Document:

Exhibit 10.3

SENIOR MEZZANINE
PROMISSORY NOTE

	
  $6,900,000

  	
  September 29, 2006

  

 

SW 109 Wagon Wheel SM LLC,
a Delaware limited liability company (“Borrower”), FOR
VALUE RECEIVED, promises to pay to the order of Behringer Harvard Alexan Nevada,
LLC, a Delaware limited liability company or its assigns (“Lender”),
at such place as Lender may from time to time designate in writing, the
principal sum of Six Million Nine Hundred Thousand Dollars ($6,900,000) or so
much thereof as may from time to time have been advanced to Borrower under this
Note with Interest (as defined below) on the outstanding principal amount at
the rates set forth herein.

DEFINITIONS

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

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

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

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

“Interest Rate” shall mean a rate of interest per annum equal
to the lesser of: (a) ten and one half percent (10.5%) or (b) the maximum rate
of interest which may be collected from Borrower under applicable law.

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

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

“Maturity Date” shall mean September 29, 2011.

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

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“Payment Date” shall mean the first day of each calendar
month, commencing on the date set forth in Section 1.1, and the Maturity Date
(or, if any such date is not a Business Day, then the first Business Day
immediately before such date).

SECTION 1 - STATED
MATURITY; INTEREST AND PRINCIPAL PAYMENTS.

1.1                                 Payment
of Interest. Interest shall accrue on this Note at the Interest Rate or,
during any time at which an Event of Default is continuing, at the Default
Interest Rate. Commencing on November 1, 2006, and continuing monthly on the
same date of each calendar month thereafter up to and until the Maturity Date,
an installment of accrued and unpaid Interest shall be due and payable to Lender
to the extent required by the following:

(a)                                  until
the Completion (as defined in the Senior Mezzanine Completion Guaranty) no
payment will be required and the Interest shall accrue; and

(b)                                 after
Completion, Borrower shall only be required to pay, on each such payment date,
an amount equal to the then available Net Cash Flow (i.e.
Net Cash Flow through the end of the second preceding calendar month not
previously paid to Lender), or the total of all accrued Interest that then
remains unpaid, if less, and the excess of such installment of Interest over
the amount of available Net Cash Flow (if any) so deferred shall accrue as set
forth herein.

On the Maturity
Date, all accrued but unpaid Interest, shall be due and payable in full. It is
the intent of Borrower and Lender that this Note shall be treated as a security
that satisfies the requirements of Section 856(m)(1)(A) and Section 856(m)(2)
of the Internal Revenue Code of 1986, as amended (the “Code”)
(the “Straight Debt Safe Harbor”). Accordingly,
notwithstanding any indication herein to the contrary, (i) Borrower and Lender
agree that the terms of this Note shall be interpreted in such a manner that
the Note satisfies the Straight Debt Safe Harbor and (ii) the terms of this
Note shall be applied such that the Note has a constant effective yield to
maturity, as determined under Section 1272 of the Code, at a fixed rate over
the entire term of the Note equal to the Interest Rate; provided, however, that
such construction shall not alter the dates of the principal or Interest
payments (described in Section 1.1 above), or the amounts of principal or Interest
payments required to be paid hereunder.

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

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

1.4                                 Computation
of Interest. Subject to the provisions of Section 1.8, Interest under this
Note shall be paid as set forth herein and shall be calculated based on actual
days elapsed and a three hundred sixty (360) day year. Subject to the
provisions of Section 1.8, Interest that becomes due under this Note and
remains unpaid shall be compounded monthly and shall itself

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bear Interest (without becoming part of the principal
balance of this Note) at the Interest Rate such that the Note has a constant
effective yield to maturity at the Interest Rate as described in Section 1.1.
hereof (or, during any time at which an Event of Default is continuing, at the
Default Interest Rate).

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

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

1.7                                 Prepayment.
No prepayment of this Note shall be permitted without Lender’s approval in
writing in Lender’s sole discretion except (1) in connection with the sale of
all of the equity interests in Mortgagor and Borrower by Principal to Lender
(the “Option Interests”) after Completion pursuant
to the Option Agreement or the Put Option (as defined in the Option Agreement)
or (ii) at any time after 150 days after Completion. Borrower shall be required
to prepay this Note upon earlier to occur of: (a) the sale of the Option
Interests to Lender or its assignee pursuant to the Option Agreement or the Put
Option, (b) an uncured default by Principal under the Option Agreement and the
commencement of the pursuit by Lender or its assignee of its remedies in
connection with such default, (c) the sale of the Option Interests (other than
in connection with the Option Agreement or Put Option) or the sale of the
Property or (d) the event of an uncured default by Borrower under the Loan
Agreement (after the expiration of any applicable grace and cure periods).

