Document:

exhibit10_22.htm

    
      

    

    Exhibit
      10.22

    LOAN
      AGREEMENT

    

    THIS
      LOAN AGREEMENT (this
“Agreement”) is made as of June 1, 2007 between STRATUS
      PROPERTIES INC., a Delaware corporation (“Borrower”),
      and HOLLIDAY FENOGLIO FOWLER, L.P., a Texas limited partnership
      (“Lender”).

    

    WHEREAS,
      Borrower and Lender desire to
      set forth herein the terms and conditions upon which Lender shall provide
      financing to Borrower;

    

    NOW,
      THEREFORE, the parties hereto
      hereby agree as follows:

     

    Section
      1.                      Certain
      Definitions and Index to Definitions.

    

    
      	
              A.

            	
              Accounting
                Terms.  Unless otherwise specified herein, all accounting
                terms used herein shall be interpreted, all accounting determinations
                hereunder shall be made, and all financial statements required to
                be
                delivered hereunder shall be prepared in accordance with GAAP and
                practices consistently applied.

            

    

    

    
      	
              B.

            	
              Definitions.  Capitalized
                terms used herein shall have the respective meanings set forth in
                Schedule 1 attached hereto when used in this Agreement (including
                the Exhibits hereto) except as the context shall otherwise
                require.  Schedule 1 is hereby made a part of this
                Agreement.

            

    

     

    Section
      2.                    
 Loan.

    

    
      	
              A.

            	
              Loan
                Amount.  Lender agrees to provide a loan to Borrower in the
                amount of THREE MILLION FIVE HUNDRED THOUSAND AND
                00/100 DOLLARS ($3,500,000.00) (“Loan”),
                provided that all conditions precedent described in this Agreement
                have
                been met or waived by Lender and that Borrower is not otherwise in
                default
                as of the date of disbursement.

            

    

    

    
      	
              B.

            	
              Note.  Borrower’s
                obligation to repay the Loan shall be further evidenced by the
                Note.  Reference is made to the Note for certain terms relating
                to interest rate, payments, prepayment, Maturity Date and additional
                terms
                governing the Loan.

            

    

     

    C.           Referral
      Fee/Application Fee.  In connection with the Loan, Borrower agrees
      to pay a referral fee of $35,000.00 to Lender and an application fee of $2,000
      to FAF Advisors, Inc.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      3.                      Payments
      by Borrower.

    

    
      	
              A.

            	
              General.  All
                payments hereunder shall be made by Borrower to Lender at the Lending
                Office, or at such other place as Lender may designate in
                writing.  Payments shall be made by wire
                transfer.

            

    

    

    
      	
              B.

            	
              Other
                Outstanding Obligations.  Unless required to be paid sooner
                hereunder, any and all Obligations in addition to the amounts due
                under
                the Note shall be due and payable in full upon the Maturity
                Date.

            

    

     

    Section
      4.                      Conditions
      Precedent.  As conditions precedent to Lender’s obligation to
      advance the Loan to Borrower:

     

    A.           Borrower
      shall deliver, or cause to be delivered, to Lender:

    

    
      	
               

            	
              (1)

            	
              A
                duly executed copy of this Agreement, the Note, and any and all other
                Loan
                Documents.

            

    

    

    
      	
               

            	
              (2)

            	
              A
                favorable written opinion of counsel for Borrower, addressed to Lender
                and
                in form and substance acceptable to Lender and its
                counsel.

            

    

    

    
      	
               

            	
              (3)

            	
              Current
                financial statements of Borrower in form and substance acceptable
                to
                Lender.

            

    

    

    
      	
               

            	
              (4)

            	
              The
                following organizational documents of
                Borrower:

            

    

    

    
      	
               

            	
              (a)

            	
              Borrower’s
                Certificate of Incorporation as certified by the Secretary of State
                of the
                state of Borrower’s organization and by the corporate secretary of
                Borrower, a Certificate of Good Standing dated no less recently than
                thirty (30) calendar days prior to the date of this Agreement, issued
                by
                the Secretary of State of the state of Borrower’s organization, stating
                that Borrower is in good standing in such state, and evidence of
                good
                standing to transact business in the State of Texas, dated no less
                recently than thirty (30) calendar days prior to the date of this
                Agreement, issued by the Secretary of State of the State of
                Texas.

            

    

    

    
      	
               

            	
              (b)

            	
              A
                resolution of the board of directors of Borrower, certified as of
                the date
                of this Agreement by its corporate secretary, authorizing the execution,
                delivery and performance of this Agreement and the other Loan Documents,
                and all other instruments or documents to be delivered by Borrower
                pursuant to this Agreement.

            

    

    

    
      	
               

            	
              (c)

            	
              A
                certificate of Borrower’s corporate secretary as to the incumbency and
                authenticity of the signatures of the officers of Borrower
                

            

    

     

    
      
        
        

      

      
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    executing
      any Loan Documents (Lender being entitled to rely thereon until
      a new such certificate has been furnished to Lender).

     

    (5)           The
      written consent of Comerica Bank-Texas to the Loan as required under the
      Comerica Loan Agreement (and/or the written consent of any other lender whose
      consent is required to the financing evidenced by this Agreement pursuant to
      agreements between Borrower and such lender(s)).

    

    (6)           Borrower
      will pay (prior to or contemporaneously with the funding of the Loan) the
      outstanding balance of the Comerica Bank-Texas Loan (as described in the
      Comerica Loan Agreement) in full.

    

    
      	
              B.

            	
              All
                acts, conditions, and things (including, without limitation, the
                obtaining
                of any necessary regulatory approvals and the making of any required
                filings, recordings or registrations) required to be done and performed
                and to have happened prior to the execution, delivery and performance
                of
                the Loan Documents to constitute the same legal, valid and binding
                obligations of Borrower, enforceable in accordance with their respective
                terms, subject to limitations as to enforceability which might result
                from
                bankruptcy, insolvency, moratorium and other similar laws affecting
                creditors’ rights generally and subject to limitations on the availability
                of equitable remedies, shall have been done and performed and shall
                have
                happened in compliance with all applicable laws or shall have been
                waived
                by Lender in writing.

            

    

    

    
      	
              C.

            	
              All
                documentation shall be satisfactory in form and substance to Lender,
                and
                Lender shall have received any and all further information, documents
                and
                opinions which Lender may reasonably have requested in connection
                therewith, such documents, where appropriate, to be certified by
                proper
                authorities and officials of
                Borrower.

            

    

    

    
      	
              D.

            	
              All
                representations and warranties of Borrower to Lender set forth herein
                or
                in any of the Loan Documents shall be accurate and complete in all
                material respects.

            

    

    

    
      	
              E.

            	
              There
                shall not exist an Event of Default or an event which with the giving
                of
                notice or passage of time, or both, would be an Event of
                Default.

            

    

     

    Section
      5.                      Representations
      and Warranties of Borrower.  Borrower represents and warrants to
      Lender as follows:

    

    
      	
              A.

            	
              Capacity.  Borrower
                is duly organized, validly existing, and in good standing under the
                laws
                of the state of its organization (as described herein) and is authorized
                to do business in the State of Texas and in any and all other
                jurisdictions in which its ownership of Property or conduct of business
                legally requires such authorization and the failure to do so would
                have a
                Material Adverse Effect, and has full power, authority, and legal
                right to
                own its properties and assets and to conduct its business as presently
                conducted or proposed to be conducted, and the consummation of the
                

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    transactions
      contemplated herein do not, and will not, require the
      consent or approval of, or filing with, any Person which has not been
      obtained.

     

    
      	
              B.

            	
              Authority.  Borrower
                has full power, authority and legal right to execute and deliver,
                and to
                perform and observe the provisions of the Loan Documents to be executed
                by
                Borrower.  The execution, delivery and performance of the Loan
                Documents have been duly authorized by all necessary action, and
                when duly
                executed and delivered, will be legal, valid, and binding obligations
                of
                Borrower enforceable in accordance with their respective terms, subject
                to
                limitations as to enforceability which might result from bankruptcy,
                insolvency, moratorium and other similar laws affecting creditors’ rights
                generally and subject to limitations on the availability of equitable
                remedies.

            

    

    

    
      	
              C.

            	
              Compliance.  The
                      execution and delivery of the Loan Documents and compliance
                with their
                terms will not violate any provision of applicable law and will not
                result
                in a breach of any of the terms or conditions of, or result in the
                imposition of any lien, charge, or encumbrance upon any properties
                of
                Borrower pursuant to, or constitute a default (with due notice or
                lapse of
                time or both) or result in an occurrence of an event pursuant to
                which any
                holder or holders of Indebtedness may declare the same due and
                payable.

            

    

    

    
      	
              D.

            	
              Financial
                Statements.  The financial statements provided by Borrower
                to Lender pursuant to subsection 4.A(3) are correct and complete
                as of the
                dates indicated in such statements and fairly present the financial
                condition and results of operations of Borrower for the fiscal periods
                indicated therein.

            

    

    

    
      	
              E.

            	
              Material
                Adverse Events.  Since the Statement Dates, neither any
                event nor the passage of time has resulted in a Material Adverse
                Effect.

            

    

    

    
      	
              F.

            	
              Litigation.  Except
                as heretofore disclosed by Borrower to Lender in writing, there are
                no
                actions or proceedings pending, or to the knowledge of Borrower
                threatened, against or affecting Borrower which, if adversely determined,
                could reasonably be expected to have a Material Adverse
                Effect.  Borrower is not in default with respect to any
                applicable laws or regulations which materially affect the operations
                or
                financial condition of Borrower, nor is it in default with respect
                to any
                other writ, injunction, demand, or decree or in default under any
                indenture, agreement, or other instrument to which Borrower is a
                party or
                by which Borrower may be bound where any such default would have
                a
                Materially Adverse Effect.

            

    

    

    
      	
              G.

            	
              Taxes.  Borrower
                has filed or caused to be filed all tax returns which are required
                to be
                filed by it.  Borrower has paid, or made provision for the
                payment of, all taxes which have or may have become due pursuant
                to said
                returns or otherwise or pursuant to an assessment received by Borrower,
                except such taxes, if any, as are being contested in good faith and
                as to
                which adequate reserves have been provided.  The charges,
                accruals, and reserves in respect of income taxes on the books of
                Borrower
                are adequate.  Borrower knows of no proposed material tax
                assessment against it and no 

            

    

     

    
      
        
        

      

      
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    extension
      of time for the assessment of federal, state, or local taxes of
      Borrower is in effect or has been requested, except as disclosed in the
      financial statements furnished to Lender.

     

    
      	
              H.

            	
              Accurate
                Information.  All written information supplied to Lender by
                or on behalf of Borrower is and shall be true and correct in all
                material
                respects, and all financial projections or forecasts of future results
                or
                events supplied to Lender by or on behalf of Borrower have been prepared
                in good faith and based on good faith estimates and assumptions of
                the
                management of Borrower, and Borrower has no reason to believe that
                such
                projections or forecasts are not
                reasonable.

            

    

    

    
      	
              I.

            	
              Use
                of Loan Proceeds.  Borrower is not engaged principally in,
                nor does it have as one of its important activities, the business
                of
                extending credit for the purpose of purchasing or carrying any margin
                stock (within the meaning of Regulation U of the Board of Governors
                of the
                Federal Reserve System), and no part of any advance made hereunder
                will be
                used to purchase or carry margin stock, extend credit to others for
                the
                purpose of purchasing or carrying any margin stock, or used for any
                purpose which violates Regulation U or Regulation X of the Board
                of
                Governors of the Federal Reserve System or any other provision of
                law.

            

    

    

    
      	
              J.

            	
              ERISA.  No
                plan (as that term is defined in the Employee Retirement
                Income  Security Act of 1974 (“ERISA”))
                of the Borrower (a “Plan”) which is subject to
                Part 3 of Subtitle B of Title 1 of ERISA had an accumulated funding
                deficiency (as such term is defined in ERISA) as of the last day
                of the
                most recent fiscal year of such Plan ended prior to the date hereof,
                or
                would have had such an accumulated funding deficiency on such date
                if such
                year were the first year of such Plan, and no material liability
                to the
                Pension Benefit Guaranty Corporation has been, or is expected by
                the
                Borrower to be, incurred with respect to any such Plan.  No
                Reportable Event (as defined in ERISA) has occurred and is continuing
                in
                respect to any such Plan.

            

    

     

    Section
      6.                      Affirmative
      Covenants of Borrower.  Until payment in full of the Obligations,
      Borrower agrees that:

    

    
      	
              A.

            	
              Financial
                Statements, Reports and Certifications. Borrower will furnish to
                Lender, in form and substance satisfactory to
                Lender:

            

    

    

    
      	
               

            	
              (1)

            	
              As
                soon as possible after the end of each fiscal year of Borrower, and
                in any
                event within ninety (90) Business Days thereafter, (i) a complete
                copy of
                its annual audit which shall include the balance sheet of Borrower
                as of
                the close of the fiscal year and an income statement for such year,
                certified by the Auditors without material qualification, (ii) a
                statement
                of changes in partners’ equity and cash flows for the period ended on such
                date, certified by the Auditors, and (iii) a statement certified
                by the
                chief financial officer of Borrower that no act or omission has occurred
                which has resulted in an Event or Default or, if not
                

            

    

     

    
      
        
        

      

      
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    cured,
      remedied, waived or otherwise eliminated to the satisfaction of
      Lender, would result in an Event of Default;

     

    
      	
               

            	
              (2)

            	
              No
                later than thirty (30) Business Days after the close of each Accounting
                Period, (i) Borrower’s balance sheet as of the close of such Accounting
                Period and its income statement for that portion of the then current
                fiscal year through the end of such Accounting Period prepared in
                accordance with GAAP and certified as being complete, correct, and
                fairly
                representing its financial condition and results of operations by
                the
                chief financial officer of Borrower, subject to the absence of footnotes
                and year-end adjustments, (ii) a statement of changes in equity and
                cash
                flows for the period ended on such date, certified by the chief financial
                officer of Borrower, (iii) the calculation of the Debt Service Coverage
                Ratio demonstrating compliance with Subsection 8.G. of this Agreement,
                together with any supporting calculations used to arrive at such
                calculation, certified by the chief financial officer of Borrower,
                and
                (iv) a completed Borrower’s Officer’s Compliance
                Certificate;

            

    

    

    
      	
               

            	
              (3)

            	
              Promptly
                upon the filing or receiving thereof, copies of all reports which
                the
                Borrower files under ERISA or which the Borrower receives from the
                Pension
                Benefit Guaranty Corporation if such report shows any material violation
                or potential violation by the Borrower of its obligations under ERISA;
                and

            

    

    

    
      	
               

            	
              (4)

            	
              Such
                other information concerning Borrower as Lender may reasonably
                request.

