ex10-3.htm


    
      

    

    Exhibit 10.3

     

     

    
      PROMISSORY
NOTE

       

      
        	
                1.

              	
                DEFINED
      TERMS.  As used in this Promissory Note, the following
      terms shall have the following
      meanings:

              
	 
      	
                 

              
	 
      	1.1.     
      Borrower:  Whitestone
      Centers LLC, a Texas limited liability company, its successors
      and assigns.
	 	 	 
	 
      	1.2.     
      Lender: Sun Life
      Assurance Company of Canada, a Canadian corporation, together with other
      holders from time to time of this Note.
	 	 	 
	 
      	1.3.     
      Guarantor: Whitestone
      REIT, a Maryland real estate investment trust.
	 	 	 
	 
      	1.4.     
      Principal Sum:
      $3,348,750.00.
	 	 	 
	 
      	1.5.     
      Monthly Payment:
      $25,224.34.
	 	 	 
	 
      	1.6.     
      Date of Disbursement:
      February 3, 2009.
	 	 	 
	 
      	1.7.     
      Interest
      Rate:  6.63% per annum.
	 	 	 
	 
      	1.8.     
      Default Rate: the
      Interest Rate plus five percent (5%) per annum, but in no event greater
      than the maximum lawful rate of interest.
	 	 	 
	 
      	1.9.     
      Maturity
      Date:  March 1, 2014.
	 	 	 
	 
      	1.10.    Amortization
      Period:  Twenty (20) years from the Interest Only Payment
      Date.
	 	 	 
	 
      	1.11.    Interest Only Payment
      Date:  March 1, 2009, being the first day of the first
      month after the Date of Disbursement.
	 	 	 
	 
      	1.12.    First Payment
      Date:  April 1, 2009, being the first day of the second
      month after the Date of Disbursement.
	 	 	 
	 
      	1.13.    Lender's
      Payment Address:	
                Sun
      Life Assurance Company of Canada

              
	 
      	 
      	 
      	
                c/o
      Kinghorn Driver Hough & Co.

              
	 
      	 
      	 
      	
                1300
      Post Oak Blvd., Suite 1200

              
	 
      	 
      	 
      	
                Houston,
      Texas 77056

              
	 
      	 
      	 
      	 
      
	 
      	
                1.14.    Permitted Prepayment
      Period:  the period commencing on Date of Disbursement
      and ending on the Maturity Date, subject to and in accordance with the
      provisions of Paragraphs 12 and 13 of this Note.

              
	 	 	 
	 
      	
                1.15.    Mortgage:  a
      Deed of Trust and Security Agreement of even date with this Note from
      Borrower to, or for the benefit of, Lender, which secures Borrower's
      obligations hereunder, and which covers property in Harris County, Texas,
      and all modifications or amendments thereto or extensions
      thereof.

              


      

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      
        	 
      	
                1.16.    Loan Documents, Insurance
      Proceeds, Laws, Taking Proceeds, Secured Debt, Property, and Event of
      Default: shall have the same meanings as in the
      Mortgage.

              
	 	 	 
	
                2.

              	
                DEBT.  For
      value received, Borrower promises to pay to the order of Lender, the
      Principal Sum with interest on unpaid principal from the Date of
      Disbursement at the Interest Rate. Interest shall be calculated on a
      360-day year of twelve 30-day months.

              
	 
      	
                 

              
	
                3.

              	
                PAYMENTS. Borrower shall pay the
      Monthly Payment to Lender commencing on the First Payment Date and
      continuing on each monthly anniversary thereof until the Maturity Date. If
      a payment date is a non-business day, the Monthly Payment shall be due on
      the next business day.  On the Interest Only Payment Date,
      Borrower shall pay the interest then due and accrued from the Date of
      Disbursement.

              
	 
      	
                 

              
	 
      	
                On
      the Maturity Date, Borrower shall pay to Lender the entire then unpaid
      balance of principal and interest.  Lender shall have no
      obligation, express or implied, to refinance the “balloon payment” then
      due.

              
	 	 
	 
      	
                All
      payments shall be made in lawful money of the United States of America, in
      immediately available funds, at Lender's Payment Address, or at such other
      place as Lender may from time to time designate in
  writing.

              
	 	 
	
                4.

