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AMENDED AND RESTATED
 
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
 
BEAL BANK NEVADA, as Lender
6000 Legacy Drive
Plano, Texas 75024
 
Dated as of October 21, 2009
 

 
 
 

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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
3
2.1           Defined Terms
3
2.2           Other Definitional Provisions
15
Article 3 BORROWER'S REPRESENTATIONS AND WARRANTIES
15
3.1           Representations and Warranties
15
3.2           Survival of Representations and Warranties
20
Article 4 LOAN AND LOAN DOCUMENTS
21
4.1           Agreement to Borrow and Lend; Lender's Obligation to Disburse;
Excess Disbursements
21
4.2           Loan Documents
22
4.3           Term of the Loan
23
4.4           Prepayments
23
4.5           Required Principal Payments
24
4.6           Receipt of Payments
24
4.7           Termination of Lender's Unfunded Commitment
24
4.8           Lender's Inability to Fund
25
Article 5 INTEREST
25
5.1           Interest Rate
25
Article 6 COSTS OF MAINTAINING LOAN
25
6.1           Increased Costs and Capital Adequacy
25
6.2           Borrower Withholding
26
Article 7 LOAN EXPENSE AND ADVANCES
26
7.1           Loan and Administration Expenses
26
7.2           Loan Fees
27
7.3           Loan Administration Fees
27
7.4           Reserved
27
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
28
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
34
9.1           Construction Documents Required as of Closing
34
9.2           Construction Deliveries Required as of Full Loan Opening
36
Article 10 BUDGET, CONTINGENCY FUND AND CHANGE ORDERS
37
10.1           Budget
37

  (i)
 

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10.2           Budget Line Items
37
10.3           Owner's Contingency
39
10.4           Optional Method for Payment of Interest / Additional Interest
Reserve
39
10.5           Change Orders
40
Article 11 SUFFICIENCY OF LOAN
40
11.1           Loan In Balance
40
Article 12 CONSTRUCTION PAYOUT REQUIREMENTS
42
12.1           Applicability of Sections
42
12.2           Monthly Payouts
42
12.3           Documents to be Furnished for Each Disbursement
43
12.4           Retainages
45
12.5           Disbursements for Materials Stored On-Site
45
12.6           Disbursements for Off-site Materials
45
12.7           Specific Limitation on Disbursements
46
12.8           Disbursements Related to Commercial Space Leases
46
Article 13 FINAL DISBURSEMENT FOR CONSTRUCTION
47
13.1           Final Disbursement for Construction
47
Article 14 SALE OF RESIDENTIAL UNITS
48
14.1           Price List Schedule
48
14.2           Sales Agreements
48
14.3           Purchaser Deposits
49
14.4           Residential Unit Sales
50
14.5           Sales Operations and Seller's Obligations; Amendment and
Termination of Sales Agreements
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
59
14.10           Application of Sales Proceeds
60
Article 15 OTHER COVENANTS
60
15.1           Borrower further covenants and agrees as follows:
60
15.2           Single Purpose Entity Covenants
71
15.3           Authorized Representative
73
Article 16 CASUALTIES AND CONDEMNATION
74
16.1           Lender's Election to Apply Proceeds on Indebtedness
74
16.2           Borrower's Obligation to Rebuild and Use of Proceeds Therefor
75
Article 17 ASSIGNMENTS BY LENDER AND BORROWER
75
17.1           Assignments and Participations
75
17.2           Prohibition of Assignments and Transfers by Borrower
75
17.3           Prohibition of Transfers in Violation of ERISA
76
17.4           Successors and Assigns
77
Article 18 TIME OF THE ESSENCE
77
18.1           Time is of the Essence
77

(ii) 
 

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Article 19 EVENTS OF DEFAULT
77
19.1           Events of Default
77
Article 20 LENDER'S REMEDIES IN EVENT OF DEFAULT
80
20.1           Remedies Conferred Upon Lender
80
Article 21 GENERAL PROVISIONS
81
21.1           Captions
81
21.2           Modification; Waiver
81
21.3           Governing Law
81
21.4           Acquiescence Not to Constitute Waiver of Lender's Requirements
81
21.5           Disclaimer by Lender
82
21.6           Partial Invalidity; Severability
82
21.7           Definitions Include Amendments
83
21.8           Execution in Counterparts
83
21.9           Entire Agreement
83
21.10           Waiver of Damages and Limitation of Liability
83
21.11           Reserved
85
21.12           Jurisdiction
85
21.13           Set-Offs
85
21.14           Binding Effect
86
21.15           Waiver of Accord and Satisfaction
86
Article 22 NOTICES
86
Article 23 WAIVER OF JURY TRIAL
88
   

  (iii)
 

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EXHIBITS TO LOAN AGREEMENT
  

 Exhibit A  Legal Description of Land  Exhibit B  Construction Schedule  Exhibit
C  Permitted Exceptions  Exhibit D  Litigation  Exhibit E   Insurance
Requirements  Exhibit F  Architect's Certificate  Exhibit G  Budget  Exhibit H
 Draw Request Form  Exhibit I   Approved Plans and Specifications and Approved
Finish Standards  Exhibit J  Subcontracts  Exhibit K  Bailment Letter
(Warehousemen)  Exhibit L   Bailment Letter (Other Than Warehousemen)  Exhibit M
 List of Sales Agreements  Exhibit M-1  List of Sales Agreements Discrepancy
Items  Exhibit M-2  Price List Schedule  Exhibit N  Required Changes to
Condominium Documents  Exhibit O  Approved Form of Sales Agreement  Exhibit P
 Materials Purchases Not Subject to Retainage  Exhibit Q  Leasing Parameters and
Allowable Tenant Improvements  Exhibit R  List of Change Orders  Exhibit S  Form
of Fourth Estoppel and Agreement from City of Austin  Exhibit T  Due Diligence
materials provided to Lender

 
(iv) 
 

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AMENDED AND RESTATED
 
CONSTRUCTION LOAN AGREEMENT
Project Commonly Known as
"W Hotel and Residences"
Block 21, Austin, Texas
 
THIS AMENDED AND RESTATED CONSTRUCTION LOAN AGREEMENT ("Agreement") is made as
of October 21, 2009, by and between CJUF II STRATUS BLOCK 21 LLC, a Delaware
limited liability company ("Borrower"), and BEAL BANK NEVADA, a Nevada thrift,
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
fifty-nine (159) 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 restaurant space (provided that such restaurant
space will not consist of more than 15,900 net Rentable Square Feet exclusive of
any outdoor space and Hotel kitchen space) (the "Restaurant 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 86,750 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, 300 Parking Spaces shall be allocated for
the Residential Units, and 122 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.
 
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B.           Borrower and Corus Bank, N.A. ("Corus") previously entered into a
Construction Loan Agreement (the "Existing Loan Agreement"), dated as of May 2,
2008, pursuant to which Corus agreed, provided certain conditions were
satisfied, to make a loan to Borrower 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.
 
C.           Corus became unable to fund such loan and, as a result, Stratus
Partnership Investments, L.P. ("SPI"), an affiliate of Borrower, purchased all
right, title and interest of Corus in and to such loan, including, without
limitation, all rights of Corus under the Existing Loan Agreement and the Loan
Documents, as such term is defined in the Existing Loan Agreement (the "Existing
Loan Documents").
 
D.           Borrower has requested that Lender provide the Loan, as hereinafter
defined, to Borrower and Lender has agreed to do so. Borrower, the Guarantors,
as hereinafter defined, and Lender have entered into that certain Commitment
Letter, dated September 14, 2009, relating to the Loan (as amended, the
"Commitment Letter").  Contemporaneously with the execution of this Agreement,
Borrower has caused SPI to sell, assign, transfer and convey to Lender all
right, title and interest SPI acquired from Corus in regard to the loan
contemplated by the Existing Loan Agreement, including, without limitation, all
right, title and interest of the Lender, as defined in the Existing Loan
Agreement, under the Existing Loan Agreement and the Existing Loan Documents,
together with all other rights, titles and interests of SPI in and to the loan
contemplated by the Existing Loan Agreement.
 
E.           Borrower and Lender have agreed to amend and restate the Existing
Loan Agreement as provided herein and amend and restate and/or amend the
Existing Loan Documents, to evidence, secure, govern and otherwise relate to the
Loan, and as contemplated by the Commitment Letter.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto amend and restate the Existing Loan Agreement, and
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 T to this Agreement, attached hereto, are incorporated in
this Agreement and expressly made a part hereof by this reference.
 
2

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Article 2
 
DEFINITIONS
 
2.1  
Defined Terms.

 
The following terms as used herein shall have the following meanings:
 
Additional Interest Reserve:  An interest bearing account of Borrower with
Lender or, at Lender's option, Beal Bank, an Affiliate of Lender, which must be
first established and funded on the earliest to occur of (i) January 15, 2011,
(ii) Substantial Completion or (iii) within ten (10) days following the date
Lender first provides a Funding Notice to Borrower as a result of Lender having
determined that the unfunded balance of the Interest Reserve Budget Line Item
contains less than the amount of interest anticipated to accrue on the Loan over
the succeeding three (3) months based on the then applicable Interest Rate and
the then outstanding principal balance of the Loan, and into which from time to
time Borrower will deposit funds sufficient to satisfy the Interest Reserve
Funding Requirement.
 
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 Amended and Restated Construction Loan Agreement.
 
Allowable Tenant Improvements:  As such term defined in Section 12.8.
 
Applicable Condominium Laws:   As such term is defined in Section 14.8(c).
 
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 9.1(f).
 
Approved Lease:  As such term is defined in Section 15.1(m).
 
Approved Plans and Specifications:  As such term is defined in Section 9.1(f).
 
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.
 
Associations:   As such term is defined in Section 14.8(d).
 
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).
 
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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.
 
Base Rate:  As such term is defined in the Note.
 
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 (including, the Loan) 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.
 
City Documents: Declaration of Restrictive Covenants (as amended, the
"Declaration") dated as of December 15, 2006, by the City of Austin, a Texas
home rule city and municipal corporation, recorded in the Official Public
Records of Travis County, Texas as Document No. 2006240877; and Special Warranty
Deed (as amended, the "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 Document No.
2006240878, as both were amended by Estoppel Certificate and Agreement dated
April 26, 2008 and recorded in the Official Public Records of Travis County,
Texas under Document No. 2008078527 and by Estoppel Certificate and Agreement
dated May 13, 2008 and recorded in the Official Public Records of Travis County,
Texas under Document No. 2008085863
 
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
$3,348,457.08, which shall be advanced on or about the date hereof.
 
Collateral Assignment of Hotel Documents:  That certain Amended and Restated
Assignment of Hotel Documents collaterally assigning Borrower's interests in the
Hotel Documents (and related documents) to Lender.
 
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Commercial Space:  Together, the Office Space, the Restaurant Space and the
Retail Space.
 
Commitment:  Lender's maximum aggregate funding obligation hereunder of up to
One Hundred Twenty Million Dollars ($120,000,000), less any reduction thereof in
accordance with the terms of this Agreement.
 
Commitment Letter:  As such term is defined in Recital D.
 
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 Commercial Space, January 7, 2011; and with respect to the
entire Project, December 31, 2011.
 
Condominiums:   All condominium units, including, without limitation,
Residential Units, included within the Project.
 
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:  The schedule attached hereto as Exhibit B 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 applicable Completion Date and that the
Residential Units will be delivered prior to any outside dates, if any, provided
for in the Sales Agreements.
 
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.
 
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Deed of Trust:  That certain Amended and Restated Construction Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing, executed by Borrower
for the benefit of Lender and its successors and assigns, 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.
 
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), or otherwise delivered to Lender, which
complies with the USEPA "all appropriate inquiry" rule contained in 40 CRF Part
312.
 
Equity Investment:  The sum of the Initial Equity Investment plus all other
amounts of equity required to be provided by Borrower pursuant to this Agreement
to keep the Loan In Balance and otherwise complete Construction and perform all
other obligations of Borrower in regard to the Loan and/or under this Agreement
and the other Loan Documents.
 
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(w).
 
Event of Default:  As such term is defined in Section 19.1.
 
Excess Parking Spaces: As such term is defined in Section 14.1.
 
Existing Loan Documents:  As such term is defined in Recital C.
 
6

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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.
 
Funding Notice:    As such term is defined in Section 10.4.
 
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 and Guarantors:  Stratus Properties and CJUF Stratus Properties and
CJUF are referred to herein individually as a "Guarantor".
 
Guarantor Financial Covenants: The covenants of Guarantors set forth in Section
25 of the Guaranty.
 
Guaranty:  That certain Amended and Restated Guaranty Agreement, of even date
herewith, executed by each Guarantor in favor of Lender, by which each Guarantor
jointly and severally guarantees the payment and performance of all obligations
of Borrower with regard to the Loan, including, without limitation, (i) payment
of all amounts due with regard to the Loan and (ii) 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.
 
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
 
7

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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 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, and Second Amendment to W Austin
Hotel Operating Agreement, dated May 6, 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" of determination
in question.
 
Indemnified Party:  As such term is defined in Section 15.1(t).
 
8

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Initial Equity Investment:  As such term is defined in Section 8.1(a) .
 
Insurance Policy:  As such term is defined in Section 8.1(e).
 
Interest Rate:  The interest rate in effect from time to time under the Note.
 
Interest Reserve Budget Line Item:  As such term is defined in Section 10.4.
 
Interest Reserve Funding Requirement:  The amount required from time to time to
be in the Additional Interest Reserve which will be equal to three (3) months of
interest on the Loan at the Interest Rate applicable as of the date of
determination on the then outstanding principal balance of the Loan, less any
funds then remaining unfunded under the Interest Reserve Budget Line Item
calculated and adjusted as provided in Section 10.4 as of the first (1st) day of
each calendar month.
 
Internal Revenue Code:  The Internal Revenue Code of 1986, as amended from time
to time.
 
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.
 
Lease and 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. Lease refers to any of such leases, subleases or
occupancy agreements.
 
Lender:  As such term is defined in the opening paragraph of this Agreement and
including any successor owner or holder of the Loan or any part of the Loan
(other than a participation interest in 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).
 
List Price:  As such term is defined in Section 14.1.
 
Loan:  The loan, in the maximum principal amount of $120,000,000.00 to be
provided by Lender to Borrower pursuant to this Agreement and which is evidenced
by the Note.
 
Loan Commitment Fee:  As such term is defined in the Commitment Letter.
 
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 per-
 
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­formance of Borrower's or Guarantor's obligations in connection with the
transaction con­templated hereunder, each as amended and/or amended and
restated. Without limitation of the foregoing, the Loan Documents include the
Existing Loan Documents to the extent they have been amended and/or amended and
restated by Borrower and Lender.
 
Loan Origination Fee:                                           As such term is
defined in the Commitment Letter.
 
Loan Term:  The period of time commencing on the date of this Agreement through
and including the date the Loan is repaid in full.
 
Margin:  As such term is defined in the Commitment Letter.
 
Master Association:                                As such term is defined in
Section 14.8(d).
 