            

    

    

    
      	
              B.

            	
              Other
                Information.  Borrower will (1) maintain accurate books and
                records concerning its business in a manner consistent with Borrower’s
                current bookkeeping and record-keeping practices (provided such practices
                result in accurate books and records), (2) upon request, furnish
                to Lender
                such information, statements, lists of Property and accounts, budgets,
                forecasts, or reports as Lender may reasonably request with respect
                to the
                business, affairs, and financial condition of Borrower, and (3) permit
                Lender or representatives thereof, upon at least forty-eight (48)
                hours
                prior written notice to Borrower, to inspect during Borrower’s usual
                business hours, the properties of Borrower and to inspect, audit,
                make
                copies of, and make extracts from the books or accounts of
                Borrower.

            

    

    

    
      	
              C.

            	
              Expenses.  Borrower
                shall pay all reasonable out-of-pocket expenses of Lender (including,
                but
                not limited to, fees and disbursements of Lender’s counsel) incident to
                (1) preparation and negotiation of the Loan Documents and any amendments,
                extensions and renewals thereof, (2) following an Event of Default,
                the
                protection and exercise of the rights of Lender under the Loan Documents,
                or (3) defense by Lender against all claims against Lender relating
                to any
                acts of commission or omission directly or indirectly relating to
                the Loan
                Documents, all whether by judicial proceedings or otherwise, but
                excluding
                claims related to Lender’s gross negligence or intentional
                misconduct.  Borrower will also pay and save Lender harmless
                from any and all liability 

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    with
      respect to any stamp or other taxes (other than transfer or income
      taxes) which may be determined to be payable in connection with the making
      of
      the Loan Documents.

     

    
      	
              D.

            	
              Taxes
                and Expenses Regarding Borrower’s Property.  Borrower shall
                make due and timely payment or deposit of all taxes, assessments
                or
                contributions required of it, except such deposits, assessments or
                contributions which are being contested in good faith and as to which,
                in
                the reasonable determination of Lender, adequate reserves have been
                provided.

            

    

    

    
      	
              E.

            	
              Notice
                of Events.  Promptly after the later of (i) the occurrence
                thereof or (ii) such time as Borrower has knowledge of the occurrence
                thereof, Borrower will give Lender written notice of any Event of
                Default
                or any event which with the giving of notice or passage of time,
                or both,
                would become an Event of Default; provided, however, in the event
                that the
                respective Event of Default is subsequently cured as permitted herein,
                such failure to give notice shall also be deemed to be
                cured.

            

    

    

    
      	
              F.

            	
              Notice
                of Litigation.  In addition to any regularly scheduled
                reporting required to be delivered with the Borrower’s Officer’s
                Certificate, Borrower will promptly give notice to Lender in writing
                of
                (i) any litigation or other proceedings against Borrower involving
                claims
                for amounts in excess of $250,000 that Borrower does not reasonably
                expect
                are covered by insurance, (ii) any labor controversy resulting in
                or
                threatening to result in a strike against Borrower, or (iii) any
                proposal
                by any public authority to acquire a material portion of the assets
                or
                business of Borrower.

            

    

    

    
      	
              G.

            	
              Other
                Debt.  Borrower will promptly pay and discharge any and all
                Indebtedness when due (where the failure to do so either individually
                or
                in the aggregate with any such other unpaid Indebtedness would have
                a
                Material Adverse Effect), and lawful claims which, if unpaid, might
                become
                a lien or charge upon the Property of Borrower, except such as may
                in good
                faith be contested or disputed or for which arrangements for deferred
                payment have been made, provided appropriate reserves are maintained
                to
                the satisfaction of Lender for the eventual payment thereof in the
                event
                it is found that such Indebtedness is an Indebtedness payable by
                Borrower,
                and when such dispute or contest is settled and determined, will
                promptly
                pay the full amount then due.

            

    

    

    
      	
              H.

            	
              Cooperation.  Borrower
                will execute and deliver to Lender any and all documents, and do
                or cause
                to be done any and all other acts reasonably deemed necessary by
                Lender,
                in its reasonable discretion, to effect the provisions and purposes
                of
                this Agreement.

            

    

    

    
      	
              I.

            	
              Maintenance
                of Insurance; Notice of Loss.  Borrower shall maintain such
                insurance with reputable insurance carriers as is normally carried
                by
                companies engaged in similar businesses and owning similar
                Property.  Upon request from Lender, Borrower will provide
                Lender with certificates indicating that such insurance is in effect
                and
                all premiums due have been paid.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
              J.

            	
              Location
                of Business.  Borrower will give Lender written notice
                immediately upon forming an intention to change the location of its
                chief
                place of business.

            

    

    

    
      	
              K.

            	
              Maintenance
                of Existence.  Borrower will preserve and maintain its legal
                existence and all rights, privileges and franchises necessary or
                desirable
                in the normal conduct of its business, will conduct its business
                in an
                orderly, efficient and regular manner, and will comply with all applicable
                laws and regulations and the terms of any indenture, contract or
                other
                instrument to which it may be a party or under which it or its properties
                may be bound, in each instance where the failure to do so would have
                a
                Material Adverse Effect.

            

    

    

    
      	
              L.

            	
              Compliance
                with ERISA.  Cause each Plan to comply and be administered
                in accordance with those provisions of ERISA which are applicable
                to such
                Plan.

            

    

     

    Section
      7.                      Negative
      Covenants of Borrower.  Except as expressly provided for in
      Section 7 H. below, and subject to the terms and conditions set forth therein,
      until payment in full of the Obligations, without the prior written consent
      of
      Lender (which consent may be withheld in the sole discretion and determination
      of Lender), Borrower will not do any of the following items A through
      G:

    

    
      	
              A.

            	
              Sale
                of Assets.  Borrower will not sell, abandon, or otherwise
                dispose of any of its assets except in the ordinary course of
                business.

            

    

    

    
      	
              B.

            	
              Consolidation,
                Merger, etc.  Borrower will not consolidate with, merge
                into, or sell (whether in a single transaction or in a series of
                transactions) all or substantially all of its assets to any
                Person.

            

    

    

    
      	
              C.

            	
              Change
                in Business.  Borrower will not make any change in the
                nature of the business of Borrower or a Subsidiary which would result
                in a
                material change in the character of the business of Borrower, taken
                as a
                whole.

            

    

    

    
      	
              D.

            	
              Transactions
                with Affiliates. Borrower will not enter into any transaction with any
                Person affiliated with Borrower on terms materially less favorable
                to
                Borrower, than at the time could be available to Borrower, from any
                Person
                not affiliated with Borrower.

            

    

    

    
      	
              E.

            	
              Plans.  Borrower
                will not sponsor or contribute to any other Plan or other defined
                benefit
                pension plan or contributes to any multi-employer pension
                plan.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              F.

            	
              Dividends,
                Redemptions.

            

    

    

    
      	
              (1)

            	
              Borrower
                will not, except as allowed below, declare or pay any dividend on,
                or
                declare or make any other distribution on account of, any stock interest
                or other ownership interest.

            

    

    

    
      	
              (2)

            	
              Borrower
                will not, except as allowed below, directly or indirectly redeem,
                retire,
                purchase, or otherwise acquire beneficially any shares of any class
                of its
                own stock now or hereafter outstanding or set apart any sum for any
                such
                purpose.  The foregoing notwithstanding, Borrower may redeem,
                retire, purchase or otherwise acquire beneficially shares of common
                stock
                of Borrower in an aggregate amount that does not exceed
                $5,000,000.

            

    

    

    
      	
              G.

            	
              Indebtedness.
                Borrower will not incur any Indebtedness other than Permitted
                Debt.

            

    

     

    H.           Change
      of Control.  Notwithstanding anything to the contrary, in the
      event of a contemplated Change in Control (as defined below) Borrower shall
      give
      thirty (30) days’ prior written notice to Lender indicating whether it (i)
      intends to prepay the Loan, which it shall have the right to do in its sole
      and
      absolute discretion, subject to a prepayment premium of one percent (1%) of
      the
      then outstanding balance of the Loan (the “Change in Control
      Prepayment Premium”) or in the event of a voluntary Change in
      Control under H.(a)(iii) below, the Reinvestment Charge, or (ii) requests
      Lender’s written consent to such Change in Control (with the intent to keep the
      Loan in place, subject to the terms hereof) which may be withheld, conditioned
      or delayed, for any or no reason, in its sole and absolute
      discretion.

     

    Provided,
      notwithstanding anything to the contrary (including any prepayment provisions
      or
      limitations in the Note, and without limiting its ability to prepay the Loan
      pursuant to the provisions of the Note), if such consent is not granted,
      Borrower may subsequently choose to prepay the Loan, together with (i) the
      Change in Control Prepayment Premium or (ii) in the case of a voluntary Change
      in Control under H.(a)(iii) below (i.e., one not necessitated by the death,
      incapacity or other occurrence preventing a member of the senior management
      from
      fulfilling his role in the management of Borrower), the Reinvestment
      Charge.  Any Change in Control in contravention of the provisions set
      forth herein, shall be an immediate Event of Default (as defined in Section
      8
      below) and Borrower shall be liable for the Change in Control Prepayment Premium
      and Lender may also pursue any other remedies available to it at law, in equity
      or under Section 8 of this Agreement.

     

    
      (a)           As
        used herein “Change of Control” means (capitalized terms
        not otherwise defined will have the meanings ascribed to them in paragraph
        (b)
        below):

       

    

    
      (i)           the
        acquisition by any Person together with all Affiliates of such Person, of
        Beneficial Ownership of the Threshold Percentage or more; provided, however,
        that for purposes of this Section 7 H.(a)(i), the following will not constitute
        a Change of Control:

    

    
       

      (A)  any
        acquisition of Company Voting Stock by the Company or its
        subsidiaries,

    

    
      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (B)  any
        acquisition of Company Voting Stock by any employee benefit plan (or related
        trust) sponsored or maintained by the Company or any corporation or other
        entity
        controlled by the Company; or

    

    
       

      (ii)           individuals
        who, as of the effective date of this Agreement, constitute the Board (the
        “Incumbent Board”) cease for any reason to constitute at
        least a majority of the Board; provided, however, that any individual becoming
        a
        director subsequent to the effective date of this Agreement whose election,
        or
        nomination for election by the Company’s shareholders, was approved by a vote of
        at least a majority of the directors then comprising the Incumbent Board
        will be
        considered a member of the Incumbent Board, unless such individual’s initial
        assumption of office occurs as a result of an actual or threatened election
        contest with respect to the election or removal of directors or any other
        actual
        or threatened solicitation of proxies or consents by or on behalf of a Person
        other than the Incumbent Board; or

    

    
       

      (iii)           a
        majority of those three individuals currently comprising senior management,
        William H. Armstrong, President, John E. Baker, Senior Vice President, and
        Kenneth N. Jones, General Counsel, cease to serve in their current positions;
        or

    

    
       

      (iv)           the
        consummation of a reorganization, merger or consolidation (including a merger
        or
        consolidation of the Company or any direct or indirect subsidiary of the
        Company), or sale or other disposition of all or substantially all of the
        assets
        of the Company (a “Business Combination”), in each case,
        unless, immediately following such Business Combination:

    

    
       

      (A)  the
        individuals and entities who were the Beneficial Owners of the Company Voting
        Stock immediately prior to such Business Combination have direct or indirect
        Beneficial Ownership of more than 50% of the then outstanding shares of common
        stock, and more than 50% of the combined voting power of the then outstanding
        voting securities entitled to vote generally in the election of directors,
        of
        the Post-Transaction Corporation, and

    

    
       

      (B)  no
        Person
        together with all Affiliates of such Person (excluding the Post-Transaction
        Corporation and any employee benefit plan or related trust of either the
        Company, the Post-Transaction Corporation or any subsidiary of either
        corporation) Beneficially Owns 30% or more of the then outstanding shares
        of
        common stock of the Post-Transaction Corporation or 30% or more of the combined
        voting power of the then outstanding voting securities of the Post-Transaction
        Corporation, and

    

    
       

      (C)  at
        least
        a majority of the members of the board of directors of the Post-Transaction
        Corporation were members of the Incumbent Board at the time of the execution
        of
        the initial agreement, and of the action of the Board, providing for such
        Business Combination; or

    

    
       

      (v)           approval
        by the shareholders of the Company of a complete liquidation or dissolution
        of
        the Company.

    

    
       

      (b)           As
        used in this Section 7 H. and elsewhere in this Agreement, the following
        terms
        have the meanings indicated:

    

    
      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (i)           Affiliate:  “Affiliate”
        means a Person that directly, or indirectly through one or more intermediaries,
        controls, or is controlled by, or is under common control with, another
        specified Person.

    

    
       

      (ii)           Beneficial
        Owner:  “Beneficial Owner” (and variants
        thereof), with respect to a security, means a Person who, directly or indirectly
        (through any contract, understanding, relationship or otherwise), has or
        shares
        (A) the power to vote, or direct the voting of, the security, and/or (B)
        the
        power to dispose of, or to direct the disposition of, the
        security.

    

    
       

      (iii)           Company
        Voting Stock:  “Company Voting Stock” means
        any capital stock of the Company that is then entitled to vote for the election
        of directors.