              	
                LATE CHARGE AND ADDITIONAL INTEREST. Borrower recognizes that
      if it does not make the Monthly Payments when due, Lender will incur
      additional administrative expenses in servicing the loan, will lose the
      use of the money due and will be frustrated in meeting its other financial
      and loan commitments.  Lender and Borrower acknowledge that
      different methods could be used to calculate Lender's actual damages if
      the Monthly Payment is not made when due. To avoid disputes over which
      method shall apply, Borrower agrees that a late charge equal to four
      percent (4%) of each Monthly Payment which is not made when due is a
      reasonable method for calculating said damages.  Borrower shall
      pay such late charge to Lender immediately after the due date for each
      Monthly Payment which is not made when due.  The payment of such
      late charge shall not affect Lender's other rights and remedies under this
      Note and the other Loan Documents.

              
	 
      	
                 

              
	 
      	
                All
      expenditures by Lender pursuant to the Loan Documents, other than advances
      of the Principal Sum, which are not reimbursed by Borrower immediately
      upon demand; all amounts remaining due and unpaid after the Maturity Date;
      and any amounts due and unpaid after an Event of Default (including late
      charges) shall bear interest at the Default Rate until such amounts are
      paid to Lender. Such payments shall be in addition to the late charge
      described above.

              
	 	 
	
                5.

              	
                APPLICATION OF PAYMENTS.
       Unless Lender elects
      otherwise, all sums received by Lender in payment hereunder shall be
      applied first to late charges, costs of collection or enforcement, all
      expenditures made by Lender pursuant to the Loan Documents, and any other
      similar amounts due, if any, under this Note and the other Loan Documents,
      then to amounts due pursuant to Paragraph 13 of this Note, then to
      interest which is due and payable under this Note and the remainder to
      principal due and payable under this Note.  If an Event of
      Default has occurred and is continuing, such payments may be applied to
      sums due hereunder or under the other Loan Documents in any order and
      combination that Lender may, in its sole discretion,
      determine.

              


      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                6.

              	
                WAIVERS. Borrower waives
      presentment for payment, demand, notice of nonpayment, notice of intention
      to accelerate the maturity of this Note, diligence in collection,
      commencement of suit against any obligor, 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, before or after maturity of this Note, with or without notice to
      Borrower, and agrees that Borrower's liability shall not be in any manner
      affected by any indulgence, extension of time, renewal, waiver or
      modification granted or consented to by Lender.  Borrower
      consents to any and all extensions of time, renewals, waivers or
      modifications that may be granted by Lender with respect to the payment or
      other provisions of this Note, and to any substitution, exchange or
      release of the collateral for this Note, or any part thereof, with or
      without substitution of said collateral, and agrees to the addition or
      release of any guarantor, all whether primarily or secondarily liable,
      before or after maturity of this Note, with or without notice to Borrower,
      and without  affecting Borrower's liability under this
      Note.

              
	 
      	
                 

              
	
                7.

              	
                NO USURY.
       It is the intent of Lender
      and Borrower in the execution of this Note and all other Loan Documents to
      contract in strict compliance with applicable usury law.  In
      furtherance thereof, Lender and Borrower stipulate and agree that none of
      the terms and provisions contained in this Note, or in any other Loan
      Documents, shall ever be construed to create a contract to pay for the
      use, forbearance or detention of money, interest at a rate in excess of
      the maximum interest rate permitted to be charged by applicable law; that
      neither the Borrower nor any guarantors, endorsers or other parties now or
      hereafter becoming liable for payment of this Note shall ever be obligated
      or required to pay interest on this Note at a rate in excess of the
      maximum interest that may be lawfully charged under applicable law; and
      that the provisions of this Paragraph 7 shall control over all other
      provisions of this Note and any other Loan Documents which may be in
      apparent conflict herewith.  Lender expressly disavows any
      intention to charge or collect excessive unearned interest or finance
      charges in the event the maturity of this Note is
      accelerated.  If the maturity of this Note shall be accelerated
      for any reason or if the principal of this Note is paid prior to the end
      of the term of this Note, and as a result thereof the interest received
      for the actual period of existence of the loan evidenced by this Note
      exceeds the applicable maximum lawful rate, Lender shall, at its option,
      either refund to Borrower the amount of such excess or credit the amount
      of such excess against the principal balance of this Note then outstanding
      and thereby shall render inapplicable any and all penalties of any kind
      provided by applicable law as a result of such excess
      interest.  In the event that Lender shall contract for, charge
      or receive any amount or amounts and/or any other thing of value which are
      determined to constitute interest which would increase the effective
      interest rate on this Note to a rate in excess of that permitted to be
      charged by applicable law, an amount equal to interest in excess of the
      lawful rate shall, upon such determination, at the option of Lender, be
      either immediately returned to Borrower or credited against the principal
      balance of this Note then outstanding, in which event any and all
      penalties of any kind under applicable law as a result of such excess
      interest shall be inapplicable.  By execution of this Note,
      Borrower acknowledges that it believes the loan evidenced by this Note to
      be non-usurious and agrees that if, at any time, Borrower should have
      reason to believe that such loan is in fact usurious, it will give Lender
      notice of such condition and Borrower agrees that Lender shall have sixty
      (60) days in which to make appropriate refund or other adjustment in order
      to correct such condition if in fact such exists.  The term
      “applicable law” as used in this Note shall mean the laws of the State of
      Texas or the laws of the United States, whichever laws allow the greater
      rate of interest, as such laws now exist or may be changed or amended or
      come into effect in the
  future.

