, as amended from time to time.
 
Full Loan Opening Date:  The date of Full Loan Opening.
 
Full Loan Opening or Full Opening of the Loan:  The second disbursement of Loan
proceeds, being the first disbursement of Loan proceeds other than the Closing
Funding.
 
General Contract:  As such term is defined in Section 9.1(a).
 
General Contract Price:  As such term is defined in Section 9.1(a).
 
General Contractor:  Austin Building Company.
 
Governmental Approvals:  Collectively, all consents, licenses, and permits and
all other authorizations or approvals required from any Governmental Authority
for the Construction in accordance with the Approved Plans and Specifications or
the sale of the Residential Units.
 
Governmental Authority:  Any federal, state, county or municipal government, or
political subdivision thereof, any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality, or public
body, or any court, administrative tribunal, or public utility.
 
Guarantor:  Stratus Properties, Inc., a Delaware corporation.
 
Guarantor Financial Covenants: The covenants of Guarantor set forth in Section
16 of the Limited Payment Guaranty.
 
Hard Costs:  Any and all costs related to or incurred in connection with the
construction of the Project, including, without limitation, the cost of all
labor, materials and equipment, but excluding any fees for architectural and
engineering services, marketing fees, financing costs, developers’ fees and
other similar soft fees and costs.  The Hard Costs include the items delineated
as such on the Budget.
 
Hazardous Material:  Means and includes gasoline, petroleum, asbestos containing
materials, explosives, radioactive materials or any hazardous or toxic material,
substance or waste which is defined by those or similar terms or is regulated as
such under any Law of any Governmental Authority having jurisdiction over the
Project or any portion thereof or its use, including: (i) any “hazardous
substance” defined as such in (or for purposes of) the Compre­hensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.A. § 9601(14)
as may be amended from time to time, or any so-called “superfund” or “superlien”
Law, including the judicial interpretation thereof; (ii) any “pollutant or
contaminant” as defined in 42 U.S.C.A. § 9601(33); (iii) any material now
defined as “hazardous waste” pursuant to 40 C.F.R. Part 260; (iv) any petroleum,
including crude oil or any fraction thereof; (v) natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel; (vi) any
“hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910; (vii) any mold
or fungus that may cause an allergic, toxic or inflammatory response in humans
arising from exposure to such mold or fungus in indoor air; and (viii) any other
toxic substance or contaminant that is subject to any other Law or
 

 
6

--------------------------------------------------------------------------------

 

other past or present requirement of any Governmental Authority.  Any reference
above to a Law, includes the same as it may be amended from time to time,
including the judicial interpretation thereof.
 
Hotel:  As such term is defined in Recital A.
 
Hotel Documents: The Condominium Marketing License Agreement, the Hotel
Operating Agreement, and/or the Technical Services Agreement, individually or
collectively, as the context may infer.
 
Hotel Operator:  W Hotel Management, Inc., a Delaware corporation, an Affiliate
of Starwood Hotel & Resorts Worldwide, Inc.,
 
Hotel Operating Agreement:  That certain W Austin Hotel Operating Agreement by
and between Stratus Block 21 Investments, L.P., and Starwood Hotel & Resorts
Worldwide, Inc., dated as of October 26, 2006, as amended by First Amendment to
Operating Agreement dated January 30, 2008, as such agreement was assigned by
Stratus Block 21 Investments, L.P. to Borrower by virtue of that certain
Assignment and Assumption Agreement dated as of July 30, 2007; and as such
agreement was assigned by Starwood Hotel & Resorts Worldwide, Inc. to Hotel
Operator by virtue of that certain Assignment and Assumption Agreement dated as
of July 30, 2007.
 
HUD:  United States Department of Housing and Urban Development.
 
ILSA:  The Interstate Land Sales Full Disclosure Act, 42 USC 1701 et. seq., as
amended.
 
Improvements:  All of the improvements referred to in Recital A hereto and more
particularly described in the Approved Plans and Specifications and any offsite
improvements reasonably required to be constructed by Borrower for the use or
operation of the improvements described in Recital A.
 
In Balance or in balance:  As such term is defined in Article 11.
 
Including or including:  Means “including, but not limited to”.
 
Indemnified Party:  As such term is defined in Section 15.1(t).
 
Initial Equity Investment:  As such term is defined in Section 8.1(a).
 
Initial Maturity Date:  The date that is forty (40) months from the date of this
Agreement.
 
Insurance Policy:  As such term is defined in Section 8.1(e).
 
Interest Rate:  As such term is defined in the Note.
 
Interest Reserve Budget Line Item:  As such term is defined in Section 10.4.
 
Internal Revenue Code:  The Internal Revenue Code of 1986, as amended from time
to time.
 

 
7

--------------------------------------------------------------------------------

 

Land:  As such term is defined in Recital A.
 
Laws:  Collectively, all federal, state and local laws, statutes, codes,
ordinances, orders, rules and regulations, including judicial opinions or
precedential authority in the applicable jurisdiction.
 
Leases:  The collective reference to all leases, subleases and occupancy
agreements affecting the Project or any part thereof now existing or hereafter
executed and all amendments, modifications or supplements thereto approved in
writing by Lender.
 
Lender:  As such term is defined in the opening paragraph of this Agreement and
including any successor holder of the Loan from time to time.
 
Lender’s Consultant:  An independent consulting architect, inspector, and/or
engineer designated by Lender in Lender’s sole discretion.
 
Lender’s Estimate of Remaining Costs:  As such term is defined in Section
11.1(d).
 
Lender’s Remaining Exposure:  The sum, at any date, of the outstanding principal
balance of the Loan and the Unfunded Commitment.
 
Limited Payment Guaranty:  A guaranty of payment, executed by Guarantor and
pursuant to which Guarantor guarantees the repayment of the Loan, in an amount
up to $20,000,000 of the principal amount of the Loan, plus accrued interest
thereon (including default interest, if any), and the cost of the enforcement of
such guaranty, all in accordance with the terms and provisions more particularly
described therein.
 
List Price:  As such term is defined in Section 14.1.
 
Loan:  As such term is defined in Recital B.
 
Loan Documents:  The collective reference to this Agreement, the documents and
instruments listed in Section 4.2, and all the other documents and instruments
entered into from time to time, evidencing or securing the Loan or any
obligation of payment thereof or per­formance of Borrower’s or Guarantor’s
obligations in connection with the transaction con­templated hereunder, each as
amended.
 
Loan Term:  The period of time commencing on the date of this Agreement through
and including the date the Loan is repaid in full.
 
Master Condominium Declaration:  That certain Declaration of Condominium Regime
for Block 21 Master Condominiums to be recorded against the Project upon
completion thereof, which will subdivide the Project into thirteen (13) “Master
Units.”
 
Material Adverse Change or material adverse change:  If, in Lender’s sole and
reasonable discre­tion, the operations or financial condition of a person,
entity, or property has changed in a manner likely to impair materially the
value of Lender’s security for the Loan, prevent timely
 

 
8

--------------------------------------------------------------------------------

 

repayment of the Loan, or otherwise prevent the applicable person or entity from
timely performing any of its material obligations under the Loan Documents.
 
Maturity Date:  As such term is defined in Section 4.3.
 
Mezzanine Borrower:  One or more constituent entities of Borrower, as agreed to
between Borrower and Mezzanine Lender.
 
Mezzanine Lender:  A institutional lender experienced in condominium development
selected by Borrower and approved in writing by Lender in its reasonable
discretion.
 
Mezzanine Loan:  A loan from a Mezzanine Lender to Mezzanine Borrower in an
aggregate principal amount such that the Qualifying Portion thereof is equal to
or greater than Twenty Million Dollars ($20,000,000), but no greater than Fifty
Million Dollars ($50,000,000), maturing on a date no earlier than the Maturity
Date, and secured by pledges of the membership interests in Borrower.
 
Mezzanine Loan Documents:  The collective reference to the documents and
instruments entered into from time to time, evidencing or securing the Mezzanine
Loan or any obligation of payment thereof or per­formance of Mezzanine
Borrower’s or Guarantor’s obligations in connection with the transaction
con­templated thereunder, each as amended.
 
Mezzanine Loan Intercreditor Agreement.  A subordination and intercreditor
agreement by and between Lender and Mezzanine Lender, prepared by counsel to
Lender, in form and substance acceptable to Lender in its reasonable discretion,
which provides, without limitation, that (i) the Mezzanine Loan is fully
subordinate in right of payment and priority of lien to the Loan; (ii) Mezzanine
Lender has no interest in any collateral which is unrelated to the Project and
shall not accept any payments of the Mezzanine Loan until Lender is indefeasibly
paid in full and Lender has released its Deed of Trust, except interest payments
to be funded solely from the Mezzanine Loan interest reserve, if any; (iii)
Mezzanine Lender shall not interfere in any manner with the enforcement of
Lender’s remedies; (iv) Mezzanine Lender shall not enforce any remedies with
respect to its collateral or any other collateral (or against Guarantor), except
that Mezzanine Lender may foreclose on the pledges of ownership interest in
Borrower, provided that (A) any monetary default under the Loan (including any
payment due to make the Loan In Balance) is cured by Mezzanine Lender, and (B)
Mezzanine Lender delivers to Lender a replacement guaranty substantially similar
to the Completion and Carveout Guaranty, and (v) provided that Lender consents
to such price reduction in its sole discretion, Mezzanine Lender shall permit
Borrower to enter into contracts and thereafter close on any Residential Unit
provided that the gross purchase price (exclusive of Upgrades) is greater than
or equal to 80% of the List Price for such Residential Unit as specified on the
approved Price List Schedule attached hereto as Exhibit M; (vi) Mezzanine Lender
shall be authorized (but not required) by the terms of the Mezzanine Loan to
make protective advances with respect to the Project and the Loan; (vii) a
default under the Loan shall be a default under the Mezzanine Loan; and (viii)
Mezzanine Lender shall not be permitted to (A) sell, transfer, or otherwise
assign its interest in the Mezzanine Loan, (B) sell or otherwise offer any
participations in the Mezzanine Loan, except at par to a Qualified Transferee,
or (C) cause or permit the sale, assignment or other transfer of any of the
ownership interests in a Mezzanine Lender which is a single purpose entity; in
each case,
 

 
9

--------------------------------------------------------------------------------

 

without the express prior written approval of Lender.  Notwithstanding the
foregoing, Lender shall permit the transfer of an economic interest of less than
fifty percent (50%) in the Mezzanine Loan to a Qualified Transferee, provided
(x) the identity, ownership, and financial profile of such Qualified Transferee
is disclosed to Lender prior to such transfer, (y) the Loan is In Balance, and
(z) there is no Default or Event of Default.
 
Net Operating Income:  For the applicable month, the gross income from the
Project less a prorated management fee (not to exceed 4% of annual gross
revenues), customary monthly operating expenses, and reasonable prorated tax and
insurance reserves; provided, however, for the Hotel, Net Operating Income shall
be deemed the amount distributable by Hotel Operator to Borrower pursuant to the
Hotel Operating Agreement.
 
Net Sales Proceeds:  The gross sales price paid by any Residential Unit
Purchaser for its respective Residential Unit (exclusive of Residential Unit
customization items paid for from Upgrade Deposits, but inclusive of all Upgrade
Profits and inclusive of all fees and other amounts paid by Residential Unit
Purchasers in excess of the purchase price) minus brokerage commissions, title
costs, legal fees and other customary closing costs associated with the sale of
such Residential Unit that are paid or incurred by Borrower, provided that in
calculating Net Sales Proceeds closing costs shall be excluded from this clause
to the extent funded from the Loan (rather than being paid from gross sales
proceeds).
 
Non-Disturbance Agreement:  That certain subordination, non-disturbance and
attornment agreement by and among Hotel Operator, Lender and Borrower.
 
Note:  A promissory note in the amount of One Hundred Sixty-Five Million Dollars
($165,000,000), executed by Borrower and payable to the order of Lender,
evidencing the Loan.
 
OFAC:  As such term is defined in Section 3.1(x).
 
Office Space:  As such term is defined in Recital A.
 
Owner’s Hard Cost Contingency:  As such term is defined in Section 10.3.
 
Parking Garage:  As such term is defined in Recital A.
 
Parking Space:  As such term is defined in Recital A.
 
Partial Plans and Specifications:  Those certain partially completed Plans and
Specifications set forth on Exhibit I hereto.
 
Partial Proposed Finish Standards:  Those certain partially completed Proposed
Finish Standards set forth on Exhibit J hereto.
 
Permitted Affiliate Expenses:  As such term is defined in Section 12.7.
 
Permitted Exceptions:  Those matters listed on Exhibit B attached hereto, to
which title to the Project may be subject at the Closing, and thereafter such
other title exceptions as are acceptable to Lender in its sole discretion and
approved by Lender in writing.
 

 
10

--------------------------------------------------------------------------------

 

Person:  Any natural person, partnership, limited liability company,
corporation, trust, Governmental Authority or other entity.
 
Plans and Specifications:  As such term is defined in Section 9.2(e).
 
Pre-sale Requirement:  As such term is defined in Section 8.1(u).
 
Price List Schedule:  As such term is defined in Section 14.1.
 
Proceeding:  As such term is defined in Section 21.12.
 
Proceeds:  As such term is defined in Section 16.1(a).
 
Project:  The collective reference to (i) the Land, together with all buildings,
structures and improvements located or to be located thereon, including the
Improvements, (ii) all rights, privileges, easements and hereditaments relating
or appertaining thereto, and (iii) all personal property, fixtures and equipment
required or beneficial for the operation thereof.
 
Proposed Finish Standards:  As such term is defined in Section 9.2(f).
 
Qualified Transferee:  As such term shall be defined in the Mezzanine Loan
Intercreditor Agreement.
 
Qualifying Portion:  As such term is defined in Section 8.1(a).
 
Qualifying Sales Agreement:  As such term is defined in Section 14.4.
 
Reinvested Proceeds: As such term is defined in Section 14.10(a).
 
Release Price:  As such term is defined in Section 14.9 or Section 14.9A, as
applicable for the component of the Project being released.
 
Remaining Units:  Residential Units which have not been conveyed to Residential
Unit Purchasers as of the time of determination of the Remaining Units (and,
therefore, remain as collateral for the Loan).
 
Rentable Square Feet:  The number of indoor net rentable square feet in any
particular portion of the Commercial Space or other space, as measured from the
interior of the glass in the exterior walls, the middle of demising walls
between rentable spaces and to the public side of any common area walls, but
excluding balconies, terraces, hallways, common areas, lobbies, loft space or
“loft walls” and the structural walls and areas of exit stairs, elevator shafts,
and common mechanical shafts.  (One such rentable square foot is referred to in
the singular as a “Rentable Square Foot”.)
 
Replacement Lender:  As such term is defined in Section 4.8(b).
 
Required Construction Commencement Date:  The date that is thirty (30) days
after the date hereof.
 

 
11

--------------------------------------------------------------------------------

 

Required Permits:  Each building permit, environmental permit, utility permit,
land use permit and any other permits, approvals or licenses issued by any
Governmental Authority that are required in connection the Construction,
marketing, sale or operation of the Project.
 
Residential Condominium Declaration:  That certain sub-condominium declaration,
entitled the “Subordinate Declaration of Condominium Regime for Block 21 Hotel
Residential Condominiums,” to be recorded against the Residential Units and
Hotel.
 
Residential Unit:  As such term is defined in Recital A.  For the sake of
clarity, the Hotel is not included in the defined term “Residential Units.”
 
Residential Unit Purchaser:  The contract purchaser(s) under each Sales
Agreement.
 
Retail Space:  As such term is defined in Recital A.
 
Retainage:  As such term is defined in Section 12.4.
 
Revised GMP: As such term is defined in Section 9.2(a).
 
Saleable Square Feet:  The number of indoor net saleable square feet in a
Residential Unit or other space, as measured from the exterior of the exterior
walls, the middle of demising walls between Residential Units and to the public
side of any common area walls, but excluding balconies, terraces, common
hallways, common mechanical shafts, lobbies, loft space or “loft walls” and the
structural walls and areas of exit stairs, elevator shafts, and other common
areas.  (One such saleable square foot is referred to in the singular as a
“Saleable Square Foot”.)
 
Sales Agreement:  As such term is defined in Section 14.2.
 
Sales Report:  As such term is defined in Section 14.6.
 
Soft Cost Contingency:  As such term is defined in Section 10.3.
 
Soft Costs:  All costs incurred or to be incurred in connection with the
Project, other than the Hard Costs, including, without limitation, interest on
the Loan, fees incurred in connection with the Loan, commissions, appraisal
fees, architectural and engineering fees, title and recording charges, legal
fees, real estate taxes and other impositions and sales and marketing
costs.  Soft Costs shall include the items delineated as such on the Budget.
 
Soil Report:  A soil test report prepared by a licensed engineer satisfactory to
Lender indicating to the satisfaction of Lender that the soil and subsurface
conditions underlying the Project will support the Improvements.
 
State:  The state in which the Land is located.
 
Subcontracts:  Subcontracts for labor or materials to be furnished to the
Project.
 
Substantial Completion:  The satisfaction of all of the following conditions:
(a) the date when the Construction shall have been completed (except for Punch
List Items and minor items
 

 
12

--------------------------------------------------------------------------------

 

which can be fully completed without material interference with the use and
operation of the Project) in accordance with the Approved Plans and
Specifications; and (b) all material permits and approvals required for the
normal use and occupancy of the Project (including a temporary certificate of
occupancy) shall have been issued by the appropriate Governmental Authority and
shall be in full force and effect to such extent under items (a) and (b) so that
Borrower has the absolute right and ability under applicable Laws to convey and
deliver Residential Units to the respective Residential Unit Purchasers and open
and operate the Hotel.
 
Technical Services Agreement: That certain Technical Services Agreement dated as
of October 26, 2006 by and between Stratus Block 21 Investments, L.P.
(predecessor in interest to Borrower), and Starwood Hotels & Resorts Worldwide,
Inc.
 
Tenant:  The tenant under a Lease.
 
Title Insurer:  Commonwealth Land Title Insurance Company, or such other title
insurance company licensed in the State as may be approved in writing by Lender.
 
Title Policy:  An ALTA 2006 Lender’s Title Insurance Policy, or an equivalent
Texas Lender’s Title Insurance Policy, with extended coverage issued by the
Title Insurer insuring the lien of the Deed of Trust as a valid first, prior and
paramount lien upon the Project and all appurtenant easements, and subject to no
other exceptions other than the Permitted Exceptions and otherwise satisfying
the requirements of Exhibit C attached hereto and made a part hereof, all to the
extent permitted by the Laws of the State.
 
Transfer:  Any sale, transfer, lease (other than a Lease approved by Lender),
conveyance, alienation, pledge, assignment, Deed of Trust, encumbrance,
hypothecation or other disposition of (a) all or any portion of the Project or
any portion of any other security for the Loan, (b) all or any portion of
Borrower’s right, title and interest (legal or equitable) in and to the Project
or any portion of any other security for the Loan, or (c) any interest in
Borrower or any interest in any entity, including, without limitation,
Guarantor, which directly or indirectly holds an interest in, or directly or
indirectly controls, Borrower.
 
Unavoidable Delay:  Any delay in the construction of the Project, caused by
natural disaster, fire, earthquake, hurricanes, tropical storms, floods, war,
acts of terrorism, explosion, extraordinary adverse weather conditions,
inability to procure or a general shortage of labor, equipment, facilities,
energy, materials or supplies in the open market, failure of transportation,
strikes or lockouts, or like causes, so long as such cause is not within the
reasonable control of Borrower, but in no event to exceed ninety (90) days in
the aggregate.  In no event shall lack of funds be deemed an Unavoidable Delay.
 
Unfunded Commitment:  The Commitment less all disbursements of the Loan made
prior to the date on which the amount of the Unfunded Commitment is being
calculated.
 
Upgrade Deposits:  As such term is defined in Section 14.3(c).
 
Upgrade:  As such term is defined in Section 14.3(c).
 

 
13

--------------------------------------------------------------------------------

 

Upgrade Profit:  The amount by which Borrower’s costs of providing any upgrades
is less than the cost charged to the Residential Unit Purchaser for any
upgrades.
 
Venue:  As such term is defined in Recital A.
 
Waste Management Plan: As such term is defined in Section 9.2(e).
 
2.2 Other Definitional Provisions.
 
All terms defined in this Agreement shall have the same meanings when used in
the Note, Deed of Trust, any other Loan Documents, or any certificate or other
document made or delivered pursuant hereto.  The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement.
 
 
Article 3
 
 
BORROWER’S REPRESENTATIONS AND WARRANTIES
 
3.1 Representations and Warranties.
 
To induce Lender to execute this Agreement and perform its obligations
hereunder, Borrower hereby represents and warrants to Lender as follows:
 
(a) Borrower has good and indefeasible fee simple title to the Project, subject
only to the Permitted Exceptions.
 
(b) Except as previously disclosed to Lender in writing, no litigation or
proceedings are pending, or to the best of Borrower’s actual knowledge
threatened in writing, against Borrower or Guarantor, that could, if adversely
determined, be reasonably expected to cause a Material Adverse Change with
respect to Borrower, Guarantor or the Project.  There are no pending
Environmental Proceedings and Borrower has no actual knowledge of any threatened
Environmental Proceedings or any facts or circumstances that are reasonably
likely give rise to any future Environmental Proceedings.
 
(c) Borrower is a duly organized and validly existing limited liability company
and has full power and authority to execute, deliver and perform all Loan
Documents to which Borrower is a party, and such execution, delivery and
performance have been duly authorized by all requisite action on the part of
Borrower; Borrower has been a single purpose entity in compliance with Section
15.2 hereof since its formation.
 
(d) No consent, approval or authorization of or declaration, registration or
filing with any Governmental Authority or nongovernmental person or entity,
including any creditor, partner, member or shareholder of Borrower or Guarantor,
is required in connection with the execution, delivery and performance of this
Agreement or any of the Loan Documents other than the recordation of the Deed of
Trust and Declaration of Condominium for the Project and the filing of UCC-1
Financing Statements, except for such consents, approvals or authorizations of
or declarations or filings with any Governmental Authority or non-governmental
person or entity
 

 
14

--------------------------------------------------------------------------------

 

where the failure to so obtain would not have a material adverse effect on
Borrower or Guarantor or which have been obtained as of any date on which this
representation is made or remade.
 
(e) The execution, delivery and performance of this Agreement, the execution and
payment of the Note and the granting of the Deed of Trust and other security
interests under the other Loan Documents have not constituted and will not
constitute, upon the giving of notice or lapse of time or both, a breach or
default under any other agreement to which Borrower or Guarantor is a party or
may be bound or affected, or a violation of any law or court order that may
affect the Project, any part thereof, any interest therein, or the use thereof.
 
(f) There is no default under this Agreement or the other Loan Documents, nor
any condition that, after notice or the passage of time or both, would
constitute a default or an Event of Default under said documents.
 
(g) (i) No condemnation of any portion of the Project, (ii) no condemnation or
relocation of any roadways abutting the Project, and (iii) no proceeding to deny
access to the Project from any point or planned point of access to the Project,
has commenced or, to Borrower’s actual knowledge, is contemplated by any
Governmental Authority.
 
(h) The amounts set forth in the Budget present a full and complete itemization
by category of all costs, expenses and fees that Borrower reasonably expects to
pay or reasonably anticipates becoming obligated to pay to complete the
Construction (including all off-site improvements to be paid for by Borrower),
operate the Project and market and sell the Residential Units.  Borrower is
unaware of any other such costs, expenses or fees that are material and are not
covered by the Budget.  Borrower further warrants that neither Borrower,
Guarantor, nor any of their respective Affiliates are receiving any other
payments, distributions, or other consideration directly or indirectly from
Borrower, the Project, its seller, contractors or any other party associated
with the Project other than the Permitted Affiliate Expenses.
 
(i) Neither the construction of the Improvements nor the use of the Project when
completed in accordance with the Approved Plans and Specifications and the
contemplated accessory uses will violate (i) any Laws (including subdivision,
zoning, building, environmental protection and wetland protection Laws), or (ii)
any building permits, restrictions of record, or agreements affecting the
Project or any part thereof.  Neither the zoning authorizations, approvals or
variances nor any other right to construct or to use the Project is to any
extent dependent upon or related to any real estate other than the Land.  All
Governmental Approvals required for the Construction in accordance with the
Approved Plans and Specifications have been obtained or will be obtained prior
to Closing (except for those Governmental Approvals that cannot or need not be
obtained until a later stage of the Construction or completion of Construction,
in which case such Governmental Approvals will be obtained by Borrower on a
timely basis and copies will be delivered to Lender on the earliest possible
date) and all Laws relating to the Construction and operation of the
Improvements have been complied with in all material respects and to Borrower’s
knowledge, after due inquiry, all permits and licenses, required for the
operation of the Project that cannot be obtained until the Construction is
completed can be obtained if the Improvements are completed in accordance with
the Approved Plans and Specifications.
 

 
15

--------------------------------------------------------------------------------

 

 
(j) The Project will have adequate water, gas, if applicable, and electrical
supply, storm and sanitary sewerage facilities, other required public utilities,
fire and police protection, and means of access between the Project and public
highways, and none of the foregoing will be foreseeably delayed or impeded by
virtue of any requirements under any applicable Laws.
 
(k) No brokerage fees or commissions are payable by or to any person in
connection with this Agreement or the Loan to be disbursed hereunder, other than
to Holliday Fenoglio Fowler, who will be paid by Borrower.
 
(l) All financial statements and other information previously furnished by
Borrower or Guarantor to Lender in connection with the Loan are true, complete
and correct in all material respects and fairly present the financial conditions
of the subjects thereof as of the respective dates thereof and do not fail to
state any material fact necessary to make such statements or information not
misleading, and no Material Adverse Change with respect to Borrower or Guarantor
has occurred since the respective dates of such statements and
information.  Neither Borrower nor Guarantor has any material liability,
contingent or otherwise, not disclosed in such financial statements and that all
charges payable with respect to the Project are current and not in
default.  Except as previously disclosed in writing to Lender, neither Borrower,
nor Guarantor, nor any officer or director of Borrower, nor any equity owner of
Borrower or Guarantor, or any of Borrower’s or Guarantor’s respective Affiliates
(excluding investors in CJUF and any shareholders of Guarantor other than those
that are considered “insiders” under SEC regulations): (i) has ever been the
subject of any criminal proceedings (other than minor traffic violations); (ii)
has ever been the owner, whether directly or indirectly, of a parcel of real
property that has been the subject of foreclosure proceedings (whether judicial
or non-judicial); (iii) has ever been a party, whether directly or indirectly,
to a deed in lieu of foreclosure; or (iv) is currently a party to any material
pending litigation or administrative proceedings, or subject to any judicial or
non-judicial orders or consent agreements.
 
(m) Except as disclosed in any Environmental Report delivered by Borrower to
Lender prior to the date hereof, (i) to Borrower’s actual knowledge, the Project
is in a safe condition, and, except for small quantities of Hazardous Materials
lawfully used in the ordinary course of construction, maintenance and operation
of the Project, is free of all Hazardous Material and is in compliance with all
applicable Laws; (ii) except for small quantities of Hazardous Materials
lawfully used in the ordinary course of construction, maintenance and operation
of the Project, neither Borrower nor, to the actual knowledge of Borrower, any
other person or entity, has ever caused or permitted any Hazardous Material to
be placed, held, located or disposed of on, under, at or in a manner to affect
the Project, or any part thereof, and the Project has never been used (whether
by Borrower or, to the actual knowledge of Borrower, by any other person or
entity) for any activities involving, directly or indirectly, the use,
generation, treatment, storage, transportation, or disposal of any Hazardous
Material; (iii) neither the Project nor Borrower is subject to any existing,
pending, or, to Borrower’s actual knowledge, threatened investigation or inquiry
by any Governmental Authority, and the Project is not subject to any remedial
obligations under any applicable Laws pertaining to health or the environment;
and (iv) to the actual knowledge of Borrower, there are no underground tanks,
vessels, or similar facilities for the storage, containment or accumulation of
Hazardous Materials of any sort on, under or affecting the Project.
 

 
16

--------------------------------------------------------------------------------

 

 
(n) For all purposes the Project may be mortgaged, conveyed and otherwise dealt
with as an independent parcel and is a separate real estate tax parcel.
 
(o) Borrower and its agents have not entered into any Leases, subleases or other
arrangements for occupancy of space within the Project (other than Sales
Agreements that permit occupancy by the Residential Unit Purchasers following
closing thereunder and the Hotel Operating Agreement).
 
(p) When the Construction is completed substantially in accordance with the
Approved Plans and Specifications, no building or other improvement will
encroach upon any property line, building line, setback line, side yard line or
any recorded or visible easement (or other easement of which Borrower is aware
or has reason to believe may exist) in violation thereof.
 
(q) The Loan is not being made for the purpose of purchasing or carrying “margin
stock” within the meaning of Regulation T, U or X issued by the Board of
Governors of the Federal Reserve System, and Borrower agrees to execute all
instruments necessary to comply with all the requirements of Regulation U of the
Federal Reserve System.
 
(r) Borrower is not a party in interest to any plan defined or regulated under
ERISA, and the assets of Borrower are not “plan assets” of any employee benefit
plan covered by ERISA or Section 4975 of the Internal Revenue Code.
 
(s) Borrower is not a “foreign person” within the meaning of Section 1445 or
7701 of the Internal Revenue Code.
 
(t) Borrower uses no trade name other than (i) its actual name set forth herein
and (ii) “W Hotel and Residences.”  The principal place of business of Borrower
is as stated in Article 22.
 
(u) Borrower’s place of organization is Delaware.
 
(v) Except as set forth in Exhibit M, there are no Sales Agreements to purchase
Residential Units.  The Sales Agreements listed on Exhibit M are in full force
and effect and such Sales Agreements are not subject to any rights of
rescission.  Borrower hereby represents that Exhibit M is a true, accurate and
complete schedule of all Sales Agreements and sets forth:  (i) the name of
Residential Unit Purchaser, (ii) the Residential Unit being purchased, (iii) any
upgrades, (iv) any Upgrade Deposit, (v) the purchase price, and (vi) the Earnest
Money Deposit.  All Sales Agreements are (or when entered into, and after
expiration of statutory rescission periods, will be) Qualifying Sales
Agreements.  No event of default, or any event that, with the passage of time or
the giving of notice, or both, would constitute an event of default, has
occurred pursuant to the terms of any of the Sales Agreements on the part of
Borrower or, to Borrower’s actual knowledge, the other parties thereto.  No
Residential Unit Purchaser under the Sales Agreements listed on Exhibit M has
terminated its respective Sales Agreement and there are no side agreements with
any Residential Unit Purchasers modifying any of the terms of the Sales
Agreements or otherwise.
 

 
17

--------------------------------------------------------------------------------

 

 
(w) All Sales Agreements are exempt from or will comply with the requirements of
ILSA, and Laws of the State (and any applicable local Laws), so that (i) the
sale of the Residential Units is lawful and will not be subject to interruption
due to a violation of Laws, (ii) no Sales Agreement is terminable under any of
such Laws (other than the termination rights contained in such Sales Agreement),
and (iii) neither Borrower nor the Project will be subject to any civil or
criminal penalties by reason of failure to comply with such Laws.  The marketing
and sale of Residential Units by Borrower (and any marketing or sales of
Residential Units) is, and at all times has been, in compliance with all Laws
pertaining to the sale of condominiums (and/or residential real estate
generally).  All consents and approvals needed for the sale of Residential Units
under applicable federal, state and local Laws have been received and remain in
full force and effect.
 
