ex10-5.htm


    
      
        

      
Exhibit 10.5

     

    

      PROMISSORY
NOTE

       

      Project
Commonly Known as

       

      “W Hotel
& Residences”

       

      May
2, 2008 Chicago, Illinois

       

       $165,000,000

       

      


       

      


       

      FOR VALUE
RECEIVED, CJUF II STRATUS BLOCK
21 LLC, a Delaware limited liability company (“Maker”), with a mailing
address of c/o Stratus Properties Inc., 98 San Jacinto, Suite 220, Austin, Texas
78701, promises to pay to the order of CORUS BANK, N.A., a national
banking association (“Lender”), at the address set
forth in Section
4.1(e) of
the Loan Agreement (as defined in Section 7 below), or
such other place as Lender may designate in writing, in the manner provided
hereinafter the principal sum of up to One Hundred Sixty-Five Million Dollars
($165,000,000), or so much thereof as may now or hereafter be disbursed by
Lender to or for the benefit of Maker (the “Loan”), on or before the
Maturity Date (as defined in the Loan Agreement) or the date to which the
indebtedness evidenced hereby is accelerated pursuant to the terms of this Note
and the terms of the other Loan Documents, with interest, in the manner and upon
the terms and conditions set forth below.  All capitalized terms not
expressly defined herein shall have the same meanings as set forth in the Loan
Agreement.

       

      1. Interest
Rate.  Interest shall
accrue from the date of first disbursement of the Loan on the principal balance
thereof remaining from time to time outstanding at the rate (“Interest Rate”) established
below.  Unless the Loan is then bearing interest at the Default Rate,
the Interest Rate shall be equal to the greater of: (1) the sum of: (i) three
and one half percent (3.5%) per annum plus (ii) the three month London Interbank
Offered Rate quoted in the Money Rates section of The Wall Street
Journal (the “LIBOR
Rate”); or (2) six percent and one-half percent (6.5%) per
annum.  The LIBOR Rate shall be automatically adjusted without notice
to Maker on the first (1st) day of each January, April, July, and October
following the calendar month in which the Loan Opening Date occurs (the “Quarterly Adjustment Date”)
based on the LIBOR Rate as of the Quarterly Adjustment Date (or, if the
Quarterly Adjustment Date falls on a non-Business Day, then the Interest Rate
shall be adjusted based on the LIBOR Rate on the first Business Day following
the Quarterly Adjustment Date, effective retroactively to the Quarterly
Adjustment Date).  Interest shall be computed based on a 360-day year
and charged for the actual number of days elapsed.

       

      2. Principal
and Interest Payments.
Commencing on the first day of the first month after the initial
disbursement of the Loan, and continuing on the first day of each month
thereafter until the Loan has been repaid in full, interest on the Loan shall be
payable monthly in arrears on the first day of each month (“Payment Date”) in the amount
of all interest accrued and unpaid.  The final payment of the entire
unpaid principal balance of the Loan plus all accrued and unpaid interest, Exit
Fees, charges, fees, and expenses, if not sooner paid, shall be due and payable
on the Maturity Date.

       

      3. Prepayment.  During the twelve
(12) months immediately following the execution of this Note (“Lockout Period”), Maker shall
not be permitted to prepay the Loan in part or in full from any
source.  At Lender’s option, any attempted unpermitted
prepayment

       

      
        
          
             

          

           


        

        
           


          
            

          

        

        
           


        

      


      during
the Lockout Period shall be placed in a non-interest bearing account and held
until such time as prepayment is allowed.  After the Lockout Period,
Maker may prepay the Loan in part or in full (in accordance with the provisions
hereof) upon not less than seven (7) days prior written notice to Lender, except
that no such notice shall be required in the case of the sale of individual
Residential Units.  In the event that Maker repays any portion of the
Loan after the 12-month anniversary of this Note but before the 30-month
anniversary of this Note from a source other than proceeds realized from the
sale of individual Residential Units or of a component of the Project (i.e., the
Venue, the Hotel or the Commercial Space), in each case, in accordance with and
as permitted by the Loan Documents, then Maker shall pay Lender a prepayment
charge (the “Prepayment
Charge”) equal to (x) in the event of a partial prepayment, two percent
(2.0%) of the amount prepaid, or (y) in the event of prepayment in full, the sum
of (i) two percent (2.0%) of the amount prepaid and (ii) two percent (2.0%) of
any Unfunded Commitment.  The Prepayment Charge shall be in addition
to any Exit Fee still outstanding.  There shall be no Prepayment
Charge on casualty or condemnation proceeds which Lender requires be applied to
the Loan.