              


      

       

      
        
          
          

        

        
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                8.

              	
                ACCELERATION AND OTHER REMEDIES.  The rights and remedies of
      Lender are set forth in the other Loan Documents and include, without
      limitation, the right to declare the Secured Debt, including the principal
      balance of this Note and accrued interest, immediately due and payable in
      case of an Event of Default.

              
	 
      	
                 

              
	
                9.

              	
                JOINT AND SEVERAL LIABILITY. If there is more than one
      Borrower and/or Guarantor, the obligations and covenants of each Borrower
      and/or Guarantor shall be joint and
      several.

              
	 
      	
                 

              
	
                10.

              	
                AMENDMENTS. This Note may not be
      changed or amended orally, but only by an agreement in writing, signed by
      the party against whom enforcement is
  sought.

              
	 
      	
                 

              
	
                11.

              	
                GOVERNING LAW.  This Note shall be
      governed by and construed in accordance with the laws of the state in
      which the Property is located.

              
	 
      	
                 

              
	
                12.

              	
                PREPAYMENT. Borrower shall have no
      right to prepay, and Lender shall have no obligation to accept tendered
      payments of, any portion of the unpaid Principal Sum outstanding under
      this Note prior to the beginning of the Permitted Prepayment Period.
      Borrower may prepay the entire unpaid Principal Sum (but not any lesser
      amount) (the “Amount Prepaid”), with accrued interest thereon to the date
      of prepayment, on any date on which a Monthly Payment is due after the
      beginning of the Permitted Prepayment Period, upon  thirty (30)
      days' prior written notice to Lender of its intention to prepay, provided
      that Borrower pays, at the time of prepayment and in addition thereto, the
      amounts required to be paid pursuant to Paragraph 13 of this Note and all
      other sums due under this Note and the other Loan Documents. The date
      fixed for prepayment in such notice shall become the Maturity Date, except
      that for the purpose of calculating the amounts payable pursuant to
      Paragraph 13 of this Note, the Maturity Date shall mean the date set forth
      in Paragraph 1.9 of this Note.

              
	 
      	
                 

              
	
                13.

              	
                PREPAYMENT INDEMNIFICATION.  Borrower shall indemnify
      Lender against any loss, damage and expense Lender incurs if the unpaid
      Principal Sum is paid prior to the Maturity Date for any reason except (i)
      a payment of the entire unpaid Principal Sum, with accrued and unpaid
      interest, made within ninety (90) days of the Maturity Date or (ii) any
      application by Lender of Insurance Proceeds or Taking Proceeds to
      reduction of the Secured Debt pursuant to the other Loan
      Documents.  Lender and Borrower acknowledge that different
      methods could be used to calculate Lender's actual damages if the unpaid
      Principal Sum is paid prior to the Maturity Date. To avoid disputes over
      which method shall apply, Borrower agrees that the following is a
      reasonable method to calculate damages in such case, and Borrower shall
      pay to Lender a prepayment premium in an amount equal to the greater
      of:

              


      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	 
      	
                (a)

              	
                one
      percent (1%) of the then unpaid Principal Sum; or

              
	 	 	 
	 
      	
                (b)

              	
                the
      Discounted Yield Maintenance Prepayment Fee, as hereinafter
      defined.  For purposes of this Paragraph 13, the term “Treasury
      Security” shall mean the non-callable U.S. Treasury bill, note or bond
      having a maturity date most closely equivalent to the Maturity
      Date.  If more than one such non-callable bill, note or bond
      matures in the same month as the Maturity Date, the bill, note or bond
      with a coupon interest rate closest to the Interest Rate shall be the
      Treasury Security.  For purposes of this Paragraph 13, the term
      “Treasury Yield” shall mean the per annum yield to maturity of the
      Treasury Security, as published in the Wall Street Journal on the fifth
      (5th) business day prior to the date of prepayment.

