Exhibit 10.5


 


SENIOR MEZZANINE PROMISSORY NOTE


 


	
  $21,043,197

  	
   

  	
  December 31,
  2008

  



 


SW 131 ST. ROSE MEZZANINE BORROWER LLC, a Delaware
limited liability company (“Borrower”), FOR
VALUE RECEIVED, promises to pay to the order of BEHRINGER HARVARD ST. ROSE REIT,
LLC, a Delaware limited liability company or its assigns (“Lender”),
at such place as Lender may from time to time designate in writing, the
principal sum of Twenty One Million Forty Three Thousand One Hundred Ninety
Seven and No/100 Dollars ($21,043,197) or so much thereof as may from time to
time have been advanced to Borrower under this Note, with Interest (as defined
below) on the outstanding principal amount at the rates set forth herein.  In no event shall the principal amount
outstanding hereunder at any time exceed, when combined with the principal
amount outstanding at any time under the Junior Mezzanine Promissory Note,
dated December 31, 2008, from Borrower to Lender (the “Junior Mezzanine Note”), exceed in the aggregate Twenty One
Million Forty Three Thousand One Hundred Ninety Seven and No/100 Dollars
($21,043,197).  Also, in no event shall
the accrued and unpaid interest under this Note, when combined with the accrued
and unpaid interest owing under the Junior Mezzanine Note, exceed the amount of
interest that would be due (taking into account payments of interest made prior
to the time in question) if interest had accrued at the rate applicable from
time to time under this Note and the Junior Mezzanine Note on a principal
balance equal to the aggregate principal outstanding from time to time under
this Note and the Junior Mezzanine Note.


 


DEFINITIONS


 


For the purpose of this Note capitalized terms not
defined below will be as defined in the Loan Agreement:


 


“Completion”
shall mean the time when the Project is deemed substantially complete, which
will occur upon the issuance of the final certificate of occupancy, the receipt of
evidence reasonably satisfactory to Lender that no building has been
constructed over any easements or setback areas and no other improvements
prohibited by the terms of the easements or setbacks have been constructed
within such easements or setbacks, as applicable, the issuance of a certificate of substantial completion from the
Mortgagor’s architect, receipt of a contractor’s release and the receipt of
lien waivers or similar evidence of payment from the general contractor and all
major subcontractor (i.e. subcontractors whose contract amount exceeds
$100,000) to Lender’s reasonable satisfaction; provided, however, that if
Sender Lender shall deem the Project substantially complete, then Lender shall
deem the Project substantially complete.


 


“Default
Interest” shall mean any interest accruing at the Default Interest
Rate and payable pursuant to the terms hereof or of the other Loan Documents.


 


“Default
Interest Rate” shall mean a rate of interest per annum equal to the
lesser of either (a) fifteen percent (15%) per annum or (b) the
maximum rate of interest which may be collected from Borrower under applicable
law.


 


“Interest”
shall mean any interest accruing at the Interest Rate or the Default Interest
Rate, as applicable, and payable pursuant to the terms hereof or of the other
Loan Documents.


 

















 


“Interest
Rate” shall mean a rate of interest per annum equal to thirteen percent
(13%) per annum or, if less, the maximum rate of interest which may be
collected from Borrower under applicable law.


 


“Late Charge”
shall mean the lesser of (a) five percent (5%) of any unpaid amount, or (b) the
maximum late charge permitted to be charged under applicable law.


 


“Loan Agreement”
shall mean that certain Senior Mezzanine Loan Agreement, between Lender and
Borrower, dated of even date herewith, corresponding to this Note, as the same
may hereafter be amended, modified and restated from time to time.


 


“Maturity
Date” shall mean December 31, 2013.


 


“Net Cash
Flow” shall mean the amount by which (i) gross income of
the Project (which shall include, without limitation, all income received by
Mortgagor from and in connection with any leasing activity) exceeds (ii) operating
expenses (which shall mean the actual cash operating expenses of the Project
incurred during the period in question and which are consistent with generally
accepted operating practices for similar properties plus any payments of
interest and/or principal pursuant to the Senior Loan and the Junior Mezzanine
Note) excluding Interest paid or payable under this Note to the extent included
in operating expenses.


 


“Payment Date”
shall mean the first day of each calendar month, commencing on February 1,
2009, and the Maturity Date (or, if any such date is not a Business Day, then
the first Business Day immediately before such date).


 


SECTION 1 - STATED MATURITY; INTEREST AND
PRINCIPAL PAYMENTS.


 


1.1           Payment of Interest.  Interest shall accrue on this Note
at the Interest Rate or, during any time at which an Event of Default is
continuing, at the Default Interest Rate. 
Commencing on the first Payment Date, and continuing monthly on
the same date of each calendar month thereafter up to and until the Maturity
Date, an installment of accrued and unpaid Interest shall be due and payable to
Lender to the extent required by the following:


 


(a)                                  Borrower shall be required to pay
Interest-only, to the extent proceeds are budgeted therefor in the Construction
Budget (the amount so budgeted being stipulated to be $6,413,523 and being
herein called the “Interest Reserve”); and


 


(b)                                 After the Interest Reserve has been
exhausted, Borrower shall be required to pay Interest-only in an amount equal
to the then available Net Cash Flow, or the total of all accrued Interest that
then remains unpaid, if less, and the excess of such installment of Interest
over the amount of the available Net Cash Flow (if any) so deferred shall
accrue as set forth herein.