    

    
       

      (iv)           Majority
        Shares:  “Majority Shares” means the number of
        shares of Company Voting Stock that could elect a majority of the directors
        of
        the Company if all directors were to be elected at a single
        meeting.

    

    
       

      (v)           Person:  “Person”
        means a natural person or entity, and will also mean the group or syndicate
        created when two or more Persons act as a syndicate or other group (including
        without limitation a partnership, limited partnership, joint venture or other
        joint undertaking) for the purpose of acquiring, holding, or disposing of
        a
        security, except that “Person” will not include an underwriter temporarily
        holding a security pursuant to an offering of the security.

    

    
       

      (vi)           Post-Transaction
        Corporation:  Unless a Change of Control includes a Business
        Combination, “Post-Transaction Corporation” means the
        Company after the Change of Control.  If a Change of Control includes
        a Business Combination, “Post-Transaction
Corporation” will mean the corporation
        or
        other entity resulting from the Business Combination unless, as a result
        of such
        Business Combination, an ultimate parent entity controls the Company or all
        or
        substantially all of the Company’s assets either directly or indirectly, in
        which case, “Post-Transaction Corporation” will mean such ultimate parent
        entity.

    

    
       

      (vii)           Threshold
        Percentage:  “Threshold Percentage” means 30%
        of all then outstanding Company Voting Stock.

    

    

    Section
      8.                      Events
      of Default; Remedies. If any of the following events occurs, it is hereby
      defined as and declared to be and to constitute an “Event of
      Default”:

    

    
      	
              A.

            	
              Borrower
                shall fail to make any payment of principal, interest or other amount
                     under the Note, when due whether at maturity, upon acceleration,
                or
                otherwise, and such default shall continue for three (3) Business
                Days
                after written notice to Borrower from Lender (except that Borrower
                shall
                not be entitled to said three (3) Business Day notice period more
                than
                twice in any twelve (12) calendar month period);
                or

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              B.

            	
              Borrower
                shall default in the payment of any of the other Obligations when
                due, and
                such default shall continue for ten (10) Business Days after written
                notice to Borrower from Lender; or

            

    

    

    
      	
              C.

            	
              An
                order for relief shall be entered against Borrower or any Subsidiary
                by
                any United States Bankruptcy Court; or Borrower or any Subsidiary
                shall
                generally not pay its debts as they become due (within the meaning
                of 11
                U.S.C. 303(h) as at any time amended or any successor statute thereto)
                or
                make an assignment for the benefit of creditors; or Borrower or any
                Subsidiary shall apply for or consent to the appointment of a custodian,
                receiver, trustee, or similar officer for it or for all or any substantial
                part of its Property; or such custodian, receiver, trustee, or similar
                officer shall be appointed without the application or consent of
                Borrower
                or such Subsidiary and such appointment shall continue undischarged
                for a
                period of sixty (60) calendar days; or Borrower or such Subsidiary
                shall
                institute (by petition, application, answer, consent, or otherwise)
                any
                bankruptcy, insolvency, reorganization, moratorium, arrangement,
                readjustment of debt, dissolution, liquidation or similar proceeding
                relating to it under the laws of any jurisdiction; or any such proceeding
                shall be instituted (by petition, application, or otherwise) against
                Borrower or such Subsidiary and shall remain undismissed for a period
                of
                sixty (60) calendar days; or any judgment, writ, warrant of attachment,
                execution, or similar process shall be issued or levied against a
                substantial part of the Property of Borrower or such Subsidiary and
                such
                judgment, writ, or similar process shall not be released, vacated,
                or
                fully bonded within sixty (60) calendar days after its issue or levy;
                or

            

    

    

    
      	
              D.

            	
              Borrower
                shall be in breach of any other agreement, covenant, obligation,
                representation or warranty hereunder or with respect to any of the
                Loan
                Documents, and such breach shall continue for twenty (20) Business
                Days
                after whichever of the following dates is the earliest: (i) the date
                on
                which Borrower gives notice of such breach to Lender, and (ii) the
                date on
                which Lender gives notice of such breach to Borrower; provided, however,
                such twenty (20) Business Day period may be extended for up to an
                additional thirty (30) calendar days if and only if Lender extends
                such
                time period in writing following Lender’s good faith determination that
                (X) Borrower is continuously and diligently taking action to cure
                such
                breach, and (Y) such breach cannot be cured within the initial twenty
                (20)-day cure period; or

            

    

    

    
      	
              E.

            	
              The
                aggregate book value of the Borrower’s assets shall at any time be less
                than (1) $80,000,000 minus (2) the product of $80,000,000 multiplied
                by
                the Cash Collateral Factor.

            

    

    

    
      	
              F.

            	
              The
                aggregate market value of the Borrower’s assets shall at any time be less
                than (1) $160,000,000 minus (2) the product of $160,000,000 multiplied
                by
                the Cash Collateral Factor.

            

    

    

    
      	
              G.

            	
              The
                Debt Service Coverage Ratio measured on a quarterly basis for the
                previous
                twelve (12) months shall be less than (1) (a) 5.0 minus (b) the product
                of
                5.0 multiplied by the Cash Collateral Factor, to (2)
                1.0.

            

    

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              H.

            	
              The
                ratio of (1) the Borrower’s Indebtedness to (2) the aggregate market value
                of the Borrower’s assets shall at any time exceed (a) sixty percent
                (60.0%) minus (b) the product of sixty percent (60.0%) multiplied
                by the
                Cash Collateral Factor.

            

    

    

    
      	
              I.

            	
              The
                ratio of (1) the Borrower’s Secured Indebtedness to (2) the aggregate
                market value of the Borrower’s assets shall at any time exceed (1) forty
                percent (40.0%) minus (2) forty percent (40.0%) multiplied by the
                Cash
                Collateral Factor.

            

    

    

    
      	
              J.

            	
              An
                “Event of Default” as defined in the Comerica Loan Agreement shall
                occur.

            

    

    

    
      	
              K.

            	
              Any
                Reportable Event (as defined in ERISA) shall have occurred and continue
                for 30 days; or any Plan shall have been terminated by the Borrower
                not in
                compliance with ERISA, or a trustee shall have been appointed by
                a court
                to administer any Plan, or the Pension Benefit Guaranty Corporation
                shall
                have instituted proceedings to terminate any Plan or to appoint a
                trustee
                to administer any Plan.

            

    

    

    THEN,
      at
      Lender’s option unless and until cured or waived in writing by Lender and
      regardless of any prior forbearance by Lender, all Obligations shall, without
      presentment, demand, protest, or notice of any kind, all of which are hereby
      expressly waived, be forthwith automatically due and payable in full, and Lender
      may, immediately and without expiration of any period of grace, enforce payment
      of all Obligations and exercise any and all other remedies granted to it at
      law,
      in equity, or otherwise.

    

    Section
      9.                      Disclaimer
      for Negligence.  Lender shall not be liable for any claims,
      demands, losses or damages made, claimed or suffered by Borrower, excepting
      such
      as may arise through or could be caused by Lender’s gross negligence or willful
      misconduct, and specifically disclaiming any liability of Lender to Borrower
      arising or claimed to have arisen out of Lender’s ordinary
      negligence.

    

    Section
      10.                                Limitation
      of Consequential Damage. Lender shall not be responsible for any lost
      profits of Borrower arising from any breach of contract, tort (excluding
      Lender’s gross negligence or willful misconduct), or any other wrong arising
      from the establishment, administration or collection of the obligations
      evidenced hereby.

    

    Section
      11.                                Indemnification
      and Expenses. Borrower agrees to hold Lender harmless from and
      indemnify Lender against all liabilities, losses, damages, judgments, costs
      and
      expenses of any kind which may be imposed on, incurred by or asserted against
      Lender (collectively, the “Costs”)
      relating to or arising out of this Agreement, any other Loan Document, or any
      transaction contemplated hereby or thereby, or any amendment, supplement or
      modification of, or any waiver or consent under or in respect of, this
      Agreement, any other Loan Document, or any transaction contemplated hereby
      or
      thereby, that, in each case, results from anything other than Lender’s gross
      negligence or willful 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    misconduct.   Borrower
      also agrees to reimburse Lender as and when billed by Lender for all Lender’s
      reasonable costs and expenses incurred in connection with the enforcement or
      the
      preservation of Lender’s rights under this Agreement, any other Loan Document,
      or any transaction contemplated hereby or thereby, including without limitation
      the reasonable fees and disbursements of its counsel. Borrower’s obligations
      under this Section 11 shall survive repayment of the Loan.

    

    Section
      12.                                Miscellaneous.

    

    
      	
              A.

            	
              Entire
                Agreement.   The Loan Documents embody the entire
                agreement and understanding between the parties hereto and supersede
                all
                prior agreements and understandings relating to the subject matter
                hereof.  No course of prior dealings between the parties, no
                usage of the trade, and no parole or extrinsic evidence of any nature,
                shall be used or be relevant to supplement, explain or modify any
                term
                used herein.

            

    

    

    
      	
              B.

            	
              No
                Waiver.  No failure to exercise and no delay in exercising
                any right, power, or remedy hereunder or under the Loan Documents
                shall
                impair any right, power, or remedy which Lender may have, nor shall
                any
                such delay be construed to be a waiver of any of such rights, powers,
                or
                remedies, or any acquiescence in any breach or default under the
                Loan
                Documents; nor shall any waiver of any breach or default of Borrower
                hereunder be deemed a waiver of any default or breach subsequently
                occurring.  The rights and remedies specified in the Loan
                Documents are cumulative and not exclusive of each other or of any
                rights
                or remedies which Lender would otherwise
                have.

            

    

    

    
      	
              C.

            	
              Survival.  All
                representations, warranties and agreements herein contained on the
                part of
                Borrower shall survive the making of advances hereunder and all such
                representations, warranties and agreements shall be effective so
                long as
                the Obligations arising pursuant to the terms of this Agreement remain
                unpaid or for such longer periods as may be expressly stated therein.                                                                                        

            

    

     

    
      

      
        	
                D.

              	
                Notices. 
                  All notices of any type hereunder shall be effective as against
                  Borrower
                  or Lender, as the case may be, upon the first to occur of (a) three
                  (3)
                  Business Days after deposit in a receptacle under the control of
                  the
                  United States Postal Service, (b) one (1) Business Day after being
                  transmitted by electronic means to a receiver under the control
                  of the
                  receiving party, provided there is an electronic confirmation of
                  receipt,
                  or (c) actual receipt by an employee or agent of the receiving
                  party.  For the purposes hereof, the addresses are as
                  follows:                                                                           

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

    

    
      	
              DEBTOR:

            	
              with
                a copy to:

            
	
              Stratus
                Properties Inc.

              98
                San Jacinto Boulevard, Suite 220

              Austin,
                TX 78791

              Attention:
                Mr. William H. Armstrong III

            	
              Armbrust
                & Brown, L.L.P.

              100
                Congress Avenue, Suite 1300

              Austin,
                TX 78701

              Attention:
                Kenneth Jones, Esq.

            
	
              Phone:  (512)
                478-5788

              Fax:      (512)
                478-6340

            	
              Phone:  (512)
                435-2312

              Fax:      (512)
                435-2360

            

    

    

    
      	
              LENDER:

            	
              with
                a copy to:

            
	
              Holliday
                Fenoglio Fowler, L.P.

              8401
                North Central Expressway,

              Suite
                700

              Dallas,
                TX 75225

              Attn:
                Whitaker Johnson

            	
              Leonard,
                Street and Deinard

              Suite
                2300, 150 S. Fifth Street

              Minneapolis,
                Minnesota 55402

              Attention:  Andrew
                P. Lee

            
	
              Phone:  (214)
                265-0880

              Fax:      (469)
                232-1955

            	
              Phone:  (612)
                335-1881

              Fax:      (612)
                335-1657

            

    

    

    
      	
              E.

            	
              Separability
                of Provisions.  In the event that any one or more of the
                provisions contained in this Agreement should be invalid, illegal
                or
                unenforceable in any respect, the validity, legality, and enforceability
                of the remaining provisions contained herein shall not in any way
                be
                affected or impaired thereby.

            

    

    

    
      	
              F.

            	
              Successors
                and Assigns.  This Agreement shall be binding upon and inure
                to the benefit of Borrower, Lender, and their respective successors
                and
                assigns, provided, however, that Borrower may not transfer its rights
                or
                obligations under any of the Loan Documents without the prior written
                consent of Lender which may be withheld in its sole and absolute
                discretion.  Lender may assign its interest in the Loan
                Documents, in whole, or in part, without any consent from, or notice
                to,
                Borrower.

            

    

    

    
      	
              G.

            	
              Counterparts.  This
                Agreement may be executed in any number of counterparts all of which
                taken
                together shall constitute one agreement and any party hereto may
                execute
                this Agreement by signing any such
                Counterpart.

            

    

    

    
      	
              H.

            	
              Choice
                of Law; Location of Loan.  This Agreement shall be governed
                by and construed in accordance with the laws of the State of
                Minnesota.  Lender and Borrower agree that the Loan will be
                negotiated, funded and closed in the State of
                Minnesota.

            

    

    

    
      	
              I.

            	
              Amendment
                and Waiver.  Neither this Agreement nor any provisions
                hereof may be changed, waived, discharged or terminated orally, but
                only
                by an 

            

    

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    instrument
      in writing signed by the party against whom enforcement of the
      change, waiver, discharge or termination is sought.

     

    
      	
              J.

            	
              Plural.  When
                permitted by the context, the singular includes the plural and vice
                versa.

            

    

    

    
      	
              K.

            	
              Retention
                of Records.  Lender shall retain any documents, schedules,
                invoices or other papers delivered by Borrower only for such period
                as
                Lender, at its sole discretion, may determine
                necessary.

            

    

    

    
      	
              L.

            	
              Headings.  Section
                and paragraph headings and numbers have been set forth for convenience
                only.

            

    

    

    
      	
              M.