(x) The Hotel Documents are in full force and effect.  No event of default, or
any event that, with the passage of time or the giving of notice, or both, would
constitute an event of default, has occurred pursuant to the terms of the Hotel
Documents, either on the part of Borrower or, to Borrower’s actual knowledge,
the other parties thereto.  Hotel Operator, or any other party to any Hotel
Document, has not sent to Borrower any notices of default under any Hotel
Document, nor has Hotel Operator, or any other party to any Hotel Document, sent
to Borrower any other written notices of a material nature.  The Hotel Documents
have not been amended (except as set forth in the definition of Hotel
Documents).  There are no other agreements, written or oral, with Hotel
Operator, Starwood Hotels & Resorts Worldwide, Inc., or any Affiliates of the
foregoing, that supplement or modify any of the terms of any of the Hotel
Documents or otherwise.
 
(y) Neither Borrower, Guarantor or any other person owning an interest in
Borrower is (or will be) a person with whom Lender is restricted from doing
business with under regulations of the Office of Foreign Asset Control (“OFAC”)
of the Department of the Treasury of the United States of America (including,
those persons named on OFAC’s Specially Designated and Blocked Persons list) or
under any statute, executive order (including the September 24, 2001 Executive
Order Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism), or other governmental action and is
not and shall not knowingly engage in any dealings or transactions or otherwise
be associated with such persons.  In addition, Borrower hereby agrees to provide
Lender with any additional information that Lender deems reasonably necessary
from time to time in order to ensure compliance with all applicable Laws
concerning money laundering and similar activities.
 
(z) Borrower shall have complied, in all respects, with the provisions of the
USA PATRIOT Act of 2001, as applicable to Borrower and the Project.
 
(aa) The Project complies and, when constructed, shall comply with all
requirements of that certain Declaration of Restrictive Covenants by the City of
Austin, dated December 15, 2006 recorded in the official public records of
Travis County, Texas as Instrument No. 2006240877.
 
(bb) All statements set forth in the Recitals are true and correct in all
material respects.
 

 
18

--------------------------------------------------------------------------------

 

3.2 Survival of Representations and Warranties.
 
Borrower agrees that all of the representations and warranties set forth in
Section 3.1 and elsewhere in this Agreement are true in all material respects as
of the date hereof, will be true in all material respects at Closing and, except
for matters that have been disclosed by Borrower and approved by Lender in
writing, will be true in all material respects at all times thereafter
(including at Full Loan Opening) until the Loan has been repaid and Borrower’s
obligations hereunder have been satisfied in full.  Each request for a
disbursement under the Loan Documents shall constitute a reaffirmation of such
representations and warranties, as deemed modified in accordance with the
disclosures made and approved as aforesaid, as of the date of such request.  It
shall be a condition precedent to the Closing Funding and each subsequent
disbursement that each of said representations and warranties is true and
correct in all material respects as of the date of such requested
disbursement.  In addition, at Lender’s request, Borrower shall reaffirm such
representations and warranties in writing prior to each disbursement hereunder.
 
 
Article 4
 
 
LOAN AND LOAN DOCUMENTS
 
4.1 Agreement to Borrow and Lend; Lender’s Obligation to Disburse; Excess
Disbursements.
 
Subject to the terms, provisions and conditions of this Agreement and the other
Loan Documents, Borrower agrees to borrow from Lender and Lender agrees to lend
to Borrower the Loan, for the purposes and subject to all of the terms,
provisions and conditions contained in this Agreement.  If Lender consists of
more than one party, the obligations of each such party with respect to the
amount it has agreed to loan to Borrower shall be several (and not joint and
several) and each lending party’s obligations shall be limited to its
proportionate share of the Loan and of each advance.
 
(a) The maximum aggregate principal amount of the Loan to be funded hereunder
shall be the lesser of (i) the Commitment, or (ii) the total costs associated
with the Project (as described in the Budget) less the required Equity
Investment.
 
(b) Lender agrees, upon Borrower’s compliance with and satisfaction of all
conditions precedent to the Closing Funding set forth in this Agreement and
provided (i) the Loan is In Balance, (ii) no Material Adverse Change has
occurred and is continuing with respect to Borrower, Guarantor or the Project,
(iii) no material casualty to the Project has occurred that has not been
repaired and there is no existing or threatened condemnation or taking which
could cause a Material Adverse Change with respect to the Project and (iv) no
Default or Event of Default has occurred and is continuing hereunder, to make
the Closing Funding.
 
(c) After the Closing Funding, Borrower shall be entitled to receive further
successive disbursements of the proceeds of the Loan in accordance with Articles
8, 9, 12 and 13 following compliance with all conditions precedent thereto set
forth in this Agreement, provided that (i) the Loan remains In Balance, (ii)
Borrower has complied with all conditions precedent to disbursement from time to
time set forth in this Agreement including the requirements of Section
 

 
19

--------------------------------------------------------------------------------

 

3.2 and Articles 8, 9, 12 and 13, (iii) no Material Adverse Change has occurred
and is continuing with respect to Borrower, Guarantor or the Project, (iv) no
material casualty to the Project has occurred that has not been repaired or is
not being repaired in accordance with Article 16 hereof, and there is no
existing or threatened condemnation or taking which could cause a Material
Adverse Change with respect to the Project and (v) no Event of Default and no
material Default has occurred and is continuing hereunder or under any other
Loan Document.  Lender shall make commercially reasonable efforts to fund such
subsequent disbursements within ten (10) Business Days after receipt of all of
the documents required under this Agreement, including a draw request together
with all items listed in Section 12.3.
 
(d) To the extent that Lender may acquiesce in noncompliance with any
requirements set forth in this Agreement precedent to the Closing Funding, the
Full Opening of the Loan, or any subsequent disbursement of Loan proceeds, such
acquiescence shall not constitute a waiver by Lender, and Lender may at any time
after such acquiescence require Borrower to comply with all such requirements.
 
(e) All payments by Borrower on account of the Loan shall be made as such
amounts become due or are declared due pursuant to the terms of this Agreement
and the other Loan Documents.  All payments shall be made without deduction,
defense, setoff or counterclaim as follows:
 
 
For payments made by Regular Mail:

 
 
Corus Bank N.A.

 
 
P.O. Box 102865

 
 
Atlanta, Georgia 30368-2865

 
 
For payments made by Federal Express:

 
 
Corus Bank N.A. – #102865

 
 
Lockbox Mail Department

 
 
Georgia Operations Center

 
 
100 South Crest Drive

 
 
Stockbridge, Georgia 30281

 
 
For payments made by Wire Transfer and ACH:

 
 
SUNTRUST BANK, ATLANTA

 
 
ABA 061000104

 
 
TO CREDIT ACCOUNT 1000008140328

 
 
ACCOUNT NAME:  CORUS BANK NA

 
 
FOR FURTHER CREDIT TO: Corus Bank Loan

 
 
   No. 67920-11152

 

 
20

--------------------------------------------------------------------------------

 

4.2 Loan Documents.
 
Borrower agrees that it will, on or before the date hereof, execute and deliver
or cause to be executed and delivered to Lender the following documents in form
and substance acceptable to Lender:
 
(a) The Note.
 
(b) The Deed of Trust.
 
(c) The Completion and Carveout Guaranty.
 
(d) The Limited Payment Guaranty.
 
(e) The Environmental Indemnity.
 
(f) The Collateral Assignment of Hotel Documents.
 
(g) A collateral assignment, to the extent assignable, of construction
documents, including, without limitation, the General Contract, all
architecture, Design Professional and engineering contracts, Plans and
Specifications, permits, licenses, approvals and development rights, together
with consents to the assignment and continuation agreements from the General
Contractor, the architect, real estate broker and other parties reasonably
specified by Lender.
 
(h) A collateral assignment, to the extent assignable, of all Sales Agreements,
Earnest Money Deposits, Upgrade Deposits and all other documents relating to the
establishment of a condominium regime at the Project.
 
(i) Such UCC financing statements as Lender determines are advisable or
necessary to perfect or notify third parties of the security interests intended
to be created by the Loan Documents.
 
(j) A collateral assignment, to the extent assignable, of any management
contract entered into with respect to the Project.
 
(k) Such other documents, instruments or certificates as Lender and its counsel
may reasonably require, including such documents as Lender in its reasonable
discretion deems necessary or appropriate to effectuate the terms and conditions
of this Agreement and the Loan Documents, and to comply with the laws of the
State.
 
4.3 Term of the Loan.
 
(a) All principal, interest and other sums due under the Loan Documents shall be
due and payable in full on the Initial Maturity Date, provided that Borrower
shall have the option to extend the Maturity Date for one (1) additional
six-month period (the “Extension Option”), provided Borrower has satisfied the
conditions set forth in subparagraph (b) below.  All references herein to the
“Maturity Date” shall mean the Initial Maturity Date, or, in the event Borrower
satisfies the conditions to the exercise of the Extension Option in accordance
with this
21

--------------------------------------------------------------------------------

 
Section 4.3, the “Maturity Date” shall mean the Extended Maturity
Date.  Interest only payments shall continue to be due and payable on the first
of the month according to the Interest Rate then in effect on the outstanding
principal balance of the Loan during the extension period.
 
(b) Borrower may only exercise the Extension Option upon satisfying the
following conditions:
 
(i) The Project has been completed in accordance with the Approved Plans and
Specifications in all material respects, the Project is lien free (other than
liens for the benefit of Lender and Permitted Exceptions), and certificates of
occupancy shall have been issued by the appropriate Governmental Authority for
all of the Project sufficient, among other things, to allow operation of the
Hotel and Venue, leasing and occupancy of the Commercial Space, the conveyance
and occupancy of the Residential Units, and the use and occupancy of the Parking
Garage and all Parking Spaces, and to allow satisfaction of item (vii) below
(any certificate of occupancy for the Commercial Space may be conditioned upon
the completion of tenant finish improvements);
 
(ii) The Hotel is open and operating in accordance with the Hotel Documents, and
the Hotel Operator, on behalf of Starwood Hotel & Resorts Worldwide, Inc., has
accepted and confirmed the completion of the Hotel in accordance with the Hotel
Documents;
 
(iii) Borrower shall have delivered to Lender written notice of such election no
earlier than seventy-five (75) days and no later than thirty (30) days prior to
the Initial Maturity Date;
 
(iv) Borrower shall pay, together with its written notice of such election, an
extension fee (the “Extension Fee”) equal to 0.5% of Lender’s Remaining Exposure
at the time the Extension Option is requested;
 
(v) If there is a Mezzanine Loan, the Mezzanine Lender extends the maturity date
of the Mezzanine Loan to a date no earlier than the Extended Maturity Date;
 
(vi) The Loan has not matured and no Event of Default or material Default has
occurred and is continuing under the Loan Documents;
 
(vii) Following the full funding of the Reinvested Proceeds pursuant to Section
14.10(b) hereof, Borrower has closed and conveyed, pursuant to Qualifying Sales
Agreements and each at no less than 90% of the applicable List Price,
Residential Units in an amount sufficient to generate aggregate gross sales
proceeds of at least $55,000,000 (apart from and in addition to the gross sales
proceeds which generated the Reinvested Proceeds), and Borrower shall have paid
to Lender the Release Prices for each such Residential Unit sold; and
 
(viii) Borrower has funded the Additional Equity Investment, as and to the
extent required hereunder.
 
(c) Notwithstanding the above provisions of this Section 4.3, in the event that
(x) Borrower does not repay the Loan in full on or before the Initial Maturity
Date and (y) the Maturity Date is not extended pursuant to the provisions of
Section 4.3(b) (whether because
 

 
22

--------------------------------------------------------------------------------

 

Borrower did not request the extension or Borrower requested the extension but
did not qualify for such extension) then the Maturity Date shall nevertheless be
extended from the Initial Maturity Date to a date that is thirty (30) days after
the Initial Maturity Date and the Extension Fee shall be due and payable from
Borrower to Lender on the Initial Maturity Date.  The Deed of Trust will not be
released until the Extension Fee and all other amounts due under the Loan have
been paid in full.  In such event, Borrower shall not be entitled to any further
extensions of the Maturity Date.  No such extension shall occur if the Loan has
been accelerated prior to the Initial Maturity Date.
 
(d) If Borrower timely sends written notice of Borrower’s election to exercise
the Extension Option in accordance with Section 4.3(b), Lender, no later than
twenty (20) days prior to the Initial Maturity Date, shall notify Borrower
(“Lender’s Response Notice”) whether, with respect to the Extension Option, the
conditions set forth in Section 4.3(b) have been satisfied and accordingly the
Maturity Date has been extended to the Extended Maturity Date.
 
(e) If Lender fails to timely send Lender’s Response Notice, but Borrower has
not qualified for such Extension Option, then Lender shall not thereby be deemed
to have waived the Extension Fee payable under subparagraph 4.3(c); provided,
however, that in such circumstance, if (x) Borrower repays the Loan in full
prior to its receipt of Lender’s Response Notice or (y) Borrower repays the Loan
in full no later than the date twenty (20) days after its receipt of Lender’s
Response Notice, then no Extension Fee shall be owed under subparagraph 4.3(c).
 
4.4 Prepayments.
 
Borrower shall have the right to make prepayments of the Loan in accordance with
and subject to the terms of the Note.
 
4.5 Required Principal Payments.
 
All principal shall be paid on or before the Maturity Date.
 
4.6 Receipt of Payments.
 
All payments received by Lender prior to or at 3:00 p.m. (Chicago time) on a
Business Day shall be credited to Borrower on the day of receipt; all payments
received after 3:00 p.m. (Chicago time) on a Business Day shall be deemed
received on the next succeeding Business Day.
 
4.7 Termination of Lender’s Unfunded Commitment.
 
Upon the repayment in full of the outstanding principal balance of the Loan,
Lender’s obligation to fund the Unfunded Commitment shall thereupon terminate
and Lender shall have no further obligation to fund Loan proceeds
hereunder.  If, in Lender’s sole discretion, Lender agrees (in writing) that the
Commitment shall not so terminate, all Release Prices for the sale of
Residential Units or any other part of the Project shall be escrowed with Lender
until such time as Lender’s obligation to fund the Commitment expires or is
terminated and the Loan has been repaid.
 

 
23

--------------------------------------------------------------------------------

 

4.8 Lender Default.
 
If Lender is prevented from funding the Unfunded Commitment by reason of
bankruptcy or insolvency proceedings or an order from regulatory authorities in
connection with Lender’s insolvency or failure to meet regulatory requirements,
then Lender shall notify Borrower and, so long as no Event of Default exists,
Borrower shall have the right to do either of the following no later than ninety
(90) days after receipt of such notice:
 
(a) Borrower may prepay the Loan in full without the payment of any Prepayment
Charge (as such term is defined in the Note) or the remaining Exit Fee; or
 
(b) Borrower may cause another financial institution experienced at making
similar construction loans and reasonably acceptable to Lender (the “Replacement
Lender”) to agree to fund the Unfunded Commitment.  Pursuant to a standard
Assignment and Assumption Agreement, Lender shall assign to Replacement Lender,
without recourse, and Replacement Lender shall assume, Lender’s rights and
obligations with respect to the Unfunded Commitment and whereupon Lender shall
be released therefrom.  Lender and Replacement Lender shall execute a co-lender
agreement in form and substance reasonably acceptable to Lender and Replacement
Lender, providing, among other things, for the priority of the Unfunded
Commitment to the previously advanced Loan proceeds.
 
 
Article 5
 
 
INTEREST
 
5.1 Interest Rate.
 
The Loan shall bear interest as set forth in the Note.  Interest shall be paid
on the Loan when and as set forth in the Note.
 
 
Article 6
 
 
COSTS OF MAINTAINING LOAN
 
6.1 Increased Costs and Capital Adequacy.
 
(a) Borrower recognizes that the cost to Lender of maintaining the Loan or any
portion thereof may fluctuate, and Borrower agrees to pay Lender additional
amounts to compensate Lender for any increase in its actual costs incurred in
maintaining the Loan or any portion thereof outstanding or for the reduction of
any amounts received or receivable from Borrower as a result of any change after
the date hereof in any applicable Law, regulation or treaty, or in the
interpretation or administration thereof, or by any domestic or foreign court,
(i) changing the basis of taxation of payments under this Agreement and/or the
Note to Lender (other than taxes imposed on all or any portion of the overall
net income or receipts of Lender), or (ii) imposing, modifying or applying any
reserve (other than a loan loss reserve), special deposit or similar requirement
against assets of, deposits with or for the account of, credit extended by, or
any other acquisition of funds for loans by Lender (which includes the Loan or
any applicable portion thereof) or (iii) imposing on Lender any other condition
affecting the Loan, provided that the result of the foregoing is to increase the
cost to Lender of maintaining the
 

 
24

--------------------------------------------------------------------------------

 

Loan or any portion thereof or to reduce the amount of any sum received or
receivable from Borrower by Lender under the Loan Documents.
 
(b) If the adoption after the date hereof of any Law, rule, regulation or
guideline regarding capital adequacy, or any change after the date hereof in any
of the foregoing, or in the interpretation or administration thereof by any
domestic or foreign Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has the effect of reducing the rate of return on Lender’s capital to a
level below that which Lender would have achieved but for such application,
adoption, change or compliance, then, from time to time Borrower shall pay to
Lender such additional amounts as will compensate Lender for such reduction with
respect to any portion of the Loan outstanding.
 
(c) Any amount payable by Borrower under subsection (a) or subsection (b) of
this Section 6.1 shall be paid within ten (10) Business Days of receipt by
Borrower of a certificate signed by an authorized officer of Lender setting
forth the amount due and the basis for the determination of such amount, which
statement shall be conclusive and binding upon Borrower absent manifest
error.  Lender shall also provide to Borrower copies of any applicable invoices,
bills, demands or statements of account.  Failure on the part of Lender to
demand payment from Borrower for any such amount attributable to any particular
period shall not constitute a waiver of Lender’s right to demand payment of such
amount for any subsequent or prior period.
 
6.2 Borrower Withholding.
 
If by reason of a change in any applicable Laws occurring after the date hereof,
Borrower is required by Law to make any deduction or withholding in respect of
any taxes (other than taxes imposed on or measured by the net income of Lender
or any franchise tax imposed on Lender), duties or other charges from any
payment due under the Note to the maximum extent permitted by law, the sum due
from Borrower in respect of such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or withholding,
Lender receives and retains a net sum equal to the sum that it would have
received had no such deduction or withholding been required to be made.
 
 
Article 7
 
 
LOAN EXPENSE AND ADVANCES
 
7.1 Loan and Administration Expenses.
 
Borrower unconditionally agrees to pay all reasonable expenses of the Loan,
including all amounts payable pursuant to Sections 7.2 and 7.3 and any and all
other fees owing to Lender pursuant to the Loan Documents, and also including,
without limiting the generality of the foregoing, all recording, filing and
registration fees and charges, Deed of Trust, intangible or documentary taxes,
escrow charges, title charges, all insurance premiums, title insurance premiums
and other charges of the Title Insurer, printing and photocopying expenses,
survey fees and charges, cost of certified copies of instruments, cost of
premiums on the Title Policy, charges of the Title Insurer or other escrowee for
administering disbursements, all reasonable
 

 
25

--------------------------------------------------------------------------------

 

fees and disbursements of Lender’s Consultant, all appraisal fees, insurance
consultant’s fees, investigator’s fees, environmental consultant’s fees,
reasonable travel related expenses and all reasonable costs and expenses
incurred by Lender in connection with the determination of whether or not
Borrower has performed the obligations undertaken by Borrower hereunder or has
satisfied any conditions precedent to the obligations of Lender
hereunder.  Borrower shall pay the airfare and other reasonable travel expenses
for each officer or analyst of Lender who inspects the Project as part of
Lender’s due diligence.  The amount charged for airfare shall be the lesser of
(i) the actual cost thereof incurred by Lender, or (ii) $1,200 per person per
visit.  Borrower agrees to pay all brokerage, finder or similar fees or
commissions payable in connection with the transactions contemplated hereby and
shall indemnify, defend, and hold Lender harmless against all claims,
liabilities, costs and expenses (including attorneys’ fees and expenses)
incurred in relation to any such claim by broker, finder or similar person
alleging to have dealt with Borrower in connection with this transaction.
 
7.2 Loan Fee.
 
Borrower shall pay to Lender on or before the date of this Agreement a loan fee
in the amount of One Million Six Hundred Fifty Thousand Dollars ($1,650,000),
which includes an application fee of Two Hundred Fifty Thousand Dollars
($250,000) (which was previously received by Lender), a commitment fee in the
amount of Two Hundred Fifty Thousand Dollars ($250,000) (which was previously
received by Lender), and a closing fee in the amount of One Million One Hundred
Fifty Thousand Dollars ($1,150,000).  Such fees are fully earned and
non-refundable.  Lender may deduct the closing fee and any costs from the
Closing Funding.
 
7.3 Draw Fees.
 
The first disbursement of funds for Hard Costs associated with construction and
each such disbursement thereafter shall be referred to as a “Construction
Disbursement.”  Borrower shall pay to Lender at the time of each Construction
Disbursement a draw fee in the amount of Five Thousand Dollars ($5,000) per
disbursement as compensation to Lender for its costs in  reviewing and
processing each Construction Disbursement.  Borrower hereby authorizes Lender to
retain such fee from each such disbursement without further direction from
Borrower.
 
7.4 Exit Fee.
 
Borrower shall pay to Lender a fee equal to the amount of $1,650,000 (the “Exit
Fee”), which Exit Fee shall be due and payable to Lender upon the earlier of (i)
payment in full of the Loan for any reason (which shall be deemed to include
Borrower’s cancellation or termination of the Loan prior to any funding after
the Closing Funding) or (ii) maturity of the Loan, whether by acceleration or
otherwise.  Prior to payment in full or maturity of the Loan, the Exit Fee shall
be payable at the rate of the full Exit Fee for the release of the Hotel in
accordance with the terms of this Agreement, or in installments of $20,000 per
Residential Unit at the closing of the sale of any Residential Unit sold in
accordance with the terms of this Agreement (such amounts to be paid out of the
Release Price paid to Lender in accordance with Section 14.9 until such time as
Borrower has paid the Exit Fee in full).  Any unpaid portion of the Exit Fee
shall be due and payable on the first to occur of the acceleration of the Loan,
the Maturity Date or payment in full of the Loan for any reason if prior to the
Maturity Date.
 

 
26

--------------------------------------------------------------------------------

 

7.5 Lender’s Attorneys’ Fees and Disbursements.
 
Borrower agrees to pay Lender’s reasonable attorneys fees and disbursements
incurred in connection with this Loan both before and after the date hereof (and
whether or not the Loan closes), including (i) the preparation of this
Agreement, any intercreditor agreements and the other Loan Documents and the
preparation of the closing binders, (ii) the disbursement and administration of
the Loan and (iii) the enforcement of the terms of this Agreement and the other
Loan Documents.  The reasonable legal fees and disbursements to be paid by
Borrower under this Section 7.5 and the reasonable legal fees and disbursements
to be paid by Borrower under all other applicable provisions of this Loan
Agreement and the other Loan Documents shall include the reasonable fees and
expenses of Lender’s inside counsel charged at a rate not higher than the rate
charged by Lender’s outside counsel for an attorney with equivalent
experience.  Without limiting the generality of the foregoing, Borrower hereby
acknowledges and agrees that Lender will incur additional expenses, including
attorneys fees and disbursements, in connection with any Mezzanine Loan that
Borrower proposes to obtain in accordance with this Agreement, and Borrower
hereby covenants to pay, at such time and in such manner requested by Lender,
all such reasonable expenses of Lender incurred for its review of the proposed
and final Mezzanine Loan Documents, drafting and negotiating an intercreditor
agreement, and all other reasonable expenses of Lender in connection with such
Mezzanine Loan, regardless of whether such Mezzanine Loan closes during the term
of the Loan.
 
7.6 Time of Payment of Fees and Expenses.
 
Borrower shall pay all expenses and fees incurred by Lender in connection with
the Loan as of the date of this Agreement at Closing.  At Closing, Lender may
pay from the Closing Funding all reasonable Loan expenses and all fees payable
to Lender and not previously paid.  Lender may require the payment of
outstanding fees and expenses as a condition to any disbursement of the
Loan.  Lender is hereby authorized, without any specific request or direction by
Borrower, to make disbursements from time to time in payment of or to reimburse
Lender for all reasonable Loan expenses and fees (whether or not, at such time,
there may be any undisbursed amounts of the Loan allocated in the Budget for the
same).  Lender shall provide to Borrower copies of all applicable invoices
relating to such expenses and fees.  Lender may charge any such disbursement to
any applicable Budget Line Item or, if in Lender’s judgment there is no
available source of funds in the Budget, may require Borrower to pay excess
expenses from Borrower’s own funds.  If the actual amount of charges are not
ascertainable at Closing, then Lender may charge the same, at its option, at
Full Loan Opening or to the Soft Cost Contingency or other applicable Budget
Line Item, and Borrower shall pay upon demand any excess monies due.
 
7.7 Expenses and Advances Secured by Loan Documents.
 
Any and all advances or payments made by Lender under this Article 7 from time
to time, and any amounts expended by Lender pursuant to Section 20.1(a), shall,
as and when advanced or incurred, constitute additional indebtedness evidenced
by the Note and secured by the Deed of Trust and the other Loan Documents and
shall bear interest at the rate then applicable under the Note (including the
Default Rate, when applicable).
 

 
27

--------------------------------------------------------------------------------

 

7.8 Right of Lender to Make Advances to Cure Borrower’s Defaults.
 
In the event that Borrower fails to perform any of Borrower’s covenants,
agreements or obligations contained in this Agreement or any of the other Loan
Documents (and applicable grace or cure periods have expired, unless in Lender’s
judgment an emergency or other exigent circumstance exists, in which case Lender
need not wait for such period to expire), Lender may (but shall not be required
to) perform any of such covenants, agreements and obligations, and any
reasonable amounts expended by Lender in so doing and shall constitute
additional indebtedness evidenced by the Note and secured by the Deed of Trust
and the other Loan Documents and shall bear interest at the Default
Rate.  Lender may expend any such amounts even if such advance would result in
the balance owing to Lender exceeding the stated amount of the Note.
 
 
Article 8
 
 
NON-CONSTRUCTION REQUIREMENTS PRECEDENT
 
8.1 Non-Construction Conditions Precedent.
 
Borrower agrees that Lender’s obligation to make the Loan is conditioned upon
Borrower’s delivery, performance and satisfaction of the following conditions
precedent in form and substance satisfactory to Lender in its reasonable
discretion (except as otherwise expressly set forth herein) prior to (or at the
time of) Closing, with the exception of the conditions listed in Section 8.1(a),
Section 8.1(u), Section 8.1(w), Section 8.1(y)(b) and Section 8.1(z)(ii) and
(iii) hereunder that must be satisfied at such other time as is set forth
therein:
 
(a) Equity:  Borrower shall have provided evidence reasonably satisfactory to
Lender prior to Full Loan Opening (which, for the avoidance of doubt, shall
exclude the Closing Funding) that Borrower’s equity invested in the Project for
costs in the Budget is not less than $124,412,805.92 in cash (the “Initial
Equity Investment”), of which, Guarantor or its Affiliates shall contribute at
least $49,165,122.37, and CJUF shall contribute the balance; provided, however,
that Lender shall permit $1,500,000 (which amount shall be credited pro rata to
the respective contributions of Guarantor and CJUF) of the Initial Equity
Investment to be deferred until on or after the repayment in full of the Loan,
provided that the Developer Fee Budget Line Item is paid only in strict
accordance with Section 12.7 hereof.  Such Initial Equity Investment must be
used to pay Project costs contained in the Budget and approved by Lender, with
evidence of payment of the Initial Equity Investment to be delivered to Lender
prior to Full Loan Opening.  In all events, any equity contribution shall be
subordinate to the rights of Lender and general unsecured creditors of
Borrower.  Borrower may not be indebted to any Person for any equity
contribution.  Borrower shall provide Lender with documentation identifying all
equity investors and supporting the actual Land cost and predevelopment expenses
(which actual cost and expenses shall be credited against the Initial Equity
Investment, provided same appear in the Project Budget and such expenditures are
validated by Lender in its reasonable discretion), such documentation to be in
form and substance acceptable to Lender, in its sole discretion.
 
Borrower’s Initial Equity Investment was increased by $1,505,000 (the “Equity
Increase”) to a total of $124,412,805.92 so as to permit the creation of the
“Sales Commissions Paid During Construction” Budget Line Item in the amount of
$1,505,000. ($460,179 of this Budget Line
 

 
28

--------------------------------------------------------------------------------

 

Item has already been funded and the remainder is to be funded at a rate of
approximately $35,000 per month as an advance against brokerage commissions for
Unit sales.) Notwithstanding anything to the contrary contained herein, so long
as no Event of Default exists, at the time of Unit closings  up to fifty percent
(50%) of the brokerage commissions payable upon each such closing may be used to
return to Borrower the Equity Increase. The foregoing shall not reduce any
Release Price payable to Lender.
 
If Borrower obtains a Mezzanine Loan with the consent of Lender and otherwise in
accordance Section 15.1(u) hereof, the Initial Equity Investment may be reduced
by the Qualifying Portion of such Mezzanine Loan; provided, however, that such
reduction in the Initial Equity Investment shall only be applicable to such
portion of the Initial Equity Investment that has not been contributed at the
time of the closing of the Mezzanine Loan, such that no part of the Initial
Equity Investment may be recouped by Borrower or other contributor, and Borrower
hereby acknowledges and agrees that, as a result, less than all of the reduction
in the Initial Equity Investment may be realized.  The “Qualifying Portion” of
the Mezzanine Loan shall mean the portion available for borrowing to pay costs
in the Budget attached as Exhibit G hereto (e.g., the Qualifying Portion shall
not include items such as interest and/or fees and expenses payable with respect
to the Mezzanine Loan).  The Qualifying Portion must be fully funded prior to
Full Loan Opening.
 
Borrower’s Equity Investment requirement shall be increased as a result of any
changes to the Budget and as necessary to maintain the Loan In Balance as
described in Section 11.1.  Lender shall not be required to disburse any
proceeds to reimburse Borrower for its Equity Investment unless Lender has
determined that Borrower has invested amounts in excess of its required Equity
Investment.  In the event that Borrower, or such other Person on behalf of
Borrower, invests such funds that render the total actual equity investment to
be in excess of the required Equity Investment (excluding the Additional Equity
Investment or any equity deposited as a result of the Loan being not In
Balance), the Commitment shall be permanently reduced by such excess investment,
unless Borrower delivers to Lender a written request for a refund of such excess
within thirty (30) days of such excess investment, but in no event shall such a
request be required sooner than thirty (30) days after the date hereof.
 
(b) Fees and Expenses:  Borrower shall have paid all of Lender’s fees and
expenses as required by Article 7 or elsewhere in this Agreement, to the extent
due and payable.
 
