Document:

exhibit10_1

    
      Exhibit 10.1

      

       

       

      
        

          LOAN
            AGREEMENT

           

          BY
            AND BETWEEN

           

          COMERICA
            BANK

           

          AND

           

          STRATUS
            PROPERTIES INC.,

           

          STRATUS
            PROPERTIES OPERATING CO., L.P. 

           

          CIRCLE
            C LAND, L.P. 

           

          AUSTIN
            290 PROPERTIES, INC. 

           

          CALERA
            COURT, L.P.

           

          Dated
            September 30, 2005

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          LOAN
            AGREEMENT

           

          THIS
            LOAN
            AGREEMENT (this “Agreement”)
            is
            made and delivered effective as of the 30th day of September, 2005, by
            and
            between STRATUS
            PROPERTIES INC.,
            a
            Delaware corporation (“Stratus”),
            STRATUS
            PROPERTIES OPERATING CO., L.P.,
            a
            Delaware limited partnership (“SPOC”),
            CIRCLE
            C LAND, L.P.,
            a Texas
            limited partnership (“Circle
            C”),
            and
AUSTIN
            290 PROPERTIES, INC.,
            a Texas
            corporation (“Austin”)
            (Stratus, SPOC, Circle C and Austin are sometimes referred to in this
            Agreement
            severally as “Borrower”
            and
            jointly as “Borrowers”),
            CALERA
            COURT, L.P.,
            a Texas
            limited partnership and COMERICA
            BANK
            (“Bank”).

           

          RECITALS

           

          A. Borrowers
            desire to obtain certain credit facilities from the Bank, and the Bank
            is
            willing to provide such credit facilities to and in favor of
            Borrowers.

           

          B. Such
            credit facilities are subject to the terms and conditions set forth herein
            and
            in every other Loan Document.

           

          C. This
            Agreement is entered into for purposes of renewing, extending and modifying
            the
            credit facilities and extensions of credit made pursuant to that certain
            Loan
            Agreement dated effective as of December 16, 1999 entered into by the
            Bank and
            Borrowers, as the same has heretofore been amended, restated and modified
            from
            time to time (the "Original
            Credit Agreement")
            and
            amending and restating the Original Credit Agreement in its
            entirety.

           

           

          AGREEMENT

           

          NOW,
            THEREFORE, in consideration of the premises and the mutual promises herein
            contained, Borrowers and Bank agree as follows:

           

          
            	SECTION
                    1.  	
                    DEFINITIONS

                  

          

           

          1.1  Defined
            Terms.
            The
            terms as used in this Agreement shall have the meanings assigned to such
            terms
            in the Defined Terms Addendum.

           

          1.2  Accounting
            Terms.
            All
            accounting terms not specifically defined in this Agreement shall be
            determined
            and construed in accordance with GAAP.

           

          1.3  Singular
            and Plural.
            Where
            the context herein requires, the singular number shall be deemed to include
            the
            plural, the masculine gender shall include the feminine and neuter genders,
            and
            vice versa.

           

          
            	SECTION
                    2.  	
                    TERMS,
                      CONDITIONS AND PROCEDURES FOR
                      BORROWING

                  

          

           

          Subject
            to the terms, conditions and procedures of this Agreement and each other
            Loan
            Document including, but not limited to, the terms, conditions and procedures
            set
            forth in the Defined Terms Addendum and Loan Terms, Conditions and Procedures
            Addendum, Bank agrees to make credit available to the Borrowers on such
            dates
            and in such amounts as the Borrowers shall request from time to time
            or as may
            otherwise be agreed to by Borrowers and Bank.

           

          
            	SECTION
                    3.  	
                    REPRESENTATIONS
                      AND WARRANTIES

                  

          

           

          Each
            Borrower represents and warrants as to itself and, as the context requires,
            each
            Loan Party within its control, and such representations and warranties
            shall be
            deemed to be continuing representations and warranties during the entire
            life of
            this Agreement, and so long as Bank shall have any commitment or obligation
            to
            make any Advances hereunder, and so long as any Indebtedness remains
            unpaid and
            outstanding under any Loan Document, as follows:

           

          3.1  Authority.
            Stratus
            and Austin are each a corporation. SPOC and Circle C are each limited
            partnerships of which Stratus is an indirect or direct owner. Each of
            Stratus,
            Circle C, Austin and SPOC is duly organized, validly existing and in
            good
            standing under the laws of the jurisdiction of its organization and is
            duly
            qualified and authorized to do business in the state where the Land it
            owns is
            located and in each other jurisdiction in which the character of its
            assets or
            the nature of its business makes such qualification necessary.

           

          3.2  Due
            Authorization.
            Each
            Loan Party has all requisite power and authority to execute, deliver
            and perform
            its obligations under each Loan Document to which it is a party or is
            otherwise
            bound, all of which have been duly authorized by all necessary action,
            and are
            not in contravention of law or the terms of any Loan Party’s organizational or
            other governing documents.

           

          3.3  Title
            to Property.
            Each
            Loan Party has good title to all property and assets purported to be
            owned by
            it, including those assets identified on the Financial Statements most
            recently
            delivered by Borrowers to Bank, subject to the Permitted
            Encumbrances.

           

          3.4  Encumbrances.
            There
            are no Liens on, and no financing statements on file with respect to,
            any of the
            property or assets of any Loan Party, except for Permitted Encumbrances
            and any
            Liens or financing statements in favor of Bank.

           

          3.5  Subsidiaries.
            As of
            the date hereof, none of the Borrowers has any Subsidiaries, except as
            set forth
            in Schedule
            3.5,
            which
            Schedule sets forth the percentage of ownership of such Borrower in each
            such
            Subsidiary as of the date of this Agreement.

           

          3.6  Taxes.
            Each
            Loan Party (i) has filed, on or before their respective delinquency dates,
            all
            federal, state, local and foreign tax returns that are required to be
            filed, or
            has obtained extensions for filing such tax returns, (ii) is not delinquent
            in
            filing such returns in accordance with such extensions, and (iii) has
            paid all
            taxes which have become due pursuant to those returns or pursuant to
            any
            assessments received by any such party, as the case may be, to the extent
            such
            taxes have become due, except to the extent such tax payments are being
            actively
            and diligently contested in good faith by appropriate proceedings, and,
            if
            requested by Bank, have been bonded or reserved in an amount and manner
            satisfactory to Bank. Further, no Loan Party knows of any additional
            assessments
            in respect of any such taxes and related liabilities.

           

          3.7  No-Defaults.
            There
            exists no default (or event which, with the giving of notice or passage
            of time,
            or both, would result in a default) under the provisions of any instrument
            or
            agreement evidencing, governing, securing or otherwise relating to any
            Debt of
            any Loan Party or pertaining to any of the Permitted Encumbrances (other
            than
            Contested Items) except to the extent that any such failure has been
            waived or
            that such failure to comply would not have a Material Adverse
            Effect.

           

          3.8  Enforceability
            of Agreement and Loan Documents.
            Each
            Loan Document has been duly executed and delivered by duly authorized
            officer(s)
            or other representative(s) of each Loan Party that is a party thereto,
            and
            constitutes the valid and binding obligations of each such Loan Party,
            enforceable in accordance with their respective terms, except to the
            extent that
            enforcement thereof may be limited by applicable bankruptcy, reorganization,
            insolvency, moratorium or similar laws affecting the enforcement of creditors’
            rights generally at the time in effect.

           

          3.9  Non-contravention.
            The
            execution, delivery and performance by each Loan Party of the Loan Documents
            to
            which such Loan Party is a party or otherwise bound, are not in contravention
            of
            the terms of any indenture, agreement or undertaking to which any such
            Loan
            Party is a party or by which it is bound, except to the extent that such
            terms
            have been waived or that failure to comply with any such terms would
            not have a
            Material Adverse Effect.

           

          3.10  Actions,
            Suits, Litigation or Proceedings.
            Except
            as shown on Schedule
            3.10,
            there
            is no Material Litigation, and, to the best knowledge of each Borrower,
            no Loan
            Party is under investigation by, or is operating under any restrictions
            imposed
            by, any Governmental Authority.

           

          3.11  Compliance
            with Laws.
            To the
            best knowledge of each Borrower, each Loan Party has complied with all
            applicable Governmental Requirements, including, without limitation,
            Environmental Laws, to the extent that failure to so comply could have
            a
            Material Adverse Effect.

           

          3.12  Consents,
            Approvals and Filings, Etc.
            Except
            as have been previously obtained or as otherwise expressly provided in
            this
            Agreement, no authorization, consent, approval license, qualification
            or formal
            exemption from, nor any filing, declaration or registration with, any
            Governmental Authority and no material authorization, consent or approval
            from
            any other Person, is required in connection with the execution, delivery
            and
            performance by each Loan Party of any Loan Document to which it is a
            party. All
            such authorizations, consents, approvals, licenses, qualifications, exemptions,
            filings, declarations and registrations which have previously been obtained
            or
            made, as the case may be, are in full force and effect and are not the
            subject
            of any attack, or to the best knowledge of each Borrower, any threatened
            attack,
            in any material respect, by appeal, direct proceeding or otherwise.

           

          3.13  Contracts,
            Agreements and Leases.
            To each
            Borrower’s best knowledge and after due inquiry, no Loan Party is in default
            (beyond any applicable period of grace or cure) in complying with any
            provision
            of any material contract, agreement, indenture, lease or instrument to
            which it
            is a party or by which it or any of its properties or assets are bound,
            where
            such default would have a Material Adverse Effect. To each Borrower’s knowledge,
            each such material contract, commitment, undertaking, agreement, indenture
            and
            instrument is in full force and effect and is valid and legally
            binding.

           

          3.14  ERISA.
            Except
            as shown on Schedule
            3.14,
            no Loan
            Party maintains or contributes to any employee benefit plan subject to
            Title IV
            of ERISA. Furthermore, no Loan Party has incurred any accumulated funding
            deficiency within the meaning of ERISA or incurred any liability to the
            PBGC in
            connection with any employee benefit plan established or maintained by
            such Loan
            Party, and no reportable event or prohibited transaction, as defined
            in ERISA,
            has occurred with respect to such plans.

           

          3.15  No
            Investment Company.
            No Loan
            Party is an “investment company” within the meaning of the Investment Company
            Act of 1940, as amended, nor is any Loan Party “controlled” by an “investment
            company” within the meaning of the Investment Company Act of 1940, as
            amended.

           

          3.16  No
            Margin Stock.
            No Loan
            Party is engaged principally, or as one of its important activities,
            directly or
            indirectly, in the business of extending credit for the purpose of purchasing
            or
            carrying margin stock, and none of the proceeds of the Loan will be used,
            directly or indirectly, to purchase or carry any margin stock or made
            available
            by any Loan Party in any manner to any other Person to enable or assist
            such
            Person in purchasing or carrying margin stock, or otherwise used or made
            available for any other purpose which might violate the provisions of
            Regulations G, T, U, or X of the Board of Governors of the Federal Reserve
            System.

           

          3.17  Environmental
            Representations.

           

          (a)  No
            Loan
            Party has received any notice of any violation of any Environmental Law(s);
            and
            no Loan Party is a party to any litigation or administrative proceeding,
            nor, so
            far as is known by any Borrower, is any litigation or administrative
            proceeding
            threatened against any Loan Party which, in any event, (i) asserts or
            alleges
            that any Loan Party violated any Environmental Law(s), (ii) asserts or
            alleges
            that any Loan Party is required to clean up, remove or take any other
            remedial
            or response action due to the disposal, depositing, discharge, leaking
            or other
            release of any Hazardous Materials, or (iii) asserts or alleges that
            any Loan
            Party is required to pay all or a portion of any past, present or future
            clean-up, removal or other remedial or response action which arises out
            of or is
            related to the disposal, depositing, discharge, leaking or other release
            of any
            Hazardous Materials by any Loan Party, and which in each case of (i)-(iii),
            either singularly or in the aggregate, could have a Material Adverse
            Effect.

           

          (b)  To
            Borrowers’ knowledge, there are no conditions existing currently which could
            subject any Loan Party to damages, penalties, injunctive relief or clean-up
            costs under any applicable Environmental Law(s), or which require, or
            are likely
            to require, clean-up, removal, remedial action or other response pursuant
            to any
            applicable Environmental Law(s) by any Loan Party, and which, in any
            event,
            either singularly or in aggregate, could have a Material Adverse
            Effect.

           

          (c)  No
            Loan
            Party is subject to any judgment, decree, order or citation related to
            or
            arising out of any applicable Environmental Law(s), which, either singularly
            or
            in the aggregate, could have a Material Adverse Effect; and, to Borrowers’
            knowledge, no Loan Party has been named or listed as a potentially responsible
            party by any Governmental Authority in any matter arising under any applicable
            Environmental Law(s), except as disclosed in Schedule
            3.16,
            and, in
            the event that any such matters are disclosed in said Schedule
            3.16
            they
            will not, either singularly or in the aggregate, have a Material Adverse
            Effect.

           

          (d)  Each
            Loan
            Party has all permits, licenses and approvals required under applicable
            Environmental Laws, where the failure to so obtain or maintain any such
            permits,
            licenses or approvals could have a Material Adverse Effect.

           

          3.18  Accuracy
            of Information.
            The
            Financial Statements previously furnished to Bank have been prepared
            in
            accordance with GAAP and fairly present the financial condition of Borrower
            and,
            as applicable, the consolidated financial condition of Borrower and such
            other
            Person(s) as such Financial Statements purport to present, and the results
            of
            their respective operations as of the dates and for the periods covered
            thereby;
            and since the date(s) of said Financial Statements, there has been no
            material
            adverse change in the financial condition of Borrower or any other Person
            covered by such Financial Statements. No Loan Party, nor any such other
            Person
            has any material contingent obligations, liabilities for taxes, long-term
            leases
            or long-term commitments not disclosed by, or reserved against in, such
            Financial Statements. Each Loan Party is solvent, able to pay its respective
            debts as they mature, has capital sufficient to carry on its business
            and has
            assets the fair market value of which exceed its liabilities, and no
            Loan Party
            will be rendered insolvent, under-capitalized or unable to pay debts
            generally
            as they become due by the execution or performance of any Loan Document
            to which
            it is a party or by which it is otherwise bound.

           

          3.19  Equity
            Ownership.
            Stratus’ entire issued and outstanding capital stock consists of 7,205,690
            shares of common stock, $.01 par value; and the names of all Persons
            who own
            beneficially five percent (5%) or more of such shares, together with
            the amount
            of such ownership, are set forth in Schedule
            3.19, Part 1
            attached
            hereto. All of the partnership interests in Circle C are owned beneficially
            and
            of record by the Persons and in the amounts/percentages set forth in
            Schedule
            3.19, Part 2
            attached
            hereto. Austin’s entire issued and outstanding capital stock consists of 1,000
            shares of common stock, $1.00 par value; and the names of all Persons
            who own
            beneficially five percent (5%) or more of such shares, together with
            the amount
            of such ownership, are set forth in Schedule
            3.19, Part 4
            attached
            hereto. All of the partnership interests in SPOC are owned beneficially
            and of
            record by the Persons and in the amounts/percentages set forth in Schedule
            3.19, Part 3.
            To the
            extent that any such partner is a corporation (other than Stratus or
            Austin),
            limited liability company or partnership (other than Circle C), similar
            information with respect to the beneficial and record owners of all equity
            ownership interests in each such entity is set forth in Schedule
            3.19, Part 3.
            There
            are no outstanding options, warrants or rights to purchase, nor any agreement
            for the subscription, purchase or acquisition of, any equity ownership
            interests
            of any Loan Party, except described in Schedule
            3.19, Part 5.

           

          3.20  Business
            Loan.
            The
            Loan is a business loan transaction in the stated amount solely for the
            purpose
            of carrying on the businesses of Borrowers and none of the proceeds of
            the Loan
            will be used for the personal, family, household or agricultural purposes
            of any
            Borrower.

           

          3.21  Relationship.
            The
            relationship between each Borrower and Bank is solely that of borrower
            and
            lender, and Bank has no fiduciary or other special relationship with
            any
            Borrower or any other Loan Party, and no term or condition of any of
            the Loan
            Documents shall be construed so as to deem the relationship between any
            Borrower
            or any other Loan Party and Bank to be other than that of borrower and
            lender.

           

          3.22  Experience.
            The
            principals of each Borrower are knowledgeable businessmen with experience
            in
            real estate transactions and real estate financing. In all of their transactions
            with Bank, each Borrower and its principals have been represented by
            (or have
            had the opportunity to be represented by) legal counsel independent of
            Bank and
            independent of counsel for Bank.

           

          3.23  Compliance
            with Laws.
            The
            Land and any Improvements thereon comply, in all material respects, with
            all
            applicable Governmental Requirements and restrictive covenants, including,
            without limitation, zoning laws, building codes, handicap or disability
            legislation, and all rules, regulations and orders relating thereto,
            and all
            Environmental Laws, and the use to which a Borrower is using or intends
            to use
            its Land and Improvements complies with all Governmental Regulations
            in all
            material respects, specifically including, but not limited to, any and
            all land
            use and development entitlements and Municipal Utility District requirements
            for
            the Primary Collateral and the Other Collateral, and that Borrower has
            taken all
            action necessary to preserve and maintain the land use and development
            entitlements, and has taken no action which would cause a loss of any
            such
            entitlements.

           

          3.24  Access.
            Access
            by vehicles to the Land exists over paved roadways that have been completed,
            dedicated to the public use and accepted by the appropriate Governmental
            Authority.

           

          3.25  Statements.
            No
            certificate, statement, report or other information delivered heretofore,
            concurrently herewith or hereafter by any Loan Party to Bank in connection
            herewith, or in connection with any transaction contemplated hereby,
            contains or
            will contain any untrue statement of a material fact or fails to state
            any
            material fact necessary to keep the statements contained therein from
            being
            materially misleading, and same were true, complete and accurate as of
            the date
            hereof in all material respects.

           

          3.26  Disclaimer
            of Permanent Financing.
            Each
            Borrower acknowledges and agrees that Bank has not made any commitments,
            either
            express or implied, to extend the terms of the Loan past its stated maturity
            date or to provide Borrowers with any permanent financing, except to
            the extent,
            if any, that the same is expressly stated in this Agreement and the other
            Loan
            Documents.

           

          3.27  Not
            a
            Broker Or Dealer.
            No Loan
            Party is a “broker” or a “dealer” within the meaning of the Securities Exchange
            Act of 1934, as amended from time to time, and any rules or regulations
            promulgated thereunder.

           

          
            	SECTION
                    4.  	
                    AFFIRMATIVE
                      COVENANTS

                  

          

           

          Each
            Borrower covenants and agrees that, so long as Bank is committed to make
            any
            Advance or issue any Letter of Credit under this Agreement, and until
            all
            instruments and agreements evidencing any Loan which is payable on demand
            or
            which conditions Advances upon the Bank’s discretion are fully discharged and
            terminated, and thereafter, so long as any Indebtedness remains outstanding,
            it
            will, and, as applicable, it will cause each Loan Party within its control
            or
            under common control to:

           

          4.1  Preservation
            of Existence, Etc.
            Preserve and maintain its existence and preserve and maintain such of
            its
            rights, licenses, and privileges as are material to the business and
            operations
            conducted by it; qualify and remain qualified to do business in each
            jurisdiction in which the Land it owns is located and where such qualification
            is material to its business and operations or ownership of its properties;
            continue to conduct and operate its business substantially as conducted
            and
            operated during the present and preceding calendar year; at all times
            maintain,
            preserve and protect all of its franchises and trade names and preserve
            all the
            remainder of its property and keep the same in good repair, working order
            and
            condition; and from time to time make, or cause to be made such repairs
            or
            betterments as Borrower is obligated to make under any Governmental
            Requirements.

           

          4.2  Keeping
            of Books.
            Keep
            proper books of record and account in which full and correct entries
            shall be
            made of all of its financial transactions and its assets and businesses
            so as to
            permit the presentation of financial statements (including, without limitation,
            those Financial Statements to be delivered to Bank pursuant to Section
            4.3
            hereof)
            prepared in accordance with GAAP; and permit Bank, or its representatives,
            at
            reasonable times and intervals after forty-eight (48) hours prior notice,
            at
            Borrowers’ cost and expense, to visit any office of any Loan Party, discuss its
            financial matters with its officers, employees, and independent certified
            public
            accountants, and by this provision, each Borrower authorizes such officers,
            employees and accountants to discuss the finances and affairs of any
            Loan Party
            and to examine any of its books and other corporate records; provided,
            however,
            if no Event of Default exists, such visit will not occur more often than
            four
            (4) times in any calendar year.

           

          4.3  Reporting
            Requirements.
            Stratus
            shall furnish to Bank, or cause to be furnished to Bank, the
            following:

           

          (a)  As
            soon
            as possible, and in any event within five (5) calendar days after becoming
            aware
            of the occurrence or existence of each Default or Event of Default hereunder
            or
            of any Material Adverse Effect, a written statement of the chief financial
            officer or other appropriate authorized representative of Stratus, setting
            forth
            details of such Default, Event of Default or Material Adverse Effect,
            and the
            action which Stratus has taken, or has caused to be taken, or proposes
            to take,
            or to cause to be taken, with respect thereto.

           

          (b)  As
            soon
            as available, and in any event within ninety (90) days after and as of
            the end
            of each fiscal year of Stratus, audited consolidated Financial Statements
            of
            Stratus, including a balance sheet, income statement, statement of profit
            and
            loss, statement of changes in shareholders equity, statement of cash
            flows and
            contingent obligations, for and as of such fiscal year then ending, with
            comparative numbers for the preceding fiscal year, in each case, prepared
            by
            Stratus or such other Person, as applicable, and completed in such detail
            as
            Bank shall require, and certified by the chief financial officer or other
            appropriate authorized representative of Stratus or of such other Person,
            as
            applicable, as to consistency with prior financial reports and accounting
            periods, accuracy and fairness of presentation. Such audited Financial
            Statements shall be prepared in accordance with GAAP by independent certified
            public accountants of recognized standing selected by Borrower and approved
            by
            Bank and shall contain unqualified opinions as to the fairness of the
            statements
            therein contained.

           

          (c)  As
            soon
            as available, and in any event not later than sixty (60) days after the
            start of
            each fiscal year of Stratus, the business plan of Stratus for such forthcoming
            fiscal year.

           

          (d)  As
            soon
            as available, and in any event within forty (40) days after and as of
            the end of
            each calendar quarter, including the last such reporting period of each
            calendar
            year, consolidated Financial Statements of Stratus and, to the extent
            not
            covered in the Stratus Financial Statements, from such of the other Loan
            Parties
            as may be required by the Bank, Consolidated, as applicable, for and
            as of such
            reporting period, including a balance sheet, income statement, statement
            of
            profit and loss, surplus reconciliation statement and statement of cash
            flows
            and contingency for and as of such reporting period then ending and for
            and as
            of that portion of the calendar year then ending, with comparative numbers
            for
            the same period of the preceding calendar year, in each case, certified
            by the
            chief financial officer or other appropriate authorized representative
            of
            Stratus and, as applicable, each other Loan Party as to consistency with
            prior
            financial reports and accounting periods, accuracy and fairness of
            presentation.

           

          (e)  As
            soon
            as available, and in any event within forty (40) days after and as of
            the end of
            each calendar month, a statement of Stratus’ sales as of such reporting period
            then ending and for and as of that portion of the calendar year then
            ending,
            with comparative numbers for the same period of the preceding calendar
            year, in
            each case, certified by the chief financial officer of Stratus as to
            consistency
            with prior reports and accounting periods, accuracy and fairness of presentation
            ended and the year-to-date.

           

          (f)  As
            soon
            as available, and in any event within forty (40) days after and as of
            the end of
            each calendar quarter, a statement of the status of MUD Reimbursables
            and the
            MUD Reimbursables Value, Credit Banks and Credit Bank Value, and Material
            Litigation as of such reporting period then ending certified by the chief
            financial officer of Stratus as to accuracy and completeness.

           

          (g)  Promptly
            upon receipt thereof, copies of all management letters and other substantive
            reports submitted to any Loan Party by independent certified public accountants
            in connection with any annual audit of any such party.

           

          (h)  Promptly
            after filing the same, a copy of Stratus’ annual federal income tax
            return.

           

          (i)  Simultaneously
            with the Financial Statements to be delivered to Bank pursuant to Sections
            (b)
            and (d) above, a Compliance Certificate dated as of the end of such quarter
            or
            year, as the case may be.

           

          (j)  Promptly,
            and in form and detail reasonably satisfactory to Bank, such other information
            as Bank may reasonably request from time to time.

           

          4.4  Intentionally
            Omitted.

           

          4.5  Further
            Assurances: Financing Statements.
            Furnish
            Bank, at Borrowers’ expense, upon Bank’s request and in form reasonably
            satisfactory to Bank, and execute and deliver or cause to be executed
            and
            delivered, such additional pledges, assignments, mortgages, lien instruments
            or
            other security instruments, consents, acknowledgments, subordinations
            and
            financing statements covering any or all of the Mortgaged Property pledged,
            assigned, mortgaged or encumbered pursuant to any Loan Document, of every
            nature
            and description, whether now owned or hereafter acquired by the Person
            providing
            such Mortgaged Property, together with such other documents or instruments
            as
            Bank may require to effectuate more fully the express purposes of any
            Loan
            Document.

           

          4.6  Compliance
            with Leases.
            Comply
            with all material terms and conditions of the Leases, if any, and all
            other
            lease or rental agreements covering any premises or property (real or
            personal)
            wherein any of the Mortgaged Property is or may be located, or covering
            any of
            the other material personal or real property now or hereafter owned,
            leased or
            otherwise used by any Loan Party in the conduct of its business, and
            any
            Governmental Requirement, except where the failure to so comply could
            not cause
            a Material Adverse Effect.

           

          4.7  Indemnification.
            Indemnify, defend and save Bank harmless from any and all claims, losses,
            costs,
            damages, liabilities, obligations and expenses, including, without limitation,
            reasonable attorneys’ fees, incurred by Bank by reason of any Default or Event
            of Default, in defending or protecting the Liens which secure or purport
            to
            secure all or any portion of the Indebtedness, whether existing under
            any Loan
            Document or otherwise or the priority thereof, or in enforcing the obligations
            of any Borrower or any other Person under or pursuant to any Loan Document,
            or
            in the prosecution or defense of any action or proceeding concerning
            any matter
            growing out of or connected with the Mortgaged Property or any Loan Document,
            INCLUDING
            ANY CLAIMS, LOSSES, COSTS, DAMAGES, LIABILITIES, OBLIGATIONS, AND EXPENSES
            RESULTING FROM BANK’S OWN NEGLIGENCE, EXCEPT AND TO THE EXTENT, BUT ONLY TO THE
            EXTENT, CAUSED BY BANK’S GROSS NEGLIGENCE OR WILLFUL
            MISCONDUCT.
            Without
            limiting in any manner any of the foregoing, it is specifically agreed
            that the
            obligations of Borrowers under this section shall extend to any and all
            claims,
            losses, costs, damages, liabilities, obligations and expenses, including,
            without limitation, reasonable attorneys’ fees, incurred by Bank by reason that
            the legal description of any of the Mortgaged Property in any Loan Document
            is
            incorrect in any respect or because the Liens of any of the Deeds of
            Trust are
            other than first and prior Liens, except to the extent any such Deed
            of Trust
            expressly recognizes that it is not a first and prior Lien.

           

          4.8  Governmental
            and Other Approvals.
            To the
            extent necessary to be in compliance, comply with all Governmental Requirements
            in a timely matter and apply for, obtain and/or maintain in effect, as
            applicable, all authorizations, consents, approvals, licenses, qualifications,
            exemptions, filings, declarations, and registrations (whether with any
            Governmental Authority, securities exchange or otherwise) which are necessary
            in
            connection with the execution, delivery and/or performance by any Loan
            Party of
            any Loan Document to which it is a party, specifically including, but
            not
            limited to, the entitlements necessary to develop the Mortgaged
            Property.

           

          4.9  Insurance.
            Each
            Borrower shall obtain and maintain or cause to be obtained and maintained
            at
            such Borrower’s sole expense with respect to the portions of the Mortgaged
            Property owned by it: (a) all-risk property insurance with respect to
            all
            insurable Mortgaged Property, if any, against loss or damage by fire,
            lightening, windstorm, explosion, hail, tornado and such hazards as are
            presently included in so-called “all-risk” coverage and against such other
            insurable hazards as Bank may reasonably require, in an amount not less
            than
            100% of the full replacement cost, including the cost of debris removal,
            without
            deduction for depreciation and sufficient to prevent Borrowers or Bank
            from
            becoming a coinsurer; (b) if and to the extent any insurable Improvements
            are in
            a special flood hazard area, a flood insurance policy in an amount equal
            to the
            lesser of the principal balance of the Indebtedness or the maximum amount
            available or the replacement cost of the insurable Mortgaged Property;
            (c)
            commercial general public liability insurance, on an “occurrence” basis, for the
            benefit of Borrowers with Bank named as loss payee in respect to the
            Land and
            Improvements; (d) statutory worker’s compensation insurance with respect to any
            work on or about the Mortgaged Property; and (e) such other insurance
            on the
            insurable Mortgaged Property as may from time to time be reasonably required
            by
            Bank and against other insurable hazards or casualties which at the time
            are
            commonly insured against in the case of premises similarly situated,
            due regard
            being given to the height, type, construction, location, use and occupancy
            of
            buildings and improvements. All insurance policies shall be issued and
            maintained by insurers, in amounts, with deductibles, and in form reasonably
            satisfactory to Bank, and shall require not less than fifteen (15) days’ prior
            written notice to Bank of any cancellation or material change of coverage.
            All
            insurance policies maintained, or caused to be maintained, by a Borrower
            with
            respect to any of the Mortgaged Property shall provide that each such
            policy
            shall be primary without right of contribution from any other insurance
            that may
            be carried by such Borrower or Bank and that all of the provisions thereof,
            except the limits of liability, shall operate in the same manner as if
            there
            were a separate policy covering each insured. If any insurer which has
            issued a
            policy of title, hazard, liability or other insurance required pursuant
            to this
            Agreement or any other Loan Document becomes insolvent or the subject
            of any
            bankruptcy, receivership or similar proceeding or if Bank, in good faith,
            believes that the financial responsibility of such insurer is or becomes
            inadequate, the applicable Borrower shall, in each instance, promptly,
            upon the
            request of Bank and at such Borrower’s expense, obtain and deliver to Bank a
            certificate of insurance issued by another insurer, which insurer and
            policy
            meet the requirements of this Agreement or such other Loan Document,
            as the case
            may be and shall furnish a copy of the policy upon Bank’s request. Without
            limiting the discretion of Bank with respect to required endorsements
            to
            insurance policies, all such policies for loss of or damage to the Mortgaged
            Property shall contain a standard mortgage clause (without contribution)
            naming
            Bank as mortgagee with loss proceeds payable to Bank notwithstanding
            (i) any
            act, failure to act or negligence of or violation of any warranty, declaration
            or condition contained in any such policy by any named insured; (ii)
            the
            occupation or use of the Mortgaged Property for purposes more hazardous
            than
            permitted by the terms of any such policy; (iii) any foreclosure or other
            similar action by Bank under the Loan Documents; or (iv) any change in
            title to
            or ownership of the Mortgaged Property or any portion thereof, such proceeds
            to
            be held for application as provided in the Loan Documents. The originals
            of each
            initial insurance policy (or to the extent permitted by Bank, a copy
            of the
            original policy and a satisfactory certificate of insurance) shall be
            delivered
            to Bank at the time of execution of this Agreement, with no delinquent
            premium
            payments, and each renewal certificate shall be delivered to Bank prior
            to the
            expiration of the policy it renews or replaces with no delinquent premium
            payments; provided that all insurance premiums shall be prepaid on an
            annual
            basis. Borrower shall pay all premiums on policies required hereunder
            as they
            become due and payable. If any loss occurs at any time when Borrower
            has failed
            to perform any Borrower’s covenants and agreements in this Paragraph, Bank shall
            nevertheless be entitled to the benefit of all insurance covering the
            loss and
            held by or for all Borrowers, to the same extent as if it had been made
            payable
            to Bank. Upon any foreclosure hereof or transfer of title to the Mortgaged
            Property in extinguishment of the whole or any part of the Indebtedness,
            all of
            Borrowers’ right, title and interest in and to the insurance policies referred
            to in this Paragraph (including unearned premiums) and all proceeds payable
            thereunder shall thereupon vest in the purchaser at foreclosure or other
            such
            transferee, to the extent permissible under such policies. Bank shall
            have the
            right (but not the obligation) to make proof of loss for, settle and
            adjust any
            claim under, and receive the proceeds of, all insurance for loss of or
            damage to
            the Mortgaged Property, and the expenses incurred by Bank in the adjustment
            and
            collection of insurance proceeds shall be a part of the Indebtedness,
            shall be
            due and payable to Bank on demand and shall bear interest from the date
            paid by
            Bank until reimbursed at the highest rate of interest applicable to any
            of the
            Indebtedness (but not in excess of the highest rate permitted by applicable
            law). Bank and Bank’s employees are each irrevocably appointed attorney-in-fact
            for Borrowers and are authorized to adjust and compromise each loss without
            the
            consent of Bank, to collect, receive and receipt for all insurance proceeds
            in
            the name of Bank and/or Borrowers, and to endorse Borrowers’ name upon any check
            in payment of the loss. Bank shall not be, under any circumstances, liable
            or
            responsible for failure to collect or exercise diligence in the collection
            of
            any of such proceeds or for the obtaining, maintaining or adequacy of
            any
            insurance or for failure to see to the proper application of any amount
            paid
            over to any Borrower.

           

          4.10  Compliance
            with ERlSA.
            In the
            event that any Loan Party or any of its Subsidiaries maintain(s) or
            establish(es) a Pension Plan subject to ERISA, (a) comply in all material
            respects with all requirements imposed by ERISA as presently in effect
            or
            hereafter promulgated, including, but not limited to, the minimum funding
            requirements thereof; (b) promptly notify Bank upon the occurrence of
            a
“reportable event” or “prohibited transaction” within the meaning of ERlSA, or
            that the PBGC or any Loan Party has instituted or will institute proceedings
            to
            terminate any Pension Plan, together with a copy of any proposed notice
            of such
            event which may be required to be filed with the PBGC; and (c) furnish
            to Bank
            (or cause the plan administrator to furnish Bank) a copy of the annual
            return
            (including all schedules and attachments) for each Pension Plan covered
            by
            ERlSA, and filed with the Internal Revenue Service by any Loan Party
            not later
            than thirty (30) days after such report has been so filed.

           

          4.11  Environmental
            Covenants.

           

          (a)  Comply
            with all applicable Environmental Laws in all material respects, including,
            but
            not limited to, the demolition of any existing house or other buildings,
            in
            accordance with Texas Department of Health Regulations, and maintain
            all
            permits, licenses and approvals required under applicable Environmental
            Laws,
            where the failure to do so could have a Material Adverse Effect. Further,
            Borrower acknowledges that certain petroleum hydrocarbons have been released
            from Exxon and Shell Oil pipelines located on or in the vicinity of the
            Land,
            and in the event the subsurface soil affected by such releases on the
            Land are
            to be disturbed, Borrower will take such health and safety measures as
            necessary
            to protect any person coming into contact with such releases, and all
            impacted
            soil resulting from site excavations will be disposed of in accordance
            with
            applicable regulations.