            	
              Information
                to Participants.  Borrower agrees that Lender may furnish
                any financial or other information concerning Borrower or any of
                its
                Subsidiaries heretofore or hereafter provided by Borrower to Lender,
                pursuant to this Agreement or otherwise, to any prospective or actual
                purchaser of any participation or other interest in any of the loans
                made
                by Lender to Borrower (whether under this Agreement or otherwise),
                or to
                any prospective purchaser of any securities issued or to be issued
                by
                Lender; provided, however, any such delivery shall be delivered on
                the
                condition that such information is delivered on a confidential
                basis.

            

    

     

    
      

      
        	
                N.

              	
                Acknowledgments. 
                  Borrower hereby acknowledges that: (i) it has been advised by counsel
                  in
                  the negotiation, execution and delivery of this Agreement and the
                  other
                  Loan Documents; (ii) Lender has no fiduciary relationship to Borrower,
                  and
                  the relationship between Borrower and Lender is solely that of
                  debtor and
                  creditor; and (iii) no joint venture exists between Lender and
                  Borrower.

              

      

       

      Section
        13.        Submission to
        Jurisdiction; Venue.   To induce Lender to enter into this
        Agreement, Borrower irrevocably agrees that, subject to Lender’s sole
        discretion, all actions and proceedings in any way, manner or respect, arising
        out of, from or related to this Agreement or the other Loan Documents shall
        be
        litigated in courts having situs within the City of Minneapolis, State of
        Minnesota.  Borrower hereby consents and submits to the jurisdiction
        of any local, state or federal court located within said City and State.
        Borrower hereby waives any right it may have to transfer or change the venue
        of
        any litigation brought against Borrower by Lender in accordance with this
        paragraph.

    

     

    Section
      14.       Waiver Of Trial By
      Jury.  In recognition of the higher costs and delay which may
      result from a jury trial, the parties hereto waive any right to trial by jury
      of
      any claim, demand, action or cause of action (1) arising hereunder or any other
      instrument, document or agreement executed or delivered in connection herewith,
      or (2) in any way connected with or related or incidental to the dealings of
      the
      parties hereto or any of them with respect hereto or any other instrument,
      document or agreement executed or delivered in connection herewith, or the
      transactions related hereto or thereto, in each case whether now existing or
      hereafter arising, and whether sounding in contract or tort or otherwise; and
      each party hereby agrees and consents that 

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    any
      such
      claim, demand, action or cause of action shall be decided by court trial without
      a jury, and that any party hereto may file an original counterpart or a copy
      of
      this section with any court as written evidence of the consent of the parties
      hereto to the waiver of their right to trial by jury.

     

    Section
      15.       Liability of Officers,
      Directors, Shareholders.  Notwithstanding anything contained
      herein or in the other 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 any partner of Borrower or any officers, directors, or shareholders
      of
      Borrower.

    

    

    [Signature
      page follows.]

    
      
          

        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    LOAN
      AGREEMENT

    

    [SIGNATURE
      PAGE]

    

    

    IN
      WITNESS WHEREOF, the parties hereto
      have caused this Agreement to be executed as of the day and year first above
      written.

    

    

    
      	
              BORROWER:

            
	
              STRATUS
                PROPERTIES INC.,

              a
                Delaware corporation

              By:   
                /s/ John E. Baker

              Name:  John
                E. Baker

              Title:   Senior
                Vice President

            

    

    

    

    

    
      	
              LENDER:

            
	
              HOLLIDAY
                FENOGLIO FOWLER, L.P., a Texas limited partnership, by Holliday
                GP Corp., a Delaware corporation, its General Partner

              By:
                /s/ Nancy Goodson

              Name:   Nancy
                Goodson

              Its:        Vice
                President

            

    

    

    

    

    
      
        
                  SIGNATURE
            PAGE TO $3,500,000 LOAN
            AGREEMENT      

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      1 TO LOAN AGREEMENT

    

    CERTAIN
      DEFINITIONS

    

    

    “Accounting
      Period” means each
      calendar quarter during the term of the Loan, commencing on July 1,
      2007.

    

    “Agreement”
means
      the Loan
      Agreement to which this Schedule 1 is attached to and made a part
      of.

    

    “Auditors”
means
      Borrower’s
      independent certified public accountants, which shall be of nationally
      recognized standing and otherwise reasonably acceptable to Lender.

    

    “Borrower”
has
      the meaning
      provided in the introductory paragraph of the Agreement.

    

    “Borrower’s
      Officer’s Compliance
      Certificate” means a certificate made by a duly authorized officer of
      Borrower and addressed to Lender, in the form attached hereto as Exhibit
      B.

    

    “Business
      Day” means any day
      excluding Saturday or Sunday and excluding any day on which national banking
      associations are closed for business.

    

    “Capital
      Improvements
      Expenditures” means investments of Borrower and certain affiliates of
      Borrower in real estate and facilities investments, plus any municipal utility
      reimbursements which have been credited to such real estate and/or facilities
      investments, determined on a consolidated basis.

    

     “Cash
      and Cash
      Equivalents” means cash and cash equivalents of Borrower and certain
      affiliates of Borrower, determined on a consolidated basis.

    

    “Cash
      Collateral Account” means
      a blocked deposit account held by Lender in which funds are deposited by
      Borrower, which funds are pledged as collateral for the Loan pursuant to an
      agreement satisfactory to Lender in form and substance and in which Lender
      has a
      perfected first security interest.

    

    “Cash
      Collateral Factor” means
      at any time the ratio of (1) the balance in the Cash Collateral Account to
      (2)
      the principal balance of the Loan.

    

    “Comerica
      Debt” means the
      Indebtedness incurred by Borrower from time to time pursuant to the Comerica
      Loan Agreement.

    

    “Comerica
      Loan Agreement” means
      that certain Loan Agreement dated as of September 30, 2005, among Borrower
      and
      certain Affiliates of Borrower and Comerica Bank-Texas.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

            
       “Controlled Group” means a “controlled group of
      corporations” as defined in Section 1563(a) (4) of the Internal Revenue Code of
      1954, as amended, determined without regard to Section 1563(a) and (e) (3)
      (c)
      of such Code, of which Borrower is a part.

    

    “Costs”
has
      the meaning
      contained in Section 11.

    

    “Debt
      Service” means, with
      respect to a specified period, scheduled payments of principal and interest
      with
      respect to the respective Indebtedness.

    

    “Debt
      Service Coverage Ratio”
means for any period of time the ratio of (1) the sum of the Borrower’s increase
      (or decrease) in Cash and Cash Equivalents during that period, plus Capital
      Improvements Expenditures during that period, plus Debt Service on all of
      Borrower’s Indebtedness during that period, to (2) Debt Service on all of
      Borrower’s Indebtedness.

    

    “Events
      of Default” has the
      meaning contained in Section 8 of the Agreement.

    

    “GAAP”
shall
      mean generally
      accepted accounting principles as in effect from time to time in the United
      States.

    

    “Indebtedness”
of
      any Person
      means all items of indebtedness which, in accordance with GAAP, would be deemed
      a liability of such Person as of the date as of which indebtedness is to be
      determined and shall also include, without duplication, all indebtedness and
      liabilities of others assumed or guaranteed by such Person or in respect of
      which such Person is secondarily or contingently liable (other than by
      endorsement of instruments in the course of collection) that would otherwise
      be
      deemed to be liabilities under GAAP, whether by reason of any agreement to
      acquire such indebtedness, to supply or advance sums, or otherwise.

    

    “Lender”
has
      the meaning
      provided in the introductory paragraph of the Agreement.

    

    “Lending
      Office” shall refer to
      Lender’s office described in Section 12.D of the Agreement.

    

    “Loan”
has
      the meaning contained
      in Subsection 2.A. of the Agreement.

    

    “Loan
      Documents” means the
      Agreement, the Note, and any riders, supplements and amendments thereto,
      mortgages, security agreements, assignments, pledges, subordination agreements
      or guaranties delivered in connection with the Agreement and all other documents
      or instruments heretofore, now or hereafter executed, pursuant to the Agreement,
      or any of the aforesaid.

    

    “Material
      Adverse Effect” means
      with respect to any event or circumstance, a material adverse effect
      on:

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
      	
              (i)

            	
              the
                ability of Borrower to perform its obligations under the Agreement,
                the
                Note, or any other Loan Document;
                or

            

    

    

    
      	
              (ii)

            	
              the
                validity, enforceability or collectibility of the Note, the Agreement
                or
                any other Loan Document.

            

    

    

    “Maturity
      Date” means December
      31, 2011.

    

    “Note”
means
      the Promissory Note
      dated as of the date of the Agreement made by Borrower to Lender pursuant to
      Subsection 2.B. of the Agreement in the form attached hereto as Exhibit
      A, together with any replacements, modifications, amendments, renewals and
      extensions thereof.

    

    “Obligations”
means
      and includes
      all amounts owing by Borrower to Lender under the Note and the other Loan
      Documents, together with any and all loans, advances, debts, liabilities,
      obligations, letters of credit, or acceptance transactions, trust receipt
      transactions, or any other financial accommodations, owing by Borrower to Lender
      of every kind and description (whether or not evidenced by any note or other
      instrument and whether or not for the payment of money), direct or indirect,
      absolute or contingent, due or to become due, now existing or arising hereafter
      with respect to the Note and the other Loan Documents, including, without
      limitation, all interest, fees, charges, expenses, attorneys’ fees, and
      accountants’ fees chargeable to Borrower and incurred by Lender in connection
      the Loan.

    

    “Permitted
      Debt” means (i) the
      Loan and other Indebtedness to Lender or Related Lenders, (ii) the Comerica
      Debt
      (as of the date hereof), (iii) any other Indebtedness of Borrower for fair
      value
      received that is secured by assets owned by Borrower having an appraised value
      equal to or greater than the indebtedness secured thereby (and which assets
      do
      not secure other indebtedness), (iv) debt outstanding as of the date of the
      Loan
      Agreement, (v) unsecured trade, utility or non-extraordinary accounts payable
      in
      the ordinary course of business and other unsecured debt of Borrower at any
      one
      time not to exceed $500,000.00, and (vi) guaranties of Borrower guaranteeing
      project development and/or construction costs and related costs, provided that
      Borrower has a direct or indirect interest in such projects and that the
      aggregate amount, at any one time, of such guaranties does not exceed the sum
      of
      $15,000,000.00.

    

    “Person”
means
      any individual,
      entity, government, governmental agency or any other entity and whether acting
      in an individual, fiduciary or other capacity.

    

    “Plan”
means
      any employee
      pension benefit plan subject to Title IV of ERISA and maintained by Borrower
      or
      any member of a Controlled Group or any such plan to which Borrower or any
      member of a Controlled Group is required to contribute on behalf of any of
      its
      employees.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

             
“Property”  shall
      mean any and all right, title and interest of a specified Person in and to
      any
      and all property, whether real or personal, tangible or intangible, and wherever
      situated.

    

    “Related
      Lenders” shall mean
      American Strategic Income Portfolio Inc., a Minnesota corporation, American
      Select Portfolio Inc., a Minnesota corporation, American Strategic Income
      Portfolio Inc.—II, a  Minnesota corporation, and American Strategic
      Income Portfolio Inc.—III, a  Minnesota corporation.

    

    “Secured
      Indebtedness” means any
      Indebtedness that is subject to any security interest or lien securing the
      payment of money.

    

    “Statement
      Dates” means the
      dates of the financial statements delivered to Lender pursuant to Section 4.A(3)
      of the Agreement.

    

    “Subsidiary”
means
      (i) any
      entity of which more than fifty percent (50%) of the outstanding having ordinary
      voting power (irrespective of whether or not at the time class or classes of
      shall have or might have voting power by reason of the happening of any
      contingency) is at the time directly or indirectly owned by Borrower and/or
      any
      Subsidiary, (ii) any limited liability company or similar entity of which more
      than fifty percent (50%) of the member interests of such limited liability
      company are directly or indirectly owned by Borrower and/or any Subsidiary,
      and
      (iii) any partnership of which more than fifty percent (50%) of the limited
      partner interests of such limited partnership or any of the general partner
      interests of such limited partnership are directly or indirectly owned by
      Borrower and/or any Subsidiary.

    
      
              

        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
      
 

    

    EXHIBIT
      A
      TO LOAN AGREEMENT

    

    FORM
      OF NOTE

    

    
      
            

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B
      TO LOAN AGREEMENT

    

    FORM
      OF BORROWER’S OFFICER’S COMPLIANCE CERTIFICATE

    

    Stratus
      Properties Inc.

    98
      San
      Jacinto Boulevard, Suite 220

    Austin,
      TX 78791

    

    

    [DATE]

    

    Holliday
      Fenoglio Fowler, L.P.

    c/o
      FAF
      Advisors, Inc.

    800
      Nicollet Mall, Suite 500

    BC-MN-H05W

    Minneapolis,
      MN  55402

    Attention:  John
      G. Wenker

    

    

    
      	
              Re

            	
              Loan
                Agreement dated as of June 1, 2007 between Stratus Properties Inc.
                (“Borrower”) and Holliday Fenoglio Fowler, L.P.
                (“Lender”) (the “Loan
                Agreement”) (capitalized terms not defined herein have the
                respective meanings contained in the Loan
                Agreement)

            

    

    
       

      Ladies
        and Gentlemen:

       

    

    Pursuant
      to subsection 6.A(2) of the
      Loan Agreement, Borrower certifies to Lender as follows:

    

    1.           As
      of the date of this Certificate, no act or omission has occurred which has
      resulted in an Event or Default or, if not cured, remedied, waived or otherwise
      eliminated to the satisfaction of Lender, would result in an Event of
      Default.

    

    2.           The
      undersigned officer is authorized to make this Certificate on behalf of Borrower
      and has reviewed the terms of the Loan Agreement and has made, or caused to
      be
      made under such officer’s supervision, a review in reasonable detail of the
      facts necessary to make the certifications contained herein.