Master Condominium:   As such term is defined in Section 14.8(c).
 
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 eleven (11) "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 repayment of the Loan,
or otherwise prevent the applicable person or entity from timely performing any
of its material obligations under the Loan Documents.
 
Material Contracts:                                The City Documents, the Hotel
Documents, the General Contract, each Sale Agreement,
 
Maturity Date:  As such term is defined in Section 4.3.
 
Net Operating Income:  For the applicable month, the gross income from the
Project less, to the extent actually paid during the applicable period, a
prorated management fee (not to exceed 4% of annual gross revenues), customary
monthly operating expenses (not including accrued, unpaid interest on the Loan),
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 greater of (i) 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 (limited to 3% of such gross sales price if no Residential
Unit Purchaser's broker is to be paid by Borrower and 6% of such gross sales
price if both the Residential Unit Purchaser's broker and Borrower's broker are
to be paid by Borrower), Starwood Hotels & Resorts Worldwide, Inc. licensing
fees in the amount of 4.5% of the gross sales price for each Residential Unit
sold, 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
 
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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) or (ii) 89% of such gross sales price if both the Residential
Unit Purchaser's broker and Borrower's broker are to be paid by Borrower and 92%
of such gross sales price if the Residential Unit Purchaser's broker is not to
be paid by Borrower.
 
Non-Disturbance Agreement:  That certain Subordination and Non-Disturbance
Agreement by and among Hotel Operator, Lender and Borrower, dated as of October
21, 2009.
 
Note:  That certain Amended and Restated Promissory Note, of even date herewith,
in the amount of One Hundred Twenty Million Dollars ($120,000,000), executed by
Borrower and payable to the order of Lender, evidencing the Loan.
 
OFAC:  As such term is defined in Section 3.1(y).
 
Office Space:  As such term is defined in Recital A.
 
Owner's 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.
 
Permitted Affiliate Expenses:  As such term is defined in Section 12.7.
 
Permitted Exceptions:  Those matters listed on Exhibit C 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.
 
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 9.1(f).
 
Pledge Agreement:  That certain Pledge and Security Agreement to be executed and
delivered at or prior to the Closing by the Pledgors to Lender by which all
ownership interests in Borrower are pledged to Lender as security for the Loan.
 
Pledgor and Pledgors:  Stratus Block 21 Investments, L.P. and CJUF II Block 21
Member, LLC and each other owner of any interest in Borrower.
 
Pre-sale Requirement:  As such term is defined in Section 8.1(v).
 
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).
 
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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, including, without limitation, all of Borrower's right,
title and interest under the Condominium Documents, including, without
limitation, all telecommunication easements, development rights and
Declarant/special Declarant rights, and (iii) all personal property, fixtures
and equipment required or beneficial for the operation thereof.
 
Qualifying Sales Agreement:  As such term is defined in Section 14.4.
 
Release Price:  As such term is defined in Section 14.9 for the  Residential
Unit 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".)
 
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 with the Construction,
marketing, sale or operation of the Project.
 
Residential Association:  As such term is defined in Section 14.8(d).
 
Residential Condominium:  As such term is defined in Section 14.8(c).
 
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.
 
Restaurant Space:  As such term is defined in Recital A.
 
Retail Space:  As such term is defined in Recital A.
 
Retainage:  As such term is defined in Section 12.4.
 
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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 Notice:  As such term is defined in Section 14.9.
 
Sales Report:  As such term is defined in Section 14.6.
 
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 only 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.
 
Spa Amendment:  As such term is defined in Section 9.2(g).
 
Spa Plans and Specifications:  As such term is defined in Section 9.2(g).
 
State:  The State of Texas.
 
Stratus Properties:  Stratus Properties Inc., a Delaware corporation.
 
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 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.
 
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Title Insurer:  Land America/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:  That certain Lender's Title Insurance Policy, dated May 2, 2008,
issued by the Title Insurer to Corus with regard to the Existing Loan Agreement,
as endorsed as required by Lender to confirm that Lender is now the insured
thereunder, 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.
 
Transfer:  Any sale, transfer, lease (other than a Lease approved by Lender),
conveyance, alienation, pledge, assignment, mortgage, 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, any Pledgor, which directly or
indirectly holds an interest in, or directly or indirectly controls, Borrower.
 
TUCA:   As such term is defined in Section 14.8(c).
 
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 Deposit:  As such term is defined in Section 14.3(c).
 
Upgrade:  As such term is defined in Section 14.3(c).
 
Upgrade Profit:  The amount by which Borrower's costs of providing any Upgrade
is less than the cost charged to the Residential Unit Purchaser for such
Upgrade.
 
Venue:  As such term is defined in Recital A.
 
Venue Documents:  The documents hereafter entered into by Borrower as herein
provided for the operation of the Venue.  It is currently contemplated that the
Venue Documents will include a Management Agreement with Live Nation Worldwide,
Inc. and a Block 21 Master Agreement with Capital of Texas Telecommunications
Council.
 
Waste Management Plan: As such term is defined in Section 9.2(c).
 
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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 Document, 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 described on Exhibit D hereto, no litigation or proceeding is
pending, or to the best of Borrower's actual knowledge threatened in writing,
against Borrower, either Pledgor or either Guarantor, that could, if adversely
determined, be reasonably expected to cause a Material Adverse Change with
respect to Borrower, either Pledgor, either 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, either
Pledgor or either 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 the 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 where the failure to
so obtain would not have a material adverse effect on Borrower, either Pledgor
or either 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, either
 
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Pledgor or either 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) Each of the Material Contracts, other than the Hotel Documents, is in full
force and effect.  There is no Default or Event of Default under the Existing
Loan Agreement, any of the Existing Loan Documents, this Agreement, the other
Loan Documents, or, to the knowledge of Borrower, any of the Material Contracts
(other than the Hotel Documents), nor, to Borrower's knowledge, is there any
condition that, after notice or the passage of time or both, would constitute a
Default or an Event of Default under any of said documents.  No counterparty to
any Material Contract has sent to Borrower any notice alleging a default on the
part of Borrower under any Material Contract or any other material notice of an
adverse matter relating to any such Material Contract, except for the notices,
if any, which have been provided by Borrower to Lender.  Borrower is not aware
of any material default or failure to perform which exists under any Material
Contract on the part of any party to such Material Contract.  Certain
Residential Unit Purchasers have not yet fully funded the required Earnest Money
Deposit as reflected on Exhibit M-1.
 
(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 with respect to the Loan
and 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, either Pledgor, either 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 (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
 
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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.
 
(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 using Loan proceeds
from the Closing Funding.
 
(l) All financial statements and other information previously furnished by
Borrower, either Pledgor or either 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, either Pledgor or either Guarantor has occurred since the
respective dates of such statements and information.  Neither Borrower, either
Pledgor nor either Guarantor has any material liability, contingent or
otherwise, not disclosed in such financial statements and all charges payable
with respect to the Project are current and not in default.  Except as
previously disclosed in writing to Lender, neither Borrower, either Pledgor nor
either Guarantor, nor any officer or director of Borrower, nor any equity owner
of Borrower, either Pledgor or either Guarantor, or any of Borrower's, either
Pledgor's or either Guarantor's respective Affiliates (excluding investors in
CJUF and any shareholders of either 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
when it was 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
 
17

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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.
 
(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,  (ii) "W Hotel and Residences"  and (iii) "W Austin Hotel".  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.  Except for the Sales Agreements referenced on Exhibit M-1 where
delinquent Earnest Money Deposit installments are noted, 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
 
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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.
 
(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, either Pledgor, either Guarantor nor any other person
owning an interest in Borrower is (or will be) a person with whom Lender is
restricted from doing business 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 (i) the City Documents, (ii) that certain Restrictive Covenant
by Zoning Case No. C14-06-0190, dated December 5, 2006 by The City of Austin
recorded as Instrument No. 200634734,
 
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and (iii) that certain Restrictive Covenant Regarding Unified Development and
Maintenance of Drainage Facilities, dated January 9, 2008 by CJUF II Stratus
Block 21, LLC recorded as Instrument No. 2008013723.
 
(bb) All statements set forth in the Recitals are true and correct in all
material respects.
 
(cc) Construction of the Improvements to date is in compliance with the Approved
Plans and Specifications, the Governmental Approvals and the requirements of
each applicable Material Contract. To date, Borrower has utilized
$105,918,438.51 of its Initial Equity Investment to pay Budget Line Item Costs
as shown on Exhibit G.
 
(dd) To Borrower’s actual knowledge, all factual information with respect to the
Borrower, the Guarantors, the Project, the loan evidenced by the Existing Loan
Documents and/or the Loan, set forth in the Existing Loan Documents or in the
reports, other papers and data set forth in the items listed on Exhibit T (the
“Due Diligence Materials”) and, to Borrower’s actual knowledge, all factual
statements and representations made to the Lender by or on behalf of the
Borrower in the Due Diligence Materials, were, at the time the same were so
furnished or made, when taken together with all such other factual information,
reports and other papers and data previously so furnished in connection with
this Agreement and the Loan and all such other factual statements and
representations previously so made in connection with this Agreement and the
Loan, complete and correct in all material respects, and, to Borrower’s actual
knowledge, did not as of the date so furnished or made and as of the date
hereof, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances in which the same were made.  Borrower
has not intentionally withheld any material information from Lender concerning
the Borrower, the Guarantors, the Project or the loan evidenced by the Existing
Loan Documents.
 

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 or otherwise permitted by this Agreement, 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.
 
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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) $120,000,000.00, 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, either 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.  As a result of Lender's purchase from SPI of the loan
made pursuant to the Existing Loan Agreement, the outstanding balance of such
loan, as of the date of the closing of Lender's purchase thereof from SPI, which
outstanding principal balance was $25,000.00, will be outstanding under the
Note.  In addition, the amounts advanced by Lender to or for the account of
Borrower as part of the Closing Funding will also be considered outstanding
under the Note. Accordingly, immediately following the completion of the Closing
Funding the outstanding principal balance of the Loan and the Note is
$3,373,457.08.
 
(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 3.2 and Articles 8, 9, 12 and 13, (iii) no Material Adverse Change has
occurred and is continuing with respect to Borrower, either 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.
 
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(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:

 
 
Beal Bank Nevada

6000 Legacy Drive
Plano, Texas 75024

 
 
For payments made by Federal Express:

 
 
Beal Bank Nevada

6000 Legacy Drive
Plano, Texas 75024

 
For payments made by Wire Transfer and ACH:

 
 
ABA 111040195

 
TO CREDIT ACCOUNT 4991001

 
ACCOUNT NAME:  BEAL BANK NEVADA

 
FOR FURTHER CREDIT TO: CJUFFII STRATUS BLOCK 21 LLC

 
Attn: Anthony Sassine

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 Guaranty.
 
(d) The Environmental Indemnity.
 
(e) The Collateral Assignment of Hotel Documents.
 
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(f) 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.
 
(g) 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.
 
(h) 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.
 
(i) A collateral assignment, to the extent assignable, of any management
contract entered into with respect to the Project.
 
(j) Estoppel Agreement with the City of Austin.
 
(k) The Pledge Agreement.
 
(l) A Pledge and Security Agreement.
 
(m) 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 fifth (5th) anniversary of the date hereof (the
"Maturity Date").  The Loan may become due and payable prior to the Maturity
Date as a result of an acceleration thereof as provided in the Loan Documents.
 
4.4  
Prepayments.

 
Except for offered prepayments the Lender agrees to accept as described in
Section 4.5 below and except for any insurance proceeds or condemnation awards
that are applied to the payment of the Loan pursuant to the Loan Documents, the
Loan may not be prepaid, in whole or in part, at any time prior to the third
(3rd) anniversary of the date of Full Loan Opening.  The Loan may be prepaid in
whole or in part subsequent to the third (3rd) anniversary of the date of Full
Loan Opening and on or prior to the fourth (4th) anniversary of the date of Full
Loan Opening provided Borrower pays to Lender with each such prepayment a
prepayment fee equal to one percent (1%) of the amount of principal then being
prepaid.  Subsequent to the fourth (4th) anniversary of the date of Full Loan
Opening, Borrower may prepay the Loan, in whole or in part, without premium or
fee.  Except for offered payments Lender agrees to accept as described in
Section 4.5 below and except for any insurance proceeds or condemnation awards
that are
 
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applied to the payment of the Loan pursuant to the Loan Documents, Borrower must
provide to the Lender at least ten (10) business days prior written notice of
each prepayment.
 
4.5  
Required Principal Payments.

 
The unpaid Principal Balance of and all accrued and unpaid interest on the Loan
shall be due and payable on the Maturity Date. In addition, (i) as and when
Residential Units are sold, as permitted by the Loan Documents, all Net Sales
Proceeds from the sale of the Residential Unit sold, and (ii) all Net Operating
Income, must be offered to Lender as a principal prepayment on the
Loan.  Lender, in its sole discretion, may at any time elect to accept or reject
some or all of each such offered prepayment(s).  Within thirty (30) days
following the end of each month during which there is Net Operating Income,
Borrower will provide to Lender a written report (the "NOI Report") which will
include the amount of Net Operating Income for the month in question and the
calculation of same.  Within seven (7) Business Days following Lender's receipt
of, as applicable (a) a Sales Notice or (b) a NOI Report, Lender fails to notify
Borrower in writing of the acceptance or rejection of some or all of the Net
Sales Proceeds or Net Operating Income in question, Lender will be deemed to
have elected to accept all of the Net Sales Proceeds and/or Net Operating Income
in question, as a prepayment on the Loan.  Provided the Loan is then In Balance,
no Default or Event of Default then exists under any Loan Document and Borrower
has deposited with Lender in cash such amounts (x) as are necessary to satisfy
the Interest Reserve Funding Requirement and (y) as are to be retained as
otherwise provided in this Agreement, Borrower may retain such Net Sales
Proceeds and/or Net Operating Income, as applicable, that Lender does not
require as a prepayment on the Loan for use at Borrower's discretion; provided,
however, if a Default exists but such Default is cured before such Default
becomes an Event of Default, then upon the curing of such Default and so long as
all other conditions set forth above are satisfied, Borrower may retain the
related Net Sales Proceeds and related Net Operating Income Lender does not
require as a prepayment on the Loan for use at Borrower's discretion.  Subject
to the terms of this Section 4.5, Borrower may transfer Net Sales Proceeds and
Net Operating Income that is released to Borrower hereunder to a Borrower
account that is not pledged to Lender to secure the Loan.
 
4.6  
Receipt of Payments.

 
All payments received by Lender prior to or at 2:00 p.m. (Dallas time) on a
Business Day shall be credited to Borrower on the day of receipt; all payments
received after 2:00 p.m. (Dallas 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.  Upon request by Borrower, if agreed to in writing by Lender, in
Lender's sole discretion, that the Commitment shall not so terminate, all
Release Prices for the sale of Residential Units 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.
 
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       4.8   Lender's Inability to Fund.
 
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 may prepay the Loan in full without the payment of any prepayment
premium or fee.  This Section 4.8 is in addition to the legal rights and
remedies of Borrower under Section 21.10 below.
 