(c) Title and Other Documents:  Borrower shall have furnished to Lender a
Commitment for the Title Policy with the premiums for such Title Policy paid in
full, and a pro forma Title Policy, with coverage effective as of Closing,
together with legible copies of all title exception documents cited in the
Commitment for the Title Policy and all other legal documents affecting the
Project or the use thereof.  Borrower shall provide to Lender the final original
Title Policy within fifteen (15) days following Closing.  The pro forma Title
Policy and the Title Policy shall be subject only to the Permitted
Exceptions.  Any exception for the rights of Residential Unit Purchasers shall
only be permissible if the Title Insurer insures such rights are subordinate to
the Deed of Trust.
 
(d) Survey:  Borrower shall have furnished to Lender an ALTA/ACSM “Class A” Land
Title Survey of the Project prepared by a licensed surveyor satisfactory to
Lender.  Said
 

 
29

--------------------------------------------------------------------------------

 

survey shall be dated no earlier than ninety (90) days prior to the date hereof,
shall be made (and certified to have been made) as set forth in Exhibit D
attached hereto and made a part hereof.  Such survey shall be sufficient to
permit issuance of the Title Policy in the form required by this
Agreement.  Such survey shall include the legal description of the Land.
 
(e) Insurance Policies:  Borrower shall have furnished to Lender, prior to the
date hereof, certificates evidencing that insurance coverages are in effect with
respect to the Project and Borrower, in accordance with the Insurance
Requirements attached hereto as Exhibit E and incorporated herein by reference
as if fully set forth herein (or such other insurance coverages reasonably
acceptable to Lender), for which the premiums have been prepaid, and with
endorsements satisfactory to Lender.  On or before the date that is thirty (30)
days after the date hereof, Borrower shall provide a copy of the insurance
policy with respect to the Project and Borrower in accordance with Exhibit E
(the “Insurance Policy”).
 
(f) No Litigation:  Borrower shall have furnished evidence that no litigation or
proceedings shall be pending or threatened that is reasonably likely to cause a
Material Adverse Change with respect to Borrower, Guarantor or the Project,
other than litigation that is disclosed in writing to Lender prior to the Loan
closing and is acceptable to Lender, in its sole discretion.
 
(g) Utilities:  Borrower shall have furnished to Lender (by way of utility
letters or otherwise) evidence establishing to the reasonable satisfaction of
Lender that the Project, when constructed, will have adequate water supply,
storm and sanitary sewerage facilities, telephone, gas (if applicable),
electricity, fire and police protection, means of ingress and egress to and from
the Project and public highways and any other required public utilities and that
the Project is benefited by insured easements as may be required for any of the
foregoing.
 
(h) Attorney Opinions:  Borrower shall have furnished to Lender an opinion from
counsel for Borrower and Guarantor, in a form satisfactory to Lender, covering
due authorization, execution and delivery and enforceability of the Loan
Documents and also containing such other legal opinions as Lender shall
reasonably require, with customary assumptions and qualifications.
 
(i) Appraisal:  Lender shall have obtained, at Borrower’s expense, an Appraisal
acceptable to Lender in all respects, in Lender’s sole discretion.  The
Appraisal of the Project performed by CB Richard Ellis of Austin, dated March 5,
2008, is hereby accepted by Lender.  A copy of such Appraisal will be supplied
to Borrower upon request, subsequent to Closing.
 
(j) Searches:  Borrower shall have furnished to Lender current bankruptcy,
federal tax lien and judgment searches and searches of all Uniform Commercial
Code financing statements filed in each place UCC Financing Statements are to be
filed hereunder for Borrower and Guarantor, demonstrating the absence of
materially adverse claims.
 
(k) Financial Statements; Tax Returns:  Borrower shall have furnished to Lender
current annual financial statements of Borrower and Guarantor, each in form and
substance and certified by such individual as acceptable to Lender.  Borrower
shall have furnished to Lender any federal and state tax returns of Borrower or
Guarantor for the past two (2) years.  Borrower and Guarantor shall have signed
and delivered to Lender an Internal Revenue Service Tax Return
 

 
30

--------------------------------------------------------------------------------

 

Verification Form (IRS Form 4506-T).  Borrower and Guarantor shall provide such
other additional financial information as Lender reasonably requires, including
financial statements of income and expenses for the Project and tax returns for
all entities reporting the income and expenses on the Project.
 
(l) Price List Schedule.  Borrower shall have furnished to Lender the Price List
Schedule, as approved by Lender.
 
(m) Other Agreements:  Borrower shall have delivered to Lender executed copies
of any marketing, brokerage and development agreements entered into by Borrower
in connection with the Construction and/or the sale of Residential Units at, or
any other part of, the Project, each of which Lender shall have approved in
Lender’s reasonable discretion.
 
(n) Flood Hazard:  Lender has received evidence that the Project is not located
in an area designated by the Secretary of Housing and Urban Development as a
special flood hazard area, or flood hazard insurance acceptable to Lender in its
reasonable discretion.
 
(o) Zoning:  The Title Policy shall include an ALTA 3.1 zoning endorsement
modified for plans and specifications, or, if not available in the State,
Borrower shall have furnished to Lender a legal opinion that provides the same
zoning compliance assurance as an ALTA 3.1 zoning endorsement subject to
customary qualifications, clarifications and assumptions.
 
(p) Organizational Documents:  Borrower shall have furnished to Lender proof
satisfactory to Lender of authority, formation, organization and good standing
in the state of its incorporation or formation and, if applicable, qualification
as a foreign entity in good standing in the state of its incorporation or
formation, of all corporate, partnership, trust and limited liability company
entities (including Borrower and Guarantor) executing any Loan Documents,
whether in their own name or on behalf of another entity.  Borrower shall also
provide an organizational chart as well as certified resolutions in form and
content satisfactory to Lender, authorizing execution, delivery and performance
of the Loan Documents, and such other documentation as Lender may require to
evidence the authority of the persons executing the Loan Documents.
 
(q) No Default; No Material Adverse Change; No Condemnation; etc.:  There shall
be no Default or continuing Event of Default by Borrower hereunder; there shall
have not occurred a Material Adverse Change in the financial condition of
Borrower or Guarantor or the condition of the Project that has not been cured or
satisfied; and neither the Project nor any part thereof shall have suffered any
material casualty or be subject to any existing or threatened condemnation or
taking by eminent domain proceeding or otherwise.
 
(r) Easements:  Borrower shall have furnished to Lender all easements reasonably
required for the construction, maintenance or operation of the Project, and such
easements shall be insured by the Title Policy.
 
(s) Condominium Documents:  Borrower shall have delivered to Lender a copy of
all proposed and/or executed condominium plats, declarations, agreements
regarding cost sharing, filings, escrow agreements and other documents
pertaining to the establishment of a condominium regimes at the Project or
relating to the Project’s compliance with all applicable
 

 
31

--------------------------------------------------------------------------------

 

local, state and federal Laws relating to condominiums (collectively, the
“Condominium Documents”), including, without limitation, the draft Master
Condominium Declaration and Residential Condominium Declaration, all of which
Condominium Documents shall be acceptable to Lender in its sole and absolute
discretion. Lender shall be satisfied with the sufficiency of the services and
infrastructure provided and the adequacy of their funding.
 
(t) [Intentionally Omitted]
 
(u) Lease.  Borrower shall have delivered to Lender the form of Lease to be used
for the leases of space in the Retail Space and in the Office Space.
 
(v) Pre-sales.  Borrower shall have delivered to Lender, prior to Closing,
Qualifying Sales Agreements (in full force and effect) for at least 55
Residential Units comprising at least 70,761 Saleable Square Feet together with
Parking Spaces for such applicable Residential Units at prices greater than or
equal to the List Price for each and every such Residential Unit, constituting,
in the aggregate, gross sales of greater than or equal to $45,184,250
(collectively, the “Pre-sale Requirement”).  The mix of Residential Unit types
and locations within the Project must be reasonably acceptable to Lender.
 
(w) Earnest Money and Upgrade Deposits.  All existing Earnest Money Deposits and
Upgrade Deposits shall have been deposited by the Escrow Agent, or by Lender to
the extent allowed by Law, in accounts in accordance with Section 14.3.  If an
Escrow Agent is being used, Borrower shall have delivered to Lender a copy of
the escrow agreement pursuant to which the Earnest Money Deposits are being held
(the “Escrow Agreement”), together with a letter from the Escrow Agent agreeing
to deliver such deposits to Lender when and as Borrower has a right to receive
such deposits for application in accordance with Section 14.3 and Section 14.9
below.  Prior to Full Loan Opening, Borrower shall have deposited with either
the Escrow Agent or Lender, as applicable, cash Earnest Money Deposits equal to
at least ten percent (10%) of the contract price for each Residential Unit
included in the Pre-sale Requirement.
 
(x) Required Condominium Approvals.  Borrower shall have furnished to Lender
evidence satisfactory to Lender that Borrower has received all approvals
required for the condominium subdivision of the Project pursuant to the
Declaration of Condominium, the sale or marketing of the Residential Units under
the requirements of ILSA, applicable laws of the State and any applicable local
Laws.  Borrower also shall have furnished to Lender as filed copies of
Borrower’s HUD Property Report and any additional reports required by the State
of Texas or City of Austin.
 
(y) Operating Agreements.  Borrower shall have provided to Lender (a) the
executed Hotel Documents, Non-Disturbance Agreement and an estoppel letters
addressed to Lender with respect to the Hotel Documents, and (b) before Full
Loan Opening, (x) the management agreement for the management and operation of
the Venue, together with a subordination, estoppel and collateral assignment
thereof and (y) an amendment to the Hotel Operating Agreement extending the
outside completion date thereunder to January 7, 2012; all of the foregoing in
form and substance reasonably satisfactory to Lender
 

 
32

--------------------------------------------------------------------------------

 

(z) City Estoppel and Agreement.  (i) Prior to Closing, Borrower shall have
provided to Lender an Estoppel Certificate and Agreement from the City of
Austin, a Texas home rule city and municipal corporation (“City”) in form and
substance satisfactory to Lender addressing certain matters relative to (A) that
certain Declaration of Restrictive Covenants dated as of December 15, 2006, by
the City, recorded in the official public records of Travis County, Texas as
Instrument No. 2006240877; and (B) Special Warranty Deed dated as of December
15, 2006, by the City, in favor of Stratus Block 21 Investments, L.P., a Texas
limited partnership, recorded in the official public records of Travis County,
Texas as Instrument No. 2006240878; (ii) prior to Full Loan Opening, a direction
by Borrower to the City to pay any repurchase price payable under such deed to
Lender (to be applied to the indebtedness under the Loan Documents in such order
as Lender shall elect, with any excess payable to Borrower), which direction is
accepted by the City and (iii) prior to Full Loan Opening, Borrower shall have
provided to Lender a Second Estoppel Certificate and Agreement from the City in
all material respects in the form of Exhibit S or otherwise in form and
substance satisfactory to Lender.
 
(aa) Patriot Act:  Borrower shall have provided Lender with proof that Borrower
has complied in all respects with the provisions of the USA PATRIOT Act of 2001,
as applicable, including without limitation, furnishing to Lender proof that
Borrower has taken all action necessary to comply with Section 326 of such Act.
 
(bb) Additional Documents.  Borrower shall have furnished to Lender such other
materials, documents, papers or requirements regarding the Project, Borrower or
Guarantor as Lender shall reasonably request.
 
 
Article 9
 
 
CONSTRUCTION REQUIREMENTS PRECEDENT
 
9.1 Construction Documents Required as of Closing.
 
Borrower shall cause to be furnished to Lender and to Lender’s Consultant the
following, in form and substance satisfactory to Lender in its reasonable
discretion (except as otherwise expressly set forth herein), and Lender shall
have approved the following in its reasonable discretion (except as otherwise
expressly set forth herein), prior to (and at the time of) Closing (or such
later time as is specified in any subparagraph hereof) as additional conditions
to Lender’s obligations to make any disbursements of the Loan:
 
(a) Fully executed copies of the following shall be delivered: (i) prior to the
Closing, a general contract with the General Contractor pertaining to the
construction of the Project (the “General Contract”), which must be acceptable
to Lender in all respects in Lender’s sole discretion, with a guaranteed maximum
price not to exceed $186,889,641 (the “General Contract Price”), and the General
Contract shall not be entered into until after the Deed of Trust is recorded;
(ii) [intentionally omitted]; (iii) copies of all other direct contracts to be
entered into by Borrower for construction, purchase of materials or furniture,
fixtures or equipment; and (iv) all contracts with the architects, engineers,
third-party owner’s representatives and other design professionals (the “Design
Professionals”) acceptable to Lender in all respects in Lender’s reasonable
discretion.  None of General Contractor and any Design Professionals shall be an
Affiliate of Borrower or of Guarantor, and all shall be of acceptable credit
quality, as determined
 

 
33

--------------------------------------------------------------------------------

 

by Lender in its sole discretion.  If Lender shall determine that the General
Contractor is not of acceptable credit quality, Lender may require, in its sole
discretion, certain guaranties or other assurances from the parent entity or
entities or Affiliates of General Contractor. Lender hereby approves the General
Contract and approves Austin Building Company as General Contractor, subject to
the execution and delivery of a guaranty of the General Contract, in form and
substance satisfactory to Lender in its sole discretion, from General
Contractor’s parent company, Austin Commercial, L.P., a Delaware limited
partnership.  General Contractor may not be replaced without Lender’s prior
written consent. No Design Professional may be replaced without Lender’s prior
written consent, subject to its reasonable discretion;
 
(b) A schedule of values, as included in the General Contract;
 
(c) [Intentionally Omitted];
 
(d)  In lieu of Bonds, Lender agrees to accept subguard insurance with terms,
limits, and endorsements (including a Financial Interest Endorsement naming
Lender) acceptable to Lender in its reasonable discretion covering all
Subcontracts;
 
(e) Copies of each of the Required Permits, except for those Required Permits
that cannot be issued until a later stage or completion of Construction, in
which event such Required Permits will be obtained by Borrower on a timely basis
in accordance with all recorded maps and conditions and applicable building,
land use, zoning and environmental codes, statutes and regulations and will be
delivered to Lender promptly thereafter;
 
(f) The Partial Plans and Specifications and the Partial Proposed Finish
Standards, each of which Lender approves as of the date hereof;
 
(g) The Construction Schedule;
 
(h) The Soil Report;
 
(i) The Environmental Report, which shall, at a minimum, (i) demonstrate the
absence of any existing or potential Hazardous Material contamination or
violations of environmental Laws at the Project, except as acceptable to Lender
in its sole and absolute discretion, (ii) include the results of all sampling or
monitoring to confirm the extent of existing or potential Hazardous Material
contamination at the Project, including the results of leak detection tests for
each underground storage tank located at the Project, if any, (iii) describe
response actions appropriate to remedy any existing or potential Hazardous
Material contamination, and report the estimated cost of any such appropriate
response, (iv) confirm that any prior removal of Hazardous Material or
underground storage tanks from the Project was completed in accordance with
applicable Laws, (v) confirm whether or not the Land is located in a wetlands
district, and (vi) comply with the USEPA “all appropriate inquiry” rule
contained in 40 C.F.R. Part 312.  Borrower shall also have caused to be
furnished to Lender any environmental disclosure statement required pursuant to
the law of the State;
 
(j) A report from Lender’s Consultant that contains an analysis of the Approved
Plans and Specifications, the Budget, the Construction Schedule, the General
Contract, all subcontracts then existing and the Soil Report.  Such report shall
be solely for the benefit of
 

 
34

--------------------------------------------------------------------------------

 

Lender and shall contain (i) an analysis satisfactory to Lender demonstrating
the adequacy of the Budget to complete the Project and (ii) a confirmation that
the Construction Schedule is realistic.  Lender’s Consultant shall monitor
construction of the Project and shall visit the Project at least one (1) time
each month, and shall certify as to amounts of construction costs for all
requested fundings; each report of Lender’s Consultant is for the sole benefit
of Lender and Lender shall not be bound by any recommendation or conclusion of
Lender’s Consultant;
 
(k) Each Architect’s Certificate;
 
(l) The Budget, as approved by Lender pursuant to Article 10 hereof;
 
(m) Original executed consents, in form and substance satisfactory to Lender, of
the General Contractor, the Architect, and any other Design Professional to the
Collateral Assignment of Construction Documents; and
 
(n) Such other papers, materials and documents as Lender may reasonably require
with respect to the Construction, the Project, Borrower, or Guarantor.
 
9.2 Construction Deliveries Required as of Full Loan Opening.
 
Prior to Full Loan Opening, in addition to fully satisfying the conditions set
forth above in Section 9.1, Borrower shall also satisfy the following
conditions:

(a) General Contractor shall have affirmed in writing the validity of the
General Contract and described any Change Orders or pending Change Orders as of
the Full Loan Opening.  As of Full Loan Opening, General Contractor shall
provide to Lender the then-current guaranteed maximum price based upon the 100%
complete and final Approved Plans and Specifications (and 100% buyout of
Subcontracts based upon such 100% complete and final Approved Plans and
Specifications) and the reductions of Allowances as set forth in this subsection
(the “Revised GMP”).  After giving effect to such Revised GMP and Change Orders,
if the Loan is not In Balance, Borrower shall contribute any additional equity
required to put the Loan In Balance (including, without limitation, the
available amount under the Owner’s Hard Cost Contingency being equal to or
greater than 4% of the remaining Project hard costs).  An additional condition
to Full Loan Opening shall be that no more than two percent (2%) of the total
General Contract may be an “Allowance” (as such term is defined under the AIA
A201-1997 General Conditions of the Contract for Construction) (excluding
general conditions, General Contractor’s fees and the Contractor’s Contingency)
and such allowances shall be subject to Lender’s reasonable approval;
 
(b) An initial sworn statement of the General Contractor, approved by Borrower,
and Lender covering all work done and to be done, together with lien waivers
covering all work and materials for which payments have been made by Borrower
prior to the Full Loan Opening;
 
(c) An update of the consultant’s report set forth in Section 9.1(j) above;
 
(d) Executed contract(s) for all owner direct cost items signed by the
applicable suppliers of such items, including, without limitation, those for the
purchase of the furniture, fixtures and equipment for the Project.
 

 
35

--------------------------------------------------------------------------------

 

(e) In addition to the Partial Plans and Specifications addressed in Section
9.1(f) above, full and complete detailed plans and specifications for the
Improvements in duplicate, prepared by the Architect (the “Plans and
Specifications”).  Without limiting the foregoing, such Plans and Specifications
must be predicated on, among other things, the Partial Plans and Specifications
approved by Lender, and the characteristics in the Recitals of this Agreement
and the floor layouts and elevations substantially similar to those which have
been previously submitted to Lender.  Lender must also be satisfied, in its
reasonable discretion, that the specifications, project manual, floor plans,
mechanical, electrical, plumbing, fire protection and life safety, structural
and site plans are sufficient and appropriate for the Project.  Borrower shall
deliver packages of such Plans and Specifications to Lender in accordance with
the delivery schedule attached hereto as Exhibit R.  Lender shall review each
such package of Plans and Specifications and approve or comment on same within a
commercially reasonable period of time following its receipt thereof.  Borrower
shall have delivered the final package of Plans and Specifications required
under Exhibit R, for Lender’s final review and approval in its reasonable
discretion, as more specifically addressed in Section 9.1(f) above, at least
sixty (60) days prior to the expected day of Full Loan Opening.  Upon Lender’s
written approval of such final package of Plans and Specifications, such final
Plans and Specifications shall be the “Approved Plans and
Specifications”.  Borrower shall have obtained Lender’s approval of the Approved
Plans and Specifications prior to Full Loan Opening. Other than Change Orders
permitted pursuant to the terms of this Agreement, no changes to the Approved
Plans and Specifications shall be permitted without Lender’s prior written
approval;
 
(f) Borrower shall have furnished to Lender and Lender’s Consultant, for
Lender’s approval, detailed Plans and Specifications based upon the Partial
Proposed Finish Standards and setting forth a detailed description and quality
level for materials used for the type of construction, the façade and the
finishes of each Residential Unit, and throughout the Hotel, and of all fixtures
and personal property that will be included in the standard price of the
individual Residential Units, and throughout the Hotel, including, without
limitation, items such as floor coverings, wall coverings, electrical systems,
lighting plans, HVAC systems, bathroom and kitchen fixtures and countertops,
cabinetry, appliances and furniture (collectively, “Proposed Finish
Standards”).  Lender must be satisfied, in its reasonable discretion, that the
quality level of the Proposed Finish Standards is comparable to other
condominium developments or hotels, as applicable, in the same price range and
located in Austin, Texas, that the Proposed Finish Standards are consistent with
the Plans and Specifications submitted to Lender, and that the Hotel finish
standards are in accordance with the Hotel Documents.  Borrower shall have
delivered the final Proposed Finish Standards for Lender’s final review and
approval in its reasonable discretion at least sixty (60) days prior to Full
Loan Opening, and Lender shall review and approve or comment on same within a
reasonable period of time following its receipt thereof.   Borrower shall have
obtained Lender’s approval of such Proposed Finish Standards prior to Full Loan
Opening, in which event such standards shall constitute the “Approved Finish
Standards.”  No material changes to the Approved Finish Standards shall be
permitted without the prior written approval by Lender, to be determined in
Lender’s reasonable discretion.  Borrower shall finish all Residential Units and
the Hotel to the Approved Finish Standards as part of the Construction required
hereunder;
 
(g) Borrower has provided evidence to Lender that all of the work, other than
that certain water filtration system, contemplated by that certain Waste
Management Plan dated
 

 
36

--------------------------------------------------------------------------------

 

March 4, 2008 and prepared by Terracon Consultants, Inc., and any amendments or
updates thereto (the “Waste Management Plan”), has been completed or otherwise
addressed to Lender’s reasonable satisfaction, such evidence to include, but not
be limited to, a written statement from an authorized representative of Terracon
Consultants, Inc., affirming that the recommendations of such Waste Management
Plan were complied with and no further actions, other than the ongoing use and
maintenance of the water filtration system during the operation of the Project,
are required to address the conditions at the Project site that were disclosed
in any of Environmental Reports delivered to Lender.
 
(h) Hotel Operator, and, as may be required by the Hotel Documents, Starwood
Hotels & Resorts Worldwide, Inc., shall have approved the Approved Plans and
Specifications and Approved Finish Standards; and
 
(i) To the extent not previously delivered at Closing, the Required Permits, and
updates thereof, which shall include the final full building permits for the
Project no later than thirty (30) days prior to Full Loan Opening.
 
 
Article 10
 
 
BUDGET, CONTINGENCY FUND AND CHANGE ORDERS
 
10.1 Budget.
 
Disbursement of the Loan shall be governed by the Budget for the Project, in
form and substance acceptable to Lender in Lender’s reasonable
discretion.  Borrower shall only be entitled to disbursements that are in
accordance with the Budget.  The Budget shall specify the amount of cash equity
invested in the Project, and all costs and expenses of every kind and nature
whatsoever to be incurred by Borrower in connection with the Project.  Costs
associated with Residential Unit sales (including but not limited to broker’s
commissions, closing and escrow costs) may be paid from proceeds resulting from
any Residential Unit closing to the extent the gross sales price paid by any
Residential Unit Purchaser for its respective Residential Unit exceeds the
applicable Release Price; otherwise, such closing costs shall be paid in cash by
Borrower.  The Budget shall include, in addition to the Budget Line Items
described in Section 10.2 below, the Contingency Fund described in Section 10.3
below and amounts satisfactory to Lender for Hard Costs, Soft Costs and other
reserves reasonably acceptable to Lender.  The construction trade line items
contained in the General Contract (or in the schedule of values) shall each be
deemed a Budget Line Item for purposes of this Agreement.  The Budget is
attached hereto as Exhibit G and made a part hereof.  Except as set forth in
this Agreement, all changes to the Budget shall in all respects be subject to
the prior written approval of Lender, which approval shall be granted or
withheld in Lender’s reasonable discretion.  Borrower shall promptly notify
Lender of any anticipated changes in the line items of the Budget that, if
approved, would result in a net increase in the total amount of the Budget and
Borrower shall not enter into any agreement that would increase the total amount
of the costs in the Budget without Lender’s prior written consent.  In the event
the total Project costs are less than the final Budget, Borrower shall have no
right to borrow the balance of the Loan not needed for Project costs.
 

 
37

--------------------------------------------------------------------------------

 

10.2 Budget Line Items.
 
(a) The Budget shall include as line items (“Budget Line Items”), to the extent
determined to be applicable by Lender in its reasonable discretion, the cost of
all labor, materials, equipment, fixtures and furnishings needed for the
completion of the Construction, and all other costs, fees and expenses relating
in any way whatsoever to the Construction of the Improvements, marketing and
sales costs, commissions, operating deficits, real estate taxes, and all other
sums due in connection with Construction and operation of the Project, the Loan,
and this Agreement.  Each line item in the trade breakdown of the General
Contract shall be considered a separate Budget Line Item for all purposes of
this Agreement whether or not separately shown as Budget Line Items on the
Budget attached hereto.  Borrower agrees that all Loan proceeds disbursed by
Lender shall be used only for the Budget Line Items for which such proceeds were
disbursed, except as reallocated in accordance with this Agreement or otherwise
permitted by Lender in its reasonable discretion.  The Budget shall not contain
any line items payable to Borrower, Guarantor or any Affiliate of either
Borrower or Guarantor and Borrower and Guarantor shall not pay or cause to be
paid any Loan proceeds to any Affiliate of either, except for the Permitted
Affiliate Expenses.  The Budget shall include as Budget Line Items, outside of
Owner’s Hard Cost Contingency and the Soft Cost Contingency, (i) all fees and
sums payable to Hotel Operator or its Affiliates pursuant to the Hotel
Documents, including without limitation, (A) the marketing assistance fee of
$1,250 per Residential Unit payable in twenty-four (24) equal monthly
installments commencing upon the effective date of the Condominium Marketing
License Agreement, (B) pre-opening services budget of $2,536,085, (C)
pre-opening information technology budget of $1,261,604 (which shall be included
within the TV Lease and Technology Line Item), (D) pre-opening inventories
budget of $3,276,000, (E) FF&E of $15,000 per Hotel key, (F) technical services
fees of $513,000, consisting of $1,250 per Hotel key, plus $1,000 per
Residential Unit, and (G) reimbursable expenses under the Technical Services
Agreement up to $5,000 per Hotel key and initial working capital budget of $1500
per Hotel key, but excluding the Condominium Licensing Fee of 4.5% of gross
sales revenue per Residential Unit, which shall be payable to Hotel Operator
from sales proceeds, as opposed to the Budget, and (ii) all costs contemplated
by the Waste Management Plan.
 
(b) Borrower shall have the right to reallocate cost savings effected by a final
Change Order or other appropriate final documentation to other Budget Line Items
subject to (x) Lender’s prior written consent, in its reasonable discretion, and
(y) the limits contained in this Section 10.2 and Section 10.3 of this
Agreement. No reallocations shall be permitted to or from the Interest Reserve
Budget Line Item, Developer Fee Budget Line Item or for any amounts payable to
Borrower, Guarantor or any Affiliates of Borrower or Guarantor.  If there is a
savings in Hard Costs upon completion of the construction work contemplated by
the General Contract, as determined by Lender in its reasonable discretion,
savings may be reallocated to Owner’s Hard Cost Contingency (except to the
extent a portion of such savings are paid to the General Contractor pursuant to
the terms of the General Contract).  Notwithstanding the foregoing in the
immediately preceding sentence and subject to Lender’s reasonable approval,
Borrower may reallocate any final savings in Hard Costs, which accrue prior to
completion of the Project, to the Owner’s Hard Cost Contingency for use by
Borrower for other Hard Costs.  If the total and final expenditures for any Soft
Cost Budget Line Item are less than the amount provided for in the Budget, then
the savings may be reallocated to the Soft Cost Contingency.  In the event that
the final costs of the Project
 

 
38

--------------------------------------------------------------------------------

 

are less than the total amount of sources of funds in the Budget (including the
Loan), the amount of the cost savings shall not be available for borrowing
(e.g., as a return of equity).
 
(c) Except as reallocated in accordance with this Agreement or otherwise
permitted by Lender in its reasonable discretion, Lender shall not be obligated
to disburse any amount for any category of costs set forth as a Budget Line Item
that is greater than the amount set forth for such category in the applicable
Budget Line Item.  Borrower shall pay as they become due all amounts set forth
in the Budget with respect to costs to be paid for by Borrower.
 
10.3 Contingency Fund.
 
The Budget shall contain Budget Line Items available to Borrower for (i) payment
of Hard Costs, separate and apart from the General Contract (the “Owner’s Hard
Cost Contingency”) and (ii) for payment of Soft Costs (the “Soft Cost
Contingency;” together, the Owner’s Hard Cost Contingency and the Soft Cost
Contingency constitute the “Contingency Fund”).  At Closing, the funds in the
(i) Owner’s Hard Cost Contingency Budget Line Item must be in an amount equal to
$8,000,000, and at no time shall the Owner’s Hard Cost Contingency be reduced
below $8,000,000 to pay for an increase in the initial contractual amount of
such General Contract, and (b) the Soft Cost Contingency Budget Line Item must
be in an amount equal to $750,000.  At Full Loan Opening, the remaining
unallocated Owner’s Hard Cost Contingency must equal at least 4% of the unpaid
cost of all construction hard cost Budget Line Items.
 
Lender shall not be obligated to disburse or reallocate all or any part of the
Contingency Fund, except as set forth herein.  The Owner’s Hard Cost Contingency
may be used by Borrower to pay the cost of Change Orders (which have been
approved by Lender or as to which Lender’s approval is not required under
Section 10.5) or reallocated to other Hard Costs (in accordance with this
Agreement) on a pro rata basis over the course of Construction, according to the
percentage of construction trade items (which shall equal the amount of the
General Contract Price less general conditions, the General Contractor’s fee and
any Contractor’s Contingency) expended by Borrower and completed to such
date.  Funds from the Soft Cost Contingency may be reallocated to pay other Soft
Costs, excluding the Developer Fee Budget Line Item (and any other amounts
payable to Borrower, Guarantor, or any of their Affiliates) and the Interest
Reserve Budget Line Item (i) without Lender’s approval on a pro rata basis such
that the cumulative percentage of such reallocated funds is equal to or less
than the percentage of completion of the Project, and (ii) otherwise subject to
Lender’s prior written approval, in its reasonable discretion.
 
The Budget Line Item for amounts payable to the General Contractor under the
General Contract may also include a contingency amount that is available to the
General Contractor (the “Contractor’s Contingency”).  This is in addition to the
Contingency Fund, which is intended to afford protection to Lender, and any
Contractor’s Contingency may not be counted towards the amounts required to be
contained in the Contingency Fund by the preceding paragraphs of this Section
10.3. The Contractor’s Contingency shall be used in accordance with the terms of
the General Contract.
 