    

    
      	 
	
              STRATUS
                PROPERTIES INC.,

              a
                Delaware corporation

              By:___________________________

              Name:  John
                E. Baker

              Title:  Senior
                Vice Presidentexhibit10_23.htm

    
      

    

    Exhibit
      10.23

    LOAN
      AGREEMENT

    

    THIS
      LOAN AGREEMENT (this
“Agreement”) is made as of June 1, 2007 between STRATUS
      PROPERTIES INC., a Delaware corporation (“Borrower”),
      and HOLLIDAY FENOGLIO FOWLER, L.P., a Texas limited partnership
      (“Lender”).

    

    WHEREAS,
      Borrower and Lender desire to
      set forth herein the terms and conditions upon which Lender shall provide
      financing to Borrower;

    

    NOW,
      THEREFORE, the parties hereto
      hereby agree as follows:

     

    Section
      1.                      Certain
      Definitions and Index to Definitions.

    

    
      	
              A.

            	
              Accounting
                Terms.  Unless otherwise specified herein, all accounting
                terms used herein shall be interpreted, all accounting determinations
                hereunder shall be made, and all financial statements required to
                be
                delivered hereunder shall be prepared in accordance with GAAP and
                practices consistently applied.

            

    

    

    
      	
              B.

            	
              Definitions.  Capitalized
                terms used herein shall have the respective meanings set forth in
                Schedule 1 attached hereto when used in this Agreement (including
                the Exhibits hereto) except as the context shall otherwise
                require.  Schedule 1 is hereby made a part of this
                Agreement.

            

    

    

    Section
      2.                      Loan.

    

    
      	
              A.

            	
              Loan
                Amount.  Lender agrees to provide a loan to Borrower in the
                amount of THREEMILLION FIVE HUNDRED THOUSAND AND
                00/100 DOLLARS ($3,500,000.00) (“Loan”),
                provided that all conditions precedent described in this Agreement
                have
                been met or waived by Lender and that Borrower is not otherwise in
                default
                as of the date of disbursement.

            

    

    

    
      	
              B.

            	
              Note.  Borrower’s
                obligation to repay the Loan shall be further evidenced by the
                Note.  Reference is made to the Note for certain terms relating
                to interest rate, payments, prepayment, Maturity Date and additional
                terms
                governing the Loan.

            

    

     

    C.           Referral
      Fee/Application Fee.  In connection with the Loan, Borrower agrees
      to pay a referral fee of $35,000.00 to Lender and an application fee of $2,000
      to FAF Advisors, Inc.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    Section
      3.                      Payments
      by Borrower.

    

    
      	
              A.

            	
              General.  All
                payments hereunder shall be made by Borrower to Lender at the Lending
                Office, or at such other place as Lender may designate in
                writing.  Payments shall be made by wire
                transfer.

            

    

    

    
      	
              B.

            	
              Other
                Outstanding Obligations.  Unless required to be paid sooner
                hereunder, any and all Obligations in addition to the amounts due
                under
                the Note shall be due and payable in full upon the Maturity
                Date.

            

    

    

    Section
      4.                      Conditions
      Precedent.  As conditions precedent to Lender’s obligation to
      advance the Loan to Borrower:

    

    A.           Borrower
      shall deliver, or cause to be delivered, to Lender:

    

    
      	
               

            	
              (1)

            	
              A
                duly executed copy of this Agreement, the Note, and any and all other
                Loan
                Documents.

            

    

    

    
      	
               

            	
              (2)

            	
              A
                favorable written opinion of counsel for Borrower, addressed to Lender
                and
                in form and substance acceptable to Lender and its
                counsel.

            

    

    

    
      	
               

            	
              (3)

            	
              Current
                financial statements of Borrower in form and substance acceptable
                to
                Lender.

            

    

    

    
      	
               

            	
              (4)

            	
              The
                following organizational documents of
                Borrower:

            

    

    

    
      	
               

            	
              (a)

            	
              Borrower’s
                Certificate of Incorporation as certified by the Secretary of State
                of the
                state of Borrower’s organization and by the corporate secretary of
                Borrower, a Certificate of Good Standing dated no less recently than
                thirty (30) calendar days prior to the date of this Agreement, issued
                by
                the Secretary of State of the state of Borrower’s organization, stating
                that Borrower is in good standing in such state, and evidence of
                good
                standing to transact business in the State of Texas, dated no less
                recently than thirty (30) calendar days prior to the date of this
                Agreement, issued by the Secretary of State of the State of
                Texas.

            

    

    

    
      	
               

            	
              (b)

            	
              A
                resolution of the board of directors of Borrower, certified as of
                the date
                of this Agreement by its corporate secretary, authorizing the execution,
                delivery and performance of this Agreement and the other Loan Documents,
                and all other instruments or documents to be delivered by Borrower
                pursuant to this Agreement.

            

    

    

    
      	
               

            	
              (c)

            	
              A
                certificate of Borrower’s corporate secretary as to the incumbency and
                authenticity of the signatures of the officers of Borrower
                

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    executing
      any Loan Documents (Lender being entitled to rely thereon until
      a new such certificate has been furnished to Lender).

     

    (5)           The
      written consent of Comerica Bank-Texas to the Loan as required under the
      Comerica Loan Agreement (and/or the written consent of any other lender whose
      consent is required to the financing evidenced by this Agreement pursuant to
      agreements between Borrower and such lender(s)).

    

    (6)           Borrower
      will pay (prior to or contemporaneously with the funding of the Loan) the
      outstanding balance of the Comerica Bank-Texas Loan (as described in the
      Comerica Loan Agreement) in full.

    

    
      	
              B.

            	
              All
                acts, conditions, and things (including, without limitation, the
                obtaining
                of any necessary regulatory approvals and the making of any required
                filings, recordings or registrations) required to be done and performed
                and to have happened prior to the execution, delivery and performance
                of
                the Loan Documents to constitute the same legal, valid and binding
                obligations of Borrower, enforceable in accordance with their respective
                terms, subject to limitations as to enforceability which might result
                from
                bankruptcy, insolvency, moratorium and other similar laws affecting
                creditors’ rights generally and subject to limitations on the availability
                of equitable remedies, shall have been done and performed and shall
                have
                happened in compliance with all applicable laws or shall have been
                waived
                by Lender in writing.

            

    

    

    
      	
              C.

            	
              All
                documentation shall be satisfactory in form and substance to Lender,
                and
                Lender shall have received any and all further information, documents
                and
                opinions which Lender may reasonably have requested in connection
                therewith, such documents, where appropriate, to be certified by
                proper
                authorities and officials of
                Borrower.

            

    

    

    
      	
              D.

            	
              All
                representations and warranties of Borrower to Lender set forth herein
                or
                in any of the Loan Documents shall be accurate and complete in all
                material respects.

            

    

    

    
      	
              E.

            	
              There
                shall not exist an Event of Default or an event which with the giving
                of
                notice or passage of time, or both, would be an Event of
                Default.

            

    

    

    Section
      5.                      Representations
      and Warranties of Borrower.  Borrower represents and warrants to
      Lender as follows:

    

    
      	
              A.

            	
              Capacity.  Borrower
                is duly organized, validly existing, and in good standing under the
                laws
                of the state of its organization (as described herein) and is authorized
                to do business in the State of Texas and in any and all other
                jurisdictions in which its ownership of Property or conduct of business
                legally requires such authorization and the failure to do so would
                have a
                Material Adverse Effect, and has full power, authority, and legal
                right to
                own its properties and assets and to conduct its business as presently
                conducted or proposed to be conducted, and the consummation of the
                

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    transactions
      contemplated herein do not, and will not, require the
      consent or approval of, or filing with, any Person which has not been
      obtained.

     

    
      	
              B.

            	
              Authority.  Borrower
                has full power, authority and legal right to execute and deliver,
                and to
                perform and observe the provisions of the Loan Documents to be executed
                by
                Borrower.  The execution, delivery and performance of the Loan
                Documents have been duly authorized by all necessary action, and
                when duly
                executed and delivered, will be legal, valid, and binding obligations
                of
                Borrower enforceable in accordance with their respective terms, subject
                to
                limitations as to enforceability which might result from bankruptcy,
                insolvency, moratorium and other similar laws affecting creditors’ rights
                generally and subject to limitations on the availability of equitable
                remedies.

            

    

    

    
      	
              C.

            	
              Compliance.  The
                execution and delivery of the Loan Documents and compliance with
                their
                terms will not violate any provision of applicable law and will not
                result
                in a breach of any of the terms or conditions of, or result in the
                imposition of any lien, charge, or encumbrance upon any properties
                of
                Borrower pursuant to, or constitute a default (with due notice or
                lapse of
                time or both) or result in an occurrence of an event pursuant to
                which any
                holder or holders of Indebtedness may declare the same due and
                payable.

            

    

    

    
      	
              D.

            	
              Financial
                Statements.  The financial statements provided by Borrower
                to Lender pursuant to subsection 4.A(3) are correct and complete
                as of the
                dates indicated in such statements and fairly present the financial
                condition and results of operations of Borrower for the fiscal periods
                indicated therein.

            

    

    

    
      	
              E.

            	
              Material
                Adverse Events.  Since the Statement Dates, neither any
                event nor the passage of time has resulted in a Material Adverse
                Effect.

            

    

    

    
      	
              F.

            	
              Litigation.  Except
                as heretofore disclosed by Borrower to Lender in writing, there are
                no
                actions or proceedings pending, or to the knowledge of Borrower
                threatened, against or affecting Borrower which, if adversely determined,
                could reasonably be expected to have a Material Adverse
                Effect.  Borrower is not in default with respect to any
                applicable laws or regulations which materially affect the operations
                or
                financial condition of Borrower, nor is it in default with respect
                to any
                other writ, injunction, demand, or decree or in default under any
                indenture, agreement, or other instrument to which Borrower is a
                party or
                by which Borrower may be bound where any such default would have
                a
                Materially Adverse Effect.

            

    

    

    
      	
              G.

            	
              Taxes.  Borrower
                has filed or caused to be filed all tax returns which are required
                to be
                filed by it.  Borrower has paid, or made provision for the
                payment of, all taxes which have or may have become due pursuant
                to said
                returns or otherwise or pursuant to an assessment received by Borrower,
                except such taxes, if any, as are being contested in good faith and
                as to
                which adequate reserves have been provided.  The charges,
                accruals, and reserves in respect of income taxes on the books of
                Borrower
                are adequate.  Borrower knows of no proposed material tax
                assessment against it and no 

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    extension
      of time for the assessment of federal, state, or local taxes of
      Borrower is in effect or has been requested, except as disclosed in the
      financial statements furnished to Lender.

     

    
      	
              H.

            	
              Accurate
                Information.  All written information supplied to Lender by
                or on behalf of Borrower is and shall be true and correct in all
                material
                respects, and all financial projections or forecasts of future results
                or
                events supplied to Lender by or on behalf of Borrower have been prepared
                in good faith and based on good faith estimates and assumptions of
                the
                management of Borrower, and Borrower has no reason to believe that
                such
                projections or forecasts are not
                reasonable.

            

    

    

    
      	
              I.

            	
              Use
                of Loan Proceeds.  Borrower is not engaged principally in,
                nor does it have as one of its important activities, the business
                of
                extending credit for the purpose of purchasing or carrying any margin
                stock (within the meaning of Regulation U of the Board of Governors
                of the
                Federal Reserve System), and no part of any advance made hereunder
                will be
                used to purchase or carry margin stock, extend credit to others for
                the
                purpose of purchasing or carrying any margin stock, or used for any
                purpose which violates Regulation U or Regulation X of the Board
                of
                Governors of the Federal Reserve System or any other provision of
                law.

            

    

    

    
      	
              J.

            	
              ERISA.  No
                plan (as that term is defined in the Employee Retirement
                Income  Security Act of 1974 (“ERISA”))
                of the Borrower (a “Plan”) which is subject to
                Part 3 of Subtitle B of Title 1 of ERISA had an accumulated funding
                deficiency (as such term is defined in ERISA) as of the last day
                of the
                most recent fiscal year of such Plan ended prior to the date hereof,
                or
                would have had such an accumulated funding deficiency on such date
                if such
                year were the first year of such Plan, and no material liability
                to the
                Pension Benefit Guaranty Corporation has been, or is expected by
                the
                Borrower to be, incurred with respect to any such Plan.  No
                Reportable Event (as defined in ERISA) has occurred and is continuing
                in
                respect to any such Plan.

            

    

    

    Section
      6.                      Affirmative
      Covenants of Borrower.  Until payment in full of the Obligations,
      Borrower agrees that:

    

    
      	
              A.

            	
              Financial
                Statements, Reports and Certifications. Borrower will furnish to
                Lender, in form and substance satisfactory to
                Lender:

            

    

    

    
      	
               

            	
              (1)

            	
              As
                soon as possible after the end of each fiscal year of Borrower, and
                in any
                event within ninety (90) Business Days thereafter, (i) a complete
                copy of
                its annual audit which shall include the balance sheet of Borrower
                as of
                the close of the fiscal year and an income statement for such year,
                certified by the Auditors without material qualification, (ii) a
                statement
                of changes in partners’ equity and cash flows for the period ended on such
                date, certified by the Auditors, and (iii) a statement certified
                by the
                chief financial officer of Borrower that no act or omission has occurred
                which has resulted in an Event or Default or, if not
                

            

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    cured,
      remedied, waived or otherwise eliminated to the satisfaction of
      Lender, would result in an Event of Default;

     

    
      	
               

            	
              (2)

            	
              No
                later than thirty (30) Business Days after the close of each Accounting
                Period, (i) Borrower’s balance sheet as of the close of such Accounting
                Period and its income statement for that portion of the then current
                fiscal year through the end of such Accounting Period prepared in
                accordance with GAAP and certified as being complete, correct, and
                fairly
                representing its financial condition and results of operations by
                the
                chief financial officer of Borrower, subject to the absence of footnotes
                and year-end adjustments, (ii) a statement of changes in equity and
                cash
                flows for the period ended on such date, certified by the chief financial
                officer of Borrower, (iii) the calculation of the Debt Service Coverage
                Ratio demonstrating compliance with Subsection 8.G. of this Agreement,
                together with any supporting calculations used to arrive at such
                calculation, certified by the chief financial officer of Borrower,
                and
                (iv) a completed Borrower’s Officer’s Compliance
                Certificate;

            

    

    

    
      	
               

            	
              (3)

            	
              Promptly
                upon the filing or receiving thereof, copies of all reports which
                the
                Borrower files under ERISA or which the Borrower receives from the
                Pension
                Benefit Guaranty Corporation if such report shows any material violation
                or potential violation by the Borrower of its obligations under ERISA;
                and

            

    

    

    
      	
               

            	
              (4)

            	
              Such
                other information concerning Borrower as Lender may reasonably
                request.