           

          (b)  Promptly
            notify Bank, in writing, as soon as any Borrower becomes aware of any
            condition
            or circumstance which makes any of the environmental representations
            or
            warranties set forth in this Agreement or any other Loan Document incomplete,
            incorrect or inaccurate in any material respect as of any date; and promptly
            provide to Bank, immediately upon receipt thereof, copies of any material
            correspondence, notice, pleading, citation, indictment, complaint, order,
            decree, or other document from any source asserting or alleging a violation
            of
            any Environmental Laws by any Loan Party, or of any circumstance or condition
            which requires or may require, a financial contribution by any Loan Party,
            or a
            clean-up, removal, remedial action or other response by or on behalf
            of any Loan
            Party, under applicable Environmental Law(s), or which seeks damages
            or civil,
            criminal or punitive penalties from any Loan Party or any violation or
            alleged
            violation of Environmental Law(s).

           

          (c)  Borrower
            hereby agrees to indemnify, defend and hold Bank, and any of Bank’s past,
            present and future officers, directors, shareholders, employees, representatives
            and consultants, harmless from any and all claims, losses, damages, suits,
            penalties, costs, liabilities, obligations and expenses (including, without
            limitation, reasonable legal expenses and attorneys’ fees, whether inside or
            outside counsel is used) incurred or arising out of any claim, loss or
            damage of
            any property, injuries to or death of any persons, contamination of or
            adverse
            effects on the environment, or other violation of any applicable Environmental
            Law(s), in any case, caused by any Loan Party or in any way related to
            any
            property owned or operated by any Loan Party or due to any acts of any
            Loan
            Party or any of its officers, directors, shareholders, employees, consultants
            and/or representatives, INCLUDING
            ANY CLAIMS, LOSSES, DAMAGES, SUITS, PENALTIES, COSTS, LIABILITIES, OBLIGATIONS
            OR EXPENSES, RESULTING FROM BANK’S OWN NEGLIGENCE; PROVIDED HOWEVER, THAT THE
            FOREGOING INDEMNIFICATION SHALL NOT BE APPLICABLE, AND BORROWER SHALL
            NOT BE
            LIABLE FOR ANY SUCH CLAIMS, LOSSES, DAMAGES, SUITS, PENALTIES, COSTS,
            LIABILITIES, OBLIGATIONS OR EXPENSES, TO THE EXTENT (BUT ONLY TO THE
            EXTENT) THE
            SAME ARISE OR RESULT FROM ANY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
            OF BANK OR
            ANY OF ITS AGENTS OR EMPLOYEES.

           

          4.12  Bank’s
            Expenses.
            Pay or
            reimburse to Bank on demand all costs and expenses of Bank, including,
            without
            limitation, reasonable attorneys’ fees and legal expenses, incurred in
            connection with the preparation, execution, delivery, administration
            and
            performance of the Loan Documents, the Mortgaged Property, and the transactions
            contemplated by this Agreement including, without limitation, title insurance
            and examination charges, survey costs, insurance premiums, filing and
            recording
            fees, attorneys’ fees and expenses, and other expenses payable to third parties
            incurred by Bank in connection with the consummation of the transactions
            contemplated by this Agreement.

           

          4.13  Surveys.
            Furnish
            Bank from time to time at the request of Bank but no more often than
            once per
            year, at Borrowers’ expense recertified and updated Surveys of the Primary
            Collateral. All Surveys shall be in form and substance reasonably acceptable
            to
            Bank.

           

          4.14  Estoppel
            Certificates.
            Deliver
            to Bank, within ten (10) days after request therefor, estoppel certificates
            or
            written statements, duly acknowledged, stating to Borrowers’ knowledge after
            diligent inquiry, the amount that has then been advanced to Borrowers
            under this
            Agreement, the amount due on the Note, and whether any offsets or defenses
            exist
            against the Note or any of the other Loan Documents.

           

          4.15  Personalty
            and Fixtures.
            Deliver
            to Bank, on demand, any contracts, bills of sale, statements, receipted
            vouchers
            or agreements under which any Borrower claims title to any items of personal
            property incorporated in any Improvements or subject to the lien of any
            of the
            Deeds of Trust or to the security interest of any of the Security
            Agreements.

           

          4.16  Leases.
            Deliver
            to Bank executed copies of all Leases; and all said Leases will contain
            a
            written provision reasonably acceptable to Bank whereby all rights of
            the tenant
            in the Lease and the Mortgaged Property are subordinated to the liens
            and
            security interests granted in the Loan Documents. Furthermore, if requested
            by
            Bank, Borrowers shall cause to be executed and delivered to Bank a
            Subordination, Non-Disturbance and Attornment Agreement, in form and
            substance
            reasonably acceptable to Bank, relating to each Lease and fully executed
            by
            Bank, Borrowers and such tenant.

           

          4.17  Approval
            to Lease Required.
            Borrowers will obtain the prior written consent of Bank as to the form
            and
            substance of each proposed Lease specifically including, but not limited
            to, any
            ground lease transaction, and of each prospective tenant prior to entering
            into
            any such Lease, which approval will not be unreasonably withheld, conditioned
            or
            delayed.

           

          4.18  Brokers.
            Pay all
            fees, commissions and other compensation payable to all brokers, if any,
            involved in this transaction at or prior to the disbursement of the Initial
            Advance, except for any brokers expressly contracted with by Bank. Borrowers
            hereby agree to indemnify and hold harmless Bank from and against any
            loss,
            damage, expense or claims of brokers (except for brokers expressly contracted
            with by Bank) arising by reason of the execution hereof or the consummation
            of
            the transactions contemplated hereby, including but not limited to, any
            transactions involving or relating to any Lease.

           

          4.19  Appraisals.
            Supply
            Bank, at Borrowers’ expense, with new or recertified Appraisals from time to
            time upon Bank’s request; provided, (i) such Appraisals shall be updated at
            least one time every two (2) years and (ii) so long as no Default or
            Event of
            Default shall have occurred and be continuing, Borrowers shall not be
            obligated
            to pay for any such Appraisals more frequently than once during any calendar
            year; subject, however, to the updated information regarding reconciliation
            of
            value as may be required by Bank in connection with a Partial Release,
            as more
            fully set forth in Addendum
            3.
            Without
            limiting the foregoing in any manner, Borrower may, from time to time
            and at its
            cost and expense, and without affecting Bank's right to require any updated
            Appraisal pursuant to this Section
            4.19,
            obtain
            and deliver to Bank new Appraisals or updates of existing Appraisals,
            provided
            such Appraisals comply with the requirements of this Agreement, for the
            purposes
            of updating the Borrowing Base Limitation.

           

          4.20  Financial
            Covenants.
            Maintain compliance with the following financial covenants on a consolidated
            basis:

           

          (a)  Maintain
            a Tangible Net Worth at all times of not less than $80,000,000.00.

           

          (b)  Maintain
            a minimum Debt-to-Tangible Net Worth Ratio at all times of
            not
            more than 1.5 to 1.

           

          The
            foregoing covenants shall be (i) computed on a consolidated basis, (ii)
            tested
            at the end of each calendar quarter, (iii) and certified to in the Compliance
            Certificate required to be delivered to Bank pursuant to Section
            4.3(i)
            above.

           

          4.21  FAAM
            Loan.
            Stratus
            previously obtained the FAAM Loan, which is an unsecured loan from one
            or more
            affiliates of First American Asset Management ("FAAM")
            in a
            principal amount not to exceed $10,000,000.00. Borrowers hereby represent
            and
            warrant that the following terms, covenants and restrictions have been
            satisfied
            and complied with at all times to date and shall continue to be satisfied
            and
            complied with throughout the term of the FAAM Loan until the Loan has
            been
            repaid in full and all other obligations of Borrowers under the Loan
            Documents
            have been fully satisfied: (i) neither the stated principal amount of
            the FAAM
            Loan, nor the outstanding principal balance of the Holiday Loan, shall
            at any
            time exceed $10,000,000; (ii) the proceeds of the FAAM Loan shall be
            used only
            for general corporate purposes of Stratus, including the use of such
            proceeds
            for the purpose of repurchasing the common stock of Stratus; (iii) the
            FAAM Loan
            is not and shall at no time be secured by any of the real property or
            other
            collateral securing the Loan or otherwise be secured by any Liens in
            contravention of any terms or provisions in this Agreement (including,
            without
            limitation, Section
            5.5
            hereof),
            or any of the other Loan Documents; (iv) Bank’s rights to receive, use and apply
            any and all proceeds and other amounts as set forth in Sections
            2.18
            and
2.19
            of
Addendum
            2
            and
            elsewhere in this Agreement shall continue in full force and effect and
            shall
            not be affected in any manner by the FAAM Loan, and FAAM (and any subsequent
            holder of the FAAM Loan) shall have no rights to the receipt of any such
            proceeds, and Borrowers shall not utilize any of such proceeds for repayment
            of
            or application to any of the indebtedness evidenced by the FAAM Loan;
            (v)
            without the prior written approval of Bank, no proceeds of the Loan shall
            be
            used by Borrowers to repay any principal or other amounts then outstanding
            under
            the FAAM Loan, except that proceeds of the Loan may be used by Borrowers
            for the
            repayment of ordinary interest then due and payable under the FAAM Loan
            so long
            as no Event of Default or Default exists and is continuing under this
            Agreement
            or the other Loan Documents; and (vi) the promissory note, loan agreement
            and
            other loan documents (if any) executed in connection with the FAAM Loan
            shall
            not, without Bank’s written consent, be amended or modified in any manner that
            (a) conflicts with any of the foregoing terms, covenants and restrictions,
            (b)
            increases the principal amount of the FAAM Loan to more than $10,000,000.00,
            or
            (c) would cause a default or an event of default under this Agreement
            or any of
            the other Loan Documents. Borrowers shall promptly provide Bank with
            a copy of
            any notice of default received by Stratus or Borrowers from FAAM (or
            the then
            holder of the FAAM Loan) or delivered by Stratus or Borrowers to FAAM
            (or the
            then holder of the FAAM Loan), in connection with the FAAM Loan. Any
            failure of
            Borrowers or the FAAM Loan to comply with any of the foregoing conditions,
            covenants and restrictions set forth in items (i) through (vi) above
            shall be an
            Event of Default under this Agreement and the other Loan Documents. Any
            default
            or event of default under the FAAM Loan which continues beyond any applicable
            grace or cure period thereunder shall also constitute an Event of Default
            under
            the Loan Agreement (and the other Loan Documents.

           

          
            	SECTION
                    5.  	
                    NEGATIVE
                      COVENANTS

                  

          

           

          Each
            Borrower covenants and agrees that, so long as Bank is committed to make
            any
            Advance or issue any Letter of Credit under this Agreement and until
            all
            instruments and agreements evidencing any Loan which is payable on demand
            or
            which conditions Advances upon the Bank’s discretion are fully discharged and
            terminated and, thereafter, so long as any Indebtedness remains outstanding,
            it
            will not, and it will not allow any Loan Party within its control to,
            without
            the prior written consent of the Bank:

           

          5.1  Capital
            Structure, Business Objects or Purpose.
            Purchase, acquire or redeem any of its equity ownership interests, or
            enter into
            any reorganization or recapitalization or reclassify its equity ownership
            interests, or make any material change in its capital structure or general
            business objects or purpose. Notwithstanding the foregoing, Borrowers
            may
            repurchase up to $10,000,000.00 of the outstanding common stock of Stratus
            (which amount is inclusive of common stock previously repurchased as
            of the date
            hereof, which amount is approximately $3,550,000). 

           

          5.2  Mergers
            or Dispositions.
            Change
            its name, enter into any merger or consolidation, whether or not the
            surviving
            entity thereunder, or sell, lease, transfer, relocate or dispose of all,
            substantially all, or any material part of its assets (whether in a single
            transaction or in a series of transactions), except as expressly permitted
            under
            this Agreement or the other Loan Documents.

           

          5.3  Guaranties.
            Guarantee, endorse, or otherwise become secondarily liable for or upon
            the
            obligations or Debt of others (whether directly or indirectly),
            except:

           

          (a)  guaranties
            in favor of and satisfactory to Bank; 

           

          (b)  endorsements
            for deposit or collection in the ordinary course of business; and

           

          (c)  guaranties
            of carve-outs of non-recourse liabilities in connection with permanent
            financing
            of projects owned by Subsidiaries of Borrowers (collectively, the "Guaranties
            of Non-Recourse Carve-Out Liabilities").

           

          5.4  Debt.
            Become
            or remain obligated for any Debt, except:

           

          (a)  Indebtedness
            and other Debt from time to time outstanding and owing to Bank; 

           

          (b)  other
            than the FAAM Loan, unsecured trade, utility or non-extraordinary accounts
            payable arising in the ordinary course of business and other unsecured
            Debt of
            Borrowers or the Loan Parties on a Consolidated basis at any one time
            not to
            exceed $500,000.00;

           

          (c)  except
            for the Guaranties of Non-Recourse Carve-Out Liabilities and any guaranties
            for
            the benefit of Bank with regard to other loans to Subsidiaries of Borrowers
            or
            any other Loan Party, contingent liabilities of Borrowers on a Consolidated
            basis at any one time not to exceed $20,000,000.00;

           

          (d)  Debt
            of a
            Related Party but only to the extent of the lesser of seventy-five percent
            (75%)
            of the appraised value of the real estate project owned by such Related
            Party or
            eighty percent (80%) of the total costs associated with the real estate
            project
            owned by such Related Party;

           

          (e)  Debt
            subordinated to the prior payment in full of the Indebtedness upon terms
            and
            conditions approved in writing by Bank;

           

          (f)  Debt
            outstanding as of the date hereof that is shown on the Financial Statements
            previously delivered to Bank; and

           

          (g)  Debt
            of
            Loan Party to any other Loan Party.

           

          5.5  Encumbrances.
            Create,
            incur, assume or suffer to exist any Lien upon, or create, suffer or
            permit to
            exist any Lien upon any of its property or assets, whether now owned
            or
            hereafter acquired, except for Permitted Encumbrances.

           

          5.6  Acquisitions.
            Except
            as expressly permitted under this Agreement, purchase or otherwise acquire
            or
            become obligated for the purchase of all or substantially all of the
            assets or
            business interests of any Person or any shares of stock or other ownership
            interests of any Person or in any other manner effectuate or attempt
            to
            effectuate an expansion of present business by acquisition.

           

          5.7  Dividends.
            Declare
            or pay dividends on, or make any other distribution (whether by reduction
            of
            capital or otherwise) in respect of any shares of its capital stock or
            other
            ownership interests, including but not limited to dividends payable by
            Stratus
            or any dividends payable solely in stock except (a) dividends payable
            by a
            Subsidiary of a Borrower to a Borrower or by the Subsidiary of another
            Loan
            Party to such other Loan Party; or (b) the redemption, repurchase or
            acquisition
            of any shares of its capital stock payable upon an employee’s termination
            pursuant to its employee stock option, repurchase, or similar plan; provided,
            however, that after giving effect to such redemption, repurchase or acquisition,
            such Borrower or such other Loan Party, as applicable, shall be in full
            compliance with the terms of this Agreement.

           

          5.8  Investments.
            Except
            as otherwise permitted in Section
            2.17
            of
Addendum
            2,
            make or
            allow to remain outstanding any investment (whether such investment shall
            be of
            the character of investment in shares of stock, evidences of indebtedness
            or
            other securities or otherwise) in, or any loans, advances or extensions
            of
            credit to, any Person, other than:

           

          (a)  Each
            Borrower’s current ownership in its respective Subsidiaries and Related Parties;
            and

           

          (b)  Acquisition
            of a new Subsidiary in connection with the acquisition of additional
            land which
            otherwise qualifies for a Section 2.17 acquisition as provided in Section
            2.17
            of
Addendum
            2
            hereof;
            and

           

          (c)  any
            investment in direct obligations of the United States of America or any
            agency
            thereof, or in certificates of deposit issued by Bank, maintained consistent
            with a Borrower’s or such Subsidiary’s business practices prior to the date
            hereof; provided, that no such investment shall mature more than ninety
            (90)
            days after the date when made or the issuance thereof.

           

          5.9  Transactions
            with Affiliates.
            Enter
            into any transaction with any of their stockholders, officers, employees,
            partners or any of their Affiliates or Related Parties, except subject
            to the
            terms hereof, transactions in the ordinary course of business and on
            terms not
            less favorable than would be usual and customary in similar transactions
            between
            Persons dealing at arm’s length, or transfer any assets to any Related Party
            which is not a Borrower hereunder without Bank’s prior consent.

           

          5.10  Defaults
            on Other Obligations.
            Fail to
            perform, observe or comply duly with any covenant, agreement or other
            obligation
            to be performed, observed or complied with by any Loan Party, subject
            to any
            grace or cure periods provided therein, which failure could have a Material
            Adverse Effect.

           

          5.11  Prepayment
            of Debt.
            Use
            proceeds of the Loan to prepay (or take any actions which impose an obligation
            to prepay) any Debt, except the Indebtedness, taxes, trade debt of Borrowers
            incurred in the ordinary course of business and for the other purposes
            set forth
            in Section
            2.4
            of
Addendum
            2
            hereof.

           

          5.12  Pension
            Plans.
            Except
            in compliance with this Agreement, enter into, maintain, or make contribution
            to, directly or indirectly, any Pension Plan that is subject to
            ERISA.

           

          5.13  Subordinate
            Indebtedness.
            Subordinate any indebtedness due to it from any Person to indebtedness
            of other
            creditors of such Person.

           

          5.14  No
            Further Negative Pledges.
            Other
            than the FAAM Loan, enter into or become subject to any agreement (other
            than
            this Agreement or the Loan Documents) (a) prohibiting the guaranteeing
            by any
            Loan Party of any obligations, (b) prohibiting the creation or assumption
            of any
            Lien upon the properties or assets of any Loan Party, whether now owned
            or
            hereafter acquired or (c) requiring an obligation to become secured (or
            further
            secured) if another obligation is secured or further secured.

           

          5.15  No
            License Restrictions.
            Permit
            any restriction in any license or other agreement that restricts any
            Borrower or
            any other Loan Party from granting a Lien to Bank upon any of any Borrower’s or
            such other Loan Party’s rights under such license or agreement.

           

          5.16  No
            Transfers to Related Parties.
            Transfer or permit any transfer of any assets of any Borrower to any
            Related
            Party for non-project related purposes.

           

          5.17  Change
            in Management.
            Not
            permit any change in the management of Borrowers, unless such change
            in
            management is the result of a replacement for normal attrition, retirement,
            death or incapacity and within a reasonable period following such change,
            Borrowers have provided for the replacement of such manager to Bank’s reasonable
            satisfaction; provided, further, Borrowers shall promptly notify Bank
            in writing
            of the occurrence of any change in the management of any Borrower.

           

          
            	SECTION
                    6.  	
                    EVENTS
                      OF DEFAULT

                  

          

           

          6.1  Events
            of Default.
            The
            occurrence or existence of any one or more of the following conditions
            or events
            shall constitute an “Event
            of Default”
            hereunder:

           

          (a)  Non-payment
            of any principal, interest or other sum due under the terms of this Agreement,
            the Note, or under any other Loan Document when due in accordance with
            the terms
            hereof or thereof, which non-payment continues for five (5) days beyond
            its due
            date.

           

          (b)  Default
            by any Borrower in the observance or performance of any of the other
            conditions,
            covenants or agreements of Borrowers set forth in this Agreement or under
            any
            other Loan Document, which default continues for thirty (30) days following
            the
            date on which written notice is delivered by Bank to Borrower with respect
            to
            such default or event of default; provided, however, that such thirty
            (30) day
            period will be extended for up to ninety (90) days in Bank’s sole discretion so
            long as a Borrower commences to cure such default during such thirty
            (30) day
            period and thereafter diligently prosecutes such cure to
            completion.

           

          (c)  Any
            representation or warranty made by any Loan Party in any Loan Document
            shall be
            untrue or incorrect in any material respect; provided that it will not
            be an
            Event of Default hereunder if (i) Borrower believed that any such representation
            or warranty was true when made, (ii) such representation or warranty
            is
            susceptible of being cured and made true and correct and (iii) within
            thirty
            (30) days after receipt of written notice Borrower takes whatever action
            is
            required so that such representation or warranty is made true and correct
            within
            such thirty (30) day period.

           

          (d)  Any
            default by any Loan Party, in the payment of any Debt (other than Debt
            owing to
            Bank) in an individual amount of $50,000.00 or greater, or in an aggregate
            amount exceeding $100,000.00, or in the material observance or performance
            of
            any conditions, covenants or agreements related or given with respect
            thereto
            and, in each such case, continuation thereof beyond any applicable grace
            or cure
            period.

           

          (e)  Any
            default by Stratus or any Borrower under the FAAM Loan which continues
            beyond
            any applicable grace or cure period.

           

          (f)  The
            rendering of one or more judgments or decrees for the payment of money,
            against
            any Loan Party, and such judgment(s) or decree(s) has not been vacated,
            bonded
            or stayed, by appeal or otherwise, for a period of sixty (60) consecutive
            days
            after the date of final entry.

           

          (g)  The
            failure by any Loan Party, to meet the minimum funding requirements under
            ERISA
            with respect to any Pension Plan established or maintained by it; the
            occurrence
            of any “reportable event”, as defined in ERISA, which could constitute grounds
            for termination by the PBGC of any Pension Plan or for the appointment
            by the
            appropriate United States District Court of a trustee to administer such
            Pension
            Plan, and such reportable event is not corrected and such determination
            is not
            revoked within sixty (60) days after notice thereof has been given to
            the plan
            administrator or any Loan Party, as the case may be; or the institution
            of any
            proceedings by the PBGC to terminate any such Pension Plan or to appoint
            a
            trustee by the appropriate United States District Court to administer
            any such
            Pension Plan.

           

          (h)  If
            any
            Loan Party, becomes insolvent or generally fails to pay, or admits in
            writing
            its inability to pay, its debts as they mature, or applies for, consents
            to, or
            acquiesces in the appointment of a trustee, receiver, liquidator, conservator
            or
            other custodian for any Loan Party, or a substantial part of its property,
            or
            makes a general assignment for the benefit of creditors; or in the absence
            of
            such application, consent or acquiescence, a trustee, receiver, liquidator,
            conservator or other custodian is appointed for any Loan Party, or for
            a
            substantial part of its property, and the same is not discharged within
            sixty
            (60) days; or any bankruptcy, reorganization, debt arrangement, or other
            proceedings under any bankruptcy or insolvency law, or any dissolution
            or
            liquidation proceeding, is instituted by or against any Loan Party, and,
            if
            instituted against any Loan Party, the same is consented to or acquiesced
            in by
            any such Loan Party or otherwise is not dismissed for sixty (60) days;
            or any
            warrant of attachment is issued against any substantial part of the property
            of
            any Loan Party, which is not released within thirty (30) days of service
            thereof.

           

          (i)  If
            any
            Loan Document shall be terminated, revoked, or otherwise rendered void
            or
            unenforceable, in any case, without Bank’s prior written consent and Borrower
            fails to re-execute same within five (5) days of written notice requesting
            same.

           

          (j)  Any
            Borrower shall dissolve, terminate or liquidate, or merge with or be
            consolidated into any other entity without Bank’s prior written
            consent.

           

          (k)  Without
            the Bank’s prior written consent, any Borrower creates, places, or permits to
            be
            created or placed, or through any act or failure to act, acquiesces in
            the
            placing of, or allows to remain, any Lien with respect to the Mortgaged
            Property, or any portion thereof, other than the Permitted Encumbrances
            and, in
            the case of non-consensual Liens, such Borrower fails to cure same or
            bond
            around such lien in accordance with applicable Governmental Requirements
            and
            otherwise in a manner acceptable to Bank within forty-five (45) days
            from the
            date incurred.

           

          (l)  Except
            as
            otherwise expressly permitted under the Loan Documents, any Borrower
            sells,
            conveys, transfers or assigns all or any portion of the Mortgaged Property
            other
            than to a Loan Party and the Mortgaged Property remains subject to the
            Lien in
            favor of the Bank.

           

          (m)  There
            is
            a transfer, sale, assignment or conveyance of any beneficial interest
            in any
            Borrower or any entity that directly or indirectly holds a beneficial
            interest
            in any Borrower, except for Permitted Dispositions.

           

          (n)  Any
            Borrower abandons all or any portion of the Mortgaged Property.

           

          (o)  The
            construction of a Calera Court House is, at any time, (i) discontinued
            for
            a period of twenty (20) or more consecutive days after commencement of
            construction thereof, or (ii) not completed within 30 days after
            the
            Completion Date applicable to such Calera Court House, or the Calera
            Court House
            Borrower is unable to satisfy any condition precedent to its right to
            receive
            Advances, after Acceptance, for the construction of a Calera Court House
            for a
            period in excess of thirty (30) days after Bank's refusal to make any
            further
            Advances. Notwithstanding the foregoing, so long as no other Event of
            Default
            exists and is continuing, no Event of Default under this subsection shall
            exist
            due to the Calera Court Borrower's failure to commence, continue or complete
            construction of a Calera Court House or satisfy any condition to Calera
            Court
            Borrower's right to receive Advances hereunder within the time periods
            provided
            for in this Agreement to the extent, and only to the extent, the failure
            to do
            so is due to an act of force majeure if (i) the Calera Court Borrower
            has given
            Bank written notice of the act of force majeure within fifteen (15) days
            after
            the event occurs and (ii) the Calera Court Borrower continues to use
            its
            commercially reasonable best efforts to recommence its performance whenever
            and
            to whatever extent possible without delay, including through the use
            of
            alternate sources, work around plans or other means. In no event, however,
            shall
            any one or more acts of force majeure (i) extend the Completion Date
            for a
            Calera Court House by more than a total of ninety (90) days or (ii) extend
            the
            Maturity Date or any date on which payment of any of the Indebtedness
            is
            due.

           

          (p)  Bank
            deems itself insecure, believing in good faith that the prospect of payment
            or
            performance of any of the Indebtedness is impaired.

           

          6.2  Remedies
            Upon Event of Default.
            Upon
            the occurrence and at any time during the existence or continuance of
            any Event
            of Default, but without impairing or otherwise limiting the Bank’s right to
            demand payment of all or any portion of the Indebtedness which is payable
            on
            demand, at Bank’s option, Bank may give notice to Borrowers declaring all or any
            portion of the Indebtedness remaining unpaid and outstanding, whether
            under the
            Note or otherwise, to be due and payable in full without presentation,
            demand,
            protest, notice of dishonor, notice of intent to accelerate, notice of
            acceleration or other notice of any kind, all of which are hereby expressly
            waived, whereupon all such Indebtedness shall immediately become due
            and
            payable. Furthermore, upon the occurrence of a Default or Event of Default
            and
            at any time during the existence or continuance of any Default or Event
            of
            Default, but without impairing or otherwise limiting the right of Bank,
            if
            reserved under any Loan Document, to make or withhold financial accommodations
            at its discretion, to the extent not yet disbursed, any commitment by
            Bank to
            make any further Advances to Borrowers or issue any further Letters of
            Credit
            for any Borrower's account under this Agreement shall automatically terminate;
            provided, should such Default or Event of Default be cured to Bank’s
            satisfaction, Bank may, but shall be under no obligation to, reinstate
            any such
            commitment by written notice to Borrowers. Notwithstanding the foregoing,
            in the
            case of an Event of Default under Section
            6.1(i),
            and
            notwithstanding the lack of any notice, demand or declaration by Bank,
            the
            entire Indebtedness remaining unpaid and outstanding shall become automatically
            due and payable in full, and any commitment by Bank to make any further
            Advances
            to Borrowers or issue any further Letters of Credit for any Borrower's
            account
            shall be automatically and immediately terminated, without any requirement
            of
            notice or demand by Bank upon Borrowers, each of which are hereby expressly
            waived by Borrowers. Bank may, without waiving any Default or Event of
            Default,
            advance Loan proceeds to correct Borrowers’ violation giving rise to the Event
            of Default. Any Loan proceeds so advanced will either, at Bank’s option, be
            evidenced by the Note or constitute Indebtedness of Borrowers to Bank
            payable on
            demand, bearing interest at the Default Rate from the date advanced by
            Bank. All
            such demand indebtedness will be a part of the Indebtedness and will
            be secured
            by the liens and security interests of the Loan Documents. Each Loan
            Party that
            is a partnership agrees that Bank is not required to comply with Section
            3.05(d)
            of the Texas Revised Partnership Act and agrees that Bank may proceed
            directly
            against one or more general (but not limited) partners or their property
            without
            first seeking satisfaction from partnership property. The foregoing rights
            and
            remedies are in addition to any other rights, remedies and privileges
            Bank may
            otherwise have or which may be available to it, whether under this Agreement,
            any other Loan Document, by law, or otherwise.

           

          6.3  Setoff.
            In
            addition to any other rights or remedies of Bank under any Loan Document,
            by law
            or otherwise, upon the occurrence and during the continuance or existence
            of any
            Event of Default, Bank may, at any time and from time to time, without
            notice to
            Borrowers (any requirements for such notice being expressly waived by
            Borrowers), setoff and apply against any or all of the Indebtedness (whether
            or
            not then due), any or all deposits (general or special, time or demand,
            provisional or final) at any time held by Borrowers and other indebtedness
            at
            any time owing by Bank to or for the credit or for the account of Borrowers,
            and
            any property of Borrowers, from time to time in possession or control
            of Bank,
            irrespective of whether or not Bank shall have made any demand hereunder
            or for
            payment of the Indebtedness and although such obligations may be contingent
            or
            unmatured, and regardless of whether any Mortgaged Property then held
            by Bank is
            adequate to cover the Indebtedness. The rights of Bank under this Section
            are in
            addition to any other rights and remedies (including, without limitation,
            other
            rights of setoff) which Bank may otherwise have. Borrowers hereby grant
            Bank a
            Lien on and security interest in all such deposits, indebtedness and
            other
            property as additional collateral for the payment and performance of
            the
            Indebtedness.

           

          6.4  Waiver
            of Certain Laws.
            To the
            extent permitted by applicable law, Borrowers hereby agree to waive,
            and do
            hereby absolutely and irrevocably waive and relinquish, the benefit and
            advantage of any valuation, stay, appraisement, extension or redemption
            laws now
            existing or which may hereafter exist, which, but for this provision,
            might be
            applicable to any sale made under the judgment, order or decree of any
            court, on
            any claim for interest on the Note, or to any security interest or other
            Lien
            contemplated by or granted under or in connection with this Agreement
            or the
            Indebtedness.

           

          6.5  Waiver
            of Defaults.
            No
            Default or Event of Default shall be waived by Bank except in a written
            instrument specifying the scope and terms of such waiver and signed by
            an
            authorized officer of Bank, and such waiver shall be effective only for
            the
            specific time(s) and purpose(s) given. No single or partial exercise
            of any
            right, power or privilege hereunder, nor any delay in the exercise thereof,
            shall preclude other or further exercise of Bank’s rights. No waiver of any
            Default or Event of Default shall extend to any other or further Default
            or
            Event of Default. No forbearance on the part of Bank in enforcing any
            of Bank’s
            rights or remedies under any Loan Document shall constitute a waiver
            of any of
            its rights or remedies. Borrowers expressly agree that this Section may
            not be
            waived or modified by Bank by course of performance, estoppel or
            otherwise.

           

          6.6  Receiver.
            In any
            action or suit to foreclose upon any of the Mortgaged Property, Bank
            shall be
            entitled, without notice or consent, and completely without regard to
            the
            adequacy of any security for the Indebtedness, to the appointment of
            a receiver
            of the business and premises in question and of the rents and profits
            derived
            therefrom. This appointment shall be in addition to any other rights,
            relief or
            remedies afforded Bank. Such receiver, in addition to any other rights
            to which
            he shall be entitled, shall be authorized to sell, foreclose or complete
            foreclosure on Mortgaged Property for the benefit of Bank, pursuant to
            provisions of applicable law.

           

          6.7  Discretionary
            Credit and Credit Payable Upon Demand.
            To the
            extent that any of the Indebtedness shall, at anytime, be payable upon
            demand,
            nothing contained in this Agreement, or any other Loan Document, shall
            be
            construed to prevent Bank from making demand, without notice and with
            or without
            reason, for immediate payment of all or any part of such Indebtedness
            at any
            time or times, whether or not a Default or Event of Default has occurred
            or
            exists. In the event that such demand is made in accordance with the
            Loan
            Documents upon any portion of the Indebtedness and Borrower fails to
            meet any
            such demand within any applicable cure periods, the Bank, at its election,
            may
            terminate any commitment by Bank to make any further Advances to Borrowers
            or
            issue any further Letters of Credit for any Borrower's account under
            this
            Agreement or otherwise. Furthermore, to the extent any Loan Document
            authorizes
            the Bank, at its discretion, to make or to decline to make financial
            accommodations to the Borrowers, nothing contained in this Agreement
            or any
            other Loan Document shall be construed to limit or impair such discretion
            or to
            commit or otherwise obligate the Bank to make any such financial
            accommodation.

           

          6.8  Application
            of Proceeds of Mortgaged Property.
            Notwithstanding anything to the contrary set forth in any Loan Document,
            during
            the existence of any Event of Default, the proceeds of any of the Mortgaged
            Property, together with any offsets, voluntary payments, and any other
            sums
            received or collected in respect of the Indebtedness, may be applied
            in such
            order and manner as determined by Bank in its sole and absolute
            discretion.

           

          
            	SECTION
                    7.  	
                    BANK’S
                      DISCLAIMERS - BORROWERS’
                      INDEMNITIES

                  

          

           

          7.1  No
            Obligation by Bank.
            Bank
            has no liability or obligation whatsoever or howsoever in connection
            with any of
            the Mortgaged Property, and has no obligation except to disburse the
            proceeds of
            the Loan as herein agreed.

           

          7.2  No
            Obligation by Bank to Operate.
            Any
            term or condition of any of the Loan Documents to the contrary notwithstanding,
            Bank shall not have, and by its execution and acceptance of this Agreement
            hereby expressly disclaims, any obligation or responsibility for the
            management,
            conduct or operation of the business and affairs of any Loan Party. Any
            term or
            condition of the Loan Documents which permits Bank to disburse funds,
            whether
            from the proceeds of the Loan or otherwise, or to take or refrain from
            taking
            any action with respect to any Loan Party, the Mortgaged Property or
            any other
            collateral for repayment of the Loan, shall be deemed to be solely to
            permit
            Bank to audit and review the management, operation and conduct of the
            business
            and affairs of any Loan Party, and to maintain and preserve the security
            given
            by Borrowers to Bank for the Loan, and may not be relied upon by any
            other
            person. Further, Bank shall not have, has not assumed and by its execution
            and
            acceptance of this Agreement hereby expressly disclaims any liability
            or
            responsibility for the payment or performance of any indebtedness or
            obligation
            of any Loan Party and no term or condition of the Loan Documents, shall
            be
            construed otherwise. Borrowers, jointly and severally, hereby indemnify
            and
            agree to hold Bank harmless from and against any cost, expense or liability
            incurred or suffered by Bank as a result of any assertion or claim of
            any
            obligation or responsibility of Bank for the management, operation and
            conduct
            of the business and affairs of any Borrower or any other Loan Party,
            or as a
            result of any assertion or claim of any liability or responsibility of
            Bank for
            the payment or performance of any Indebtedness or obligation of any Borrower
            or
            any other Loan Party.