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 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.
 
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(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, mortgage, 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 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) $500.00 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.
 
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7.2  
Loan Fees.

 
Borrower shall pay to Lender on or before the date of this Agreement (i) the
balance of the Loan Commitment Fee, in the amount of Nine Hundred Thousand
Dollars ($900,000), and (ii) the Loan Origination Fee, in the amount of One
Million Two Hundred Thousand Dollars ($1,200,000).  Such Fees are fully earned
and non-refundable.  Lender will advance the Loan Fees and any costs due from
Borrower to Lender as part of the Closing Funding.
 
7.3  
Loan Administration Fees.

 
The first disbursement of Loan proceeds for Hard Costs associated with
construction and each such disbursement thereafter shall be referred to as a
"Construction Disbursement."  In addition to amounts due from Borrower pursuant
to Section 7.5 below, Borrower shall pay to Lender on each date on which an
interest payment is due on the Loan a Loan administration fee in the amount of
$3,000.00 per month in connection with Lender's reimbursement for reviewing and
processing each Construction Disbursement and other materials relating to the
Loan and/or the Project, including, without limitation, proposed Sales
Agreements and Leases.  Borrower hereby authorizes Lender to retain such fee
from each Construction Disbursement without further direction from Borrower but
without limitation of Borrower's obligation to pay such fee if it is not so
retained by Lender.
 
7.4  
Reserved.

 
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.
 
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 will
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 proceeds 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).  Following Lender's receipt of a request from Borrower,
Lender shall provide to Borrower copies of all applicable invoices (redacted as
Lender deems reasonably appropriate) relating to such expenses
 
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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
Owner's Contingency or other applicable Budget Line Item, and Borrower shall pay
within ten (10) days of written 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).
 
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 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(f), Section 8.1(q), Section 8.1(w), Section 8.1(y) and Section
8.1(z) (iii) hereunder that must be satisfied at such other time as is set forth
therein:
 
(a) Equity:  Borrower shall have provided to Lender prior to the Closing
evidence satisfactory to Lender in its sole discretion of (i) the amount of the
Initial Equity Investment that has been expended as of the date which is ten
(10) Business Days prior to the Closing for the payment of costs included in the
Budget and (ii) the sources of and unconditional availability of all remaining
amounts of the Initial Equity Investment.  In addition, Borrower shall have
provided evidence satisfactory to Lender in its sole discretion 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 $175,570,670.00 in cash (the "Initial Equity Investment"). Such
Initial Equity Investment must be used to pay Project costs contained in the
 
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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,
predevelopment expenses and Budgeted costs paid prior to x) Closing and (y) Full
Loan Opening, as applicable (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 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 and to satisfy the Interest Reserve Funding
Requirement.  Lender shall not be required to disburse any Loan proceeds to
reimburse Borrower for its Equity Investment unless Lender has determined that
Borrower has invested amounts in excess of its required Equity Investment and
all conditions to Borrower's right to request or receive and Lender's obligation
to make an advance of Loan proceeds have been satisfied.  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 any equity deposited as a result of the Loan being not In
Balance or to satisfy the Interest Reserve Funding Requirement), 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 an
Endorsement to the Title Policy, in form as required by Lender, with the premium
for such Endorsement paid in full, together with legible copies of all documents
creating Permitted Exceptions and all other legal documents affecting the
Project or the use thereof.  The Title Policy, as endorsed, 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 survey shall be dated no earlier than thirty (30) days prior to
the date hereof, shall be made (and certified to have been made) in accordance
with the requirements set forth in the Commitment Letter.  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
 
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reasonably acceptable to Lender), for which the premiums have been prepaid, and
with endorsements satisfactory to Lender.  On or before 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:  Prior to the Closing and in connection with each request
from Borrower for an advance of Loan proceeds at and subsequent to Full Loan
Opening, 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, either Pledgor, either
Guarantor or the Project, other than litigation that is disclosed on Exhibit D
attached hereto.  A sworn certificate, in form as reasonably required by Lender,
executed by an officer or manager of Borrower will serve as the evidence of no
litigation or proceeding hereunder for each advance of Loan proceeds.
 
(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, each Pledgor and each 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, as described
in the Commitment Letter.
 
(i) Appraisal:  Lender shall have obtained, at Borrower's expense, an Appraisal
acceptable to Lender in all respects, in Lender's sole discretion.  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, each Pledgor and each Guarantor, demonstrating the
absence of (i) any UCC Financing Statement that reflect Borrower as debtor other
than those filed in connection with the Existing Loan Agreement and (ii) any
materially adverse claims.
 
(k) Financial Statements; Tax Returns:  Borrower shall have furnished to Lender
current annual financial statements of Borrower, each Pledgor and each
Guarantor, each in form and substance and certified by such individual as is
acceptable to Lender.  Borrower shall have furnished to Lender any federal and
state tax returns of Borrower, each Pledgor and each Guarantor for the past two
(2) years.  Borrower, each Pledgor and Stratus Properties shall have signed and
delivered to Lender an Internal Revenue Service Tax Return Verification Form
(IRS Form 4506-T).  Borrower, each Pledgor and each 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
 
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the Project.  The foregoing notwithstanding, Lender has approved the form tax
returns previously provided by CJUF without K-1 Schedules to Lender as
satisfying the requirements of this paragraph.
 
(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 material marketing, brokerage and development agreements entered into by
Borrower in connection with the Project, the Construction and/or the sale of
Residential Units, 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, each Pledgor and each Guarantor) executing any
Loan Document, 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 under the Existing Loan
Agreement, under any of the Existing Loan Documents, hereunder or under any
other Loan Document; there shall have not occurred a Material Adverse Change in
the financial condition of Borrower, any Pledgor or either 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 information statements, condominium
plats and/or
 
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plans, declarations (including exhibits), budgets, owners' association
certificates of formation, bylaws, resolutions, rules and regulations,
agreements regarding cost sharing, filings, escrow agreements and other
documents pertaining to the establishment of the condominium regimes at the
Project or relating to the Project's compliance with all applicable local, state
and federal Laws relating to condominiums (collectively, the "Condominium
Documents"), including, without limitation, the draft Master Condominium
Declaration and Residential Condominium Declaration. The Condominium Documents
previously provided to Lender for review will be revised, in a manner reasonably
acceptable to Lender, as further described in Section 14.8.  Borrower agrees
that it shall not record any Declaration of Condominium or other Condominium
Document without the prior written consent of Lender, as further described in
Section 14.8.  Without limiting the foregoing, Borrower agrees that it shall
deliver the final form of Condominium Documents, including, without limitation,
condominium plats and plans for both the Block 21 Master and Block 21
Hotel/Residential Condominiums, not later than 30 days prior to the date that
Borrower desires to record any Declaration of Condominium or other Condominium
Document.
 
(t) General Contractor and Design Professional Agreements.  Borrower shall have
provided to Lender agreements, in form as required by Lender, executed by the
General Contractor and each Design Professional confirming, among such other
things as Lender may require, (i) the amounts paid to date to such parties for
the Construction and design of the Project and the amount of Retainage then held
by or on behalf of Borrower, (ii) that all sub-contractors of the respective
parties have been paid all amounts owed to such sub-contractors for work
performed with regard to the Project to the date of such agreements and
(iii) that no mechanic's or materialmen's liens or lien claims exist as of the
date of such agreements for the benefit of the General Contractor or any of the
Design Professionals or any of their respective sub-contractors for any work
theretofore performed with regard to the Project.  In addition, Borrower will
cause to be delivered to Lender a 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 as of the date that is five (5) Business Days prior to the
Closing.
 
(u) Lease.  Borrower shall have delivered to Lender the forms of Lease to be
used for the leasing of Retail Space.  Prior to Full Loan Opening, Borrower
shall have delivered to Lender the form of Lease to be used for the leasing of
Restaurant Space and Office Space for approval by Lender, which approval will
not be unreasonably withheld or delayed.
 
(v) Pre-sales.  Borrower shall have delivered to Lender, prior to Closing,
Qualifying Sales Agreements (in full force and effect) for at least 70
Residential Units relating to the sale of 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
$72,995,425.00 (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, if any, (in the amounts set forth on Exhibit M) shall have
been deposited with the Escrow Agent or with Lender in accounts in accordance
with Section 14.3.  The Earnest
 
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Money Deposits are being held by Escrow Agent in accordance with the terms and
provisions of each Sales Agreement (such provisions are referred to herein as
the "Escrow Agreement").  Prior to the Closing, Borrower shall deliver to Lender
a letter from the Escrow Agent agreeing to deliver such Earnest Money Deposits
to Lender when and as Borrower has a right to receive such Earnest Money
Deposits for application in accordance with Section 14.3 and Section 14.9 below
and recognizing that Lender will be entitled to all right, title and interest of
Borrower in and to such Earnest Money Deposits upon foreclosure of Borrower's
interest in the Sales Agreements and the Property after an Event of
Default.  Prior to the Closing, Borrower will provide to Lender evidence
satisfactory to Lender that all Earnest Money Deposits for all of the Sales
Agreement included within the Pre-sale Requirement have been deposited with, and
are currently held by, the Escrow Agent in the amounts shown on Exhibit M
attached hereto.
 
(x) Required Condominium Approvals.  Except with respect to the requirements to
be satisfied post Closing as set forth in Section 14.8 below, Borrower shall
have furnished to Lender evidence satisfactory to Lender that Borrower has
received all approvals required for the recordation of 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 currently required by
the State of Texas or City of Austin.
 
(y) Material Contracts.  Borrower shall have provided to Lender  the executed
Hotel Documents, Non-Disturbance Agreement and estoppel letters addressed to
Lender with respect to the Hotel Documents, and all of the foregoing must be in
form and substance reasonably satisfactory to Lender.  A condition to Lender's
obligation to make any advance of proceeds of the Loan, whether at the Closing,
the Full Loan Opening or thereafter, is that no material default on the part of
any party thereto may exist under any Material Contract and each Material
Contract (other than, solely with regard to the Closing, the Venue Documents)
must be in full force and effect.
 
(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 the City
Documents; (ii) prior to the Closing, a direction by Borrower to the City to pay
any repurchase price payable under the City Documents 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 Fourth 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.
 
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(bb) Additional Documents.  Borrower shall have furnished to Lender such other
materials, documents, papers or requirements regarding the Project, Borrower,
the Pledgors and/or the Guarantors 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 together with all Change Orders entered into between
General Contractor and Borrower as of the date of this Agreement (collectively,
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
$191,981,143.00 (the "General Contract Price"), and evidence satisfactory to
Lender that the General Contract was not entered into until after the Deed of
Trust was recorded; (ii) those certain fully-executed Subcontracts for the
trades and divisions set forth on Exhibit J, which Subcontracts shall be in form
and substance satisfactory to Lender in its reasonable discretion; (iii) copies
of all other direct contracts previously entered into or 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, either Pledgor or either Guarantor, and all shall be of
acceptable credit quality, as determined by Lender in its sole
discretion.  Lender hereby approves the General Contract and approves Austin
Building Company as General Contractor.  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) General Contractor shall have affirmed in writing the validity of the
General Contract.  An additional condition to Closing shall be (i) 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, and (ii) an initial sworn statement of the General
Contractor, approved by Borrower, and Lender covering all work done prior to
Closing, together with a lien waiver covering all work and materials for which
payments have been made by Borrower prior to Closing;
 
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(d) In lieu of payment and performance 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 Plans and Specifications and the Finish Standards described on Exhibits
"I", which do not include the Spa Plans and Specifications, are each approved by
Lender as of the date hereof. As so approved, they are sometimes referred to as
the "Approved Plans and Specifications" and the "Approved Finish Standards,"
respectively.  Other than Change Orders permitted pursuant to the terms of this
Agreement and Change Orders entered into prior to the date of this Agreement,
all of which are listed on Exhibit R and copies of which have been provided by
Borrower to Lender, no changes to the Approved Plans and Specifications or the
Approved Finish Standards shall be permitted without Lender's prior written
approval to be determined in Lender's reasonable discretion except for Change
Orders that do not require Lender's approval under this Agreement.  Borrower
shall finish all Residential Units and the Hotel to the Approved Finish
Standards as part of the Construction required hereunder;
 
(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 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
 
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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, the Pledgors and/or the
Guarantors.
 
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 provide the following documents
and satisfy the following conditions:
 
(a) An update of the consultant's report set forth in Section 9.1(j) above;
 
(b) Executed contract(s) for all owner direct cost items (except for
non-material 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;
 
(c) Borrower has provided evidence to Lender that all of the work contemplated
by that certain Waste Management Plan dated March 4, 2008 and prepared by
Terracon Consultants, Inc., and any amendments or updates thereto (the "Waste
Management Plan") contemplated to be performed on or before the Full Loan
Opening, 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;
 
(d) Hotel Operator, and, as may be required by the Hotel Documents, Starwood
Hotels & Resorts Worldwide, Inc., shall have approved the Approved Plans and
Specifications (including, without limitation, the Spa Plans and Specifications,
as approved by Lender) and Approved Finish Standards and Borrower shall have
provided to Lender evidence of such approval, reasonably satisfactory to Lender;
 
(e) To the extent not previously delivered at Closing, the Required Permits, and
updates thereof, no later than thirty (30) days prior to Full Loan Opening;
 
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(f) Fully executed Venue Documents and collateral assignment, estoppel and
subordination agreements relating thereto, in forms, on terms and with
counterparties acceptable to Lender; and
 
(g) A fully executed amendment to the Hotel Operating Agreement (the “Spa
Amendment”) providing for (i) the management of the spa related to the Hotel,
and (ii) the plans and specifications for finishout of the spa facility (the
“Spa Plans and Specifications”) on terms acceptable to the Lender.  The Spa
Plans and Specifications, once approved by Lender in conjunction with approval
of the Spa Amendment, will be part of the Approved Plans and Specifications
hereunder.
 
Article 10
 
BUDGET, CONTINGENCY FUND AND CHANGE ORDERS
 
10.1  
Budget.

 
Disbursement of the proceeds 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 Owner's Contingency 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.
 
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
 
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this Agreement.  Each line item in the trade breakdown of the General Contract
as provided to and approved by Lender prior to the Closing 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, either Guarantor or any Affiliate of either Borrower or either
Guarantor and Borrower and each 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
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, either Guarantor or any Affiliates of Borrower or either
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 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 Contingency for
use by Borrower for other Hard Costs and/or Soft 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 Owner's
Contingency.  In the event that the final costs of the Project 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).  Without limitation of the foregoing, if as a result of any amendment
or modification of any Subcontract as permitted by this Agreement the Borrower
realizes any savings, the amount of such savings shall be reallocated to the
Owner's Contingency.
 
(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
 
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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  
Owner's Contingency.

 
The Budget shall contain a contingency Budget Line Item available to Borrower
for payment of Hard Costs and Soft Costs that is separate and apart from General
Contractor's contingency in the General Contract (the "Owner's
Contingency").  At Closing, the funds in the Owner's Contingency Budget Line
Item must be in an amount equal to $5,100,000.00, and at Full Loan Opening, the
remaining unallocated Owner's 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
Owner's Contingency, except as set forth herein.  The Owner's 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 Budget Line Items 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
costs, the General Contractor’s fee and any Contractor Contingency) expended by
Borrower.
 