 
39

--------------------------------------------------------------------------------

 

10.4 Optional Method for Payment of Interest.
 
For Borrower’s benefit, the Budget includes a Budget Line Item for interest on
the Loan (the “Interest Reserve Budget Line Item”). (Neither the Interest
Reserve Budget Line Item nor any other part of the Loan shall be available to
pay interest on any Mezzanine Loan.)  Borrower hereby authorizes Lender from
time to time, for the mutual convenience of Lender and Borrower, to disburse
Loan proceeds to pay all the then accrued interest on the Note when due,
regardless of whether Borrower shall have specifically requested a disbursement
of such amount.  Any such disbursement, if made, shall be added to the
outstanding principal balance of the Note and shall, when disbursed, bear
interest pursuant to the Note.  Borrower may borrow the Interest Reserve Budget
Line Item to pay interest on the Loan upon qualifying for such disbursement by
satisfying the applicable requirements of Section 4.1(c) hereof.  Without
limiting the foregoing, or the provisions of Article 11 below, once the Interest
Reserve Budget Line Item has been expended, Borrower shall pay interest from its
own funds.  In the event the Project, during any month during the term of the
Loan, achieves a positive Net Operating Income, such Net Operating Income shall
be applied to the payment of interest before the funds in the Interest Reserve
Budget Line Item are used to pay such interest.  If the Net Operating Income
exceeds the monthly interest then due, the excess shall continue to be held in
the operating account for the Project established pursuant to Section 15.1(ii),
and such excess shall be applied to pay the interest accrued on the Loan for the
following month.
 
10.5 Change Orders.
 
Borrower agrees that no changes will be made in the Approved Plans and
Specifications (or in such Plans and Specifications as have been approved by
Lender from time to time) without the prior written approval of Lender in
Lender’s reasonable discretion, and Borrower must notify Lender in writing of
any such change at least seven (7) days prior to date such change order will be
implemented, provided, however, that Borrower may make changes to the Approved
Plans and Specifications without Lender’s approval if (a) Borrower notifies
Lender in writing of such change in no event later than the next construction
draw following Borrower’s agreement to the changes; (b) Borrower obtains the
approval of all parties whose approval is legally required, including any
affected Residential Unit Purchaser, sureties, and any Governmental Authority to
the extent approval from such parties is required; (c) the structural integrity
of the Improvements is not impaired; (d) no change in architectural appearance
is effected; (e) the performance of the mechanical, electrical, and life safety
systems of the Improvements is not affected; (f) the change does not result in a
use of a particular component that is not of similar quality or functional
equivalency as the original components of the Project and as a result of such
change there would be no diminution in value or impairment of the marketability
of the Project as described in the Approved Plans and Specifications; (g) the
cost of, or reduction in cost, resulting from any such change does not exceed
$200,000; and (h) the Loan will remain In Balance (after giving effect to any
reallocation of the Contingency Fund or other Budget Line Items that Borrower
has qualified for pursuant to this Article 10).  Changes in the scope of
construction work or to any construction related contract must be documented
with a Change Order on the AIA Form G 701 or equivalent form.  Borrower shall
not agree to or implement any Change Order without the prior written consent of
Hotel Operator (or its Affiliate) where such approval is required under any of
the Hotel Documents.
 

 
40

--------------------------------------------------------------------------------

 

Article 11
 
 
SUFFICIENCY OF LOAN
 
11.1 Loan In Balance.
 
(a) The Loan is required to be In Balance at all times.  The Loan shall be “In
Balance” only when both (i) the Available Sources of Funds equal or exceed
Lender’s Estimate of Remaining Costs and (ii) each Budget Line Item is
sufficient to pay the costs such Budget Line Item was established to pay for
(including, with respect to the Interest Reserve Budget Line Item interest in
the Loan through the Maturity Date), all as determined by Lender from time to
time in its reasonable discretion in accordance with the provisions of this
Article 11.  The determination by Lender at any time that the Loan is In Balance
shall not preclude Lender from determining at a later time that the Loan is not
In Balance.  Lender shall not be obligated to make any disbursements unless the
Loan is In Balance.
 
(b) Borrower agrees that if Lender determines in its reasonable discretion that
the Loan is not In Balance, regardless of how such condition may have been
caused, Borrower shall within ten (10) days after written request by Lender (and
in any event prior to any further disbursement of the Loan) deposit the
deficiency with Lender (“Deficiency Deposit”). The Deficiency Deposit shall be
first exhausted for costs of the Project before any further disbursements of the
Loan shall be made. Disbursement of a Deficiency Deposit shall be subject to the
same conditions precedent and the same requirements as apply to a disbursement
of the Loan pursuant to this Agreement.  Any Deficiency Deposit deposited with
Lender shall be added to and made a part of the Equity Investment of Borrower in
the Project, and no interest shall be paid to Borrower with respect to any such
amounts.  Borrower pledges to Lender any Deficiency Deposit (and Borrower’s
rights in any such account and interest earned thereon) as security for the
Loan.
 
(c) (i) The “Available Sources of Funds” shall mean the Unfunded Commitment,
adjusted as provided below, plus any remaining unexpended Deficiency Deposit,
less the remaining balance of the Contingency Fund.  Prior to Full Loan Opening,
the unfunded Initial Equity Investment shall be an Available Source of
Funds.  Borrower may seek to increase the Available Sources of Funds (or the
amount of any Budget Line Item) by requesting that Lender reallocate cost
savings in another Budget Line Item or a portion of the Contingency Fund to pay
for cost increases in Budget Line Items, and Lender shall grant or deny such
request in accordance with the provisions of Sections 10.2(b) or 10.3.  Lender
may, so long as it is entitled to do so under Sections 10.2(b) or 10.3, deny a
request for reallocation of cost savings or a portion of the Contingency Fund,
even if as a result thereof Borrower would be required to make a Deficiency
Deposit to maintain the Loan In Balance.
 
(ii) The following specific adjustments shall be made to the Available Sources
of Funds for this transaction:  (i) Upgrade Deposits may be counted as an
Available Source of Funds but only up to the amount of costs of upgrades
included in Lender’s Estimate of Remaining Costs, and (ii) tax escrow deposits
may be counted as an Available Source of Funds to the extent real estate taxes
are included in Lender’s Estimate of Remaining Costs.
 

 
41

--------------------------------------------------------------------------------

 
 
(d) “Lender’s Estimate of Remaining Costs” shall mean the amount which Lender
estimates in its reasonable discretion is necessary to pay for all Hard Costs
and Soft Costs of the Project which have not yet been paid, including, without
limitation, the following:  (i) all costs of the Construction in accordance with
the Approved Plans and Specifications; (ii) all costs required to complete the
preparation of the Residential Units and the Hotel in accordance with the
Approved Finish Standards, including, without limitation, all finishes of
Residential Units required to be paid for by Borrower under Sales Agreements or
reasonably anticipated for unsold Residential Units; (iii) marketing and sales
costs for the Residential Units (other than closing costs which are paid from
gross sales proceeds or by Borrower pursuant to Section 10.1); (iv) marketing,
sales, and operation costs for the Hotel, Commercial Space and Venue; (v) costs
of furniture, fixtures and equipment for the Hotel, Commercial Space and Venue;
(vi) any work to be completed by Borrower in accordance with the Budget; (vii)
the amount required to pay interest on the Loan through the Maturity Date;
(viii) all expenses payable or reimbursable to Lender under the terms of this
Agreement; (ix) all real estate taxes, insurance premiums and operating costs of
the Project (in excess of any Net Operating Income which Lender estimates will
be available for payment of such costs); (x) all amounts needed for tenant
allowances, tenant improvements and leasing commissions with respect to executed
Leases and with respect to unleased space at the Project; (xi) all other amounts
of any type or nature incurred or expected to be incurred in connection with the
acquisition, Construction, marketing and sale of the Project or in order for
Borrower to comply with the Loan Documents or the requirements of Governmental
Authorities.
 
(e) In determining Lender’s Estimate of Remaining Costs (or the amount of any
Budget Line Item), Lender shall be entitled to take into account all conditions,
facts and circumstances related to the Project or the Loan then existing, and
all other considerations which Lender, in its reasonable discretion, determines
are relevant to, or reasonably likely to have an impact upon, any of the amounts
included in Lender’s Estimate of Remaining Costs.  By way of example and not
limitation, Lender shall have the right, in making Lender’s Estimate of
Remaining Costs (or determining the sufficiency of any Budget Line Item), to
consider in such manner and to such extent as Lender determines is appropriate
in its reasonable discretion: (i) all existing and proposed modifications to the
Approved Plans and Specifications (whether or not Lender has the right to
approve the same), whether the same are proposed by Borrower or by a contractor,
(ii) all existing construction contracts and purchase orders or, in those
instances where construction contracts or purchase orders have not yet been let,
written bids from responsible contractors, tradesmen and material suppliers
acceptable to Lender in its reasonable discretion, or Lender’s estimate of such
costs, (iii) all Change Orders and pending Change Orders, (iv) all claims by any
contractors or suppliers for increased or additional amounts, including all
claims by the General Contractor for increases in the amount payable under
General Contract, (v) all disputes between Borrower and any supplier or
contractor (including the General Contractor), (vi) whether any savings in a
Budget Line Item have been demonstrated to Lender’s satisfaction to be final and
permanent and whether any proposed reallocation of such savings to pay other
costs satisfies the limitations and restrictions in Section 10.2(b) of this
Agreement (and any applicable restrictions or limitations in the General
Contract), and (vii) the effect of actual or anticipated delays, whether or not
permitted by the terms of this Agreement.
 

 
42

--------------------------------------------------------------------------------

 

11.2 Additional Equity Investment.
 
The Budget has been prepared and approved with the expectation that Eight
Million Dollars ($8,000,000) in Project costs set forth in such Budget will be
funded by Reinvested Proceeds available pursuant to Section 14.10.  Such
anticipated Eight Million Dollars ($8,000,000) of Reinvested Proceeds shall be
an Available Source of Funds for determining whether the Loan is In Balance,
provided that if less than Eight Million Dollars ($8,000,000) of Reinvested
Proceeds has been generated and is on deposit with Lender upon the earliest to
occur of the following: (A) the Initial Maturity Date, (B) the occurrence of an
Event of Default, and (C) the date upon which the Unfunded Commitment (exclusive
of the Interest Reserve Budget Line Item) is insufficient to fund a draw request
for Project Costs then due, Borrower, in addition to the Initial Equity
Investment, shall deposit with Lender additional equity in an amount equal to
(i) Eight Million Dollars ($8,000,000), less (ii) the aggregate amount of
Reinvested Proceeds actually received by Lender to date (the “Additional Equity
Investment,” and collectively with the Initial Equity Investment and any
additional equity investment that may be required by Lender hereunder, the
“Equity Investment”).   Borrower shall deposit any required Additional Equity
Investment with Lender within ten (10) days of written request by Lender (and,
in any event, any further disbursement of the Loan).  Provided Borrower
contributes such Additional Equity Investment as and when required pursuant
hereto and provided further that no Default or Event of Default then exists, on
or following such time as the full amount of the Reinvested Proceeds are
contributed pursuant to Section 14.10(b) hereof, Borrower may, as part of its
draw package, request that Lender reimburse Borrower in the amount of the
Additional Equity Investment.
 
 
Article 12
 
 
CONSTRUCTION PAYOUT REQUIREMENTS
 
12.1 Applicability of Sections.
 
The provisions contained in this Article 12 shall apply to the Full Opening of
the Loan and to all disbursements of proceeds during Construction.
 
12.2 Monthly Payouts.
 
After the Full Opening of the Loan, further disbursements shall be made during
Construction from time to time as the Construction progresses, but no more
frequently than once in each calendar month, except to pay interest from the
Interest Reserve Budget Line Item in accordance with Section 10.4 or as Lender
may otherwise permit in its sole discretion.  Hard Costs shall be disbursed as
incurred, less the Retainage.  The General Contractor’s fee shall be disbursed
on a pro rata basis according to the percentage of construction trade items
(excluding general conditions, Contractor’s fees and the Contractor’s
Contingency) completed.  All disbursements of Loan proceeds must be approved by
Lender in its reasonable discretion based on costs expended as contained in the
Budget.  Lender shall have no obligation to disburse funds if an Event of
Default or material Default has occurred and is continuing.  Lender reserves the
right to at any time to make disbursements into an escrow to be subsequently
disbursed to Borrower by the Title Insurer.
 

 
43

--------------------------------------------------------------------------------

 

Lender, through Lender’s Consultant and/or its own employees, may perform site
inspections to confirm that progress on the Project conforms to the sworn
statements, and that the Project is progressing within the Budget and the
Approved Plans and Specifications.  Such inspections and confirmations are
solely for the benefit of Lender and may not be relied upon by Borrower.  Upon
such confirmation, and upon receipt of a title company’s commitment to issue a
date down endorsement insuring the funds about to be disbursed, the Title
Insurer shall disburse money to Borrower or General Contractor pursuant to the
escrow agreement, or, after any default, directly to subcontractors or other
payees.  Provided Lender receives complete and orderly draw requests, together
with the appropriate lien waivers, it shall make every commercially reasonable
effort to fund such requests within ten (10) Business Days.  No disbursements
for costs arising under the General Contract for a particular component of the
Project shall be made later than ninety (90) days after the applicable
Completion Date for such component.
 
12.3 Documents to be Furnished for Each Disbursement.
 
As a condition precedent to each disbursement of the Loan proceeds (including
the initial disbursement at the Full Opening of the Loan), Borrower shall
furnish or cause to be furnished to Lender the following documents covering each
disbursement, in form and substance reasonably satisfactory to Lender:
 
(a) A completed draw request in the form attached as Exhibit H hereto and made a
part hereof, including a Borrower’s Sworn Statement executed by an Authorized
Representative and a completed standard AIA Form G702 and Form G703 (or similar
forms acceptable to Lender) signed by the General Contractor and certified by
the Architect, together with General Contractor’s sworn statements and
unconditional waivers of lien, and all Design Professionals’, consultants’,
vendors’, contractors’, subcontractors’, material suppliers’ and laborers’
waivers of lien (except that partial lien waivers from subcontractors and Design
Professionals may be delivered on a trailing thirty (30) day basis, except for
the final disbursement to each subcontractor) substantiating each line item of
the draw request and covering all work, paid with the proceeds of the prior draw
requests, together with such invoices, contracts or other supporting data as
Lender may reasonably require to evidence that all costs for which disbursement
is sought have been incurred, to be followed by lien waivers for such draw no
later than the subsequent draw request, so long as the Title Insurer provides
Lender with a date down endorsement to the Title Policy as provided in Section
12.3(f) below;
 
(b) A sworn owner’s statement detailing the names of all suppliers, vendors,
consultants and contractors with whom Borrower has contracted, amounts of
contracts, amounts paid to date, and amounts of current payment and balances
due, broken down in a consistent manner with the Budget;
 
(c) A Contractor’s statement detailing the names and addresses of all suppliers,
contractors and its own forces contracted to perform work including amounts of
contracts, amounts paid to date, change orders, amounts of current payment,
Retainage, and balances due;
 
(d) The Contractor’s application and certification for payment executed by
Borrower’s lead Design Professional;
 

 
44

--------------------------------------------------------------------------------

 

(e) Paid invoices or other evidence reasonably satisfactory to Lender that
fixtures and equipment, if any, have been paid for and are free of any lien or
security interest therein;
 
(f) A date down endorsement to the Title Policy issued to Lender covering the
date of disbursement and showing the Deed of Trust as a first, prior and
paramount lien on the Project subject only to the Permitted Exceptions and real
estate taxes that have accrued but are not yet due and payable and particularly
that nothing has intervened to affect the validity or priority of the Deed of
Trust.  If the Title Policy is subject to a pending disbursement endorsement,
the amount of such endorsement must be increased to the full amount funded;
 
(g) A report from Lender’s Consultant (who shall be retained solely at
Borrower’s expense) that contains an analysis satisfactory to Lender
demonstrating the adequacy of the Budget to complete the Project, a confirmation
that Construction is proceeding in accordance with the Construction Schedule and
the Approved Plans and Specifications, and a certification as to amounts of
Construction costs for the applicable requested funding, provided, however, that
the opinion of Lender’s Consultant shall not be binding on Lender;
 
(h) Copies of any proposed or executed Change Orders on the standard AIA G701
form that have not been previously furnished to Lender;
 
(i) Copies of all construction contracts (including subcontracts) that have been
executed since the last disbursement;
 
(j) Verification of expenditures for Soft Costs;
 
(k) All Required Permits not previously delivered to Lender;
 
(l) Upon commencement of sales, the Sales Report; and
 
(m) Such other instruments, documents and information as Lender or the Title
Insurer may reasonably request.
 
12.4 Retainages.
 
At the time of each disbursement of Loan proceeds, ten percent (10%) of the draw
request for Hard Cost Line Items in the Budget (excluding the General
Contractor’s fee line item and the General Contractor’s general conditions)
shall be withheld from the amount disbursed to the various contractors,
subcontractors and material suppliers for costs of the Construction (the
“Retainage”).  Once Lender determines, in its sole discretion, that any given
Subcontract is 50% complete and all such work thereunder has been approved by
Lender and Lender’s Consultant, no further Retainage for such Subcontract will
be required.  Once Lender determines, in its sole discretion, that any given
Subcontract is fully complete and all work thereunder has been approved by
Lender and Lender’s Consultant, any Retainage payable under such Subcontract
shall be released.  The remaining Retainage shall be disbursed when Borrower has
satisfied the requirements set forth in Article 13 below.  Retainage may be
witheld from tenant improvement work to be performed by Borrower on the same
basis.  Notwithstanding the foregoing, Lender shall not withhold a Retainage for
purchases of those materials set forth on Exhibit P attached hereto.
 

 
45

--------------------------------------------------------------------------------

 

12.5 Disbursements for Materials Stored On-Site.
 
Any requests for disbursements that in whole or in part relate to materials,
equipment or furnishings that Borrower owns and that are not incorporated into
the Improvements as of the date of the request for disbursement, but are to be
temporarily stored at the Project, shall be made in an aggregate amount not to
exceed $3,000,000 with respect to materials covered by the General Contract plus
$1,000,000 for materials under owner direct contracts other than the General
Contract (such amounts are subject to increase at Lender’s reasonable discretion
upon request of Borrower).  Any such request must be accompanied by evidence
satisfactory to Lender that (a) such stored materials are included within the
coverages of insurance policies carried by Borrower, (b) the ownership of such
materials is vested in Borrower free of any liens and claims of third parties,
and Lender has a purported security interest in such stored materials; (c) such
materials are properly protected against theft or damage, (d) Lender’s
Consultant has viewed and inspected the stored materials, and (e) in the opinion
of Lender’s Consultant the stored materials are physically secured and can be
incorporated into the Project within forty-five (45) days.
 
12.6 Disbursements for Off-site Materials.
 
Lender shall make disbursements for materials stored off-site, in which event
all of the requirements of Section 12.5 shall be applicable to such
disbursement, provided that the following additional requirements must have been
complied with:  (a) such stored materials are stored in a bonded public
warehouse or another facility acceptable to Lender in its sole discretion;
(b) Borrower has caused any warehouseman (as defined in Section 7-102 of the
Uniform Commercial Code) that possesses, holds or controls the stored materials
to execute (i) a bailment letter in the form of Exhibit K and (ii) a
non-negotiable warehouse receipt covering such stored materials in form
sufficient to enable Lender to have perfected security interest therein and (c)
Borrower has caused any party other than a warehouseman that possesses, holds or
controls the stored materials to execute and deliver to Lender a bailment letter
in the form of Exhibit L.  At any one time, the maximum amount of disbursements
for materials stored offsite shall not exceed $3,000,000 with respect to
materials  covered by the General Contract plus $3,000,000 for materials under
owner direct contracts other than the General Contract (such amounts are subject
to increase at Lender’s reasonable discretion upon request of Borrower).
 
12.7 Specific Limitation on Disbursements.
 
No amounts in the Budget shall be disbursed to Borrower, Guarantor, any direct
or indirect beneficial owner of an interest in Borrower, Guarantor or any
Affiliate of any of the foregoing, except for (a) the Developer Fee Budget Line
Item equal to $6,000,000 (the “Permitted Affiliate Expenses”), which shall be
paid, provided no Event of Default exists and the Loan is In Balance as follows:
(i) $4,500,000, to be paid in equal monthly installments of $112,500 per month
over Loan Term (or until such earlier time as such amount has been fully
disbursed), and (ii) the remaining balance of $1,500,000 to be paid after the
repayment in full of the Loan; and (b) a payment to Guarantor of up to $500,000
for a employee salary reimbursement for OCIP administration on behalf of
Borrower.  Borrower shall have no right to borrow any portion of the developer’s
fee referred to in clause (a)(ii) above from Lender.
 

 
46

--------------------------------------------------------------------------------

 

All disbursements of Permitted Affiliate Expenses are subject to the same
conditions precedent as apply to disbursements generally under this Agreement.
 
12.8 Disbursements Related to Commercial Space Leases.
 
Loan proceeds may be used to fund leasing commissions and tenant improvements
with respect to Approved Leases, provided (a) the maximum cost to be funded with
respect to each Commercial Space Lease shall not exceed (i) for tenant
improvements, the dollar amount per Rentable Square Foot set forth on Exhibit Q
attached hereto with respect to the type of space being leased (the “Allowable
Tenant Improvements”), and (ii) for leasing commissions, $21.00 per Rentable
Square Foot, and (b) the undisbursed amount in the (i) Tenant Improvements
Budget Line Item must be sufficient to pay for the Allowable Tenant Improvements
for all Commercial Space for which tenant improvements have not been paid, and
(ii) the undisbursed amount in the Commercial Leasing Commissions Budget Line
Item must equal at least $21 times the number of unleased Rentable Square Feet
in the Commercial Space.  Borrower shall fund any excess as the first dollars to
be funded for any Commercial Space, provided that cost savings in (i) tenant
improvements for any one Commercial Space Lease may be reallocated to tenant
improvements with respect to any other Commercial Space Lease, and (ii) leasing
commissions for any one Commercial Space Lease may be reallocated to leasing
commissions with respect to any other Commercial Space Lease.  In addition to
any items to be provided by Borrower pursuant to Section 12.3 hereof, and as a
condition precedent to the first advance for any tenant improvements pursuant to
a Lease, Borrower shall furnish to Lender for approval a budget for the tenant
improvements, an estimated schedule for the completion of the improvements,
copies of all proposed contracts with trades or subcontractors relating to the
completion of the tenant improvements, plans and specifications for the tenant
improvements and such other documents and information which will demonstrate
that the tenant improvements will be completed in accordance with the Lease and
the Budget.  Borrower shall also promptly provide to Lender proof of payment of
all leasing commissions.
 
12.9 Delivery of Subcontracts.  »
 

 
Borrower shall deliver to Lender by the deadlines specified in Exhibit N those
certain fully-executed Subcontracts for the trades and divisions set forth on
Exhibit N, which Subcontracts shall be in form and substance satisfactory to
Lender in its reasonable discretion.  The receipt of Subcontracts by the
applicable deadline as set forth in Exhibit N shall be a condition to funding
any then-pending or forthcoming draw request.
 

 
47

--------------------------------------------------------------------------------

 
 
 
Article 13
 
 
FINAL DISBURSEMENT FOR CONSTRUCTION
 
13.1 Final Disbursement for Construction.
 
Lender will advance to Borrower the final disbursement for the cost of the
Construction (including retainages not yet disbursed) when the following
conditions have been complied with, provided that all other conditions in this
Agreement for disbursements have been complied with:
 
(a) The Improvements have been fully completed and equipped substantially in
accordance with the Approved Plans and Specifications free and clear of
materialmen’s liens and security interests and are ready for occupancy;
 
(b) Borrower shall have furnished or caused to be furnished to Lender
“all risks” casualty insurance and windstorm and flood insurance each in form
and amount and with companies reasonably satisfactory to Lender in accordance
with the requirements contained herein;
 
(c) Borrower shall have furnished to Lender copies of all licenses and permits
required by any Governmental Authority having jurisdiction for the occupancy of
the Improvements and the operation thereof, including a final certificate of
occupancy from the municipality in which the Project is located or a temporary
certificate of occupancy, so long as (i) Residential Units may still be sold and
occupied, (ii) the Hotel is open and operating in accordance with the Hotel
Documents, (iii) the Commercial Space may still be rented and/or sold and
occupied, and (iv) the Venue is open and operating in accordance with the
management agreement reviewed and approved by Lender in accordance herewith;
 
(d) Borrower shall have furnished a plat of survey covering the completed
Improvements in compliance with Section 8.1(d);
 
(e) All fixtures, furnishings, furniture, equipment and other property required
for the operation of the Project shall have been installed free and clear of all
liens and security interests, except in favor of Lender;
 
(f) Borrower shall have furnished to Lender copies of all final waivers of lien
(other than the liens that Borrower is contesting and has insured or bonded over
in accordance with Section 15.1(f) of this Agreement), and sworn statements from
contractors, subcontractors and material suppliers and an affidavit from the
General Contractor in accordance with the mechanic’s lien law of the State or as
otherwise established by Lender;
 
(g) Borrower shall have furnished to Lender a certificate from the Architect or
other evidence satisfactory to Lender in Lender’s sole discretion dated at or
about the Completion Date stating that (i) the Improvements have been completed
substantially in accordance with the Approved Plans and Specifications, and (ii)
the Improvements as so completed comply with all applicable Laws in all material
respects; and
 

 
48

--------------------------------------------------------------------------------

 

 
(h) Lender shall have received a certificate from Lender’s Consultant for the
sole benefit of Lender that the Improvements have been satisfactorily completed
substantially in accordance with the Approved Plans and Specifications.
 
Borrower shall comply with and satisfy each of the foregoing final disbursement
conditions contained in this Section 13.1 within ninety (90) days after the
Completion Date.
 
 
Article 14
 
 
SALE OF RESIDENTIAL UNITS OR OTHER PORTIONS OF THE PROJECT
 
14.1 Price List Schedule.
 
Borrower has submitted to Lender for its written approval a Price List Schedule
(the “Price List Schedule”) stating, at a minimum, a detailed breakdown of each
condominium Residential Unit’s size, type, location and gross sales price (“List
Price”) for each Residential Unit (including, but not limited to, a weighted
average gross sales price (excluding Parking Spaces and Upgrades) of not less
than $620 per Saleable Square Foot for each Residential Unit).  The approved
Price List Schedule is attached to this Agreement as Exhibit M.  No changes to
the approved Price List Schedule shall be permitted without Lender’s prior
written approval, in Lender’s sole and reasonable discretion.  The List Prices
for each Residential Unit include the price of one (1) Parking Space per bedroom
in such Residential Unit, up to two (2) Parking Spaces per Residential Unit,
except for the penthouse Residential Units, which are each allocated three (3)
Parking Spaces but does not include storage space.  Of the 306 Parking Spaces
allocated to the Residential Units collectively, 300 Parking Spaces shall be
included in the List Prices of such Residential Units as set forth above, and 6
Parking Spaces (the “Excess Parking Spaces”) shall not be included in the List
Price of any Residential Unit and shall be available for sale at an additional
charge.
 
14.2 Sales Agreements.
 
Each Residential Unit shall be sold under a written agreement (the “Sales
Agreement”) in the form of the sales agreements attached hereto as Exhibit O, or
on a form otherwise approved by Lender, in its sole discretion in all material
respects conforming to all Laws, including those requiring disclosures to
prospective and actual buyers.  Lender has previously approved the form of the
Sales Agreement to be used for such Residential Unit sales, which form of sales
contract is attached hereto as Exhibit O.  No Residential Unit may be leased,
sold or conveyed under any lease, conditional sales contract or other
arrangement where Borrower retains a deferred portion of the purchase price or
any residual or contingent interest in the Residential Unit, including any
purchase money security interest, without the express prior written consent of
Lender in each instance.  All agreements (each, also a “Sales Agreement”) with
respect to the sale of any portion of the Project other than the Residential
Units shall be subject to the prior written approval of Lender in its reasonable
discretion. Borrower shall deliver to Lender a copy of each executed Sales
Agreement within thirty-one (31) days of its execution.  Borrower shall promptly
enforce the obligations of the purchasers under each Sales Agreement upon
default by any such purchaser, except as lender may otherwise agree in writing
in its reasonable discretion.
 

 
49

--------------------------------------------------------------------------------

 

 
14.3 Purchaser Deposits.
 
(a) On or before Closing (as to earnest money deposits received prior to
Closing), and promptly after receiving any additional deposits made by the
Residential Unit Purchasers from time to time (as to earnest money deposits
received following Closing), Borrower shall deposit with Armbrust & Brown,
L.L.P. and Heritage Title Company of Austin, Inc., jointly and severally, as
escrow agent (or any successor agent approved by Lender in writing in its sole
discretion) (together, jointly and severally, the “Escrow Agent”), in accordance
with the Escrow Agreement, a copy of which has been delivered to Lender, and
shall cause Escrow Agent to maintain in one or more accounts titled in the name
and subject to the control of Escrow Agent all earnest money deposits paid by
Residential Unit Purchasers under the Sales Agreements (the “Earnest Money
Deposits”).  At Lender’s option, Borrower shall require Escrow Agent to use
Lender as the depository bank for all deposits, and in such case, the deposits
shall be placed in an interest bearing account.  Such account(s) shall bear
interest at a rate comparable to the rate provided by Escrow Agent.
 
(b) Borrower shall require all Residential Unit Purchasers to make cash Earnest
Money Deposits of at least ten percent (10%) of the gross sales price at the
time of contract execution.  If Earnest Money Deposits are held by an Escrow
Agent, Borrower shall cause Escrow Agent to deliver to Lender within seven (7)
days of the end of each calendar month a statement indicating the amount of
funds on deposit representing Earnest Money Deposits, together with information
on the date of deposit, and to which Residential Unit all such deposits
apply.  Borrower shall not accept any non-cash Earnest Money Deposits or Upgrade
Deposits.  Borrower shall not be permitted to use or apply the Earnest Money
Deposits prior to the closing of the sale of a Residential Unit, whereupon the
Earnest Money Deposit shall be considered part of the Net Sales Proceeds and
applied as set forth in Section 14.9.
 
(c) If a Residential Unit Purchaser desires to alter the Approved Construction
Finish Standards, which results in additional costs to Borrower to complete a
Residential Unit (an “Upgrade”), Borrower shall require such Residential Unit
Purchaser to deposit funds with Lender prior to the commencement of any work
relating to such Upgrade (the “Upgrade Deposit”).  Borrower shall require
Residential Unit Purchasers to make Upgrade Deposits equal to one hundred
percent (100%) of the cost to Borrower of such Upgrade.  All Upgrade or
Residential Unit customization costs shall be subject to Lender’s approval if
such costs for any Residential Unit are in excess of Forty Dollars ($40.00) per
Saleable Square Foot.   Loan proceeds shall not be available for payment of
costs incurred in connection with Upgrades or customization items, the sole
responsibility for such costs being with Borrower.  So long as permitted under
applicable law, Lender shall permit Borrower to use Upgrade Deposits to perform
such Upgrades.  To the extent that the amount of Upgrade Deposit on deposit with
Lender is not sufficient to pay in full the costs of any such Upgrades when due,
Borrower shall promptly deposit with Lender an additional Equity Investment
equal to the costs of the Upgrade.  Such deposit will be required at the time of
the execution of the Sales Agreement containing the Upgrade.  Lender shall also
be entitled to inspect any Upgrade work, and shall be entitled to review and
approve reasonable supporting documentation with respect to such Upgrade work,
in a manner commensurate with other Hard Cost disbursements before approving
payment therefor.
 