           

          7.3  Indemnity
            by Borrowers.
            Borrowers, jointly and severally, hereby indemnify Bank and each affiliate
            thereof and their respective officers, directors, employees, attorneys
            and
            agents from, and holds each of them harmless against, any and all losses,
            liabilities, claims, damages, costs, and expenses to which any of them
            may
            become subject, insofar as such losses, liabilities, claims, damages,
            costs, and
            expenses arise from or relate to any of the Loan Documents or any of
            the
            transactions contemplated thereby or from any investigation, litigation,
            or
            other proceeding, including, without limitation, any threatened investigation,
            litigation, or other proceeding relating to any of the foregoing, INCLUDING
            WITHOUT LIMITATION, ANY CLAIMS, LOSSES, COSTS, DAMAGES, LIABILITIES,
            OBLIGATIONS, AND EXPENSES RESULTING FROM BANK’S OWN NEGLIGENCE, EXCEPT AND TO
            THE EXTENT, BUT ONLY TO THE EXTENT, CAUSED BY BANK’S GROSS NEGLIGENCE OR WILLFUL
            MISCONDUCT.
            Without
            intending to limit the remedies available to Bank with respect to the
            enforcement of its indemnification rights as stated herein or as stated
            in any
            Loan Document, in the event any claim or demand is made or any other
            fact comes
            to the attention of Bank in connection with, relating or pertaining to,
            or
            arising out of the transactions contemplated by this Agreement, which
            Bank
            reasonably believes might involve or lead to some liability of Bank,
            Borrowers
            shall, immediately upon receipt of written notification of any such claim
            or
            demand, assume in full the personal responsibility for and the defense
            of any
            such claim or demand and pay in connection therewith any loss, damage,
            deficiency, liability or obligation, including, without limitation, legal
            fees
            and court costs incurred in connection therewith. In the event of court
            action
            in connection with any such claim or demand, Borrowers shall assume in
            full the
            responsibility for the defense of any such action and shall immediately
            satisfy
            and discharge any final decree or judgment rendered therein. Bank may,
            in its
            sole but reasonable discretion, make any payments sustained or incurred
            by
            reason of any of the foregoing; and Borrowers shall immediately upon
            receipt of
            notice repay to Bank, in cash, the amount of such payment, with interest
            thereon
            at the Maximum Lawful Rate from the date of such payment. Bank shall
            have the
            right to join Borrowers, or any of them, as a party defendant in any
            legal
            action brought against Bank, and Borrowers hereby consent to the entry
            of an
            order making Borrowers, or any of them, a party defendant to any such
            action.

           

          7.4  No
            Agency.
            Nothing
            herein shall be construed as making or constituting Bank as the agent
            of any
            Loan Party in making payments pursuant to any construction contracts
            or
            subcontracts entered into by any Loan Party for construction of the Improvements
            or otherwise. The purpose of all requirements of Bank hereunder is solely
            to
            allow Bank to check and require documentation (including, but not limited
            to,
            lien waivers) sufficient to protect Bank and the Loan contemplated
            hereby.

           

          7.5  Assignment
            of Reimbursables and Assignment of Partnership Interests.
            As
            additional security for the Loan, Borrowers or certain Loan Parties have
            transferred and assigned to Bank all of Borrowers’ right, title and interest in
            and to certain reimbursements and credits due Borrowers from various
            municipal
            utility districts and cities, certain management and other fees, and
            certain
            partnership interests, all as more fully set forth in the Assignment
            of
            Reimbursables and Other Fees and in the Assignment of Partnership Interests
            now
            or hereafter executed by certain of the Borrowers (collectively, the
            “Assignments”).
            Any
            default which remains uncured beyond an grace or cure period under the
            Assignments shall also constitute an Event of Default hereunder. Said
            Assignments shall inure to the benefit of Bank and its successors and
            assigns,
            any purchaser upon foreclosure of any of the Deeds of Trust, any receiver
            in
            possession of the Mortgaged Property and any corporation affiliated with
            Bank
            which assumes Bank’s rights and obligations under this Agreement.

           

          
            	SECTION
                    8.  	
                    MISCELLANEOUS

                  

          

           

          8.1  Taxes
            and Fees.
            Unless
            otherwise prohibited by applicable law, should any tax (other than a
            tax based
            upon the net income of Bank) or recording or filing fee become payable
            in
            respect of any Loan Document, any of the Mortgaged Property, any of the
            Indebtedness or any amendment, modification or supplement hereof or thereof,
            Borrowers agree to pay such taxes (or reimburse Bank therefor upon demand
            for
            reimbursement), together with any interest or penalties thereon, and
            agrees to
            hold Bank harmless with respect thereto.

           

          8.2  Governing
            Law.
            Each
            Loan Document shall be deemed to have been delivered in the State of
            Texas, and
            shall be governed by and construed and enforced in accordance with the
            laws of
            the State of Texas, except to the extent that the Uniform Commercial
            Code, other
            personal property law or real property law of another jurisdiction where
            Mortgaged Property is located is applicable, and except to the extent
            expressed
            to the contrary in any Loan Document. Whenever possible, each provision
            of this
            Agreement shall be interpreted in such manner as to be effective and
            valid under
            applicable law, but if any provision of this Agreement shall be prohibited
            by or
            invalid under applicable law, such provision shall be ineffective to
            the extent
            of such prohibition or invalidity, without invalidating the remainder
            of such
            provision or the remaining provisions of this Agreement.

           

          8.3  Audits
            of Mortgaged Property; Fees.
            Bank
            shall have the right from time to time to audit the Mortgaged Property,
            provided
            that such audits will be conducted no more than one (1) time in any calendar
            year unless an Event of Default has occurred. Borrowers agree to reimburse
            Bank,
            on demand, for customary and reasonable fees and costs incurred by Bank
            for such
            audits and financial analysis and examination of Borrowers or any other
            Loan
            Party performed from time to time.

           

          8.4  Costs
            and Expenses.
            Borrowers shall pay Bank, on demand, all costs and expenses, including,
            without
            limitation, reasonable attorneys’ fees and legal expenses (whether inside or
            outside counsel is used), incurred by Bank in perfecting, revising, protecting
            or enforcing any of its rights or remedies against any Loan Party or
            any
            Mortgaged Property, or otherwise incurred by Bank in connection with
            any Default
            or Event of Default or the enforcement of the Loan Documents or the
            Indebtedness. Following Bank’s demand upon Borrowers for the payment of any such
            costs and expenses, and until the same are paid in full, the unpaid amount
            of
            such costs and expenses shall constitute Indebtedness and shall bear
            interest at
            the Default Rate.

           

          8.5  Notices.
            All
            notices and other communications provided for in any Loan Document (unless
            otherwise expressly stipulated therein) or contemplated thereby, given
            thereunder or required by law to be given, shall be in writing (unless
            expressly
            provided to the contrary). If personally delivered, such notices shall
            be
            effective when delivered, and in the case of mailing or delivery by overnight
            courier, such notices shall be effective when placed in an envelope and
            deposited at a post office or official depository under the exclusive
            care and
            custody of the United States Postal Service or delivered to an overnight
            courier, postage prepaid, in each case addressed to the parties as set
            forth on
            the signature page of this Agreement, or to such other address as a party
            shall
            have designated to the other in writing in accordance with this Section.
            In the
            case of mailing, the mailing shall be by certified or first class mail.
            Except
            as specifically set forth to the contrary herein, in a Deed of Trust
            or in any
            other Loan Document, the giving of at least five (5) days’ notice before Bank
            shall take any action described in any notice shall conclusively be deemed
            reasonable for all purposes; provided, that this shall not be deemed
            to require
            Bank to give such five (5) days’ notice, or any notice, if not specifically
            required to do so in this Agreement.

           

          8.6  Further
            Action.
            Borrowers, from time to time, upon written request of Bank, will promptly
            make,
            execute, acknowledge and deliver, or cause to be made, executed, acknowledged
            and delivered, all such further and additional instruments, and promptly
            take
            all such further action as may be reasonably required to carry out the
            intent
            and purpose of the Loan Documents, and to provide for the Loan thereunder
            and
            payment of the Note, according to the intent and purpose therein
            expressed.

           

          8.7  Successors
            and Assigns; Participation.
            This
            Agreement shall be binding upon and shall inure to the benefit of Borrowers
            and
            Bank and their respective successors and assigns. The foregoing shall
            not
            authorize any assignment or transfer by any Borrower of any of its respective
            rights, duties or obligations hereunder, such assignments or transfers
            being
            expressly prohibited. Bank, however, may freely assign, whether by assignment,
            participation or otherwise, its rights and obligations hereunder, and
            is hereby
            authorized to disclose to any such assignee or participant (or proposed
            assignee
            or participant) any financial or other information in its knowledge or
            possession regarding any Loan Party or the Indebtedness.

           

          8.8  Indulgence.
            No
            delay or failure of Bank in exercising any right, power or privilege
            hereunder
            or under any of the Loan Documents shall affect such right, power or
            privilege,
            nor shall any single or partial exercise thereof preclude any further
            exercise
            thereof, nor the exercise of any other right, power or privilege available
            to
            Bank. The rights and remedies of Bank hereunder are cumulative and are
            not
            exclusive of any rights or remedies of Bank.

           

          8.9  Amendment
            and Waiver.
            No
            amendment or waiver of any provision of any Loan Document, or consent
            to any
            departure by any Loan Party therefrom, shall in any event be effective
            unless
            the same shall be in writing and signed by Bank, and then such waiver
            or consent
            shall be effective only in the specific instance(s) and for the specific
            time(s)
            and purpose(s) for which it is given.

           

          8.10  Severability.
            In case
            any one or more of the obligations of any Loan Party under any Loan Document
            shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
            legality and enforceability of the remaining obligations of such Loan
            Party
            shall not in any way be affected or impaired thereby, and such invalidity,
            illegally or unenforceability in one jurisdiction shall not affect the
            validity,
            legality or enforceability of the obligations of such Loan Party under
            any Loan
            Document in any other jurisdiction.

           

          8.11  Headings
            and Construction of Terms.
            The
            headings of the various subsections hereof are for convenience of reference
            only
            and shall in no way modify or affect any of the terms or provisions hereof.
            Where the context herein requires, the singular number shall include
            the plural,
            and any gender shall include any other gender.

           

          8.12  Independence
            of Covenants.
            Each
            covenant hereunder shall be given independent effect so that if a particular
            action or condition is not permitted by any such covenant, the fact that
            it
            would be permitted by an exception to, or would be otherwise within the
            limitations of, another covenant shall not avoid the occurrence of any
            Default
            or Event of Default.

           

          8.13  Reliance
            on and Survival of Various Provisions.
            All
            terms, covenants, agreements, indemnities, representations and warranties
            of any
            Loan Party made in any Loan Document, or in any certificate, report,
            financial
            statement or other document furnished by or on behalf of any Loan Party
            in
            connection with any Loan Document, shall be deemed to have been relied
            upon by
            Bank, notwithstanding any investigation heretofore or hereafter made
            by Bank or
            on Bank’s behalf, and those covenants and agreements of Borrowers set forth in
            Sections
            4.7,
            4.11,
            4.18,
            7.2
            and
7.3
            hereof
            (together with any other indemnities of Borrowers contained elsewhere
            in any
            Loan Document) shall survive the termination of this Agreement and the
            repayment
            in full of the Indebtedness.

           

          8.14  Effective
            Upon Execution.
            This
            Agreement shall become effective upon the execution hereof by Bank and
            Borrowers, and shall remain effective until the Indebtedness under this
            Agreement and the Note and the related Loan Documents shall have been
            repaid and
            discharged in full and no commitment to extend any credit hereunder (whether
            optional or obligatory) remains outstanding.

           

          8.15  No
            Third Party Beneficiaries.
            The
            benefits of this Agreement shall not inure to any third party. This Agreement
            shall not be construed to make or render Bank liable to any materialmen,
            subcontractors, contractors, laborers or others for goods and materials
            supplied
            or work and labor furnished in connection with any of the Mortgaged Property
            or
            for debts or claims accruing to any such persons or entities against
            any
            Borrower. Bank shall not be liable for the manner in which any Advances
            under
            this Agreement maybe applied by Borrowers. Notwithstanding anything contained
            in
            the Loan Documents, or any conduct or course of conduct by the parties
            hereto,
            before or after signing the Loan Documents, this Agreement shall not
            be
            construed as creating any rights, claims or causes of action against
            Bank, or
            any of its officers, directors, agents or employees, in favor of any
            contractor,
            subcontractor, supplier of labor or materials, or any of their respective
            creditors, or any other person or entity other than Borrowers. Without
            limiting
            the generality of the foregoing, Advances made to any Person pursuant
            to any
            requests for Advances, whether or not such request is required to be
            approved by
            Borrowers, shall not be deemed a recognition by Bank of a third-party
            beneficiary status of any such person or entity.

           

          8.16  Complete
            Agreement: Conflicts.
            The
            Loan Documents contain the entire agreement of the parties thereto, and
            none of
            the parties shall be bound by anything not expressed in writing. In the
            event
            that and to the extent that any of the terms, conditions or provisions
            of any of
            the other Loan Documents are inconsistent with or in conflict with any
            of the
            terms, conditions or provisions of this Agreement, the applicable terms,
            conditions and provisions of this Agreement shall govern and
            control.

           

          8.17  Exhibits
            and Addenda and Schedules.
            The
            following Addenda and Exhibits and Schedules are attached to this Agreement
            and
            are incorporated into this Agreement by this reference and made a part
            hereof
            for all purposes:

           

          Addenda:
            

          Addendum
            1  - Defined
            Terms Addendum

          Addendum
            2  - Loan
            Terms, Conditions and Procedures Addendum

          Addendum
            3  - Release
            Provisions

          Addendum
            3-1 - Schedule
            of Appraised Value

          

          Exhibits:
            

          Exhibit
            A - Primary
            Collateral

          Exhibit
            B
 - Other
            Collateral

          Exhibit
            C
 - Form
            of
            Borrowing Base Certificate

          Exhibit
            D
 - MUD
            Reimbursables

          Exhibit
            E - Request
            for Advance

          Exhibit
            F - Form
            of
            Compliance Certificate

          

          Schedules:
            

           

          Schedule
            3.5 - Subsidiaries

           

          Schedule
            3.10  - Material
            Litigation

           

          Schedule
            3.14  - Employee
            Benefit Plans

           

          Schedule
            3.16  - Environmental
            Disclosures

           

          Schedule
            3.19 - Equity
            Ownership

           

          8.18  ORAL
            AGREEMENTS INEFFECTIVE.
            THIS
            AGREEMENT AND THE OTHER “LOAN AGREEMENTS” (AS DEFINED IN SECTION 26.02(A)(2) OF
            THE TEXAS BUSINESS & COMMERCE CODE, AS AMENDED) REPRESENT THE FINAL
            AGREEMENT BETWEEN THE PARTIES, AND THIS AGREEMENT AND THE OTHER WRITTEN
            LOAN
            AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
            OR
            SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN
            ORAL
            AGREEMENTS BETWEEN THE PARTIES.

           

          Remainder
            of the Page 

           

          Left
            Blank Intentionally

           

          Signature
            Page Follows

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          WITNESS
            the due execution hereof as of the day and year first above
            written.

           

          
            	
                    BANK:

                     

                    COMERICA
                      BANK

                     

                     

                    By:      
                      /s/ Kevin Crayton    

                    Name:      Kevin
                      Crayton     

                    Title:        Vice
                      President     

                  	 	
                    BORROWERS:

                     

                    STRATUS
                      PROPERTIES INC., 

                    a
                      Delaware corporation

                     

                    By:     
                      /s/ John E. Baker     

                    John
                      E. Baker, Senior Vice President

                  
	
                    Bank’s
                      Address: 

                    1601
                      Elm Street, 2nd
                      Floor

                    Dallas,
                      Texas 75201

                    Mail
                      Code 6504

                    Dallas,
                      Texas 75262-0282 

                    Attn:
                      Shery Layne

                    Telefax
                      No.: (214) 969-6682

                  	 	
                    STRATUS
                      PROPERTIES OPERATING CO., L.P., a
                      Delaware limited partnership

                     

                    By:
                       STRS
                      L.L.C., a Delaware limited liability company, General Partner

                     

                    By Stratus
                      Properties Inc., a Delaware corporation, Sole Member

                     

                    By: 
                      /s/ John E. Baker    

                    John
                      E. Baker, 

                    Senior
                      Vice President

                  
	
                    Borrowers’
                      Address:

                    98
                      San Jacinto Blvd., Suite 220 

                    Austin,
                      Texas 78701

                    Attn:
                      William H. Armstrong, III 

                    Telefax
                      No.: (512) 478-6340

                  	 	
                    CIRCLE
                      C LAND, L.P., 

                    a
                      Texas limited partnership

                     

                    By:
                       Circle
                      C GP, L.L.C., a Delaware limited liability company, General
                      Partner

                     

                    By Stratus
                      Properties Inc., a Delaware corporation, Sole Member

                     

                    By: 
                      /s/ John E. Baker    

                    John
                      E. Baker, 

                    Senior
                      Vice President

                  
	 	 	
                    AUSTIN
                      290 PROPERTIES, INC., 

                    a
                      Texas corporation

                     

                    By:
                      /s/ John E. Baker      

                    John
                      E. Baker, Senior Vice President

                  

          

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

          

          The
            undersigned, Calera Court, L.P., hereby executes the Agreement to evidence
            its
            agreement to be bound by the provisions of Article 4 of Addendum 2 attached
            to
            this Agreement, and its obligation and liability for that portion of
            the
            Indebtedness under the Calera Court Construction Loan.

          

          CALERA
            COURT, L.P. a
            Texas
            limited partnership

          

          
            	 	
                    By:

                  	
                    Calera
                      Court Management, L.L.C., a Texas limited liability company,
                      its general
                      partner

                  

          

          

          
            	 	
                    By:

                  	
                    Stratus
                      Properties Operating Co., L.P., a Delaware limited partnership,
                      its
                      Manager

                  

          

          

          
            	 	
                    By:

                  	
                    STRS
                      L.L.C., a Delaware limited liability company, its general
                      partner

                  

          

          

          
            	 	
                    By:

                  	
                    Stratus
                      Properties Inc., a Delaware corporation, its
                      Manager

                  

          

          

          

          By:
            /s/ John E. Baker     

                       
             John E. Baker, 

                      
              Senior Vice President

          

          

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          ADDENDUM
            1

           

          DEFINED
            TERMS ADDENDUM

           

          
            	SECTION
                    1.  	
                    DEFINITIONS

                  

          

           

          1.1  Defined
            Terms.
            As used
            in this Agreement, the following terms shall have the following respective
            meanings:

           

          "Acceptance"
            means
            Bank's agreement, to be provided or denied in Bank's sole discretion
            as provided
            herein, to fund construction of a proposed Calera Court House pursuant
            to an
            Approved Budget.

           

          “Acceptance
            Termination Date” shall
            mean the date which is twelve (12) months prior to the Maturity Date,
            as such
            date may be extended from time to time.

           

          “Accounts,”“Chattel
            Paper,”“Documents”,
            “Fixtures,”“General
            Intangibles,”“Goods,”“Instruments”
            and
“Inventory”
            shall
            have the respective meanings assigned to them in the UCC on the date
            of this
            Agreement.

           

          “Advance” shall
            mean a disbursement by Bank, whether by journal entry, deposit to Borrower’s
            account, check to third party or otherwise of any of the proceeds of
            the Loan or
            any insurance proceeds.

           

          “Affiliate”
            shall
            mean, when used with respect to any Person, any other Person which, directly
            or
            indirectly, controls or is controlled by or is under common control with
            such
            Person. For purposes of this definition, “control” (including, with correlative
            meanings, the terms “controlled by” and “under common control with”), with
            respect to any Person, shall mean possession, directly or indirectly,
            of the
            power to generally direct or cause the direction of the management and
            policies
            of such Person, whether through the ownership of voting securities, by
            contract
            or otherwise.

           

          "Affiliate
            Receivables"
            shall
            mean, as of any time of determination, any amounts in respect of loans
            or
            advances owing to Borrower or another Loan Party from any of its Subsidiaries
            or
            Affiliates at such time.

           

          “Agreement”
            shall
            mean this Loan Agreement; including the Defined Terms Addendum, the Loan
            Terms,
            Conditions and Procedures Addendum, and the Partial Release Addendum,
            together
            with all exhibits and schedules, as it may be amended from time to
            time.

           

          "Allocations"
            means
            the amounts allocated for each stage of construction of a Calera Court
            House, as
            set forth in the Approved Budget for such Calera Court House for which
            Advances
            of Loan proceeds will be made.

           

          “Appraisals”
            shall
            mean appraisals prepared and obtained at Borrowers’ expense covering the Primary
            Collateral in form and content and conducted and prepared by one or more
            appraisers reasonably acceptable to Bank. Each Appraisal shall comply
            with all
            appraisal requirements of Bank and any Governmental Authority having
            jurisdiction over Bank.

           

          "Approved
            Budget"
            means
            the budget for a Calera Court House, once such budget has been agreed
            to and
            accepted in writing by Bank; which Approved Budget shall be in form and
            substance acceptable to Bank in Bank's reasonable discretion. 

           

          "Approved
            Sales Contract"
            means a
            bona fide, legally binding, enforceable contract for the sale of a Calera
            Court
            House, between the Calera Court Borrower, as seller, and a third party
            unrelated
            to the Calera Court Borrower, as buyer, with respect to which (i) the
            form
            and substance of such contract of sale shall have been previously approved
            in
            writing by Bank, (ii) a non-refundable earnest money deposit in
            an amount
            not less than $5,000.00 has been delivered to either an independent escrow
            agent
            or to the Calera Court Borrower to be deposited into a segregated account
            used
            solely for earnest money deposits under sales contracts, and (iii) unless
            such contract contemplates a cash only purchase, such buyer has
            (A) submitted a fully completed mortgage loan application to a
            qualified
            single-family mortgage lender for the financing of the acquisition of
            such
            Calera Court House, (B) such single-family mortgage lender has
            given its
            written pre-approval of such mortgage loan application, and (C) such
            buyer
            has, to date, fully satisfied any and all other conditions of the Calera
            Court
            Borrower as specified in such contract of sale. Notwithstanding the foregoing,
            if such pending sale is not an all cash acquisition, then if within forty-five
            (45) days after the date of such contract of sale, the buyer has not
            received a
            final, binding mortgage loan commitment from a qualified single-family
            mortgage
            lender for the financing of the acquisition of such Calera Court House,
            then
            such contract of sale shall thereafter not be deemed to constitute an
            Approved
            Sales Contract until such commitment has been secured. 

           

          "Approved
            Work"
            means
            only labor and materials furnished in connection with construction of
            any Calera
            Court House in accordance with the corresponding Approved Budget, subject
            however to change orders made in compliance with this Agreement.

           

          “Assignment
            of Reimbursables and Other Fees”
            shall
            mean the Assignment of Reimbursables and Other Fees of even date herewith
            executed by Borrowers and assigning to Bank all reimbursements, credits,
            receivables and proceeds due to any Borrower including, but not limited
            to, the
            MUD Reimbursables, the Credit Banks, all utility reimbursements, fees
            for
            property management, commission fees and other fee income as more specifically
            set forth therein.

           

          “Assignment
            of Partnership Interest”
            shall
            mean, collectively, all Assignments of Partnership Interests now or hereafter
            executed by a Loan Party in favor of Bank, assigning to Bank their respective
            partnership interests in the joint ventures or partnerships more fully
            described
            therein.

           

          “Bankruptcy
            Code”
            shall
            mean Title 11 of the United States Code, as amended, or any successor
            act or
            code.

           

          “Borrowing
            Base Limitation”
            shall
            mean the sum of:

           

          (a)  forty-five
            percent (45%) of the fair market value of the Primary Collateral which
            is
            unimproved real property (except for any portions which are covered by
            other
            subsections in the definition of Borrowing Base Limitation set forth
            below), as
            indicated by Appraisals delivered to and accepted by Bank pursuant to
            Section
            4.19
            hereof;

           

          (b)  seventy-five
            percent (75%) of the fair market value of the Developed Lots, as indicated
            by
            Appraisals delivered to and accepted by Bank pursuant to Section
            4.19
            hereof;

           

          (c)  with
            respect to portions of the Land which are currently being developed into
            single-family residential lots (but which are not yet fully Developed
            Lots), the
            lesser of (x) seventy-five percent (75%) of the fair market value of
            such Land
            (as if improved and developed), as indicated by Appraisals delivered
            to and
            accepted by Bank pursuant to Section
            4.19
            hereof
            or (y) an amount equal to the sum of (1) the discounted fair market value
            of the
            Land plus (2) the hard and soft cost of all improvements made to the
            Land as of
            the date of determination of the Borrowing Base Limitation;

           

          (d)  seventy-five
            percent (75%) of the Credit Bank Value;

           

          (e)  fifty
            percent (50%) of the MUD Reimbursables Value;

           

          (f)  eighty
            percent (80%) of the appraised value of Calera Court Pre-Sold Houses;
            and

           

          (g)  seventy-five
            percent (75%) of the appraised value of the Calera Court Spec Houses
            and Calera
            Court Model Houses; provided, however, (i) the value of a Calera Court
            Spec
            House included in the Borrowing Base Limitation shall decrease by ten
            percent
            (10%) after the first anniversary of the Acceptance of such Calera Court
            Spec
            House, and the value of a Calera Court Spec House included in the Borrowing
            Base
            Limitation after the expiration of the final Curtailment Period for such
            Calera
            Court Spec House shall be reduced to zero; and (ii) the value of a Calera
            Court
            Model House shall decrease by ten percent (10%) on each anniversary of
            the
            Acceptance of such Calera Court Model House commencing on the second
            (2nd)
            anniversary date hereof, and the value of a Calera Court Model House
            included in
            the Borrowing Base Limitation after the expiration of the final Curtailment
            Period for such Calera Court Model House shall be reduced to zero.
            Notwithstanding the foregoing, in the event that a Calera Court Spec
            House or
            Calera Court Model House does not qualify for an extension of a Curtailment
            Period, then the value of such Calera Court Spec House or Calera Court
            Model
            House included in the Borrowing Base Limitation shall be zero.

           

          “Business
            Day”
            shall
            mean any day, other than a Saturday, Sunday or holiday, on which the
            Bank is
            open to carry on all or substantially all of its normal commercial lending
            business in Dallas, Texas.

           

          "Calera
            Court Borrower"
            means
            Calera Court, L.P.

           

          "Calera
            Court Construction Loan"
            means
            that portion of the Loan allocated for the construction of single family
            residences on the Calera Court Lots as provided in this Agreement; provided,
            the
            amount outstanding under the Calera Court Construction Loan, plus any
            unfunded
            commitment thereunder pursuant to Approved Budgets, shall not exceed
            $3,000,000
            in any event.

           

          "Calera
            Court House"
            means a
            Developed Lot and an Improvement constructed thereon consisting of a
            single-family residence pursuant to the Calera Court Construction Loan
            which has
            not been sold. A Calera Court House is sometimes referred to as a "House"
            under
Article
            4
            of
Addendum
            2
            of this
            Agreement.

           

          "Calera
            Court Lots"
            means
            that certain property described on Exhibit
            A
            as the
            Calera Court Lots and which is owned by the Calera Court Borrower, and
            which
            property is legally described as Units 1 through 17, together with the
            undivided
            interest in and the General and Limited Common Elements appurtenant thereto,
            of
            Calera Court Condominiums, a condominium project in Travis County, Texas,
            according to the Declaration of Condominium of record under Document
            No.
            2003111246 of the Official Public Records of Travis County, Texas, except
            for
            Unit 16 which has been previously developed and sold by the Calera Court
            Borrower.

           

          "Calera
            Court Model Houses"
            means a
            Calera Court House that is to be, has been, or is in the process of being,
            constructed thereon and which at the time of any Advance covering such
            Calera
            Court House is not the subject of an Approved Sales Contract and is intended
            by
            the Calera Court Borrower to be furnished and used by the Calera Court
            Borrower
            for on-site office and/or marketing purposes. A Calera Court Model House
            shall
            not also be deemed to be a Calera Court Spec House. A Calera Court Model
            House
            will become and constitute a Calera Court Pre-Sold House when, and for
            so long
            as, such Calera Court Model House becomes subject to an Approved Sales
            Contract.
            A Calera Court Model House is referred to as a "Model
            House"
            under
Article
            4
            of
Addendum
            2
            of this
            Agreement.

           

          "Calera
            Court Pre-Sold House"
            means a
            Calera Court House which is has been or is in the process of being, constructed
            thereon, and which is the subject of an Approved Sales Contract. A Calera
            Court
            Pre-Sold House is referred to as a "Pre-Sold
            House"
            under
Article
            4
            of
Addendum
            2
            of this
            Agreement.

           

          "Calera
            Court Spec Houses"
            means a
            Calera Court House which has been or is in the process of being, constructed
            thereon, and which at the time of Acceptance is not the subject of an
            Approved
            Sales Contract and is not Calera Court Model House. A Calera Court Model
            House
            shall not be deemed to be a Calera Court Spec House. A Calera Court Spec
            House
            will become and constitute a Calera Court Pre-Sold House when, and for
            so long
            as, such Calera Court Spec House becomes subject to an Approved Sales
            Contract.
            A Calera Court Spec House is referred to as a "Spec
            House"
            under
Article
            4
            of
Addendum
            2
            of this
            Agreement.

           

          "Calera
            Court Sublimit"
            means
            $3,000,000.00.

           

          "Commencement
            Date"
            means,
            with respect to each Calera Court House, the date on which Approved Work
            relating to such Calera Court House is commenced.

           

          “Commitment
            Fee”
            shall
            mean the sum of $24,500 to be paid by Borrowers to Bank pursuant to the
            applicable provisions of this Agreement.

           

          "Completion
            Date"
            means,
            with respect to each Calera Court House, the date that is nine (9) months
            after
            the Commencement Date applicable thereto (subject to extension due to
            force
            majeure), but in no event beyond the Maturity Date.

           

          “Compliance
            Certificate”
            shall
            mean a certificate to be furnished by Borrowers to Bank, in the form
            of
Exhibit
            F,
            certified by the chief financial officer of Borrowers (or in such officer’s
            absence, another responsible officer of Borrowers) pursuant to Section
            4.3
            of this
            Agreement, certifying that, as of the date thereof, no Default or Event
            of
            Default shall have occurred and be continuing, or if any Default or Event
            of
            Default shall have occurred and be continuing, specifying in detail the
            nature
            and period of existence thereof and any action taken or proposed to be
            taken by
            the Borrowers with respect thereto, and also certifying as to whether
            Borrowers
            are in compliance with the financial covenants contained in Section
            4.20
            of this
            Agreement.

           

          “Consolidated”
            or
“consolidated”
            shall
            mean, when used with reference to any financial term in this Agreement,
            the
            aggregate for two or more persons of the amounts signified by such term
            for all
            such persons determined on a consolidated basis in accordance with GAAP.
            Unless
            otherwise specified herein, references to “consolidated” financial statements or
            data of the Borrowers includes consolidation with their respective Subsidiaries
            in accordance with GAAP.

           

          "Construction
            Costs"
            means,
            with respect to each Calera Court House, all costs of labor and material,
            reasonable architectural, engineering, interior and landscape design,
            legal,
            consulting and other related fees, taxes on land and improvements, and
            bond and
            insurance costs and commitment fees, interest and other financing charges,
            all
            as set forth in an Approved Budget.

           

          “Contested
            Item”shall
            mean any Lien asserted against all or any portion of the Mortgaged Property
            if,
            and so long as (i) Borrowers have notified Bank of same within fifteen
            (15) days
            of obtaining knowledge thereof, (ii) Borrowers shall diligently and in
            good
            faith contest the same by appropriate legal proceedings which shall operate
            to
            prevent the enforcement of collection of the same and the sale of the
            Mortgaged
            Property or any part thereof, to satisfy the same, (iii) pending resolution
            of
            such Contested Item, Borrowers shall have furnished to Bank a cash deposit
            or an
            indemnity bond reasonably satisfactory to Bank with a surety reasonably
            satisfactory to Bank in the amount of such imposition or lien claim,
            plus a
            reasonable additional sum to pay all costs, interest and penalties that
            may be
            imposed or incurred in connection therewith, to ensure payment of the
            matters
            under contest and to prevent any sale or forfeiture of the Mortgaged
            Property or
            any part thereof, (iv) Borrowers shall promptly upon final determination
            thereof
            pay the amount of any such imposition or lien claim so determined, together
            with
            all costs, interest and penalties which may be payable in connection
            therewith,
            (v) the failure to pay such imposition or, lien claim does not constitute
            a
            default under any other deed of trust, mortgage or security interest
            covering or
            affecting any part of the Mortgaged Property, and (vi) notwithstanding
            the
            foregoing, Borrowers shall immediately upon request of Bank pay any such
            imposition or lien claim notwithstanding such contest if, in the reasonable
            opinion of Bank, the Mortgaged Property shall be in jeopardy or in danger
            of
            being forfeited or foreclosed. Bank may pay over any such cash deposit
            or part
            thereof to the claimant entitled thereto at any time when, in the reasonable
            judgment of Bank, the entitlement of such claimant is established.

           

          "Credit
            Banks"
            means
            the credits to which Borrower is entitled to receive from the City of
            Austin
            under Article 12 of the Development Agreement, in the original aggregate
            face
            amount of $15,000,000.

           

          "Credit
            Bank Value"
            means
            the present discounted value of the Credit Banks, using a discount factor
            of six
            percent (6%). As of June 30, 2005, it is estimated that the Credit Bank
            Value is
            approximately $6,257,218.

           

          "Curtailment
            Period"
            means a
            period of 12 months from Acceptance of a Calera Court Spec House and
            a period of
            12 months from Acceptance of a Calera Court Model House; provided,
            that,
            with respect to a Calera Court House which is still a part of the Mortgaged
            Property upon the expiration of the original Curtailment Period, and
            further
            provided that (i) no Event of Default is then existing, (ii) Lender has
            not sent
            written notice to Borrower of a Default which has not been cured as of
            such
            date, and (iii) the Curtailment Period (after giving effect to such extension)
            will not expire after the Maturity Date (as may have been extended by
            Bank as
            provided in Section
            1.5
            of
Addendum
            2
            hereof),
            then the Curtailment Period shall be automatically extended as follows:
            (a) the
            Curtailment Period with respect to any Calera Court Spec House shall
            be extended
            one time for a period of twelve (12) months; and (b) the Curtailment
            Period with
            respect to any Calera Court Model House shall be extended up to four
            (4) times
            time for a period of twelve (12) months each.

          

          “Debt”shall
            mean, as of any applicable date of determination thereof, all items of
            indebtedness, obligation or liability of a Person, whether matured or
            unmatured,
            liquidated or unliquidated, direct or indirect, absolute or contingent,
            joint or
            several, that should be classified as liabilities in accordance with
            GAAP. In
            the case of Borrowers, the term “Debt” shall include, without limitation, the
            Indebtedness.