1.8                                 No
Usury. The
provisions of this Note and of all other agreements between Borrower and Lender,
whether now existing or hereafter arising and whether written or oral,
including, but not limited to, the Loan Documents, are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of this Note or otherwise, shall the amount
contracted for, charged, taken, reserved, paid, or agreed to be paid to Lender
for the use, forbearance, retention or detention of the money loaned under this
Note and related indebtedness exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or
fulfillment of any provision hereof or of any agreement between Borrower and
Lender shall, at the time performance or fulfillment of such provision shall be
due, exceed the limit for interest prescribed by law or otherwise transcend the
limit of validity prescribed by applicable law, then ipso facto the obligation
to be performed or fulfilled shall be reduced to such limit; and if, from any
circumstance whatsoever, Lender shall ever receive anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive interest shall be applied to the

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reduction of the principal
balance owing under this Note in the inverse order of its maturity (whether or
not then due) or at the option of Lender be paid over to Borrower, and not to
the payment of interest. All Interest (including any amounts or payments
judicially or otherwise under the law deemed to be interest) contracted for,
charged, taken, reserved, paid or agreed to be paid to Lender shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Note, including any extensions or
renewals thereof, until payment in full of the Indebtedness so that the
Interest thereof for such full period will not exceed at any time the maximum
amount permitted by applicable law. This paragraph 1.8 will control all
agreements between Borrower and Lender.

SECTION 2 - DEFAULT;
REMEDIES

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

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

(b)                                 If
any monthly installment of Interest due hereunder is not received by Lender on
or before the tenth (10th) day
after such installment becomes due, Borrower shall pay to Lender, immediately
and without demand by Lender, the Late Charge on such outstanding monthly. Borrower
acknowledges that its failure to make timely payments will cause Lender to
incur additional expenses in servicing and processing the Loan, and that it is
extremely difficult and impractical to determine those additional expenses. Borrower
agrees that any such Late Charges payable pursuant to this Section 2.2(b)
represents a fair and reasonable estimate, taking into account all
circumstances existing on the date hereof, of the additional expenses Lender
will incur by reason of such late payment. Any such Late Charge is payable in
addition to, and not in lieu of, any Interest payable at the Default Rate
pursuant to Section 2.2(a).

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

SECTION 3 - SECURITY

Borrower’s
obligations under this Note are secured by, among other instruments, the Pledge
Agreement and other Loan Documents. The covenants of the Pledge Agreement and the
Loan Agreement are incorporated by reference into this Note.

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SECTION 4 - WAIVER

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

SECTION 5 - EXCULPATION

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

5.2                                 Borrower
Exculpation. Borrower’s liability in connection with this Note and the
other Loan Documents (including Borrower’s liability for all amounts due
hereunder or thereunder) is collectible only from the collateral against which
a security interest is created by the Pledge Agreement. In no case will any
person who holds a direct or indirect ownership interest in Borrower, or any
officer, director, manager, trustee, employee, agent or affiliate of Borrower
or any such direct or indirect owner, have any responsibility for Borrower’s
obligations in connection with this Note and the other Loan Documents
(including Borrower’s liability for any amounts due hereunder or thereunder);
provided, however, that nothing in this Section 5.2 limits the liability of any
person under a guaranty or other agreement executed by such person.

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

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

6.2                                 SUBMISSION TO JURISDICTION/SERVICE OF PROCESS.
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THE STATE
COURTS OF THE STATE OF NEVADA LOCATED IN CLARK COUNTY, NEVADA FOR THE PURPOSES
OF ANY SUIT, ACTION OR 

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

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

6.4                                 Waiver
of Jury Trial. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT THAT BORROWER MAY HAVE TO A

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

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

SECTION 7 - NOTICES

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

7.2                                 Any
party to this Agreement may change the address to which Notice is intended for
it are to be directed by means of Notice given to the other party in accordance
with this Section 7. Each party agrees that it will not refuse or reject
delivery of any Notice given in accordance with this Section 7, that it will
acknowledge, in writing, the receipt of any Notice upon request by the other
party and that any Notice rejected or refused by it shall be deemed for
purposes of this Section 7 to have been received by the rejecting party on the
date so refused or rejected, as conclusively established by the records of the
U.S. Postal Service or the courier service. Any Notice under any other Loan
Document which does not specify how Notices are to be given shall be given in
accordance with this Section 7.