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
Owner's Contingency, 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 Owner's Contingency 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.
 
10.4  
Optional Method for Payment of Interest / Additional Interest Reserve.

 
For Borrower's benefit, the Budget includes a Budget Line Item for interest on
the Loan (the "Interest Reserve Budget Line Item"). Prior to Full Loan Opening,
Borrower will pay interest on the Loan from the Initial Equity Investment.  Upon
Full Loan Opening, the Interest Reserve Budget Line Item will be in the amount
equal to the difference between (i) $4,700,000.00 and (ii) the amount of
interest on the Loan paid by Borrower prior to Full Loan Opening.  Borrower
hereby authorizes Lender from time to time after Full Loan Opening,  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.  Lender
will promptly notify Borrower of any such disbursement.  So long as no Event of
Default or material Default exists, Borrower may utilize the Interest Reserve
Budget Line Item to pay interest on the Loan.  Without limiting the foregoing,
(i) once the Interest Reserve Budget Line Item has been expended or (ii) if an
Event of Default or material Default exists, Borrower shall pay interest from
the Additional Interest Reserve and, to the extent not available in the
Additional Interest Reserve, from Borrower's own funds.  Lender will notify
Borrower in writing
 
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when additional amounts are required to be funded into the Additional Interest
Reserve together with reasonable backup documentation of the amount required to
be funded (the "Funding Notice").  Borrower will fund the required amounts into
the Additional Interest Reserve within ten (10) days of receipt of the related
Funding Notice.
 
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 the 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 or Change Order, together with any related changes and related Change
Orders, does not exceed $200,000; and (h) the Loan will remain In Balance (after
giving effect to any reallocation of the Owner's Contingency 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.
 
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,
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 of proceeds of the Loan unless the Loan
is In Balance.
 
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(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 Owner's Contingency, the remaining balance of
the Interest Reserve Budget Line Item, and the remaining balance of the
Additional Interest Reserve.  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 Owner's Contingency 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 Owner's Contingency, 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.
 
(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) all expenses payable or reimbursable to Lender under the terms of this
Agreement; (viii) 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); (ix) all amounts needed for tenant
 
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allowances, tenant improvements and leasing commissions with respect to executed
Leases and with respect to unleased space at the Project; and (x) 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. Lender's Estimate of Remaining Costs excludes interest
requirements for the Loan since these are addressed with the Interest Reserve
Funding Requirement.
 
(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.
 
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 of proceeds of the
Loan 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 prorata basis according to the
percentage of construction
 
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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 and must be at least $500,000.00 (except for the final
draw of the Loan).  Lender shall have no obligation to disburse funds (i) if an
Event of Default or Default has occurred and is continuing or (ii) subsequent to
April 30, 2013.  Lender reserves the right to at any time to make disbursements
into an escrow to be subsequently disbursed to Borrower by the Title Insurer.
 
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 Lender shall
disburse money to Borrower, or, after any, and during the continuance of, any
Default or Event of Default, directly to General Contractor, subcontractors
and/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;
 
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(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;
 
(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 monthly report from Lender's Consultant (who shall be retained by Lender,
but whose fees and expenses shall be reimbursed to Lender by Borrower from time
to time upon request by Lender) 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;
 
(m) Evidence satisfactory to Lender, in its reasonable business judgment, that
the Loan is In Balance;
 
(n) True, correct and complete copies of all reports provided to Borrower, any
Guarantor or any Affiliate of Borrower or any Guarantor with regard to the
Construction and/or the request for an advance of Loan proceeds, including,
without limitation, the reports prepared by Newbanks, Inc./ Dallas and La Jolla
Pacific, Ltd.; and
 
(o) Such other instruments, documents and information as Lender or the Title
Insurer may reasonably request.
 
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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
withheld 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.
 
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 a 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
 
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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). If, as of the Closing, Borrower
is storing any materials off-site, Borrower will cause the warehouseman storing
such materials to execute and deliver to Lender a bailment letter in the form of
Exhibit K.   In addition, if Borrower proposes to store materials off-site in
premises leased by Borrower, Borrower must first obtain Lender's written consent
to such proposed action, which consent will not be unreasonably withheld, and if
such consent is given, Borrower must obtain Lender's written consent to the
lease applicable to the premises in which such materials are to be stored, and
the Borrower must provide to Lender an agreement (which will include a waiver of
landlord's lien) in form as required by Lender, executed by the landlord under
such lease.
 
12.7  
Specific Limitation on Disbursements.

 
No amounts in the Budget shall be disbursed to Borrower, either Pledgor, either
Guarantor, any direct or indirect beneficial owner of an interest in Borrower,
either Pledgor, either Guarantor or any Affiliate of any of the foregoing,
except for (a) the Developer Fee Budget Line Item equal to $6,000,000, with
$3,750,000 left to fund (the "Permitted Affiliate Expenses"), which shall be
paid, provided no Event of Default or material Default exists and the Loan is In
Balance, in equal monthly installments of $150,000.00 over the remaining term of
the Construction Schedule (or until such time as such amount has been fully
disbursed) provided that if the Construction Schedule is extended by Change
Order, then such monthly amount will be adjusted pro rata to reflect the
extended Construction Schedule.  Borrower shall have no right to borrow any
portion of the developer's fee referred to in clause (a)(ii) above from Lender.
 
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, the applicable dollar
amount set forth on Exhibit Q, payable to Borrower's representative and the
applicable Tenant's representative as set forth on Exhibit Q 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 the applicable dollar amount set forth on Exhibit Q 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
 
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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 and compliance by Borrower with the requirements of Exhibit
Q.
 
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 City 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
 
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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
 
(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
 
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-2.  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 on floors 35, 36 and 37, which are
each allocated three (3) Parking Spaces but does not include storage space.  Of
the 300 Parking Spaces allocated to the Residential Units collectively, 275
Parking Spaces shall be included in the List Prices of such Residential Units as
set forth above, and 25 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 and has approved the Sales Agreement
for each of the pending sales listed on Exhibit M-1.  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
 
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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; provided, however, that (i) no portion of the Project other than
Residential Units that are sold as permitted by this Agreement, may be sold
without the prior written consent of Lender, which consent may be granted or
withheld by Lender, in its sole discretion and (ii) Borrower may not enter into
any Sales Agreement for any part of the Project, other than Sales Agreements for
Residential Units which satisfy the requirements set forth in this Agreement,
without the Lender's prior written consent, which may be granted or withheld in
Lender's sole 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.
 
14.3  
Purchaser Deposits.

 
(a) On or before Closing (as to earnest money deposits received prior to
Closing), and promptly after receiving any additional earnest money 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, 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").
 
(b) Except as reflected on Exhibit M, 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 Sales Agreement 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 non-cash 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 related 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 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 ($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
 
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costs being with Borrower.  So long as permitted under applicable Laws, Lender
shall permit Borrower to use Upgrade Deposits to pay for such Upgrades as
provided in this Agreement.  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.  Borrower shall request release
of Upgrade Deposits for payment of costs of the related Upgrade at the time and
in the manner, and, to the extent lawful, subject to the conditions applicable
to, Construction Disbursements.
 
(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; however, the return of such Deposit shall not affect any obligations of
Borrower to Lender or any rights or remedies of Lender.  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 for Residential Units 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
 
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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 purchase 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  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; provided, however, Borrower may hereafter enter into
Sales Agreements for Residential Units with a base purchase price that is not
less than 90% the subject Residential Unit's List Price set forth in the Price
List Schedule so long as at no time will the aggregate of the base purchase
prices under all then existing Sales Agreements be less than 95% of the related
List Prices for all Residential Units then subject to a Sales Agreement as set
forth on the Price List Schedule;
 
(c) The Sales Agreement requires a non-refundable Earnest Money Deposit 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 except as otherwise set
forth on Exhibit M-1;
 
(d) The Residential Unit Purchaser is not affiliated with Borrower, either
Pledgor or either 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 three (3) Residential Units, in the
aggregate, may be sold to Affiliates of Borrower, either Pledgor or either
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, plus extensions for Unavoidable Delay;
 
(g) The Sales Agreement clearly identifies any Upgrade required to be provided
by Borrower, as seller, which Upgrade and the related 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) Any Sales Agreement executed (a) on or before May 31, 2011, the date that
the residential condominium component of the Project is scheduled to be
completed, must provide for a closing of the sale of the Residential Unit in
question on or before the later (i) thirty (30) days after Borrower secures a
certificate of occupancy for the Residential Unit being sold, or (ii) one
hundred eighty (180) days after the effective date of such Sales Agreement, but
in no
 
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event later than three hundred sixty (360) days after the scheduled date of
completion for such Residential Unit as currently set forth in the Construction
Schedule, and (b) after May 31, 2011 must provide for a closing of the sale of
the Residential Unit in question on or before one hundred eighty (180) days
after the effective date of such Sales Agreement;
 
(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.
 
(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 for the sale of a
Residential Unit meeting all of the conditions required by this Agreement, and
(ii) those certain Sales Agreements described on Exhibit M attached hereto that
have been delivered to Lender prior to the date of this Agreement.  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 financing contingency.  Borrower shall not
terminate a
 
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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; Amendment and Termination of Sales
Agreements.

 
(a) 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.
 
(b) Borrower may not amend or modify any Sales Agreement without Lender's prior
written consent, which will not be unreasonably withheld except Borrower may
amend a Sales Agreement without Lender's prior written consent to provide for
(i) upgrades to the Residential Unit to be purchased pursuant to such Sales
Agreement provided that the Residential Unit Purchaser under such Sales
Agreement pays the costs of the upgrades contemporaneously with the execution of
the amendment, and (ii) so long as the Lender is satisfied that the remaining,
uncommitted Parking Spaces and storage units are sufficient for the sale of
Residential Units not then subject to a Sales Agreement, the addition of one or
more Parking Spaces or storage units to the Sales Agreement in accordance with
the approved Price List Schedule provided that the Residential Unit Purchaser
under such Sales Agreement pays an additional Earnest Money Deposit in the
amount of 10% of the cost of such Parking Space(s) and/or storage unit(s)
contemporaneously with the execution of the amendment.  In such case, Borrower
will provide to Lender a copy of the amendment promptly following its execution.
 
(c) Borrower may not terminate a Sales Agreement without Lender's prior written
consent except as a result of the default of the Residential Unit Purchaser
under such Sales Agreement and provided the Deposits paid under such Sales
Agreement are released to Borrower, as the seller, subject to the requirements
of the Loan Documents in regard to such Deposits.
 
14.6  
Delivery of Sales Information and Documents.

 
Within thirty (30) days after the end of each month, Borrower shall deliver to
Lender a sales report (the "Sales Report") showing (a) each Residential Unit
under a Sales Agreement, including the date of the Sales Agreement, 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 from the sale of such Residential
Unit; and (c) for each Sales Agreement cancelled by a Residential Unit
Purchaser, the Residential Unit number, the date cancelled, the reason the Sales
Agreement was cancelled by the Residential Unit Purchaser and a statement
regarding whether the 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.
 
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14.7  
Borrower's Acknowledgment Regarding Buyer Financing.

 
Borrower acknowledges that Lender is not committed to, and does not intend to
offer to,  provide any financing to or for the buyers of any individual
Residential Units or any other part of the Project.
 
14.8  
Condominium Regime.

 
(a)           Borrower shall revise the Condominium Information Statement, the
Master Condominium Declaration and the Residential Condominium Declaration in
accordance with Exhibit N attached hereto.  Borrower shall promptly, and in any
event prior to the closing of the first purchase and sale of any Residential
Unit, cause the Condominium Documents, including, without limitation, the Master
Condominium Declaration and the Residential Condominium Declaration, each in
form and containing terms approved by Lender as provided below, to be filed or
recorded, as appropriate. At least thirty (30) days prior to recording or filing
any of the Condominium Documents, Borrower shall submit to Lender for Lender's
final review and approval (which approval will not be unreasonably withheld
provided the final Condominium Documents provided by Borrower to Lender are in
substantially the forms of the Condominium Documents approved by Lender prior to
the Closing with the changes required by Exhibit N made thereto), executed
copies of the proposed Condominium Documents, which, once approved, shall be
filed or recorded, as applicable.  Borrower shall on an ongoing basis comply
with all requirements of ILSA, TUCA and all other Applicable Condominium
Laws.  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 or the City to
Borrower.  Borrower shall not amend the HUD Property Report or the City or State
Property Report without Lender's prior written consent which approval will not
be unreasonably withheld.  Provided that no Event of Default or material 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 Condominium 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.
 
(b)           Notwithstanding the foregoing or any other provision of this
Agreement, Lender shall not be deemed to have represented or warranted that the
Condominium Documents comply
 
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with Applicable Condominium Laws.  Lender shall have no liability for the
failure of the Condominium Documents to comply with any Applicable Condominium
Law.
 
(c)           Borrower represents and warrants that:
 
(i)           The sale of Units, as defined in the Declarations, has complied,
and at all times will comply, with ILSA and regulations promulgated in
connection therewith and Texas Uniform Condominium Act, Tex. Prop. Code, Ch. 82
(2009) ("TUCA").
 
(ii)           Borrower has delivered to Lender true, correct and complete
copies of all ILSA-related disclosure statements and property reports that, as
of the date hereof, have been prepared or delivered in connection with the
Condominiums, the Condominium Documents or the Project, together with evidence
those items that are, as of the date hereof, required by law to be delivered to
prospective purchasers of Residential Units, have been so delivered.
 
(iii)           From time-to-time as Residential Units are sold, Borrower shall
deliver to Lender evidence those items required by Applicable Condominium Laws
to be delivered to prospective purchasers of Residential Units have been so
delivered in a timely manner.
 
(iv)           There shall be no material agreements relating to the
Condominiums entered into after date of this Agreement other than the
Condominium Documents unless the same have been approved by Lender in advance
and in writing, which approval will not be unreasonably withheld or delayed or
are otherwise expressly permitted by this Agreement (such as the Sales
Agreement).
 
(v)           Borrower shall at all times (a) exercise its rights and powers
as  "Declarant" "Member" or "Owner" (as defined in the Condominium Documents)
strictly in accordance with this Loan Agreement, the Condominium Documents and
the Applicable Condominium Laws, and (b) take all steps and action necessary to
assure that all officers and directors of the Associations appointed or elected
by Borrower or any principal or affiliate of Borrower, exercise their rights and
powers in accordance with the Applicable Condominium Laws and consistent with
their duties under Applicable Condominium Laws, including the Texas Business
Organizations Code, and the terms and provisions of this Agreement.
 