 


On the Maturity Date, all accrued but unpaid Interest, shall be due and
payable in full.  It is the intent of
Borrower and Lender that this Note shall be treated as a security that
satisfies the requirements (the “Straight Debt Safe Harbor”)
of Section 856(m)(1)(A) and Section 856(m)(2) of the
Internal Revenue Code of 1986, as amended (the “Code”).  Accordingly, notwithstanding any indication
herein to the contrary, (i) Borrower and Lender


 


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agree that the terms of this Note shall be interpreted
in such a manner that the Note satisfies the Straight Debt Safe Harbor and (ii) the
terms of this Note shall be applied such that the Note has a constant effective
yield to maturity, as determined under Section 1272 of the Code, at a
fixed rate over the entire term of the Note equal to the Interest Rate (or, during any time at which an Event of Default is
continuing, at the Default Interest Rate); provided, however, that such
construction shall not alter the dates of the principal or Interest payments,
or the amounts of principal or Interest payments required to be paid hereunder.


 


1.2           Payments of Principal. 
On the Maturity Date, the unpaid principal balance, together with all
accrued but unpaid Interest, shall be due and payable in full.


 


1.3           Payment
on Stated Maturity Date.  Any
remaining unpaid Indebtedness shall be due and payable in full at the Maturity
Date.


 


1.4           Computation
of Interest.  Subject to the
provisions of Section 1.8, Interest under this Note shall be paid as set
forth herein and shall be calculated based on actual days elapsed and a three
hundred sixty (360) day year.  Subject to
the provisions of Section 1.8, Interest that becomes due under this Note
and remains unpaid shall be compounded monthly and shall itself bear Interest
(without becoming part of the principal balance of this Note) at the Interest
Rate such that the Note has a constant effective yield to maturity at the
Interest Rate as described in Section 1.1. hereof (or, during any time at
which an Event of Default is continuing, at the Default Interest Rate).


 


1.5           Method
of Payment.  Each payment due
hereunder shall not be deemed received by Lender until received on a Business
Day (as hereafter defined) in Federal funds in lawful money of the United
States of America immediately available to Lender prior to 2:00 p.m. local
time at the place then designated by Lender. 
Any payment received on a Business Day after the time established by the
preceding sentence, shall be deemed to have been received on the immediately
following Business Day for purposes of determining interest accruals and Late
Charges.


 


1.6           Application
of Payments.  Payments under this
Note shall be applied first to the payment of Late Charges and Default Interest
and other costs and charges due in connection with this Note, as Lender
determines in its sole discretion, then to the payment of accrued but unpaid
Interest, and then to reduction of the outstanding principal balance.  No principal amount repaid may be
reborrowed.  All amounts due under this
Note shall be payable without setoff, counterclaim or any other deduction
whatsoever.


 


1.7           Prepayment.  No prepayment of this Note shall
be permitted without Lender’s approval in writing, in Lender’s sole discretion,
except as expressly provided in Section 4(d) of the Loan
Agreement.


 


1.8           No Usury.  The provisions of this Note and of all other
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, including, but not limited to, the Loan
Documents, are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of demand or acceleration of the maturity of this
Note or otherwise, shall the amount contracted for, charged, taken, reserved,
paid, or agreed 


 


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to be paid to Lender for
the use, forbearance, retention or detention of the money loaned under this
Note and related indebtedness exceed the maximum amount permissible under
applicable law.  If, from any
circumstance whatsoever, performance or fulfillment of any provision hereof or
of any agreement between Borrower and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled
shall be reduced to such limit; and if, from any circumstance whatsoever,
Lender shall ever receive anything of value deemed interest by applicable law
in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal balance owing under
this Note in the inverse order of its maturity (whether or not then due) or at
the option of Lender be paid over to Borrower, and not to the payment of
interest.  All Interest (including any
amounts or payments judicially or otherwise under the law deemed to be
interest) contracted for, charged, taken, reserved, paid or agreed to be paid
to Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the Note, including
any extensions or renewals thereof, until payment in full of the Indebtedness
so that the Interest thereof for such full period will not exceed at any time
the maximum amount permitted by applicable law. 
To the extent that Lender is relying on Chapter 303, as amended, of
the Texas Finance Code to determine the maximum amount of interest permitted by
applicable law on the principal of the Loan, Lender will utilize the weekly
rate ceiling from time to time in effect as provided in such Chapter 303,
as amended.  To the extent United States
federal law permits a greater amount of interest than is permitted under Texas
law, Lender will rely on United States federal law instead of such
Chapter 303, as amended, for the purpose of determining the maximum amount
permitted by applicable law. 
Additionally, to the extent permitted by applicable law now or hereafter
in effect, Lender may, at its option and from time to time, implement any other
method of computing the maximum lawful rate under such Chapter 303, as
amended, or under other applicable law by giving notice, if required, to
Borrower as provided by applicable law now or hereafter in effect.  This Section 1.8 will control all
agreements between Borrower and Lender.


 


SECTION 2 - DEFAULT; REMEDIES


 


2.1           Acceleration.  Lender may, by notice to Borrower at any time
during the existence of an Event of Default, declare immediately due and
payable the entire principal amount outstanding hereunder together with all
Interest and other charges due hereunder including, without limitation, all
Late Charges and Default Interest.