            

    

    

    
      	
              B.

            	
              Other
                Information.  Borrower will (1) maintain accurate books and
                records concerning its business in a manner consistent with Borrower’s
                current bookkeeping and record-keeping practices (provided such practices
                result in accurate books and records), (2) upon request, furnish
                to Lender
                such information, statements, lists of Property and accounts, budgets,
                forecasts, or reports as Lender may reasonably request with respect
                to the
                business, affairs, and financial condition of Borrower, and (3) permit
                Lender or representatives thereof, upon at least forty-eight (48)
                hours
                prior written notice to Borrower, to inspect during Borrower’s usual
                business hours, the properties of Borrower and to inspect, audit,
                make
                copies of, and make extracts from the books or accounts of
                Borrower.

            

    

    

    
      	
              C.

            	
              Expenses.  Borrower
                shall pay all reasonable out-of-pocket expenses of Lender (including,
                but
                not limited to, fees and disbursements of Lender’s counsel) incident to
                (1) preparation and negotiation of the Loan Documents and any amendments,
                extensions and renewals thereof, (2) following an Event of Default,
                the
                protection and exercise of the rights of Lender under the Loan Documents,
                or (3) defense by Lender against all claims against Lender relating
                to any
                acts of commission or omission directly or indirectly relating to
                the Loan
                Documents, all whether by judicial proceedings or otherwise, but
                excluding
                claims related to Lender’s gross negligence or intentional
                misconduct.  Borrower will also pay and save Lender harmless
                from any and all liability 

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    with
      respect to any stamp or other taxes (other than transfer or income
      taxes) which may be determined to be payable in connection with the making
      of
      the Loan Documents.

     

    
      	
              D.

            	
              Taxes
                and Expenses Regarding Borrower’s Property.  Borrower shall
                make due and timely payment or deposit of all taxes, assessments
                or
                contributions required of it, except such deposits, assessments or
                contributions which are being contested in good faith and as to which,
                in
                the reasonable determination of Lender, adequate reserves have been
                provided.

            

    

    

    
      	
              E.

            	
              Notice
                of Events.  Promptly after the later of (i) the occurrence
                thereof or (ii) such time as Borrower has knowledge of the occurrence
                thereof, Borrower will give Lender written notice of any Event of
                Default
                or any event which with the giving of notice or passage of time,
                or both,
                would become an Event of Default; provided, however, in the event
                that the
                respective Event of Default is subsequently cured as permitted herein,
                such failure to give notice shall also be deemed to be
                cured.

            

    

    

    
      	
              F.

            	
              Notice
                of Litigation.  In addition to any regularly scheduled
                reporting required to be delivered with the Borrower’s Officer’s
                Certificate, Borrower will promptly give notice to Lender in writing
                of
                (i) any litigation or other proceedings against Borrower involving
                claims
                for amounts in excess of $250,000 that Borrower does not reasonably
                expect
                are covered by insurance, (ii) any labor controversy resulting in
                or
                threatening to result in a strike against Borrower, or (iii) any
                proposal
                by any public authority to acquire a material portion of the assets
                or
                business of Borrower.

            

    

    

    
      	
              G.

            	
              Other
                Debt.  Borrower will promptly pay and discharge any and all
                Indebtedness when due (where the failure to do so either individually
                or
                in the aggregate with any such other unpaid Indebtedness would have
                a
                Material Adverse Effect), and lawful claims which, if unpaid, might
                become
                a lien or charge upon the Property of Borrower, except such as may
                in good
                faith be contested or disputed or for which arrangements for deferred
                payment have been made, provided appropriate reserves are maintained
                to
                the satisfaction of Lender for the eventual payment thereof in the
                event
                it is found that such Indebtedness is an Indebtedness payable by
                Borrower,
                and when such dispute or contest is settled and determined, will
                promptly
                pay the full amount then due.

            

    

    

    
      	
              H.

            	
              Cooperation.  Borrower
                will execute and deliver to Lender any and all documents, and do
                or cause
                to be done any and all other acts reasonably deemed necessary by
                Lender,
                in its reasonable discretion, to effect the provisions and purposes
                of
                this Agreement.

            

    

    

    
      	
              I.

            	
              Maintenance
                of Insurance; Notice of Loss.  Borrower shall maintain such
                insurance with reputable insurance carriers as is normally carried
                by
                companies engaged in similar businesses and owning similar
                Property.  Upon request from Lender, Borrower will provide
                Lender with certificates indicating that such insurance is in effect
                and
                all premiums due have been paid.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
      	
              J.

            	
              Location
                of Business.  Borrower will give Lender written notice
                immediately upon forming an intention to change the location of its
                chief
                place of business.

            

    

    

    
      	
              K.

            	
              Maintenance
                of Existence.  Borrower will preserve and maintain its legal
                existence and all rights, privileges and franchises necessary or
                desirable
                in the normal conduct of its business, will conduct its business
                in an
                orderly, efficient and regular manner, and will comply with all applicable
                laws and regulations and the terms of any indenture, contract or
                other
                instrument to which it may be a party or under which it or its properties
                may be bound, in each instance where the failure to do so would have
                a
                Material Adverse Effect.

            

    

    

    
      	
              L.

            	
              Compliance
                with ERISA.  Cause each Plan to comply and be administered
                in accordance with those provisions of ERISA which are applicable
                to such
                Plan.

            

    

    

    Section
      7.                      Negative
      Covenants of Borrower.  Except as expressly provided for in
      Section 7 H. below, and subject to the terms and conditions set forth therein,
      until payment in full of the Obligations, without the prior written consent
      of
      Lender (which consent may be withheld in the sole discretion and determination
      of Lender), Borrower will not do any of the following items A through
      G:

    

    
      	
              A.

            	
              Sale
                of Assets.  Borrower will not sell, abandon, or otherwise
                dispose of any of its assets except in the ordinary course of
                business.

            

    

    

    
      	
              B.

            	
              Consolidation,
                Merger, etc.  Borrower will not consolidate with, merge
                into, or sell (whether in a single transaction or in a series of
                transactions) all or substantially all of its assets to any
                Person.

            

    

    

    
      	
              C.

            	
              Change
                in Business.  Borrower will not make any change in the
                nature of the business of Borrower or a Subsidiary which would result
                in a
                material change in the character of the business of Borrower, taken
                as a
                whole.

            

    

    

    
      	
              D.

            	
              Transactions
                with Affiliates. Borrower will not enter into any transaction with any
                Person affiliated with Borrower on terms materially less favorable
                to
                Borrower, than at the time could be available to Borrower, from any
                Person
                not affiliated with Borrower.

            

    

    

    
      	
              E.

            	
              Plans.  Borrower
                will not sponsor or contribute to any other Plan or other defined
                benefit
                pension plan or contributes to any multi-employer pension
                plan.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              F.

            	
              Dividends,
                Redemptions.

            

    

    

    
      	
              (1)

            	
              Borrower
                will not, except as allowed below, declare or pay any dividend on,
                or
                declare or make any other distribution on account of, any stock interest
                or other ownership interest.

            

    

    

    
      	
              (2)

            	
              Borrower
                will not, except as allowed below, directly or indirectly redeem,
                retire,
                purchase, or otherwise acquire beneficially any shares of any class
                of its
                own stock now or hereafter outstanding or set apart any sum for any
                such
                purpose.  The foregoing notwithstanding, Borrower may redeem,
                retire, purchase or otherwise acquire beneficially shares of common
                stock
                of Borrower in an aggregate amount that does not exceed
                $5,000,000.

            

    

    

    
      	
              G.

            	
              Indebtedness.
                Borrower will not incur any Indebtedness other than Permitted
                Debt.

            

    

    
H.           Change
      of Control.  Notwithstanding anything to the contrary, in the
      event of a contemplated Change in Control (as defined below) Borrower shall
      give
      thirty (30) days’ prior written notice to Lender indicating whether it (i)
      intends to prepay the Loan, which it shall have the right to do in its sole
      and
      absolute discretion, subject to a prepayment premium of one percent (1%) of
      the
      then outstanding balance of the Loan (the “Change in Control
      Prepayment Premium”) or in the event of a voluntary Change in
      Control under H.(a)(iii) below, the Reinvestment Charge, or (ii) requests
      Lender’s written consent to such Change in Control (with the intent to keep the
      Loan in place, subject to the terms hereof) which may be withheld, conditioned
      or delayed, for any or no reason, in its sole and absolute
      discretion.

     

    Provided,
      notwithstanding anything to the contrary (including any prepayment provisions
      or
      limitations in the Note, and without limiting its ability to prepay the Loan
      pursuant to the provisions of the Note), if such consent is not granted,
      Borrower may subsequently choose to prepay the Loan, together with (i) the
      Change in Control Prepayment Premium or (ii) in the case of a voluntary Change
      in Control under H.(a)(iii) below (i.e., one not necessitated by the death,
      incapacity or other occurrence preventing a member of the senior management
      from
      fulfilling his role in the management of Borrower), the Reinvestment
      Charge.  Any Change in Control in contravention of the provisions set
      forth herein, shall be an immediate Event of Default (as defined in Section
      8
      below) and Borrower shall be liable for the Change in Control Prepayment Premium
      and Lender may also pursue any other remedies available to it at law, in equity
      or under Section 8 of this Agreement.

     

    

    
      (a)           As
        used herein “Change of Control” means (capitalized terms
        not otherwise defined will have the meanings ascribed to them in paragraph
        (b)
        below):

       

      

    

    
      (i)           the
        acquisition by any Person together with all Affiliates of such Person, of
        Beneficial Ownership of the Threshold Percentage or more; provided, however,
        that for purposes of this Section 7 H.(a)(i), the following will not constitute
        a Change of Control:

    

    
      

       

      (A)  any
        acquisition of Company Voting Stock by the Company or its
        subsidiaries,

    

    
      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (B)  any
        acquisition of Company Voting Stock by any employee benefit plan (or related
        trust) sponsored or maintained by the Company or any corporation or other
        entity
        controlled by the Company; or

    

    
      

       

      (ii)           individuals
        who, as of the effective date of this Agreement, constitute the Board (the
        “Incumbent Board”) cease for any reason to constitute at
        least a majority of the Board; provided, however, that any individual becoming
        a
        director subsequent to the effective date of this Agreement whose election,
        or
        nomination for election by the Company’s shareholders, was approved by a vote of
        at least a majority of the directors then comprising the Incumbent Board
        will be
        considered a member of the Incumbent Board, unless such individual’s initial
        assumption of office occurs as a result of an actual or threatened election
        contest with respect to the election or removal of directors or any other
        actual
        or threatened solicitation of proxies or consents by or on behalf of a Person
        other than the Incumbent Board; or

    

    
      

       

      (iii)           a
        majority of those three individuals currently comprising senior management,
        William H. Armstrong, President, John E. Baker, Senior Vice President, and
        Kenneth N. Jones, General Counsel, cease to serve in their current positions;
        or

    

    
      

       

      (iv)           the
        consummation of a reorganization, merger or consolidation (including a merger
        or
        consolidation of the Company or any direct or indirect subsidiary of the
        Company), or sale or other disposition of all or substantially all of the
        assets
        of the Company (a “Business Combination”), in each case,
        unless, immediately following such Business Combination:

    

    
      

       

      (A)  the
        individuals and entities who were the Beneficial Owners of the Company Voting
        Stock immediately prior to such Business Combination have direct or indirect
        Beneficial Ownership of more than 50% of the then outstanding shares of common
        stock, and more than 50% of the combined voting power of the then outstanding
        voting securities entitled to vote generally in the election of directors,
        of
        the Post-Transaction Corporation, and

    

    
      

       

      (B)  no
        Person
        together with all Affiliates of such Person (excluding the Post-Transaction
        Corporation and any employee benefit plan or related trust of either the
        Company, the Post-Transaction Corporation or any subsidiary of either
        corporation) Beneficially Owns 30% or more of the then outstanding shares
        of
        common stock of the Post-Transaction Corporation or 30% or more of the combined
        voting power of the then outstanding voting securities of the Post-Transaction
        Corporation, and

    

    
      

       

      (C)  at
        least
        a majority of the members of the board of directors of the Post-Transaction
        Corporation were members of the Incumbent Board at the time of the execution
        of
        the initial agreement, and of the action of the Board, providing for such
        Business Combination; or

    

    
      

       

      (v)           approval
        by the shareholders of the Company of a complete liquidation or dissolution
        of
        the Company.

    

    
      

       

      (b)           As
        used in this Section 7 H. and elsewhere in this Agreement, the following
        terms
        have the meanings indicated:

    

    
      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (i)           Affiliate:  “Affiliate”
        means a Person that directly, or indirectly through one or more intermediaries,
        controls, or is controlled by, or is under common control with, another
        specified Person.

    

    
      

       

      (ii)           Beneficial
        Owner:  “Beneficial Owner” (and variants
        thereof), with respect to a security, means a Person who, directly or indirectly
        (through any contract, understanding, relationship or otherwise), has or
        shares
        (A) the power to vote, or direct the voting of, the security, and/or (B)
        the
        power to dispose of, or to direct the disposition of, the
        security.

    

    
      

       

      (iii)           Company
        Voting Stock:  “Company Voting Stock” means
        any capital stock of the Company that is then entitled to vote for the election
        of directors.