(vi)           Not later than the recordation of the Master Condominium
Declaration and the Residential Condominium Declaration, Block 21
Hotel/Residential Condominiums ("Residential Condominium") and the Block 21
Master Condominiums ("Master Condominium") shall each comply with all of the
requirements of TUCA, ILSA, and each other state and federal law applicable to
the creation, management, ownership or operation of the Residential Condominium
or Master Condominium or sale of units located therein (the "Applicable
Condominium Laws").  Borrower shall indemnify and hold Lender harmless from any
and all costs, damages, claims, or losses incurred by Lender, including
attorneys' fees and court costs, arising from the failure of the Condominium
Documents or the Condominiums to comply with Applicable Condominium Laws.
 
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(d)           (i)           Not later than the date of recordation of the Master
Condominium Declaration or the Residential Condominium Declaration, whichever is
first recorded:
 
(x)           The Block 21 H/R Condominium Community, Inc., a Texas nonprofit
corporation (the "Residential Association"), described in the Residential
Condominium Declaration shall have been formed as a nonprofit corporation under
the laws of the State of Texas, the board of directors shall have been appointed
or elected in accordance with the requirements of the Residential Condominium
Declaration and the applicable law and all officers contemplated by the
Residential Condominium Declaration and the bylaws of the
Residential  Association shall have been properly appointed or elected, as the
case may be.
 
(y)           The Block 21 Master Condominium Community, Inc., a Texas nonprofit
corporation (the "Master Association"), described in the Master Condominium
Declaration shall have been formed as a nonprofit corporation under the laws of
the State of Texas, the board of directors shall have been appointed or elected
in accordance with the requirements of the Master Condominium Declaration and
the applicable law and all officers contemplated by the Master Condominium
Declaration and the bylaws of the Master Association shall have been properly
appointed or elected, as the case may be.  The Residential Association and
Master Association are referred to collectively as the "Associations."
 
(ii)           Not later than 15 days after the recordation of the Master
Condominium Declaration or the Residential Condominium Declaration, whichever is
first recorded, Borrower shall cause the dedicatory instruments with respect to
the Condominiums described in Texas Property Code Section 202.006, as the same
may be amended or superceded, to be recorded in Travis County, Texas and
certified copies of the same delivered to Lender.
 
(iii)           Concurrently with the recordation, filing, or adoption, as the
case may be, of the Condominium Documents true, correct, and legible copies
thereof, including without limitation, a certified copy of each of the recorded
Master Condominium Declaration or the Residential Condominium Declaration, the
Associations' certificates of formation, bylaws, minute books, other books and
records, and any rules and regulations and other Condominium Documents which may
have been promulgated, shall have been delivered to Lender and, where
applicable, showing the recordation or filing data.  After the date thereof,
Borrower shall not amend or supplement or consent to the amendment or supplement
of any of the Condominium Documents unless Lender first approves such amendment
or supplement in writing, which approval will not be unreasonably
withheld.  Borrower covenants and agrees to make or cause to be made each
revision to any Condominium Document requested by Lender in Lender's reasonable
judgment.
 
(e)           Concurrently with the recordation of the Declarations, Borrower
shall cause to be delivered to the Lender an opinion, reasonably acceptable to
the Lender, from Armbrust & Brown, LLP or, at Borrower's option, other Texas
legal counsel acceptable to Lender, opining that the Condominium Documents are
in compliance with the Applicable Condominium Laws.
 
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(f)           Concurrently with the recordation of the Master Condominium
Declaration and the Residential Condominium Declaration, Borrower shall deliver
true, complete, and legible copies of the following to Lender:
 
(i)           A current accounting for the Associations' funds and financial
statements certified by Borrower and stating unconditionally that the financial
statements present fairly the financial position of each Association in
conformity with generally accepted accounting principles;
 
(ii)           The budgets for the Master Condominium and Residential
Condominium in the form required by TUCA, including Section 82.153 (a) 6 and
(b), for the calendar year(s) the Master Condominium Declaration and the
Residential Condominium Declaration are recorded and the proposed budgets for
the calendar year following such recordation;
 
(iii)           A current inventory of tangible personal property owned: by the
Associations; or by Borrower and used in connection with the ownership or
operation of the Condominiums.
 
(iv)           A copy of the final as built plans and specifications used for
the construction of the improvements in the Condominiums, together with a CAD
version of the same;
 
(v)           Certified duplicate copies of all insurance policies currently in
force, in which the Borrower, the Residential Unit Owners, the Associations,
and/or the directors and officers of the Associations are named as insured
persons;
 
(vi)           Copies of any certificates of occupancy that have been issued
with respect to any improvements comprising the Condominiums;
 
(vii)           Any other permits issued by governmental bodies applicable to
the Condominiums and which are currently in force or which were issued within
one year prior to the date construction of the Project was commenced, including
without limitation, all licenses for the use of public property;
 
(viii)           Written warranties of the contractor, subcontractors,
suppliers, and manufacturers that are still effective related to the Project or
any portion thereof or interest therein;
 
(ix)           A roster of Owners, Eligible Mortgagees, and Mortgagees, each as
defined in the Declarations, and their addresses and telephone numbers;
 
(x)           Employment contracts in which the Associations are a contracting
party;
 
(xi)           Service contracts in which the Associations are a contracting
party or in which the Associations or the Owners have any obligation to pay a
fee to the persons performing the services;
 
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(xii)           To the extent not previously delivered to Lender, true, correct
and complete copies of all other documents and records the Associations are
required to keep pursuant to TUCA § 82.114; and
 
(xiii)           Copies of all recorded deeds and all recorded and unrecorded
leases evidencing ownership or leasehold rights in general common elements
within the Condominiums.
 
(xiv)           During the term of the Loan, to the extent of any material
change in any of the foregoing or the Condominium Documents, Borrower shall
promptly deliver a copy of the same to Lender.  It is the intention of the
Borrower and Lender that Lender shall have at all times duplicate copies of all
of the foregoing that are in the possession or control of Borrower, including in
its capacity as Declarant under the Declarations.
 
(g)           The addresses of the respective Associations for the purposes of
Article 18 of the Master Declaration and Article 16 of the Residential
Declaration are:
 
Block 21 H/R Condominium Community, Inc.
c/o Armbrust & Brown, LLP
Attn:  Bob Burton
100 Congress Avenue, Suite 1300
Austin, Texas 78701
 
Block 21 Master Condominium Community, Inc.
c/o Armbrust & Brown, LLP
Attn:  Bob Burton
100 Congress Avenue, Suite 1300
Austin, Texas 78701
 
Borrower may change the addresses set forth above upon thirty (30) days prior
written notice to Lender specifying the new address or addresses.  On behalf and
for the benefit of Lender, concurrently with the recordation of the Master
Condominium Declaration and the Residential Condominium Declaration, Borrower
shall deliver written notice in accordance with the Declarations to the
Associations that Lender is an "Eligible Mortgagee" with respect to the
Condominiums.  Such notice shall include the name and address of Lender as set
forth in this Agreement. Evidence of the delivery of the foregoing shall be
delivered to Lender not later than five (5) days after filing of the
Certificates of Formation of the Associations or each Association, if filed at
different times.  If the address of an Association shall change, Borrower shall
(i) immediately notify Lender in writing of the new address and (ii) send notice
to such Association at such new address that Lender is an "Eligible Mortgagee",
as defined in the Condominium Documents, together with such other information as
may be required to assure Lender is recognized by each Association as an
Eligible Mortgagee.  Time is of the essence of the foregoing sentence.
 
(h)           Borrower shall not permit control of any 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.
 
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14.9           Release of Residential Units.
 
(a) At Borrower's request upon or promptly following 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) the Release Price (defined below) for the Residential Unit in an amount
determined as set forth below has been funded into the Net Sales Proceeds
Account (defined below) pending Lender’s determination of whether to apply the
Net Sales Proceeds to the Loan in accordance with Section 4.5 above;
 
(v) Lender receives from Borrower a written notice of the sale in question (each
a "Sales Notice") which will include a copy of the closing statement and
applicable Residential Unit release no later than 5:00 p.m. (Dallas time) on the
day of such 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 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).  The "Net Sales Proceeds Account" is an interest
bearing account established at Lender or, at Lender's option, Beal Bank, for the
deposit of the Release Price for each closing of a sale of a Residential Unit in
accordance with this Agreement.  Borrower hereby pledges the Net Sales Proceeds
Account and all funds on deposit therein to Lender.  Net Sales Proceeds may,
however, be disbursed from the Net Sales Proceeds Account pursuant to and
subject to the terms and conditions of Section 4.5 above. The Escrow Agent will
be jointly
 
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instructed by Lender and Borrower (and will agree in writing) to pay (by wire
transfer pursuant to instructions provided by Lender) and deliver all Net Sales
Proceeds from the sale of each Residential Unit into the Net Sales Proceeds
Account on the Business Day following the day on which the sale of the
Residential Unit in question is closed.
 
(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 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.
 
14.10           Application of Sales Proceeds.
 
Except as otherwise expressly provided herein, all Release Prices in connection
with the sale of a Residential Unit shall be offered by Borrower to Lender as a
payment on the Loan as provided in Section 4.5, and if Lender elects to accept
some or all of such offered payment so much of such offered payment as Lender
shall designate shall be applied by Lender as follows (regardless of any
contrary order of payment specified by Borrower):
 
(a)           First, to the payment of principal then due and owing under the
Note, until the amounts due thereunder have been paid in full; and
 
(b)           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 Price 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.
 
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 to the Full Opening of the Loan to be complied
with, and Borrower shall qualify for Full Loan Opening, no later than July 31,
2010.  If Borrower fails to satisfy timely such requirement, an Event of Default
shall exist and, without limitation of the
 
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other rights and remedies of Lender, 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 TUCA, 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
fifteenth (15th) 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 to), without the prior written consent
of Lender which may be granted or withheld in Lender's sole discretion), 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 applicable 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 regimes created
thereby.  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.
 
(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 has commenced construction
of the Project, and shall substantially complete (i) the entire Project no later
than the Completion Date applicable to the
 
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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 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.
 
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(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, either Pledgor, either
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 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.
 
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(k) Tax Escrow Accounts.  After an Event of Default and if Lender elects to
require that Borrower escrow money for payment of taxes (a "Triggering Event"),
Borrower shall make monthly tax escrow deposits in the amount of one-twelfth
(1/12) 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. Borrower
shall not acquire by lease any of the personal property, fixtures, attachments
or equipment which is to be used in connection with the Project without Lender's
prior written consent, which consent will not be unreasonably withheld with
regard to leases of non-essential, movable equipment utilized in the operation
of the Project, but may otherwise be granted or withheld in Lender's sole
discretion.  Borrower has notified Lender that Borrower does not currently
intend to lease any such personal property and that the Budget includes funds
necessary to purchase all such personal property.
 
(m) Leasing Restrictions.
 
(i) Borrower shall not enter into any Leases pertaining to the Project without
Lender's prior written consent in its sole discretion.  Borrower shall provide
Lender with a copy of any proposed Lease no less than ten (10) Business 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 proposed tenant, (b) credit worthiness
of the proposed tenant, (c) form and content of the Lease, including, among
other things, the proposed tenant's obligation to provide, at least annually,
its financial information to Borrower, (d) the proposed 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 consented to by Lender, each Lease
must provide for a minimum annual triple net rent per Rentable Square Foot as
specified in Exhibit Q  at all times throughout the term of the related Lease,
and, for purposes of calculating such rent, the total value of free rent, non-
 
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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 applicable minimum rent as
specified in Exhibit Q.  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.  Each Lease must otherwise satisfy the applicable
requirements set forth on Exhibit Q (including, without limitation, the amount
of leasing commissions that may be paid to Borrower's representative and the
Tenant's representative), unless Lender otherwise consents in writing, which
consent may be granted or withheld in Lender's sole discretion.
 
(ii) Borrower shall not execute any Lease without written acknowledgement of
Lease approval by the Lender, except that Leases of Office Space proposed to be
entered into with third party tenants who are not Affiliates of Borrower, any
Pledgor or any Guarantor 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 consented to by the Lender (or as to which
Lender's consent 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
 
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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 or material 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 limitation, any
attorney and paralegal fees and costs incurred in connection with such Event of
Default or material Default, including, without limitation, 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 at any time and from time to time.  Borrower shall
cooperate with Lender in this regard.  If the Appraisal is obtained to comply
with any applicable law or regulatory requirement, or bank policy promulgated to
comply therewith, or if a material Default or an Event of Default exists,
Borrower shall pay the reasonable costs for any such Appraisal upon Lender's
request. In addition, the Borrower shall pay the reasonable costs for two (2)
Appraisals obtained by Lender which are not obtained for any of the reasons
specified in the preceding sentence.
 
(q) Financial Statements and Reports.
 
(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. Each Guarantor's financial
statements shall be audited and Borrower's financial statements shall be
certified by Borrower's managing member. Each Guarantor and, or Borrower shall
also each deliver to Lender quarterly financial statements within sixty (60)
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 each Guarantor as to such 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
 
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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 (in writing) litigation which
would have a material adverse effect on Borrower's, either Pledgor's or either
Guarantor's ability to perform their respective obligations under the Loan
Documents promptly after learning thereof.  Within thirty (30) days following
the end of each month during the term of the Loan, Borrower will provide to
Lender, unaudited, certified (by Borrower) operating statements of the Project,
and leasing reports relating to the Project, in such form as Lender may
reasonably request.  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 (1) all "Operating Reports" received under Section 10.2 of the
Hotel Operating Agreement, (2) all financial statements received under
Section 10.3 of the Hotel Operating Agreement, (3) all other material
information or notices received from Hotel Operator, and, (4) all material
notices, reports and other information received by or issued by or on behalf of
Borrower under any Venue Document or any other Material Contract; and
 
(iv) After the Closing and up to and including Full Loan Opening, Borrower shall
provide to Lender on or before the 15th day of each month, a certified (by
Borrower) statement, in form acceptable to Lender, specifying amounts paid
during the preceding month from the Equity Investment to pay costs set forth on
the Budget Line Items and a reconciliation of the unfunded Equity Investment and
unpaid Budget Line Items.
 
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(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 and the amounts of Lender's fees), 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, Pledgors, Guarantors, any Residential Unit Purchaser or
Sales Agreement, or the Project.  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.   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).
 
(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 (however, Lender's consent will not be unreasonably
withheld with regard to any such amendment or modification to provide for the
admission of a new member, partner or shareholder as permitted by Section 17.2
of this Agreement), (ii) the admission of any new
 
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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 Material Contract or any other 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, any counterparty under any Material Contract or
insurance company within seven (7) days after such notice is received.  Borrower
shall promptly notify Lender of any judgment entered against, or any material
litigation filed against, Borrower, either Pledgor or either Guarantor.
 
(aa) Construction Contracts.  Borrower shall not enter into, materially modify
or materially amend, or terminate or cancel the General Contract, any
Subcontract or any other 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 Stratus Block 21 Investments, L.P. 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 notify Lender in writing and
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
of Loan proceeds and/or Equity made hereunder directly to Borrower, for the
purpose of paying costs of the Construction in accordance with the Budget and
for the purposes and to the parties for which such proceeds are
advanced.  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.
 