 


2.2           Default Interest Rate; Late
Charges.


 


(a)           After
an Event of Default, the Default Interest Rate shall apply, in place of the
Interest Rate, to all amounts outstanding under the Loan.  Such Default Interest shall be compounded on
the monthly anniversary of such Event of Default until paid in full.


 


(b)           If
any monthly installment of Interest due hereunder is not received by Lender on
or before the tenth (10th) day after such installment becomes due,
Borrower shall pay to Lender, immediately and without demand by Lender, the
Late Charge on such outstanding monthly installment.  Borrower acknowledges that its failure to
make timely payments will cause Lender to incur additional expenses in
servicing and processing the Loan, and that it is extremely 


 


4

















 


difficult
and impractical to determine those additional expenses.  Borrower agrees that any such Late Charges
payable pursuant to this Section 2.2(b) represent a fair and
reasonable estimate, taking into account all circumstances existing on the date
hereof, of the additional expenses Lender will incur by reason of such late
payment.  Any such Late Charge is payable
in addition to, and not in lieu of, any Interest payable at the Default Rate
pursuant to Section 2.2(a).


 


2.3           Remedies.  The remedies of Lender as provided herein, or
in the Loan Documents, or at law or in equity shall be cumulative and
concurrent, and may be pursued singularly, successively, or together at the
sole discretion of Lender, and may be exercised as often as occasion therefor
shall occur.  The failure at any time to
exercise any right or remedy shall not constitute a waiver of the right to
exercise the right or remedy at any other time.


 


SECTION 3 - SECURITY


 


Borrower’s obligations under this Note are secured
by, among other instruments, the Security Instrument and other Loan
Documents.  The covenants of the Security
Instrument and the Loan Agreement, to the extent to be performed by Borrower,
are incorporated by reference into this Note.


 


SECTION 4 - WAIVER


 


Presentment for payment, demand, notice of dishonor,
protest, and notice of protest and stay of execution are hereby waived by
Borrower.  No extension or indulgence or
release of collateral granted from time to time shall be construed as a
novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of the rights of Lender herein.


 


SECTION 5 - EXCULPATION


 


5.1           Lender
Exculpation.  Notwithstanding
anything to the contrary contained in this Note, no present or future
shareholder, director, officer, member or partner of Lender or of any entity
which is now or hereafter a shareholder, director, officer, member or partner
of Lender (or of any entity which is now or hereafter a shareholder, director,
officer, member or partner of a shareholder, director, officer, member or
partner of Lender) shall have any personal liability, directly or indirectly,
under or in connection with this Note or any agreement made or entered into
under or in connection with the provisions of this Note, or any amendment or amendments
to any of the foregoing made at any time or times, heretofore or hereafter, and
Borrower hereby forever and irrevocably waives and releases any and all such
personal liability.  In addition, neither
Lender nor any successor or assign of Lender shall have at any time or times
hereafter any personal liability, directly or indirectly, under or in
connection with any agreement, lease, instrument, encumbrance, claim or right
affecting or relating to the Project or to which the Project is now or hereafter
subject.  The limitation of liability
provided in this paragraph is in addition to, and not in limitation of, any
limitation on liability applicable to Lender provided by law or by any other
contract, agreement or instrument.


 


5.2           Borrower
Exculpation.  Borrower’s liability in
connection with this Note and the other Loan Documents (including Borrower’s
liability for all amounts due hereunder or thereunder) is collectible only from
the collateral against which a security interest is created by the Security Instrument.  In no case will any person who holds a direct
or indirect ownership 


 


5

















 


interest
in Borrower, or any officer, director, manager, trustee, employee, agent or
affiliate of Borrower or any such direct or indirect owner, have any
responsibility for Borrower’s obligations in connection with this Note and the
other Loan Documents (including Borrower’s liability for any amounts due
hereunder or thereunder); provided, however, that nothing in this Section 5.2
limits the liability of any person under a guaranty or other agreement executed
by such person.


 


SECTION 6 - GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; SEVERABILITY


 


6.1           Governing
Law.  This Note shall be governed by,
and construed in accordance with, the substantive law of the State of Texas
without regard to the application of choice of law principles.


 


6.2           SUBMISSION TO
JURISDICTION/SERVICE OF PROCESS. 
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THE
STATE COURTS OF THE STATE OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS FOR THE
PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON
THIS NOTE, THE SUBJECT MATTER HEREOF, OR THE LOAN. BORROWER TO THE EXTENT
PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHER
PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR THAT THIS 
NOTE, THE SUBJECT MATTER HEREOF, OR THE OTHER LOAN (AS APPLICABLE) MAY NOT
BE ENFORCED IN OR BY SUCH COURT AND (B) HEREBY WAIVES THE RIGHT TO REMOVE
ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY LENDER IN THE ABOVE NAMED
COURTS.  BORROWER HEREBY CONSENTS TO
SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TO
IT PURSUANT TO SECTION 7 HEREOF, BUT SERVICE SO MADE WILL BE EFFECTIVE
ONLY ON DELIVERY AT SUCH ADDRESS. 
BORROWER AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO
SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF LENDER.  FINAL JUDGMENT AGAINST BORROWER IN ANY SUCH ACTION,
SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF
THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF BORROWER THEREIN DESCRIBED, OR (Y) IN
ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER
JURISDICTION.  THE LENDER MAY AT ITS
OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST BORROWER OR
ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF 


 


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ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCH
ASSETS MAY BE FOUND.