 
50

--------------------------------------------------------------------------------

 

(d) The Deposits shall be segregated from other funds and shall be held, applied
or returned, as applicable, in accordance with the terms of the respective Sales
Agreement and applicable Laws.  To the extent Borrower becomes entitled to
retain any Deposits that have not been previously applied in accordance herewith
(i.e. upon the forfeiture of any deposit by a Residential Unit Purchaser), such
amounts shall be paid to Lender and applied to the Loan.  To the extent that a
Residential Unit Purchaser becomes entitled to return of its Deposits under its
Sales Agreement or under applicable Laws, so long as the Upgrade Deposit has not
already been spent by Borrower, Borrower shall be entitled to notify either
Lender or the Escrow Agent, as applicable, and withdraw from the escrow account
such Deposit for return to the Residential Unit Purchaser, with a copy of such
notice to be simultaneously sent to Lender if Deposits are held by an Escrow
Agent.  The Escrow Agent may not be changed without the prior written consent of
Lender. Notwithstanding the foregoing, Lender hereby acknowledges and agrees
that Borrower’s rights to the Deposits are subject to the rights of the
Residential Unit Purchasers to such Deposits as set forth in the Sales
Agreements, the Escrow Agreement and under applicable Law, and that Lender or
the Escrow Agent, as the case may be, may be obligated to return the Deposits to
such Residential Unit Purchasers when and as so required even if an Event of
Default exists.
 
(e) Borrower hereby grants to Lender a security interest in all of Borrower’s
right, title and interest in and to the Deposits and all accounts holding any
such deposits from time to time.  Upon request by Lender, Borrower shall
promptly provide to Lender such documentation as Lender determines is necessary
to confirm and perfect such security interest.  Such security interest is
subject to the rights of Residential Unit Purchasers in and to such Deposits in
accordance with the terms of their respective Sales Agreements and applicable
Laws.
 
14.4 Residential Unit Sales.
 
Borrower may enter into Sales Agreements and sell Residential Units without
Lender’s prior written consent only if:
 
(a) A Sales Agreement is executed with the Residential Unit Purchaser, the form
and substance of which does not materially differ from the form of sales
contract attached hereto as Exhibit O and approved by Lender in writing and that
otherwise conforms to the requirements of this Agreement, and Borrower has not
entered into any side agreements relating to the purchase of the Residential
Units with any Residential Unit Purchaser.
 
(b) The Sales Agreement requires full payment in cash not later than closing,
with no purchase money financing provided by Borrower, and the sale of the
Residential Unit is for a base price (including one (1) Parking Space per
bedroom in such Residential Unit, up to two (2) Parking Spaces per Residential
Unit, except for the penthouse Residential Units, which are allocated three (3)
Parking Spaces per Residential Unit) that is greater than or equal to 90% of
such Residential Unit’s List Price set forth in the Price List Schedule,
excluding from such base sale price any Upgrades and any seller concessions or
discounts;
 
(c) The Sales Agreement requires non-refundable earnest money of at least ten
percent (10%) of the gross sales price to be deposited with Lender or the Escrow
Agent in accordance with Section 14.3 hereof;
 

 
51

--------------------------------------------------------------------------------

 

(d) The Residential Unit Purchaser is not affiliated with Borrower or Guarantor,
and no more than two Residential Units may be purchased by any single
Residential Unit Purchaser or its Affiliates without Lender’s prior approval,
except that up to nine (9) Residential Units may be sold to Affiliates of
Borrower or Guarantor;
 
(e) The Sales Agreement must not be cancelable or contain any unexpired
contingencies except as set forth in Exhibit O;
 
(f) The Sales Agreement must not include a Residential Unit completion,
delivery, or closing date which gives the Residential Unit Purchaser the ability
to cancel or terminate the Sales Agreement.  Notwithstanding the foregoing, the
Sales Agreement may include an outside estimated Project completion date that is
no earlier than one (1) year following the completion date for the floor upon
which such Residential Unit is to be located, as stated in the construction
schedule attached to the General Contract, plus extensions for Unavoidable
Delay;
 
(g) The Sales Agreement clearly identifies any Upgrade required to be provided
by Borrower, as seller, which Upgrade and Upgrade Deposit shall comply with the
requirements hereof and all Laws;
 
(h) The Sales Agreement is not assignable by the Residential Unit Purchaser,
except to an Affiliate of the Residential Unit Purchaser;
 
(i) [Intentionally Omitted];
 
(j) Subject to subsection (k) below, the Sales Agreement stipulates that, in the
event that the Residential Unit Purchaser fails to perform thereunder, Borrower
shall be entitled to the full amount of the Earnest Money Deposit and Upgrade
Deposit and can sue the Residential Unit Purchaser to collect any unpaid portion
of such Earnest Money Deposit; and
 
(k) The Sales Agreement complies with ILSA through a HUD filing, not through an
exemption or exception, and complies with all other local and state regulations
applying to condominium sales.  Lender shall have received an executed
acknowledgement by each Residential Unit Purchaser stipulating that prior to the
date of the Sales Agreement acceptance, Residential Unit Purchaser received a
copy of the Property Report which has been accepted for filing by HUD.  The
Sales Agreement must not be dated earlier than the effective date on which HUD
accepted the Statement of Record.  In addition, Lender shall have approved the
specific terms of the form contract, which shall contain provisions required by
ILSA including:
 
(i) A statement that the Residential Unit Purchaser may revoke the Sales
Agreement for a period of seven (7) days from the date of signing, or if
applicable state law provides for a longer period, the longer period shall be
stated.
 
(ii) A statement that if the Residential Unit Purchaser has not received the
ILSA Property Report prior to executing the Sales Agreement, the Sales Agreement
shall be revocable for two (2) years from the date the Sales Agreement was
signed by Residential Unit Purchaser.
 

 
52

--------------------------------------------------------------------------------

 

 
(iii) A provision which states that if the Residential Unit Purchaser defaults
under the terms of the Sales Agreement, the Residential Unit Purchaser shall
receive written notice of default, and shall have a period of twenty (20) days
from the date of the notice to cure the default.
 
(iv) Damages payable to Borrower under the Sales Agreement must conform to the
limitations in ILSA, which generally limit damages to the greatest of 15%
liquidated damages or actual damages.
 
“Qualifying Sales Agreement” shall mean (i) an agreement meeting all of the
conditions required by this Agreement, and (ii) those certain Sales Agreements
delivered to Lender prior to the date of this Agreement, despite the failure of
such Sales Agreements to comply with the requirements of Sections 14.4(d), (e)
(f) and (h) above. Borrower shall not, without the prior written consent of
Lender, enter into any Sales Agreement that is not a Qualifying Sales Agreement,
or any other documentation pertaining to the sale of any portion of the Project;
provided, however, that Borrower may enter into a Qualifying Sales Agreement
subject to a commercially reasonable financing contingency for up to sixty (60)
days provided such Qualifying Sales Agreements will not be deemed Qualifying
Sales Agreements until the expiration or satisfaction of the Deed of Trust
contingency.  Borrower shall not terminate a Qualifying Sales Agreement for any
reason other than the default of the Residential Unit Purchaser thereunder
without Lender’s prior written consent.
 
14.5 Sales Operations and Seller’s Obligations.
 
Borrower shall at all times maintain adequate marketing capability, and shall
timely perform all obligations required to be performed by it under each Sales
Agreement.
 
14.6 Delivery of Sales Information and Documents.
 
Within ten (10) days after the end of each month, Borrower shall deliver to
Lender a sales report (the “Sales Report”) showing (a) each Residential Unit
under contract for sale, including the date of the contract, the Residential
Unit number, the base contract price plus the charge for Upgrades, the amount of
the Earnest Money Deposit and, if applicable, the Upgrade Deposit, and the date
expected to close; and (b) for each Residential Unit closed, the Residential
Unit number, the base contract price plus the charge for Upgrades, the date
closed, and the Net Sales Proceeds paid to Lender; and (c) for each Sales
Agreement cancelled by a Residential Unit Purchaser, the Residential Unit
number, the date cancelled, the reason the contract was cancelled by the
Residential Unit Purchaser and a statement regarding whether the Earnest Money
Deposit was returned to the Residential Unit Purchaser or retained by Borrower
(and remitted to Lender).  Borrower shall also promptly deliver to Lender such
other sales information and documents that Lender from time to time may
reasonably request, including operating statements, all new Sales Agreements,
and notice of or information regarding any claimed breach or disavowal of
buyer’s or seller’s obligations under any one or more Sales Agreements.
 

 
53

--------------------------------------------------------------------------------

 

 
14.7 Borrower’s Acknowledgment Regarding Buyer Financing.
 
Borrower acknowledges that Lender is not committed to provide any financing to
or for the buyers of any individual Residential Units.
 
14.8 Condominium Regime.
 
Borrower shall promptly, and in any event (a) prior to the closing of the first
purchase and sale of any Residential Unit, cause the Condominium Documents to be
filed or recorded, as appropriate, and (b) prior to Lender’s execution of any
partial release of the Deed of Trust, cause the Master Condominium Declaration
to be recorded.  Prior to recording or filing any documents, Borrower shall
submit to Lender for Lender’s final review and reasonable approval, executed
copies of the proposed Condominium Documents, which, once approved, shall be
filed or recorded, as applicable.  If such documents have been submitted to and
approved by Lender prior to the Full Loan Opening Date, any changes or additions
to such documents from those submitted to Lender prior to the Full Loan Opening
Date shall be subject to Lender’s consent, which consent shall not unreasonably
be withheld.  Borrower shall on an ongoing basis comply with all requirements of
ILSA and all other applicable Laws relating to the sale or marketing of the
Residential Units.  Without limiting the generality of the foregoing, Borrower
shall (i) timely file its Annual Report of Activity with HUD each year during
the term hereof; (ii) pay any fees in connection therewith before the due date;
(iii) deliver financial statements to HUD within one hundred and twenty (120)
days after the close of Borrower’s fiscal year; and (iv) amend the HUD Property
Report to reflect any change in any material representation of a material fact
required in the Statement of Record within fifteen (15) days of learning of the
change.  Borrower shall deliver to Lender (simultaneously with delivery to the
applicable governmental authority) copies of all filings and notices delivered
to HUD in accordance with ILSA, and Borrower shall, within five (5) Business
Days after receipt thereof, deliver to Lender all notices, requests,
correspondence and demands delivered by HUD, the State of Texas or the City of
Austin to Borrower.  Borrower shall not amend the HUD Property Report or the
City or State Property Report without Lender’s prior written consent.  Provided
that no Event of Default exists, Lender, prior to the initial conveyance of
Residential Units, shall execute such subordinations of the Deed of Trust and
other documents as are needed to permit the recordation or filing of such
documents.  Prior to such execution by Lender and as a condition thereto,
Borrower shall furnish to Lender a copy of (a) a notice sent by Borrower to the
condominium association informing the association of Lender’s rights under the
declaration as a beneficiary under the Deed of Trust and furnishing the
association with Lender’s address for notice purposes, (b) resignations of all
Borrower-appointed directors and officers, which Lender may deliver at any time
an Event of Default exists, and (c) such other documents in connection with the
establishment of such condominium regime as Lender reasonably requests.
 
Borrower shall not permit control of any condominium association to be turned
over to the Residential Unit owners more than thirty (30) days prior to the date
that is required by Texas law.
 

 
54

--------------------------------------------------------------------------------

 

14.9 Release of Residential Units.
 
(a)  At Borrower’s request upon the closing of a Residential Unit sale, Lender
shall issue a partial release of the Residential Unit from the Deed of Trust, so
long as all of the following conditions are satisfied at the time of, and with
respect to, the partial release:
 
(i) The Master Declaration of Condominium and the Residential Condominium
Declaration have each been recorded in the public records of Travis County,
Texas;
 
(ii) No Event of Default exists;
 
(iii) Such sale is pursuant to a Qualifying Sales Agreement;
 
(iv) Lender has been paid, in immediately available funds, a Release Price
(defined below) for the Residential Unit in an amount determined as set forth
below to be applied to the Loan as set forth in Section 14.10;
 
(v) Lender receives a copy of the closing statement and applicable Residential
Unit release no later than 9:00 a.m. (Chicago time) at least one (1) Business
Day prior to any Residential Unit sale; and
 
(vi) All escrow, closing and recording costs have been paid at no expense to
Lender.
 
(b) The execution of a Sales Agreement shall not by itself satisfy the
conditions for release of the Residential Unit that is being sold; those
conditions must be satisfied in full at the time the Residential Unit is to be
released.
 
(c) If Lender does not require satisfaction of all of the conditions described
above before releasing one or more Residential Units, that alone shall not be a
waiver of such conditions, and Lender reserves the right to require their
satisfaction in full before releasing any further Residential Units from the
Deed of Trust.
 
(d) The “Release Price” for a Residential Unit (including one (1) Parking Space
per bedroom in such Residential Unit, up to two (2) Parking Spaces per
Residential Unit, except for the penthouse Residential Units, which are each
allocated three (3) Parking Spaces ) shall be the greatest of (x) 100% of Net
Sales Proceeds from the sale of the applicable Residential Unit and associated
Parking Spaces (including any additional charge or fee in excess of the purchase
price payable to Borrower or its Affiliates), (y) 90% of the gross sales
proceeds, exclusive of any extras and/or Upgrades, plus 100% of any Upgrade
Profits for such Residential Unit, and (z) 90% of the Sales Agreement contract
sales price (excluding the selling price of any extras and/or Upgrades, and
without accounting for sales commissions paid from the Project Budget), plus
100% of any Upgrade Profits for such Residential Unit.
 
(e) Borrower shall pay all reasonable costs and expenses associated with the
sale of the Residential Unit, including title expenses, reasonable legal fees,
brokerage and sales commissions and other closing costs, from the portion of the
sales price in excess of such
 

 
55

--------------------------------------------------------------------------------

 

Release Price and, if such excess is insufficient for such purpose, shall pay
such excess costs from its own funds.
 
(f) If requested by Lender, Borrower shall also deposit with Lender (to the
extent not required to be deposited in condominium association bank accounts)
all amounts deducted or set aside for real estate taxes or retained for
assessments or working capital (and pledges its interest in such account(s) to
Lender).  Lender shall hold such amount subject to the rights of Residential
Unit Purchasers and the condominium association therein, provided, however,
Lender shall permit Borrower to use the funds deposited in such accounts for
their legally required purposes.
 
14.9A                      Sales of Parking, Storage, Commercial Space or Venue.

(a) The Hotel may be released from the Deed of Trust during the term of the Loan
in accordance herewith.  The Venue and the Commercial Space may be subject to
release from the Deed of Trust, provided that, in addition to the satisfaction
of the other conditions of this Section 14.9A, the Venue and the Commercial
Space must be released concurrently.  Borrower shall provide for Lender’s prior
review and written approval any agreement for the sale of any Excess Parking
Space, Storage, Hotel, and/or Venue and Commercial Space, and Borrower shall
obtain Lender’s consent thereto prior to executing such sale
agreement.  Lender’s consent and approval under this paragraph shall not be
unreasonably withheld or delayed.
 
(b) At Borrower’s request upon the closing of a sale of the Hotel, the
Commercial Space or Venue, Lender shall issue a partial release of the portion
of the Project from the Deed of Trust, so long as all of the following
conditions are satisfied at the time of, and with respect to, the partial
release:
 
(i) The Declaration of Condominium has been recorded in the public records of
Travis County, Texas;
 
(ii) All rights of the declarant under the Declaration of Condominium shall
remain with Borrower following the sale and release;
 
(iii) No Event of Default exists;
 
(iv) With respect to the Venue and Commercial Space only, Borrower shall have
closed and conveyed, pursuant to Qualifying Sales Agreements, and Lender shall
have received, Release Prices for such number of Residential Units totaling or
exceeding 137,500 Saleable Square Feet of space; and
 
(v) Such other conditions as Lender shall reasonably require.
 
(c) The “Release Price” for:
 
(i) Any Excess Parking Space shall be the greater of (x) 100% of the Net Sales
Proceeds for such Parking Space(s), and (y) $20,000 per Parking Space;
 
(ii) The storage space shall be the greater of (x) 100% of the Net Sales
Proceeds for such storage space, and (y) $20 per square foot of such storage
space;
 

 
56

--------------------------------------------------------------------------------

 

(iii) The Venue and the Commercial Space, together, shall be the greater of: (x)
100% of the Net Sales Proceeds or proceeds of the third-party re-financing of
such area, and (y) $20,000,000; and
 
(iv) The Hotel shall be the greatest of: (x) 100% of the Net Sales Proceeds or
proceeds of the third-party re-financing of the Hotel, (y) $70,000,000, and (z)
an amount, to be applied as a payment of principal, that, after payment of the
Exit Fee and the escrow of Reinvested Proceeds, would be sufficient to reduce
Lender’s Remaining Exposure to: (A) $175, multiplied by (B) the Saleable Square
Feet in the Remaining Units.
 
14.10 Application of Sales Proceeds.
 
Except as otherwise expressly provided herein, all Release Prices received by
Lender in connection with the sale of a Residential Unit or other component of
the Project addressed in Section 14.9A above shall be applied by Lender as
follows (regardless of any contrary order of payment specified by Borrower):
 
(a) First, with respect to Release Prices from Residential Units, to the payment
of any Exit Fee then due, or, with respect to the Release Price from the Hotel,
to the payment of the full Exit Fee;
 
(b) Second, the first $8,000,000 of aggregate Release Prices collected pursuant
to closings that otherwise satisfy the terms and provisions of this Agreement
(collectively, the “Reinvested Proceeds”) shall be held by Lender and shall be
used by Lender (before funding from the Loan proceeds) to fund un-depleted line
items in the Budget (except for the interest payable on the Loan, which shall be
paid from the Interest Reserve Budget Line Item); provided, however, Lender
shall not be required to disburse any Reinvested Proceeds unless: (i) the
Initial Equity Investment has been contributed in accordance with Section 8.1(a)
hereof, (ii) the Additional Equity Investment, if any, has been contributed, and
(iii) all conditions set forth in Section 4.1(c) are satisfied.  Borrower hereby
pledges to Lender all Reinvested Proceeds held by Lender from time to time as
additional security for the Loan.
 
(c) Third, to the payment of principal then due and owing under the Note, until
the amounts due thereunder have been paid in full; and
 
(d) Finally, to any other amounts payable to Lender under the Loan Documents,
including any costs and expenses of Lender.
 
Notwithstanding the foregoing, (i) Lender may elect in its sole discretion to
apply Release Prices proceeds first to payment of accrued interest (but shall
never be obligated to do so, even if doing so would cure a default in the
payment of interest) and (ii) if an Event of Default exists, Lender may apply
all amounts received to the indebtedness under the Loan Documents in such order
as Lender may elect in its sole discretion.
 

 
57

--------------------------------------------------------------------------------

 

Article 15
 
OTHER COVENANTS
 
15.1 Borrower further covenants and agrees as follows:
 
(a) Full Opening of Loan on or Prior to Full Loan Opening Date.  Borrower shall
cause all conditions precedent set forth in Article 8 and Section 9.1 of this
Agreement, except those which are expressly required to be satisfied by a later
date, to be satisfied on or before May 15, 2008.  Borrower shall cause all
conditions precedent to the Full Opening of the Loan to be complied with, and
Borrower shall qualify for Full Loan Opening, no later than January 1, 2010.  If
Borrower fails to satisfy timely either of such requirements, an Event of
Default shall exist and Lender may terminate its commitment to fund the Loan by
written notice to Borrower.
 
(b) Compliance with Condominium Documents.  Once the Declaration of Master
Condominium and/or Residential Condominium Declaration are recorded, and subject
to the provisions of Section 82.112(b) of the Texas Uniform Condominium Act,
Borrower shall pay all general and special assessments for common charges and
expenses and insurance premiums made against or relating to the Residential
Units owned by Borrower or otherwise payable by Borrower under the Condominium
Documents as the same shall become due and payable and prior to delinquency, and
not later than the tenth (10th) day of each month provide to Lender evidence of
such payments, and in the event Borrower shall fail to make such payments as the
same become due and payable and prior to delinquency, Lender may from time to
time at its option, but without any obligation to do so and without notice or
demand upon Borrower, make such payments, and all expenses paid by Lender for
such purpose, including, without limitation, attorneys’ fees, shall be added to
the outstanding principal amount of the Loan and shall be payable on demand and
bear interest at the Default Rate until repaid.  Borrower shall not (and shall
not permit any Borrower appointed directors), without the prior written consent
of Lender (not to be unreasonably withheld or delayed), give any consent or
perform any action in furtherance of any material modification or amendment of
the Condominium Documents, including any modifications or amendments to the
Condominium Documents which would permit a Residential Unit Purchaser to rescind
its Sales Agreement under Texas Laws.  Borrower shall comply with all of the
material terms, covenants and conditions on its part to be performed under the
Condominium Documents, as the same shall be in force and effect from time to
time; provided, however, that if Borrower fails to cure such non-compliance
within any applicable cure periods provided in the Condominium Documents, Lender
may from time to time at its option, but without any obligation to do so, cure
or remedy any such default by Borrower (Borrower hereby authorizing Lender to
enter upon the Project as may be necessary for such purposes), and all
reasonable expenses paid by Lender for such purpose, including, without
limitation, reasonable attorneys’ fees, shall be added to the outstanding
principal balance of the Loan and shall be payable on demand and bear interest
at the Default Rate until repaid.  Borrower shall deliver to Lender a true and
complete copy of each and every notice of default, if any, received by Borrower
with respect to Borrower under any of the Condominium Documents or applicable
law regarding the condominium.  Borrower shall not (and shall not permit any
Borrower appointed director to), without the prior written consent of Lender,
exercise any right it may have to vote for (x) the expenditure of insurance
proceeds (which are governed by Article 16 below) or condemnation awards for the
repair or restoration of the Project or (y) any additions or improvements to the
common elements of the Project.
 

 
58

--------------------------------------------------------------------------------

 

(c) Construction of Improvements.  The Improvements shall be constructed and
fully equipped in a good and workmanlike manner with materials of high quality,
substantially in accordance with the Approved Plans and Specifications (or in
accordance with any changes therein that may be approved in writing by Lender or
as to which Lender’s approval is not required).  Such construction and equipping
shall be commenced and completed, as applicable, and shall be prosecuted with
due diligence and continuity in substantial accordance with the Construction
Schedule, the requirements of all Sales Agreements and the Operating
Agreement.  Without limiting the foregoing, Borrower shall commence construction
by the Required Commencement Date, and shall substantially complete (i) the
entire Project no later than the Completion Date applicable to the entire
Project, and (ii) each particular portion of the Project no later than the
Completion Date applicable to such portion.  The Completion Dates are not
subject to extension for any reason, except that Lender may elect, but shall be
under no obligation, to extend such dates at its sole discretion, but such
election shall not constitute a waiver of Lender’s right to enforce any other
Completion Date or a waiver of any of Lender’s remedies and shall not constitute
any custom or course of dealing between the parties hereto.
 
(d) Payment for Work.  Borrower agrees to fully pay and discharge when due and
payable all claims for labor done and material and services furnished in
connection with the construction of the Project and to take all other steps to
forestall the assertion of claims against the Project or the Loan.
 
(e) Inspection by Lender.  Borrower shall reasonably cooperate with Lender in
arranging for inspections by representatives of Lender of the progress of the
Construction from time to time including an examination of (i) the Improvements,
(ii) all materials to be used in the Construction, (iii) all plans and shop
drawings that are or may be kept at the construction site, (iv) any contracts,
bills of sale, statements, receipts or vouchers in connection with the
Improvements, (v) all work done, labor performed, and materials furnished in and
about the Improvements, (vi) all books, contracts and records with respect to
the Improvements, and (vii) any other documents relating to the Improvements or
the Construction. Borrower shall cooperate with Lender’s Consultant to enable
him to perform his functions hereunder and will promptly comply with Lender’s
requirements and remove any defect regarding the Construction of the
Improvements or the progress thereof.
 
(f) Materialmen’s Liens and Contest Thereof.  Borrower shall not suffer or
permit any materialmen’s lien claims to be filed or otherwise asserted against
the Project or any funds due to the General Contractor, and shall promptly
discharge the same in case of the filing of any claims for lien or proceedings
for the enforcement thereof, provided, however, that Borrower shall have the
right to contest in good faith by appropriate legal proceeding and with
reasonable diligence the validity of any such lien or claim, provided that
Borrower posts a statutory lien bond over such lien.   Lender shall not be
required to make any further disbursements of the proceeds of the Loan until any
materialmen’s lien claims have been removed or bonded over, and Lender may, at
its option, restrict disbursements to reserve sufficient sums to pay 125% of the
face amount of the lien unless and until the lien is removed or bonded over.
 
(g) Settlement of Materialmen’s Lien Claims.  If Borrower shall fail promptly
either (i) to discharge any such lien, or (ii) to post a statutory lien bond
over such lien, in each case, within thirty (30) days after the filing of the
lien, Lender may, at its election (but shall not be
 

 
59

--------------------------------------------------------------------------------

 

required to), procure the release and discharge of any such claim and any
judgment or decree thereon and, further, may in its sole discretion effect any
settlement or compromise of the same, or may furnish such security or indemnity
to the Title Insurer, and any amounts so expended by Lender, including premiums
paid or security furnished in connection with the issuance of any surety company
bonds, shall be deemed to constitute disbursement of the proceeds of the Loan
hereunder.  In settling, compromising or discharging any claims for lien, Lender
shall not be required to inquire into the validity or amount of any such claim.
 
(h) Proceedings.  In addition to (and not in lieu of Borrower’s covenants set
forth in Section 15.1(f)), if any action, claim or proceeding affecting title to
the Land, the construction of the Project, Borrower, Guarantor, the rights of
Lender under any Loan Document, or otherwise affecting the Project, be filed or
commenced, then at the request of Lender, Borrower shall appear in and defend,
at Borrower’s sole cost and expense, any such action or proceeding and, if
applicable, Borrower shall insure or bond over such action, claim or proceeding
in accordance with Section 15.1(f).  If Borrower fails to appear and defend any
such action or proceeding, then Lender may commence, intervene in, and defend
actions or proceedings affecting the Project or the transactions contemplated
herein, and compromise or settle any claim or controversy pertaining thereto,
employing legal counsel acceptable to Lender to defend such claims at Borrower’s
sole cost, unless due to the willful misconduct of Lender.  Lender shall not be
liable to Borrower for any action, error, mistake, omission or delay pertaining
to the actions described in this Section or any damages resulting therefrom,
unless due to the willful misconduct of Lender.  Any cost incurred by Lender
under this Section shall be deemed to be expenses of the Loan payable by
Borrower pursuant to Article 7 of this Agreement.
 
(i) Insurance.  Borrower shall cause insurance policies to be maintained in
compliance with Exhibit E, or such other insurance requirements as may be
reasonably required by Lender, at all times.  Borrower shall provide Lender,
prior to the date hereof, a certificate(s) demonstrating appropriate insurance
coverage(s), which shall demonstrate insurance coverage that meets or exceeds
the requirements on Exhibit E.  Borrower shall timely pay all premiums on all
insurance policies required hereunder, and as and when additional insurance is
required, from time to time, during the progress of Construction, and as and
when any policies of insurance may expire, furnish to Lender, premiums prepaid,
additional and renewal insurance policies with companies, coverage and in
amounts reasonably satisfactory to Lender in accordance with Exhibit E.
 
(j) Payment of Taxes.  Borrower shall pay all real estate taxes and assessments
and charges of every kind upon the Project before the same become
delinquent.  Borrower may use Loan proceeds for such purpose to the extent
available in the Budget for such purpose upon meeting all conditions precedent
set forth in this Agreement to any such disbursement.  Borrower shall have the
right to pay such tax under protest or to otherwise contest any such tax or
assessment, but only if (i) such contest has the effect of preventing the
collection of such taxes so contested and also of preventing the sale or
forfeiture of the Project or any part thereof or any interest therein, (ii)
Borrower has notified Lender of Borrower’s intent to contest such taxes, and
(iii) Borrower has deposited security in form and amount reasonably satisfactory
to Lender, in its reasonable discretion, and has increased the amount of such
security so deposited promptly after Lender’s request therefor.  If Borrower
fails to commence such contest or, having commenced to contest the same, and
having deposited such security required by Lender for its full amount, shall
 

 
60

--------------------------------------------------------------------------------

 

thereafter fail to prosecute such contest in good faith or with due diligence,
or, upon adverse conclusion of any such contest, shall fail to pay such tax,
assessment or charge, Lender may, at its election (but shall not be required
to), pay and discharge any such tax, assessment or charge, and any interest or
penalty thereon, and any amounts so expended by Lender shall be deemed to
constitute disbursements of the Loan proceeds hereunder (even if the total
amount of disbursements would exceed the face amount of the Note).  Borrower
shall furnish to Lender evidence that taxes are paid at least five (5) days
prior to the last date for payment of such taxes and before imposition of any
penalty or accrual of interest.
 
(k) Tax Escrow Accounts.  After the earlier to occur of (i) an Event of Default
or (ii) the Budget Line Item for real estate taxes having been exhausted (in
either case, a “Triggering Event”), Borrower shall make monthly tax escrow
deposits in the amount of one-twelfth (1/12) of one hundred ten percent (110%)
of the annual real estate taxes as reasonably estimated by Lender, such deposit
to be held in an interest bearing escrow account held by Lender in Lender’s name
and under its sole dominion and control.  (If an Event of Default occurs and
Lender requires real estate tax escrow deposits to be made, but such Event of
Default is thereafter cured, then, so long as no other Triggering Event exists,
Lender shall not require further real estate tax deposits to be made.)  If at
any time Lender determines in its sole discretion that the amount of the monthly
escrow payments made pursuant to this Section 15.1(k) are not sufficient to pay
in full the next installment of real estate taxes then due, then upon written
notice from Lender of the amount of any expected deficiency (and regardless of
whether a Triggering Event then exists), Borrower shall then deposit funds equal
to such amount with Lender.  All payments deposited in the escrow account, and
all interest accruing thereon, are pledged as additional collateral for the
Loan.  Notwithstanding Lender’s holding of the escrow account, nothing herein
shall obligate Lender to pay any real property taxes with respect to any portion
of the Project at any time an Event of Default exists.
 
(l) Personal Property.  All of Borrower’s personal property, fixtures,
attachments and equipment delivered upon, attached to or used in connection with
the Construction or the operation of the Project shall always be located at the
Project and shall be kept free and clear of all liens, encumbrances and security
interests, other than as otherwise permitted under the Loan Documents.
 
(m) Leasing Restrictions.  (i) Borrower shall not enter into any Leases
pertaining to the Project without Lender’s prior written approval in its sole
discretion.  Borrower shall provide Lender with a copy of any proposed Lease no
less than ten (10) days prior to the proposed execution date of such
Lease.  Lender’s approval of any Lease for the Commercial Space shall be
predicated upon, among other things: (A) current tenant financial information in
sufficient detail to assess the experience and credit worthiness of the tenant,
(B) credit worthiness of tenant, (C) form and content of the Lease, including,
among other things, tenant’s obligation to provide, at least annually, its
financial information to Borrower, (D) tenant’s agreement to enter into an
acceptable subordination, non-disturbance and attornment agreement, and (E) a
minimum (7) seven year term, without any right to cancel prior to five (5)
years; provided, however, Lender shall approve a five (5) year Lease term, but
the tenant improvement funding permitted for such Lease shall be reduced
proportionately.  Except as otherwise approved by Lender, each Lease must
provide for a minimum triple net rent of $35 per Rentable Square Foot at all
times throughout the term of the Loan, and, for purposes of calculating such
rent, the total value of free
 

 
61

--------------------------------------------------------------------------------

 

rent, non-standard lease concessions and tenant improvements in excess of the
budgeted amount will be amortized at a per annum rate of ten percent (10%) over
the full term of the Lease, including any free rent period. The resulting amount
will be deducted from the lowest stated rent at any point in the term of the
Lease, and that figure must be equal to or greater than the minimum rent noted
above.  Furthermore, Borrower will in no event offer more than six (6) months of
free rent, tenant improvements in excess of twenty percent (20%) more than the
budgeted amount, or other non-standard concessions unacceptable to the Lender.
 