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(dd) Food and Liquor Licenses.  Borrower does not currently believe it will, or
will need to, obtain any food or liquor licenses in connection with the
Project.  Instead, all such licenses will be obtained by the Hotel Operator and
the lessee(s) of the Restaurant Space.
 
(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 (including, without limitation, either
Pledgor), either Guarantor or any Affiliate of Borrower, either Pledgor or
either Guarantor until the Loan has been repaid, except for (i) the
disbursements set forth in Section 12.7 hereof and (ii) Net Sales Proceeds and
Net Operating Income not applied to payment of the Loan under Section 4.5 and
not used to fund the Additional Interest Reserve in accordance with Section
10.4.
 
(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, including, without
limitation, 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 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) Reserved.
 
(ii) Operating Revenues.  In the event the Project produces gross operating
revenues, Borrower shall establish with Lender or, at Lender's option, Beal
Bank, an interest bearing operating account for the Project (the "Project
Operating Account") into which Borrower shall deposit, on the Business Day
received or, if received on a day which is not a Business Day, the first
Business Day following the day of receipt, all revenue associated with the
Project (including any Net Operating Income distributed by Hotel Operator to the
Borrower), and from which Borrower shall make withdrawals to pay all operating
expenses (other than interest on the Loan) of the Project  and, to the extent of
any remaining Net Operating Income, payments on the Loan pursuant to Section 4.5
if accepted by Lender and to fund the Additional Interest Reserve if required by
Section 10.4.  Borrower's failure to deposit operating revenues or Net Operating
Income into the Project Operating Account as set forth above shall constitute an
Event of Default hereunder.  In the event that there is excess Net Operating
Income in the Project Operating Account after satisfaction of the requirements
of this paragraph, they may be retained by Borrower and disbursed at Borrower's
discretion pursuant to and upon satisfaction of the requirements of Section
4.5.  Borrower hereby pledges the Project Operating Account and all funds on
deposit therein to Lender subject, however, to Borrower's rights to excess Net
Operating Income under Section 4.5.  Borrower hereby pledges, to the extent
permitted by, and subject to the limits of, the Hotel Operating Agreement and
the Non-Disturbance Agreement, all
 
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other 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 to the extent a pledge is permitted under the Hotel
Operating Agreement and the Non-Disturbance Agreement.
 
(jj) Environmental Remediation.  Borrower has performed all recommended
remediation set forth in those certain Environmental Reports dated October 24,
2007, May 3, 2007, October 18, 2006, and October 9, 2009, prepared by Terracon
Consultants, Inc. in each case, by the dates such remediation is recommended to
be completed in such Environmental Report, except in the case of the Waste
Management Plan, the water filtration system discussed in the Waste Management
System 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 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) Venue Documents.  Once fully executed, Borrower shall timely perform and
comply with all of its obligations under the Venue Documents, shall keep all
such Venue Documents in full force and effect.  Once fully executed, Borrower
shall not modify, amend or terminate any such Venue Document without Lender's
prior written consent, to be given in its reasonable discretion.
 
(mm) 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 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
 
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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 (i) existence as an entity duly organized, validly
existing and in good standing under the laws of the State of Delaware or
(ii) qualification to do business in the State, 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, if any, 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;
 
(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
 
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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 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.
 
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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 and as required by the Non-Disturbance Agreement or if (i) no Event of
Default or material 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 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) each Guarantor reaffirms the 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 Venue
Documents, 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.
 
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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 proceeds 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 proceeds of the Loan.
 
Article 17
 
ASSIGNMENTS BY LENDER AND BORROWER
 
17.1  
Assignments and Participations.

 
Lender may from time to time, with written notice to Borrower, sell all or any
part of the Loan and the Loan Documents (or any interest therein) and may grant
participations in the Loan (i) if and to the extent required by applicable
regulatory authority and (ii) to any Affiliate of Lender.  Except as provided in
the preceding sentence, Lender will not sell all or any part of the Loan or
grant participation in the Loan without Borrower's prior written consent.
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
either Guarantor's rights under the Loan Documents or materially increase
Borrower's or either Guarantor's obligations under the Loan Documents.  No such
assignment or participation will release Lender from any liability 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 any
change in the ownership, or management or economic interests (whether direct or
indirect) of the Project, or any Transfer.  Notwithstanding the foregoing, so
long as all owners of interests in Borrower satisfy the requirements of Section
3.1 (y) above (a) so long as CJUF continues to hold the ownership interest in
Borrower (directly or indirectly including through CJUF II Block 21 Member, LLC)
which CJUF held at Closing (directly or indirectly including through CJUF II
Block 21 Member,
 
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LLC) 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 (directly or indirectly including through
CJUF II Block 21 Member, LLC) which CJUF held at Closing (directly or indirectly
including through CJUF II Block 21 Member, LLC), 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, (c) any buyout of a member's interest
or change in control permitted by the Operating Agreement of Borrower, as such
Operating Agreement has been consented to by Lender, may be effected provided
all membership interests in Borrower remain encumbered by the Pledge Agreement,
it being agreed that when and as required by Lender, any new member in Borrower
must execute and deliver to Lender a Joinder Agreement relating to the Pledge
Agreement and (d) the following Transfers of interests in 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 either Guarantor,
(iii) the transfer of an interest of no more than twenty percent (20%) in
Borrower to Wheelock Street Capital (or an entity affiliated with Wheelock
Street Capital) or another preferred equity provider who may provide up to
$35,000,000.00 of equity through Borrower for the Project and any transfers of
direct and indirect interests in that new equity partner; (iv) Leases permitted
hereunder; and (v) the sale and release of Residential Units pursuant to
Article 14 hereof.  Borrower may also dispose of immaterial quantities of
personal property in the ordinary course of business 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, mortgage,
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 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.
 
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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) to make any principal, interest or other payment on
or with regard to the Loan, when due, and such payment remains unpaid upon the
expiration of five (5) days following the date written notice of such failure to
pay is provided to Borrower; provided, however, Lender will not be obligated to
give such written notice more than twice during any twelve (12) month period and
following the second such notice, any subsequent default during the then current
twelve (12) month period will constitute an Event of Default without any notice
being required and the Lender shall not be obligated to provide any such written
notice or cure period in regard to the payment due on the Loan on the maturity
date of the Loan, whether such maturity date is the stated Maturity Date thereof
or any accelerated maturity date declared by the Lender pursuant to the Loan
Documents or (ii) 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 for a period of thirty (30) days after written notice from Lender,
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 ninety (90) day
period to cure such failure and no Event of Default shall be deemed to exist
under this paragraph (a) 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 the one hundred and twenty (120) 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.
 
(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.
 
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(c) (i) 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, (ii) failure of Borrower to comply with the
Construction Schedule resulting in a delay (which is not an Unavoidable Delay)
of more than forty-five (45) days  behind the Construction Schedule with respect
to any material component of Construction, or (iii) 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, any Pledgor 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)(ii) above.
 
(g) Borrower, either Pledgor or either Guarantor shall commence a voluntary case
concerning Borrower, either Pledgor or either Guarantor under the Bankruptcy
Code; or an involuntary proceeding is commenced against Borrower, either Pledgor
or either Guarantor under the Bankruptcy Code and relief is ordered against
Borrower, either Pledgor or either 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, either
Pledgor or either Guarantor; or Borrower, either Pledgor or either 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, either Pledgor or either Guarantor; or there is commenced against
Borrower, either Pledgor or either Guarantor any such proceeding that remains
undismissed or unstayed for a period of sixty (60) days; or Borrower, either
Pledgor or either 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,
either Pledgor or either 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.
 
(h) Borrower, either Pledgor or either 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, either
 
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Pledgor or either 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) Borrower, either Pledgor or either Guarantor shall dissolve or its existence
shall otherwise terminate.
 
(j) Either 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 either Pledgor or
either Guarantor in amounts aggregating in excess of $250,000 for either Pledgor
or either Guarantor, and said judgments are not paid, stayed or bonded over
within thirty (30) days after entry.
 
(n) Borrower, either Pledgor or either 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 either
Pledgor's or either Guarantor's maximum liability does not exceed $500,000).
 
(o) If a Material Adverse Change occurs with respect to Borrower, the Project,
either Pledgor or either Guarantor.
 
(p) Borrower shall fail to comply with its obligations under this Agreement
and/or any other Loan Document relating to the obtaining and maintenance of
insurance coverages.
 
(q) The Pre-Sale Requirement shall cease to be satisfied.
 
(r) Borrower shall default under any of 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 any Material Contract, other than the Hotel
Documents, and shall fail to cure such default within the shorter of the
applicable cure period set forth in Section 19.1 (a) or the applicable grace or
cure period set forth in such Material Contract, or such Material Contract shall
otherwise cease to be in full force and effect.
 
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(t) 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.
 
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, in the sole discretion of Lender, 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 to complete the Construction in the name of Borrower; to use
unadvanced proceeds of the Loan 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 Approved 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 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) Accelerate the Maturity Date and 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) Reserved;
 
(f) Assess interest on all amounts outstanding under the Note at the Default
Rate; and
 
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(g) Exercise or pursue any other remedy or cause of action permitted under this
Agreement and/or any of the other Loan Documents (including, without limitation,
the exercise of the power of sale under the Deed of Trust), 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.
 
If, prior to the fourth (4th) anniversary of the Full Loan Opening, the Maturity
Date of the Loan has been accelerated as a result of an Event of Default and the
Loan is subsequently repaid, Borrower must pay to Lender (i) a yield maintenance
fee, calculated as provided below, for the period from the date the Loan is
repaid until the third (3rd) anniversary of the Full Loan Opening, if the Loan
is repaid prior to such third (3rd) anniversary and (ii) a fee equal to one
percent (1%) of the principal repaid if the Loan is repaid after the third (3rd)
anniversary, and before the fourth (4th) anniversary, of the Full Loan Opening
(but in any case not in excess of the maximum amount the Lender may charge or
receive without violating applicable law). The yield maintenance fee will be
equal to the amount of interest, based on the Margin, that would accrue on the
principal balance of the Loan as of the date the Loan is repaid until the third
(3rd) anniversary of the Full Loan Opening Date, plus one percent (1%) of such
principal balance of the Loan, discounted at the Federal Funds Rate-Target, as
published in The Wall Street Journal as of the date of such repayment, minus
one-half percent (½ %).
 
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.
 
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
Texas.
 
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
 
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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
 
(c) Lender owes no duty of care to protect Borrower, either Pledgor, either
Guarantor, any Tenant or Residential Unit Purchaser or any other person or
entity 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
 
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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.  Notwithstanding anything to the contrary contained
herein or in the Commitment Letter, in the event of any conflict between the
terms and conditions of this Agreement and those of the Commitment Letter, then
the conflicting terms and provisions of this Agreement will supersede those of
the Commitment Letter.
 
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 and Limitation of Liability.

 
IN THE EVENT  THE CLOSING FUNDING IS MADE BUT  THEREAFTER THE LENDER DEFAULTS IN
ITS OBLIGATION TO ADVANCE PROCEEDS OF THE LOAN PROVIDED ALL APPLICABLE
CONDITIONS TO ITS OBLIGATION TO FUND SUCH PROCEEDS HAVE BEEN SATISFIED, OR
THE  LENDER IS OTHERWISE IN DEFAULT OF ANY OF ITS OTHER MATERIAL OBLIGATIONS
WITH REGARD TO THE LOAN, AND IN ANY SUCH CASE SUCH FUNDING OR OTHER MATERIAL
DEFAULT REMAINS UNCURED FOR A PERIOD OF (i) FIVE (5) BUSINESS DAYS FOR A FUNDING
DEFAULT OR (ii) THIRTY (30) DAYS FOR ANY OTHER MATERIAL DEFAULT, IN EACH CASE
FOLLOWING LENDER'S RECEIPT FROM BORROWER OF WRITTEN NOTICE OF THE DEFAULT IN
QUESTION,  THEN:
 
           (i)           IF, PRIOR TO THE DATE THE DEFAULT BY LENDER IS
CURED,  LITIGATION IS FILED BY ONE OR MORE OF THE PARTIES IN A COURT OF
COMPETENT JURISDICTION WITH REGARD TO THE ALLEGED DEFAULT BY LENDER AS DESCRIBED
ABOVE, BORROWER MAY, AT ITS OPTION REQUIRE THAT LENDER, CONCURRENTLY WITH THE
DELIVERY OF THE PAYMENTS DESCRIBED IN (a) AND (b) BELOW, AND PRIOR TO A
DETERMINATION BY SUCH COURT OF
 
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WHETHER LENDER IS IN DEFAULT (BUT SUBJECT TO THE REQUIREMENTS BELOW), ASSIGN
(WITHOUT RECOURSE, REPRESENTATION OR WARRANTY) THE LOAN DOCUMENTS (INCLUDING THE
DEED OF TRUST LIEN WITH ITS EXISTING FIRST LIEN POSITION) TO A REPLACEMENT
LENDER FOR THE PROJECT (WHICH MAY BE AN AFFILIATE OF BORROWER) AND ENDORSE THE
NOTE, WITHOUT RECOURSE, REPRESENTATION OR WARRANTY, TO THE REPLACEMENT LENDER
AND RELEASE ALL OTHER COLLATERAL FOR THE LOAN.  IN THAT CASE, THE LOAN WILL BE
ASSIGNED TO THE REPLACEMENT LENDER IN ACCORDANCE WITH A CUSTOMARY ASSIGNMENT AND
ASSUMPTION AGREEMENT IN CONFORMITY WITH THE FOREGOING
PROVISIONS.  CONTEMPORANEOUSLY WITH, AND AS A CONDITION TO SUCH TRANSFER OF THE
LOAN AND RELEASE OF COLLATERAL, BORROWER MUST (a) PAY OR CAUSE TO BE PAID TO
LENDER THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AND ALL ACCRUED, UNPAID
INTEREST THEREON AND OTHER AMOUNTS OWED TO LENDER WITH REGARD TO THE LOAN,
INCLUDING OUTSTANDING REIMBURSABLE EXPENSES BUT WITHOUT PAYMENT OF ANY
PREPAYMENT PREMIUM OR YIELD MAINTENANCE, AND (b) PAY OR CAUSE TO BE PAID INTO
THE REGISTRY OF SUCH COURT ALL REQUIRED YIELD MAINTENANCE AND PREPAYMENT FEES
(CALCULATED IN ACCORDANCE WITH THE LOAN DOCUMENTS) TO BE HELD BY SUCH COURT
PENDING FINAL DETERMINATION OF THE DISPUTE BETWEEN THE PARTIES, WITH SUCH YIELD
MAINTENANCE AND PREPAYMENT FEES TO BE RELEASED AND PAID (1) TO BORROWER IF SUCH
COURT DETERMINES LENDER WAS IN DEFAULT OF ITS OBLIGATIONS UNDER THE LOAN
DOCUMENTS AS ALLEGED BY BORROWER AND (2) TO LENDER IF SUCH COURT DOES NOT
DETERMINE LENDER WAS IN DEFAULT AS ALLEGED BY BORROWER AND
 
           (ii)           IF SUCH COURT DETERMINES LENDER WAS IN DEFAULT AS
ALLEGED BY BORROWER, BORROWER AND ANY GUARANTOR WILL BE ENTITLED TO RECOVERY OF
ACTUAL DAMAGES (BUT NO PUNITIVE, SPECIAL OR OTHER DAMAGES) INCURRED AGAINST
LENDER DUE TO LENDER'S DEFAULT AND AWARDED BY THE COURT IN A FINAL JUDGMENT
WHICH IS UNAPPEALED AND UNAPPEALABLE; PROVIDED, HOWEVER, THAT THE AGGREGATE
AMOUNT OF ALL SUCH ACTUAL DAMAGES INCLUDING ATTORNEYS FEES AND RELATED COSTS
THAT MAY BE RECOVERED AGAINST LENDER WILL BE LIMITED TO THE "DAMAGE CAP" AS
DEFINED BELOW.  THE "DAMAGE CAP" FOR LENDER WITH REGARD TO ALL LENDER DEFAULTS
OCCURRING AFTER THE CLOSING FUNDING WILL BE (a) THE SUM OF $15,000,000.00 UP
UNTIL THE DATE THAT LENDER HAS FUNDED $60,000,000.00 OF THE LOAN, (b) THE SUM OF
$10,000,000.00 AFTER LENDER HAS FUNDED $60,000,000.00 OF THE LOAN BUT BEFORE ALL
AMOUNTS LENDER IS OBLIGATED TO FUND UNDER THE PROCEEDS OF THE LOAN DOCUMENTS
HAVE BEEN FUNDED, AND (c) THE SUM OF $5,000,000.00 AFTER ALL PROCEEDS OF THE
LOAN LENDER IS OBLIGATED TO FUND UNDER THE LOAN DOCUMENTS HAVE BEEN FUNDED.  THE
FOREGOING NOTWITHSTANDING, IN THE EVENT LENDER IS PUT INTO RECEIVERSHIP BY
APPLICABLE REGULATORY AUTHORITIES, THEN THE DAMAGE CAP WILL AUTOMATICALLY BE
VOID AND OF NO FURTHER FORCE OR EFFECT.
 