 


6.3           WAIVER
WITH RESPECT TO DAMAGES.  BORROWER
ACKNOWLEDGES THAT LENDER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP WITH, OR
FIDUCIARY DUTY TO, BORROWER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR
ANY OTHER LOAN DOCUMENT AND THE RELATIONSHIP BETWEEN LENDER AND BORROWER IN
CONNECTION HEREWITH AND THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER SHALL NOT ASSERT, AND BORROWER HEREBY WAIVES, ANY CLAIMS AGAINST
LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION
WITH, OR AS A RESULT OF, THIS NOTE, ANY OTHER LOAN DOCUMENT, ANY AGREEMENT OR
INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.


 


6.4           WAIVER
OF JURY TRIAL.  BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT BORROWER MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS
NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF
THE LENDER IN CONNECTION WITH THIS NOTE OR ANY OF THE OTHER LOAN
DOCUMENTS.  BORROWER ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE LENDER TO DISBURSE THE MONEY
EVIDENCED BY THIS NOTE AND TO ENTER INTO THE OTHER LOAN DOCUMENTS.


 


6.5           Severability.
 If any provision of this Note is held to
be invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect.


 


SECTION 7 - NOTICES


 


7.1           Notices.  All notices, demands and other communications
(“Notice”) under or concerning this Note
shall be in writing.  Each Notice shall
be addressed to the intended recipient at its address set forth in the Loan
Agreement.  Each Notice shall be deemed
given on the earliest to occur of (1) the date when the Notice is received
by the addressee; (2) the first (1st) Business Day after the Notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges, for next Business Day delivery; or (3) the third
Business Day after the Notice is deposited in the United States mail with
postage prepaid, certified mail, return receipt requested.


 


7.2           Any
party to this Agreement may change the address to which Notices intended for it
are to be directed by means of Notice given to the other party in accordance
with this Section 7.  Each party
agrees that it will not refuse or reject delivery of any Notice given in
accordance with this Section 7, that it will acknowledge, in writing, the
receipt of any Notice upon request by the other party and that any Notice
rejected or refused by it shall be deemed for 


 


7

















 


purposes
of this Section 7 to have been received by the rejecting party on the date
so refused or rejected, as conclusively established by the records of the U.S.
Postal Service or the courier service. Any Notice under any other Loan Document
which does not specify how Notices are to be given shall be given in accordance
with this Section 7.


 


SECTION 8 - MISCELLANEOUS


 


8.1           Costs.  If, and as often as, this Note is referred to
an attorney for the collection of any sum payable hereunder, or to defend or
enforce any of Lender’s rights hereunder, or to commence an action,
cross-claim, third-party claim or counterclaim by Lender against Borrower
relating to this Note, Borrower agrees to pay to Lender all costs reasonably
incurred in connection therewith, including reasonable attorney’s fees
(including such fees incurred in appellate, bankruptcy or insolvency
proceedings), with or without the institution of any action or proceeding.


 


8.2           Modification.  Neither this Note nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only
by an instrument in writing executed by the party against which enforcement of
the termination, amendment, supplement, waiver or modification is sought.


 


8.3           Successors.  As used herein, the terms “Borrower” and “Lender”
shall be deemed to include their respective successors and assigns whether by
voluntary action of the parties or by operation of law.  All of the rights, privileges and obligations
hereof shall inure to the benefit of and bind such successors and assigns.


 


8.4           Loan
Agreement.  To the extent not
expressly stated otherwise herein, all of the terms and conditions of the Loan
Agreement shall survive the execution of this Note and shall remain in full
force and effect; provided, however, to the extent of any irreconcilable
conflict between the terms and conditions of the Loan Agreement and this Note,
the terms and provisions of this Note shall govern and control.


 


8.5           No
Waiver.  No failure or delay by
Lender in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  Without limiting the foregoing, no
disbursement by Lender after a default by Borrower hereunder shall constitute a
waiver of any of the Lender’s remedies established or referred to hereunder or
shall obligate Lender to make any further disbursement.  No waiver, consent or approval of any kind by
Lender shall be effective unless (and it shall be effective only to the extent)
expressly set out in a writing signed and delivered by Lender.  No notice to or demand on Borrower in any
case shall entitle Borrower to any other notice or demand in similar or other
circumstances, nor shall such notice or demand constitute a waiver of the
rights of Lender to any other or further actions.  In its sole discretion, Lender may, at any
time and from time to time, waive any one or more of the requirements contained
herein, but such waiver in any instance or under any particular circumstances
shall not be considered a waiver of such requirement or requirements in any
other instance or under any other circumstance.


 


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8.6           Sole
and Absolute Discretion.  Any option,
consent, approval, discretion or similar right of Lender set forth in this Note
may be exercised by Lender in its sole and absolute discretion, unless the
provisions of this Note or another Loan Document specifically require another
standard.


 


[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


 


 


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IN WITNESS WHEREOF, the undersigned has duly
executed and delivered this Note as of the date first set forth above.