              
	 	 	 
	 
      	 
      	
                If
      the Interest Rate is greater than the Treasury Yield, the difference
      between the Interest Rate and the Treasury Yield shall be divided by
      twelve (12) and multiplied by the then unpaid Principal Sum to determine
      the monthly payment differential.  The present value of the
      series of monthly payment differentials for the number of whole and
      partial months from the date of prepayment to the Maturity Date shall be
      calculated using the Treasury Yield as the discount rate, compounded
      monthly.  The resulting sum of all the discounted monthly
      payment differentials shall be the Discounted Yield Maintenance Prepayment
      Fee.

              
	 	 	 
	 
      	 
      	
                If
      the Interest Rate is equal to or less than the Treasury Yield, the
      prepayment premium shall be one percent  (1%) of the then unpaid
      Principal Sum.

              
	 	 	 
	
                14.

              	
                ACCELERATION INDEMNIFICATION.  If the Maturity Date is
      accelerated by Lender because of the occurrence of an Event of Default,
      Lender will sustain damages due to the loss of its
      investment.  Borrower therefore agrees to pay, at the time of
      acceleration, in addition to all other sums due under this Note and the
      other Loan Documents, as liquidated damages, an acceleration premium in an
      amount equal to the greater of:

              
	 
      	
                 

              
	 
      	
                (a)

              	
                three
      percent (3%) of the then unpaid Principal Sum; or

              
	 	 	 
	 
      	
                (b)

              	
                the
      Discounted Yield Maintenance Prepayment Fee, as defined in Paragraph 13 of
      this Note.

              
	 	 	 
	
                15.

              	
                NONRECOURSE DEBT.  Borrower shall
      be liable upon the indebtedness evidenced by this Note, for all sums to
      accrue or to become payable thereon and for performance of all covenants
      contained in this Note or in any of the other Loan Documents, to the
      extent, but only to the extent, of Lender's security for the same,
      including, without limitation, all properties, rights, estates and
      interests covered by the Mortgage and the other Loan
      Documents.  No attachment, execution or other writ or process
      shall be sought, issued or levied upon any assets, properties or funds of
      Borrower other than the properties, rights, estates and interests
      described in the Mortgage and the other Loan Documents.  In the
      event of foreclosure of such liens, mortgages or security interests, by
      private power of sale or otherwise, no judgment for any deficiency upon
      such indebtedness, sums and amounts shall be sought or obtained by Lender
      against Borrower. Subject to the foregoing, nothing herein contained shall
      be construed to prevent Lender from exercising and enforcing any other
      remedy relating to the Property allowed at law or in equity or by any
      statute or by the terms of any of the Loan
      Documents.

              


      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	 
      	
                Notwithstanding
      the foregoing, Borrower shall be personally liable to Lender
      for:

              
	 	 
	 
      	
                (a)

              	
                any
      damages, losses, liabilities, costs or expenses (including, without
      limitation, reasonable attorneys' fees) incurred by Lender due to any of
      the following: (i) any security deposits of tenants of the Property (not
      previously applied to remedy tenant defaults) which have not been paid
      over to Lender; (ii) any rents prepaid by any tenant of the Property more
      than one (1) month in advance; (iii) any insurance proceeds or
      condemnation awards received by Borrower and not applied according to the
      terms of the Mortgage; (iv) accepting Lease termination payments without
      Lender's prior written consent and direction as to use; (v) repairs to the
      Property resulting from a casualty not reimbursed by insurance, to the
      extent insurance coverage for such repairs was required by the Loan
      Documents; (vi) fraud, material misrepresentation or bad faith on the part
      of Borrower; (vii) any event or circumstance for which Borrower is
      obligated to indemnify Lender under the provisions of the Mortgage
      respecting Hazardous Substances, Contamination or Clean-Up; (viii) waste
      of the Property by Borrower; (ix) Borrower's failure to pay real estate
      taxes or other assessments against the Property; (x) Borrower's failure to
      comply with the Americans with Disabilities Act of 1990, as amended, or
      any other Laws; or (xi) any failure of Borrower to obtain, or cause to be
      obtained, any certificate of occupancy required by Laws covering the
      Property or any portion thereof; and

              
	 	 	 
	 
      	
                (b)

              	
                all
      rents, issues and profits from the Property collected by Borrower after an
      Event of Default has occurred and is continuing or after an event or
      circumstance has occurred and is continuing which with the passage of time
      or the giving of notice, or both, would constitute an Event of Default,
      unless such rents, issues and profits are applied to the normal operating
      expenses of the Property or to the Secured Debt.

              
	 	 	 
	 
      	
                Lender
      shall not be limited in any way in enforcing the personal liability and
      obligations of Borrower under the Loan Documents against Borrower, nor
      shall Lender be limited in any way in enforcing the personal liability and
      obligations of any guarantor or indemnitor in accordance with the terms of
      the instruments creating such liabilities and
  obligations.