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THIS SECTION SETS FORTH THE SOLE REMEDIES AND RELIEF OF THE BORROWER AND THE
GUARANTORS FOR A DEFAULT BY LENDER UNDER THE LOAN DOCUMENTS.  THE BORROWER AND
THE GUARANTORS HEREBY WAIVE ALL OTHER REMEDIES AND RELIEF, INCLUDING, WITHOUT
LIMITATION, EQUITABLE RELIEF (INCLUDING, WITHOUT LIMITATION, SPECIFIC
PERFORMANCE OR INJUNCTIVE RELIEF EXCEPT TO THE EXTENT NECESSARY TO ENFORCE THE
REMEDIES SET FORTH ABOVE).
 
21.11  
Reserved.

 
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 DALLAS AND STATE OF
TEXAS, 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 TEXAS STATE OR
UNITED STATES COURT HAVING JURISDICTION OVER THE COUNTY OF DALLAS, TEXAS 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).
 
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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 Lender, attention Stephen J.
Costas, 6000 Legacy Drive, Plano, Texas 75024.
 
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, Texas  78701

 
 
Attention:
Kenneth N. Jones, Esq.

 
 
Telephone:
(512) 435-2312

 
 
Facsimile:
(512) 435-2360

 
86

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And to:

 
 
Canyon-Johnson Urban Funds

 
 
2000 Avenue of the Stars, 11th Floor

 
 
Los Angeles, California  90067

 
 
Attention:
Head of Asset Management

 
 
Telephone:
(310) 272-1500

 
 
Facsimile:
(310) 272-1523

 
 
 
And to:

 
 
Canyon-Johnson Urban Funds

 
 
2000 Avenue of the Stars, 11th Floor

 
 
Los Angeles, California  90067

 
 
Attention:
General Counsel

 
 
Telephone:
(310) 272-1500

 
 
Facsimile:
(310) 272-1523

 
 
And to:

 
 
DLA Piper US LLP

 
 
550 South Hope Street, Suite 2300

 
 
Los Angeles, California  90071

 
 
Attention:
Steven A. Fein, Esq.

 
 
Telephone:
(213) 330-7772

 
 
Facsimile:
(213) 330-7572

 
 
If to Lender:

 
Beal Bank Nevada

 
6000 Legacy Drive

 
Plano, Texas 75024

Attention:                      Stephen J. Costas, General Counsel
 
Telephone:                      (469) 467-5534
 
Facsimile:                         (469)
 
 
With a copy to:

 
 
Hunton & Williams LLP

 
 
1445 Ross Avenue, Suite 3700

 
 
Dallas, Texas 75202

 
 
Attention:
Lawrence C. Adams

 
 
Telephone:
(469) 467-5513

 
 
Facsimile:
(469) 241-9568

 
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.
 
87

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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.
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
 
 

 
88

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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/ Erin D. Pickens                                     
Name:         Erin D. Pickens
Title:           Senior Vice President

By:        CJUF II Block 21 Member, LLC,
a Delaware limited liability company, Member

By:          Canyon-Johnson Urban Fund II, L.P.,
a Delaware limited partnership, Member

By:          Canyon-Johnson Realty Advisors II LLC,
a Delaware limited liability company,
General Partner

           By:      /s/ K. Robert Turner                             
Name:          K. Robert Turner
Title:            Managing Partner

LENDER:

BEAL BANK NEVADA

By:  /s/ Anthony Sassine                                               
Name:   Anthony Sassine                                                   
Title:   Authorized Signer                                                  

 
89

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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.
 

Exhibit A - Page 1
 
 

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EXHIBIT B
 
Construction Schedule
 
 
Exhibit B - Page 1
 
 

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EXHIBIT C
 
Permitted Exceptions
 
1.
Restrictive Covenants recorded under Document No(s). 2006234734, 2006240877,
2008013712, 2008078527 and 2008085863 of the Official Public Records of Travis
County, Texas.

 
2.
All interest in all oil, gas and other minerals reserved by Missouri Pacific
Railroad Company in instrument recorded in Volume 8687, Page 248 of the Real
Property Records of Travis County, Texas, as modified and amended by the
Modification of Mineral Reservation dated January 7, 2000, recorded under
Document No. 2000010490 in the Official Public Records of Travis County,
Texas.  Said mineral estate not traced further herein.  (Surface Rights waived
therein) (Lots 7-12)

 
3.
The terms, conditions and stipulations, including but not limited to repurchase
rights, set forth in that certain Special Warranty Deed dated to be effective
December 15, 2006 and recorded under Document No. 2006240878 of the Official
Public Records of Travis County, Texas, as further affected by Estoppel
Certificate and Agreement recorded under Document No(s). 2008078527 and
2008085863 of the Official Public Records of Travis County, Texas and Estoppel
Certificate and Agreement recorded concurrently with the Deed of Trust.

 
4.
The terms, conditions and stipulations set out in that certain Restrictive
Covenant Regarding Unified Development and Maintenance of Drainage Facilities
dated January 9, 2008, recorded under Document No. 2008013712 of the Official
Public Records of Travis County, Texas.

 
5.
The terms, conditions and stipulations set out in that certain Temporary Right
of Way Encroachment License Agreement dated June 4, 2008, recorded under
Document No. 2008094734 of the Official Public Records of Travis County, Texas.

 
6.
The terms, conditions and stipulations set out in that certain Temporary Right
of Way Encroachment License Agreement dated August 29, 2008, recorded under
Document No. 2008151032 of the Official Public Records of Travis County, Texas.

 
7.
Terms, conditions and stipulations set out in that certain Operating Agreement
dated October 26, 2006, as amended by First Amendment to Operating Agreement
dated January 30, 2008 (and by Second Amendment to Operating Agreement dated as
of May 6, 2008), as evidenced by Subordination and Non-Disturbance Agreement,
recorded under Document No. 2008078528 of the Official Public Records of Travis
County, Texas, and as further evidenced by Subordination and Non-Disturbance
Agreement in recorded concurrently with the Deed of Trust.

 
8.
Apparent easement evidenced by the location of electric panel, abandoned service
pole, power poles and guy anchors, breaker box, overhead electric line, electric
meter outside of a dedicated easement as shown on the Survey dated February 26,
2008, prepared by William H. Ramsey, Registered Professional Land Surveyor No.
4532.

 
Exhibit C - Page 1

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9.
The terms, conditions and stipulations set out in that certain Electric Utility
Easement and Vault Agreement dated August 4, 2009, recorded under Document No.
2009133082 of the Official  Public Records of Travis County, Texas.

 
 
Exhibit C - Page 2
 
 

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EXHIBIT D
 
Litigation
 
NONE
 

Exhibit D - Page 1
 
 

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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 Beal Bank Nevada ("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 $250,865,764 per occurrence
and in the annual aggregate. 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 in
amounts sufficient to cover the replacement cost of such exposure subject to a
minimum limit of $10,000,000 for both transit and off site storage (per
location)  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)
$21,820,000 in coverage will be provided for additional Soft Cost expenses
including coverage for all types (including but not limited to interest expense;
fees; and plans, specifications, blueprints and models, in connection with any
restoration following an insured loss);

 
 
(iii)
If applicable, loss or delay of rental income will be provided up to a minimum
of $12,302,173 on an actual loss sustained basis.

 
(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
 
Exhibit E - Page 1

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

 
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.  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.
 
(d)           Commercial General Liability and Umbrella Liability coverage, for
contractors excluded from the Owner Controlled Insurance Program, including but
not limited to, coverage for Personal Injury, Bodily Injury, Death, Property
Damage, with limits of not less than $2,000,000 per occurrence and in the annual
aggregate. 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.  Worker's compensation insurance, for
contractors excluded from the Owner Controlled Insurance Program, 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. 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, for contractors excluded from the Owner Controlled Insurance
Program.
 
(g)           Owner Controlled Insurance Program.  The following coverage shall
be provided by the Borrower for all enrolled parties. Coverage shall include
Borrower as an additional insured on the general liability and excess liability
policies. If applicable, the Workers Compensation/Employers Liability policy
shall also cover the Borrower.
 
(i)           Workers' Compensation Insurance - Statutory Limits of the Workers'
Compensation Laws of the State of Texas, with Coverage B - Employer's Liability
(with limits of $1,000,000 each accident for Bodily Injury by accident,
$1,000,000 each employee for Bodily Injury by disease
 
Exhibit E - Page 2

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

 
and $1,000,000 policy limit Bodily Injury by disease), covering operations of
the enrolled party performing Work at the project site.

Coverage under the CIP will remain in force through completion or other similar
period described in the CIP policy. This insurance is extended for an additional
period of time with respects to liability for "bodily injury" or "property
damage" arising out of "repair work".  This extension shall commence as of the
date that work is completed and shall end as of the expiration of any express
warranty for the work, or up to 24 months from the date of completion of  work,
whichever comes first.

(ii)           Commercial General Liability Insurance -(Excluding Automobile and
Professional Liability) in form providing coverage not less than a Commercial
General Liability insurance policy, including hazards of explosion, collapse,
underground, independent Contractor(s), employees as additional insureds,
completed operations for 10 years after the Project has reached substantial
completion as defined in Article 9.8 of the General Conditions of the Contract
for construction,  contractual liability coverage for claims arising out of the
Work for personal injury, bodily injury and property damage in policy or
policies of insurance such that the total available limits, reinstated annually
to all insureds combined will not be less than:

$2,000,000 per occurrence
$2,000,000 personal and advertising injury aggregate
$2,000,000 general aggregate
$2,000,000 completed operations aggregate - term limit.

Coverage will apply only to work performed at the Project site.  Such insurance
will not include coverage for products liability for any product(s)
manufactured, assembled, or otherwise worked upon away from the Project site for
any enrolled party or excluded party performing such off-site work.

(iii)           Umbrella/Excess Liability Insurance in limits of:

$150,000,000 per occurrence
$150,000,000 general aggregate
$150,000,000 products/completed operations aggregate

excess of Employers Liability and Commercial General Liability stated above, to
all insureds combined.

(h)           Automobile Liability.  Contractors shall be required to carry
automobile liability insurance for all owned, hired and no owned vehicles with
limits of at least $1 million.
 
Exhibit E - Page 3

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(i)           Contractors Pollution Liability.  The Project will have a limit of
$15,000,000 per claim and a $15,000,000 aggregate limit.  The policy period
shall coincide with the construction term.  Coverage will apply to all claims as
a result of Bodily Injury, Property Damage or Clean-up Costs caused by Pollution
Conditions resulting from Covered Operations that are performed by or on the
behalf of the Contractor at the project site.  Coverage shall also include
transportation, disposal site coverage and a minimum of ten (10) years completed
operations.
 
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.  Flood and Earthquake sublimits shall be what is
commercially available at reasonable costs in the market but in no event be less
than $100,000,000 each per occurrence and in the annual aggregate. 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
$10,000,000, debris removal with a sublimit of not less than
$15,000,000.    Deductibles shall not exceed $250,000 for physical
damage.   Cover shall also include extra expense cover with sublimits not less
than $5,000,000. Lender shall be named as sole Loss Payee and Mortgagee for the
Project, for all claim proceeds, including business interruption insurance loss
proceeds, in excess of $250,000.
 
(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.  Loss of rental income on an actual loss
sustained, in an amount equal to 12 months of projected rental income, with a
120 day extended period of indemnification.  Cover shall also include extra
expense with a sublimit of not less than $5,000,000.  Waiting period of not
greater than 30 days can apply.
 
Exhibit E - Page 4

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(d)           Commercial General Liability. Commercial General Liability
Insurance, for Personal Injury, Bodily Injury, Death, Accident and Property
Damage providing in combination no less than $100,000,000 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.  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 applicable Laws or $5,000,000,
whichever is greater. 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 $10,000,000 per accident; $10,000,000 per illness,
per employee; and $10,000,000 per illness, in the aggregate.  Such limits can be
met through excess liability policies of insurance.
 
(h)           Auto Liability for Owned (if any) and Hired and Non Owned with
limits not less than $10,000,000, unless otherwise approved by Lender.  If owner
/Operator does not have any Automobiles , the Commercial General Liability
policy must be endorsed to cover Non-Owned Automobile Liability.
 
(i)           Directors & Officers Liability.  To the extent the project has the
exposure at the time it becomes operational, Directors and Officers liability
insurance providing cover for Side A and Side B in an amount not less than
$5,000,000 subject to industry standard deductibles.  If deemed to be required,
this requirement can be satisfied by the separate coverage of the individual
Borrower membership entities.
 
(j)           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 E - Page 5

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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.
 
(c)           The Commercial General Liability, Automobile Liability, and
Pollution Liability policies required in this Exhibit E 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.
 
(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 or as soon as coverage has been bound,
but no later than prior to the renewal date.  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
 
Exhibit E - Page 6

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

 
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 without 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.
 
(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.