 


	
   

  	
   

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SW
  131 ST. ROSE MEZZANINE BORROWER LLC,

  
	
   

  	
   

  	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  SW
  130 St. Rose Limited Partnership, a Delaware

  
	
   

  	
   

  	
   

  	
   

  	
  limited
  partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  SW
  129 St. Rose Limited Partnership, a

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Delaware
  limited partnership, its general

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  SW
  104 Development GP LLC, a

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Delaware
  limited liability company, its

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  general
  partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Timothy J. Hogan

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Timothy
  J. Hogan, Vice President

  



 
















 


JUNIOR MEZZANINE PROMISSORY NOTE


 


	
  $21,043,197

  	
   

  	
  December 31,
  2008

  



 


SW 131 ST. ROSE MEZZANINE BORROWER LLC, a Delaware
limited liability company (“Borrower”), FOR
VALUE RECEIVED, promises to pay to the order of BEHRINGER HARVARD ST. ROSE
REIT, LLC, a Delaware limited liability company or its assigns (“Lender”), at such place as Lender may from time to time
designate in writing, the principal sum of Twenty One Million Forty Three
Thousand One Hundred Ninety Seven and No/100 Dollars ($21,043,197) or so much thereof
as may from time to time have been advanced to Borrower under this Note, with
Interest (as defined below) on the outstanding principal amount at the rates
set forth herein.  In no event shall the
principal amount outstanding hereunder at any time, when combined with the
principal amount outstanding at any time under the Senior Mezzanine Promissory
Note, dated December 31, 2008, from Borrower to Lender (the “Senior Mezzanine Note”), exceed in the aggregate Twenty One
Million Forty Three Thousand One Hundred Ninety Seven and No/100 Dollars
($21,043,197).  Also, in no event shall
the accrued and unpaid interest under this Note, when combined with the accrued
and unpaid interest owing under the Senior Mezzanine Note, exceed the amount of
interest that would be due (taking into account payments of interest made prior
to the time in question) if interest had accrued at the rate applicable from
time to time under this Note and the Senior Mezzanine Note on a principal
balance equal to the aggregate principal outstanding from time to time under
this Note and the Senior Mezzanine Note.


 


DEFINITIONS


 


For the purpose of this Note capitalized terms not
defined below will be as defined in the Loan Agreement:


 


“Completion”
shall mean the time when the Project is deemed substantially complete, which
will occur upon the issuance of the final certificate of occupancy, the receipt of
evidence reasonably satisfactory to Lender that no building has been
constructed over any easements or setback areas and no other improvements
prohibited by the terms of the easements or setbacks have been constructed
within such easements or setbacks, as applicable, the issuance of a certificate of substantial completion from the
Mortgagor’s architect, receipt of a contractor’s release and the receipt of
lien waivers or similar evidence of payment from the general contractor and all
major subcontractor (i.e. subcontractors whose contract amount exceeds
$100,000) to Lender’s reasonable satisfaction; provided, however, that if
Sender Lender shall deem the Project substantially complete, then Lender shall
deem the Project substantially complete.


 


“Default
Interest” shall mean any interest accruing at the Default Interest
Rate and payable pursuant to the terms hereof or of the other Loan Documents.


 


“Default
Interest Rate” shall mean a rate of interest per annum equal to the
lesser of either (a) fifteen percent (15%) per annum or (b) the
maximum rate of interest which may be collected from Borrower under applicable
law.


 


“Interest”
shall mean any interest accruing at the Interest Rate or the Default Interest
Rate, as applicable, and payable pursuant to the terms hereof or of the other
Loan Documents.


 

















 


“Interest
Rate” shall mean a rate of interest per annum equal to thirteen
percent (13%) per annum or, if less, the maximum rate of interest which may be
collected from Borrower under applicable law.


 


“Late Charge”
shall mean the lesser of (a) five percent (5%) of any unpaid amount, or (b) the
maximum late charge permitted to be charged under applicable law.


 


“Loan Agreement”
shall mean that certain Junior Mezzanine Loan Agreement, between Lender and
Borrower, dated of even date herewith, corresponding to this Note, as the same
may hereafter be amended, modified and restated from time to time.


 


“Maturity
Date” shall mean December 31, 2013.


 


“Net Cash
Flow” shall mean the amount by which (i) gross income of
the Project (which shall include, without limitation, all income received by
Mortgagor from and in connection with any leasing activity) exceeds (ii) operating
expenses (which shall mean the actual cash operating expenses of the Project
incurred during the period in question and which are consistent with generally
accepted operating practices for similar properties plus any payments of
interest and/or principal pursuant to the Senior Loan and the Senior Mezzanine
Note) excluding Interest paid or payable under this Note to the extent included
in operating expenses.


 


“Payment Date”
shall mean the first day of each calendar month, commencing on February 1,
2009, and the Maturity Date (or, if any such date is not a Business Day, then
the first Business Day immediately before such date).


 


SECTION 1 - STATED MATURITY; INTEREST AND
PRINCIPAL PAYMENTS.


 


1.1           Payment of Interest.  Interest shall accrue on this Note
at the Interest Rate or, during any time at which an Event of Default is
continuing, at the Default Interest Rate. 
Commencing on the first Payment Date, and continuing monthly on
the same date of each calendar month thereafter up to and until the Maturity
Date, an installment of accrued and unpaid Interest shall be due and payable to
Lender to the extent required by the following:


 


(a)                                  Borrower shall be required to pay
Interest-only, to the extent proceeds are budgeted therefor in the Construction
Budget (the amount so budgeted being stipulated to be $6,413,523 and being
herein called the “Interest Reserve”); and


 


(b)                                 After the Interest Reserve has been
exhausted, Borrower shall be required to pay Interest-only in an amount equal
to the then available Net Cash Flow, or the total of all accrued Interest that
then remains unpaid, if less, and the excess of such installment of Interest
over the amount of the available Net Cash Flow (if any) so deferred shall
accrue as set forth herein.