       

      4. Applicability
of Charges.  Upon acceleration
of the Loan at any time after the date of this Note and prior to the 30-month
anniversary of the date of this Note, in addition to the Exit Fee that may be
due as provided in the Loan Agreement and to the extent permitted by law, Maker
hereby agrees that there shall be added to the indebtedness evidenced hereby and
secured by that certain Construction Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing of even date herewith (the “Deed of Trust”) a charge equal
to the Prepayment Charge (calculated as if the outstanding Loan were being
prepaid in full as of  the date of such acceleration, regardless of
whether such acceleration would be deemed a “prepayment” under applicable
Law).  Maker hereby acknowledges that the aforesaid charge payable to
the Lender hereunder is a reasonable pre-estimate of the Lender’s losses and is
not a penalty.

       

      5. Application
of Payments.  Subject to the
application of payments required by Section 14.10 of the
Loan Agreement and other applicable provisions of the Loan Documents, Lender
shall have the right unilaterally (and without the consent of Maker) to allocate
any and all payments that may be received by or tendered to Lender made by Maker
or any other person at any time or from time to time and that relate in any way
to the Loan or any other of the obligations then due and payable under the Loan
Documents in any order of priority as Lender in its sole and exclusive
discretion shall elect, including without limitation to: (i) to the payment of
any costs and expenses of Lender that Maker is responsible for under the Loan
Documents; (ii) to accrued but unpaid interest, Exit Fees, penalties, late
payment fees; and (iii) to principal.  Maker (1) irrevocably waives
the right to direct the application of payments and collections received by
Lender from or on behalf of Maker and/or any other person, and (2) agrees that
Lender shall have the continuing exclusive right to apply and reapply any and
all such payments and collections against the Loan or any other obligations then
due and payable under the Loan Documents in such manner as Lender may deem
appropriate (subject to any express provisions of the Loan Documents to the
contrary), notwithstanding any entry by Lender upon any of its books and
records.

       

      6. Late
Charges.  If any
installment of interest, principal or other amount due under the Loan Documents
is not paid on or before the fifteenth (15th) day after the date such payment is
due, Maker shall pay Lender a late charge in an amount equal to ten percent
(10%) of the amount due on any payment (including, but not limited to, any
payment of principal, interest,

       


      
        
           


        

        
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      unfunded
loan fee, if applicable, or any other payment due other than the payment of the
total principal amount due upon maturity of the Loan [whether at stated maturity
or by acceleration]) to defray part of the increased cost of collecting the late
payments and the opportunity cost incurred by Lender because of the
unavailability of the funds.

       

      7. Security
for Payment.  The payment of
this Note is further evidenced by the Construction Loan Agreement of even date
herewith between Maker and Lender (the “Loan Agreement”), and is
secured, inter alia, by
the Deed of Trust. All of the agreements, conditions, covenants, provisions and
stipulations contained in the Loan Documents are hereby made a part of this Note
to the same extent and with the same force and effect as if they were fully set
forth herein, and Maker covenants and agrees to keep and perform them or cause
them to be kept and performed, strictly in accordance with their
terms.

       

      8. Defaults
and Acceleration.  IT IS HEREBY
EXPRESSLY AGREED BY MAKER THAT TIME IS OF THE ESSENCE HEREOF.  At any
time during the existence of any Event of Default, at the option of Lender, the
entire unpaid principal balance of the Loan with interest accrued thereon and
all other sums due by Maker hereunder or under the provisions of the other Loan
Documents shall, upon demand (except as otherwise set forth in the Loan
Agreement) become due and payable immediately.