Exhibit E - Page 7
 
 

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EXHIBIT F
 
Architect’s Certificate
 
The firm of BOKA Powell, LLC (“Architect”), hereby certifies for the benefit of
Beal Bank Nevada and CJUF II Stratus Block 21 LLC, to the best of its current
knowledge, information and belief, that:
 
Architect has been employed by Stratus Block 21 Investments GP, L.L.C., a Texas
limited liability company (“Stratus Block 21”), pursuant to a contract dated May
3, 2006 (as amended and assigned, the “Architect Agreement”), to provide
architectural and engineering services for what is commonly known as W Hotel &
Residences, which is located at Block 21 in Austin, Texas (the “Project”).  The
Architect Agreement was assigned by Stratus Block 21 to CJUF II Stratus Block 21
LLC, a Delaware limited liability company, the current owner of the Project, by
assignment dated July 30, 2007 (referred to herein as the “Owner”).  The Project
is located on the property described on Exhibit “A” attached hereto (the “Land”)
and the improvements being constructed on the Land in conjunction with the
Project is referred to herein as the “Improvements.”
 
A true and correct copy of the Architect Agreement, together with all amendments
thereto, which sets out Architect’s services is attached hereto as Exhibit “B.”
 
The firm is duly licensed and in good standing under laws of the State of Texas,
License No. 10147.
 
The foundations were designed by a structural engineer retained by Architect in
accordance with the recommendations contained in a soil report dated August 10,
2007, which was prepared by Henley-Johnston & Associates, Inc.
 
Plans listed on the attached Schedule I comprise the plans which are necessary
for the 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.  Calculations of the
gross building and the net rentable building area are attached as Schedule
II.  The plans as prepared by Architect and Architect’s consultants (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.  In addition, (i) the Urban Design Section of the Neighborhood
Planning and Zoning Department at the City of Austin approved the design of the
streetscape improvements for the Project in accordance with Restrictive Covenant
recorded under Document No. 2006234734 of the Official Public Records of Travis
County, Texas, (ii) the Project is designed as a unified Development under its
Site Development Permit No. SP-20070371C issued by the City of Austin (the “Site
Development Permit”) in accordance with Restrictive Covenant Regarding Unified
Development and Maintenance of Drainage Facilities recorded under Document No.
2008013712 of the Official Public Records of Travis County, Texas (the “Unified
Development RC”), (iii) joint access for the Project is designed in accordance
with Section 4 of the Unified Development RC, and (iv) parking for the Project
is designed in accordance with Section 5 of the Unified Development RC.
 
Exhibit F - Page 1

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

 
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 prepared with assistance from
other designers or contractors.
 
Type of Plans
 
Name of Preparing Firm
     
Construction Document Package No. 1
 
BOKA Powell & all Consultants
Construction Document Package No. 2
 
BOKA Powell & all Consultants
Construction Document Package No. 3
 
BOKA Powell & all Consultants
Construction Document Package No. 4
 
BOKA Powell & all Consultants
Construction Document Package No. 5
 
BOKA Powell & all Consultants

 
The Construction Document Pages have been supplemented by the Addenda issued as
described on Schedule I attached hereto.  The Specifications are included as
part of the aforementioned Construction Documents.
 
Architect has received payment of all sums due under the Architect Agreement
(the “Progress Payments”) other than the current amount due in the amount of
$145,572.29 (the “Current Amount”) for services provided through September 21,
2009.  In consideration of the payment by Owner of the Progress Payments and
other good and valuable consideration, the receipt of all of which is hereby
acknowledged, Architect has waived and released and, acting herein by and
through me, does hereby waive and release, any and all liens, rights and
interests (whether choate or inchoate and including, without limitation, all
mechanic’s and materialman’s liens under the Constitution, statutes and laws of
the State of Texas) owned, claimed or held, or to be owned, claimed or held by
Architect in and to the Land and in and to the Improvements, whether now or
hereafter constructed thereon, by reason of services performed by Architect to
September 21, 2009 (but not after such date); and the Architect for itself, its
representatives and assigns does release, acquit and forever discharge Owner,
its successors and assigns from any and all claims, debts, demands and causes of
action that Architect has or may have as a result of the same; provided,
however, that the release contained in this paragraph shall in no way diminish,
modify or otherwise affect the validity of any liens, rights and interests to be
owned, claimed or held by Architect by reason of services performed subsequent
to September 21, 2009 hereby by Architect or for the Current Amount due.
 
Architect has actual knowledge, and hereby certifies, that all bills owed by
Architect to others for materials furnished and services performed in connection
with any services or work product provided under the Architect Agreement with
regard to the Land or the Improvements have been fully paid and satisfied except
for amounts reflected in the Current Amount and for services and/or work product
performed subsequent to September 21, 2009.
 
Exhibit F - Page 2
 
 

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BOKA POWELL, LLC

By:                                                                
 
Name:__________________________
 
Title:                                                                
 
Date:                                                                
 

 
THE STATE OF TEXAS                     §
§
COUNTY OF ____________            §
 
This instrument was acknowledged before me on the ___ day of October, 2009 by
________________________________, ____________________________ of BOKA Powell,
LLC, a____________________, on behalf of said entity.
 

      __________________________________________
Notary Public Signature
 
(SEAL)
 

Exhibit F - Page 3
 
 

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EXHIBIT G
 
Budget
 

Exhibit G - Page 1
 
 

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EXHIBIT H
 
Draw Request Form
 

Exhibit H - Page 1
 
 

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EXHIBIT I
 
Approved Plans and Specifications and Approved Finish Standards
 
(see attached)
 

Exhibit I - Page 1
 
 

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EXHIBIT J
 

 
Subcontracts
 
 
 

Exhibit J - Page 1
 
 

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EXHIBIT K
 
PLEASE INCLUDE IN DRAW PACKAGE SENT TO BEAL BANK NEVADA
 
FORM OF BAILEE LETTER FOR PUBLIC WAREHOUSEMEN
 
[WAREHOUSEMEN LETTERHEAD]
 
[DATE]
 
Beal Bank Nevada
6000 Legacy Drive
Plano, Texas 75024
Attention: Anthony Sassine
 
Re:           W Hotel and Residences Condominiums
 
Austin, Texas
 
(the "Project")
 
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 Amended and Restated
Construction Loan Agreement (the "Loan Agreement") between Owner and Beal Bank
Nevada ("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.
 
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
 
Exhibit K - Page 1

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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:                                                      

Exhibit K - Page 2
 
 

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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.]
 
 
Exhibit K - Page 3
 
 

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EXHIBIT L
 
PLEASE INCLUDE IN DRAW PACKAGE SENT TO BEAL BANK NEVADA
 
FORM OF BAILEE LETTER
 
[SUBCONTRACTOR LETTERHEAD]
 
[DATE]
 
Beal Bank Nevada
6000 Legacy Drive
Plano, Texas 75024
Attention:  Anthony Sassine
 
Re:           W Hotel and Residences Condominiums
 
Austin, Texas
 
(the "Project")
 

 
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 Amended and
Restated Construction Loan Agreement (the "Loan Agreement") between Owner and
Beal Bank Nevada ("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;

 
Exhibit L - Page 1

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(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:                                                      

Exhibit L - Page 2
 
 

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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.]
 

Exhibit L - Page 3
 
 

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EXHIBIT M
 
List of Sales Agreements
 

 
Exhibit M - Page 1
 
 

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EXHIBIT M-1
 
List of Sales Agreements Discrepancies
 

Exhibit M-1 - Page 1
 
 

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EXHIBIT M-2
 
Approved Price List
 

Exhibit M-2 - Page 1
 
 

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EXHIBIT N
 
Required Changes to Condominium Documents
 
CIS Revisions
 
The CIS shall be revised to:
 
Comply with all of the requirements of § 82.153 of the Texas Uniform Condominium
Act (“TUCA”) for both the Master and Residential Condominiums;
 
List with specificity each lien, lease, or encumbrance in the Declarations for
the Master Condominium and the Residential Condominium;
 
Either list the written warranties to be provided with respect to the Master
Units in addition to the Residential Master Unit or add a statement there are
none;
 
Provide a general description of all insurance provided by declarant or any
owners association with respect to either the Master or Residential
Condominiums;
 
Provide a more detailed description of the expected fees to be paid by unit
owners for use of common elements and other facilities related to the
Condominiums;
 
State the pro forma or projected budgets for the Master and Residential
Condominiums were prepared in accordance with generally accepted accounting
principles and (a) taking into consideration the physical condition of the
condominium or (b) are based on assumptions that, to the best of
[Declarant’s/preparer’s] knowledge, are reasonable; each budget must also state
the amount of each reserve or that no reserve is included; the budget for the
Master Condominium must state the projected monthly common expense assessment
for each Master Condominium; each budget must identify the person who prepared
the budget, and contain a statement of the budget's assumptions concerning
occupancy and inflation factors; and
 
Delete the word “maximum” when referring to the number of units that may be
created when used in connection with the Declarant Control Period or appointment
of directors to the board of directors of the owners association.
 
Master Condominium Declaration
 
The Master Condominium Declaration shall be revised to:
 
Attach a plat and plans that strictly comply with all applicable requirements of
TUCA;
 
Exhibit N - Page 1

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Modify Attachments 6 and 7 so that the allocated percentages of ownership
interests and expenses total exactly 100 percent;
 
Limit § 19.4(h) to those amendments declarant expressly permitted by TUCA to
make;
 
State that the Owner of the Parking Master Unit shall pay 18 percent of the
Parking Master Unit Assessments described in Attachment 7 so that exactly 100
percent of such assessments are allocated to specifically named Owners;
 
Designate the number, size and location of sales, leasing, or management offices
and model units;
 
Correct reference in § 19.4 to nonexistent § 17.4;
 
Clarify application of Tex. Prop. Code Ch. 27 (Residential Construction
Liability Act) to commercial damage claims;
 
Delete the word “maximum” when referring to the number of units that may be
created when used in connection with the Declarant Control Period or appointment
of directors to the board of directors of the owners association; and
 
Attach original tax certificates or tax receipts with respect to the property.
 
Residential Condominium Declaration
 
The Residential Condominium Declaration shall be revised to:
 
Attach a plat and plans that strictly comply with all applicable requirements of
TUCA;
 
Revise Exhibits C-1 and C-2 so that the allocated percentages of ownership
interests and expenses total exactly 100 percent;
 
Limit § 17.4(h) to those amendments declarant expressly permitted by TUCA to
make;
 
Designate the number, size and location of sales, leasing, or management offices
and model units;
 
Clarify application of Tex. Prop. Code Ch. 27 (Residential Construction
Liability Act) to hotel damage claims;
 
Delete the word “maximum” when referring to the number of units that may be
created when used in connection with the Declarant Control Period; and
 
Attach original tax certificates or tax receipts with respect to the property.
 
Exhibit N - Page 2
 
 

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EXHIBIT O
 
Approved Form of Sales Agreement
 

Exhibit O - Page 1
 
 

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EXHIBIT P
 
Materials Purchases Not Subject to Retainage
 

Exhibit P - Page 1
 
 

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EXHIBIT Q
 
LEASING PARAMETERS AND ALLOWABLE TENANT IMPROVEMENTS
W Austin Commercial Space Leases
                             Retail                                                                                                                   
Restaurant                                                                                                               Office
Term (Years)
 
Minimum 1st Year Base Rent
Annual Bumps
Minimum Average Base Rent
Additional Rent
 
Maximum Allowable Tenant Improvements Allowance
 
Maximum Commission
 
5                       7                       10
 
$27.00          $27.00            $27.00
$  0.50          $ 0.50             $ 0.50
$28.00          $28.50            $29.25
       6%                6%                 6%
 
$28.00          $30.00            $35.00
 
 
$12.00          $16.80             $24.00
AVERAGE
 
$27.00
$ 0.50
$28.58
       6%
 
$31.00
 
 
$17.60
5                       7                    10
 
$29.00          $29.00          $29.00
$  0.50          $ 0.50            $ 0.50
$30.00          $30.50          $31.25
       6%                6%              6%
 
$80.00          $95.00        $120.00
 
 
$13.50          $18.90         $27.00
AVERAGE
 
$29.00
$ 0.50
$30.58
6%
 
$98.33
 
 
$19.80
5                       7                    10
 
$26.00          $26.00        $26.00
$  0.50           $ 0.50        $ 0.50
$27.00           $27.50       $28.25
 
 
$28.00           $30.00       $35.00
 
 
$16.20          $22.68        $32.40
AVERAGE
 
$26.00
$ 0.50
$27.58
 
 
$31.00
 
 
$23.76

Notes:
1.
Borrower has required duty to employ Urban Partners to market retail and
restaurant space.  U.P. represents all retail in the Second Street District.

2.
Retail and Restaurant commissions are calculated as 6% of base rent over the
initial term of the lease. Split is 4% to tenant rep and 2% to landlord rep for
Retail and Restaurant.

3.
Office commissions are calculated as 6% of gross rent over the initial term of
the lease. Splits are the same as Retail.

4.
Additional Rent applies to the retail and restaurant leases. It is calculated as
6% of annual Gross Sales over the Natural Breakpoint.

 
The Natural Breakpoint = Base Rent / 6%.  The landlord will then receive 6% of
all annual Gross Sales in excess of the Natural Breakpoint.

 
For example: Base Rent = $30 psf. Natural Breakpoint = $30 / 6% = $500 psf.
Gross Sales = $800 psf.

 
Landlord will receive additional rent on top of Base Rent equal to $18 psf =
($800 - $500) * 6%.

 
Total Rent = Base Rent + Percentage Rent = $30 + $18 = $48 psf.

 
Commissions are not payable on Percentage Rent.

5.
Lease terms not in compliance with this Exhibit or the Amended and Restated
Construction Loan Agreement require Lender's prior written consent.

6.
Any leasing commissions payable to parties affiliated with Borrower shall
require Lender's prior written consent.

7.
Each Lease to a tenant affiliated with the Borrower requires Lender's prior
written consent.

Exhibit Q - Page 1
 
 

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EXHIBIT R
 
W AUSTIN CHANGE ORDER SUMMARY
 

 
Date
Description
Total
10/01/2008
10/27/2008
10/27/2008
11/07/2008
12/29/2008
01/15/2009
02/25/2009
04/09/2009
05/05/2009
05/27/2009
06/18/2009
06/29/2009
08/19/2008
09/15/2009
Owner Change Order 1
Owner Change Order 2
Owner Change Order 3
Owner Change Order 4
Owner Change Order 5
Owner Change Order 6
Owner Change Order 7
Owner Change Order 8
Owner Change Order 9 A
Owner Change Order 9 B
Owner Change Order 10
Owner Change Order 11
Owner Change Order 12
Owner Change Order 13
Total
$ 39,645
$ 125,716
$ 101,002
$ 167,312
$ 417,003
$ 525,313
$ 238,237
$ 190,957
$ 102,886
$ 993,608
$ 255,071
$ 365,263
$ 100,818
$2,447,936
$ 6,070,767

 
Exhibit R - Page 1
 
 

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

 

Exhibit S- Page 1
 
 

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EXHIBIT T

Due Diligence Materials Provided to Lender

S-i
 
 

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