 


On the Maturity Date, all accrued but unpaid Interest, shall be due and
payable in full.  It is the intent of
Borrower and Lender that this Note shall be treated as a security that
satisfies the requirements (the “Straight Debt Safe Harbor”)
of Section 856(m)(1)(A) and Section 856(m)(2) of the
Internal Revenue Code of 1986, as amended (the “Code”).  Accordingly, notwithstanding any indication
herein to the contrary, (i) Borrower and Lender 


 


2

















 


agree
that the terms of this Note shall be interpreted in such a manner that the Note
satisfies the Straight Debt Safe Harbor and (ii) the terms of this Note
shall be applied such that the Note has a constant effective yield to maturity,
as determined under Section 1272 of the Code, at a fixed rate over the
entire term of the Note equal to the Interest Rate (or, during any time at which an Event of Default is continuing, at the
Default Interest Rate); provided, however, that such construction shall
not alter the dates of the principal or Interest payments, or the amounts of
principal or Interest payments required to be paid hereunder.


 


1.2           Payments of Principal. 
On the Maturity Date, the unpaid principal balance, together with all
accrued but unpaid Interest, shall be due and payable in full.


 


1.3           Payment
on Stated Maturity Date.  Any
remaining unpaid Indebtedness shall be due and payable in full at the Maturity
Date.


 


1.4           Computation
of Interest.  Subject to the
provisions of Section 1.8, Interest under this Note shall be paid as set
forth herein and shall be calculated based on actual days elapsed and a three
hundred sixty (360) day year.  Subject to
the provisions of Section 1.8, Interest that becomes due under this Note
and remains unpaid shall be compounded monthly and shall itself bear Interest
(without becoming part of the principal balance of this Note) at the Interest
Rate such that the Note has a constant effective yield to maturity at the
Interest Rate as described in Section 1.1. hereof (or, during any time at
which an Event of Default is continuing, at the Default Interest Rate).


 


1.5           Method
of Payment.  Each payment due
hereunder shall not be deemed received by Lender until received on a Business
Day (as hereafter defined) in Federal funds in lawful money of the United
States of America immediately available to Lender prior to 2:00 p.m. local
time at the place then designated by Lender. 
Any payment received on a Business Day after the time established by the
preceding sentence, shall be deemed to have been received on the immediately
following Business Day for purposes of determining interest accruals and Late
Charges.


 


1.6           Application
of Payments.  Payments under this
Note shall be applied first to the payment of Late Charges and Default Interest
and other costs and charges due in connection with this Note, as Lender
determines in its sole discretion, then to the payment of accrued but unpaid
Interest, and then to reduction of the outstanding principal balance.  No principal amount repaid may be
reborrowed.  All amounts due under this
Note shall be payable without setoff, counterclaim or any other deduction
whatsoever.


 


1.7           Prepayment.  No prepayment of this Note shall
be permitted without Lender’s approval in writing, in Lender’s sole discretion,
except as expressly provided in Section 4(d) of the Loan
Agreement.


 


1.8           No Usury.  The provisions of this Note and of all other
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, including, but not limited to, the Loan
Documents, are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of demand or acceleration of the maturity of this
Note or otherwise, shall the amount contracted for, charged, taken, reserved,
paid, or agreed 


 


3

















 


to be paid to Lender for
the use, forbearance, retention or detention of the money loaned under this
Note and related indebtedness exceed the maximum amount permissible under
applicable law.  If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between Borrower and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled
shall be reduced to such limit; and if, from any circumstance whatsoever,
Lender shall ever receive anything of value deemed interest by applicable law
in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal balance owing under
this Note in the inverse order of its maturity (whether or not then due) or at
the option of Lender be paid over to Borrower, and not to the payment of
interest.  All Interest (including any
amounts or payments judicially or otherwise under the law deemed to be
interest) contracted for, charged, taken, reserved, paid or agreed to be paid
to Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the Note, including
any extensions or renewals thereof, until payment in full of the Indebtedness
so that the Interest thereof for such full period will not exceed at any time
the maximum amount permitted by applicable law. 
To the extent that Lender is relying on Chapter 303, as amended, of
the Texas Finance Code to determine the maximum amount of interest permitted by
applicable law on the principal of the Loan, Lender will utilize the weekly
rate ceiling from time to time in effect as provided in such Chapter 303,
as amended.  To the extent United States
federal law permits a greater amount of interest than is permitted under Texas
law, Lender will rely on United States federal law instead of such
Chapter 303, as amended, for the purpose of determining the maximum amount
permitted by applicable law. 
Additionally, to the extent permitted by applicable law now or hereafter
in effect, Lender may, at its option and from time to time, implement any other
method of computing the maximum lawful rate under such Chapter 303, as
amended, or under other applicable law by giving notice, if required, to
Borrower as provided by applicable law now or hereafter in effect.  This Section 1.8 will control all
agreements between Borrower and Lender.


 


SECTION 2 - DEFAULT; REMEDIES


 


2.1           Acceleration.  Lender may, by notice to Borrower at any time
during the existence of an Event of Default, declare immediately due and
payable the entire principal amount outstanding hereunder together with all
Interest and other charges due hereunder including, without limitation, all
Late Charges and Default Interest.


 


2.2           Default Interest Rate; Late
Charges.


 


(a)           After
an Event of Default, the Default Interest Rate shall apply, in place of the
Interest Rate, to all amounts outstanding under the Loan.  Such Default Interest shall be compounded on
the monthly anniversary of such Event of Default until paid in full.