       

      9. Default
Rate.  After maturity,
whether by acceleration or at stated maturity, or while any Event of Default
exists, subject to the limitations set forth in Section 14 below, Maker promises
to pay interest on the amount of principal due and outstanding hereunder and any
fees, costs and advances at the rate of ten percent (10%) per annum plus the
Interest Rate that would otherwise be then in effect, and shall be adjusted on
each Quarterly Adjustment Date thereafter (the “Default Rate”), but in no
event will the Default Rate exceed the applicable maximum rate of interest
allowed by law, and shall be payable upon demand, and all unpaid interest that
has accrued under this Note, whether prior or subsequent to the occurrence of
the Event of Default, shall be paid at the time of, and as a condition precedent
to, the curing of the Event of Default.  The Default Rate, when
operative, shall be adjusted based on changes in the Interest Rate, but in no
event will the Default Rate exceed the applicable maximum rate of interest
allowed by law.

       

      10. Nature of
Remedies.  The remedies of
Lender as provided in this Note, the Deed of Trust and any of the other Loan
Documents shall be cumulative and concurrent, and may be pursued singly,
successively, or together against either or any of Maker, the mortgaged
property, any guarantor hereof or any other security, at the sole and absolute
discretion of Lender.

       

      11. Waivers,
Consents, Etc..  Maker and any
endorsers, sureties or guarantors hereof and any and all others who are now or
may become liable for all or part of the obligations of Maker under this Note
(all of the foregoing being collectively referred to herein as “Obligors”), agree to be
jointly and severally bound hereby and jointly and severally waive presentment
for payment, demand, notice of nonpayment, notice of dishonor, protest of any
dishonor, notice of protest, and protest of this Note and all other notices in
connection with the delivery, acceptance, performance, default, or enforcement
of the payment of this Note and, except as expressly provided to the contrary
herein, in the other Loan Documents or by Laws, agree that the liability of each
of them shall be unconditional, joint and several, without regard to the
liability of any other party and shall not in any manner be affected by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by Lender.  Each Obligor hereby consents to any and all
extensions of time, renewals, waivers or modifications that may be

       


      
        
           


        

        
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      granted
by Lender with respect to the payment or other provisions of this Note, and to
the release of the collateral, or any part thereof, with or without
substitution, and agree that additional makers, endorsers, guarantors, or
sureties may become parties hereto without notice to them or affecting their
liability hereunder.  Maker hereby authorizes Lender, at any time
after, and during the existence of, an Event of Default hereunder, to apply any
money, or other property which Lender may have or hold on deposit or otherwise
for Maker towards the payment of this Note.  By execution hereof,
Maker hereby specifically pledges and grants to Lender a security interest in
any money or other property which Lender may have or hold on deposit for the
undersigned.

       

      12. Non-Waiver.  Lender shall not
by any act of omission or commission be deemed to waive any of its rights or
remedies hereunder unless such waiver is in writing and signed by Lender and
then only to the extent specifically set forth therein.  A waiver on
one event shall not be construed as continuing or as a bar to or waiver of such
right or remedy in connection with a subsequent event.

       

      13. Business
Loan.  Maker warrants
and represents to Lender that Maker shall use the proceeds represented by this
Note solely for proper business purposes, and consistently with all applicable
Laws and statutes.  Maker further warrants and represents to Lender
and covenants with Lender that Maker is not in the business of extending credit
for the purpose of purchasing or carrying margin securities (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds represented by this Note will be used to purchase or carry any
margin securities or to extend credit to others for the purpose of purchasing or
carrying any margin securities.

       

      14. Interest
Laws.  It being the
intention of Lender and Maker to comply with applicable Laws, it is agreed that
notwithstanding any provision to the contrary in this Note, the Deed of Trust or
any of the other Loan Documents, no such provision shall require the payment or
permit the collection of any interest (“Excess Interest”) in excess of
the maximum amount of interest permitted by law to be charged for the use or
detention, or the forbearance in the collection, of all or any portion of the
indebtedness evidenced by this Note.  If any Excess Interest is
provided for, or is adjudicated to be provided for, in this Note, the Deed of
Trust or any of the other Loan Documents, then in such event:  (a) the
provisions of this paragraph shall govern and control; (b) neither Maker nor any
of the other Obligors shall be obligated to pay any Excess Interest; (c) any
Excess Interest that Lender may have received hereunder shall, at the option of
Lender, be (i) applied as a credit against the then outstanding principal
balance of the Loan, accrued and unpaid interest thereon not to exceed the
maximum amount permitted by law, or both, (ii) refunded to the payor thereof, or
(iii) any combination of the foregoing; (d) the applicable interest rate or
rates hereunder shall be automatically subject to reduction to the maximum
lawful contract rate allowed under the applicable usury laws of the aforesaid
State, and this Note, the Deed of Trust and the other Loan Documents shall be
deemed to have been, and shall be, reformed and modified to reflect such
reduction in such applicable interest rate or rates; and (e) neither Maker nor
any of the other Obligors shall have any action against Lender for any damages
whatsoever arising out of the payment or collection of any Excess
Interest.