           

          "Debt-to-Tangible
            Net Worth Ratio"
            shall
            mean, with respect to any Person, and as of any applicable date of determination
            thereof, the ratio of (a) the total Debt of such Person to (b) the Tangible
            Net
            Worth of such Person."

           

          “Deeds
            of Trust”shall
            mean, collectively, all Deeds of Trust now or hereafter executed for
            the benefit
            of Bank pursuant to which the Land (and any Improvements located thereon)
            is
            mortgaged to a trustee for the benefit of Bank to secure the Loan.

           

          “Default”shall
            mean, any condition or event which, with the giving of notice or the
            passage of
            time, or both, would constitute an Event of Default.

           

          “Default
            Rate”
            shall
            mean, at any time of determination thereof with respect to the applicable
            portion of the Indebtedness, the Maximum Lawful Rate or if no Maximum
            Lawful
            Rate is in effect, the sum of the Base Rate (as defined in the Note)
            plus six
            percent (6%).

           

          "Development
            Agreement"
            means
            that certain Development Agreement dated effective as of August 15, 2002
            between
            the City of Austin and Circle C Land Corp., as may be amended from time
            to time.

           

          "Developed
            Lots"
            means
            that portion of the Land which has been developed into single family
            residential
            lots with all necessary streets, utilities and other infrastructure improvements
            and which are ready for resale to builders.

           

          “Disbursement
            Date”shall
            mean the date upon which Bank makes an Advance of Loan proceeds under
            this
            Agreement.

           

          “Distribution”shall
            mean any dividend on or other distribution (whether by reduction of capital
            or
            otherwise) with respect to any shares of capital stock (or other ownership
            interests), except for dividends from a Subsidiary to its parent.

           

          “Environmental
            Law(s)”shall
            mean all laws, codes, ordinances, rules, regulations, orders, decrees
            and
            directives issued by any federal, state, local, foreign or other governmental
            or
            quasi governmental authority or body (or any agency, instrumentality
            or
            political subdivision thereof) pertaining to Hazardous Materials or otherwise
            intended to regulate or improve health, safety or the environment, including,
            without limitation, any hazardous materials or wastes, toxic substances,
            flammable, explosive or radioactive materials, asbestos, and/or other
            similar
            materials; any so-called “superfund” or “superlien” law, pertaining to Hazardous
            Materials on or about any of the Mortgaged Property, or any other property
            at
            any time owned, leased or otherwise used by any Loan Party, or any portion
            thereof, including, without limitation, those relating to soil, surface,
            subsurface ground water conditions and the condition of the ambient air;
            and any
            other federal, state, foreign or local statute, law, ordinance, code,
            rule,
            regulation, order or decree regulating, relating to, or imposing liability
            or
            standards of conduct concerning, any hazardous, toxic, radioactive, flammable
            or
            dangerous waste, substance or material, as now or at anytime hereafter
            in
            effect.

           

          “ERISA”shall
            mean the Employee Retirement Income Security Act of 1974, as amended,
            or any
            successor act or code.

           

          “Event
            of Default”shall
            mean any of those conditions or events listed in Section
            6.1
            of this
            Agreement.

           

          “Extension
            Fee”shall
            have the meaning ascribed to such term in Section
            1.6(d)
            of
Addendum
            2
            hereof.

           

          “FAAM
            Loan”shall
            mean the unsecured term debt of Stratus to First American Asset Management
            in an
            amount not to exceed $10,000,000.00.

           

          “Financing
            Statements”
            shall
            mean the financing statement or financing statements (on Standard Form
            UCC-I or
            otherwise) executed and delivered by Borrowers in connection with the
            Loan
            Documents.

           

          “Financial
            Statements”
            shall
            mean all balance sheets, income statements, statements of profit and
            loss,
            statements of changes in stockholder equity, statements of cash flow
            and
            contingency obligations and other financial data, statements and reports
            (whether of any Borrower, any of their respective Subsidiaries, or any
            other
            Loan Party or otherwise) which are required to, have been, or may from
            time to
            time hereafter, be furnished to Bank, for the purposes of, or in connection
            with, this Agreement, the transactions contemplated hereby or any of
            the
            Indebtedness.

           

          “GAAP”
            shall
            mean generally accepted accounting principles consistently applied.

           

          “Good
            Faith”or
            “good
            faith”shall
            have the meaning ascribed to the term “good faith” in Article 1.201 (20) of the
            UCC on the date of this Agreement.

           

          “Governmental
            Authority”shall
            mean the United States, each state, each county, each city, and each
            other
            political subdivision in which all or any portion of the Mortgaged Property
            is
            located, and each other political subdivision, agency, or instrumentality
            exercising jurisdiction over Bank, any Loan Party or any Mortgaged
            Property.

           

          “Governmental
            Requirements”shall
            mean all laws, ordinances, rules, and regulations of any Governmental
            Authority
            applicable to any Loan Party, any of the Indebtedness or any Mortgaged
            Property.

           

          “Hazardous
            Material”shall
            mean and include any hazardous, toxic or dangerous waste, substance or
            material
            defined as such in, or for purposes of, any Environmental Law(s).

           

          “Improvements”shall
            mean any buildings, structures or other permanent improvements to or
            located on
            any of the Land.

           

          “Indebtedness”shall
            mean all loans, advances, indebtedness, obligations and liabilities of
            any Loan
            Party to Bank under any Loan Document, together with all other indebtedness,
            obligations and liabilities whatsoever of any Borrower to Bank, whether
            matured
            or unmatured, liquidated or unliquidated, direct or indirect, absolute
            or
            contingent, joint or several, due or to become due, now existing or hereafter
            arising, voluntary or involuntary, known or unknown, or originally payable
            to
            Bank or to a third party and subsequently acquired by Bank including,
            without
            limitation, any late charges, loan fees or charges, overdraft indebtedness,
            costs incurred by Bank in establishing, determining, continuing or defending
            the
            validity or priority of any Lien or in pursuing any of its rights or
            remedies
            under any Loan Document or in connection with any proceeding involving
            Bank as a
            result of any financial accommodation to any Borrower; debts, obligations
            and
            liabilities for which any Borrower would otherwise be liable to the Bank
            were it
            not for the invalidity or enforceability of them by reason of any bankruptcy,
            insolvency or other law or for any other reason, and reasonable costs
            and
            expenses of attorneys and paralegals, whether any suit or other action
            is
            instituted, and to court costs if suit or action is instituted, and whether
            any
            such fees, costs or expenses are incurred at the trial court level or
            on appeal,
            in bankruptcy, in administrative proceedings, in probate proceedings
            or
            otherwise; provided that the term Indebtedness shall not include any
            consumer
            loan to the extent treatment of such loan as part of the Indebtedness
            would
            violate any Governmental Requirement.

           

          “Initial
            Advance”shall
            mean the Advance to be made at the time Borrowers satisfy the conditions
            set
            forth in Section
            2.13
            of
Addendum
            2.

           

          "Inspecting
            Person"
            means a
            person designated by Bank from time to time who may inspect the Calera
            Court
            Houses from time to time for the sole benefit of Bank.

           

          “Land”shall
            mean the tracts of real property owned by any Loan Party, whether designated
            as
            Primary Collateral, Other Collateral or a Related Party Asset.

           

          "LC
            Collateral" has
            the
            meaning ascribed to such term in Section
            3.6(a)
            of
Addendum
            2
            hereof.

           

          “Leases”
            shall
            mean all written leases or rental agreements, if any, by which any Borrower,
            as
            landlord, grants to a tenant a leasehold interest in all or any portion
            of the
            Land or Improvements. 

           

          "Letter
            of Credit" shall
            mean a letter of credit issued by the Bank for the account of and/or
            upon the
            application of any Loan Party in accordance with this Agreement, as such
            Letter
            of Credit may be amended, supplemented, extended or confirmed from time
            to
            time.

           

          "Letter
            of Credit Liabilities"
            shall
            mean, at any time and in respect of all Letters of Credit, the sum of
            (a) the
            aggregate amount available to be drawn under all such Letters of Credit
            plus (b)
            the aggregate unpaid amount of all Matured L/C Obligations then due and
            payable
            in respect of previous drawings under such Letters of Credit.

           

          “Lien”shall
            mean any valid and enforceable interest in any property, whether real,
            personal
            or mixed, securing an indebtedness, obligation or liability owed to or
            claimed
            by any Person other than the owner of such property, whether such indebtedness
            is based on the common law or any statute or contract and including,
            but not
            limited to, a security interest, pledge, mortgage, assignment, conditional
            sale,
            trust receipt, lease, consignment or bailment for security
            purposes.

           

          “Loan”shall
            mean the Loan made, or to be made, by Bank to or for the credit of Borrowers
            in
            one or more Advances not to exceed at any one time the Maximum Loan Amount,
            pursuant to the Loan Terms, Conditions and Procedures Addendum.

           

          “Loan
            Documents”shall
            mean collectively, this Agreement, the Note, the Deeds of Trust, the
            Security
            Agreements, the Financing Statements, any reimbursement agreement or
            other
            documentation executed in connection with any Letter of Credit, and any
            other
            documents, instruments or agreements evidencing, governing, securing,
            guaranteeing or otherwise relating to or executed pursuant to or in connection
            with any of the Indebtedness or any Loan Document (whether executed and
            delivered prior to, concurrently with or subsequent to this Agreement),
            as such
            documents may have been or may hereafter be amended from time to
            time.

           

          “Loan
            Party”shall
            mean each Borrower, each of their respective Subsidiaries (whether or
            not a
            party to any Loan Document) and each other Person who or which shall
            be liable
            for the payment or performance of all or any portion of the Indebtedness
            or who
            or which shall own any property that is subject to (or purported to be
            subject
            to) a Lien which secures all or any portion of the Indebtedness.

           

          “Material
            Adverse Effect”shall
            mean any act, event, condition or circumstance which could be expected
            to
            materially and adversely affect the business, operations, condition (financial
            or otherwise), performance or assets of any Loan Party, the ability of
            any Loan
            Party to perform its obligations under any Loan Document to which it
            is a party
            or by which it is bound or the enforceability of any Loan Document.

           

          “Material
            Litigation”shall
            mean any existing or threatened action, suit or litigation reported or
            required
            by applicable law to be reported by Stratus in any filing with the Securities
            and Exchange Commission and any other action, suit, litigation or proceeding,
            at
            law or in equity, or before any arbitrator or by or before any Governmental
            Authority, pending, or, to the best knowledge of any Borrower, threatened
            against or affecting any Loan Party, which has a reasonable prospect
            of adverse
            determination and, if adversely determined, could reasonably be expected
            to
            materially impair the right of the Loan Party to carry on its business
            substantially as now conducted or could have a Material Adverse
            Effect.

           

          "Matured
            L/C Obligations"
            shall
            mean, at any time and in respect of all Letters of Credit, all amounts
            paid by
            Bank on drafts or demands for payment drawn or made under as purported
            to be
            under any Letter of Credit, and all other amounts due and owing to Bank
            under
            any application by any Loan Party for any Letter of Credit to be issued
            by Bank
            (a “LC
            Application”),
            to
            the extent the same have not been repaid to Bank (with the proceeds of
            an
            Advance or otherwise).

           

          “Maturity
            Date”shall
            mean May 30, 2007, or such earlier date on which the entire unpaid principal
            amount of the Loan becomes due and payable whether by the lapse of time,
            acceleration or otherwise; provided, however, if any such date is not
            a Business
            Day, then the Maturity Date shall be the next succeeding Business
            Day.

           

          “Maximum
            Lawful Rate”shall
            mean the maximum lawful rate of interest which may be contracted for,
            charged,
            taken, received or reserved by Bank in accordance with the applicable
            laws of
            the State of Texas (or applicable United States federal law to the extent
            that
            it permits Bank to contract for, charge, take, receive or reserve a greater
            amount of interest than under Texas law), taking into account all Charges
            (defined
            as all fees, charges and/or any other things of value, if any, contracted
            for,
            charged, received, taken or reserved by Bank in connection with the transactions
            relating to the Note and the other Loan Documents, which are treated
            as interest
            under applicable law) made in connection with the transaction evidenced
            by the
            Note and the other Loan Documents. To the extent that Bank is relying
            on Chapter
            303 of the Texas Finance Code to determine the Maximum Lawful Rate payable
            on
            the Indebtedness, Bank will utilize the weekly ceiling from time to time
            in
            effect as provided in such Chapter 303. To the extent United States federal
            law
            permits Bank to contract for, charge, take, receive or reserve a greater
            amount
            of interest than under Texas law, Bank will rely on United States federal
            law
            instead of such Chapter 303 for the purpose of determining the Maximum
            Lawful
            Rate. Additionally, to the extent permitted by applicable law, Bank may,
            at its
            option and from time to time, utilize any other method of establishing
            the
            Maximum Lawful Rate under such Chapter 303 or under other applicable
            law by
            giving notice, if required, to Borrower as provided by applicable
            law.

           

          “Maximum
            Loan Amount”
            shall
            mean the lesser of (a) $45,000,000 or (b) the Borrowing Base
            Limitation.

           

          “Mortgaged
            Property”shall
            mean the Land, Improvements, MUD Reimbursables, Credit Banks, Stratus’ ownership
            interests, direct or indirect, in all Related Parties, and all other
            property,
            assets and rights in which a Lien or other encumbrance in favor of or
            for the
            benefit of Bank is or has been granted or arises or has arisen, or may
            hereafter
            be granted or arise, under or in connection with any Loan Document, or
            otherwise, including all other property, assets and rights in which any
            Borrower
            obtains an ownership interest, directly or indirectly, with proceeds
            of the
            Loan.

           

          “MUD
            Reimbursables”
            shall
            mean those reimbursements due to any one or more of the Borrowers from
            the
            Municipal Utility Districts, including, but not limited to, those payments
            due
            to one or more of the Borrowers from the City of Austin, as more fully
            identified in Exhibit
            D
            attached
            hereto.

           

          "MUD
            Reimbursables Value"
            means
            the present discounted value of the MUD Reimbursables owned by Borrower,
            using a
            discount factor of six percent (6%). As of June 30, 2005, it is estimated
            that
            the MUD Reimbursables Value is approximately $21,351,333.

           

          "Net
            Proceeds"
            means
            the gross sales proceeds received from the sale of an asset of any Borrower
            or
            any Related Party which is collateral for the Loan, less only reasonable
            closing
            costs, surveying costs, title insurance premiums, reasonable attorneys’ fees and
            a broker’s commission not to exceed six percent (6.0%), with aggregate
            deductions not to exceed eight percent (8%) of the gross sales price
            of such
            asset. 

           

          “Note”shall
            mean the Revolving Promissory Note of even date herewith in the original
            principal amount of $45,000,000.00 made by Borrowers payable to the order
            of the
            Bank, as the same may be renewed, extended, modified, increased or restated
            from
            time to time. 

           

          “Other
            Collateral”
            shall
            mean the tracts of Land listed on Exhibit
            B,
            attached hereto, and no other part or portion of the Mortgaged
            Property.

           

          “PBGC”shall
            mean the Pension Benefit Guaranty Corporation, or any Person succeeding
            to the
            present powers and functions of the Pension Benefit Guaranty
            Corporation.

           

          “Pension
            Plan(s)”shall
            mean any and all employee benefit pension plans of Borrower and/or any
            of its
            Subsidiaries in effect from time to time, as such term is defined in
            ERISA.

           

          “Permitted
            Disposition”
            shall
            mean (i) a transfer of a beneficial interest in any Borrower or any entity
            holding a direct or indirect interest in any Borrower by any person or
            entity
            holding such an interest to any other person or entity holding such an
            interest
            as of the date of this Agreement (the “Interest
            Holders”);
            (ii)
            any transfer of a legal or beneficial interest in any publicly-traded
            stock of
            Stratus; or (iii) a transfer of a legal or beneficial interest in any
            Borrower
            or any entity holding a direct or indirect interest in any Borrower for
            bona
            fide estate planning purposes to: (A) members of such transferor’s immediate
            family or (B) a trust, the holders of the beneficial interests of which
            are a
            current Interest Holder or a member of the Interest Holder’s immediate family;
            provided, however, that a Permitted Disposition shall not include any
            transfer
            or series of transfers which (1) after taking into account any prior
            Permitted
            Disposition shall result in (x) the proposed transferee owning (directly
            or
            indirectly) more than 49% of the interests in any Borrower or any entity
            holding
            a direct or indirect interest in any Borrower unless such transferee
            owned more
            than 49% of such interests as of the date of this Agreement, or (y) a
            transfer
            of more than 49% of the interests in any Borrower or any entity holding
            a direct
            or indirect interest in any Borrower; (2) shall result in a change of
            control of
            any Borrower or the day to day operations of the Mortgaged Property;
            (3) notice
            of which has not been given by Borrower to Bank, together with copies
            of all
            instruments effecting such transfer later than seven (7) Business Days
            prior to
            the effective date of such transfer (except notice shall not be required
            with
            respect to any stock of any Borrower publicly traded on a national stock
            exchange); or (4) occurs at any time when an Event of Default has occurred
            and
            remains uncured (except with respect to any stock of any Borrower publicly
            traded on a national stock exchange). For the purposes of Permitted
            Dispositions, a change of control of any Borrower or any entity holding
            a direct
            or indirect interest in any Borrower shall be deemed to have occurred
            if there
            is any change in the identity of the individual or group of individuals
            who have
            the right, by virtue of the articles of incorporation, articles of organization,
            the by-laws or an agreement, with or without taking any formative action,
            to
            cause such Borrower or such entity to take some action or to block such
            Borrower
            or such entity from taking some action which, in either case, such Borrower
            or
            such entity could take or could refrain from taking were it not for the
            rights
            of such stockholders, partners or members of such Borrower or such entity,
            as
            the case may be.

           

          “Permitted
            Encumbrances”
            shall
            mean Liens in favor of the Bank, all matters shown on Schedule B of the
            Title
            Policy, Liens for taxes not yet due and payable, Liens not delinquent
            arising in
            the ordinary course of business and created by statute in connection
            with
            worker’s compensation, unemployment insurance, social security and similar
            statutory obligations, and Contested Items.

           

          “Person”or
            “person”shall
            mean any individual, corporation, partnership, joint venture, limited
            liability
            company, association, trust, unincorporated association, joint stock
            company,
            government, municipality, political subdivision or agency, or other
            entity.

           

          "Plans"
            means
            the plans and specifications for the construction of each House, prepared
            by
            Borrower or a design professional and approved by Bank as required herein,
            by
            all applicable Governmental Authorities, and by any party to a purchase
            or
            construction contract with a right of approval, and all amendments and
            modifications thereof approved in writing by the same.

           

          “Primary
            Collateral”shall
            mean the tracts of Land listed on Exhibit
            A,
            attached hereto, and no other part or portion of the Mortgaged Property;
            provided, however, the Primary Collateral may be expanded by adding additional
            collateral to Exhibit
            A
            and
            obtaining an Appraisal, an environmental audit, Title Policy and other
            documents
            that may be required by Bank with respect to such additional collateral.
            

           

          “Related
            Party”shall
            mean any corporation, partnership, limited liability company or any other
            legal
            entity in which Stratus owns or holds, directly or indirectly, any legal
            or
            beneficial ownership interest.

           

          “Related
            Party Assets”
            shall
            mean the assets owned by the Borrower which may be transferred to the
            Related
            Parties from time to time.

           

          “Release
            Provisions”shall
            mean the provisions set forth on Addendum
            3
            attached
            hereto.

           

          “Request
            for Advance”
            shall
            mean an oral or written request or authorization for an Advance of Loan
            proceeds
            which, if made in writing, shall be in the form annexed hereto as Exhibit
            E,
            or in
            such other form as is acceptable to Bank.

           

          "Sales
            Contracts"
            means
            all contracts relating to the sale of Calera Court Houses, including
            all
            Approved Sales Contracts.

           

          “Section
            2.17 Assets”
            shall
            have the meaning given to the term in Section
            2.17
            of
Addendum
            2.

           

          “Security
            Agreement”
            means,
            collectively, all security agreements executed by Borrowers in favor
            of Bank
            pursuant to which Borrowers grant a security interest in certain personal
            property of Borrowers to Bank.

           

          “Special
            Account”
            means
            the account styled "Stratus Properties Inc. Controlled Disbursement Account",
            Account No. 1880671001, or any successor account.

           

          “Subsidiary”
            shall
            mean as to any particular parent entity, any corporation, partnership,
            limited
            liability company or other entity (whether now existing or hereafter
            organized
            or acquired) in which more than fifty percent (50%) of the outstanding
            equity
            ownership interests having voting rights as of any applicable date of
            determination, shall be owned directly, or indirectly through one or
            more
            Subsidiaries, by such parent entity.

           

          “Surveys”shall
            mean a survey of each tract of the Primary Collateral in form and content
            reasonably satisfactory and acceptable to the Bank and sufficient to
            allow the
            Title Company to endorse the standard survey exception in the Title Policy
            to
“shortages in area” only.

           

          "Tangible
            Net Worth"
            shall
            mean, with respect to any Person and as of any applicable date of determination,
            (a) the net book value of all assets of such Person (excluding Affiliate
            Receivables, patent rights, trademarks, trade names, franchises, copyrights,
            licenses, goodwill, and all other intangible assets of such Person),
            after all
            appropriate deductions in accordance with GAAP (including, without limitation,
            reserves for doubtful receivables, obsolescence, depreciation and amortization),
            less (b) all Debt of such Person at such time.

           

          “Telephone
            Notice Authorization”shall
            mean an agreement in form satisfactory to Bank authorizing telephonic
            and
            facsimile notices of borrowing and establishing a codeword system of
            identification in connection therewith.

           

          “Title
            Company”shall
            mean the Title Company (and its issuing agent, inapplicable) issuing
            the Title
            Policy, which shall be acceptable to Bank in its sole and absolute
            discretion.

           

          “Title
            Policy”shall
            mean the mortgagee policy of title insurance issued by the Title Company,
            on a
            coinsurance or reinsurance basis (with direct access endorsement or rights)
            if
            and as required by Bank, in the aggregate maximum amount of $45,000,000.00
            insuring that the Deeds of Trust covering the Primary Collateral constitute
            valid liens covering the Primary Collateral subject only to those exceptions
            which Bank may approve and containing such endorsements as Bank may
            require. 

           

          “UCC”shall
            mean the Uniform Commercial Code as adopted and in force in the State
            in which
            the Land is located, as amended.

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          ADDENDUM
            2

           

          LOAN
            TERMS, CONDITIONS AND PROCEDURES ADDENDUM

           

          
            	SECTION
                    1.  	
                    THE
                      LOAN

                  

          

           

          1.1  Agreements
            to Lend.
            Bank
            hereby agrees to lend to Borrowers up to but not in excess of the Maximum
            Loan
            Amount, and Borrowers hereby agree to borrow such sums from Bank, all
            upon and
            subject to the terms and provisions of this Agreement, such sums to be
            evidenced
            by the Note; provided, however, in no event shall the aggregate outstanding
            principal balance of the Loan and any Letters of Credit exceed the Maximum
            Loan
            Amount. Subject to the terms and provisions of this Agreement and the
            other Loan
            Documents, principal repaid on the Loan may be reborrowed by Borrowers.
            Borrowers’ liability for repayment of the interest on account of the Loan shall
            be limited to and calculated with respect to Loan proceeds actually disbursed
            to
            Borrowers pursuant to the terms of this Agreement and the Note and only
            from the
            date or dates of such disbursements. Bank may, in Bank’s discretion, disburse
            Loan proceeds by journal entry to pay interest and financing costs and
            disburse
            Loan proceeds directly to third parties to pay costs or expenses required
            to be
            paid by Borrowers pursuant to this Agreement. Loan proceeds disbursed
            by Bank by
            journal entry to pay interest or financing costs, and Loan proceeds disbursed
            directly by Bank to pay costs or expenses required to be paid by Borrowers
            pursuant to this Agreement, shall constitute Advances to Borrowers.

           

          1.2  Advances.
            The
            proceeds of the Loan shall be disbursed to Borrowers in one or more Advances
            provided all applicable conditions to Advances for the Loan set forth
            in this
            Agreement have been satisfied. Without limiting the foregoing, any Advance
            requested by Borrower under the Loans shall be subject to Borrower’s
            satisfaction of the terms and conditions set forth in this Addendum
            2
            (including, if applicable, Section
            2.17
            (Additional Land Acquisitions)) and in particular shall comply with the
            use of
            proceeds restrictions set forth in Section
            2.4
            below.
            The Initial Advance shall be used to repay all indebtedness outstanding
            under
            the Original Credit Agreement on the date of this Agreement. 

           

          1.3  Limitation
            on Advances.
            Under
            no circumstances shall Bank be required to disburse any proceeds of the
            Note
            that would cause the outstanding balance thereof plus the Letter of Credit
            Liabilities at any one time to exceed the Maximum Loan Amount or disburse
            any
            proceeds of the Loan that would cause the aggregate outstanding balance
            of the
            Loan plus the Letter of Credit Liabilities at any one time to exceed
            the Maximum
            Loan Amount.

           

          1.4  Regulatory
            Restrictions.
            Notwithstanding anything in this Agreement or the other Loan Documents
            to the
            contrary, in no event shall Bank be required to disburse, nor shall Borrowers
            be
            entitled to demand that Bank disburse, all or any portion of the Loan
            if the
            amounts of the Loan would, in Bank’s sole and absolute discretion, cause Bank to
            exceed the lending limit to a single borrower under any applicable state
            or
            federal law, regulation or ruling. If Bank determines, in its sole and
            absolute
            discretion, at any time (including after any portion or all of the Loan
            has been
            disbursed) that the transactions evidenced by this Agreement and the
            other Loan
            Documents violates such lending limit restriction, then Bank shall have
            the
            right to immediately declare the Note to be due and payable and shall
            thereafter
            have no further obligations to disburse any further proceeds of the Loan.
            In
            such event, Borrowers shall be required to immediately pay all outstanding
            Indebtedness and shall have no further rights and privileges under this
            Agreement and the other Loan Documents.

           

          1.5  Repayment
            of and Interest on Loan.
            The
            Indebtedness from time to time outstanding under and evidenced by the
            Note shall
            bear interest at the applicable rate per annum set forth in the Note
            until the
            occurrence of an Event of Default and thereafter at the Default Rate
            and shall
            otherwise be repaid in accordance with the terms of the respective Note.
            All
            unpaid principal, accrued and unpaid interest and other amounts owing
            under the
            Note shall be due and payable on the Maturity Date. The Bank shall review
            the
            Loan each year as of the date which is twelve (12) months prior to the
            then
            Maturity Date (the "Review
            Date"),
            as
            the Maturity Date may be extended from time to time. In connection with
            such
            review, Bank will notify Borrower on or about the Review Date of whether
            the
            Bank will agree to extend the Maturity Date. The determination of whether
            to
            grant a particular 12 month extension option of the Maturity Date hereunder
            shall be in Bank's sole discretion. In the event that Bank elects to
            so grant an
            option to Borrower to extend the Maturity Date and Borrower exercises
            such
            option, then at Bank's option, Borrowers shall (i) execute an extension
            agreement in form and substance reasonably acceptable to Bank evidencing
            such
            extension, and (ii) provide an endorsement to the Title Policy in connection
            with such extension.

           

          1.6  Fees.

           

          (a)  Commitment
            Fee.
            Borrowers shall pay the Commitment Fee to Bank upon the execution of
            this
            Agreement and the closing of the Loan as consideration for the increase
            in the
            amount of the Loan from the amount previously committed by Bank in the
            Original
            Credit Agreement.

           

          (b)  Unused
            Commitment Fee.
            Borrowers shall pay to Bank an unused commitment fee in an amount equal
            to the
            product of (a) one-eighth of one percent (.125%) per annum multiplied
            by (b) the
            difference between (i) the Maximum Loan Amount and (ii) the aggregate
            outstanding principal balance of the Loan. Such fee shall be computed
            on a daily
            basis and shall be payable quarterly in arrears as of the end of each
            of
            Borrower's fiscal quarters. Bank shall invoice Borrower for such fees,
            which
            invoice shall be due and payable within fifteen (15) days after
            receipt.

           

          (c)  Administration
            Fee.
            Borrowers shall pay an annual upfront administration fee to Bank in the
            amount
            of $15,000, which fee shall be due and payable on the date of this Agreement
            and
            on each anniversary date hereof; provided that the administration fee
            due and
            payable on the date hereof shall be prorated based on the number of months
            remaining until the Review Date (i.e., the administration fee due on
            the date
            hereof shall be $10,000).

           

          (d)  Extension
            Fee.
            In the
            event that Borrower exercises an extension option granted by Bank to
            extend the
            Maturity Date (it being acknowledged that Bank has no obligation to grant
            an
            extension option), Borrowers shall pay an extension fee (an "Extension
            Fee")
            in
            amount equal to one-fourth of one percent (.25%) of the Maximum Loan
            Amount on a
            per annum basis for such extension.

           

          
            	SECTION
                    2.  	
                    ADVANCES,
                      PAYMENTS, RECOVERIES AND
                      COLLECTIONS

                  

          

           

          2.1  Advance
            Procedure.
            Except
            as hereinafter provided, Borrowers may request an Advance by submitting
            to Bank
            a Request for Advance by an authorized representative of Borrowers, subject
            to
            the following:

           

          (a)  each
            such
            Request for Advance shall include, without limitation, a report setting
            forth
            the then current Borrowing Base Limitation substantially in the format
            attached
            hereto as Exhibit
            C,
            the
            proposed amount of such Advance and the proposed Disbursement Date, which
            date
            must be a Business Day;

           

          (b)  a
            Request
            for Advance, once communicated to Bank, shall not be revocable by
            Borrowers;

           

          (c)  each
            Request for Advance, once communicated to Bank, shall constitute a
            representation, warranty and certification by Borrowers as of the date
            thereof
            that:

           

          (i)  both
            before and after the making of such Advance, all of the Loan Documents
            are and
            shall be valid, binding and enforceable against each Loan Party, as
            applicable;

           

          (ii)  all
            terms
            and conditions precedent to the making of such Advance have been satisfied,
            and
            shall remain satisfied through the date of such Advance;

           

          (iii)  the
            making of such Advance will not cause the aggregate principal amount
            outstanding
            on the Note plus the Letter of Credit Liabilities to exceed the Maximum
            Loan
            Amount;

           

          (iv)  no
            Default or Event of Default shall have occurred or be in existence, and
            none
            will exist or arise upon the making of such Advance;

           

          (v)  the
            representations and warranties contained in this Agreement, and the other
            Loan
            Documents are true and correct in all material respects and shall be
            true and
            correct in all material respects as of the making of such Advance;
            and

           

          (vi)  the
            Advance will not violate the terms or conditions of any contract, indenture,
            agreement or other borrowing of any Loan Party.

           

          Bank
            may
            elect (but without any obligation to do so) to make an Advance upon the
            telephonic or facsimile request of Borrowers, provided that Borrowers
            have first
            executed and delivered to Bank a Telephone Notice Authorization. If any
            such
            Advance based upon a telephonic or facsimile request is made by Borrowers,
            Bank
            may require Borrowers to confirm said telephonic or facsimile request
            in writing
            by delivering to Bank, on or before 11:00 a.m. (Dallas, Texas time) on
            the next
            Business Day following the Disbursement Date of such Advance, a duly
            executed
            written Request for Advance, and all other provisions of this Section
            2.1
            shall be
            applicable with respect to such Advance. In addition, Borrowers may authorize
            the Bank to automatically make Advances pursuant to such other written
            agreements as may be entered into by Bank and Borrowers. Except as set
            forth in
            this Agreement, all Advances are to be made by direct deposit into the
            Special
            Account.

           

          2.2  Voluntary
            Prepayment.
            Borrowers may prepay all or part of the outstanding balance under the
            Note
            (subject to the provisions of the Note regarding a prepayment prior to
            the
            expiration of the applicable Interest Period for a LIBOR Rate Tranche)
            at any
            time, without premium, penalty or prejudice to the right of Borrowers
            to
            reborrow sums of the Loan under the terms of this Agreement, subject
            to the
            terms and conditions of the Loan Documents.

           

          2.3  Maximum
            Loan Amount and Reduction of Indebtedness.
            Notwithstanding anything contained in this Agreement to the contrary,
            the
            principal amount of the Loan at any time outstanding plus the Letter
            of Credit
            Liabilities shall not exceed the Maximum Loan Amount. If said limitation
            is
            exceeded at anytime, Borrowers shall immediately, without demand by Bank,
            pay to
            Bank an amount not less than such excess, or, if Bank, in its sole discretion,
            shall so agree, Borrowers shall provide Bank cash collateral in an amount
            not
            less than such excess, and Borrowers hereby pledge and grant to Bank
            a security
            interest in such cash collateral so provided to Bank.

           

          2.4  Use
            of
            Proceeds of Loan.
            The
            proceeds of the Loan shall be used to fund equity contributions for development
            ventures of Borrower, for pre-development and development costs for the
            Land,
            such as earnest money deposits, and property improvements in connection
            with the
            Land and other working capital needs of Borrowers, including corporate
            and
            project general, administrative and operating costs, stock repurchase
            costs (not
            to exceed $6,500,000 in the aggregate during the term of the Loan), pursuit
            costs, entitlement costs, taxes, business endeavors associated with the
            development of commercial and residential real properties, and for land
            acquisitions in accordance with the terms of Section
            2.17
            of this
            Addendum.

           

          2.5  Non-Application
            of Chapter 346 of Texas Finance Code.
            The
            provisions of Chapter 346 of the Texas Finance Code are specifically
            declared by
            the parties not to be applicable to any of the Loan Documents or the
            transactions contemplated thereby.

           

          2.6  Place
            of Advances.
            All
            Advances are to be made at the office of Bank, or at such other place
            as Bank
            may designate.

           

          2.7  Bank’s
            Books and Records.
            The
            amount and date of each Advance hereunder, the amount from time to time
            outstanding under the Note, the interest rate in respect of the Loan,
            and the
            amount and date of any repayment hereunder or under the Note, shall be
            noted on
            Bank’s books and records, which shall be conclusive evidence thereof, absent
            manifest error; provided, however, any failure by Bank to make any such
            notation, or any error in any such notation, shall not relieve Borrowers
            of
            their obligations to pay to Bank all amounts owing to Bank under or pursuant
            to
            the Loan Documents, in each case, when due in accordance with the terms
            hereof
            or thereof.

           

          2.8  Payments
            on Non-Business Day.
            In the
            event that any payment of any principal, interest, fees or any other
            amounts
            payable by Borrowers under or pursuant to any Loan Document shall become
            due on
            any day which is not a Business Day, such due date shall be extended
            to the next
            succeeding Business Day, and, to the extent applicable, interest shall
            continue
            to accrue and be payable at the interest rate set forth in the applicable
            Note
            for and during any such extension.