(ii)           Borrower shall not execute any Lease without written
acknowledgement of Lease approval by the Lender, except that Leases of
Commercial Space covering not more than 1,500 Rentable Square Feet individually,
and 8,000 Rentable Square Feet in the aggregate, and otherwise satisfying the
leasing requirements set forth above may be entered into without Lender’s
consent.  Lender shall endeavor to provide (i) preliminary approval or
disapproval of any proposed Lease within five (5) Business Days of the receipt
of all pertinent information needed for approval, and (ii) final approval or
disapproval of any proposed lease transaction within ten (10) Business Days of
the receipt of final proposed lease documentation and any other information
needed for its decision, and Lender’s failure to approve a Lease within such ten
(10) Business Day period shall be deemed its disapproval thereof.
 
(iii)           A Lease, which has been approved by the Lender (or as to which
Lender’s approval is not required under the terms of clause (ii)), is
hereinafter referred to as an “Approved Lease.”  Approval of a Lease shall not
create a presumption that the Loan is In Balance as the result of excess tenant
improvements or leasing commissions as set forth in Section 12.8 hereof.  To the
extent that the Loan is not In Balance due to tenant improvements or leasing
commissions in excess of the amount allowed pursuant to Section 12.8, Borrower
shall deposit additional equity within ten (10) days following the execution of
the Lease. An Approved Lease shall not be amended or modified (in any material
respect) or terminated without the Lender’s prior written consent.
 
(iv) Borrower shall not accept any rental payment under any Approved Lease in
advance of its due date, other than acceptance of a prepayment of the first
month’s rent upon the execution of an Approved Lease.
 
(n) Defaults Under Leases.  Borrower will not suffer or permit any material
breach or default to occur in any of Borrower’s obligations under any of the
Leases, nor suffer or permit the same to terminate by reason of any failure of
Borrower to meet any requirement of any Lease, including those requirements with
respect to any time limitation within which any of Borrower’s work is to be done
or the space is to be available for occupancy by the lessee.  Without limiting
the generality of the foregoing, a default by Borrower under the terms of an
Approved Lease that would allow the tenant to withhold or delay the payment of
rent, or to terminate or cancel the Approved Lease, shall constitute a Default
hereunder.  Borrower shall notify Lender promptly in writing in the event a
tenant commits a material default under a material Lease.
 
(o) Lender’s Attorneys’ Fees for Enforcement of Agreement.  In case of any Event
of Default hereunder, Borrower (in addition to Lender’s attorneys’ fees, if any,
to be paid pursuant to Section 7.5) will pay Lender’s reasonable attorneys’ and
paralegal fees (including, without
 

 
62

--------------------------------------------------------------------------------

 

limitation, any attorney and paralegal fees and costs incurred in connection
with any litigation or bankruptcy or administrative hearing and any appeals
therefrom and any post-judgment enforcement action including, without
limitation, supplementary proceedings) in connection with the enforcement of
this Agreement; without limiting the generality of the foregoing, if at any time
or times hereafter Lender employs counsel (whether or not any suit has been or
shall be filed and whether or not other legal proceedings have been or shall be
instituted) for advice or other representation with respect to the Project, this
Agreement, or any of the other Loan Documents, or to protect, collect, lease,
sell, take possession of, or liquidate any of the Project, or to attempt to
enforce any security interest or lien in any portion of the Project, or to
enforce any rights of Lender or Borrower’s obligations hereunder, then in any of
such events all of the reasonable attorneys’ fees arising from such services,
and any expenses, costs and charges relating thereto (including fees and costs
of paralegals), shall constitute an additional liability owing by Borrower to
Lender, payable on demand.  Such attorneys’ fees and expenses shall include fees
and expenses of Lender’s in-house counsel as specified in Section 7.5.
 
(p) Appraisals.  Lender shall have the right to obtain a new or updated
Appraisal of the Project from time to time, but not more frequently than two (2)
times after Closing, provided Lender shall have the right to obtain a new or
updated Appraisal at any time a Default or Event of Default exists.  Borrower
shall cooperate with Lender in this regard.  If the Appraisal is obtained to
comply with this Agreement or any applicable law or regulatory requirement, or
bank policy promulgated to comply therewith, or if an Event of Default exists,
Borrower shall pay the reasonable costs for any such Appraisal upon Lender’s
request.
 
(q) Financial Statements.
 
(i) Borrower and each Guarantor shall deliver or cause to be delivered to Lender
annual financial statements with respect to Borrower and each Guarantor within
ninety (90) days after the end of its fiscal year.  Guarantor’s financial
statements shall be audited and Borrower’s financial statements shall be
certified by Borrower’s managing member.  Guarantor and, after the opening of
the Commercial Space and/or Venue, Borrower shall also each deliver to Lender
quarterly financial statements within forty five (45) days after the end of each
fiscal quarter. Each such quarterly financial statement shall be accompanied by
a certification by an authorized financial officer of Guarantor as to
Guarantor’s compliance with the Guarantor Financial Covenants and attaching
information sufficient to demonstrate such compliance. All such financial
statements shall be in a format approved in writing by Lender in Lender’s
reasonable discretion and in substance acceptable to Lender.  Each financial
statement shall be certified as true, complete and correct by its preparer and
by Borrower or, in the case of each Guarantor’s financial statements, by the
Guarantor to whom it relates.  Financial statements of each Guarantor shall
include verifications, supporting schedules and additional statements as needed
to substantiate the information contained in such statements.  In addition, such
financial statements shall include disclosure of any pending or threatened
litigation and judgments entered against Borrower or each Guarantor.  Borrower
and each Guarantor shall deliver to Lender Borrower’s, each Guarantor’s, and
each entity in which a Guarantor has a material interest, federal and state tax
returns by April 15 of each year (except that if the date on which such returns
may be filed is extended beyond April 15, then such entity shall provide Lender
with a copy of the extension request and shall furnish such tax returns to
Lender within thirty (30) days after the date such returns are filed).  Borrower
shall inform Lender as to any filed or threatened
 

 
63

--------------------------------------------------------------------------------

 

(in writing) litigation which would have a material adverse effect on Borrower’s
or each Guarantor’s ability to perform their respective obligations under the
Loan Documents promptly after learning thereof.  Borrower and each Guarantor
shall provide such additional financial information as Lender reasonably
requires.  Borrower shall during regular business hours permit Lender or any of
its agents or representatives to have access to and examine all of its books and
records regarding the development and operation of the Project and, in addition,
agrees to provide Lender with copies of any purchase contracts pertaining to the
Project.  Borrower agrees that Lender may retain an investigator to research
available public records and information relating to Borrower, the principals of
Borrower and each Guarantor.
 
(ii) Borrower shall furnish to Lender within three (3) Business Days of receipt
from time to time each proposed budget and “Operating Plan” received from Hotel
Operator.  Borrower shall not approve any such budget or Operating Plan without
Lender’s prior written consent, to be granted or withheld in Lender’s reasonable
discretion.
 
(iii) Borrower shall, within five (5) Business Days of receipt from time to time
furnish to Lender all “Operating Reports” received under Section 10.2 of the
Hotel Operating Agreement, all financial statements received under Section 10.3
of the Hotel Operating Agreement and all other material information or notices
received from Hotel Operator.
 
(r) Sign and Publicity.  Upon Lender’s request, Borrower shall, at Lender’s sole
cost and expense, promptly erect a sign approved in advance by Lender in a
conspicuous location on the Project during the Construction indicating that the
financing for the Project is provided by Lender, so long as such sign complies
with Laws and requirements of all Governmental Authorities.  Lender reserves the
right to publicize the making of the Loan.  Without limiting the foregoing,
following Closing, Lender shall have the right to announce publicly in print or
otherwise that Lender has made and closed the Loan to Borrower.  In connection
therewith, Lender shall have the right to describe the Loan, including
Borrower’s name, the type of loan and the amount thereof (but excluding the
interest rate, the amounts of Lender’s fees and the specific nature of the
non-recourse guaranty), and to identify the Project and the location thereof by
way of description and/or photographs of the Project.
 
(s) Lost Note.  Upon Lender’s furnishing to Borrower an affidavit to such
effect, Borrower shall, if the Note is mutilated, destroyed, lost or stolen,
deliver to Lender, in substitution therefor, a new note containing the same
terms and conditions as the Note
 
(t) Indemnification.  Borrower shall indemnify Lender, including each party
owning an interest in the Loan and their respective officers, directors,
employees and consultants (each, an “Indemnified Party”) and defend and hold
each Indemnified Party harmless from and against all claims, injury, damage,
loss, liability, cost and/or expense (including reasonable attorneys’ fees,
costs and expenses) of any and every kind to any persons or property by reason
of (i) the Construction; (ii) the sale, operation or maintenance of the Project;
(iii) any claim with respect to application, disposition or return of any
Earnest Money Deposit or Upgrade Deposit, (iv) any breach of representation or
warranty, default or Event of Default under this Agreement or any other Loan
Document or related Document; or (v) any other matter arising in connection with
the Loan, Borrower, Guarantors, any Residential Unit Purchaser or Sales
Agreement, or the Project.
 

 
64

--------------------------------------------------------------------------------

 

No Indemnified Party shall be entitled to be indemnified against its own gross
negligence or willful misconduct.  The foregoing indemnification shall survive
repayment of the Loan.
 
(u) No Additional Debt; Mezzanine Loan.
 
(i) Except for the Loan, Borrower shall not incur or guarantee any indebtedness
(whether personal or nonrecourse, secured or unsecured) other than customary
trade payables paid within ninety (90) days after they are incurred.  Except for
the liens securing the Loan and except for the Permitted Exceptions, Borrower
shall keep the Project free and clear of liens, provided, however, mechanics’
liens may be contested in compliance with Section 15.1(f).
 
(ii) No mezzanine financing may be borrowed by Borrower or its constituent
entities, except that Mezzanine Borrower shall be entitled to obtain a Mezzanine
Loan upon delivery of forty-five (45) days’ prior written notice to Lender,
provided (A) the identity of the Mezzanine Lender has been approved in writing
by Lender, (B) Mezzanine Lender has executed the Mezzanine Loan Intercreditor
Agreement, as prepared by Lender’s counsel in compliance with the requirements
set forth in the definition of Mezzanine Loan Intercreditor Agreement, (C) the
Mezzanine Loan Documents are acceptable to Lender in its reasonable discretion,
(D) the Mezzanine Loan shall have been closed and the Qualifying Portion thereof
shall have been fully funded for costs in the Budget, with evidence of such
funding delivered to Lender, prior to Full Loan Opening, (E) Borrower shall have
furnished to Lender current contact information for each of the individuals
comprising the Mezzanine Lender, and (F) such other reasonable requirements of
Lender have been satisfied.  Such right of Borrower to obtain a Mezzanine Loan
shall expire unless such Mezzanine Loan has closed and the Qualifying Portion
thereof has fully funded prior to Full Loan Opening.
 
(v) Compliance With Laws.  Borrower shall comply with all applicable
requirements (including applicable Laws) of any Governmental Authority having
jurisdiction over Borrower or the Project.
 
(w) Organizational Documents.  Borrower shall not, without the prior written
consent of Lender, permit or suffer (i) a material amendment or modification of
its organizational documents, (ii) the admission of any new member, partner or
shareholder in violation of Section 17.2 of this Agreement, or (iii) any
dissolution or termination of its existence.
 
(x) Furnishing Reports.  Upon Lender’s request, Borrower shall provide Lender
with copies of all inspections, reports, test results and other information
received by any Borrower, that in any way relate to the Project or any part
thereof.
 
(y) Management Contracts.  Borrower shall not enter into, modify, amend,
terminate or cancel any management, sales or marketing contracts for the
Project, without the prior written approval of Lender, not to be unreasonably
withheld or delayed.
 
(z) Furnishing Notices.  Borrower shall provide Lender with copies of all
material notices pertaining to the Project received by Borrower from any
Governmental Authority or insurance company within seven (7) days after such
notice is received.  Borrower shall promptly
 

 
65

--------------------------------------------------------------------------------

 

notify Lender of any judgment entered against, or any material litigation filed
against, Borrower or Guarantor.
 
(aa) Construction Contracts.  Borrower shall not enter into, materially modify
or materially amend, or terminate or cancel any material contracts for the
Construction, without the prior written approval of Lender.  Borrower shall not
enter into any contract which would cause the Loan to cease to be In
Balance.  Borrower will furnish Lender promptly after execution thereof,
executed copies of all contracts between Borrower, architects, engineers and
contractors and all subcontracts between the General Contractor or contractors
and all of their subcontractors and suppliers, which contracts and subcontracts
may not have been furnished pursuant to Section 9.1(a) at Closing.  The
development agreement between the Borrower and Guarantor (or Guarantor’s
Affiliate) may be modified without Lender’s consent so long as such modification
does not materially adversely affect Lender and may be terminated upon
satisfaction of the same conditions as are applicable to CJUF’s replacement of
Stratus Block 21 Investments, L.P. as the managing member of Borrower under
Section 17.2 below.
 
(bb) Correction of Defects.  Within five (5) days after Borrower acquires
knowledge of or receives notice of a material defect in the Improvements or any
material departure from the Approved Plans and Specifications, or any other
requirement of this Agreement, Borrower shall proceed with diligence to correct
all such defects and departures.
 
(cc) Hold Disbursements in Trust.  Borrower shall receive and hold in trust for
the sole benefit of Lender (and not for the benefit of any other person,
including, but not limited to, contractors or any subcontractors) all advances
made hereunder directly to Borrower, for the purpose of paying costs of the
Construction in accordance with the Budget.  Borrower shall use the proceeds of
the Loan solely for the payment of costs as specified in the Budget.  Borrower
shall pay all other costs, expenses and fees relating to the acquisition,
equipping, use, sale and operation of the Project.
 
(dd) Foundation Survey.  Not later than thirty (30) days after completion of the
foundation with respect to the Improvements, Borrower shall furnish to Lender a
survey of the Land with the foundation of the Improvements located thereon
satisfying the requirements set forth in Section 8.1(d).
 
(ee) Alterations.  Without the prior written consent of Lender, Borrower shall
not make any material alterations to the Project (other than completion of the
Construction in accordance with the Approved Plans and Specifications).
 
(ff) Cash Distributions.  Borrower shall not make any distributions to its
partners or other equity holders, Guarantor or any Affiliate of Borrower or
Guarantor until the Loan has been repaid, except for the disbursements set forth
in Section 12.7 hereof.
 
(gg) Injunctive Proceedings.  If any proceedings are filed seeking to enjoin or
otherwise prevent or declare invalid or unlawful the construction, sale,
occupancy, maintenance or operation of the Project or the Residential Units,
Borrower shall cause such proceedings to be diligently contested in good faith,
and in the event of an adverse ruling or decision, shall prosecute all allowable
appeals therefrom, and shall, without limiting the generality of the
 

 
66

--------------------------------------------------------------------------------

 

foregoing, resist the entry or seek the stay of any temporary or permanent
injunction that may be entered and use commercially reasonable efforts to bring
about a favorable and speedy disposition of all such proceedings.  Lender’s
reasonable costs and disbursements (including attorney’s fees) in connection
with any such proceedings, whether or not Lender is a party thereto, shall be
deemed to be expenses of the Loan payable by Borrower in accordance with
Article 7 of this Agreement.
 
(hh) Commencement of Work.  No work or Construction of any character shall be
commenced upon, nor shall any materials be delivered to, the Project until (i)
the Deed of Trust has been recorded in the records of Travis County, Texas and a
file stamped copy thereof has been received by Lender, or, if work has commenced
with Lender’s consent, the Title Insurer has agreed to insure Lender to Lender’s
satisfaction and (ii) the subguard insurance required by Lender has been
properly received and approved by Lender.
 
(ii) Operating Revenues.  In the event the Project produces gross operating
revenues, Borrower shall establish with Lender (i) an interest bearing operating
account for the Project (other than the Hotel) into which Borrower shall deposit
all revenue associated with the Project (other than the Hotel), and from which
Borrower shall make withdrawals to pay all operating expenses of the Project
(other than the Hotel) and, to the extent of any remaining Net Operating Income,
interest due on the Loan in accordance with Section 10.4, and (ii) an interest
bearing Hotel revenue account into which Borrower shall deposit or shall cause
to be deposited all Net Operating Income distributed by Hotel Operator to
Borrower, and from which Borrower shall pay interest due on the Loan in
accordance with Section 10.4.  Borrower’s failure to deposit operating revenues
or Net Operating Income into such accounts as set forth above shall constitute
an Event of Default hereunder.  In the event that Net Operating Income,
together, in such accounts exceeds the monthly interest due, the then excess
shall remain in the applicable account for the payment of future month’s
interest. Borrower hereby pledges each such account and all funds on deposit
therein to Lender.  Borrower hereby pledges, to the extent permitted by, and
subject to the limits of, the Hotel Operating Agreement, all accounts to be
established in accordance with the terms and provisions of the Hotel Operating
Agreement, and all funds on deposit therein to Lender.  Prior to the opening of
the Hotel, Borrower shall deliver, or shall cause to be delivered, to Lender, a
control agreement from each depository bank with which each such Hotel operating
account has been established substantially similar in form and substance to the
reasonable form of same prepared by Lender’s legal counsel.
 
(jj) Environmental Remediation.  Borrower shall perform all recommended
remediation set forth in those certain Environmental Reports, in each case, by
the dates such remediation is recommended to be completed in such report, except
in the case of the Waste Management Plan, with respect to which all
recommendations must be complied with by Full Loan Opening; provided, however,
that the water filtration system discussed in the Waste Management System shall
be completed at such later date as is sufficient to comply with the
recommendations of the Waste Management Plan, and same shall continue to be
operated and maintained in accordance with the Waste Management Plan during the
construction and operation of the Project.
 
(kk) Hotel Documents.  Borrower shall timely perform and comply with all of its
obligations under the Hotel Documents and all other agreements with Hotel
Operator, Starwood
 

 
67

--------------------------------------------------------------------------------

 

Hotels & Resorts Worldwide, Inc., and their affiliates with respect to the
Hotel, and shall keep all such agreements in full force and effect.  Borrower
shall not modify, amend or terminate any such agreements without Lender’s prior
written consent, to be given in its reasonable discretion.
 
(ll) Pre-sale Requirement.  The Pre-sale Requirement must remain satisfied
throughout the Loan Term.
 
15.2 Single Purpose Entity Covenants.
 
Borrower hereby represents, warrants and covenants that without Lender’s prior
written consent, which may be withheld in Lender’s sole discretion, and except
as otherwise expressly permitted hereunder, Borrower has not, will not and shall
not:
 
(a) engage in any business or activity other than the ownership, management,
construction and operation of the Project;
 
(b) acquire or own any material assets other than the Project, and such
incidental personal property as may be necessary for the operation of the
Project;
 
(c) merge into or consolidate with any Person or entity or dissolve, terminate
or liquidate in whole or in part, transfer or otherwise dispose of all or
substantially all of its assets or change in its legal structure or acquire by
purchase or otherwise all or substantially all the business or assets of, or
stock or other evidence of beneficial ownership of, any Person, without in each
case the prior written consent of Lender, which consent may be withheld or
delayed in Lender’s sole and absolute discretion;
 
(d) fail to preserve its existence as an entity duly organized, validly existing
and in good standing under the laws of the State of Delaware or without the
prior written consent of Lender amend, modify, terminate or fail to comply with
the provisions of Borrower’s formation documents, as same may be further amended
or supplemented, if such amendment, modification, termination or failure to
comply would adversely affect the ability of Borrower to perform its obligations
under the applicable Loan Documents or jeopardize Borrower’s existence as a
single purpose entity;
 
(e) own any subsidiary or make any investment in, any Person without the consent
of Lender;
 
(f) commingle its assets with the assets of any of its Affiliates, or of any
other Person;
 
(g) incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than other indebtedness expressly permitted
under this Agreement, provided that any such debt is paid before such payments
are past due;
 
(h) become insolvent and fail to pay its debts, liabilities and obligations of
any kind, including all administrative expenses, from its own separate assets as
the same shall become due;
 

 
68

--------------------------------------------------------------------------------

 

(i) fail to maintain its records, books or accounts and bank accounts separate
and apart from those of any Affiliate of Borrower, any Affiliate of a partner of
Borrower and any other Person or entity;
 
(j) enter into any contract or agreement with any of its Affiliates except on
terms and conditions that are intrinsically fair and substantially similar to
those that would be available on an arms-length basis with third parties other
than an Affiliate or as provided in this Agreement;
 
(k) seek the dissolution or winding up in whole, or in part, of Borrower;
 
(l) maintain its assets in such manner that it will be costly or difficult to
segregate, ascertain or identify its individual assets from those of any
partner, member, constituent, principal or Affiliate of Borrower, or any member,
general partner, principal or Affiliate thereof, or any other person;
 
(m) hold itself out to be responsible for the debts of another Person except as
specifically permitted in this Agreement;
 
(n) make any loans or advances to any third party, including any partner,
member, constituent, principal or Affiliate of Borrower or any member, general
partner, principal or Affiliate thereof;
 
(o) fail to file its own tax returns; provided, however, that Borrower may file
a consolidated tax return with any of its Affiliates, but only because such
consolidated tax return is required by applicable Laws, and provided such
consolidated tax return includes footnotes identifying the separate assets or
liabilities of Borrower and/or its Affiliates, as applicable;
 
(p) fail either to hold itself out to the public as a legal entity separate and
distinct from any other Person or to conduct its business solely in its own name
in order not (A) to mislead others as to the identity with which such other
party is transacting business, or (B) to suggest that it is responsible for the
debts of any third party (including any partner, principal, member of Affiliate
or Borrower, or any partner, principal, member or Affiliate thereof) except as
specifically permitted in this Agreement;
 
(q) fail to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations;
 
(r) file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors;
 
(s) fail to maintain a reasonably sufficient number of employees in light of its
contemplated business operations if any employees are required for the
contemplated business operations;
 
(t) fail to allocate fairly and reasonably any overhead expenses that are shared
with any of their respective partners, members, principals or Affiliates of
Borrower, any guarantor or indemnitor, or any partner, member, principal or
Affiliate thereof, including paying for office
 

 
69

--------------------------------------------------------------------------------

 

space and services performed by any employee of any of their respective
partners, of any members, principals or Affiliates, any guarantor or indemnitor,
or any partner, member, principal or Affiliate of any thereof;
 
(u) except to the extent required by generally accepted accounting principles or
applicable law, fail to maintain separate financial statements, which shows its
assets and liabilities, separate and apart from those of any other Person or
entity and not have its assets listed in the financial statement of any other
entity; or
 
(v) fail to correct any known misunderstanding regarding its separate identity.
 
15.3 Authorized Representative.
 
Borrower hereby appoints the Authorized Representative as its authorized
representative for purposes of dealing with Lender on behalf of Borrower in
respect of any and all matters in connection with this Agreement, the other Loan
Documents, and the Loan.  The Authorized Representative shall have the power, in
his discretion, to give and receive all notices, monies, approvals, and other
documents and instruments, and to take any other action on behalf of
Borrower.  All actions by the Authorized Representative shall be final and
binding on Borrower.  Lender may rely on the authority given to the Authorized
Representative until actual receipt by Lender of a duly authorized resolution
substituting a different person as the Authorized Representative.  If Borrower
appoints more than one Authorized Representative, the action of any one
Authorized Representative shall be binding and sufficient.
 
 
Article 16
 
 
CASUALTIES AND CONDEMNATION
 
16.1 Lender’s Election to Apply Proceeds on Indebtedness.
 
(a) Subject to the provisions of Section 16.1(b) below, Lender may elect to
negotiate, settle, collect, retain and apply upon the indebtedness of Borrower
under this Agreement or any of the other Loan Documents all proceeds of
insurance or condemnation (individually and collectively referred to as
“Proceeds”) after deduction of all expenses of collection and settlement,
including reasonable attorneys’ and adjusters’ fees and charges.  Lender shall
have the right to participate with Borrower in negotiation of any settlement,
adjustment or compromise of any claim arising in connection with a casualty to
the Improvements or any condemnation of all or part of the Project; provided,
however, if an Event of Default exists, Lender shall have the right to settle
any claim without Borrower’s participation or consent.  Any Proceeds remaining
after repayment of the indebtedness under the Loan Documents shall be paid by
Lender to Borrower.
 
(b) Notwithstanding anything in Section 16.1(a) to the contrary, in the event of
any casualty to the Improvements or any condemnation of part of the Project,
Lender agrees to make available the Proceeds for restoration of the Improvements
if (i) no Event of Default exists, (ii) all Proceeds are deposited with Lender,
(iii) in Lender’s reasonable judgment, the amount of Proceeds available for
restoration of the Improvements (together with undisbursed proceeds of the Loan,
if any, allocated for the cost of the Construction and any sums deposited with
Lender
 

 
70

--------------------------------------------------------------------------------

 

by Borrower for such purpose) is sufficient to pay the full and complete costs
of such restoration, (iv) the cost of restoration does not exceed twenty percent
(20%) of the stated amount of the Note, (v) if Lender determines that the cost
of restoration exceeds $5,000,000, Lender determines in its reasonable
discretion that the values set forth in the Appraisal reviewed and approved by
Lender at Closing remain valid; (vi) in Lender’s reasonable determination, the
Project can be restored to an architecturally and economically viable project in
compliance with applicable Laws, (vii) Guarantor reaffirms the Completion and
Carveout and the Limited Payment Guaranty in writing, (viii) Borrower shall have
provided evidence reasonably acceptable to Lender that following restoration
(and completion of the Project) the Pre-Sale Requirement will remain satisfied,
(ix) the Hotel Documents, and the management agreement for the Venue, will each
remain in full force and effect; and (x) in Lender’s reasonable determination,
such restoration is likely to be completed so that the Residential Units
sufficient to satisfy the Pre-sale Requirement may be delivered to all
Residential Unit Purchasers prior to the outside delivery dates contained in
their respective Sales Agreements and in any event not later than the Maturity
Date.  On and after such time as the condominium is formed, Borrower agrees to
vote its votes with respect to all unsold Residential Units (and to cause all
Borrower appointed directors to vote their votes) in a manner consistent with
the provisions of this Article 16.
 
16.2 Borrower’s Obligation to Rebuild and Use of Proceeds Therefor.
 
In case Lender does not elect to apply or does not have the right to apply the
Proceeds to the indebtedness, as provided in Section 16.1 above, Borrower shall:
 
(a) Proceed with diligence to make settlement with insurers or the appropriate
Governmental Authorities and cause the Proceeds to be deposited with Lender;
 
(b) In the event the Proceeds and the available proceeds of the Loan are
insufficient to assure Lender that the Loan will be In Balance, promptly deposit
with Lender any amount necessary to place the Loan In Balance; and
 
(c) Promptly proceed with the assumption of construction of the Improvements,
including the repair of all damage resulting from such fire, condemnation or
other cause and restoration to its former condition.
 
Any request by Borrower for a disbursement by Lender of Proceeds and funds
deposited by Borrower shall be treated by Lender as if such request were for an
advance of the Loan hereunder, and the disbursement thereof shall be conditioned
upon Borrower’s compliance with and satisfaction of the same conditions
precedent as would be applicable under this Agreement for an advance of the
Loan.
 

 
71

--------------------------------------------------------------------------------

 

Article 17
 
ASSIGNMENTS BY LENDER AND BORROWER
 
17.1 Assignments and Participations.
 
Lender may from time to time, with written notice to Borrower, sell the Loan and
the Loan Documents (or any interest therein) and may grant participations in the
Loan.  Borrower agrees to reasonably cooperate with Lender’s efforts to do any
of the foregoing and to execute all documents reasonably required by Lender in
connection therewith that do not materially adversely affect Borrower’s or
Guarantor’s rights under the Loan Documents or materially increase Borrower’s or
Guarantor’s obligations under the Loan Documents.
 
17.2 Prohibition of Assignments and Transfers by Borrower.
 
Borrower shall not assign or attempt to assign its rights under this Agreement
and any purported assignment shall be void.  Without the prior written consent
of Lender, in Lender’s sole discretion, Borrower shall not suffer or permit (a)
any change in the ownership, or management or economic interests (whether direct
or indirect) of the Project, or (b) any Transfer.  Notwithstanding the
foregoing, (A) so long as CJUF continues to hold the ownership interest in
Borrower which CJUF held at Closing and no monetary Event of Default then exists
(including without limitation default in making a Deficiency Deposit), or if a
monetary Event of Default does exist and is cured by Borrower or CJUF, CJUF
may  with prior written notice to Lender (but without Lender’s consent) replace
Stratus Block 21 Investments, L.P. as the managing member of Borrower (with
Stratus Block 21 Investments, L.P. retaining its current ownership interest but
as non-managing member), (B) even if a monetary Event of Default then exists, so
long as CJUF continues to hold the ownership interest in Borrower which CJUF
held at Closing, CJUF may request that Lender approve CJUF replacing Stratus
Block 21 Investments, L.P. as managing member of Borrower (with Stratus Block 21
Investments, L.P. retaining its current ownership interest but as non-managing
member), and Lender shall grant or deny such consent in its reasonable
discretion, and (C) the following Transfers of interests as Borrower’s direct or
indirect constituent entities shall be permitted without Lender’s consent:  (i)
Transfers of direct or indirect interests in Canyon-Johnson Urban Fund II, L.P.,
(ii) Transfers of non-controlling interests in Guarantor, (iii) Leases permitted
hereunder; and (iv) the sale and release of various components of the Project
pursuant to Sections 14.9 and 14.9A hereof.  The sale and conveyance of
Residential Units shall be permitted in accordance with Article 14
hereof.  Borrower may also dispose of immaterial quantities of personal property
without Lender’s prior consent.
 
17.3 Prohibition of Transfers in Violation of ERISA.
 
In addition to the prohibitions set forth in Section 17.2 above, Borrower shall
not assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose
of its interest or rights in this Agreement or in the Project, or attempt to do
any of the foregoing or suffer any of the foregoing, nor shall any party owning
a direct or indirect interest in Borrower assign, sell, pledge, Deed of Trust,
encumber, transfer, hypothecate or otherwise dispose of any of its rights or
interest (direct or indirect) in Borrower, attempt to do any of the foregoing or
suffer any of the foregoing, if such action would cause the Loan, or the
exercise of any of Lender’s rights in connection therewith, to constitute a
prohibited transaction under ERISA or the Internal Revenue Code or otherwise
result
 

 
72

--------------------------------------------------------------------------------

 

in Lender being deemed in violation of any applicable provision of
ERISA.  Borrower agrees to indemnify and hold Lender free and harmless from and
against all losses, costs (including reasonable attorneys’ fees and expenses),
taxes, damages (including consequential damages) and expenses Lender may suffer
by reason of the investigation, defense and settlement of claims and in
obtaining any prohibited transaction exemption under ERISA necessary or
desirable in Lender’s sole judgment or by reason of a breach of the foregoing
prohibitions.  The foregoing indemnification shall be a recourse obligation of
Borrower and shall survive repayment of the Note, notwithstanding any
limitations on recourse contained herein or in any of the Loan Documents.
 