    

    
      

       

      (iv)           Majority
        Shares:  “Majority Shares” means the number of
        shares of Company Voting Stock that could elect a majority of the directors
        of
        the Company if all directors were to be elected at a single
        meeting.

    

    
      

       

      (v)           Person:  “Person”
        means a natural person or entity, and will also mean the group or syndicate
        created when two or more Persons act as a syndicate or other group (including
        without limitation a partnership, limited partnership, joint venture or other
        joint undertaking) for the purpose of acquiring, holding, or disposing of
        a
        security, except that “Person” will not include an underwriter temporarily
        holding a security pursuant to an offering of the security.

    

    
      

       

      (vi)           Post-Transaction
        Corporation:  Unless a Change of Control includes a Business
        Combination, “Post-Transaction Corporation” means the
        Company after the Change of Control.  If a Change of Control includes
        a Business Combination, “Post-Transaction
Corporation” will mean the corporation
        or
        other entity resulting from the Business Combination unless, as a result
        of such
        Business Combination, an ultimate parent entity controls the Company or all
        or
        substantially all of the Company’s assets either directly or indirectly, in
        which case, “Post-Transaction Corporation” will mean such ultimate parent
        entity.

    

    
      

       

      (vii)           Threshold
        Percentage:  “Threshold Percentage” means 30%
        of all then outstanding Company Voting Stock.

    

    

    

    Section
      8.                      Events
      of Default; Remedies. If any of the following events occurs, it is hereby
      defined as and declared to be and to constitute an “Event of
      Default”:

    

    
      	
              A.

            	
              Borrower
                shall fail to make any payment of principal, interest or other amount
                under the Note, when due whether at maturity, upon acceleration,
                or
                otherwise, and such default shall continue for three (3) Business
                Days
                after written notice to Borrower from Lender (except that Borrower
                shall
                not be entitled to said three (3) Business Day notice period more
                than
                twice in any twelve (12) calendar month period);
                or

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              B.

            	
              Borrower
                shall default in the payment of any of the other Obligations when
                due, and
                such default shall continue for ten (10) Business Days after written
                notice to Borrower from Lender; or

            

    

    

    
      	
              C.

            	
              An
                order for relief shall be entered against Borrower or any Subsidiary
                by
                any United States Bankruptcy Court; or Borrower or any Subsidiary
                shall
                generally not pay its debts as they become due (within the meaning
                of 11
                U.S.C. 303(h) as at any time amended or any successor statute thereto)
                or
                make an assignment for the benefit of creditors; or Borrower or any
                Subsidiary shall apply for or consent to the appointment of a custodian,
                receiver, trustee, or similar officer for it or for all or any substantial
                part of its Property; or such custodian, receiver, trustee, or similar
                officer shall be appointed without the application or consent of
                Borrower
                or such Subsidiary and such appointment shall continue undischarged
                for a
                period of sixty (60) calendar days; or Borrower or such Subsidiary
                shall
                institute (by petition, application, answer, consent, or otherwise)
                any
                bankruptcy, insolvency, reorganization, moratorium, arrangement,
                readjustment of debt, dissolution, liquidation or similar proceeding
                relating to it under the laws of any jurisdiction; or any such proceeding
                shall be instituted (by petition, application, or otherwise) against
                Borrower or such Subsidiary and shall remain undismissed for a period
                of
                sixty (60) calendar days; or any judgment, writ, warrant of attachment,
                execution, or similar process shall be issued or levied against a
                substantial part of the Property of Borrower or such Subsidiary and
                such
                judgment, writ, or similar process shall not be released, vacated,
                or
                fully bonded within sixty (60) calendar days after its issue or levy;
                or

            

    

    

    
      	
              D.

            	
              Borrower
                shall be in breach of any other agreement, covenant, obligation,
                representation or warranty hereunder or with respect to any of the
                Loan
                Documents, and such breach shall continue for twenty (20) Business
                Days
                after whichever of the following dates is the earliest: (i) the date
                on
                which Borrower gives notice of such breach to Lender, and (ii) the
                date on
                which Lender gives notice of such breach to Borrower; provided, however,
                such twenty (20) Business Day period may be extended for up to an
                additional thirty (30) calendar days if and only if Lender extends
                such
                time period in writing following Lender’s good faith determination that
                (X) Borrower is continuously and diligently taking action to cure
                such
                breach, and (Y) such breach cannot be cured within the initial twenty
                (20)-day cure period; or

            

    

    

    
      	
              E.

            	
              The
                aggregate book value of the Borrower’s assets shall at any time be less
                than (1) $80,000,000 minus (2) the product of $80,000,000 multiplied
                by
                the Cash Collateral Factor.

            

    

    

    
      	
              F.

            	
              The
                aggregate market value of the Borrower’s assets shall at any time be less
                than (1) $160,000,000 minus (2) the product of $160,000,000 multiplied
                by
                the Cash Collateral Factor.

            

    

    

    
      	
              G.

            	
              The
                Debt Service Coverage Ratio measured on a quarterly basis for the
                previous
                twelve (12) months shall be less than (1) (a) 5.0 minus (b) the product
                of
                5.0 multiplied by the Cash Collateral Factor, to (2)
                1.0.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              H.

            	
              The
                ratio of (1) the Borrower’s Indebtedness to (2) the aggregate market value
                of the Borrower’s assets shall at any time exceed (a) sixty percent
                (60.0%) minus (b) the product of sixty percent (60.0%) multiplied
                by the
                Cash Collateral Factor.

            

    

    

    
      	
              I.

            	
              The
                ratio of (1) the Borrower’s Secured Indebtedness to (2) the aggregate
                market value of the Borrower’s assets shall at any time exceed (1) forty
                percent (40.0%) minus (2) forty percent (40.0%) multiplied by the
                Cash
                Collateral Factor.

            

    

    

    
      	
              J.

            	
              An
                “Event of Default” as defined in the Comerica Loan Agreement shall
                occur.

            

    

    

    
      	
              K.

            	
              Any
                Reportable Event (as defined in ERISA) shall have occurred and continue
                for 30 days; or any Plan shall have been terminated by the Borrower
                not in
                compliance with ERISA, or a trustee shall have been appointed by
                a court
                to administer any Plan, or the Pension Benefit Guaranty Corporation
                shall
                have instituted proceedings to terminate any Plan or to appoint a
                trustee
                to administer any Plan.

            

    

    

    THEN,
      at
      Lender’s option unless and until cured or waived in writing by Lender and
      regardless of any prior forbearance by Lender, all Obligations shall, without
      presentment, demand, protest, or notice of any kind, all of which are hereby
      expressly waived, be forthwith automatically due and payable in full, and Lender
      may, immediately and without expiration of any period of grace, enforce payment
      of all Obligations and exercise any and all other remedies granted to it at
      law,
      in equity, or otherwise.

    

    Section
      9.                      Disclaimer
      for Negligence.  Lender shall not be liable for any claims,
      demands, losses or damages made, claimed or suffered by Borrower, excepting
      such
      as may arise through or could be caused by Lender’s gross negligence or willful
      misconduct, and specifically disclaiming any liability of Lender to Borrower
      arising or claimed to have arisen out of Lender’s ordinary
      negligence.

    

    Section
      10.                                Limitation
      of Consequential Damage. Lender shall not be responsible for any lost
      profits of Borrower arising from any breach of contract, tort (excluding
      Lender’s gross negligence or willful misconduct), or any other wrong arising
      from the establishment, administration or collection of the obligations
      evidenced hereby.

    

    Section
      11.                                Indemnification
      and Expenses. Borrower agrees to hold Lender harmless from and
      indemnify Lender against all liabilities, losses, damages, judgments, costs
      and
      expenses of any kind which may be imposed on, incurred by or asserted against
      Lender (collectively, the “Costs”)
      relating to or arising out of this Agreement, any other Loan Document, or any
      transaction contemplated hereby or thereby, or any amendment, supplement or
      modification of, or any waiver or consent under or in respect of, this
      Agreement, any other Loan Document, or any transaction contemplated hereby
      or
      thereby, that, in each case, results from anything other than Lender’s gross
      negligence or willful 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    misconduct.   Borrower
      also agrees to reimburse Lender as and when billed by Lender for all Lender’s
      reasonable costs and expenses incurred in connection with the enforcement or
      the
      preservation of Lender’s rights under this Agreement, any other Loan Document,
      or any transaction contemplated hereby or thereby, including without limitation
      the reasonable fees and disbursements of its counsel. Borrower’s obligations
      under this Section 11 shall survive repayment of the Loan.

    

    Section
      12.                                Miscellaneous.

    

    
      	
              A.

            	
              Entire
                Agreement.   The Loan Documents embody the entire
                agreement and understanding between the parties hereto and supersede
                all
                prior agreements and understandings relating to the subject matter
                hereof.  No course of prior dealings between the parties, no
                usage of the trade, and no parole or extrinsic evidence of any nature,
                shall be used or be relevant to supplement, explain or modify any
                term
                used herein.

            

    

    

    
      	
              B.

            	
              No
                Waiver.  No failure to exercise and no delay in exercising
                any right, power, or remedy hereunder or under the Loan Documents
                shall
                impair any right, power, or remedy which Lender may have, nor shall
                any
                such delay be construed to be a waiver of any of such rights, powers,
                or
                remedies, or any acquiescence in any breach or default under the
                Loan
                Documents; nor shall any waiver of any breach or default of Borrower
                hereunder be deemed a waiver of any default or breach subsequently
                occurring.  The rights and remedies specified in the Loan
                Documents are cumulative and not exclusive of each other or of any
                rights
                or remedies which Lender would otherwise
                have.

            

    

    

    
      	
              C.

            	
              Survival.  All
                representations, warranties and agreements herein contained on the
                part of
                Borrower shall survive the making of advances hereunder and all such
                representations, warranties and agreements shall be effective so
                long as
                the Obligations arising pursuant to the terms of this Agreement remain
                unpaid or for such longer periods as may be expressly stated
                therein.

            

    

     

    
      
        	
                D.

              	
                Notices. 
                  All notices of any type hereunder shall be effective as against
                  Borrower
                  or Lender, as the case may be, upon the first to occur of (a) three
                  (3)
                  Business Days after deposit in a receptacle under the control of
                  the
                  United States Postal Service, (b) one (1) Business Day after being
                  transmitted by electronic means to a receiver under the control
                  of the
                  receiving party, provided there is an electronic confirmation of
                  receipt,
                  or (c) actual receipt by an employee or agent of the receiving
                  party.  For the purposes hereof, the addresses are as
                  follows:

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

    

     

    
      	
              DEBTOR:

            	
              with
                a copy to:

            
	
              Stratus
                Properties Inc.

              98
                San Jacinto Boulevard, Suite 220

              Austin,
                TX 78791

              Attention:
                Mr. William H. Armstrong III

            	
              Armbrust
                & Brown, L.L.P.

              100
                Congress Avenue, Suite 1300

              Austin,
                TX 78701

              Attention:
                Kenneth Jones, Esq.

            
	
              Phone:  (512)
                478-5788

              Fax:      (512)
                478-6340

            	
              Phone:  (512)
                435-2312

              Fax:      (512)
                435-2360

            

    

    

    
      	
              LENDER:

            	
              with
                a copy to:

            
	
              Holliday
                Fenoglio Fowler, L.P.

              8401
                North Central Expressway,

              Suite
                700

              Dallas,
                TX 75225

              Attn:
                Whitaker Johnson

            	
              Leonard,
                Street and Deinard

              Suite
                2300, 150 S. Fifth Street

              Minneapolis,
                Minnesota 55402

              Attention:  Andrew
                P. Lee

            
	
              Phone:  (214)
                265-0880

              Fax:      (469)
                232-1955

            	
              Phone:  (612)
                335-1881

              Fax:      (612)
                335-1657

            

    

    

    
      	
              E.

            	
              Separability
                of Provisions.  In the event that any one or more of the
                provisions contained in this Agreement should be invalid, illegal
                or
                unenforceable in any respect, the validity, legality, and enforceability
                of the remaining provisions contained herein shall not in any way
                be
                affected or impaired thereby.

            

    

    

    
      	
              F.

            	
              Successors
                and Assigns.  This Agreement shall be binding upon and inure
                to the benefit of Borrower, Lender, and their respective successors
                and
                assigns, provided, however, that Borrower may not transfer its rights
                or
                obligations under any of the Loan Documents without the prior written
                consent of Lender which may be withheld in its sole and absolute
                discretion.  Lender may assign its interest in the Loan
                Documents, in whole, or in part, without any consent from, or notice
                to,
                Borrower.

            

    

    

    
      	
              G.

            	
              Counterparts.  This
                Agreement may be executed in any number of counterparts all of which
                taken
                together shall constitute one agreement and any party hereto may
                execute
                this Agreement by signing any such
                Counterpart.

            

    

    

    
      	
              H.

            	
              Choice
                of Law; Location of Loan.  This Agreement shall be governed
                by and construed in accordance with the laws of the State of
                Minnesota.  Lender and Borrower agree that the Loan will be
                negotiated, funded and closed in the State of
                Minnesota.

            

    

    

    
      	
              I.

            	
              Amendment
                and Waiver.  Neither this Agreement nor any provisions
                hereof may be changed, waived, discharged or terminated orally, but
                only
                by an 

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      instrument
        in writing signed by the party against whom enforcement of the
        change, waiver, discharge or termination is sought.

       

    

    
      	
              J.

            	
              Plural.  When
                permitted by the context, the singular includes the plural and vice
                versa.

            

    

    

    
      	
              K.

            	
              Retention
                of Records.  Lender shall retain any documents, schedules,
                invoices or other papers delivered by Borrower only for such period
                as
                Lender, at its sole discretion, may determine
                necessary.

            

    

    

    
      	
              L.

            	
              Headings.  Section
                and paragraph headings and numbers have been set forth for convenience
                only.

            

    

    

    
      	
              M.