           

          2.9  Payment
            Procedures.
            Unless
            otherwise expressly provided in a Loan Document, all sums payable by
            Borrowers
            to Bank under or pursuant to any Loan Document, whether principal, interest,
            or
            otherwise, shall be paid, when due, directly to Bank at the office of
            Bank
            identified on the signature page of this Agreement, or at such other
            office of
            Bank as Bank may designate in writing to Borrowers from time to time,
            in
            immediately available United States funds, and without setoff, deduction
            or
            counterclaim. Bank may, in its discretion, charge any and all deposit
            or other
            accounts (including, without limitation, any account evidenced by a certificate
            of deposit or time deposit) of any Borrower maintained with Bank for
            all or any
            part of any Indebtedness which is not paid when due and payable; provided,
            however, that such authorization shall not affect any Borrower’s obligations to
            pay all Indebtedness, when due, whether or not any such account balances
            maintained by such Borrower with Bank are insufficient to pay any amounts
            then
            due.

           

          2.10  Maximum
            Interest Rate.
            It is
            expressly stipulated and agreed to be the intent of Borrower and Bank
            at all
            times to comply strictly with the applicable Texas law governing the
            maximum
            rate or amount of interest payable on the Indebtedness (or applicable
            United
            States federal law to the extent that it permits Bank to contract for,
            charge,
            take, reserve or receive a greater amount of interest than under Texas
            law). If
            the applicable law is ever judicially interpreted so as to render usurious
            any
            amount (i) contracted for, charged, taken, reserved or received pursuant
            to the
            Note, any of the other Loan Documents or any other communication or writing
            by
            or between Borrower and Bank related to any of the Indebtedness, (ii)
            contracted
            for, charged or received by reason of Bank’s exercise of the option to
            accelerate the maturity of the Note and/or any other portion of the
            Indebtedness, or (iii) Borrower will have paid or Bank will have received
            by
            reason of any voluntary prepayment by Borrower of the Note and/or any
            of the
            other Indebtedness, then it is Borrower’s and Bank’s express intent that all
            amounts charged in excess of the Maximum Lawful Rate shall be automatically
            canceled, ab initio, and all amounts in excess of the Maximum Lawful
            Rate
            theretofore collected by Bank shall be credited on the principal balance
            of the
            Note and/or any of the other Indebtedness evidenced by the Loan Documents
            (or,
            if the Note and all other Indebtedness evidenced by the Loan Documents
            have been
            or would thereby be paid in full, refunded to Borrower), and the provisions
            of
            the Note and the other Loan Documents immediately be deemed reformed
            and the
            amounts thereafter collectible hereunder and thereunder reduced, without
            the
            necessity of the execution of any new document, so as to comply with
            the
            applicable law, but so as to permit the recovery of the fullest amount
            otherwise
            called for hereunder and thereunder; provided, however, if the Note has
            been
            paid in full before the end of the stated term of the Note, then Borrower
            and
            Bank agree that Bank shall, with reasonable promptness after Bank discovers
            or
            is advised by Borrower that interest was received in an amount in excess
            of the
            Maximum Lawful Rate, either refund such excess interest to Borrower and/or
            credit such excess interest against any other Indebtedness then owing
            by
            Borrower to Bank. Borrower hereby agrees that as a condition precedent
            to any
            claim seeking usury penalties against Bank, Borrower will provide written
            notice
            to Bank, advising Bank in reasonable detail of the nature and amount
            of the
            violation, and Bank shall have sixty (60) days after receipt of such
            notice in
            which to correct such usury violation, if any, by either refunding such
            excess
            interest to Borrower or crediting such excess interest against the Note
            and/or
            other Indebtedness then owing by Borrower to Bank. All sums contracted
            for,
            charged or received by Bank for the use, forbearance or detention of
            any of the
            Indebtedness, including any portion of the debt evidenced by the Note
            shall, to
            the extent permitted by applicable law, be amortized or spread, using
            the
            actuarial method, throughout the stated term of the Note and/or other
            Indebtedness (including any and all renewal and extension periods) until
            payment
            in full so that the rate or amount of interest on account of the Note
            and/or
            other Indebtedness does not exceed the Maximum Lawful Rate from time
            to time in
            effect and applicable to the Note and/or the other Indebtedness for so
            long as
            any Indebtedness is outstanding.

           

          In
            no
            event shall the provisions of Chapter 346 of the Texas Finance Code (which
            regulates certain revolving credit loan accounts and revolving triparty
            accounts) apply to the Note and/or any of the other Indebtedness.
            Notwithstanding anything to the contrary contained herein or in any of
            the other
            Loan Document it is not the intention of Bank to accelerate the maturity
            of any
            interest that has not accrued at the time of such acceleration or to
            collect
            unearned interest at the time of such acceleration.

           

          2.11  Receipt
            of Payments by Bank.
            Any
            payment by Borrowers of any of the Indebtedness made by mail will be
            deemed
            tendered and received by Bank only upon actual receipt thereof by Bank
            at the
            address designated for such payment, whether or not Bank has authorized
            payment
            by mail or in any other manner, and such payment shall not be deemed
            to have
            been made in a timely manner unless actually received by Bank on or before
            the
            date due for such payment, time being of the essence. Borrowers expressly
            assume
            all risks of loss or liability resulting from non-delivery or delay of
            delivery
            of any item of payment transmitted by mail or in any other manner. Acceptance
            by
            Bank of any payment in an amount less than the amount then due shall
            be deemed
            an acceptance on account only, and any failure to pay the entire amount
            then due
            shall constitute and continue to be an Event of Default hereunder. Bank
            shall be
            entitled to exercise any and all rights and remedies conferred upon and
            otherwise available to Bank under any Loan Document upon the occurrence
            and
            during the continuance of any such Event of Default. Borrower further
            agrees
            that after the occurrence and during the continuance of any Default Bank
            shall
            have the continuing exclusive right to apply and to reapply any and all
            payments
            received by Bank at any time or times, whether as voluntary payments,
            proceeds
            from any Mortgaged Property, offsets, or otherwise, against the Indebtedness
            in
            such order and in such manner as Bank may, in its sole discretion, deem
            advisable, notwithstanding any entry by Bank upon any of its books and
            records.
            Borrowers hereby expressly agree that, to the extent that Bank receives
            any
            payment or benefit of or otherwise upon any of the Indebtedness, and
            such
            payment or benefit, or any part thereof, is subsequently invalidated,
            declared
            to be fraudulent or preferential, set aside, or required to be repaid
            to a
            trustee, receiver, or any other Person under any bankruptcy act, state
            or
            federal law, common law, equitable cause or otherwise, then to the extent
            of
            such payment or benefit, the Indebtedness, or part thereof, intended
            to be
            satisfied shall be revived and continued in full force and effect as
            if such
            payment or benefit had not been made or received by Bank, and, further,
            any such
            repayment by Bank shall be added to and be deemed to be additional
            Indebtedness.

           

          2.12  Security.
            Payment
            and performance of the Indebtedness shall be secured by Liens on the
            assets,
            other collateral and properties of Borrowers and of such other Loan Parties
            as
            Bank may require from time to time, except that any projects owned by
            Subsidiaries of Borrowers which are financed with project-related debt
            (and not
            financed with proceeds of the Loan) shall not be security for the Loan,
            provided
            that with respect to any of the Mortgaged Property which is collateral
            for the
            Loan, the required Partial Release Price is paid to Bank pursuant to
            Addendum
            3
            hereof
            to obtain a release of such Mortgaged Property in connection with the
            commencement of any such project.

           

          2.13  Conditions
            Precedent to the Initial Advance.
            The
            obligation of the Bank to make the Initial Advance on the Loan pursuant
            to this
            Agreement shall be subject to the satisfaction of all of conditions precedent
            set forth in this Section. In the event that any condition precedent
            is not so
            satisfied but Bank elects to make the Initial Advance on the Loan
            notwithstanding the same, such election shall not constitute a waiver
            of such
            condition and the condition shall be satisfied prior to any subsequent
            Advance.

           

          (a)  All
            of
            the Loan Documents shall be in full force and effect and binding and
            enforceable
            obligations of Borrowers and, to the extent that it is a party thereto
            or
            otherwise bound thereby, of each other Person who may be a party thereto
            or
            bound thereby.

           

          (b)  All
            actions, proceedings, instruments and documents required to carry out
            the
            borrowings and transactions contemplated by this Agreement or any other
            Loan
            Document or incidental thereto, and all other related legal matters,
            shall have
            been satisfactory to and approved by legal counsel for Bank, and said
            counsel
            shall have been furnished with such certified copies of actions and proceedings
            and such other instruments and documents as they shall have
            requested.

           

          (c)  Each
            Loan
            Party shall have performed and complied with all agreements and conditions
            contained in the Loan Documents applicable to it and which are then in
            effect.

           

          (d)  Borrowers
            shall have delivered; or caused to have been delivered, to Bank or done
            or
            caused to have been done, to Bank’s satisfaction each and every of the following
            items:

           

          (1) This
            Agreement (together with all addenda, schedules, exhibits, certificates,
            opinions, financial statements and other documents to be delivered pursuant
            hereto), the Note, the Deeds of Trust and all other Loan Documents duly
            executed, acknowledged (if required) and delivered by Borrowers and any
            Person
            who is a party thereto.

           

          (2) (i)
            Copies of resolutions of the board of directors, partners or members
            or
            managers, as applicable, of each Loan Party evidencing approval of the
            borrowing
            hereunder and the transactions contemplated by the Loan Documents, and
            authorizing the execution, delivery and performance by each Loan Party
            of each
            Loan Document to which it is a party or by which it is otherwise bound,
            which
            resolutions shall have been certified by a duly authorized officer, partner
            or
            other representative, as applicable, of each Loan Party as of the date
            of this
            Agreement as being complete, accurate and in full force and effect; (ii)
            incumbency certifications of a duly authorized officer, partner or other
            representative, as applicable, of each Loan Party, in each case, identifying
            those individuals who are authorized to execute the Loan Documents for
            and on
            behalf of such Person(s), respectively, and to otherwise act for and
            on behalf
            of such Person(s); (iii) certified copies of each of such Person(s)’ articles of
            incorporation and bylaws, partnership agreement, certificate of limited
            partnership, articles of organization, regulations or operating agreement,
            as
            applicable, and all amendments thereto; and (iv) certificates of existence,
            good
            standing and authority to do business, as applicable, certified substantially
            contemporaneously with the date of this Agreement, from the state or
            other
            jurisdiction of each of such Person(s)’ organization and from every other state
            or jurisdiction in which such Person is required, under applicable law,
            to be
            qualified to do business.

           

          (3) Proof
            that appropriate security agreements, financing statements, mortgages,
            deeds of
            trust, collateral and such additional documents or certificates as may
            be
            required by Bank and/or contemplated under the terms of any and every
            Loan
            Document, and such other documents or agreements of security and appropriate
            assurances of validity, perfection and priority of Lien as Bank may request
            shall have been executed and delivered by the appropriate Persons and
            recorded
            or filed in such jurisdictions and such other steps shall have been taken
            as
            necessary to perfect, subject only to Permitted Encumbrances, the Liens
            granted
            thereby.

           

          (4) An
            opinion of Borrowers’ legal counsels, dated as of the date of this Agreement, as
            to enforceability and authority issues and covering such other matters
            as are
            required by Bank and which are otherwise reasonably satisfactory in form
            and
            substance to Bank.

           

          (5) A
            UCC,
            tax lien and judgment lien record search, disclosing no notice of any
            Liens or
            encumbrances filed against any of the Mortgaged Property, other than
            the
            Permitted Encumbrances.

           

          (6) Evidence
            of insurance coverage as required by this Agreement and the Deeds of
            Trust.

           

          (7) The
            Title
            Policy (or the Title Company’s unconditional commitment to issue the Title
            Policy upon recordation of the Deeds of Trust).

           

          (8) An
            environmental audit report covering the Primary Collateral, in form and
            content
            and conducted and prepared by an environmental consultant reasonably
            acceptable
            to Bank. Borrowers agree that Bank may disclose the contents of such
            environmental audit report to Governmental Authorities and Borrowers
            shall
            deliver to Bank the written consent to such disclosure from the respective
            environmental consultant.

           

          (9) Evidence
            that none of the Primary Collateral is located within any designated
            flood plain
            or special flood hazard area (as may be shown on the surveys delivered
            to Bank
            or other evidence acceptable to Bank) or, in lieu thereof at Bank’s request,
            evidence that Borrowers have applied for and received flood insurance
            covering
            the insurable Improvements in the maximum coverage available to
            Bank.

           

          (10) To
            the
            extent portions of the Primary Collateral have been platted, full-size,
            single
            sheet copies of all recorded subdivision or plat maps of the Primary
            Collateral
            approved (to the extent required by Governmental Requirements) by all
            Governmental Authorities, if applicable, and legible copies of all instruments
            representing exceptions to the state of title to the Primary
            Collateral.

           

          (11) Current
            Financial Statements of Borrowers.

           

          (12) If
            requested by Bank, a soils and geological report covering the Primary
            Collateral
            issued by a laboratory approved by Bank, which report shall be reasonably
            satisfactory in form and substance to Bank, and shall include a summary
            of soils
            test borings.

           

          (e)  Bank
            shall have received payment of the Commitment Fee.

           

          (f)  Bank
            shall have received such other instruments, documents and evidence (not
            inconsistent with the terms hereof) as Bank may reasonably request in
            connection
            with the making of the Loan hereunder, and all such instruments, documents
            and
            evidence shall be satisfactory in form and substance to Bank.

           

          (g)  Upon
            making the Initial Advance on the Loan, the sum of the amount outstanding
            on the
            Loan and all Letter of Credit Liabilities shall not exceed the Maximum
            Loan
            Amount.

           

          2.14  Conditions
            to Subsequent Advances and Letters of Credit.
            Bank
            has no obligation to make any Advance on the Loan or to issue any Letter
            of
            Credit subsequent to the Initial Advance unless the following conditions
            precedent are satisfied on or before the Disbursement Date for such
            Advance:

           

          (a)  At
            Bank’s
            request, Borrower shall furnish to Bank an endorsement to the Title Policy
            (or
            if an endorsement is not available, a letter from the Title Company)
            showing
“nothing further” of record affecting the Primary Collateral from the date of
            recording of the Deeds of Trust, except such matters as Bank specifically
            approves.

           

          (b)  All
            Loan
            Documents shall be in full force and effect and binding and enforceable
            obligations of each Loan Party.

           

          (c)  Each
            of
            the representations and warranties of each Loan Party under any Loan
            Document
            shall be true and correct in all material respects.

           

          (d)  No
            Default or Event of Default shall have occurred and be continuing; there
            shall
            exist no Material Adverse Effect; and no provision of law, any order
            of any
            Governmental Authority, or any regulation, rule or interpretation thereof,
            shall
            have had any Material Adverse Effect on the validity or enforceability
            of any
            Loan Document.

           

          (e)  To
            the
            extent that any of the proceeds of the Advance are used to acquire assets,
            Borrowers shall grant a first Lien on such assets, except for office
            equipment
            such as computers and phone systems.

           

          (f)  Upon
            making the Advance on the Loan then requested, the amount outstanding
            on the
            Loan in the aggregate shall not exceed the Maximum Loan Amount.

           

          2.15  Advance
            Not A Waiver.
            No
            Advance of the proceeds of the Loan shall constitute a waiver of any
            of the
            conditions of Bank’s obligation to make further Advances, nor, in the event
            Borrowers are unable to satisfy any such condition, shall any such Advance
            have
            the effect of precluding Bank from thereafter declaring such inability
            to be an
            Event of Default.

           

          2.16  Advance
            Not An Approval.
            Bank
            shall have no obligation to make any Advance or part thereof during the
            existence of any Default or Event of Default, but shall have the right
            and
            option so to do; provided that if Bank elects to make any such Advance,
            no such
            Advance shall be deemed to be either a waiver of the right to demand
            payment of
            the Loan, or any part thereof, or an obligation to make any other
            Advance.

           

          2.17  Additional
            Land Acquisitions.
            Subject
            to the satisfaction of all conditions precedent to Advances of the Loan,
            Bank
            hereby agrees to make one or more Advances of the Loan, which Advances
            shall
            reduce the amount available to Borrower under the Loan in question, in
            an amount
            not to exceed, without prior Bank approval, (i) $3,000,000.00 at any
            one time,
            or (ii) $10,000,000.00 in the aggregate (together with all other outstanding
            Advances for land acquisitions), for the purpose of the acquisition of
            fee title
            to real property, provided that Borrower (i) provides Bank with information
            about such real property as Bank may reasonably request, (ii) executes
            and
            delivers to Bank for each acquisition a deed of trust covering the real
            property
            acquired, substantially in the form of the Deeds of Trust, granting to
            Bank a
            deed of trust first lien on such real property, which deed of trust will
            be
            cross-defaulted and cross-collateralized with the Deeds of Trust and
            other Loan
            Documents, (iii) causes the Title Company to provide Bank with a Title
            Policy
            insuring such deed of trust as a first lien on such real property and
            containing
            only such exceptions to title acceptable to Bank, and in an amount and
            otherwise
            on terms and conditions reasonably satisfactory to Bank, and (iv) executes
            and
            delivers to Bank its proposed disposition plan of such real property
            which must
            be reasonably satisfactory to Bank. Any and all real estate assets acquired
            in
            whole or part with Advances made under this Section are sometimes referred
            to as
            "Section
            2.17 Assets".
            Notwithstanding anything in this Agreement to the contrary, such Section
            2.17
            Assets shall, for purposes of this Agreement, be deemed to be included
            as
            "Other
            Collateral";
            provided, however, that such Section 2.17 Assets may be designated as
            part of
            the "Primary
            Collateral"
            by
            obtaining an Appraisal, an environmental audit, Title Policy and other
            documents
            that may be reasonably required by Bank to classify such Section 2.17
            Assets as
            "Primary Collateral". Advances under the Loan for other than the acquisitions
            of
            Section 2.17 Assets are not subject to the terms and provisions of this
            Section
            2.17.

           

          2.18  Mandatory
            Prepayments.
            Borrower shall immediately pay to Bank for application to the Loan in
            accordance
            with the terms of this Agreement and in accordance with the Release Provisions
            set forth in Addendum
            3,
            unless
            otherwise agreed by Bank in writing, the following sums: (i) one-hundred
            percent
            (100%) of the Net Proceeds received by or on behalf of any Borrower from
            the
            sale of all or any portion of the Mortgaged Property (except to the extent
            expressly set forth in Addendum
            3
            attached
            hereto) or upon the taking by condemnation of all or any portion of the
            Mortgaged Property (except to the extent expressly set forth in Addendum
            3
            attached
            hereto), (ii) one-hundred percent (100%) of the Net Proceeds of MUD
            Reimbursables, (iii) one-hundred percent (100%) of the Net Proceeds received
            upon the sale of any Section 2.17 Asset, (iv) one-hundred percent (100%)
            of the
            Net Proceeds received from any sale or transfer of any of the Credit
            Banks (but
            not any of the Credit Banks which are drawn on by Borrower to develop
            the Land)
            and (v) and one-hundred percent (100%) of the distributions received
            by any
            Borrower from any partnership or joint venture which is a Related Party
            or
            Subsidiary of any such Borrower, upon the sale by such Related Party
            or
            Subsidiary of any real property interest (“Partnership
            Distributions”).

           

          2.19  Application
            of Payments.
            So long
            as no Event of Default exists, all payments received from Borrower (including,
            without limitation, the application of Net Proceeds received from MUD
            Reimbursables, proceeds received from the sale or transfer of Credit
            Banks, the
            application of Net Proceeds from the sale of Section 2.17 Assets, the
            application of Net Proceeds from the sale of Primary Collateral or Other
            Collateral or Partnership Distributions, the application of Net Proceeds
            from
            the conveyance of Primary Collateral or Other Collateral to a Related
            Party, and
            release price proceeds from any other source) shall be applied as
            follows:

           

          (a) First,
            such proceeds shall be applied to pay interest current on the Note;

           

          (b) Second,
            such proceeds shall be applied to pay any other sums (other than principal)
            then
            due and payable under the Loan;

           

          (c) Third,
            such proceeds shall be applied to pay the outstanding principal balance
            then due
            under the Note; and

           

          (d) Fourth,
            any remaining proceeds after application as above set forth shall be
            distributed
            to Borrower at its discretion. 

           

          
            	SECTION
                    3.  	
                    LETTERS
                      OF CREDIT

                  

          

           

          3.1  Letters
            of Credit.
            Subject
            to the terms and conditions of this Agreement and the other Loan Documents,
            Borrower may, prior to the Maturity Date, request Bank to issue one or
            more
            Letters of Credit under and as part of the Loan, provided that the conditions
            to
            the issuance of Letters of Credit herein are satisfied. In no event shall
            the
            Letter of Credit Liabilities ever exceed $10,000,000.00; and the sum
            of (i) the
            outstanding principal balance of the Loan plus (ii) the Letter of Credit
            Liabilities shall not ever exceed the Maximum Loan Amount. Letters of
            Credit may
            be issued for business purposes reasonably approved by Bank. As of the
            date
            hereof, a Letter of Credit in the face amount of $3,500,000 issued for
            the
            account of Stratus 7000 West Joint Venture (a Subsidiary of Stratus)
            and a
            letter of credit in the face amount of $1,645,000 issued for the account
            of
            Meridian Developer, L.P. (a Subsidiary of Stratus) have been issued under
            and
            are outstanding pursuant to this Agreement.

           

          3.2  Conditions
            to Letters of Credit.
            The
            issuance of each Letter of Credit shall be subject to the following
            conditions:

           

          (a)  such
            Letter of Credit and any amounts to be disbursed or advanced under such
            Letter
            of Credit shall be used only for the same purposes as allowed for Advances
            under
            the Loan, as set forth in Section
            2.4
            of
Addendum
            2
            of the
            Loan Agreement;

           

          (b)  after
            taking into account any such Letter of Credit, the sum of (i) the then
            existing
            Letter of Credit Liabilities, plus (ii) the then outstanding principal
            balance
            of the Loan, does not (and shall at no time) exceed the Maximum Loan
            Amount.
            Accordingly, the amount of all Letter of Credit Liabilities, if any,
            shall
            reduce the amount of Advances available to Borrower under the Loan;

           

          (c)  the
            expiration date of such Letter of Credit is not more than six (6) months
            after
            the maturity date of the Note; 

           

          (d)  such
            Letter of Credit shall be classified as a “Standby” Letter of Credit in
            accordance with applicable laws and regulations applicable to Bank and
            in
            accordance with the Bank’s customary practices at such times for reporting to
            regulatory authorities;

           

          (e)  the
            issuance of such Letter of Credit will be in compliance with all applicable
            Governmental Requirements and all other applicable restrictions, policies,
            and
            guidelines and will not subject Bank to any cost which is not reimbursable
            by
            Borrower under the Loan Documents;

           

          (f)  the
            form
            and terms of such Letter of Credit must be acceptable to Bank in its
            sole
            discretion;

           

          (g)  all
            other
            conditions in this Agreement to the issuance of such Letter of Credit
            shall have
            been satisfied;

           

          (h)  immediately
            before and after the issuance of such Letter of Credit, no Event of Default
            or
            Default shall have occurred and be continuing; and

           

          (i)  the
            representations and warranties of Borrower contained in this Agreement
            and the
            other Loan Documents shall be true and correct on and as of the date
            of issuance
            of such Letter of Credit.

           

          Bank
            will
            honor any such request by Borrower for the issuance of a Letter of Credit
            if the
            foregoing conditions (a) through (i) (collectively, the “LC
            Conditions”)
            have
            been met as of the date of issuance of such Letter of Credit. Bank may
            choose to
            honor any such request for any other Letter of Credit but has no obligation
            to
            do so and may refuse to issue any other requested Letter of Credit for
            any
            reason which Bank in its sole discretion deems relevant.

           

          3.3  Requesting
            Letters of Credit.
            Borrower must make written application for any Letter of Credit at least
            five
            (5) Business Days before the date on which Borrower desires for Bank
            to issue
            such Letter of Credit. By making any such written application, Borrower
            shall be
            deemed to have represented and warranted that the LC Conditions will
            be met as
            of the date of issuance of such Letter of Credit. Two (2) Business Days
            after
            the LC Conditions have been met (or if Bank otherwise desires to issue
            such
            Letter of Credit), Bank will issue such Letter of Credit at Bank’s office in
            Dallas, Texas. If any provisions of any LC Application conflict with
            any
            provisions of this Agreement, the provisions of this Agreement shall
            govern and
            control.

           

          3.4  Reimbursement
            and Participations.

           

          (a)  Reimbursement
            by Borrower.
            Each
            Matured L/C Obligation shall constitute an Advance under the Loan. To
            the extent
            the same has not been repaid to Bank (with the proceeds of an Advance
            under the
            Loan or otherwise), Borrower promises to pay to Bank, or to Bank’s order, on
            demand, (i) the full amount of each Matured L/C Obligation, whether such
            obligation accrues before or after the Maturity Date, together with (ii)
            interest thereon at a rate per annum equal to the "Applicable Base Rate"
            for the
            "Base Rate Tranche" (as such terms are defined in the Note) until repaid
            in
            full; provided that after the Maturity Date or following a Default or
            an Event
            of Default under this Agreement or the other Loan Documents, such interest
            shall
            accrue at the Default Rate.

           

          (b)  Letter
            of Credit Advances.
            If the
            beneficiary of any Letter of Credit makes a draft or other demand for
            payment
            thereunder, then Borrower may, during the interval between the making
            thereof
            and the honoring thereof by Bank, request Bank to make an Advance under
            the Loan
            to Borrower in the amount of such draft or demand, which Advance shall
            be made
            concurrently with Bank’s payment of such draft or demand and shall be
            immediately used by Bank to repay the amount of the resulting Matured
            L/C
            Obligation. Such a request by Borrower shall be made in compliance with
            all of
            the provisions hereof.

           

          (c)  Letter
            of Credit Fees.
            In
            consideration of Bank’s issuance of any Letter of Credit, Borrower agrees to pay
            to Bank a letter of credit fee at a rate equal to two percent (2.0%)
            per annum.
            Each such fee will be, calculated based on the term and face amount of
            such
            Letter of Credit and the above applicable rate and will be payable upon
            issuance. In no event shall the issuance fee be less than $500.00 for
            any Letter
            of Credit.

           

          3.5  No
            Duty to Inquire.

           

          (a)  Drafts
            and Demands.
            Bank is
            authorized and instructed to accept and pay drafts and demands for payment
            under
            any Letter of Credit without requiring, and without responsibility for,
            any
            determination as to the existence of any event giving rise to said draft,
            either
            at the time of acceptance of payment or thereafter. Bank is under no
            duty to
            determine the proper identity of anyone presenting such a draft or making
            such a
            demand (whether by tested telex or otherwise) as the officer, representative
            or
            agent of any beneficiary under any Letter of Credit, and payment by Bank
            to any
            such beneficiary when requested by any such purported officer, representative
            or
            agent is hereby authorized and approved. Borrower agrees to hold Bank
            harmless
            and indemnified against any liability or claim in connection with or
            arising out
            of the subject matter of this section, WHICH
            INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN
            ANY WAY
            OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY
            OF STRICT
            LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
            OMISSION
            OF ANY KIND BY BANK,
            provided only that Bank shall not be entitled to indemnification for
            that
            portion, if any, of any liability or claim which is approximately caused
            by its
            own individual gross negligence or willful misconduct, as determined
            in a final
            judgment.

           

          (b)  Extension
            of Letter of Credit Maturity.
            If the
            maturity of any Letter of Credit is extended by its terms or by applicable
            law
            or governmental action, if any extension of the maturity or time for
            presentation of drafts or any other modification of the terms of any
            Letter of
            Credit is made at the request of Borrower, or if the amount of any Letter
            of
            Credit is increased at the request of Borrower, this Agreement shall
            be binding
            upon Borrower with respect to such Letter of Credit as so extended, increased
            or
            otherwise modified, with respect to drafts and property covered thereby,
            and
            with respect to any action taken by Bank, or Bank’s correspondents in accordance
            with such extension, increase or other modification.

           

          (c)  Transferees
            of Letters of Credit.
            If any
            Letter of Credit provides that it is transferable, Bank shall have no
            duty to
            determine the proper identity of anyone appearing as transferee of such
            Letter
            of Credit, nor shall Bank be charged with responsibility of any nature
            or
            character for the validity or correctness of any transfer or successive
            transfers, and payment by Bank to any purported transferee or transferees
            as
            determined by Bank is hereby authorized and approved, and Borrower further
            agrees to hold Bank harmless and indemnified against any liability or
            claim in
            connection with or arising out of the foregoing, WHICH
            INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN
            ANY WAY
            OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY
            OF STRICT
            LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
            OMISSION
            OF ANY KIND BY BANK,
            provided only that Bank shall not be entitled to indemnification for
            that
            portion, if any, of any liability or claim which is proximately caused
            by its
            own individual gross negligence or willful misconduct, as determined
            in a final
            judgment.

           

          3.6  LC
            Collateral.

           

          (a)  Acceleration
            of Letter of Credit Liabilities.
            On the
            Maturity Date, or if the Loan becomes immediately due and payable pursuant
            to
            the Loan Documents, then, unless Bank otherwise specifically elects to
            the
            contrary, all Letter of Credit Liabilities shall become immediately due
            and
            payable without regard to whether or not actual drawings or payments
            on the
            Letters of Credit have occurred, and Borrower shall be obligated to return
            all
            original Letters of Credit to Bank and pay to Bank immediately an amount
            equal
            to the aggregate Letter of Credit Liabilities which are then outstanding
            (taking
            into account the actual return to Bank of any original outstanding Letters
            of
            Credit). All amounts so paid shall first be applied to Matured L/C Obligations
            and the remainder will be held by Bank as security for the remaining
            Letter of
            Credit Liabilities (all such amounts held as security for Letter of Credit
            Liabilities being herein collectively called “LC
            Collateral”)
            until
            such Letter of Credit Liabilities become Matured L/C Obligations, at
            which time
            such LC Collateral shall be applied to such Matured L/C Obligations,
            and any
            remaining amounts after the repayment of all Matured L/C Obligations
            and
            Indebtedness shall be returned to Borrowers.

           

          (b)  Investment
            of LC Collateral.
            Pending
            application thereof, all LC Collateral shall be invested by Bank in such
            investments as Bank may elect. All interest on such investments shall
            be
            reinvested or applied to Matured L/C Obligations. When all indebtedness
            evidenced by the Note and all Letter of Credit Liabilities have been
            satisfied
            in full, all Letters of Credit have expired or been terminated, and all
            of
            Borrower’s reimbursement obligations in connection therewith have been satisfied
            in full, Bank shall release any remaining LC Collateral. Borrower hereby
            assigns
            and grants to Bank a continuing security interest in all LC Collateral,
            all
            investments purchased with such LC Collateral, and all proceeds thereof
            to
            secure its Matured L/C Obligations and its obligations under this Agreement,
            the
            Note and the other Loan Documents. Borrower further agrees that Bank
            shall have
            all of the rights and remedies of a secured party under the Uniform Commercial
            Code as adopted in the State of Texas with respect to such security interest
            and
            that an Event of Default under this Agreement shall constitute a default
            for
            purposes of such security interest.

           

          (c)  Payment
            of LC Collateral.
            When
            Borrower is required to provide LC Collateral for any reason and fails
            to do so
            on the day when required, Bank may without notice to Borrower provide
            such LC
            Collateral (whether by transfers from other accounts maintained with
            Bank or
            otherwise) using any available funds of Borrower.

           

          
            	SECTION
                    4.  	
                    CALERA
                      COURT CONSTRUCTION LOAN

                  

          

           

          4.1  Agreement
            to Lend.
            Subject
            to the terms, provisions and conditions of this Agreement, Bank hereby
            agrees to
            make to the Borrower, and Borrower hereby agrees to accept from Bank,
            Advances
            of proceeds of the Loan as provided in this Agreement for the construction
            of
            Houses; provided, however, that the aggregate amount of all Advances
            made and/or
            committed to be made hereunder, but exclusive of amounts repaid, shall
            not
            exceed the Calera Court Sublimit. Amounts repaid under the Calera Court
            Construction Loan may be reborrowed, subject to the terms and conditions
            hereof.
            The nature of the Calera Court Construction Loan is a guidance line of
            credit.
            Nothing to the contrary contained herein or in any of the Loan Documents
            shall
            obligate or be construed to obligate Bank to make, or shall entitle or
            be
            construed to entitle the Borrower to receive, any Advance hereunder as
            to any
            specified House or Houses until Acceptance thereof by Bank. Borrower
            acknowledge
            and agree that Bank, in its sole and absolute discretion, with or without
            reason
            or justification, will make the decision as to whether any specified
            House or
            Houses will receive Acceptance by Bank. Borrower has no right and hereby
            waives,
            relinquishes and releases any right which it might now or hereafter have,
            to
            demand Bank to make any Advance hereunder as to any specified House or
            Houses
            until Acceptance thereof by Bank. Bank may, in Bank's discretion, disburse
            Loan
            proceeds by journal entry to pay interest and financing costs and disburse
            Loan
            proceeds directly to third parties to pay costs or expenses required
            to be paid
            by Borrower pursuant to Section
            4
            of this
            Agreement, and any such disbursements shall constitute Advances to Borrower.
            As
            used in this Section
            4,
            the
            term "Borrower"
            means
            the Calera Court Borrower; provided, however, (i) the Calera Court Borrower
            shall only be liable for the obligations under the Calera Court Construction
            Loan and shall have no personal liability for any of the Indebtedness
            or other
            obligations arising under the Loan which are not directly related to
            the Calera
            Court Construction Loan or the Calera Court Lots and (ii) each of the
            Borrowers
            under this Agreement shall be jointly and severally liable for all Advances
            made
            to the Calera Court Borrower.

           

          4.2  Acceptance.
            Borrower may from time to time propose that Bank accept a House for funding
            in
            accordance with an Approved Budget for same. "Acceptance" shall be deemed
            to
            have occurred and Bank shall be deemed to have committed to make Advances
            with
            respect to any such House at such time as Borrower has executed and/or
            delivered
            to Bank all of the items required by Section
            4.7
            hereof
            and otherwise satisfied all of the other conditions set forth in Section 4.8
            hereof.
            Bank shall, within 15 days after receipt of the above written notice,
            provide
            Borrower written notice of Bank's acceptance or rejection of any such
            proposed
            House together with an Approved Budget for same. Borrower shall not be
            entitled
            to propose that any Houses receive Acceptance either (i) after
            the
            Acceptance Termination Date, or (ii) to the extent the total Maximum
            Aggregate Advances Per House for all Houses already equals the Calera
            Court
            Sublimit.