17.4 Successors and Assigns.
 
Subject to the foregoing restrictions on transfer and assignment contained in
this Article 17, this Agreement shall inure to the benefit of and shall be
binding on the parties hereto and their respective successors and permitted
assigns.
 
 
Article 18
 
 
TIME OF THE ESSENCE
 
18.1 Time is of the Essence.
 
Time is of the essence under this Agreement.
 
 
Article 19
 
 
EVENTS OF DEFAULT
 
19.1 Events of Default.
 
The occurrence of any one or more of the following shall constitute an “Event of
Default” as said term is used herein:
 
(a) Failure of Borrower (i) (A) to make any principal payment when due, (B) to
pay any interest within ten (10) days after the date when due or (C) to observe
or perform any of the other covenants or conditions by Borrower to be performed
under the terms of this Agreement or any other Loan Document concerning the
payment of money, for a period of ten (10) days after written notice from Lender
that the same is due and payable; or (ii) for a period of thirty (30) days after
written notice from Lender, to observe or perform any non-monetary covenant or
condition contained in this Agreement or any other Loan Documents, provided that
if any such failure concerning a non-monetary covenant or condition is
susceptible to cure and cannot reasonably be cured within said thirty (30) day
period, then Borrower shall have an additional sixty (60) day period to cure
such failure and no Event of Default shall be deemed to exist hereunder so long
as Borrower commences such cure within the initial thirty (30) day period and
diligently and in good faith pursues such cure to completion within such
resulting ninety (90) day period from the date of Lender’s notice; and provided
further that if a different notice or grace period is specified under any other
subsection of this Article 19 with respect to a particular breach, or if another
subsection of this Article 19 applies to a particular breach and does not
expressly provide for a notice or grace period, the specific provision shall
control.
 

 
73

--------------------------------------------------------------------------------

 

(b) The disapproval by Lender or Lender’s Consultant at any time of any material
aspect of the construction work and failure of Borrower to cause the same to be
corrected to the satisfaction of Lender within the cure period provided in
Section 19(a)(ii) above.
 
(c) (i) Failure of Borrower to commence Construction of the Project on or before
the Required Construction Commencement Date, (ii) a discontinuance of the
Construction for a period of twenty (20) consecutive days (other than by reason
of Unavoidable Delays), or in any event a delay in the Construction of any
component of the Project so that such component is not, in Lender’s sole
judgment, likely to be completed on or before the applicable Completion Date,
(iii) failure of Borrower to comply with the Construction Schedule resulting in
a delay of more than ninety (90) days behind the Construction Schedule with
respect to any material component of Construction, or (iv) failure to complete
Construction of the all or any component of the Improvements substantially in
accordance with the Approved Plans and Specifications (or in accordance with any
changes therein that may be approved in writing by Lender or as to which
Lender’s approval is not required) on or before the applicable Completion Date.
 
(d) The bankruptcy or insolvency of the General Contractor and failure of
Borrower to procure a contract with a new contractor satisfactory to Lender
within forty-five (45) days from the occurrence of such bankruptcy or
insolvency.
 
(e) Any Transfer or other disposition in violation of Section 17.2 or 17.3.
 
(f) Any warranty, representation, statement, report or certificate made now or
hereafter by Borrower or any Guarantor is untrue or incorrect in any material
respect at the time made or delivered, provided that if such breach is
reasonably susceptible to cure, then no Event of Default shall exist so long as
Borrower cures said breach (i) within the notice and cure period provided in
(a)(i) above for a breach that can be cured by the payment of money or (ii)
within the notice and cure period provided in (a)(ii) above for any other
breach.
 
(g) Borrower or any Guarantor shall commence a voluntary case concerning
Borrower or any Guarantor under the Bankruptcy Code; or an involuntary
proceeding is commenced against Borrower or any Guarantor under the Bankruptcy
Code and relief is ordered against Borrower or any Guarantor, or the petition is
controverted but not dismissed or stayed within sixty (60) days after the
commencement of the case, or a custodian (as defined in the Bankruptcy Code) is
appointed for or takes charge of all or substantially all of the property of
Borrower or any Guarantor; or Borrower or any Guarantor commences any other
proceedings under any reorganization, arrangement, readjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar Law of any
jurisdiction whether now or hereafter in effect relating to Borrower or any
Guarantor; or there is commenced against Borrower or any Guarantor any such
proceeding that remains undismissed or unstayed for a period of sixty (60) days;
or Borrower or any Guarantor fails to controvert in a timely manner any such
case under the Bankruptcy Code or any such proceeding, or any order of relief or
other order approving any such case or proceeding is entered; or Borrower or any
Guarantor by any act or failure to act indicates its consent to, approval of, or
acquiescence in any such case or proceeding or the appointment of any custodian
or the like of or for it for any substantial part of its property or suffers any
such appointment to continue undischarged or unstayed for a period of sixty (60)
days.
 

 
74

--------------------------------------------------------------------------------

 

(h) Borrower or any Guarantor shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due, or shall consent to the appointment of a receiver or trustee or
liquidator of all of its property or the major part thereof or if all or a
substantial part of the assets of Borrower or any Guarantor are attached,
seized, subjected to a writ or distress warrant, or are levied upon, or come
into the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors.
 
(i) Any Guarantor shall dissolve or its existence shall otherwise terminate.
 
(j) Any Guarantor shall breach any of the Guarantor Financial Covenants.
 
(k) Borrower is enjoined, restrained or in any way prevented by any court order
from constructing or operating the Project or marketing or selling Residential
Units for a period in excess of thirty (30) days.
 
(l) Failure by Borrower to (i) make any Deficiency Deposit to Lender within the
time and in the manner required by Article 11 hereof, or (ii) deposit Net
Operating Income into the operating account addressed in Section 15.1(ii)(i) or
Hotel operating revenue into the Hotel operating account addressed in Section
15.1(ii)(ii).
 
(m) One or more final, unappealable judgments are entered against (i) Borrower
in amounts aggregating in excess of $250,000, or (ii) against any Guarantor in
amounts aggregating in excess of $250,000 for any Guarantor, and said judgments
are not paid, stayed or bonded over within thirty (30) days after entry.
 
(n) Borrower or any Guarantor shall fail to pay any debt owed by it or him, as
applicable, when due (either by maturity (without forbearance) or acceleration)
to Lender or any other party (other than a failure or default for which
Borrower’s maximum liability does not exceed $200,000 and any Guarantor’s
maximum liability does not exceed $500,000).
 
(o) If a Material Adverse Change occurs with respect to Borrower, the Project or
any Guarantor.
 
(p) Borrower shall fail to deliver the Insurance Policy within ninety (90) days
after the date hereof.
 
(q) The Pre-Sale Requirement shall cease to be satisfied.
 
(r) Borrower shall default under the Hotel Documents and shall fail to cure such
default within the shorter of (i) the applicable cure period set forth in
Section 19.1(a), and (ii) the applicable grace or cure period set forth in the
applicable Hotel Document, or any Hotel Document shall otherwise cease to be in
full force and effect (or any other event occurring thereunder which would give
the Hotel Operator the right to terminate a Hotel Document).
 
(s) Borrower shall default under the management agreement for the Venue reviewed
and approved by Lender in accordance with this Agreement, and shall fail to cure
such default within the applicable grace or cure period set forth in such
management agreement, or such management agreement shall otherwise cease to be
in full force and effect.
 

 
75

--------------------------------------------------------------------------------

 

(t) Borrower shall fail to deliver to Lender any executed Subcontract required
under Exhibit O within thirty days (30) following in the delivery date for such
Subcontract as set forth in Exhibit O.
 
(u) The occurrence of any other event or circumstance identified as an Event of
Default in this Agreement or under any of the other Loan Documents and the
expiration of any applicable grace or cure periods, if any, specified for such
Event of Default herein or therein, as the case may be.
 
Notwithstanding anything to the contrary set forth herein, in the event that any
Event of Default shall occur with respect to Guarantor under Section 19.1(g),
(h), (i), (j), (m), (n) or (o) (a “Guarantor Financial Default”), Borrower or
Guarantor may cure such Event of Default by depositing with Lender, within ten
(10) Business Days following Lender’s written notice to Borrower of such Event
of Default, an irrevocable and unconditional letter of credit in the amount of
Twenty Million Dollars ($20,000,000.00) from an issuer and otherwise in form and
substance satisfactory to Lender in its sole discretion.  Once such letter of
credit is deposited with Lender pursuant hereto and for so long as same remains
in effect, no Guarantor Financial Default shall be considered an Event of
Default hereunder.  Lender may draw upon such letter of credit and apply such
drawn funds to the indebtedness under the Loan Documents in such order as Lender
shall elect if an Event of Default occurs thereafter (except for a Guarantor
Financial Default), or the letter of credit shall expire in less than thirty
(30) days, or if the Loan is not paid in full on the Maturity Date.
 
 
Article 20
 
 
LENDER’S REMEDIES IN EVENT OF DEFAULT
 
20.1 Remedies Conferred Upon Lender.
 
Upon the occurrence and during the continuance of any Event of Default, Lender
may pursue any one or more of the following remedies concurrently or
successively, it being the intent hereof that none of such remedies shall be to
the exclusion of any other:
 
(a) Take possession of the Project and complete the Construction and do anything
that is necessary or appropriate in its sole judgment to fulfill the obligations
of Borrower under this Agreement and the other Loan Documents, including either
the right to avail itself of and procure performance of existing contracts or
let any contracts with the same contractors or others.  Without restricting the
generality of the foregoing and for the purposes aforesaid, Borrower hereby
appoints and constitutes Lender its lawful attorney-in-fact with full power of
substitution in the Project to complete the Construction in the name of
Borrower; to use unadvanced funds remaining under the Note or that may be
reserved, escrowed or set aside for any purposes hereunder at any time, or to
advance funds in excess of the face amount of the Note, to complete the
Construction; to make changes in the Plans and Specifications that shall be
necessary or desirable to complete the Construction in substantially the manner
contemplated by the Plans and Specifications; to retain or employ new general
contractors, subcontractors, architects, engineers and inspectors as shall be
required for said purposes; to pay, settle or compromise all existing bills and
claims that may be liens or security interests, or to avoid such bills and
claims becoming liens against the Project; to execute all applications and
certificates in
 

 
76

--------------------------------------------------------------------------------

 

the name of Borrower prosecute and defend all actions or proceedings in
connection with the Improvements or Project; and to do any and every act that
Borrower might do in its own behalf; it being understood and agreed that this
power of attorney shall be a power coupled with an interest and cannot be
revoked;
 
(b) Withhold further disbursement of the proceeds of the Loan and/or terminate
Lender’s obligations to make further disbursements hereunder;
 
(c) Declare the Note to be immediately due and payable;
 
(d) Use and apply any monies or letters of credit deposited by Borrower with
Lender, regardless of the purposes for which the same was deposited, to cure any
such default or to apply on account of any indebtedness under this Agreement
that is due and owing to Lender;
 
(e) Fund proceeds of the Loan to Guarantor to complete the Project (if Guarantor
is entitled to receive such proceeds under the Completion and Carveout Guaranty
or Lender otherwise elects to fund such proceeds to Guarantor), and in such
event such proceeds shall be considered disbursements of the Loan, whether or
not requested by Borrower (Borrower’s authorization of such disbursements being
deemed given hereby);
 
(f) Assess interest on all amounts outstanding under the Note at the Default
Rate; and
 
(g) Exercise or pursue any other remedy or cause of action permitted under this
Agreement or any other Loan Documents, or conferred upon Lender by operation of
Law.
 
Notwithstanding the foregoing, upon the occurrence of any Event of Default under
Section 19.1(g) with respect to Borrower, all amounts evidenced by the Note
shall automatically become due and payable, without any presentment, demand,
protest or notice of any kind to Borrower.
 
 
Article 21
 
 
GENERAL PROVISIONS
 
21.1 Captions.
 
The captions and headings of various Articles, Sections and subsections of this
Agree­ment and Exhibits pertaining hereto are for convenience only and are not
to be considered as defining or limiting in any way the scope or intent of the
provisions hereof.
 
21.2 Modification; Waiver.
 
No modification, waiver, amendment or discharge of this Agreement or any other
Loan Document shall be valid unless the same is in writing and signed by the
party against which the enforcement of such modification, waiver, amendment or
discharge is sought.
 

 
77

--------------------------------------------------------------------------------

 

21.3 Governing Law.
 
Irrespective of the place of execution and/or delivery, this Agreement shall be
governed by, and shall be construed in accordance with, the laws of the State of
Illinois.
 
21.4 Acquiescence Not to Constitute Waiver of Lender’s Requirements.
 
Each and every covenant and condition for the benefit of Lender contained in
this Agreement may be waived by Lender, provided, however, that to the extent
that Lender may have acquiesced in any noncompliance with any construction or
nonconstruction conditions precedent to the Closing Funding, the Full Opening of
the Loan or to any subsequent disbursement of Loan proceeds, such acquiescence
shall not be deemed to constitute a waiver by Lender of such requirements with
respect to any future disbursements of Loan proceeds.
 
21.5 Disclaimer by Lender.
 
This Agreement is made for the sole benefit of Borrower and Lender, and no other
person or persons shall have any benefits, rights or remedies under or by reason
of this Agreement, or by reason of any actions taken by Lender pursuant to this
Agreement.  Lender shall not be liable to any contractors, subcontractors,
supplier, architect, engineer, tenant or other party for labor or services
performed or materials supplied in connection with the Construction.  Lender
shall not be liable for any debts or claims accruing in favor of any such
parties against Borrower or others or against the Project.  Lender, by making
the Loan or taking any action pursuant to any of the Loan Documents, shall not
be deemed a partner or a joint venturer with Borrower or fiduciary of
Borrower.  No payment of funds directly to a contractor or subcontractor or
provider of services shall be deemed to create any third-party beneficiary
status or recognition of same by Lender.  Without limiting the generality of the
foregoing:
 
(a) Lender shall have no liability, obligation or responsibility whatsoever with
respect to the Construction.  Any inspections of the Construction made by or
through Lender are for purposes of administration of the Loan only and neither
Borrower nor any third party is entitled to rely upon the same with respect to
the quality, adequacy or suitability of materials or workmanship, conformity to
the Plans and Specifications, state of completion or otherwise;
 
(b) Lender neither undertakes nor assumes any responsibility or duty to Borrower
to select, review, inspect, supervise, pass judgment upon or inform Borrower of
any matter in connection with the Project, including matters relating to the
quality, adequacy or suitability of:  (i) the Plans and Specifications, (ii)
architects, contractors, subcontractors and material suppliers employed or
utilized in connection with the Construction, or the workmanship of or the
materials used by any of them, or (iii) the progress or course of Construction
and its conformity or nonconformity with the Plans and Specifications; Borrower
shall rely entirely upon its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment or supply of information
to Borrower by Lender in connection with such matters is for the protection of
Lender only, and neither Borrower nor any third party is entitled to rely
thereon; and
 

 
78

--------------------------------------------------------------------------------

 

 
(c) Lender owes no duty of care to protect Borrower, Guarantor, or any Tenant or
Residential Unit Purchaser against negligent, faulty, inadequate or defective
building or construction.
 
21.6 Partial Invalidity; Severability.
 
If any of the provisions of this Agreement, or the application thereof to any
person, party or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision or provisions to persons, parties or circumstances other than those as
to whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
 
21.7 Definitions Include Amendments.
 
Definitions contained in this Agreement that identify documents, including, but
not limited to, the Loan Documents, shall be deemed to include all amendments
and supplements to such documents from the date hereof, and all future
amendments, modifications, and supplements thereto entered into from time to
time to satisfy the requirements of this Agreement or otherwise with the consent
of Lender.  Reference to this Agreement contained in any of the foregoing
documents shall be deemed to include all amendments and supplements to this
Agreement.
 
21.8 Execution in Counterparts.
 
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.
 
21.9 Entire Agreement.
 
This Agreement, taken together with all of the other Loan Documents and all
certificates and other documents delivered by Borrower to Lender, embodies the
entire agreement and supersede all prior agreements, written or oral, relating
to the subject matter hereof.
 
21.10 Waiver of Damages.
 
In no event shall Lender be liable to Borrower for consequential, punitive or
exemplary damages, whatever the nature of a breach by Lender of its obligations
under this Agreement or any of the Loan Documents, and Borrower, for itself and
Guarantor, waives all claims for consequential, punitive or exemplary damages.
 
21.11 Claims Against Lender.
 
Lender shall not be in default under this Agreement, or under any other Loan
Documents, unless a written notice specifically setting forth the claim of
Borrower shall have been given to Lender and Lender shall have failed to cure
such default within thirty (30) days after receipt of written notice from
Borrower, provided that if any such default cannot reasonably be cured
 

 
79

--------------------------------------------------------------------------------

 

within said thirty (30) day period, then Lender shall have an additional sixty
(60) day period to cure such failure and no default shall be deemed to exist
hereunder so long as Lender commences such cure within the initial thirty (30)
day period and diligently and in good faith pursues such cure to completion
within such resulting ninety (90) day period from the date of Borrower’s
notice.  Borrower waives any claim, set-off or defense against Lender arising by
reason of any alleged default by Lender as to which Borrower does not give such
notice timely as aforesaid.  Borrower acknowledges that such waiver is or may be
essential to Lender’s ability to enforce its remedies without delay and that
such waiver therefore constitutes a substantial part of the bargain between
Lender and Borrower with regard to the Loan.
 
21.12 Jurisdiction.
 
TO THE GREATEST EXTENT PERMITTED BY LAW, BORROWER HEREBY WAIVES ANY AND ALL
RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER.  WITH RESPECT TO ANY SUIT,
ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”),
BORROWER IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS HAVING JURISDICTION IN THE COUNTY OF COOK AND STATE OF
ILLINOIS, AND (B) WAIVES ANY OBJECTION THAT IT MAY HAVE AT ANY TIME TO THE
LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM
THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES
THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT
HAVE JURISDICTION OVER SUCH PARTY.  NOTHING IN THIS AGREEMENT SHALL PRECLUDE
LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE
BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING
OF A PROCEEDING IN ANY OTHER JURISDICTION.  BORROWER FURTHER AGREES AND CONSENTS
THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER
APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY ILLINOIS STATE
OR UNITED STATES COURT HAVING JURISDICTION OVER THE COUNTY OF COOK MAY BE MADE,
TO THE EXTENT PERMITTED BY LAW, BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO
MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF BORROWER SHALL REFUSE TO
ACCEPT DELIVERY (AS OPPOSED TO UNABLE TO RECEIVE DELIVERY), SERVICE SHALL BE
DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.
 
21.13 Set-Offs.
 
After the occurrence and during the continuance of an Event of Default, Borrower
hereby irrevocably authorizes and directs Lender from time to time to charge
Borrower’s accounts and deposits with Lender (or its Affiliates), and to pay
over to Lender an amount equal to any amounts from time to time due and payable
to Lender hereunder, under the Note or under any other Loan Document.  Borrower
hereby grants to Lender a security interest in and to all such accounts and
deposits maintained by Borrower with Lender (or its Affiliates).
 

 
80

--------------------------------------------------------------------------------

 

 
21.14 Binding Effect.
 
The covenants, conditions, waivers, releases and agreements contained in this
Agreement shall bind, and the benefits thereof shall inure to the parties hereto
and their respective heirs, executors, administrators, successors and assigns.
 
21.15 Waiver of Accord and Satisfaction.
 
Borrower hereby expressly waives any and all rights to effect an accord and
satisfaction of any secured obligation or any other debt of Borrower to Lender
in accordance with section 3-311 of the UCC.  Notwithstanding anything to the
contrary contained in this agreement or any other loan document, except as
expressly directed in a writing addressed to Borrower after the date hereof, any
and all communications or notices by Borrower or any other loan party to Lender
concerning disputed debts, obligations or liabilities, whether arising under
this agreement or otherwise, including without limitation any instrument
tendered as full satisfaction of a debt, shall be, in addition to the notices
required under Article 22 hereof, delivered to Corus Bank, Department 311,
attention Rosa Paz, 3959 North Lincoln Avenue, Chicago, Illinois 60613.
 
 
Article 22
 
 
NOTICES
 
Any notice, demand, request or other communication that any party hereto may be
required or may desire to give hereunder shall be in writing and shall be deemed
to have been properly given (a) if hand delivered, when delivered; (b) if by
Federal Express or other reliable overnight courier service, on the next
Business Day after delivered to such courier service or (c) if by telecopier on
the day of transmission so long as copy is sent on the same day by overnight
courier as set forth below:
 
 
 
If to Borrower:

 
 
 
c/o Stratus Properties

 
 
 
98 San Jacinto, Suite 220

 
 
 
Austin, Texas 78701

 
 
Attention:
W.H. Armstrong III

 
 
Telephone:
(512) 478-6396

 
 
Facsimile:
(512) 478-5788

 
 
 
And to:

 
 
 
Armbrust & Brown, L.L.P.

 
 
 
100 Congress Avenue, Suite 1300

 
 
 
Austin, TX  78701

 
 
Attention:
Kenneth N. Jones, Esq.

 
 
Telephone:
(512) 435-2312

 
 
Facsimile:
(512) 435-2360

 

 
81

--------------------------------------------------------------------------------

 

 

 
 
 
And to:

 
 
 
Canyon-Johnson Urban Fund II, L.P.

 
 
 
9665 Wilshire Boulevard, Suite 200

 
 
 
Beverly Hills, California  90212

 
 
Attention:
K. Robert Turner

 
 
Telephone:
(310) 247-2700

 
 
Facsimile:
(310) 247-8067

 
 
 
And to:

 
 
 
Sidley Austin LLP

 
 
 
555 West Fifth Street, 40th Floor

 
 
 
Los Angeles, California  90013

 
 
Attention:
Brian C. Flavell, Esq.

 
 
Telephone:
(213) 896-6603

 
 
Facsimile:
(213) 896-6600

 
 
If to Lender:

 
 
CORUS Bank, N.A.

 
 
3959 North Lincoln Avenue

 
 
Chicago, Illinois 60613

 
Attention:
Brian Brodeur

 
Telephone:
(773) 832-3452

 
Facsimile:
(773) 832-3540

 
 
With a copy to:

 
 
CORUS Bank, N.A.

 
 
3959 North Lincoln Avenue

 
 
Chicago, Illinois 60613

 
Attention:
Joel Solomon, General Counsel

 
Telephone:
(773) 832-3526

 
Facsimile:
(773) 832-3626

 
 
And to:

 
 
Katten Muchin Rosenman LLP

 
 
525 West Monroe Street

 
 
Chicago, Illinois 60661

 
Attention:
Mark C. Simon, Esq.

 
Telephone:
(312) 902-5301

 
Facsimile:
(312) 577-4517

 
or at such other address as the party to be served with notice may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice.
 

 
82

--------------------------------------------------------------------------------

 

 
Article 23
 
 
WAIVER OF JURY TRIAL
 
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP THAT
IS THE SUBJECT OF THIS AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
 

 
83

--------------------------------------------------------------------------------

 

EXECUTED as of the date first set forth above.
 

 
 
BORROWER:

 
CJUF II STRATUS BLOCK 21 LLC, a Delaware limited liability company

 
By:
Stratus Block 21 Investments, L.P., a Texas

 
limited partnership, Manager

 
By:
Stratus Block 21 Investments GP,

 
L.L.C., a Texas limited liability

 
company, General Partner

 
By:/s/ John E. Baker

 
                    Name:
John E. Baker

                                                                                    Title:   Senior
Vice President

By:           Canyon-Johnson Urban Fund II, L.P., aDelaware limited partnership,
Member
 
By:           Canyon-Johnson Realty Advisors IILLC, a Delaware limited
liabilitycompany, General Partner
 
 
By: /s/ K. Robert Turner

 
                    Name:
K. Robert Turner

                                                                                   
Title:   Managing Partner

 
 

 
 

--------------------------------------------------------------------------------

 

 
LENDER:
   
CORUS BANK, N.A.
     
By: /s/ Brian Brodeur
 
Name: Brian Brodeur
 
Title: Senior Vice President

 
 

--------------------------------------------------------------------------------

 

EXHIBIT A
 
Legal Description of Land
 
Lots 1 through 12, Block 21, of the Original City of Austin, Travis County,
Texas, according to the map or plat of record in the General Land Office of the
State of Texas, together with the area within the alley traversing said Block,
which was vacated by Ordinance recorded under Document No. 1999086902 and
described in Memorandum Designating the Vacation of a 20 foot wide alley on
Block 21 and Block 22, in the City of Austin as recorded under Document No.
2004040650 of the Official Public Records of Travis County, Texas.
 

A-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT B
 
Permitted Exceptions
 

 

B-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT C
 
Title Requirements
 
1.
Title Insurance Company Requirements.  The maximum single risk (i.e., the amount
insured under any one policy) by a title insurer may not exceed 25% of that
insurer’s surplus and statutory reserves.  Reinsurance must be obtained by
closing for any policy exceeding such amount.

 
2.
Loan Policy Forms.  Standard 2006 American Land Title Association (“ALTA”) form
of loan title insurance policy, the 1970 (amended October 17, 1970) ALTA loan,
or an equivalent Texas form policies must be used.

 
3.
Insurance Amount.  The amount insured must equal at least the original principal
amount of the Loan.

 
4.
Named Insured.  The named insured under the Title Policy must be substantially
the same as the following:  “Corus Bank, N.A. and its respective successors and
assigns.”

 
5.
Creditors’ Rights.  Any “creditors’ rights” exception or other exclusion from
coverage for voidable transactions under bankruptcy, fraudulent conveyance, or
other debtor protection laws or equitable principles must be removed by either
an endorsement or a written waiver or issuance of a 1970 Form Policy with 1982
modifications.

 
6.
Arbitration.  In the event that the form policy which is utilized includes a
compulsory arbitration provision, the insurer must agree, if permitted by law,
that such compulsory arbitration provisions do not apply to any claims by or on
behalf of the insured. Please note that the 1987 and 1992 ALTA form loan
policies include such provisions.

 
7.
Date of Policy.  The effective date of the Title Policy must be as of the date
and time of the closing.

 
8.
Legal Description.  The legal description of the property contained in the Title
Policy must conform to (a) the legal description shown on the survey of the
property, and (b) the legal description contained in the Deed of Trust.  In any
event, the Title Policy must be endorsed to provide that the insured legal
description is the same as that shown on the survey.

 
9.
Easements.  Each Title Policy shall insure, as separate parcels: (a) all
appurtenant easements and other estates benefiting the property, and (b) all
other rights, title, and interests of the borrower in real property under
reciprocal easement agreements, access agreements, operating agreements, and
agreements containing covenants, conditions, and restrictions relating to the
Project.

 
10.
Exceptions to Coverage.  With respect to the exceptions, the following applies:

 
a)           Each Title Policy shall afford the broadest coverage available in
the state in which the subject property is located.
 

C-i
 
 

--------------------------------------------------------------------------------

 

b)           The “standard” exceptions (such as for parties in possession or
other matters not shown on public records) must be deleted.
 
c)           The “standard” exception regarding tenants in possession under
residential leases, should also be deleted.  For commercial properties, a rent
roll should be attached in lieu of the general exception.
 
d)           The standard survey exception to the Title Policy must be
deleted.  Instead, a survey reading reflecting the current survey should be
incorporated.
 
e)           Any exception for taxes, assessments, or other lienable items must
expressly insure that such taxes, assessments, or other items are not yet due
and payable.
 
f)           Any lien, encumbrance, condition, restriction, or easement of
record must be listed in the Title Policy, and, if permitted by law, the Title
Policy must affirmatively insure that the improvements do not encroach upon the
insured easements or insure against all loss or damage due to such encroachment.
 
g)           The Title Policy may not contain any exception for any filed or
unfiled mechanic’s or materialmen’s liens.
 
h)           In the event that a comprehensive endorsement has been issued and
any Schedule B exceptions continue to be excluded from the coverage provided
through that endorsement, then a determination must be made whether such
exceptions would be acceptable to Lender.  In the event that it is determined
that such exception is acceptable, a written explanation regarding the
acceptability must be submitted as part of the delivery of the loan documents.
 
(i)           No exception(s) relating to the use of a purchaser’s upgrade
deposits or earnest money deposits in the construction of the Project shall be
permitted.
 
If Schedule B indicates the presence of any easements that are not located on
the survey, the Title Policy, if permitted by law, must provide affirmative
insurance against any loss resulting from the exercise by the holder of such
easement of its right to use or maintain that easement.  ALTA Form 103.1 or an
equivalent endorsement is required for this purpose.
 
11.
Endorsements.  With respect to endorsements, the following applies:

 
a)           Each Title Policy must include an acceptable environmental
protection lien endorsement on ALTA Form 8.1.  Please note that Form 8.1 may
take exception for an entire statute which contains one or more specific
sections under which environmental protection liens could take priority over the
Deed of Trust, provided, however, that such specific sections under which the
lien could arise must also be referenced.
 

C-ii
 
 

--------------------------------------------------------------------------------

 

b)           Each Title Policy must contain an endorsement which provides that
the insured legal description is the same as shown on the survey.
 
c)           Each Title Policy must contain a comprehensive endorsement (ALTA
Form 9) if a lien, encumbrance, condition, restriction, or easement is listed in
Schedule B to the title insurance policy.
 
d)           Lender may require the following endorsements where applicable and
available:
 
-access
 
-due execution
 
-single tax lot
-address
 
-first loss
 
-subdivision
-adjustable rate
 
-last dollar
 
-tie in
-assessments
 
-leasehold
 
-usury
-assignment of leases and rents
 
-mineral rights
 
-zoning (ALTA 3.1
-with parking)
-assignment of loan documents
 
-Deed of Trust tax
 
-condominium endorsement
-reverter
-contiguity
-revolving credit
-doing business
                           

12.
Other Coverages.  If permitted by applicable law, each Title Policy shall insure
the following by endorsement or affirmative insurance to the extent such
coverage is not afforded by the ALTA Form 9 or its equivalent in a particular
jurisdiction:

 
a)           that no conditions, covenants, or restrictions of record affecting
the property:
 
(i)           have been violated,
(ii)           create lien rights which prime the insured Deed of Trust,
(iii)           contain a right of reverter or forfeiture, a right of reentry,
or power of termination, or
(iv)           if violated in the future would result in the lien created by the
insured Deed of Trust or title to the property being lost, forfeited, or
subordinated; and
 
b)           that except for temporary interference resulting solely from
maintenance, repair, replacement, or alteration of lines, facilities, or
equipment located in easements and rights of way taken as certain exceptions to
each Title Policy, such exceptions do not and shall not prevent the use and
operation of the Project or the improvements as used and operated on the
effective date of the Title Policy.
 
13.
Informational Matters.  The Policy must include, as an informational note, the
following:

 
a)           The recorded plat number together with recording information; and
 

C-iii
 
 

--------------------------------------------------------------------------------

 

b)           The property parcel number or the tax identification number, as
applicable.
 