       

      15. Subsequent
Holders.  Upon any
endorsement, assignment or other transfer of this Note by Lender or by operation
of law, the term “Lender” as used herein, shall mean the endorsee, assignee or
other transferee or successor to Lender then becoming the holder of this
Note.

       


      
        
           


        

        
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      16. Subsequent
Obligors.  This Note and all
provisions hereof shall be binding on all persons claiming under or through
Maker.  The terms “Maker” and “Obligors”, as used herein, shall
include the respective successors, assigns, legal representatives, executors,
administrators, devisees, legatees and heirs of Maker and any other
Obligors.

       

      17. Interpretation.  Whenever
possible, each provision of this Note and the other Loan Documents shall be
interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Note or any of the other Loan Documents shall be
prohibited or invalid under such Law, such provision shall be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of said documents.  As used in this Note, the singular shall
include the plural, and masculine, feminine and neuter pronouns shall be fully
interchangeable, where the context so requires.  The headings of
sections and paragraphs in this Note are for convenience only and shall not be
construed to limit or define the content, scope or intent of the provisions
hereof.

       

      18. Counterparts.  This Note may be
executed in one or more counterparts, each of which shall be deemed an
original.

       

      19. Governing
Law.  THE VALIDITY OF
THIS NOTE, ITS CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF
MAKER AND LENDER SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

       

      20. Jury
Waiver.  TO THE MAXIMUM
EXTENT PERMITTED BY LAW, MAKER AND LENDER EACH HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY ACTION, CAUSE OF ACTION, CLAIM, DEMAND OR PROCEEDING
ARISING UNDER OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE DEALINGS OF MAKER AND LENDER WITH RESPECT TO
THIS NOTE, OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.  TO THE MAXIMUM EXTENT PERMITTED BY LAW, MAKER AND LENDER
EACH HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT MAKER OR
LENDER MAY FILE A COPY OF THIS EXECUTED NOTE WITH ANY COURT OR OTHER TRIBUNAL AS
WRITTEN EVIDENCE OF THE CONSENT OF MAKER AND LENDER TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY.

       

      21. Submission
to Jurisdiction.
MAKER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR ILLINOIS STATE COURT WITH JURISDICTION OVER COOK COUNTY,
ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR
ANY OF THE OTHER LOAN DOCUMENTS AND MAKER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL
LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST MAKER IN THE COURTS
OF

       


      
        
           


        

        
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      ANY OTHER
JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE MAKER AGAINST LENDER,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS NOTE OR ANY OTHER LOAN DOCU­MENT SHALL BE BROUGHT ONLY
IN A COURT IN CHICAGO, ILLINOIS.

       

      22. Notices.  Any notice that
Lender or Maker may desire or be required to give to the other hereunder shall
be deemed given when presented in accordance with Article
22­­­­­ of the Loan Agreement.

       

      23. Conflicts.  In the event of
any conflict between the provisions of this Note and the provisions of the Loan
Agreement, the provisions of the Loan Agreement shall control.

       

      SIGNATURE
PAGE TO FOLLOW

       


      
        
           


        

        
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      IN
WITNESS WHEREOF, this Note has been executed and delivered under seal on the
date first set forth above.

       

      MAKER:

       

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

      


      
        	
                 
      

              	
                By:

              	
                Stratus
      Block 21 Investments, L.P., a Texas limited partnership,
      Manager

              


      

      


      
        	
                 
      

              	
                By:

              	
                Stratus
      Block 21 Investments GP, L.L.C., a Texas limited liability company,
      General Partner

              


      

      


      By:           /s/ John E.
Baker

      John E.
Baker, Senior Vice President

      


      


      
        	
                 
      

              	
                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

              


      

      
        	
                 
      

              	
                K.
      Robert Turner, Managing Partner

              


      

      


       


      
        
           


        

        
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