           

          4.3  Maximum
            Commitment for Houses.
            Under
            no circumstances shall Borrower be entitled to an aggregate amount of
            Advances
            outstanding at any time for the Calera Court Construction Loan as a whole
            in
            excess of the Calera Court Sublimit, and in no event shall the sum of
            (x) the
            aggregate amount of Advances outstanding at any time for the Calera Court
            Construction Loan plus (y) the unfunded amount committed for any House
            which has
            been accepted by Bank pursuant to an Approved Budget, ever exceed the
            Calera
            Court Sublimit. In addition, the Loan proceeds allocable for any House
            which is
            accepted by Bank as set forth in the Approved Budget for such House shall
            be
            reserved and shall not be available for disbursement for any purposes
            under the
            Loan other than for the construction of such House. It is recognized
            and agreed
            that all Requests for Advances shall indicate and be based on the actual
            percentage of completion of the Approved Work for each House as calculated
            using
            the Approved Budget for same and shall otherwise be on a form and with
            detail as
            may be required by Bank in Bank's reasonable discretion. Any percentage
            of
            completion of Approved Work for any House indicated by Borrower on any
            report or
            notice delivered to Bank shall be subject to verification by Bank. To
            the
            extent, for whatever reason, the outstanding balance of the Calera Court
            Construction Loan should ever exceed the aggregate amount of then applicable
            actual percentage of completion of the Approved Work for each and all
            Houses as
            calculated using the Approved Budget for each, Borrower shall immediately
            upon
            demand by Bank make any principal reductions necessary such that the
            then
            outstanding balance of the Calera Court Construction Loan shall not exceed
            then
            applicable aggregate amount. The aggregate maximum amount of any and
            all
            Advances for each House (the "Maximum
            Aggregate Advances Per House")
            shall
            not exceed the lesser of (a) Borrower's total cost of construction and
            completion of such House as provided in the Approved Budget for such
            House, or
            (b) as applicable (i) for any Model House, 75% of the Appraised Value
            of such
            Model House, (ii) for any Spec House, the lesser of 75% of the Appraised
            Value
            of such Spec House or $550,000, or (iii) for any House that is Pre-Sold
            House,
            80% of the Appraised Value of such House.

           

          4.4  Allocations.
            The
            purposes for which proceeds of the Calera Court Construction Loan are
            allocated
            and the respective amounts of such Allocations are set forth in each
            Approved
            Budget. The Allocations for any House shall be disbursed only for the
            purposes
            set forth in the Approved Budget for such House. Bank shall not be obligated
            to
            make an Advance for an Allocation set forth in an Approved Budget to
            the extent
            that the amount of the Advance for such Allocation would, when added
            to all
            prior Advances for such Allocation, exceed the total of such Allocation
            as set
            forth in the Approved Budget. Bank reserves the right, at its option
            after the
            request by Borrower for same, to disburse Loan proceeds allocated to
            any of the
            Allocations, or any percentage allocated to each stage of disbursement
            as set
            forth in an Approved Budget, for such other purposes or in such different
            percentages as Bank may, in its sole discretion, deem necessary or advisable.
            Borrower shall not be entitled to require that Bank reallocate funds
            among the
            Allocations or percentage among the various stages of disbursement set
            forth in
            an Approved Budget.

           

          4.5  Contingency
            Allocations.
            Any
            amount allocated in an Approved Budget for "contingencies" or other non-specific
            purposes may, in Bank's discretion, be disbursed by Bank to pay contingent
            costs
            and expenses of construction costs, maintaining, and promoting the Mortgaged
            Property and such other costs or expenses as Bank shall approve. Under
            no
            circumstances shall the Borrower have the right to require Bank to disburse
            any
            amounts so allocated and Bank may impose such requirements and conditions
            as it
            deems prudent and necessary should it elect to disburse all or any portion
            of
            the amounts so allocated.

           

          4.6  Limitation
            on Spec Houses and Model Houses.
            Bank
            shall have no obligation to effectuate Acceptance of any new proposed
            Spec House
            or Model House if the effect of such Acceptance would be to cause (i)
            the number
            of all Spec Houses under the Calera Court Construction Loan to exceed
            at any one
            time four (4) Spec Houses or (ii) the number of all Model Houses under
            the
            Calera Court Construction Loan to exceed at any one time two (2) Model
            Houses.
            If, at any time or for whatever reason, the number of all Spec Houses
            or Model
            Houses under the Calera Court Construction Loan should exceed the foregoing
            limits, then, Borrower shall be required to effectuate a mandatory partial
            release as to the sufficient number of Spec Houses or Model Houses such
            that the
            foregoing limits would not thereafter be exceeded. Such mandatory release
            would
            be effectuated in accordance with the provisions of Addendum
            3
            hereof.

           

          4.7  Conditions
            to Acceptance of Houses and Advances With Respect Thereto.
            Acceptance by Bank of any House pursuant to Section 4.2
            hereof
            and the making of an Advance with respect thereto shall be subject to
            the prior
            or simultaneous satisfaction of each of the conditions set forth in this
            Section. In the event that any condition precedent is not so satisfied
            but Bank
            deems Acceptance to have occurred as to a particular House notwithstanding
            the
            same, such election shall not constitute a waiver of such condition and
            the
            condition shall be satisfied prior to any subsequent Advance or Acceptance,
            as
            the case may be.

           

          (a)  All
            of
            the Loan Documents shall be in full force and effect and binding and
            enforceable
            obligations of Borrower and, to the extent that it is a party thereto
            or
            otherwise bound thereby, of each other Person who may be a party thereto
            or
            bound thereby, and there shall exist no Event of Default or
            Default.

           

          (b)  Each
            Loan
            Party shall have performed and complied with all agreements and conditions
            contained in the Loan Documents applicable to it and which are then in
            effect.

           

          (c)  Borrower
            shall have delivered, or caused to have been delivered, to Bank or done
            or
            caused to have been done, to Bank's satisfaction each and every of the
            items
            required for the Initial Advance under Section
            2.13
            of
Addendum
            2
            of this
            Agreement, and all conditions to Advances set forth in Sections
            2.13
            and
2.14
            of this
Addendum
            2
            shall
            have been satisfied as of the date of the Advance. In addition, Borrower
            shall
            have delivered to Bank the following with regard to the Acceptance of
            the House
            in question:

           

          (i)  Evidence
            of insurance coverage as required by this Agreement and the Deed of
            Trust.

           

          (ii)  At
            Bank's
            request, an Interim Binder for Construction Loan covering such proposed
            House.

           

          (iii)  When
            available, an original or a copy of each proposed construction contract
            covering
            any proposed House.

           

          (iv)  A
            copy of
            the Plans covering all proposed Houses.

           

          (v)  Evidence
            that all applicable zoning ordinances and restrictive covenants affecting
            that
            portion of the Land upon which the House is to be constructed permit
            the use for
            which the Improvements are intended and have been or will be complied
            with.

           

          (vi)  Evidence
            that all streets furnishing access to that portion of the Land upon which
            the
            House is to be constructed have been dedicated to public use and installed
            and
            accepted by applicable Governmental Authorities; and, except as permitted
            by
            Bank, evidence that all streets furnishing access to any House for which
            a
            request for Advance has been made, have been or will be timely constructed
            in
            accordance with all applicable laws and development requirements.

           

          (vii)  Evidence
            satisfactory to Bank showing the availability of all necessary utilities
            at the
            boundary lines of that portion of the Land upon which the House is to
            be
            constructed and, except as permitted by Bank, at the boundary lines of
            each Lot
            with respect to which a request for Advance has been made, including
            sanitary
            and storm sewer facilities, potable water, telephone, electricity and
            gas
            services.

           

          (viii)  Building
            permit(s) and all other permits required with respect to the construction
            of the
            Houses and evidence that the proposed use of that portion of the Land
            and Houses
            and construction of the Improvements thereon complies with all Governmental
            Requirements, including applicable zoning ordinances and restrictive
            covenants.

           

          (ix)  An
            Approved Budget for each House.

           

          (x)  As
            to
            each separate floor plan for proposed Houses, an Appraisal.

           

          (xi)  If
            requested by Bank, a waiver of lien or lien subordination agreement(s)
            executed
            by each contractor, laborer and supplier furnishing labor or materials
            for the
            construction of Houses, in a form acceptable to Bank, for work performed
            or
            materials supplied prior to the date of each Advance.

           

          (xii)  Except
            in
            the case of Spec Houses and Model Houses, a fully executed copy of the
            Approved
            Sales Contract for each House together with such supplementary documentation
            as
            Bank may reasonably require (e.g., such buyer's written evidence of
            creditworthiness, etc.).

           

          (xiii)  Evidence
            that each Lot for which an Advance for a House thereon is requested has
            been
            cleared, filled and graded, as necessary, and is in all respects ready
            for
            construction of the House thereon.

           

          (xiv)  As
            a
            condition to the final Advance with respect to any House, evidence satisfactory
            to Bank that all streets furnishing access to such House have been completed
            (and dedicated, if not private streets), and that all necessary utilities
            for
            the use of such Houses have been brought to the House, are completed
            and
            connected.

           

          (xv)  Such
            other instruments, evidence or certificates as Bank may reasonably
            request.

           

          4.8  Conditions
            to All Advances.
            In
            addition to any other terms and conditions set forth in this Agreement,
            the
            obligation of Bank to make any Advance under this Agreement shall be
            further
            subject to the satisfaction of each of the following conditions precedent
            on or
            before the Disbursement Date for such Advance:

           

          (a)  All
            conditions to Advances set forth in Sections
            2.13
            and
2.14
            of this
Addendum
            2
            shall
            have been satisfied as of the date of the Advance. 

           

          (b)  Receipt
            by Bank of a monthly endorsement to the Title Policy (or if an endorsement
            is
            not available, a letter from the Title Company) showing "nothing further"
            of
            record affecting that portion of the Land upon which Houses are being
            constructed from the date of recording of the Deed of Trust, except such
            matters
            as Bank specifically approves.

           

          (c)  Receipt
            by Bank of waivers signed and acknowledged (notarized) by each Contractor
            that
            has done work included within any prior Request for Advance that the
            respective
            Contractor has been paid in full (except for required retainage) for,
            and
            waiving any mechanic's and materialmen's lien rights with respect to,
            all work
            done at least 45 days prior to the current Request for
            Advance.

           

          (d)  The
            Houses shall not have been materially damaged by fire or other
            casualty.

           

          (e)  None
            of
            that portion of the Land upon which Houses are being constructed shall
            be
            subject to condemnation proceedings or negotiations for sale in lieu
            thereof.

           

          (f)  Borrower
            shall have recorded the executed Affidavits of Commencement to the extent
            required hereunder.

           

          (g)  Bank
            shall have obtained from the Inspecting Person an inspection report relating
            to
            the House or Houses for which a Request for Advance has been made, which
            report
            shall be satisfactory to Bank in its sole discretion.

           

          4.9  Limitation
            on Advances; Borrower's Deposit.
            If at
            any time Bank shall in its sole discretion deem that the undisbursed
            proceeds of
            the Loan are insufficient to meet the costs of completing construction
            of the
            Approved Work, plus the costs of insurance, ad valorem taxes and other
            normal
            costs incidental to the Approved Work or ownership of the Houses which
            are a
            part of the Mortgaged Property, Bank may refuse to make any additional
            Advances
            to Borrower under this Section
            4
            until
            Borrower shall have deposited with Bank sufficient additional funds
            ("Borrower's
            Deposit")
            to
            cover the deficiency which Bank deems to exist. Such Borrower's Deposit
            will be
            disbursed by Bank to Borrower pursuant to the terms and conditions hereof
            as if
            they constituted a portion of the Loan being made hereunder. Borrower
            agrees
            upon fifteen (15) days written demand by Bank to deposit with Bank such
            Borrower's Deposit. Bank shall pay interest on the Borrower's Deposit
            at a rate
            typically paid by Bank on similar deposits.

           

          4.10  Withholding
            on Advances.
            Bank
            may withhold from an Advance under this Section
            4
            or, on
            account of subsequently discovered evidence, withhold from a later Advance
            under
            this Section
            4,
            or
            require Borrower to repay to Bank the whole or any part of any earlier
            Advance,
            to such extent as may be necessary to protect Bank from loss on account
            of
            (i) defective work with regard to a House not remedied or requirements
            of
Section
            4
            not
            performed, (ii) liens filed or reasonable evidence indicating
            probable
            filing of liens against the portion of the Mortgaged Property upon which
            Houses
            are being constructed, or (iii) failure of Contractor to make
            payments to
            subcontractors for material or labor. When the foregoing applicable grounds
            are
            satisfied and removed, such withheld amount shall be promptly
            released.

           

          4.11  Representations,
            Warranties and Covenants of Borrower.
            Borrower agrees that all of the representations, warranties and covenants
            set
            forth in Article 3, Article 4 and Article 5 of this Agreement are applicable
            to
            Borrower except to the extent otherwise expressly provided or the context
            requires that Borrower is not a party to such representation, warranty
            or
            covenant.

           

          4.12  Insurance.
            Borrower shall continue to provide insurance in accordance with the requirements
            of this Agreement and as required under that certain Loan Agreement (Revolving
            Credit) dated as of September ___, 2003 by and between Borrower and Bank,
            as
            amended from time to time, the provisions of which are incorporated herein
            by
            reference.

           

          4.13  Construction
            of Houses.
            

           

          (a)  Completion.
            As to
            each House, cause the construction thereof (i) to be performed
            in a good
            and workmanlike manner, within the perimeter boundaries of the Lot and
            within
            all applicable building and setback lines in accordance with all Governmental
            Requirements and the Plans, (ii) to be prosecuted with diligence
            and
            continuity and (iii) to be completed in all material respects
            in accordance
            with the Plans on or before the applicable Completion Date, free and
            clear of
            Liens or claims for Liens for material supplied and for labor or services
            performed in connection with the construction of such House, other than
            Permitted Encumbrances.

           

          (b)  Surveys.
            Borrower will obtain, at Bank's request and at Borrower's expense,
            (i) immediately after the installation of the forms for the pouring
            of the
            foundations or slabs for each House, (ii) immediately upon completion
            of
            all foundations or slabs, and before any above ground construction, and
            (iii) upon completion of construction of each House, a survey
            prepared by a
            registered engineer or surveyor acceptable to Bank, showing that the
            locations
            of such forms, foundation or slabs and Houses, as applicable, are entirely
            within the property lines of the applicable Lot, do not encroach upon
            any
            easement, setback line or restrictions, are placed in accordance with
            the Plans,
            all Governmental Requirements and all restrictive covenants affecting
            the Lot
            and/or Houses, and showing no state of facts objectionable to Bank. Borrower
            shall maintain such surveys and, if requested by Bank, within five (5)
            days
            after the request therefor, shall deliver copies of same to Bank. If
            such
            surveys are so requested, Bank shall have no obligation to make any Advance
            hereunder at any time after the completion of foundations or slabs until
            receipt
            by Bank of such foundation survey. All surveys provided to Bank must
            be in form
            and substance reasonably acceptable to Bank.

           

          (c)  Inspecting
            Person.
            Pay the
            fees and expenses of, and cooperate, with the Inspecting Person and cause
            each
            contractor, architect, engineer and other professional consultants engaged
            by
            Borrower in connection with the design and construction of the Houses,
            to
            cooperate with the Inspecting Person in connection with the performance
            of the
            Inspecting Person's duties. Without limiting the generality of the foregoing,
            Borrower shall furnish or cause to be furnished such items as working
            details,
            the Plans and details thereof, samples of materials, licenses, permits,
            certificates of public authorities, zoning ordinances, building codes
            and copies
            of the contracts between such person and Borrower (if applicable). Borrower
            will
            permit Bank, the Inspecting Person and their representative to enter
            upon the
            Land and wherever else any of the Houses are located for the purposes
            of
            inspecting same. Borrower acknowledges that the duties of the Inspecting
            Person
            run solely to Bank and that the Inspecting Person shall have no obligations
            or
            responsibilities whatsoever to Borrower, any contractor, design professional
            or
            any other Person, or to any of their agents, employees, contractors or
            subcontractors.

           

          (d)  Affidavit
            of Commencement.
            Within
            ten (10) days after the applicable Commencement Date as to any House,
            and not
            before construction of such House has actually begun, file or cause to
            be filed
            in the appropriate records of the county in which the Lot is situated,
            an
            Affidavit of Commencement duly executed by Borrower and the contractor
            performing the work on such Lot.

           

          (e)  Affidavit
            of Completion.
            Within
            ten (10) days after construction of the House on any Lot has been completed,
            file or cause to be filed in the appropriate records in the county in
            which the
            Lot is situated an Affidavit of Completion.

           

          (f)  Delivery
            of Contracts.
            Upon
            Bank's request, deliver to Bank a copy of each contract related to the
            Houses
            promptly after the execution of same by all parties thereto. Within twenty
            (20)
            days after a request by Bank, Borrower shall prepare and deliver to Bank
            a
            complete listing of all contracts, showing date, term, parties, subject
            matter,
            concessions, whether any defaults exist, and other information specified
            by
            Bank, with respect to each of such contracts.

           

          (g)  Correcting
            Defects.
            Correct: (a) any structural defect in any of the Houses; (b) any
            material departure from the Plans not approved in writing by Bank (other
            than
            work performed in accordance with any change orders permitted hereunder
            or any
            change orders otherwise approved by Bank); (c) any encroachment
            by any part
            of any of the Houses or any other structures or improvements over or
            on any
            set-back line, easement, adjoining property or other restricted area;
            and
            (d) any encroachment of any adjoining structure upon any of the
            Land which
            any survey or inspection reflects. The advance of Loan proceeds will
            not waive
            Bank's right to require compliance with this Section.

           

          (h)  Safe
            Storage.
            Safely
            store all equipment, supplies and materials not affixed to or incorporated
            into
            the Houses on the Calera Court Lots or in a warehouse acceptable to Bank,
            in
            each case under adequate safeguard to minimize the possibility of loss,
            theft,
            damage or commingling with other property. Upon Bank's request, Borrower
            will
            furnish an inventory of all such equipment, supplies and materials stored
            off
            the Calera Court Lots, specifying their location.

           

          (i)  No
            Changes.
            Not
            amend, alter or change in any material respect (pursuant to change order,
            amendment or otherwise) the Plans unless the same shall have been approved
            in
            advance in writing by Bank, by all applicable Governmental Authorities,
            by any
            party to a sales or construction contract (including an Approved Sales
            Contract)
            with a right of approval, and by each surety under payment or performance
            bonds,
            if any, covering any construction contract or any other contract for
            construction of all or a portion of the Houses. Notwithstanding anything
            in this
            Agreement to the contrary, Borrower shall be allowed to make changes
            in the
            Plans upon and subject to the following conditions and requirements (and
            such an
            approved change order executed in compliance herewith will increase the
            amount
            of the Approved Budget for a House as applicable so long as same does
            not cause
            the Calera Court Sublimit to be exceeded):

           

          (i)  Any
            single change shall not increase the Construction Costs for a House by
            more than
            $15,000.00.

           

          (ii)  All
            changes, including the currently requested change and all prior changes,
            shall
            not increase the Construction Costs for a House in the aggregate, by
            more than
            $50,000.00.

           

          (iii)  Such
            change, by itself and when considered with all prior changes, shall not,
            in
            Bank's reasonable discretion, cause or be likely to cause the Completion
            of the
            House to occur after the Completion Date.

           

          (iv)  Any
            such
            change, or all changes in the aggregate, shall not adversely affect,
            in Bank's
            reasonable discretion, the structural integrity, utility or appearance
            of the
            Houses.

           

          (v)  Borrower
            shall have deposited into the Borrower's Deposit, sufficient funds to
            cover all
            costs associated with the requested change and all increases in the Construction
            Costs of the Houses anticipated by such changes, as determined by Bank
            in its
            reasonable discretion.

           

          (vi)  Borrower
            shall have submitted to Bank, the Inspecting Person, and the applicable
            Contractor the requested change, together with changes in the Plans necessary
            to
            accomplish such change, a certificate of the applicable Design Professional
            in
            regard to same, and a change order to the construction contract reflecting
            such
            change; and Bank shall have received the approval of such change by the
            Inspecting Person and the approved and signed change order from the applicable
            Contractor reflecting the increase in Construction Costs of the
            Houses.

           

          4.14  Completion
            of the Improvements after Event of Default.
            Bank
            shall have the right, upon the occurrence of and during the continuance
            of an
            Event of Default, in addition to any rights or remedies available to
            it under
            all other Loan Documents, to enter into possession of that portion of
            the
            Mortgaged Property upon which Houses are being constructed and perform
            any and
            all work and labor necessary to complete the Houses in accordance with
            the
            Plans. All amounts so expended by Bank shall be deemed to have been disbursed
            to
            Borrower as Loan proceeds and secured by the Deeds of Trust. For this
            purpose,
            effective automatically upon and at all times during the continuance
            of an Event
            of Default, Borrower hereby constitutes and appoints (which appointment
            is
            coupled with an interest and is therefore irrevocable) Bank as Borrower's
            true
            and lawful attorney-in-fact, with full power of substitution to complete
            the
            Houses in the name of Borrower, and hereby empowers Bank, acting as Borrower's
            attorney-in-fact, as follows: to use any funds of Borrower, including
            any
            balance which may be held in escrow, any Borrower's Deposit and any funds
            which
            may remain unadvanced hereunder, for the purpose of completing the Houses
            in the
            manner called for by the Plans; to make such additions and changes and
            corrections in the Plans which shall be necessary or desirable to complete
            the
            Houses in the manner contemplated by the Plans; to continue all or any
            existing
            construction contracts or subcontracts; to employ such contractors,
            subcontractors, agents, design professionals and inspectors as shall
            be required
            for said purposes; to pay, settle or compromise all existing bills and
            claims
            which are or may be liens, or may be necessary or desirable for the completion
            of the work or the clearing of title; to execute all the applications
            and
            certificates in the name of Borrower which may be required by any construction
            contract; and to do any and every act with respect to the construction
            of the
            Houses which Borrower could do in Borrower's own behalf. Bank, acting
            as
            Borrower's attorney-in-fact, shall also have power in such an event to
            prosecute
            and defend all actions or proceedings in connection with the Mortgaged
            Property
            and to take such action and require such performance as is deemed
            necessary.

           

          4.15  Assignment
            of Sales Contracts.
            Borrower, as additional security for the payment and performance of the
            covenants, agreements and obligations of Borrower to Bank arising under
            this
            Agreement and under all of the Loan Documents, hereby grants a security
            interest
            in, and sells, transfers, assigns and sets over, to Bank, its successors
            and
            assigns, all of Borrower's title and interest in and to, and Borrower's
            rights,
            benefits and privileges under, any and all Sales Contracts whether now
            existing
            or hereafter entered into, and all proceeds therefrom. In furtherance
            of the
            foregoing, Borrower hereby agrees that this assignment of Sales Contracts
            is
            made upon the following terms and conditions:

           

          (a)  Borrower
            shall pay and perform all of Borrower's covenants, agreements and obligations
            under the Sales Contracts and shall promptly notify Bank in writing,
            as part of
            the monthly reports to be delivered to Bank pursuant to the terms and
            conditions
            of this Agreement, of any termination of any Sales Contract. Borrower
            hereby
            covenants and agrees not to (i) materially modify, amend or change
            any
            Sales Contract after full execution thereof (except with regard to change
            orders
            and extras), (ii) terminate or otherwise cancel any fully executed
            Sales
            Contract except in the event of a default thereunder by the purchaser
            or the
            purchaser's failure to satisfy any contingency thereunder, (iii) take
            any
            action or exercise any right or option which would permit a purchaser
            to
            terminate or otherwise cancel a Sales Contract, unless said purchaser
            is in
            default thereunder, or (iv) further assign or create any further
            encumbrance or hypothecation of Borrower's interest in any of the Sales
            Contracts, without the prior written consent of Bank, unless required
            by any
            Governmental Authority, in which case Borrower shall give Bank prior
            written
            notice thereof.

           

          (b)  Upon
            the
            occurrence of an Event of Default, Bank may elect, in its sole discretion,
            to
            exercise, in the name of Borrower, all of Borrower's rights, benefits
            and
            privileges under each of the Sales Contracts, including all rights in
            and to all
            deposits and other amounts collected or otherwise received from purchasers
            under
            the Sales Contracts; in connection with such exercise of rights, benefits
            and
            privileges, Bank shall have full power and authority to do all acts as
            may be
            necessary, as determined in Bank's sole discretion, to close any transaction
            contemplated under any Sales Contract, including to receive any and all
            amounts
            paid or to be paid by a purchaser in connection therewith. Bank shall
            not be
            required to give any notice of such election to Borrower. Borrower hereby
            covenants and agrees to pay to Bank promptly upon demand any and all
            reasonable
            costs and expenses, including reasonable attorneys' fees and expenses
            incurred
            by Bank in connection with such an election by Bank to exercise its rights
            under
            this Section. Furthermore, promptly upon demand by Bank, Borrower shall
            take
            such actions and execute such documents as may be necessary to facilitate
            Bank's
            exercise of its rights hereunder, including (i) delivering to
            Bank all then
            existing Sales Contracts, (ii) delivering, jointly with Bank,
            notices to
            purchasers of the assignment of their respective Sales Contracts,
            (iii) conveying fee simple title to the purchaser of any of the
            Houses by a
            proper, recordable warranty deed in connection with the closing of a
            transaction
            under any of the Sales Contracts, and (iv) instructing any necessary
            party,
            such as a title company handling a closing, to pay to Bank the proceeds
            of sale
            which would otherwise have been paid or payable to Borrower.

           

          (c)  Borrower
            shall indemnify, defend and hold Bank and its affiliates harmless from
            and
            against any and all losses, liabilities, obligations, penalties, claims,
            fines,
            lost profits, demands, litigation, defenses, costs, judgments, suits,
            proceedings, damages, disbursements or expenses of any kind or nature
            whatsoever
            (including attorneys' fees and expenses), consequential or otherwise,
            which may
            at any time be either directly or indirectly imposed upon, incurred by
            or
            asserted or awarded against Bank or any of Bank's affiliates in connection
            with,
            arising from or relating to any action or actions taken by Bank pursuant
            to this
            section prior to a foreclosure by Bank of the Mortgaged Property or other
            taking
            of title by Bank in lieu of foreclosure of the Mortgaged Property, INCLUDING
            ANY CLAIMS, LOSSES, COSTS, DAMAGES, LIABILITIES, OBLIGATIONS, AND EXPENSES
            RESULTING FROM BANK'S OWN NEGLIGENCE, EXCEPT
            AND TO THE EXTENT BUT ONLY TO THE EXTENT CAUSED BY BANK'S GROSS NEGLIGENCE
            OR
            WILLFUL MISCONDUCT.
            Borrower's duty and obligation to defend, indemnify and hold harmless
            Bank shall
            survive the payment of the Indebtedness and the release, partial release
            or
            foreclosure (or action in lieu of foreclosure) of the Liens of the Deeds
            of
            Trust, and the exercise by Bank of any and all remedies set forth herein
            or in
            the other Loan Documents.

           

          (d)  So
            long
            as no Event of Default has occurred, Borrower may continue to receive
            and
            exercise all of its rights, benefits and privileges under the Sales Contracts,
            except as herein restricted or provided otherwise.

           

          (e)  Neither
            the assignment contained in this Section, nor any action or actions on
            the part
            of Bank, shall constitute an assumption of any of the covenants, agreements
            or
            obligations of Borrower by Bank under the Sales Contracts and Borrower
            shall
            continue to be liable for all such covenants, agreements or obligations.
            Borrower shall indemnify, defend and hold Bank and its affiliates harmless
            from
            and against any and all losses, liabilities, obligations, penalties,
            claims,
            fines, lost profits, demands, litigation, defenses, costs, judgments,
            suits,
            proceedings, damages, disbursements or expenses of any kind or nature
            whatsoever
            (including attorneys' fees and expenses), consequential or otherwise,
            which may
            at any time be either directly or indirectly imposed upon, incurred by
            or
            asserted or awarded against Bank or any of Bank's affiliates in connection
            with,
            arising from or relating to any failure of Borrower to perform and observe
            any
            of such obligations, INCLUDING
            ANY CLAIMS, LOSSES, COSTS, DAMAGES, LIABILITIES, OBLIGATIONS, AND EXPENSES
            RESULTING FROM BANK'S OWN NEGLIGENCE, EXCEPT AND TO THE EXTENT, BUT ONLY
            TO THE
            EXTENT, CAUSED BY BANK'S GROSS NEGLIGENCE OR WILLFUL
            MISCONDUCT.
            Borrower's duty and obligation to defend, indemnify and hold harmless
            Bank shall
            survive the payment of the Indebted-ness and the release, partial release
            or
            foreclosure (or action in lieu of foreclosure) of the Liens of the Deeds
            of
            Trust, and the exercise by Bank of any and all remedies set forth herein
            or in
            the other Loan Documents.

           

          (f)  Bank
            shall have the right, at any time (but shall have no obligation), to
            take in its
            name or in the name of Borrower or otherwise, such action as Bank may
            at any
            time or from time to time reasonably determine to be necessary to protect
            the
            rights of Bank as the assignee of Borrower hereunder. Bank shall incur
            no
            liability on account of any action taken by it or on its behalf in good
            faith
            pursuant to the foregoing sentence or otherwise hereunder, whether or
            not the
            same shall prove to be improper, inadequate or invalid, in whole or in
            part.

           

          (g)  Upon
            the
            full and complete payment and performance of all of the covenants, agreements
            and obligations of Borrower to Bank arising under this Agreement and
            the other
            Loan Documents, the assignment contained in this Section shall become
            null and
            void.

           

          4.16  Assignment
            of Construction Contract.
            Borrower, as additional security for the payment and performance of the
            covenants, agreements and obligations of Borrower to Bank arising under
            this
            Agreement and under all of the Loan Documents, hereby grants a security
            interest
            in, and sells, transfers, assigns and sets over, to Bank, its successors
            and
            assigns, all of Borrower's title and interest in and to, and Borrower's
            rights,
            benefits and privileges under, each Construction Contract upon the following
            terms and conditions:

           

          (a)  Borrower
            represents and warrants that the copy of each Construction Contract the
            Borrower
            has furnished or will furnish to Bank is or will be (as applicable) a
            true and
            complete copy thereof, including all amendments thereto, if any, and
            that
            Borrower's interest therein is not subject to any claim, setoff or
            encumbrance.

           

          (b)  Neither
            this assignment nor any action by Bank shall constitute an assumption
            by Bank of
            any obligations under any Construction Contract, and Borrower shall continue
            to
            be liable for all obligations of Borrower thereunder, Borrower hereby
            agreeing
            to perform all of its obligations under each Construction Contract. Borrower
            agrees to indemnify and hold Bank harmless against and from any loss,
            cost,
            liability or expense (including attorneys' fees) resulting from any failure
            of
            Borrower to so perform.

           

          (c)  Bank
            shall have the right at any time (but shall have no obligation) to take
            in its
            name or in the name of Borrower such action as Bank may at any time determine
            to
            be reasonably necessary or advisable to cure any default by Borrower
            under any
            Construction Contract or to protect the rights of Borrower or Bank thereunder.
            Bank shall incur no liability if any action so taken by it or in its
            behalf
            shall prove to be inadequate or invalid, and Borrower agrees to indemnify
            and
            hold Bank harmless against and from any loss, cost, liability or expense
            (including reasonable attorneys' fees) incurred in connection with any
            such
            action.

           

          (d)  Effective
            automatically upon and at all times during the continuance of an Event
            of
            Default, Borrower hereby irrevocably constitutes and appoints Bank as
            Borrower's
            attorney-in-fact, in Borrower's or Bank's name, to enforce all rights
            of
            Borrower under each Construction Contract. Such appointment is coupled
            with an
            interest and is therefore irrevocable.

           

          (e)  Prior
            to
            the occurrence of an Event of Default, Borrower shall have the right
            to exercise
            its rights as owner under each Construction Contract, provided that Borrower
            shall not cancel or amend any Construction Contract or do or suffer to
            be done
            any act which would impair the security constituted by this assignment
            without
            the prior written consent of Bank.

           

          (f)  This
            assignment shall inure to the benefit of Bank and its successors and
            assigns,
            any purchaser upon foreclosure of the Deed of Trust, any receiver in
            possession
            of the Mortgaged Property and any entity affiliated with Bank which assumes
            Bank's rights and obligations under this Agreement.

           

          4.17  Assignment
            of Plans.
            Borrower, as additional security for the payment and performance of the
            covenants, agreements and obligations of Borrower to Bank arising under
            this
            Agreement and under all of the Loan Documents, hereby grants a security
            interest
            in, and sells, transfers, assigns and sets over, to Bank, its successors
            and
            assigns, all of Borrower's title and interest in and to, and Borrower's
            rights,
            benefits and privileges under, the Plans and hereby represents and warrants
            to
            and agrees with Bank as follows:

           

          (a)  Each
            schedule of the Plans delivered or to be delivered to Bank is and shall
            be a
            complete and accurate description of the Plans.

           

          (b)  The
            Plans
            are and shall be complete and adequate for the construction of the Houses
            and
            there have been no modifications thereof except as described in such
            schedule.
            Subject to Section 4.13(i)
            of this
Addendum
            2,
            the
            Plans shall not be modified without the prior written consent of
            Bank.

           

          (c)  Bank
            may
            use the Plans for any purpose relating to the Houses, including inspections
            of
            construction and the completion of the Houses.

           

          (d)  Bank's
            acceptance of this assignment shall not constitute approval of the Plans
            by
            Bank. Bank has no liability or obligation in connection with the Plans
            and no
            responsibility for the adequacy thereof or for the construction of the
            Houses
            contemplated by the Plans. Bank has no duty to inspect the Houses, and
            if Bank
            should inspect the Houses, Bank shall have no liability or obligation
            to
            Borrower or any other party arising out of such inspection. No such inspection
            nor any failure by Bank to make objections after any such inspection
            shall
            constitute a representation by Bank that the Houses are in accordance
            with the
            Plans or any other requirement or constitute a waiver of Bank's right
            thereafter
            to insist that the Houses be constructed in accordance with the Plans
            or any
            other requirement.

           

          (e)  This
            assignment shall inure to the benefit of Bank and its successors and
            assigns,
            any purchaser upon foreclosure of the Deed of Trust, any receiver in
            possession
            of the Mortgaged Property and any entity affiliated with Bank which assumes
            Bank's rights and obligations under this Agreement.

           

          

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          ADDENDUM
            3

           

          RELEASE
            PROVISIONS

           

          (Terms
            used with initial capital letters in this Addendum
            3
            that are
            not specifically defined in this Agreement shall have the meanings ascribed
            to
            them in the Deeds of Trust.)

           

          1. Release
            Prices.
            

           

          (a) Primary
            Collateral.
            The
            Partial Release Price for Primary Collateral shall be as follows: The
            payment to
            Bank of a Partial Release Price equal to one hundred percent (100%) of
            the Net
            Proceeds, which Net Proceeds shall in no event be less than (i) eighty-five
            percent (85%) of the discounted appraised value (hereinafter referred
            to as
“Appraised
            Value”)
            of
            that portion of the Primary Collateral other than Developed Lots which
            is being
            released and (ii) with respect to that portion of the Primary Collateral
            consisting of Developed Lots, one hundred percent (100%) of the discounted
            Appraised Value of that portion of the Primary Collateral for each Developed
            Lot
            being released. See Addendum
            3-1
            attached
            hereto for the schedule of Appraised Value. 

           

          (b) Other
            Collateral.
            The
            Partial Release Price for Other Collateral shall be as follows: The payment
            to
            Bank of a Partial Release Price equal to one hundred percent (100%) of
            the Net
            Proceeds, which Net Proceeds shall in no event be less than eighty-five
            percent
            (85%) of the assigned value (hereinafter referred to as “Assigned
            Value”)
            established by Bank and Borrower for each of the Tracts of Other Collateral,
            which value shall (i) be established based on values for similar properties
            which have been appraised as part of the Primary Collateral, and (ii)
            be
            determined on a per square foot basis. See Addendum
            3-2
            attached
            hereto for the schedule of Assigned Value. 