14.
Delivery of Copies.  Legible copies of all easements, encumbrances, or other
restrictions shown as exceptions on the Title Policy must be delivered with the
first draft of the title commitment.

 

C-iv
 
 

--------------------------------------------------------------------------------

 

EXHIBIT D
 
Form of Survey Certification
 
CERTIFICATION FOR SURVEYS (LONG-FORM)
 
I hereby certify to CORUS Bank, N.A., its successors and assigns, and __________
(insert Borrower and Title Insurance Company) that the survey prepared by me
entitled “__________” was actually made upon the ground and that it and the
information, courses and distances shown thereon are correct; that the title
lines and lines of actual possession are the same; that the size, location and
type of buildings and improvements are as shown and all are within the boundary
lines of the property; that there are no violations of zoning ordinances,
restrictions or other rules and regulations with reference to the location of
said building and improvements; that there are no easements, encroachments or
use affecting this property appearing from a careful physical inspection of the
same, other than those shown and depicted thereon; that all utility services
required for the operations of the premises either enter the premises through
adjoining public streets, or the survey shows the point of entry and location of
any utilities which pass through or are located on adjoining private land; that
the survey shows the location and direction of all storm drainage systems for
the collection and disposal of all roof and surface drainage; that any discharge
into streams, rivers or other conveyance system is shown on the survey; and that
the parcels described heron do not lie within [or lie within] flood hazard areas
in accordance with the document entitled “Department of Housing and Urban
Development, Federal Insurance Administration–Special Flood Hazard Area Maps.”
This survey is made in accordance with the “Minimum Standard Detail Requirements
for Land Title Surveys” jointly established and adopted by ALTA and ACSM in 2005
and includes items 1-4, 6-7(b)(i), 8-10, 11(b) and 13 of Table A.  Pursuant to
the Accuracy Standards as adopted by ALTA, NSPS, and ACSM and in effect on the
date of this certification, the undersigned further certifies that:  [Surveyor
to complete with appropriate choice from Minimum Standard Detail Requirement]
 

D-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT E
 
INSURANCE REQUIREMENTS DURING AND POST CONSTRUCTION

I.           Insurance.  Borrower shall obtain, and maintain at all times during
term of the Loan, such insurance as Corus Bank, N.A. (“Lender”) may reasonably
require, including, but not limited to the insurance coverage set forth
below.  Unless otherwise expressly defined herein, capitalized terms set forth
in this Exhibit are terms of art, as used in and understood in the insurance
industry or are defined terms in the Construction Loan Agreement to which this
is attached.
 
A.           During Construction.
 
(a)           Builder’s Risk.  From the closing of the loan until replaced by
permanent property insurance, “All Risk” form of Builder’s Risk Insurance, in
such amount as Lender shall reasonably require, but in no event less than 100%
of the replacement cost value of the Project (including Upgrades and any
leasehold improvements) (the “Builder’s Risk Insurance”).  Such policy shall be
written on a Builder’s Risk Completed Value Form (100% non-reporting) or its
equivalent and shall not contain a permission to occupy limitation or a
coinsurance clause.  Such policy shall not have exclusion for sidewalks,
retaining walls or underground property.  The policy shall include coverage for
Flood and Earthquake with sub-limits no less than 25% of the replacement cost,
but each not less than $5,000,000 per occurrence and in the annual aggregate,
unless building or Project is located in Earthquake Mercalli Zone VII or
greater, or a Flood Zone  “A”, as defined by the National Insurance Flood
Plan.  If the Project is located in an Earthquake Mercalli Zone VII or greater,
Borrower shall maintain Earthquake limits providing for 75% of the replacement
cost, with a deductible not greater than 5% of replacement costs. If the Project
is located in a Flood Zone “A”, Borrower shall maintain Flood limits providing
for 30% of the replacement cost (or such other limits approved by Lender), with
a deductible not greater than 3% of replacement costs. Such insurance policy
shall also include coverage for:

 
(i)
Loss suffered with respect to Borrower’s materials, equipment, machinery, and
supplies whether on-site, in transit, or stored off site, with a limit of no
less than 100% replacement cost   and subject to a minimum limit of $250,000 for
loans less than $25 Million, $500,000 for loans $25 Million up to $50 Million,
and $1,000,000 for loans $50 Million or more for both transit and off site
storage provided that Borrower shall obtain or cause to be obtained additional
insurance whenever the value of materials in transit or storage exceed those
limits;

 
(ii)
At least 25% of the Soft Costs contained in the Approved Budget, and including
coverage for all types (including but not limited to interest expense; fees; and
plans, specifications, blueprints and

E-i
 
 

--------------------------------------------------------------------------------

 

 
models, in connection with any restoration following an insured loss);

 
(iii)
If applicable, loss or delay of rental income for a period of at least 6 months
on an actual loss sustained basis.  Lender reserves the right to require an
endorsement providing for an extended period of indemnity for the rental income
insurance.

(b)           Comprehensive Broad Form Boiler and Machinery Insurance, covering
all mechanical and electrical apparatus and pressure vessels.  Such insurance
shall provide coverage against loss or damage from an accident to and/or caused
by boilers and machinery, including but not limited to: heating apparatus,
pressure vessels, pressure pipes, electrical or air conditioning equipment on a
blanket comprehensive coverage form, in such amount as Lender shall reasonably
approve but no less than $10,000,000.  All exclusions for testing shall be
removed.

(c)           Professional Liability.  Borrower will require the architect,
engineers (including Structural and MEP contractors) and all other design
professionals retained by Borrower to purchase and maintain continuous
professional liability coverage in the amount of $1,000,000 per claim / and
$1,000,000 annual aggregate.  This policy may be on a  “claims made” basis, and
shall include coverage for bodily injury and property damage and retroactive
coverage back to the first date that professional services were provided to the
Project.  Evidence of this insurance shall be provided to Borrower in form of
insurance certificate for a period of 3 years after substantial completion of
the Project (unless the loan is paid off).

(d)           Commercial General Liability and Umbrella Liability coverage,
including but not limited to, coverage for Personal Injury, Bodily Injury,
Death, Property Damage, with limits of not less than $10,000,000 per occurrence
and in the annual aggregate per location.  If commercially available in the
location of the Project, the policy shall contain an Extended Products/Completed
Operations Hazard Endorsement (“Extended Products Endorsement”) for a period of
at least three years or the state requirement (if any), whichever is greater,
acceptable to Lender in its reasonable discretion.  The policies described in
this paragraph shall cover, without limitation: elevators, escalators,
independent contractors, contractual liability (covering, to the maximum extent
permitted by the commercial general liability policy, Borrower’s obligation to
indemnify Lender as required under this Exhibit) and Products and Completed
Operations Liability coverage. Coverage should also include host liquor
liability. Borrower shall add Lender, its directors, officers, employees and
agents as additional insured.

(e)           Worker’s Compensation.  If applicable, worker’s compensation
insurance covering Borrower and its employees at the site to the extent
required, and in the amounts required by applicable Laws. An endorsement
providing U.S.

E-ii
 
 

--------------------------------------------------------------------------------

 

Longshore and Harbor Workers Compensation Act (USL&HW) coverage should be added
on an “if any” basis if there is an exposure.

(f)           Employers Liability.  If applicable in the amount of $1,000,000
per accident, $1,000,000 per illness, per employee and $1,000,000 per illness,
in the aggregate.

(g)           Contractor’s Liability.  Borrower shall cause the Contractor to
maintain Commercial General Liability coverage, including, without limitation,
products and completed operations insurance with no less than $10,000,000 in
limits per occurrence and in the aggregate per project through primary and
umbrella liability policies.  For all condominium projects if commercially
available in location of the Project the Contractor shall be insured by the
Extended Products Endorsement or by comparable coverage.  Borrower shall also
ensure that all subcontractors maintain similar coverage with limits appropriate
to the hazard associated with their respective work on the site.  Contractor
shall be required to carry automobile liability insurance for all owned, hired
and non owned vehicles with limits of at least $10 Million. All parties engaged
in work on the Project shall maintain statutory Workers Compensation, Employer’s
Liability with limits of at least $1,000,000 and any legally mandated Disability
insurance in force for all employees on the job. It is understood that umbrella
or excess policies may be used to reach the required limits.

(h)           Borrower may provide the Commercial General and Umbrella Liability
and Workers Compensation and Employers Liability required to be carried pursuant
to Sections I.A., Subsections (d), (e) and (f) of this Exhibit through the
purchase of a Wrap-up or Owner Controlled Insurance Program or a Contractor
Controlled Insurance Program.  This program shall provide coverage for all
parties engaged in construction operations at the Project with limits approved
by Lender.

(i)           Surety bonds as required by the terms of the Application
Letter/Commitment Letter.

(j)           Such other insurance reasonably required by Lender.

 
B.           Post Construction.  After the earlier of: (i) substantial
completion of the Project, or (ii) cancellation or expiration of the Builder’s
Risk Policy, Borrower shall provide the following coverages:
 
(a)           “All Risk” insurance including Flood and Earthquake, and such
other insurable hazards as, under good insurance practices are insured against
for other property and buildings similar to the premises in nature, use,
location, height, and type of construction. The amount of such insurance shall
be not less than one hundred percent (100%) of the replacement cost without
depreciation of the Project.  Such insurance policy shall contain an agreed
amount endorsement.

E-iii
 
 

--------------------------------------------------------------------------------

 

Flood and Earthquake sublimits shall be at least 25% of the replacement cost,
but not less than $5,000,000 each per occurrence and in the annual aggregate,
unless the risk is location in a Mercalli Zone VII or greater or a Flood Zone
“A”, as defined by the National Insurance Flood Plan.  If the Project is located
in an Earthquake Mercalli Zone VII or greater Borrower shall maintain Earthquake
limits providing for 75% of the replacement cost, with a deductible not greater
than 5% of the replacement cost.  If the Project is located in a Flood Zone “A”,
Borrower shall maintain Flood limits providing for 30% of the replacement cost
(or such other limits approved by Lender), with a deductible not greater than 3%
of replacement costs.  Such insurance shall cover increased cost of law or
ordinance insurance, costs of demolition and increased cost of construction with
a sublimit of not less than $1,000,000.  If coverage is provided under a blanket
policy, Lender shall be named as sole Loss Payee and Mortgagee for the Project.

(b)           Comprehensive Broad Form Boiler and Machinery. Insurance, in the
minimum amount of $10,000,000 covering all mechanical and electrical equipment
against physical damage and covering, without limitation, all tenant
improvements and betterments that Borrower is required to insure pursuant to any
lease on a replacement cost basis.  Such insurance shall provide coverage
against loss or damage from an accident to and/or caused by boilers and
machinery, including but not limited to: heating apparatus, pressure vessels,
pressure pipes, and electrical or air conditioning equipment on a blanket
comprehensive coverage form, in such amount Lender shall reasonably
approve.  All exclusions for testing shall be removed. Coverage shall be
extended to include loss of rental income for 6 months as a result of damage
from an insured peril.

(c)           Business Interruption.  Upon Lender’s reasonable request, business
income and extra expense, against the perils insured by the “All Risk” Property,
for a period of indemnity of twelve months.

(d)           Commercial General Liability. Commercial General Liability
Insurance, for Personal Injury, Bodily Injury, Death, Accident and Property
Damage providing in combination no less than $10,000,000 per occurrence (with
sublimits approved by Lender) and in the annual aggregate, per location.  The
policies described in this paragraph shall cover, without limitation: elevators,
escalators, independent contractors, contractual liability and Products and
Completed Operations Liability coverage. It is understood that umbrella or
excess policies can be used to meet the required limits.

(e)           Dram Shop. Upon Lender’s reasonable request or prior to any tenant
selling alcoholic beverages on any part of the Project, Borrower either itself
or through the Tenant shall provide evidence of so-called “Dram Shop” against
claims or liabilities arising directly or indirectly to Persons or property on
account of the sale or dispensing of alcoholic beverages.  Coverage shall
include loss of means of support. Limits shall equal those limits as may be
required by

E-iv
 
 

--------------------------------------------------------------------------------

 

applicable Laws or as Lender may reasonably specify. If state law allows, Lender
shall be named as an additional insured on such policy.

(f)           Worker’s Compensation.  If applicable, worker’s compensation
insurance covering Borrower and its employees at the site to the extent
required, and in the amounts required by applicable Laws.

(g)           Employers
Liability.                                                      If applicable in
the amount of $1,000,000 per accident; $1,000,000 per illness, per employee; and
$1,000,000 per illness, in the aggregate.

(h)           Auto Liability for Owned (if any) and Hired and Non Owned with
limits approved by Lender.

(i)           Other. Such other insurances as may be reasonably requested by
Lender.

 
II.           Requirements of Insurance Policies.
 
(a)           All insurance policies shall be issued by an insurer or insurers
with an A.M. Best rating of A:IX or better or a Standard and Poor’s rating of
“AA”, or equivalent rating from another agency acceptable to Lender and be
authorized in the state where the Project is located.    All insurance acquired
pursuant to this Exhibit shall be in form, amounts and with coverage and
deductibles satisfactory to Lender, in Lender’s sole discretion.

(b)           The Builder’s Risk insurance policies required to be carried
pursuant to Section I.A., Subsections (a) and (b) of this Exhibit, and the All
Risk required pursuant to Section I.B, Subsections (a) and (b), shall name
Borrower as the insured and shall also name Lender as Loss Payee and Mortgagee,
under a non-contributing standard mortgagee clause.  Without Lender’s prior
written consent, Borrower shall not name any Person other than Lender, as loss
payee under any property insurance policies that Borrower is required to insure
pursuant to any Lease.

(c)           The Commercial General Liability and Contractors Liability set
forth in Section I.A., Subsections (d) and (g) and Section I.B., Subsection (d),
shall name Lender, its directors, officers, and employees as Additional Insured.

(d)           Lender shall be named as a dual-obligee on the Performance Bond
required to be obtained by General Contractor pursuant to Section I.A.,
Subsection (i) of this Exhibit.

(e)           The amount of any deductible under any insurance policy must be
reasonably acceptable to Lender.

E-v
 
 

--------------------------------------------------------------------------------

 

(f)           Borrower may provide required insurance under blanket
policies.  Borrower shall not maintain any insurance on the Project that does
not name Lender as Loss Payee.

(g)           Borrower shall pay the premiums for the insurance policies as the
same become due and payable.  Borrower shall deliver to Lender certified copies
of the insurance policies required to be maintained pursuant to this Exhibit
within sixty (60) days after the date of this Agreement or ten (10) days after
the issuance of the policies by the insurer, whichever is later, but in all
events, no later than ninety (90) days after the date of this Agreement, and
failure to do so will be an immediate Event of Default.  Notwithstanding the
foregoing, Lender shall not be deemed by reason of the custody of such insurance
policies to have knowledge of the contents thereof.  Borrower also shall deliver
to Lender, within ten (10) days of Lender’s request, a certificate of Borrower
or Borrower’s insurance agent setting forth the particulars as to all such
insurance policies, that all premiums due thereon have been paid currently and
that the same are in full force and effect.  BORROWER SHALL DELIVER A
CERTIFICATE OR OTHER EVIDENCE OF INSURANCE ACCEPTABLE TO LENDER EVIDENCING THE
INSURANCE REQUIRED HEREUNDER ON THE CLOSING DATE, TOGETHER WITH RECEIPTS FOR THE
PAYMENT OF PREMIUMS THEREON.  ALL CERTIFICATES FOR PROPERTY INSURANCE MUST BE ON
ACORD FORM 27 or the equivalent; ACORD 25 certificates are acceptable for
liability insurance.  Not later than fifteen (15) days prior to the expiration
date of each of the insurance policies Borrower shall deliver to Lender a
certificate of insurance evidencing renewal of coverage as required
herein.  Within ten (10) days after such renewal, Borrower shall deliver to
Lender evidence of payment of premium satisfactory to Lender.  Not later than
ninety (90) days after the renewal of each of the insurance policies, Borrower
shall deliver to Lender an original or certified copy (as required pursuant to
this Section) of a renewal policy or policies.

(h)           Each insurance policy shall contain a provision whereby the
insurer agrees that so long as the Loan is outstanding, such policy shall not be
canceled or fail to be renewed, lapsed or materially changed without in each
case, at least thirty (30) days prior written notice to Lender, except ten (10)
days for non-payment of premium

(i)           In the event any insurance policy (except for general and other
liability and Workers Compensation insurance) shall contain breach of warranty
provisions, such policy shall provide that with respect to the interest of
Lender, such insurance policy shall not be invalidated by and shall insure
Lender regardless of; (A) any act, failure to act or negligence of or violation
of warranties, declarations or conditions contained in such policy by any named
insured; (B) the occupancy or use of the property for purposes more hazardous
than permitted by the terms thereof; or (C) any foreclosure or other action or
proceeding taken by Lender pursuant to any provision of this Agreement.

E-vi
 
 

--------------------------------------------------------------------------------

 

(j)           Any insurance maintained pursuant to this Agreement may be
evidenced by blanket insurance policies covering the premises and other
properties or assets of Borrower or its affiliates; provided that any such
policy shall in all other respects comply with the requirements of this
section.  Lender, in its reasonable discretion, shall determine whether such
blanket policies contain sufficient limits of insurance.

(k)           Any insurance carried by Lender shall be for its sole benefit and
shall not inure to the benefit of Borrower and Insurance required from Borrower
shall be primary to any available, if any, to Lender.

(l)           All required policies, other than professional liability, shall
provide that insurers have waived rights of subrogation against Lender.  The
required insurance shall be primary without right of contribution from any
insurance, which may be carried by Lender.

(m)           The required limits are minimum limits established by Lender and
nothing contained herein shall be construed to mean the required limits are
adequate or appropriate to protect Borrower from greater loss.

If there are any questions regarding our insurance requirements, please contact
our insurance consultants:

Alpha Risk Management, Inc., 60 Cutter Mill Road, Great Neck, NY 11021
Attention: Heidi M. Bucher, ARM
hbucher@alphariskmanagement.com
Tel: (516) 829-3500 x6 or Fax: (516) 829-6029

Final insurance policies should be forwarded for review directly to the
attention of Heidi M. Bucher at Alpha Risk Management, Inc. Renewals should be
sent to the attention of Josefina Reyes, Corus Bank, 3959 N. Lincoln, Chicago,
Illinois 60613

E-vii
 
 

--------------------------------------------------------------------------------

 

 
Illinois Collateral Protection Act Notice
 

Unless Borrower provides Lender with evidence of the insurance coverage required
by this Agreement, Lender may purchase insurance at Borrower’s expense to
protect Lender’s interest in the Project.  This insurance may, but need not,
protect Borrower’s interest.  The coverage that Lender purchases may not pay any
claim that Borrower makes or any claim that is made against Borrower in
connection with the Project.  Borrower may later cancel any insurance purchased
by Lender, but only after providing Lender with evidence that Borrower has
obtained insurance as required by this Agreement.  If Lender purchases insurance
for the Project, Borrower will be responsible for the cost of that insurance,
including interest and any other charges Lender may impose in connection with
the placement of the insurance, until the effective date of the cancellation or
expiration of the insurance.  The cost of the insurance may be added to
Borrower’s total outstanding balance or obligation.  The cost of insurance may
be more than the cost of insurance Borrower may be able to obtain on its own.
 

 

E-viii
 
 

--------------------------------------------------------------------------------

 

EXHIBIT F
 
Architect’s Certificate
 
The firm of ________________________________________ hereby certifies for the
benefit of CORUS Bank, N.A. that:
 
The firm has been employed by _______________ pursuant to a contract dated
_______________ to provide architectural and engineering services commonly known
as _______________ which is located at ______________.
 
The contract provides for the following services:
 

 
preparation of plans and specifications
 
Pre-qualification of contractors
 
Contract administration and supervision of construction
 
Tenant space design
           

The firm is duly licensed and in good standing under laws of the state of
___________________________License No.__________________________________.
 
The foundations were designed in accordance with the recommendations contained
in a soil report dated _________________which was prepared
by______________________________________.
 
The following are all of the permits or governmental agency approvals required
for the construction and occupancy of the building:
 

 
Issuing Agency
 
Date Issued
       
Excavation Permit
     
Foundation Permit
     
Building Permit
     
EPA – Water
     
EPA – Sewer
     
EPA – Air
             
Cert. Of Occupancy Bldg.
     
Cert. Of Occupancy – Tenant
     
Other (Specify)
             

F-i
 
 

--------------------------------------------------------------------------------

 

All utilities necessary for the operation of the project are available with
sufficient capacity at the boundaries of the project.  If utility services must
be brought to site, please explain:.
 
The plans listed on the attached Schedule I comprise all of the plans which will
be necessary for the complete construction of the project, excepting tenant
space designs, and when the project is built in accordance therewith the project
will (excepting completion of tenant improvements) be ready for occupancy.  The
plans are complete and contain all detail necessary for
construction.  Calculations of the gross building and the net rentable building
area are attached as Schedule II.  The plans (and the project will, when
constructed in accordance therewith) comply with all applicable building,
zoning, land use, subdivision, environmental, fire, safety and other applicable
governmental laws, statutes, codes, ordinances, rules and regulations.
 
The attached Schedule III, establishing a timetable for completion of the
project and showing on a monthly basis the anticipated progress of the work, is
realistic and can be adhered to.
 
The following design drawings or plans have been or will be prepared by other
designers or contractors.
 
Type of Plans
 
Name of Preparing Firm
                             

The Specifications
are:                                                                                                
shown on plans
 
 Bound separately

By:                                                                
 
Title:                                                                           
 
Date:                                                                           
 

F-ii
 
 

--------------------------------------------------------------------------------

 

EXHIBIT G
 
Initial Budget
 

G-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT H
 
Draw Request Form

H-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT I
 
Partial Plans and Specifications

(see attached)

I-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT J
 
Proposed Finish Standards
 

 
Proposed Construction Finish for Residential Units:
 
 
1. Building Foundations:  CIP Concrete

2. Building Frame: CIP Concrete

3. Description of Exterior Wall System Including Design and Materials: 
Unitized Curtainwall System; Exterior Materials - High Performance Vision Glass,
Insulated Spandrel Glass, Composite Aluminum Panels

4. Description of Window System: See Above, Ext Wall System

5. Description of Common Area Amenities: Private Condo swimming pool, Terrace
deck, access to all hotel amenities.

6. Ceiling Heights:

a.  
Standard units: Minimum ceiling: 8' in enclosed toilet rooms only, typically
9'-4" minimum, 10-6" max with curtain slots up to 11'-1".

b.  
Subpenthouses: 9'-0" minimum, 12'-6" max with curtain slots up to 15'-1".

c.  
Penthouse levels 35 and 36: 10-0" minimum, 14'-0" max with curtain slots up to
15'-1".

d.  
Penthouse level 37: 10'-0" minimum, 20'-0" max.

7.  Description of Kitchen and Bath Millwork, Countertops, and Plumbing
Fixtures: Bulthaup Kitchen Cabinets; Stone Countertops (selection by buyer);
Plumbing Fixtures by Dornbracht and Kohler

8. Flooring (Units and Common Areas): Mafi Hardwood Engineered Wood Floors,
Stone Tile (selections vary), Carpet

9. Description of Appliances: Miele Brand Appliances

10. Other Features: n/a

J-i
 
 

--------------------------------------------------------------------------------

 

Proposed Unit Construction Finish for Hotel

 
 
1. Building Foundations:  CIP Concrete

2. Building Frame: CIP Concrete

3. Description of Exterior Wall System Including Design and Materials: 
Unitized Curtainwall System; Exterior Materials - High Performance Vision Glass,
Insulated Spandrel Glass, Composite Aluminum Panels

4. Description of Window System: See Above, Ext Wall System

5. Description of Common Area Amenities: Hotel pool, Terrace deck, ballroom,
spa, fitness, lobby bar, restaurants, valet, shopping, dining, hike and bike
trail.

6. Ceiling Heights:
a.  
First Floor: 12’6” to 18’0”  (bathrooms and secret bar at 9’ – 12’)

b.  
Second Floor: 12’ to 16’

c.  
Tower Floors: 8’ to 9’3”

7. Description of Kitchen and Bath Millwork, Countertops, and Plumbing
Fixtures: Built-in stained and lacquered closets and desk, Silestone (or
similar) counters, Kohler plumbing fixtures

8. Flooring (Units and Common Areas): Carpet in Units, Concrete, Hardwood, rugs,
porcelain tile, and carpet.

9. Description of Appliances: n/a

10. Other Features: n/a

J-ii
 
 

--------------------------------------------------------------------------------

 

EXHIBIT K
 
PLEASE INCLUDE IN DRAW PACKAGE SENT TO CORUS BANK, N.A.
 
FORM OF BAILEE LETTER FOR PUBLIC WAREHOUSEMEN
 
[WAREHOUSEMEN LETTERHEAD]
 
[DATE]
 
Corus Bank, N.A.
 
3959 North Lincoln Avenue
 
Chicago, Illinois 60613
 
Attention: Corus Construction Manager
 
Re:           W Hotel and Residences Condominiums
 
Austin, Texas
 
(the
“Project”)                                                                                                                                
 
Corus Construction Manager:
 
This letter is to confirm that the undersigned, [Insert name of Public
Warehousemen] (“Warehousemen”), is holding and will hold, from time to time, for
storage in its public warehouse located at the address set forth above, the
materials described on Schedule 1, attached hereto and made a part hereof, for
the Project (the “Stored Materials”).  Such Schedule 1 may be revised and
updated as additional materials are delivered to Warehousemen and stored in
accordance with this letter.
 
Warehousemen is holding such Stored Materials on behalf of [Insert name of
Contractor], as the “Contractor” of the Project and [____________], as owner of
the Project (“Owner”) and the Owner owns and has title to the Stored Materials
or will own and obtain title to the Stored Materials upon receipt of a bill of
sale for such Stored Materials.  Pursuant to a certain Construction Loan
Agreement (the “Loan Agreement”) between Owner and Corus Bank, N.A. (“Lender”),
Owner has granted to Lender a security interest in, among other things, the
Stored Materials.
 
We acknowledge and agree that Lender’s security interest in the Stored Materials
is senior to all liens, claims and interests, other than our warehouseman’s lien
for any accrued and unpaid warehousing fees charged by us for the actual storage
of the Stored Materials.  To protect Lender’s security interest in the Stored
Materials, from and after the date of this letter, all warehouse receipts and
other documents of title which evidence any Stored Materials now or hereafter
delivered by Owner to us shall be non-negotiable and issued to or for the
account of Lender.  We shall provide Lender with a copy of such receipts or
other documents upon Lender’s request for those items.  We will notify all of
our successors and assigns of the existence of the agreements contained herein.
 

K-i
 
 

--------------------------------------------------------------------------------

 

Notwithstanding the issuance of such receipts or other documents to or for the
account of Lender, we acknowledge and agree that Lender has authorized us to
release any of the Stored Materials to any authorized agent of Owner upon
Owner’s request (including, without limitation, Contractor); provided, however,
upon our receipt of written direction from Lender, we shall refuse to release
any of the Stored Materials to Owner or Owner’s agent (including, without
limitation, Contractor) and we shall only release such Stored Materials to
Lender or the party designated by Lender in such written direction.
 
Very truly yours,

[PUBLIC WAREHOUSEMEN]

By:                                                      
Name:                                                                
Title:                                                                

K-ii
 
 

--------------------------------------------------------------------------------

 

SCHEDULE 1
 
DESCRIPTION OF MATERIALS
 
[Warehousemen: Please insert/attach a detailed inventory of the Stored
Materials, including, without limitation, a statement of the quantity stored,
relevant invoices, warehouse receipts or other documents of title and any
applications for payment.]
 

 

K-iii
 
 

--------------------------------------------------------------------------------

 

EXHIBIT L
 
PLEASE INCLUDE IN DRAW PACKAGE SENT TO CORUS BANK, N.A.
 
FORM OF BAILEE LETTER
 
[SUBCONTRACTOR LETTERHEAD]
 
[DATE]
 
Corus Bank, N.A.
 
3959 North Lincoln Avenue
 
Chicago, Illinois 60613
 
Attention:  Corus Construction Manager
 
Re:           W Hotel and Residences Condominiums
 
Austin, Texas
 
(the
“Project”)                                                                                                                                
 
Corus Construction Manager:
 
This letter is to confirm that the undersigned, [Insert name of Sub-Contractor]
(“Bailee”), is holding for processing and/or storage the materials described on
Schedule 1, attached hereto and made a part hereof, for the Project (the “Stored
Materials”).  Such Schedule 1 may be revised and updated as additional materials
are delivered to Bailee and stored in accordance with this letter.
 
Bailee is holding such Stored Materials on behalf of [Insert name of
Contractor], as the “Contractor” of the Project and [_________________], as
owner of the Project (“Owner”) and the Owner owns and has title to the Stored
Materials or will own and obtain title to the Stored Materials upon receipt of a
bill of sale for such Stored Materials.  Pursuant to a certain Construction Loan
Agreement (the “Loan Agreement”) between Owner and Corus Bank, N.A. (“Lender”),
Owner has granted to Lender a security interest in, among other things, the
Stored Materials.
 
In order to protect Owner’s ownership interest and Lender’s security interest in
the Stored Materials, Bailee agrees, acknowledges, represents and warrants as
follows:
 
 
(i)
We are holding and will hold the Stored Materials on bailment for processing or
warehousing;

 
 
(ii)
The Stored Materials are Owner’s property and are subject to Lender’s security
interest, and we are holding and will hold the Stored Materials for Lender’s
benefit;

 

L-i
 
 

--------------------------------------------------------------------------------

 

 
(iii)
Lender’s security interest in the Stored Materials shall be senior to all liens,
claims and interests, including any fees charged by us for the actual processing
or storage of the Stored Materials and we will notify all of our successors and
assigns of the existence of the agreements contained herein;

 
 
(iv)
If, at any time after the date of this letter, Lender shall notify us in writing
that Owner has defaulted on its obligations to Lender under the Loan Agreement,
we will comply with Lender’s written instructions as to the disposition of the
Stored Materials; and

 
 
(v)
Until we are notified in writing by Lender that the financing arrangements under
the Loan Agreement have been terminated and Lender has been paid in full, we
shall not deduct from or offset against any amounts due and owing to us by
Owner, by applying any of the Stored Materials in payment for such amounts.

 
Very truly yours,

[BAILEE]

By:                                                      
Name:                                                                
Title:                                                                

L-ii
 
 

--------------------------------------------------------------------------------

 

SCHEDULE 1
 
DESCRIPTION OF MATERIALS
 
[Bailee: Please insert/attach a detailed inventory of the Stored Materials,
including, without limitation, a statement of the quantity stored, relevant
invoices and any applications for payment.]
 

L-iii
 
 

--------------------------------------------------------------------------------

 

EXHIBIT M
 
List of Sales Agreements and Price List Schedule
 

 

 

M-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT N
 
Subcontract Delivery Dates
 

 

 

N-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT O
 
Approved Form of Sales Agreement
 

 

O-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT P
 
Materials Purchases Not Subject to Retainage
 

P-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT Q
 
Allowable Tenant Improvements
 

 

Q-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT R
 
Delivery Schedule for Plans and Specifications
 

R-i
 
 

--------------------------------------------------------------------------------

 

EXHIBIT S
Form of Second Estoppel and Agreement from City of Austin

S-i
 
 

--------------------------------------------------------------------------------