            	
              Information
                to Participants.  Borrower agrees that Lender may furnish
                any financial or other information concerning Borrower or any of
                its
                Subsidiaries heretofore or hereafter provided by Borrower to Lender,
                pursuant to this Agreement or otherwise, to any prospective or actual
                purchaser of any participation or other interest in any of the loans
                made
                by Lender to Borrower (whether under this Agreement or otherwise),
                or to
                any prospective purchaser of any securities issued or to be issued
                by
                Lender; provided, however, any such delivery shall be delivered on
                the
                condition that such information is delivered on a confidential
                basis.

            

    

     

    
      
        	
                N..

              	
                Acknowledgments. 
                  Borrower hereby acknowledges that: (i) it has been advised by counsel
                  in
                  the negotiation, execution and delivery of this Agreement and the
                  other
                  Loan Documents; (ii) Lender has no fiduciary relationship to Borrower,
                  and
                  the relationship between Borrower and Lender is solely that of
                  debtor and
                  creditor; and (iii) no joint venture exists between Lender and
                  Borrower.

              

      

       

    

    Section
      13.                                Submission
      to Jurisdiction; Venue.   To induce Lender to enter into this
      Agreement, Borrower irrevocably agrees that, subject to Lender’s sole
      discretion, all actions and proceedings in any way, manner or respect, arising
      out of, from or related to this Agreement or the other Loan Documents shall
      be
      litigated in courts having situs within the City of Minneapolis, State of
      Minnesota.  Borrower hereby consents and submits to the jurisdiction
      of any local, state or federal court located within said City and State.
      Borrower hereby waives any right it may have to transfer or change the venue
      of
      any litigation brought against Borrower by Lender in accordance with this
      paragraph.

    

    Section
      14.                                Waiver
      Of Trial By Jury.  In recognition of the higher costs and delay
      which may result from a jury trial, the parties hereto waive any right to trial
      by jury of any claim, demand, action or cause of action (1) arising hereunder
      or
      any other instrument, document or agreement executed or delivered in connection
      herewith, or (2) in any way connected with or related or incidental to the
      dealings of the parties hereto or any of them with respect hereto or any other
      instrument, document or agreement executed or delivered in connection herewith,
      or the transactions related hereto or thereto, in each case whether now existing
      or hereafter arising, and whether sounding in contract or tort or otherwise;
      and
      each party hereby agrees and consents that 

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    any
      such
      claim, demand, action or cause of action shall be decided by court trial without
      a jury, and that any party hereto may file an original counterpart or a copy
      of
      this section with any court as written evidence of the consent of the parties
      hereto to the waiver of their right to trial by jury.

    

    Section
      15.                                Liability
      of Officers, Directors, Shareholders.  Notwithstanding anything
      contained herein or in the other 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 any partner of Borrower or any officers, directors, or
      shareholders of Borrower.

    

    

    [Signature
      page follows.]

    
      
             

        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    
       

       

       

    

    LOAN
      AGREEMENT

    

    [SIGNATURE
      PAGE]

    

    

    IN
      WITNESS WHEREOF, the parties hereto
      have caused this Agreement to be executed as of the day and year first above
      written.

    

    

    
      	
              BORROWER:

            
	
              STRATUS
                PROPERTIES INC.,

              a
                Delaware corporation

              By:
                /s/ John E. Baker

              Name:  John
                E. Baker

              Title:   Senior
                Vice President

            

    

    

     

    
      	
              LENDER:

            
	
              HOLLIDAY
                FENOGLIO FOWLER, L.P., a Texas limited partnership, by Holliday
                GP Corp., a Delaware corporation, its General Partner

              By: 
                /s/ Nancy Goodson

              Name:   Nancy
                Goodson

              Its:        Vice
                President

            

    

    

    

    

    
      
        
          SIGNATURE
            PAGE TO $3,500,000 LOAN
            AGREEMENT           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      1 TO LOAN AGREEMENT

    

    CERTAIN
      DEFINITIONS

    

    

    “Accounting
      Period” means each
      calendar quarter during the term of the Loan, commencing on July 1,
      2007.

    

    “Agreement”
means
      the Loan
      Agreement to which this Schedule 1 is attached to and made a part
      of.

    

    “Auditors”
means
      Borrower’s
      independent certified public accountants, which shall be of nationally
      recognized standing and otherwise reasonably acceptable to Lender.

    

    “Borrower”
has
      the meaning
      provided in the introductory paragraph of the Agreement.

    

    “Borrower’s
      Officer’s Compliance
      Certificate” means a certificate made by a duly authorized officer of
      Borrower and addressed to Lender, in the form attached hereto as Exhibit
      B.

    

    “Business
      Day” means any day
      excluding Saturday or Sunday and excluding any day on which national banking
      associations are closed for business.

    

    “Capital
      Improvements
      Expenditures” means investments of Borrower and certain affiliates of
      Borrower in real estate and facilities investments, plus any municipal utility
      reimbursements which have been credited to such real estate and/or facilities
      investments, determined on a consolidated basis.

    

     “Cash
      and Cash
      Equivalents” means cash and cash equivalents of Borrower and certain
      affiliates of Borrower, determined on a consolidated basis.

    

    “Cash
      Collateral Account” means
      a blocked deposit account held by Lender in which funds are deposited by
      Borrower, which funds are pledged as collateral for the Loan pursuant to an
      agreement satisfactory to Lender in form and substance and in which Lender
      has a
      perfected first security interest.

    

    “Cash
      Collateral Factor” means
      at any time the ratio of (1) the balance in the Cash Collateral Account to
      (2)
      the principal balance of the Loan.

    

    “Comerica
      Debt” means the
      Indebtedness incurred by Borrower from time to time pursuant to the Comerica
      Loan Agreement.

    

    “Comerica
      Loan Agreement” means
      that certain Loan Agreement dated as of September 30, 2005, among Borrower
      and
      certain Affiliates of Borrower and Comerica Bank-Texas.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Controlled
      Group” means a
“controlled group of corporations” as defined in Section 1563(a) (4) of the
      Internal Revenue Code of 1954, as amended, determined without regard to Section
      1563(a) and (e) (3) (c) of such Code, of which Borrower is a part.

    

    “Costs”
has
      the meaning
      contained in Section 11.

    

    “Debt
      Service” means, with
      respect to a specified period, scheduled payments of principal and interest
      with
      respect to the respective Indebtedness.

    

    “Debt
      Service Coverage Ratio”
means for any period of time the ratio of (1) the sum of the Borrower’s increase
      (or decrease) in Cash and Cash Equivalents during that period, plus Capital
      Improvements Expenditures during that period, plus Debt Service on all of
      Borrower’s Indebtedness during that period, to (2) Debt Service on all of
      Borrower’s Indebtedness.

    

    “Events
      of Default” has the
      meaning contained in Section 8 of the Agreement.

    

    “GAAP”
shall
      mean generally
      accepted accounting principles as in effect from time to time in the United
      States.

    

    “Indebtedness”
of
      any Person
      means all items of indebtedness which, in accordance with GAAP, would be deemed
      a liability of such Person as of the date as of which indebtedness is to be
      determined and shall also include, without duplication, all indebtedness and
      liabilities of others assumed or guaranteed by such Person or in respect of
      which such Person is secondarily or contingently liable (other than by
      endorsement of instruments in the course of collection) that would otherwise
      be
      deemed to be liabilities under GAAP, whether by reason of any agreement to
      acquire such indebtedness, to supply or advance sums, or otherwise.

    

    “Lender”
has
      the meaning
      provided in the introductory paragraph of the Agreement.

    

    “Lending
      Office” shall refer to
      Lender’s office described in Section 12.D of the Agreement.

    

    “Loan”
has
      the meaning contained
      in Subsection 2.A. of the Agreement.

    

    “Loan
      Documents” means the
      Agreement, the Note, and any riders, supplements and amendments thereto,
      mortgages, security agreements, assignments, pledges, subordination agreements
      or guaranties delivered in connection with the Agreement and all other documents
      or instruments heretofore, now or hereafter executed, pursuant to the Agreement,
      or any of the aforesaid.

    

    “Material
      Adverse Effect” means
      with respect to any event or circumstance, a material adverse effect
      on:

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    
      	
              (i)

            	
              the
                ability of Borrower to perform its obligations under the Agreement,
                the
                Note, or any other Loan Document;
                or

            

    

    

    
      	
              (ii)

            	
              the
                validity, enforceability or collectibility of the Note, the Agreement
                or
                any other Loan Document.

            

    

    

    “Maturity
      Date” means December
      31, 2011.

    

    “Note”
means
      the Promissory Note
      dated as of the date of the Agreement made by Borrower to Lender pursuant to
      Subsection 2.B. of the Agreement in the form attached hereto as Exhibit
      A, together with any replacements, modifications, amendments, renewals and
      extensions thereof.

    

    “Obligations”
means
      and includes
      all amounts owing by Borrower to Lender under the Note and the other Loan
      Documents, together with any and all loans, advances, debts, liabilities,
      obligations, letters of credit, or acceptance transactions, trust receipt
      transactions, or any other financial accommodations, owing by Borrower to Lender
      of every kind and description (whether or not evidenced by any note or other
      instrument and whether or not for the payment of money), direct or indirect,
      absolute or contingent, due or to become due, now existing or arising hereafter
      with respect to the Note and the other Loan Documents, including, without
      limitation, all interest, fees, charges, expenses, attorneys’ fees, and
      accountants’ fees chargeable to Borrower and incurred by Lender in connection
      the Loan.

    

    “Permitted
      Debt” means (i) the
      Loan and other Indebtedness to Lender or Related Lenders, (ii) the Comerica
      Debt
      (as of the date hereof), (iii) any other Indebtedness of Borrower for fair
      value
      received that is secured by assets owned by Borrower having an appraised value
      equal to or greater than the indebtedness secured thereby (and which assets
      do
      not secure other indebtedness), (iv) debt outstanding as of the date of the
      Loan
      Agreement, (v) unsecured trade, utility or non-extraordinary accounts payable
      in
      the ordinary course of business and other unsecured debt of Borrower at any
      one
      time not to exceed $500,000.00, and (vi) guaranties of Borrower guaranteeing
      project development and/or construction costs and related costs, provided that
      Borrower has a direct or indirect interest in such projects and that the
      aggregate amount, at any one time, of such guaranties does not exceed the sum
      of
      $15,000,000.00.

    

    “Person”
means
      any individual,
      entity, government, governmental agency or any other entity and whether acting
      in an individual, fiduciary or other capacity.

    

    “Plan”
means
      any employee
      pension benefit plan subject to Title IV of ERISA and maintained by Borrower
      or
      any member of a Controlled Group or any such plan to which Borrower or any
      member of a Controlled Group is required to contribute on behalf of any of
      its
      employees.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    “Property”  shall
      mean
      any and all right, title and interest of a specified Person in and to any and
      all property, whether real or personal, tangible or intangible, and wherever
      situated.

    

    “Related
      Lenders” shall mean
      American Strategic Income Portfolio Inc., a Minnesota corporation, American
      Select Portfolio Inc., a Minnesota corporation, American Strategic Income
      Portfolio Inc.—II, a  Minnesota corporation, and American Strategic
      Income Portfolio Inc.—III, a  Minnesota corporation.

    

    “Secured
      Indebtedness” means any
      Indebtedness that is subject to any security interest or lien securing the
      payment of money.

    

    “Statement
      Dates” means the
      dates of the financial statements delivered to Lender pursuant to Section 4.A(3)
      of the Agreement.

    

    “Subsidiary”
means
      (i) any
      entity of which more than fifty percent (50%) of the outstanding having ordinary
      voting power (irrespective of whether or not at the time class or classes of
      shall have or might have voting power by reason of the happening of any
      contingency) is at the time directly or indirectly owned by Borrower and/or
      any
      Subsidiary, (ii) any limited liability company or similar entity of which more
      than fifty percent (50%) of the member interests of such limited liability
      company are directly or indirectly owned by Borrower and/or any Subsidiary,
      and
      (iii) any partnership of which more than fifty percent (50%) of the limited
      partner interests of such limited partnership or any of the general partner
      interests of such limited partnership are directly or indirectly owned by
      Borrower and/or any Subsidiary.

    
      
        
        

        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A
      TO LOAN AGREEMENT

    

    FORM
      OF NOTE

    

    

    

    
      
            

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B
      TO LOAN AGREEMENT

    

    FORM
      OF BORROWER’S OFFICER’S COMPLIANCE CERTIFICATE

    

    Stratus
      Properties Inc.

    98
      San
      Jacinto Boulevard, Suite 220

    Austin,
      TX 78791

    

    

    [DATE]

    

    Holliday
      Fenoglio Fowler, L.P.

    c/o
      FAF
      Advisors, Inc.

    800
      Nicollet Mall, Suite 500

    BC-MN-H05W

    Minneapolis,
      MN  55402

    Attention:  John
      G. Wenker

    

    

    
      	
              Re

            	
              Loan
                Agreement dated as of June 1, 2007 between Stratus Properties Inc.
                (“Borrower”) and Holliday Fenoglio Fowler, L.P.
                (“Lender”) (the “Loan
                Agreement”) (capitalized terms not defined herein have the
                respective meanings contained in the Loan
                Agreement)

            

    

    
       

       

      Ladies
        and Gentlemen:

    

     

    Pursuant
      to subsection 6.A(2) of the
      Loan Agreement, Borrower certifies to Lender as follows:

    

    1.           As
      of the date of this Certificate, no act or omission has occurred which has
      resulted in an Event or Default or, if not cured, remedied, waived or otherwise
      eliminated to the satisfaction of Lender, would result in an Event of
      Default.

    

    2.           The
      undersigned officer is authorized to make this Certificate on behalf of Borrower
      and has reviewed the terms of the Loan Agreement and has made, or caused to
      be
      made under such officer’s supervision, a review in reasonable detail of the
      facts necessary to make the certifications contained herein.

    

    
      	 
	
              STRATUS
                PROPERTIES INC.,

              a
                Delaware corporation

              By:___________________________

              Name:  John
                E. Baker

              Title:  Senior
                Vice President

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