           

          (c) MUD
            Reimbursables, Credit Banks, Etc..
            The
            Partial Release Price for MUD Reimburseables, Credit Banks, notes receivable,
            accounts receivable and Partnership Distributions (as defined in Section
            2.18
            of
Addendum
            2
            hereof)
            shall be equal to one hundred percent (100%) of the Net Proceeds.

           

          (d) Related
            Party Sales.
            The
            foregoing notwithstanding, the Partial Release Price for Primary Collateral
            or
            Other Collateral for sale to a Related Party shall be as follows: The
            payment of
            a Partial Release Price equal to one hundred percent (100%) of all cash
            proceeds
            received by Borrower, which cash proceeds shall in no event be less than
            the
            greater of (i) fifty percent (50%) of the Appraised Value for Primary
            Collateral
            or fifty percent (50%) of the Assigned Value for Other Collateral, as
            applicable, of the Primary Collateral or Other Collateral being released;
            or
            (ii) fifty percent (50%) of the gross sales price paid by the Related
            Party. The
            gross sales price (i.e., cash proceeds and all other considerations)
            for the
            sale to the Related Party will not be less than eighty-five percent (85%)
            of the
            applicable Appraised Value or Assigned Value.

           

          (f) Bank
            Financed Projects.
            The
            foregoing notwithstanding, no release price will be required for the
            release of
            either Primary Collateral or Other Collateral from the lien of the Deeds
            of
            Trust in the event such Primary Collateral or Other Collateral is the
            subject of
            additional project financing by Bank pursuant to a separate loan between
            any
            Loan Party and Bank, and only so long as (i) in connection with such
            loan, Bank
            has a priority lien and security interest in such Primary Collateral
            or Other
            Collateral securing repayment of such loan (subject only to Liens in
            favor of
            Bank), (ii) such Loan Party owns 100% of the Primary Collateral or Other
            Collateral which is the subject of such separate loan, and any and all
            equity in
            the project is funded solely by Borrower without any third-parties having
            any
            ownership or equity interest therein, (iii) such loan is cross-defaulted
            and
            cross collateralized with the Loan to the extent required by Bank; and
            (iv) any
            ownership interest of Borrower in a Related Party into which Primary
            Collateral
            or Other Collateral has been transferred will, if required by Bank, be
            assigned
            to Bank as security for the Indebtedness, and Borrower agrees to execute
            and
            deliver to Bank an Assignment of Partnership Interest in such form and
            content
            as Bank may require. If the Land sought to be released as provided above
            is
            Primary Collateral, then such Primary Collateral shall be removed from
            the
            borrowing base (i.e., such Primary Collateral shall be removed from the
            Borrowing Base Limitation calculations for purposes of determining the
            Maximum
            Loan Amount allowed hereunder). Except as modified hereby, all of the
            release
            provisions (including, without limitation, the provisions requiring payment
            of a
            release price) as set forth in the Loan Agreement will continue to apply
            with
            respect to any release of Primary Collateral or Other Collateral.

           

          (e) Calera
            Court Lots.
            As each
            Calera Court Lot is transferred into the Calera Court Construction Loan,
            an
            amount equal to $58,597 for such Calera Court Lot shall be deemed outstanding
            under the Calera Court Construction Loan for purposes of calculating
            the amount
            advanced against the Calera Court Sublimit.

           

          2. Release
            Conditions.
            Notwithstanding anything contained herein to the contrary, the location
            and
            configuration of the tract or tracts, requested to be released (herein
            called
“Tract”
            or
“Tracts”)
            shall
            be reasonably satisfactory to Bank and no Partial Release shall result
            in any
            remaining Tract being without access to a public street (which may be
            via a
            private drive or private street providing perpetual means of access).
            Any and
            all Partial Releases shall be in accordance with the following
            procedures:

           

          (a) Borrowers'
            request for a Partial Release shall be given to Bank and accompanied
            by (i) the
            legal description of the Tract or Tracts to be released, together with
            a draft
            closing statement prepared for the proposed sale; (ii) information necessary
            to
            process the request for Partial Release, including whether the property
            to be
            released is Primary Collateral or Other Collateral and whether it is
            being sold
            to a Related Party; (iii) any appraisal reconciliation of value information
            as
            may be required by Bank, together with a reimbursement of the cost of
            same,
            which cost shall not exceed $750.00; and (iv) the name and address of
            the title
            company, if any, to whose attention the Partial Release Instrument (as
            hereinafter defined) should be directed, numbers that should be referenced
            (order number, loan number, etc.) and the date when such Partial Release
            is to
            be made. Borrowers shall also specify the name and address of the prospective
            purchaser and the intended use of the or Tract to be released and shall
            supply
            such other documents and information concerning such Partial Release
            as Bank may
            reasonably request.

           

          (b) Within
            five (5) days after receipt of such request, and in accordance with and
            pursuant
            to the terms and conditions of this Addendum 3 and the other applicable
            provisions of this Agreement, Bank shall execute an instrument effecting
            such
            Partial Release (“Partial
            Release Instrument”)
            and
            deliver same to the title company so specified; provided that all costs
            and
            expenses of Bank associated with such Partial Release (including, but
            not
            limited to, reasonable legal fees) shall be paid by Borrowers. Borrowers
            shall
            also obtain all title insurance endorsements reasonably required by Bank
            in
            connection with such Partial Release.

           

          (c) The
            execution and delivery of such Partial Release Instrument shall not affect
            any
            of Borrowers' obligations under the Loan Documents, except that the payment
            of
            the Partial Release Price must be actually received by Bank. Regardless
            of the
            time such Partial Release is executed, delivered and recorded, the payment
            made
            by Borrowers to Bank in respect to such Partial Release shall be credited
            against the Indebtedness in accordance with the terms of this Agreement
            only
            upon receipt by Bank of the Partial Release Price. The Partial Release
            Instrument shall be delivered, in escrow, by Bank to the title company
            so
            designated, to be held, released, delivered and recorded in accordance
            with
            Bank’s escrow instructions, which shall require payment, in cash, of the Partial
            Release Price to Bank prior to delivery and recordation of the Partial
            Release
            Instrument.

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          
            	
                    Addendum
                      3-1 (b) Revised December 31, 2004

                  
	
                    Primary
                      Collateral - Barton Creek

                  
	
                    Schedule
                      of Release Prices

                  
	
                    Stratus
                      Properties Inc.

                  
	 	 	 	 	 	 	 	 	 	 	 	
                    Inputs

                  	
                    Report
                      for month ending: 

                  
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                    Actual

                  
	
                    Tract
                      Description1

                  	
                    Release
                      Price Requirements2

                  	
                     

                  	
                    Quantity

                  	
                     

                  	
                     

                  	 	
                     

                  	 	
                    Rel.
                      Pty

                  
	
                    Ref
                      #

                  	
                    Land
                      Use

                  	
                    Projected

                  	
                    Gross
                      Area

                  	
                    Appraised
                      Value 4

                  	
                    Min.
                      Net Proceeds Req'd

                  	
                     

                  	
                    Released

                  	
                    Release
                      Price Achieved

                  	
                    Net
                      Proceeds

                  	
                    %
                      of

                  	
                    Date

                  	
                    Transaction?

                  
	
                     

                  	
                    Type

                  	
                    Unit
                      Density

                  	
                    (Acres)

                  	
                    Unit
                      Price
                      3

                  	
                    Extended
                      Amount 2

                  	
                    (50%
                      for rel. pty.; 85% all others)

                  	
                     

                  	
                    (Gross
                      Acres)

                  	
                    Unit
                      Price

                  	
                    Extended
                      Amount 

                  	
                    at
                      Closing

                  	
                    Value

                  	
                    Released

                  	
                    (Yes/No)

                  
	
                     

                  	
                     

                  	
                     

                  	
                     

                  	 	
                     

                  	 	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	 	
                     

                  	 	
                     

                  
	
                    BCN1

                  	
                    Retail
                      - Sm

                  	
                    14,000
                      SF

                  	
                    2.6683
                      

                  	
                    $
                      87,600 

                  	
                    $
                      233,700 

                  	
                    85%

                  	
                    $
                      199,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCN1

                  	
                    Single
                      Family

                  	
                    1
                      lot

                  	
                    1.3836
                      

                  	
                    $
                      13,600 

                  	
                    $
                      18,800 

                  	
                    85%

                  	
                    $
                      16,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCN16,
                      Sect. E

                  	
                    Ind.
                      Living

                  	
                    1
                      ea

                  	
                    27.8000
                      

                  	
                    $
                      81,800 

                  	
                    $
                      2,274,000 

                  	
                    85%

                  	
                    $
                      1,933,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCN16,
                      Sect. E

                  	
                    Retail
                      - Sm

                  	
                    27,800
                      SF

                  	
                    4.0360
                      

                  	
                    $
                      86,000 

                  	
                    $
                      347,100 

                  	
                    85%

                  	
                    $
                      295,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCN13,
                      Sect. ABC

                  	
                    Ind.
                      Living

                  	
                    1
                      ea

                  	
                    10.2000
                      

                  	
                    $
                      81,800 

                  	
                    $
                      834,400 

                  	
                    85%

                  	
                    $
                      709,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCN14,
                      Sect. ABC 4

                  	
                    Single
                      Family

                  	
                    47
                      lots

                  	
                    120.2450
                      

                  	
                    $
                      72,772 

                  	
                    $
                      3,420,300 

                  	
                    85%

                  	
                    $
                      2,907,000 

                  	
                     

                  	
                    18.0000
                      

                  	
                    $
                      196,120 

                  	
                    $
                      3,530,200 

                  	
                    $
                      3,165,571 

                  	
                    92.6%

                  	
                    Note
                      5

                  	
                    No

                  
	
                    Pod
                      #9, Sect. ABC

                  	
                    Single
                      Family

                  	
                    1
                      lot

                  	
                    82.8600
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    85%

                  	
                    $
                      - 

                  	
                     

                  	
                    82.8600
                      

                  	
                    $
                      21,120 

                  	
                    $
                      1,750,000 

                  	
                    $
                      1,647,804 

                  	
                    #DIV/0!

                  	
                    29-Sep-04

                  	
                    No

                  
	
                    BCN17,
                      Sect. E

                  	
                    Retail
                      - Sm

                  	
                    27,800
                      SF

                  	
                    4.0960
                      

                  	
                    $
                      87,600 

                  	
                    $
                      358,800 

                  	
                    85%

                  	
                    $
                      305,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS1,
                      Sect. H - Calera Drive

                  	
                    Single
                      Family

                  	
                    53
                      lots

                  	
                    70.0000
                      

                  	
                    $
                      13,600 

                  	
                    $
                      952,000 

                  	
                    85%

                  	
                    $
                      809,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS1,
                      Sect. H

                  	
                    Single
                      Family

                  	
                    74
                      lots

                  	
                    124.9190
                      

                  	
                    $
                      13,600 

                  	
                    $
                      1,698,900 

                  	 	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	 	
                     

                  
	
                    BCS2,
                      Sect. I

                  	
                    Single
                      Family

                  	
                    125
                      lots

                  	
                    288.2000
                      

                  	
                    $
                      13,600 

                  	
                    $
                      3,919,500 

                  	
                    85%

                  	
                    $
                      3,332,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS2,
                      Sect. I

                  	
                    Single
                      Family

                  	
                    40
                      lots

                  	
                    79.4240
                      

                  	
                    $
                      13,600 

                  	
                    $
                      1,080,200 

                  	
                    85%

                  	
                    $
                      918,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS4,
                      Sect. K

                  	
                    Single
                      Family

                  	
                    54
                      lots

                  	
                    113.7450
                      

                  	
                    $
                      13,600 

                  	
                    $
                      1,546,900 

                  	
                    85%

                  	
                    $
                      1,315,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS5,
                      Sect. L

                  	
                    Single
                      Family

                  	
                    222
                      lots

                  	
                    164.1300
                      

                  	
                    $
                      13,600 

                  	
                    $
                      2,232,200 

                  	
                    85%

                  	
                    $
                      1,897,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS7,
                      Sect. N

                  	
                    Retail
                      - Lg

                  	
                    1,500,000
                      SF

                  	
                    317.3350
                      

                  	
                    $
                      12,900 

                  	
                    $
                      4,093,600 

                  	
                    85%

                  	
                    $
                      3,480,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS7,
                      Sect. N

                  	
                    Multi-Family

                  	
                    1,860
                      units

                  	
                    300.0000
                      

                  	
                    $
                      28,300 

                  	
                    $
                      8,490,000 

                  	
                    85%

                  	
                    $
                      7,217,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS8,
                      Sect. O

                  	
                    Single
                      Family

                  	
                    237
                      lots

                  	
                    217.2250
                      

                  	
                    $
                      13,600 

                  	
                    $
                      2,954,300 

                  	
                    85%

                  	
                    $
                      2,511,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    Byram
                      & Travis Cook Outparcels

                  	
                    Outparcels

                  	
                    3
                      ea

                  	
                    30.7850
                      

                  	
                    $
                      58,900 

                  	
                    $
                      1,813,200 

                  	
                    85%

                  	
                    $
                      1,541,000 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    0.0%

                  	 	
                     

                  
	
                    BCS,
                      N/A

                  	
                    Roadways

                  	
                    N/A

                  	
                    6.4400
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    85%

                  	
                    $
                      - 

                  	
                     

                  	
                    0.0000
                      

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    $
                      - 

                  	
                    N/A

                  	 	
                     

                  
	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  
	
                     

                  	 	
                    Subtotal:

                  	
                    1965.4919
                      

                  	
                    Subtotal:

                  	
                    $
                      36,267,900 

                  	
                     

                  	 	
                     

                  	
                     

                  	 	
                     

                  	
                     

                  	 	 	
                     

                  
	
                     

                  	 	
                    Less
                      Releases:

                  	
                    (82.8600)

                  	
                    Less
                      improvemts BCN14-Wimb Ph 2:

                  	
                    (1,785,000)

                  	
                     

                  	 	
                     

                  	
                     

                  	 	
                     

                  	
                     

                  	 	 	
                     

                  
	
                     

                  	
                     

                  	
                    Total:

                  	
                    1882.6319
                      

                  	
                    Total:
                      

                  	
                    $
                      34,482,900 

                  	
                     

                  	
                    $
                      29,384,000 

                  	
                     

                  	
                    100.8600

                  	
                    $
                      - 

                  	
                    $
                      5,280,200 

                  	
                    $
                      4,813,375 

                  	
                     

                  	
                     

                  	
                     

                  
	
                    1.
                      Source:p. 71, December 31, 2004 appraisal by Dugger, Canaday,
                      Grafe, Inc.
                      ($34.5M value)

                  	 	 	 	 	 	 	 	 	 	 	 
	
                    2.
                      Dollar amount rounded to the nearest $500.

                  	 	 	 	 	 	 	 	 	
                    Summary
                      by Land Use Type

                  	 	 	 
	
                    3.
                      Source:Summary Land Use Table on this sheet & Separate Release Price
                      Derivation Worksheet.

                  	 	 	 	 	 	
                    Land
                      Use Type

                  	
                    Gross
                      Area (Acres)

                  	
                    Value/Acre2

                  	 	 	 
	
                    4.
                      BCN14, Sect ABC, Wimberly Phase 2 appraised value is $13,600/acre
                      plus
                      $1,785,000 for improvements.

                  	 	 	 	 	
                    Multi-Family

                  	
                    300.0000
                      

                  	
                    28,300
                      

                  	 	 	 
	
                    5.
                      Lots sold as follows:

                  	 	 	 	 	 	 	 	 	 	
                    Independent
                      Living

                  	
                    38.0000
                      

                  	
                    81,800
                      

                  	 	 	 
	
                    December-04

                  	
                    6

                  	 	 	
                     

                  	 	 	
                    Retail
                      - Sm

                  	
                    10.8003
                      

                  	
                    87,600
                      

                  	 	 	 
	
                    February-05

                  	
                    1

                  	 	 	 	 	 	 	 	 	
                    Retail
                      - Lg

                  	
                    317.3350
                      

                  	
                    12,900
                      

                  	 	 	 
	
                    April-05

                  	
                    5

                  	 	 	 	 	 	 	 	 	
                    Single
                      Family

                  	
                    1,179.2716
                      

                  	
                    13,600
                      

                  	 	 	 
	
                    May-05

                  	
                    2

                  	 	 	 	 	 	 	 	 	
                     

                  	
                     

                  	
                     

                  	 	 	 
	
                    July-05

                  	
                    3

                  	 	 	 	 	 	 	 	 	
                    Outparcels

                  	
                    30.7850
                      

                  	
                    58,900
                      

                  	 	 	 
	
                    August-05

                  	
                    1

                  	 	 	 	 	 	 	 	 	
                    Roadways

                  	
                    6.440
                      

                  	
                    -
                      

                  	 	 	 
	 	
                    18

                  	 	 	 	 	 	 	 	 	
                    Total/Average1:

                  	
                    1,882.6319
                      

                  	
                    $
                      18,300 

                  	 	 	 
	 	 	 	 	 	 	 	 	 	 	
                    1
                      Average
                      Value/Acre includes Open/Other acreage.

                  	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

          

          

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          EXHIBIT
            A

           

          Primary
            Collateral - Legal Description

           

          

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          EXHIBIT
            B

           

          Other
            Collateral - Legal Description

           

          

          None.

           

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          EXHIBIT
            C

          Form
            of Borrowing Base Certificate

           

          
            	
                    Stratus
                      Properties, Inc.

                  	 	 	 	 	 	 	 	
                    Date:

                  
	
                    Borrowing
                      Base Summary

                  	 	 	 	 	 	 
	
                    As
                      of 6/30/05

                  	 	 	 	 	 	 	 	 
	
                     

                  	
                     

                  	
                    Appraised
                      

                  	
                     

                  	
                    Advance

                  	
                     

                  	
                     

                  	 	 
	
                    Borrowing
                      Base Assets

                  	
                     

                  	
                    Value

                  	
                     

                  	
                    Rate

                  	
                     

                  	
                    Availability

                  	 	 
	
                     

                  	 	 	 	 	 	
                     

                  	 	 
	
                    Unimproved
                      Land

                  	 	
                    $
                      57,800,000 

                  	 	
                    45%

                  	 	
                    $
                      26,010,000 

                  	 	 
	
                     

                  	 	 	 	 	 	
                     

                  	 	 
	
                    Discounted
                      Value of MUD

                  	 	 	 	 	 	
                     

                  	 	 
	
                    Receivables

                  	 	
                    $
                      21,119,000 

                  	 	
                    45%

                  	 	
                    $
                      9,503,550 

                  	 	 
	
                     

                  	 	 	 	 	 	
                     

                  	 	 
	
                    Discounted
                      Value of Credit

                  	 	 	 	 	 	
                     

                  	 	 
	
                    Bank
                      Receivables

                  	 	
                    $
                      6,521,000 

                  	 	
                    45%

                  	 	
                    $
                      2,934,450 

                  	 	 
	
                     

                  	 	 	 	 	 	
                     

                  	 	 
	
                    Land
                      Under Development

                  	 	
                    $
                      -
                      

                  	 	
                    75%

                  	 	
                    $
                      -
                      

                  	 	 
	
                     

                  	 	 	 	 	 	
                     

                  	 	 
	
                    Finished
                      Lots

                  	 	
                    $
                      18,066,000 

                  	 	
                    75%

                  	 	
                    $
                      13,549,500 

                  	 	 
	
                    TOTAL

                  	
                     

                  	
                    $
                      103,506,000 

                  	
                     

                  	
                     

                  	
                     

                  	
                    $
                      51,997,500 

                  	 	 
	
                    Borrowing
                      Base Detail

                  	 	 	 	 	 	 	 	 
	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                    Date
                      added

                  	
                     

                  	
                    Land
                      Acreage / 

                  	
                     

                  	
                     

                  
	
                     

                  	
                     

                  	
                    Value

                  	
                     

                  	
                    to
                      Borr. Base

                  	
                     

                  	
                    #
                      of Lots 

                  	
                     

                  	
                    Project
                      Details

                  
	
                    Unimproved
                      Land Assets:

                  	 	 	 	 	 	 	 	
                     

                  
	
                    Circle
                      C

                  	 	
                    $
                      12,800,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    463.84
                      

                  	 	
                    Planned
                      XX lot development.

                  
	
                    Barton
                      Creek

                  	 	
                    $
                      32,600,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    1,851.85
                      

                  	 	
                    Planned
                      XX lot development.

                  
	
                    Lantana

                  	 	
                    $
                      12,400,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    315.50
                      

                  	 	
                    Planned
                      XX lot development.

                  
	
                    Subtotal

                  	 	
                    $
                      57,800,000 

                  	 	 	 	
                    2,631.19
                      

                  	 	
                     

                  
	
                     

                  	 	 	 	 	 	 	 	
                     

                  
	
                    MUD
                      & Credit Bank A/R:

                  	 	
                    $
                      27,640,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    N/A

                  	 	
                    Discounted
                      at 6% over 6 years.

                  
	
                     

                  	 	 	 	 	 	 	 	
                     

                  
	
                    Land
                      Under Development:

                  	 	
                    $
                      -
                      

                  	 	
                    N/A

                  	 	
                    N/A

                  	 	
                    N/A

                  
	
                     

                  	 	 	 	 	 	 	 	
                     

                  
	
                    Finished
                      Lots:

                  	 	 	 	 	 	 	 	
                     

                  
	
                    Mirador

                  	 	
                    $
                      3,776,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    13

                  	 	
                    A
                      29 lot development. Absorption = x

                  
	
                    Calera
                      Court

                  	 	
                    $
                      784,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    9

                  	 	
                    A
                      17 lot development. Absorption = x

                  
	
                    Escala

                  	 	
                    $
                      1,878,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    6

                  	 	
                    A
                      54 lot development. Absorption = x

                  
	
                    Wimberly
                      Phase II

                  	 	
                    $
                      3,138,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    31

                  	 	
                    A
                      31 lot development. Absorption = x

                  
	
                    Calera
                      Drive

                  	 	
                    $
                      8,490,000 

                  	 	
                    Jan
                      of 2005

                  	 	
                    53

                  	 	
                    A
                      53 lot development. Absorption = x

                  
	
                    Subtotal

                  	 	
                    $
                      18,066,000 

                  	 	 	 	
                    112

                  	 	
                     

                  
	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  	
                     

                  

          

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          EXHIBIT
            D

           

          MUD
            Reimbursables

           

          
            	1.  	
                    That
                      certain Utility
                      Construction Agreement Between Travis County Municipal Utility
                      District
                      No. 3 and FM Properties Operating Co.,
                      executed to be effective as of November 30, 1995, as amended
                      by that
                      certain First
                      Amendment to Utility Construction Agreement Between Travis
                      County
                      Municipal Utility District No. 3 and FM Properties Operating
                      Co.,
                      executed to be effective as of August 16,
                      1999.

                  

          

           

          
            	2.  	
                    That
                      certain Utility
                      Construction Agreement Between Travis County Municipal Utility
                      District
                      No. 4 and FM Properties Operating Co.,
                      executed to be effective as of November 20, 1995, as amended
                      by that
                      certain First
                      Amendment to Utility Construction Agreement Between Travis
                      County
                      Municipal Utility District No. 4 and FM Properties Operating
                      Co.,
                      executed to be effective as of August 16,
                      1999.

                  

          

           

          
            	3.  	
                    That
                      certain Utility
                      Construction Agreement Between Travis County Municipal Utility
                      District
                      No. 5 and FM Properties Operating Co.,
                      executed to be effective as of November 27, 1995, as amended
                      by that
                      certain First
                      Amendment to Utility Construction Agreement Between Travis
                      County
                      Municipal Utility District No. 5and FM Properties Operating
                      Co.,
                      executed to be effective as of August 19,
                      1999.

                  

          

           

          
            	4.  	
                    That
                      certain Utility
                      Construction Agreement Between Travis County Municipal Utility
                      District
                      No. 6 and FM Properties Operating Co.,
                      executed to be effective as of November 28, 1995, as amended
                      by that
                      certain First
                      Amendment to Utility Construction Agreement Between Travis
                      County
                      Municipal Utility District No. 6 and FM Properties Operating
                      Co.,
                      executed to be effective as of August 17,
                      1999.

                  

          

           

          
            	5.  	
                    That
                      certain Utility
                      Construction Agreement Between Travis County Municipal Utility
                      District
                      No. 7 and FM Properties Operating Co.,
                      executed to be effective as of November 30, 1995, as amended
                      by that
                      certain First
                      Amendment to Utility Construction Agreement Between Travis
                      County
                      Municipal Utility District No. 7 and FM Properties Operating
                      Co.,
                      executed to be effective as of August 25,
                      1999.

                  

          

           

          
            	6.  	
                    That
                      certain Utility
                      Construction Agreement Between Travis County Municipal Utility
                      District
                      No. 8 and FM Properties Operating Co.,
                      executed to be effective as of November 28, 1995, as amended
                      by that
                      certain First
                      Amendment to Utility Construction Agreement Between Travis
                      County
                      Municipal Utility District No. 8 and FM Properties Operating
                      Co.,
                      executed to be effective as of August 31,
                      1999.

                  

          

           

          
            	7.  	
                    That
                      certain Utility
                      Construction Agreement Between Travis County Municipal Utility
                      District
                      No. 9 and FM Properties Operating Co.,
                      executed to be effective as of November 29, 1995, as amended
                      by that
                      certain First
                      Amendment to Utility Construction Agreement Between Travis
                      County
                      Municipal Utility District No. 9 and FM Properties Operating
                      Co.,
                      executed to be effective as of August 25,
                      1999.

                  

          

           

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          EXHIBIT
            E

           

          Request
            for Advance

           

          The
            undersigned hereby requests COMERICA BANK ("Bank")
            to
            make an Advance under the Loan to the undersigned on _________________,
            in the
            amount of ________________________ Dollars ($_________) under the Loan
            Agreement
            dated as of September 30, 2005, by and between the undersigned and Bank
            (the
            "Credit
            Agreement").

           

          The
            undersigned represent, warrant and certify that no Default or Event of
            Default
            has occurred and is continuing under the Loan Agreement, and none will
            exist
            upon the making of the Advance requested hereunder. The undersigned further
            certify that upon making the Advance in the amount of the sum requested
            hereunder, the aggregate principal amount outstanding under the Note
            will not
            exceed the Maximum Loan Amount.

           

          The
            undersigned hereby authorize Bank to disburse the proceeds of the Advance
            being
            requested by this Request for Advance by crediting the Special Account
            of the
            undersigned with Bank separately designated by the undersigned or as
            the
            undersigned and Bank may otherwise agree.

           

          Capitalized
            terms used but not otherwise defined herein shall have the respective
            meanings
            given to them in the Loan Agreement.

           

          Dated
            this ___ day of ______________, __________.

           

          STRATUS
            PROPERTIES INC.,
            

          a
            Delaware corporation

          

          

          By:      

          John
            E.
            Baker, Senior Vice President

          

          STRATUS
            PROPERTIES OPERATING CO., L.P.,
            a
            Delaware limited partnership

          

          
            	 	
                    By:

                  	
                    STRS
                      L.L.C., a Delaware limited liability company, General
                      Partner

                  

          

          

          
            	 	
                    By:

                  	
                    Stratus
                      Properties Inc., a Delaware corporation, its General
                      Partner

                  

          

          

          

          By:     

          John
            E.
            Baker, 

          Senior
            Vice President

          

          CIRCLE
            C LAND, L.P.,
            

          a
            Texas
            limited partnership

          

          
            	 	
                    By:
                      

                  	
                    Circle
                      C GP, L.L.C., a Delaware limited liability company, General
                      Partner

                  

          

          

          
            	 	
                    By

                  	
                    Stratus
                      Properties Inc., a Delaware corporation, Sole
                      Member

                  

          

          

          By:     

          John
            E.
            Baker, 

          Senior
            Vice President

          

          AUSTIN
            290 PROPERTIES, INC.,
            

          a
            Texas
            corporation

          

          

          By:       

          John
            E.
            Baker, Senior Vice President

          

          CALERA
            COURT, L.P. a
            Texas
            limited partnership

          

          
            	 	
                    By:

                  	
                    Calera
                      Court Management, L.L.C., a Texas limited liability company,
                      its general
                      partner

                  

          

          

          
            	 	
                    By:

                  	
                    Stratus
                      Properties Operating Co., L.P., a Delaware limited partnership,
                      its
                      Manager

                  

          

          

          
            	 	
                    By:

                  	
                    STRS
                      L.L.C., a Delaware limited liability company, its general
                      partner

                  

          

          

          
            	 	
                    By:

                  	
                    Stratus
                      Properties Inc., a Delaware corporation, its
                      Manager

                  

          

          

          

          By:     

                         
            John E. Baker, 

                        
            Senior Vice President

          

          
 

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          EXHIBIT
            F

           

          Form
            of Compliance Certificate

           

          This
            Compliance Certificate is executed and delivered to Comerica Bank ("Bank")
            by
            Stratus Properties Inc., Stratus Properties Operating Co, L.P., Circle
            C Land,
            L.P., and Austin 290 Properties, Inc. ("Borrower"),
            this
            _____ day of ______________, _____. All capitalized terms used but not
            defined
            herein, shall have the meanings given to such terms in that certain Loan
            Agreement, dated as of September 30, 2005, between Bank and Borrower
            (as
            renewed, extended, modified and restated from time to time, the "Loan
            Agreement").
            The
            undersigned hereby certifies to Bank as follows:

           

          (1) The
            undersigned are authorized to make and deliver this Certificate.

           

          (2) The
            undersigned have reviewed the provisions of the Loan Agreement and confirms
            that, as of the date hereof:

           

          (a) the
            representations and warranties contained in Section
            3
            of the
            Loan Agreement are true and correct in all material respects on and as
            of the
            date hereof with the same force and effect as though made on and as of
            the date
            hereof;

           

          (b) no
            Default or Event of Default has occurred and is continuing or is imminent,
            and
            to Borrower's best knowledge after diligent inquiry, Borrower has complied
            with
            all of the terms, covenants and conditions set forth in the Loan
            Agreement.

           

          (c) The
            Tangible Net Worth of Borrower on a consolidated basis as of the calendar
            quarter ended _____________ is __________________.

           

          (d) The
            Debt-to-Tangible Net Worth Ratio of Borrower on a consolidated basis
            as of the
            calendar quarter ended _____________ is __________________.

           

          STRATUS
            PROPERTIES INC.,
            

          a
            Delaware corporation

          

          

          By:      

          John
            E.
            Baker, Senior Vice President

          

          STRATUS
            PROPERTIES OPERATING CO., L.P.,
            a
            Delaware limited partnership

          

          
            	 	
                    By:

                  	
                    STRS
                      L.L.C., a Delaware limited liability company, General
                      Partner

                  

          

          

          
            	 	
                    By:

                  	
                    Stratus
                      Properties Inc., a Delaware corporation, its General
                      Partner

                  

          

          

          

          By:     

          John
            E.
            Baker, 

          Senior
            Vice President

          

          CIRCLE
            C LAND, L.P.,
            

          a
            Texas
            limited partnership

          

          
            	 	
                    By:
                      

                  	
                    Circle
                      C GP, L.L.C., a Delaware limited liability company, General
                      Partner

                  

          

          

          
            	 	
                    By

                  	
                    Stratus
                      Properties Inc., a Delaware corporation, Sole
                      Member

                  

          

          

          By:     

          John
            E.
            Baker, 

          Senior
            Vice President

          

          AUSTIN
            290 PROPERTIES, INC.,
            

          a
            Texas
            corporation

          

          

          By:       

          John
            E.
            Baker, Senior Vice President

          

          
 

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          SCHEDULE
            3.5

           

          Subsidiaries

           

          

           

          See
            attached.

          

           

           

          

          

          

          

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          SCHEDULE
            3.10

           

          Material
            Litigation

           

          

          None.

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          SCHEDULE
            3.14

           

          Employee
            Benefit Plans

           

          

           

          None.

           

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          SCHEDULE
            3.16

          Environmental
            Disclosures

          

           

          None.

           

          

           

          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

              
              

            

          

          SCHEDULE
            3.19

          Equity
            Ownershipexhibit10_2

     

    Exhibit
      10.2

    

      REVOLVING
        PROMISSORY NOTE

       

      $45,000,000.00
        U.S.

      September
        30, 2005

       

      I.  COVENANT
        TO PAY.

       

      1.1  Promise
        to Pay.
        FOR
        VALUE RECEIVED, STRATUS
        PROPERTIES INC.,
        a
        Delaware corporation, STRATUS
        PROPERTIES OPERATING CO., L.P.,
        a
        Delaware limited partnership, CIRCLE
        C LAND, L.P..,
        a
        Texas limited partnership, and AUSTIN
        290 PROPERTIES, INC.,
        a
        Texas corporation (collectively herein called “Maker”,
        whether one or more), jointly and severally promise to pay to the order of
        COMERICA
        BANK
        [herein,
        together with all subsequent holders of this Revolving Promissory Note
        (“Note”),
        called “Payee”],
        on or
        before the Maturity Date (as herein defined), as hereinafter provided, the
        principal sum of FORTY-FIVE MILLION AND NO/100 DOLLARS ($45,000,000.00),
        or such
        lesser amount as shall equal the aggregate unpaid principal amount of the
        indebtedness evidenced hereby and any additional Advances made by Payee to
        Maker
        hereunder or under the Loan Agreement referred to below, and to pay interest
        on
        the amounts so advanced hereunder, at the office of Payee identified below,
        in
        like money and funds, for the period commencing on the date of each such
        Advance
        until paid, at the rates per annum and on the dates provided
        hereinafter.

       

      1.2  Schedule
        for Payments.
        Maker
        hereby authorizes Payee to endorse on the Schedule annexed to this Note the
        amount of each Advance made to Maker by Payee and all payments of principal
        received by Payee in respect of such Advances, which endorsements shall,
        in the
        absence of manifest error, be conclusive as to the outstanding principal
        amount
        of this Note; provided, however, that the failure to make such notation with
        respect to any such Advance or payment shall not limit or otherwise affect
        the
        obligations of Maker under the Loan Agreement or this Note.

       

      II.  INTEREST
        RATE COMPUTATION.

       

      2.1  Interest
        Rate.
        Pursuant to the terms of this Note, the indebtedness evidenced hereby may
        collectively consist of either zero (0) or one (1) Base Rate Tranches and
        any of
        zero (0), one (1), two (2), three (3), four (4) or five (5) LIBOR Rate Tranches.
        Under no circumstances shall any Tranche at any point in time accrue interest
        at
        a rate in excess of the Maximum Lawful Rate.

       

      2.2  Default
        Rate.
        Upon
        the occurrence and during the continuation of a default in the payment of
        any
        principal or interest obligations hereunder or, otherwise, upon the occurrence
        and during the continuation of any Event of Default (as defined herein),
        at the
        option of Payee, the principal balance of this Note then outstanding shall
        bear
        interest for the period beginning with the date of occurrence of such default
        at
        the Default Rate (as defined herein) until such default or Event of Default
        has
        been cured.