              
	 	 
	
                16.

              	
                SECURITY. This Note is secured by
      the other Loan Documents and all amendments, modifications, supplements,
      substitutions, additions, renewals, replacements and extensions
      thereof.

              
	 
      	
                 

              
	
                17.

              	
                COLLECTION.  Any check, draft, money
      order or other instrument given in payment of all or any portion of the
      Secured Debt may be accepted by Lender and handled by collection in the
      customary manner, but the same shall not constitute payment hereunder or
      diminish any rights of Lender except to the extent that actual cash
      proceeds of such instrument are unconditionally received by Lender and
      applied to the Secured Debt in the manner elsewhere herein
      provided.  Acceptance by Lender of actual cash proceeds of less
      than the total amount of the Secured Debt shall not constitute acceptance
      of such partial payment in satisfaction of the total amount of the Secured
      Debt, including, without limitation, the amounts payable to Lender
      pursuant to Paragraph 13 of this Note.

              
	 
      	
                 

              
	
                18.

              	
                ATTORNEYS' FEES. Upon any Event of Default,
      Borrower shall pay all costs incurred by Lender in the course of
      collection of sums due under this Note or in enforcing any of Borrower's
      other obligations under the Loan Documents, including, without limitation,
      reasonable attorneys' fees and expenses, whether or not suit is filed by
      Lender.

              


      

       

      
        
          
          

        

        
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                19.

              	
                REGISTRATION.  This Note shall be deemed
      to be in registered form at Lender's sole election.  Such
      election may be made at any time without endorsement of this Note or any
      other action by Borrower.  Borrower shall recognize any such
      election and, upon request by Lender, shall cooperate with Lender at
      Lender's expense to facilitate the consummation of such
      election.

              
	 
      	
                 

              
	
                20.

              	
                WAIVER OF JURY TRIAL.  BORROWER
      AND LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
      COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER, ON
      OR IN RESPECT OF ANY MATTER WHATSOEVER ARISING OUT OF, OR IN ANY WAY
      CONNECTED WITH, THIS NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, OR THE
      RELATIONSHIP OF BORROWER AND LENDER HEREUNDER OR
      THEREUNDER.

              
	 
      	
                 

              
	
                21.

              	
                CAPTIONS.  All paragraph and
      subparagraph captions are for convenience of reference only and shall not
      affect the construction of any provision
    herein.

              
	 
      	
                 

              


      

      IN
WITNESS WHEREOF, this Note has been executed and delivered as of the 3rd day of
February, 2009.

       

      [Remainder
of page intentionally left blank.

      Signature
page follows.]

      


       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      
        SIGNATURE
PAGE OF BORROWER TO PROMISSORY NOTE

         

        


         

        
          	 
      	WHITESTONE
      CENTERS LLC,	 
      
	 
      	a
      Texas limited liability company	 
      
	 	 	 	 
	 
      	
                  By:

                	
                   Whitestone
      REIT Operating Partnership, L.P., a

                  Delaware
      limited partnership,

                  its
      sole member

                	 
      
	 
      	 
      	 
      	 	 
      	 
      
	 
      	 
      	
                  By:

                	
                  Whitestone
      REIT, a Maryland real estate

                  investment
      trust, its general partner

                	 
      
	 
      	 
      	 
      	 	 
      	 
      
	 	 	 	
                  By:

                	/s/ John J.
      Dee	 
	 	 	 	 	
                  Name:
      John
      J. Dee

                	 
	 	 	 	 	
                  Title:  
      Executive
      Vice President

                	 


        

        


         

        
          	
                  STATE
      OF TEXAS

                	
                  §

                	 
      
	 
      	
                  §

                	 
      
	
                  COUNTY
      OF HARRIS

                	
                  §

                	 
      


        

         

        This instrument was acknowledged before
me on January 30, 2009 by John J. Dee, Executive Vice President of Whitestone
REIT, a Maryland real estate investment trust, on behalf of said real estate
investment trust, in its capacity as general partner of Whitestone REIT
Operating Partnership, L.P., a Delaware limited partnership, on behalf of said
limited partnership, in its capacity as sole member of Whitestone Centers LLC, a
Texas limited liability company, on behalf of said limited liability
company.

        


        


        


        
          	 
      	/s/
      Priscilla
      A. Gonzalez	 
      
	 
      	
                  Notary
      Public, State of Texas

                	 
      
	 
      	 
      	 
      
	 
      	Priscilla
      A. Gonzalez 	 
      
	 
      	
                  (printed
      name)

                	 
      


        

        


        
          	
                  My
      Commission Expires:

                	 
      
	
                  
                     

                    6/18/2011