 


(b)           If
any monthly installment of Interest due hereunder is not received by Lender on
or before the tenth (10th) day after such installment becomes due,
Borrower shall pay to Lender, immediately and without demand by Lender, the
Late Charge on such outstanding monthly installment.  Borrower acknowledges that its failure to
make timely payments will cause Lender to incur additional expenses in
servicing and processing the Loan, and that it is extremely 


 


4

















 


difficult
and impractical to determine those additional expenses.  Borrower agrees that any such Late Charges
payable pursuant to this Section 2.2(b) represents a fair and
reasonable estimate, taking into account all circumstances existing on the date
hereof, of the additional expenses Lender will incur by reason of such late
payment.  Any such Late Charge is payable
in addition to, and not in lieu of, any Interest payable at the Default Rate
pursuant to Section 2.2(a).


 


2.3           Remedies.  The remedies of Lender as provided herein, or
in the Loan Documents, or at law or in equity shall be cumulative and
concurrent, and may be pursued singularly, successively, or together at the
sole discretion of Lender, and may be exercised as often as occasion therefor
shall occur.  The failure at any time to
exercise any right or remedy shall not constitute a waiver of the right to
exercise the right or remedy at any other time.


 


SECTION 3 - SECURITY


 


Borrower’s obligations under this Note are secured
by, among other instruments, the Security Instrument and other Loan
Documents.  The covenants of the Security
Instrument and the Loan Agreement, to the extent to be performed by Borrower,
are incorporated by reference into this Note.


 


SECTION 4 - WAIVER


 


Presentment for payment, demand, notice of dishonor,
protest, and notice of protest and stay of execution are hereby waived by
Borrower.  No extension or indulgence or
release of collateral granted from time to time shall be construed as a
novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of the rights of Lender herein.


 


SECTION 5 - EXCULPATION


 


5.1           Lender
Exculpation.  Notwithstanding
anything to the contrary contained in this Note, no present or future
shareholder, director, officer, member or partner of Lender or of any entity
which is now or hereafter a shareholder, director, officer, member or partner
of Lender (or of any entity which is now or hereafter a shareholder, director,
officer, member or partner of a shareholder, director, officer, member or
partner of Lender) shall have any personal liability, directly or indirectly,
under or in connection with this Note or any agreement made or entered into
under or in connection with the provisions of this Note, or any amendment or
amendments to any of the foregoing made at any time or times, heretofore or
hereafter, and Borrower hereby forever and irrevocably waives and releases any
and all such personal liability.  In
addition, neither Lender nor any successor or assign of Lender shall have at
any time or times hereafter any personal liability, directly or indirectly,
under or in connection with any agreement, lease, instrument, encumbrance,
claim or right affecting or relating to the Project or to which the Project is
now or hereafter subject.  The limitation
of liability provided in this paragraph is in addition to, and not in
limitation of, any limitation on liability applicable to Lender provided by law
or by any other contract, agreement or instrument.


 


5.2           Borrower
Exculpation.  Borrower’s liability in
connection with this Note and the other Loan Documents (including Borrower’s
liability for all amounts due hereunder or thereunder) is collectible only from
the collateral against which a security interest is created by the Security
Instrument.  In no case will any person
who holds a direct or indirect ownership 


 


5

















 


interest
in Borrower, or any officer, director, manager, trustee, employee, agent or
affiliate of Borrower or any such direct or indirect owner, have any
responsibility for Borrower’s obligations in connection with this Note and the
other Loan Documents (including Borrower’s liability for any amounts due
hereunder or thereunder); provided, however, that nothing in this Section 5.2
limits the liability of any person under a guaranty or other agreement executed
by such person.


 


SECTION 6 - GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; SEVERABILITY


 


6.1           Governing
Law.  This Note shall be governed by,
and construed in accordance with, the substantive law of the State of Texas
without regard to the application of choice of law principles.


 


6.2           SUBMISSION TO
JURISDICTION/SERVICE OF PROCESS. 
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THE
STATE COURTS OF THE STATE OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS FOR THE
PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON
THIS NOTE, THE SUBJECT MATTER HEREOF, OR THE LOAN. BORROWER TO THE EXTENT
PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHER
PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING
IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THIS 
NOTE, THE SUBJECT MATTER HEREOF, OR THE OTHER LOAN (AS APPLICABLE) MAY NOT
BE ENFORCED IN OR BY SUCH COURT AND (B) HEREBY WAIVES THE RIGHT TO REMOVE
ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY LENDER IN THE ABOVE NAMED
COURTS.  BORROWER HEREBY CONSENTS TO
SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TO
IT PURSUANT TO SECTION 7 HEREOF, BUT SERVICE SO MADE WILL BE EFFECTIVE
ONLY ON DELIVERY AT SUCH ADDRESS. 
BORROWER AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO
SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF LENDER.  FINAL JUDGMENT AGAINST BORROWER IN ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF
THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF BORROWER THEREIN DESCRIBED, OR (Y) IN
ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER
JURISDICTION.  THE LENDER MAY AT ITS
OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST BORROWER OR
ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF


 


6

















 


ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCH
ASSETS MAY BE FOUND.