       

      2.3  Definitions.
        As used
        in this Note and the Loan Documents, the following terms shall have the
        respective meanings indicated below:

       

      “Adjusted
        LIBOR Rate”
        shall
        mean, on the applicable Effective Date of a LIBOR Rate Tranche, the rate
        per
        annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined
        by
        Payee to be equal to the quotient of (a) the LIBOR Rate for such LIBOR Rate
        Tranche divided by (b) one minus the Reserve Requirement on the applicable
        Effective Date.

       

      “Advances”
        shall
        mean advances made by Payee to Maker pursuant to the terms of this
        Note.

       

      “Applicable
        Base Rate”
        shall
        mean the lesser of (a) the Base Rate from time to time in effect plus one-half
        of one percent (.5%) per annum, or (b) the Maximum Lawful Rate, but in no
        event
        shall the Applicable Base Rate ever be less than the Floor Rate. Fluctuations
        in
        the Applicable Base Rate shall become effective immediately, without necessity
        for any notice whatsoever.

       

      “Applicable
        LIBOR Rate”
        shall
        mean the lesser of (a) the rate of interest equal to the Adjusted LIBOR Rate
        in
        effect for the subject Interest Period plus two and one-half of one percent
        (2.5%) or (b) the Maximum Lawful Rate, but in no event shall the Applicable
        LIBOR Rate ever be less than the Floor Rate.

       

      “Base
        Rate”
        means
        the rate of interest per annum established from time to time by Payee and
        designated as its base or prime rate, which may not necessarily be the lowest
        interest rate charged by such institution.

       

      “Base
        Rate Tranche”
        shall
        mean that portion of the indebtedness evidenced hereby which, at a particular
        point in time, bears interest at the Applicable Base Rate.

       

      “Business
        Day”
        shall
        mean any day on which commercial banks are not authorized or required to
        close
        in Dallas, Dallas County, Texas, provided that in connection with any LIBOR
        Rate
        Tranche, the term Business Day shall exclude any day on which commercial
        banks
        are not open for dealings in United States Dollar deposits in London,
        England.

       

      “Charges”
        shall
        mean all fees and charges, if any, contracted for, charged, received, taken
        or
        reserved by Payee in connection with the transactions relating to this Note
        and
        the indebtedness evidenced hereby or by the Loan Documents which are treated
        as
        interest under applicable law.

       

      “Default
        Rate”
        shall
        mean the Maximum Lawful Rate or, if no Maximum Lawful Rate exists, the sum
        of
        the Base Rate in effect from day to day plus six percent (6%).

       

      “Effective
        Date”
        shall
        mean the first day of the Interest Period applicable to a LIBOR Rate
        Tranche.

       

      “Event
        of Default”
        shall
        have the same meaning as that indicated for such term in the Loan
        Agreement.

       

      “Floor
        Rate”
        shall
        mean five percent (5.0%) per annum.

       

      “Interest
        Period”
        shall
        mean the period of time commencing on the Effective Date of any LIBOR Rate
        Tranche and ending on the numerically corresponding day in the first, second,
        third, sixth or twelfth calendar month thereafter (as designated by written
        notice by Maker to Payee given consistent with the requirements of Section
        2.6
        or
Section
        2.7
        of this
        Note). With respect to any Interest Period which commences on the last Business
        Day of a particular calendar month (or on any day for which there is no
        numerically corresponding day in the appropriate subsequent calendar month),
        such Interest Period shall end on the last Business Day of the appropriate
        subsequent calendar month. Any Interest Period which would otherwise extend
        beyond the Maturity Date shall expire as of the Maturity Date.

       

      “LIBOR
        Rate”
        shall
        mean the rate per annum (rounded upwards, if necessary, to the nearest 1/16
        of
        1%) quoted by Payee’s LIBOR Lending Office or other reference bank selected by
        Payee at approximately 11:00 a.m. London time (or as soon thereafter as
        practical), two (2) Business Days prior to the Interest Period for the offering
        by the LIBOR Lending Office or such reference bank to leading banks in the
        London interbank market of United States Dollar deposits in immediately
        available funds having a term comparable to the subject Interest Period and
        being in an amount approximating the designated LIBOR Rate Tranche.

       

      “LIBOR
        Rate Tranche”
        shall
        mean any portion of the indebtedness evidenced hereby which, at a particular
        point in time, bears interest at a common Applicable LIBOR Rate.

       

      “LIBOR
        Lending Office”
        shall
        mean Payee’s office (or an affiliate of Payee’s office) located in the Grand
        Cayman Islands, British West Indies, or such other branch of Payee or Payee’s
        affiliate, domestic or foreign, as it may hereafter designate as its LIBOR
        Lending Office.

       

      “Loan
        Agreement”
        shall
        mean that certain Loan Agreement dated of even date herewith by and between
        Maker, as borrower, and Payee, as lender, relative to the indebtedness evidenced
        by this Note and related obligations.

       

      “Maturity
        Date”
        shall
        mean May 30, 2007; subject, however, to the right of acceleration as herein
        provided and as provided elsewhere in the Loan Documents.

       

      “Maximum
        Lawful Rate”
        shall
        mean the maximum lawful rate of interest which may be contracted for, charged,
        taken, received or reserved by Payee in accordance with the applicable laws
        of
        the State of Texas (or applicable United States federal law to the extent
        that
        it permits Payee to contract for, charge, take, receive or reserve a greater
        amount of interest than under Texas law), taking into account all Charges
        made
        in connection with the transaction evidenced by the Note and the other Loan
        Documents. To the extent that Payee is relying on Chapter 303 of the Texas
        Finance Code to determine the Maximum Lawful Rate payable on the Note, Payee
        will utilize the weekly ceiling from time to time in effect as provided in
        such
        Chapter 303, as amended. To the extent United States federal law permits
        Payee
        to contract for, charge, take, receive or reserve a greater amount of interest
        than under Texas law, Payee will rely on United States federal law instead
        of
        such Chapter 303 for the purpose of determining the Maximum Lawful Rate.
        Additionally, to the extent permitted by applicable law now or hereafter
        in
        effect, Payee may, at its option and from time to time, utilize any other
        method
        of establishing the Maximum Lawful Rate under such Chapter 303 or under other
        applicable law by giving notice, if required, to Maker as provided by applicable
        law now or hereafter in effect.

       

      “Regulation
        D”
        shall
        mean Regulation D of the Board of Governors of the Federal Reserve System
        as the
        same may be amended or supplemented from time to time.

       

      “Regulatory
        Change”
        shall
        mean any change after the date hereof in federal, state or foreign laws or
        regulations (including Regulation D) or the adoption or making after such
        date
        of any interpretations, directives or requests (whether or not having the
        force
        of law) by any court or governmental or monetary authority charged with the
        interpretation or administration thereof.

       

      “Reserve
        Requirement”
        shall
        mean, on any day, that percentage (expressed as a decimal fraction) which
        is in
        effect on such day, as provided by the Federal Reserve System for determining
        the maximum reserve requirements generally applicable to financial institutions
        regulated by the Federal Reserve Board comparable in size and type to Payee,
        including, without limitation, basic, supplemental, marginal and emergency
        reserves under Regulation D with respect to “Eurocurrency Liabilities” as
        currently defined in Regulation D, or under any similar or successor regulation
        with respect to Eurocurrency Liabilities or Eurocurrency funding (or other
        category of liabilities which includes deposits by reference to which the
        interest rate on a LIBOR Rate Tranche is determined or any category of
        extensions of credit which includes loans by a non-United States office of
        Payee
        to United States residents).

       

      “Tranche”
        shall
        mean either a Base Rate Tranche or a LIBOR Rate Tranche.

       

      2.4  Interest
        Limitation Recoupment.
        Notwithstanding anything in this Note to the contrary, if at any time (i)
        interest at the Applicable Base Rate or the Applicable LIBOR Rate. (ii) interest
        at the Default Rate, if applicable, and (iii) the Charges computed over the
        full
        term of this Note, exceed the Maximum Lawful Rate, then the rate of interest
        payable hereunder, together with all Charges, shall be limited to the Maximum
        Lawful Rate; provided, however, that any subsequent reduction in the Applicable
        Base Rate or the Applicable LIBOR Rate shall not cause a reduction of the
        rate
        of interest payable hereunder below the Maximum Lawful Rate until the total
        amount of interest earned hereunder, together with all Charges, equals the
        total
        amount of interest which would have accrued at the Applicable Base Rate and/or
        Applicable LIBOR Rate (as appropriate) if such interest rate had at all times
        been in effect.

       

      2.5  Computation
        Period.
        Except
        for the computation of the Maximum Lawful Rate which shall be undertaken
        on the
        basis of a 365 or 366-day year, as the case may be, interest on the indebtedness
        evidenced by this Note shall be computed on the basis of a 360-day year and
        shall accrue on the actual number of days any principal balance hereof is
        outstanding.

       

      2.6  Initial
        Rate Options.
        Maker
        shall deliver to Payee concurrently with the execution of this Note an
        irrevocable written notice of Maker’s election to have the initial Advance bear
        interest from and after the date hereof at either (i) the Applicable Base
        Rate
        or (ii) the Applicable LIBOR Rate. To the extent Maker should elect that
        the
        initial Advance bear interest at the Applicable LIBOR Rate, Maker shall further
        designate a duration for the Interest Period for such Advance (i.e., one,
        two,
        three, six or twelve months). In the event Maker fails to timely deliver
        notice
        to Payee pursuant to this Section
        2.6,
        then
        the initial Advance of this Note shall bear interest at the Applicable Base
        Rate
        until the date specified in any proper written notice received by Payee from
        Maker specifying that Maker elects to designate the Applicable LIBOR Rate
        pursuant to Section
        2.7
        hereof.

       

      2.7  Subsequent
        Rate Options.
        Maker
        shall have the option from time to time during the term of this Note to
        designate and redesignate whether all or certain portions of the outstanding
        principal balance hereof shall bear interest at the Applicable Base Rate
        or the
        Applicable LIBOR Rate, subject to the terms, conditions and requirements
        described below:

       

      (a)  New
        Advances.
        Maker
        shall be entitled to designate any new Advance as either a Base Rate Tranche
        or
        a LIBOR Rate Tranche by delivery to Payee of an irrevocable written notice
        no
        later than three (3) Business Days for a LIBOR Rate Tranche and one (1) Business
        Day for a Base Rate Tranche prior to the date Maker desires such Advance
        to be
        funded specifying Maker’s election to have the new Advance bear interest at
        either the Applicable Base Rate or the Applicable LIBOR Rate. To the extent
        Maker should elect that such Advance bear interest at the Applicable LIBOR
        Rate,
        Maker shall further designate a duration for the Interest Period for such
        Advance (i.e., one, two, three, six or twelve months). In the event Maker
        fails
        to timely deliver notice to Payee properly designating the interest rate
        for
        such Advance, then the Advance shall bear interest at the Applicable Base
        Rate
        until and unless redesignated by Maker pursuant to the provisions
        hereof.

       

      (b)  Redesignation
        of Rate as to Existing Indebtedness.
        Maker
        shall be entitled to redesignate then existing Tranches of the indebtedness
        evidenced hereby as follows:

       

      (1) Redesignating
        a LIBOR Rate Tranche.
        With
        respect to a LIBOR Rate Tranche, no later than three (3) Business Days prior
        to
        the expiration of the then current Interest Period, Maker shall, by irrevocable
        written notice to Payee, elect to either (i) continue to have such Tranche
        bear
        interest at the Applicable LIBOR Rate, or (ii) redesignate such Tranche to
        bear
        interest after the expiration of the then current Interest Period at the
        Applicable Base Rate. To the extent Maker should elect to continue such LIBOR
        Rate Tranche at the Applicable LIBOR Rate, such election shall not be effective
        unless it also designates the duration of the immediately succeeding Interest
        Period (i.e., one, two, three, six or twelve months). To the extent Maker
        should
        fail to timely give irrevocable written notice pursuant to this Subparagraph
        2.7(b)(l),
        then
        Maker shall be deemed to have elected to redesignate the subject Tranche
        so as
        to bear interest at the Applicable Base Rate. Any LIBOR Rate Tranche may
        only be
        redesignated effective upon the expiration of the then current Interest
        Period.

       

      (2) Redesignating
        a Base Rate Tranche.
        With
        respect to the Base Rate Tranche, as such may exist from time to time, Maker
        shall be entitled to elect at any time to redesignate all or any portion
        of such
        Base Rate Tranche so as to bear interest at the Applicable LIBOR Rate by
        giving
        irrevocable written notice to Payee no later than five (5) Business Days
        prior
        to the date Maker desires such election to take effect specifying (i) Maker’s
        election that all or a designated portion (i.e., a dollar amount) of the
        Base
        Rate Tranche be redesignated as a LIBOR Rate Tranche, (ii) the duration of
        the
        immediately succeeding Interest Period for such LIBOR Rate Tranche (i.e.,
        one,
        two, three, six or twelve months), and (iii) the Effective Date for such
        LIBOR
        Rate Tranche (which date shall be a Business Day and shall not be sooner
        than
        five (5) Business Days after receipt by Payee of such notice).

       

      (c)  Conditions
        and Requirements.
        Maker’s
        right to designate, redesignate and continue any Tranche as a LIBOR Rate
        Tranche
        is subject to the following conditions: (i) No Event of Default shall have
        occurred and be continuing; (ii) the minimum amount of any LIBOR Rate Tranche
        shall be $250,000.00; (iii) the last day of any Interest Period shall not
        be
        subsequent in time to the Maturity Date; (iv) no LIBOR Rate Tranche shall
        be
        designated, redesignated or continued if Payee determines that by reason
        of
        circumstances affecting the London interbank market either adequate or
        reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for
        any
        Interest Period, or it becomes impracticable for Payee to obtain funds (by
        purchasing U.S. dollars in the London interbank market) or if Payee reasonably
        determines that the Adjusted LIBOR Rate will not adequately or fairly reflect
        the cost to Payee of maintaining the applicable LIBOR Rate Tranche at such
        rate,
        or if as a result of any Regulatory Change, it shall become unlawful or
        impossible for Payee to maintain any such LIBOR Rate Tranche; and (v) there
        shall never be more than five (5) LIBOR Rate Tranches in effect at any one
        time
        hereunder.

       

      III.  PAYMENTS.

       

      3.1  Payment
        Schedule.
        The
        amounts advanced by Payee hereunder and repaid by Maker may be re-borrowed
        as
        provided in the Loan Agreement. The amounts advanced under this Note shall
        be
        due and payable as follows:

       

      (a)  Commencing
        on November 5, 2005, and continuing thereafter on the fifth (5th) day of
        each
        successive month until the Maturity Date, Maker shall pay Payee all then
        accrued
        but unpaid interest hereon (including
        without limitation, all interest accruing under any Base Rate Tranche and
        under
        any LIBOR Rate Tranche);
        and

       

      (b)  The
        outstanding principal balance hereof and any and all accrued but unpaid interest
        thereon shall be due and payable in full on the Maturity Date or upon earlier
        maturity hereof, whether by acceleration or otherwise.

       

      3.2  Application.
        All
        payments on this Note shall, except if an uncured Event of Default has occurred,
        in which event the payments shall be applied as determined by Payee in its
        sole
        discretion, be applied at any time and from time to time and in the following
        order: (i) the payment of accrued but unpaid interest hereon, (ii) the payment
        or reimbursement of any expenses, costs or obligations (other than the principal
        hereof and interest hereon) for which Maker shall be obligated or Payee entitled
        pursuant to the provisions hereof or of the other Loan Documents, and (iii)
        the
        payment of all or any portion of the principal balance then outstanding
        hereunder, in either the direct or inverse order of maturity; provided, however,
        that in the absence of an Event of Default, any payment applied on account
        of
        principal shall first be applied to the Base Rate Tranche and then to the
        LIBOR
        Rate Tranches.

       

      3.3  Place.
        All
        payments hereunder shall be made to Payee at its offices located in Dallas
        County, Texas, at the address of Payee as specified herein or as Payee may
        from
        time to time designate in writing to Maker.

       

      3.4  Business
        Days.
        If any
        payment of principal or interest on this Note shall become due and payable
        on
        any day which is not a Business Day, such payment shall be made on the next
        succeeding Business Day. Any such extension of time for payment shall be
        included in computing interest which has accrued and shall be payable in
        connection with such payment.

       

      3.5  Legal
        Tender.
        All
        amounts payable hereunder are payable in lawful money or legal tender of
        the
        United States of America.

       

      3.6  Prepayment.
        Maker
        shall have the right to prepay this Note at any time and from time to time
        without premium or penalty, the entire unpaid principal balance of this Note
        or
        any portion thereof, but must also pay the amount of then accrued but unpaid
        interest on the amount of principal being so prepaid. Notwithstanding anything
        to the contrary set forth in this Section
        3.6,
        to the
        extent Maker should attempt to effectuate a prepayment of all or any portion
        of
        a LIBOR Rate Tranche, then any such prepayment may be effectuated only on
        the
        last day of the then current Interest Period applicable to such LIBOR Rate
        Tranche unless Payee is paid any amounts owed to Payee pursuant to Section
        3.8
        hereof.

       

      3.7  Yield
        Maintenance.
        Maker
        shall pay directly to Payee from time to time such amounts as Payee may
        determine to be necessary to compensate Payee for any costs incurred which
        are
        attributable to its making or maintaining any Advance or its obligation to
        make
        any Advance or any reduction in any amount receivable by Payee with respect
        to
        any Advance or such obligation resulting from any Regulatory Change
        which:

       

      (a)  changes
        the basis of taxation of any amounts payable to Payee (other than taxes imposed
        on the overall net income of Payee by the jurisdiction in which Payee has
        its
        principal office);

       

      (b)  imposes
        or modifies any reserve, special deposit, minimum capital, capital ratio
        or
        similar requirement relating to any extensions of credit or other assets
        of, or
        any deposits with or other liabilities or commitments of, Payee; or

       

      (c)  imposes
        any other condition affecting the Loan Agreement, this Note or any of such
        extensions of credit or liabilities or commitments regarding any LIBOR Rate
        borrowing.

       

      Notwithstanding
        the foregoing, Maker shall not be responsible pursuant to this Section
        3.7
        for
        amounts incurred as a result of any Regulatory Change which is applicable
        solely
        to Payee due to Payee being considered insolvent or in imminent danger of
        becoming insolvent. Payee agrees that, upon a recapture under the terms of
        this
Section
        3.7,
        Payee
        will provide Maker with the calculations and the specific formula utilized
        in
        said calculations simultaneously with any notice to Maker of a charge under
        this
Section
        3.7.

       

      3.8  Compensation.
        Maker
        shall pay directly to Payee from time to time such amounts as Payee may
        determine to be necessary to compensate Payee for any loss, cost or expense
        incurred by it as a result of any payment or prepayment of a LIBOR Rate Tranche
        for any reason (including, without limitation, the acceleration of the unpaid
        principal balance hereof pursuant to Section
        4.2
        hereof)
        occurring on a date other than the last day of the Interest Period for such
        LIBOR Rate Tranche provided, however, that Payee provide Maker written notice
        thereof as to the amount demanded by Payee. Without limiting the effect of
        the
        preceding sentence, such compensation shall include any costs incurred by
        Payee
        in liquidating or employing deposits from third parties and an amount equal
        to
        the excess, if any, of (i) Payee’s actual cost of obtaining the funds for the
        LIBOR Rate Tranche being paid or prepaid or not borrowed, redesignated or
        continued (assumed to be the LIBOR Rate applicable thereto) for the period
        from
        and including the date of such payment or prepayment or failure to borrow,
        redesignate or continue to but excluding the last day of the Interest Period
        for
        such LIBOR Rate Tranche (or, in the case of a failure to borrow, redesignate
        or
        continue, the interest rate for such LIBOR Rate Tranche which would have
        commenced on the date of such failure) over (ii) the amount of interest which
        would be realized by Payee in reemploying the funds so paid or prepaid or
        not
        borrowed, redesignated or continued for such period or Interest Period, as
        the
        case may be.

       

      IV.  DEFAULT
        AND REMEDIES.

       

      4.1  Default.
        Maker
        shall be in default hereunder immediately upon the occurrence of an Event
        of
        Default.

       

      4.2  Remedies.
        If an
        Event of Default shall occur, then Payee may, at its option, without notice
        or
        demand, declare the unpaid principal balance of, and the accrued but unpaid
        interest on, this Note immediately due and payable, foreclose all liens and
        security interests securing payment hereof, pursue any and all other rights,
        remedies and recourses available to Payee or pursue any combination of the
        foregoing. All remedies hereunder, under the Loan Documents and at law or
        in
        equity shall be cumulative.

       

      4.3  Waiver.
        Except
        as specifically provided in the Loan Documents, Maker and any endorsers or
        guarantors hereof severally waive presentment and demand for payment, notice
        of
        intent to accelerate maturity, notice of acceleration of maturity, protest
        and
        notice of protest and non-payment, bringing of suit and diligence in taking
        any
        action to collect any sums owing hereunder or in proceeding against any of
        the
        rights and collateral securing payment hereof. Maker and any endorsers or
        guarantors hereof agree (i) that the time for any payments hereunder may
        be
        extended from time to time without notice and consent, (ii) to the acceptance
        of
        further collateral, and/or (iii) the release of any existing collateral for
        the
        payment of this Note, all without in any manner affecting their liability
        under
        or with respect to this Note. No extension of time for the payment of this
        Note
        or any installment hereof shall affect the liability of Maker under this
        Note or
        any endorser or guarantor hereof even though Maker or such endorser or guarantor
        is not a party to such agreement.

       

      4.4  No
        Waiver.
        Failure
        of Payee to exercise any of the options granted herein to Payee upon the
        happening of one or more of the events giving rise to such options shall
        not
        constitute a waiver of the right to exercise the same or any other option
        at any
        subsequent time in respect to the same or any other event. The acceptance
        by
        Payee of any payment hereunder that is less than payment in full of all amounts
        due and payable at the time of such payment shall not constitute a waiver
        of the
        right to exercise any of the options granted herein to Payee at that time
        or at
        any subsequent time or nullify any prior exercise of any such option without
        the
        express written acknowledgment of Payee.

       

      4.5  Collection
        Costs.
        Maker
        agrees to pay all costs of collection hereof when incurred, including reasonable
        attorneys’ fees, whether or not any legal action shall be instituted to enforce
        this Note.

       

      V.  MISCELLANEOUS.

       

      5.1  Loan
        Documents.
        This
        Note is issued pursuant to the Loan Agreement and is secured, inter
        alia,
        by all
        of the assets owned by the entities which comprise Maker, including, but
        not
        limited to, (i) multiple Deeds of Trust dated of even date herewith executed
        by
        any of Stratus Properties Inc., Stratus Properties Operating Co., L.P., Circle
        C
        Land, L.P.., Austin 290 Properties, Inc. or Calera Court, L.P. in favor of
        Melinda A. Chausse, Trustee, for the benefit of Payee, covering certain real
        and
        personal property situated in multiple counties in Texas (the “Mortgaged
        Properties”),
        as
        more particularly described therein, (ii) subordinate Deeds of Trust executed
        by
        Subsidiaries (as defined in the Loan Agreement) of Maker for the benefit
        of
        Payee, covering certain real property owned by such Subsidiaries ("Subordinate
        Deeds of Trust"),
        (iii)
        multiple Assignments of Reimbursables and Other Fees dated of even date herewith
        executed by Maker for the benefit of Payee, and multiple Assignments of
        Partnership Interests now or hereafter executed pursuant to the Loan Agreement
        (collectively, the “Assignments”)
        (this
        Note, the Loan Agreement, Deeds of Trust, Subordinate Deeds of Trust, the
        Assignments, and all the other documents evidencing, securing or pertaining
        to
        the transaction in which the indebtedness evidenced hereby was incurred are,
        collectively, referred to as the “Loan
        Documents”).

       

      5.2  Notices.
        All
        notices or other communications required or permitted to be given pursuant
        hereto shall be in writing and shall be deemed properly given if (i) mailed
        by
        first class United States mail, postage prepaid, registered or certified
        with
        return receipt requested, (ii) by delivering same in person to the intended
        addressee, or (iii) by delivery to an independent third party commercial
        delivery service for same day or next day delivery and providing for evidence
        of
        receipt at the office of the intended addressee. Notice so mailed shall be
        effective upon its deposit with the United States Postal Service or any
        successor thereto; notice sent by such a commercial delivery service shall
        be
        effective upon delivery to such commercial delivery service; notice given
        by
        personal delivery shall be effective only if and when received by the addressee;
        and notice given by other means shall be effective only if and when received
        at
        the designated address of the intended addressee. Either party shall have
        the
        right to change its address for notice hereunder to any other location within
        the continental United States by the giving of thirty (30) days notice to
        the
        other party in the manner set forth herein. For purposes of such notices,
        the
        addresses of the parties shall be as follows:

       

      
        	 	
                Payee:

              	
                Comerica
                  Bank 

              

      

      1601
        Elm
        Street, 2nd Floor 

      
        	 	 	
                M.C.
                  6504

              

      

      
        	 	 	
                Dallas,
                  Texas 75201

              

      

      Attn:
        National Real Estate Services

      

      
        	 	
                Maker:

              	
                Stratus
                  Properties Inc.

              

      

      98
        San
        Jacinto Boulevard, Suite 220

      Austin,
        Texas 78701

      Attn:
        William H. Armstrong, III

      

      
        	 	 	
                Stratus
                  Properties Operating Co., L.P. 

              

      

      98
        San
        Jacinto Boulevard, Suite 220

      Austin,
        Texas 78701

      Attn:
        William H. Armstrong, III

      

      
        	 	 	
                Circle
                  C Land, L.P.

              

      

      98
        San
        Jacinto Boulevard, Suite 220

      Austin,
        Texas 78701

      Attn:
        William H. Armstrong, III

      

      
        	 	 	
                Austin
                  290 Properties, Inc.

              

      

      98
        San
        Jacinto Boulevard, Suite 220

      Austin,
        Texas 78701

      Attn:
        William H. Armstrong, III

      

      
        	 	
                With
                  a copy to:

              	
                Armbrust
                  & Brown, L.L.P. 

              

      

      100
        Congress Avenue, Suite 1300

      Austin,
        Texas 78701

      Attention:
        Kenneth Jones, Esq.

      

      5.3  GOVERNING
        LAW.
        THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
        OF THE
        STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS
        NOTE IS PERFORMABLE IN DALLAS COUNTY, TEXAS.
        Any
        action or proceeding under or in connection with this Note against Maker
        or any
        other party ever liable for payment of any sums of money payable on this
        Note
        may be brought in any state or federal court in Dallas County, Texas. Maker
        and
        each such other party hereby irrevocably (i) submits to the nonexclusive
        jurisdiction of such courts and (ii) waives any objection it may now or
        hereafter have as to the venue of any such action or proceeding brought in
        such
        court or that such court is an inconvenient forum.

       

      5.4  Interest
        Limitation.
        It is
        expressly stipulated and agreed to be the intent of Maker and Payee at all
        times
        to comply strictly with the applicable Texas law governing the maximum rate
        or
        amount of interest payable on the Note or the indebtedness evidenced hereby
        and
        by the other Loan Documents (or applicable United States federal law to the
        extent that it permits Payee to contract for, charge, take, reserve or receive
        a
        greater amount of interest than under Texas law). If the applicable law is
        ever
        judicially interpreted so as to render usurious any amount (i) contracted
        for,
        charged, taken, reserved or received pursuant to the Note, any of the other
        Loan
        Documents or any other communication or writing by or between Maker and Payee
        related to the transaction or transactions that are the subject matter of
        the
        Loan Documents, (ii) contracted for, charged or received by reason of Payee’s
        exercise of the option to accelerate the maturity of the Note, or (iii) Maker
        will have paid or Payee will have received by reason of any voluntary prepayment
        by Maker of the Note, then it is Maker’s and Payee’s express intent that all
        amounts charged in excess of the Maximum Lawful Rate shall be automatically
        canceled, ab initio, and all amounts in excess of the Maximum Lawful Rate
        theretofore collected by Payee shall be credited on the principal balance
        of the
        Note (or, if the Note has been or would thereby be paid in full, refunded
        to
        Maker), and the provisions of the Note and the other Loan Documents immediately
        be deemed reformed and the amounts thereafter collectible hereunder and
        thereunder reduced, without the necessity of the execution of any new document,
        so as to comply with the applicable law, but so as to permit the recovery
        of the
        fullest amount otherwise called for hereunder and thereunder; provided, however,
        if the Note has been paid in full before the end of the stated term of the
        Note,
        then Maker and Payee agree that Payee shall, with reasonable promptness after
        Payee discovers or is advised by Maker that interest was received in an amount
        in excess of the Maximum Lawful Rate, either refund such excess interest
        to
        Maker and/or credit such excess interest against the Note then owing by Maker
        to
        Payee. Maker hereby agrees that as a condition precedent to any claim seeking
        usury penalties against Payee, Maker will provide written notice to Payee,
        advising Payee in reasonable detail of the nature and amount of the violation,
        and Payee shall have sixty (60) days after receipt of such notice in which
        to
        correct such usury violation, if any, by either refunding such excess interest
        to Maker or crediting such excess interest against the Note then owing by
        Maker
        to Payee. All sums contracted for, charged or received by Payee for the use,
        forbearance or detention of any debt evidenced by the Note shall, to the
        extent
        permitted by applicable law, be amortized or spread, using the actuarial
        method,
        throughout the stated term of the Note (including any and all renewal and
        extension periods) until payment in full so that the rate or amount of interest
        on account of the Note does not exceed the Maximum Lawful Rate from time
        to time
        in effect and applicable to the Note for so long as debt is outstanding.
        IN
        NO EVENT SHALL THE PROVISIONS OF CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH
        REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
        ACCOUNTS) APPLY TO THE NOTE.
        Notwithstanding anything to the contrary contained herein or in any of the
        other
        Loan Documents, it is not the intention of Payee to accelerate the maturity
        of
        any interest that has not accrued at the time of such acceleration or to
        collect
        unearned interest at the time of such acceleration.

       

      5.5  Captions.
        The
        article and section headings used in this Note are for convenience of reference
        only and shall not affect, alter or define the meaning or interpretation
        of the
        text of any article or section contained in this Note.

       

      5.6  Joint
        and Several Liability.
        If this
        Note is executed by more than one party, each such party shall be jointly
        and
        severally liable for the obligations of Maker under this Note. If Maker is
        a
        partnership, each general partner of Maker shall be jointly and severally
        liable
        hereunder, and each such general partner hereby waives any requirement of
        law
        that in the event of a default hereunder, Payee exhaust any assets of Maker
        before proceeding against such general partner’s assets.

       

      5.7  NO
        ORAL AGREEMENTS.
        THIS NOTE AND ALL THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT
        OF
        MAKER AND PAYEE AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
        REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO
        THE
        SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
        EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
        OF MAKER AND PAYEE. THERE ARE NO ORAL AGREEMENTS BETWEEN MAKER AND PAYEE.
        The
        provisions of this Note and the Loan Documents may be amended or revised
        only by
        an instrument in writing signed by Maker and Payee.

       

      5.8  This
        Note
        consolidates, amends and restates in its entirety, and supersedes, (i) that
        certain Promissory Note dated as of December 16, 1999, executed by Maker
        and
        payable to the order of Comerica Bank-Texas in the stated principal amount
        of
        $20,000,000, and (ii) that certain Revolving Credit Note dated as of December
        16, 1999, executed by Maker and payable to the order of Comerica Bank-Texas
        in
        the stated principal amount of $10,000,000 (the foregoing notes, as amended
        and
        modified from time to time, herein collectively called the "Original
        Note").
        Maker
        acknowledges and agrees that the indebtedness outstanding under the Original
        Note and the liens, security interests and assignments granted by the
        undersigned securing the Original Note are valid and subsisting except to
        the
        extent the Mortgaged Properties were previously released from such liens,
        security interests, assignments and other interests, and that such liens,
        security interests, and assignments continue to secure the repayment of the
        indebtedness evidenced by this Note, and that as of the date of this Note,
        there
        are no offsets, claims or defenses existing in connection with the loan
        evidenced by this Note. This Note is entitled to all of the liens, security
        interests, benefits and priorities securing the Original Note except to the
        extent the Mortgaged Properties were previously released from such liens,
        security interests, assignments and other interests.

       

      EXECUTED
        to be effective as of the date first above written.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      MAKER:

       

      STRATUS
        PROPERTIES INC.,
        

      a
        Delaware corporation

      

      

      By:    
        /s/ John E. Baker      

      John
        E.
        Baker, Senior Vice President

      

       

      STRATUS
        PROPERTIES OPERATING CO., L.P.

       

      a
        Delaware limited partnership

       

      
        	 	
                By:

              	
                STRS
                  L.L.C., a Delaware limited liability company, its General
                  Partner

              

      

       

      
        	 	
                By:

              	
                Stratus
                  Properties Inc., a Delaware corporation, its Sole
                  Member

              

      

       

      

       

      By: 
        /s/ John E. Baker   

      John
        E.
        Baker, Senior Vice President

      

      CIRCLE
        C LAND, L.P., a
        Texas
        limited partnership

      

      
        	 	
                By:
                  

              	
                Circle
                  C GP, L.L.C., a Delaware limited liability company, General
                  Partner

              

      

      

      
        	 	
                By

              	
                Stratus
                  Properties Inc., a Delaware corporation, Sole
                  Member

              

      

      

      

      By: 
        /s/ John E. Baker      

      John
        E.
        Baker, Senior Vice President

      

      AUSTIN
        290 PROPERTIES, INC.

      a
        Texas
        corporation

      

      

      By:
        /s/ John E. Baker         

      John
        E.
        Baker, Senior Vice President

      

      The
        undersigned, Calera Court, L.P., hereby executes this Note to evidence its
        agreement to be bound by the provisions of Article 4 of Addendum 2 attached
        to
        the Loan Agreement, and its obligation and liability for that portion of
        the
        Indebtedness under the Calera Court Construction Loan (as defined in the
        Loan
        Agreement).

       

      CALERA
        COURT, L.P., a
        Texas
        limited partnership

      

      
        	 	
                By:

              	
                Calera
                  Court Management, L.L.C., a Texas limited liability company, its
                  general
                  partner

              

      

      

      
        	 	
                By:

              	
                Stratus
                  Properties Operating Co., L.P., a Delaware limited partnership,
                  its
                  Manager

              

      

      

      
        	 	
                By:

              	
                STRS
                  L.L.C., a Delaware limited liability company, its general
                  partner

              

      

      

      
        	 	
                By:

              	
                Stratus
                  Properties Inc., a Delaware corporation, its
                  Manager

              

      

      

      

      By:
        /s/ John E. Baker     

                    
        John E. Baker, 

                    
        Senior Vice President

      

      

      Schedule

       

       

      
        	
                Date
                  Made,

                 

                Continued,

                 

                Converted,

                 

                or
                  Paid

                 

              	
                Type
                  of

                 

                Advance

                 

              	
                Amount
                  of

                 

                Advance

                 

              	
                Amount
                  of Principal

                 

                Continued,

                 

                Converted,

                 

                or
                  Paid

                 

              	
                Unpaid

                 

                Principal

                 

                Balance

                 

                of
                  Note

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