 


6.3           WAIVER
WITH RESPECT TO DAMAGES.  BORROWER
ACKNOWLEDGES THAT LENDER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP WITH, OR
FIDUCIARY DUTY TO, BORROWER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR
ANY OTHER LOAN DOCUMENT AND THE RELATIONSHIP BETWEEN LENDER AND BORROWER IN
CONNECTION HEREWITH AND THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER SHALL NOT ASSERT, AND BORROWER HEREBY WAIVES, ANY CLAIMS AGAINST
LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF, THIS NOTE, ANY OTHER LOAN DOCUMENT, ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.


 


6.4           WAIVER
OF JURY TRIAL.  BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT BORROWER MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS
NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF
THE LENDER IN CONNECTION WITH THIS NOTE OR ANY OF THE OTHER LOAN
DOCUMENTS.  BORROWER ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE LENDER TO DISBURSE THE MONEY
EVIDENCED BY THIS NOTE AND TO ENTER INTO THE OTHER LOAN DOCUMENTS.


 


6.5           Severability.  If any provision of this Note is held to be
invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect.


 


SECTION 7 - NOTICES


 


7.1           Notices.  All notices, demands and other communications
(“Notice”) under or concerning this Note
shall be in writing.  Each Notice shall
be addressed to the intended recipient at its address set forth in the Loan
Agreement.  Each Notice shall be deemed
given on the earliest to occur of (1) the date when the Notice is received
by the addressee; (2) the first (1st) Business Day after the Notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges, for next Business Day delivery; or (3) the third
Business Day after the Notice is deposited in the United States mail with
postage prepaid, certified mail, return receipt requested.


 


7.2           Any
party to this Agreement may change the address to which Notices intended for it
are to be directed by means of Notice given to the other party in accordance
with this Section 7.  Each party
agrees that it will not refuse or reject delivery of any Notice given in
accordance with this Section 7, that it will acknowledge, in writing, the
receipt of any Notice upon request by the other party and that any Notice
rejected or refused by it shall be deemed for 


 


7

















 


purposes
of this Section 7 to have been received by the rejecting party on the date
so refused or rejected, as conclusively established by the records of the U.S.
Postal Service or the courier service. Any Notice under any other Loan Document
which does not specify how Notices are to be given shall be given in accordance
with this Section 7.


 


SECTION 8 - MISCELLANEOUS


 


8.1           Costs.  If, and as often as, this Note is referred to
an attorney for the collection of any sum payable hereunder, or to defend or
enforce any of Lender’s rights hereunder, or to commence an action,
cross-claim, third-party claim or counterclaim by Lender against Borrower
relating to this Note, Borrower agrees to pay to Lender all costs reasonably
incurred in connection therewith, including reasonable attorney’s fees
(including such fees incurred in appellate, bankruptcy or insolvency
proceedings), with or without the institution of any action or proceeding.


 


8.2           Modification.  Neither this Note nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified orally, but only
by an instrument in writing executed by the party against which enforcement of
the termination, amendment, supplement, waiver or modification is sought.


 


8.3           Successors.  As used herein, the terms “Borrower” and “Lender”
shall be deemed to include their respective successors and assigns whether by
voluntary action of the parties or by operation of law.  All of the rights, privileges and obligations
hereof shall inure to the benefit of and bind such successors and assigns.


 


8.4           Loan
Agreement.  To the extent not
expressly stated otherwise herein, all of the terms and conditions of the Loan
Agreement shall survive the execution of this Note and shall remain in full
force and effect; provided, however, to the extent of any irreconcilable
conflict between the terms and conditions of the Loan Agreement and this Note,
the terms and provisions of this Note shall govern and control.


 


8.5           No
Waiver.  No failure or delay by
Lender in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  Without limiting the foregoing, no
disbursement by Lender after a default by Borrower hereunder shall constitute a
waiver of any of the Lender’s remedies established or referred to hereunder or
shall obligate Lender to make any further disbursement.  No waiver, consent or approval of any kind by
Lender shall be effective unless (and it shall be effective only to the extent)
expressly set out in a writing signed and delivered by Lender.  No notice to or demand on Borrower in any
case shall entitle Borrower to any other notice or demand in similar or other
circumstances, nor shall such notice or demand constitute a waiver of the
rights of Lender to any other or further actions.  In its sole discretion, Lender may, at any
time and from time to time, waive any one or more of the requirements contained
herein, but such waiver in any instance or under any particular circumstances
shall not be considered a waiver of such requirement or requirements in any
other instance or under any other circumstance.


 


8

















 


8.6           Sole
and Absolute Discretion.  Any option,
consent, approval, discretion or similar right of Lender set forth in this Note
may be exercised by Lender in its sole and absolute discretion, unless the
provisions of this Note or another Loan Document specifically require another
standard.


 


[THE REMAINDER OF THIS PAGE
IS INTENTIONALLY LEFT BLANK]


 


9

















 


IN WITNESS WHEREOF, the undersigned has duly
executed and delivered this Note as of the date first set forth above.


 


	
   

  	
   

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SW
  131 ST. ROSE MEZZANINE BORROWER LLC,

  
	
   

  	
   

  	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  SW
  130 St. Rose Limited Partnership, a Delaware

  
	
   

  	
   

  	
   

  	
   

  	
  limited
  partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  SW
  129 St. Rose Limited Partnership, a

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Delaware
  limited partnership, its general

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  SW
  104 Development GP LLC, a

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Delaware
  limited liability company, its

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  general
  partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Timothy J. Hogan

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Timothy
  J. Hogan, Vice President