SECTION 8 - MISCELLANEOUS

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

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

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

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

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

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

[Signature follows on next page.]

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

	
   

  	
  BORROWER

  
	
   

  	
   

  
	
   

  	
  SW 109 WAGON WHEEL SM LLC, a Delaware limited

  liability company, its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  SW 108 Wagon Wheel JM LLC, a Delaware limited

  liability company, its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  SW 105 Wagon Wheel Limited Partnership, a

  Delaware limited partnership, its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  SW 104 Development GP LLC, a

  Delaware limited liability company, its

  general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Timothy J. Hogan, Vice President

  

 

 9Exhibit 10.4

JUNIOR MEZZANINE
PROMISSORY NOTE

	
  $2,775,872

  	
  September 29, 2006

  

 

SW 108 Wagon Wheel JM LLC,
a Delaware limited liability company (“Borrower”), FOR
VALUE RECEIVED, promises to pay to the order of Behringer Harvard Alexan Nevada,
LLC, a Delaware limited liability company or its assigns (“Lender”),
at such place as Lender may from time to time designate in writing, the
principal sum of Two Million Seven Hundred Seventy-Five Thousand Eight Hundred Seventy-Two
Dollars ($2,775,872) or so much thereof as may from time to time have been
advanced to Borrower under this Note with Interest (as defined below) on the
outstanding principal amount at the rates set forth herein.

DEFINITIONS

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

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

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

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

“Interest Rate” shall mean a rate of interest per annum equal
to the lesser of: (a) ten and one half percent (10.5%) or (b) the maximum rate
of interest which may be collected from Borrower under applicable law.

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

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

“Maturity Date” shall mean September 29, 2011.

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

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“Payment Date” shall mean the first day of each calendar
month, commencing on the date set forth in Section 1.1, and the Maturity Date
(or, if any such date is not a Business Day, then the first Business Day
immediately before such date).

SECTION 1 - STATED
MATURITY; INTEREST AND PRINCIPAL PAYMENTS.

1.1   Payment of Interest. Interest shall
accrue on this Note at the Interest Rate or, during any time at which an Event
of Default is continuing, at the Default Interest Rate. Commencing on November
1, 2006, and continuing monthly on the same date of each calendar month
thereafter up to and until the Maturity Date, an installment of accrued and
unpaid Interest shall be due and payable to Lender to the extent required by
the following:

(a)                                  until
the Completion (as defined in the Junior Mezzanine Completion Guaranty) no
payment will be required and the Interest shall accrue; and

(b)                                 after
Completion, Borrower shall only be required to pay, on each such payment date,
an amount equal to the then available Net Cash Flow (i.e.
Net Cash Flow through the end of the second preceding calendar month not
previously paid to Lender), or the total of all accrued Interest that then
remains unpaid, if less, and the excess of such installment of Interest over
the amount of available Net Cash Flow (if any) so deferred shall accrue as set
forth herein.

On the Maturity
Date, all accrued but unpaid Interest, shall be due and payable in full. It is
the intent of Borrower and Lender that this Note shall be treated as a security
that satisfies the requirements of Section 856(m)(1)(A) and Section 856(m)(2)
of the Internal Revenue Code of 1986, as amended (the “Code”)
(the “Straight Debt Safe Harbor”). Accordingly,
notwithstanding any indication herein to the contrary, (i) Borrower and Lender
agree that the terms of this Note shall be interpreted in such a manner that
the Note satisfies the Straight Debt Safe Harbor and (ii) the terms of this
Note shall be applied such that the Note has a constant effective yield to
maturity, as determined under Section 1272 of the Code, at a fixed rate over
the entire term of the Note equal to the Interest Rate; provided, however, that
such construction shall not alter the dates of the principal or Interest
payments (described in Section 1.1 above), or the amounts of principal or Interest
payments required to be paid hereunder.

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

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

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

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Section 1.1 hereof (or, during any time at which an
Event of Default is continuing, at the Default Interest Rate).

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

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

1.7   Prepayment. No prepayment of this Note
shall be permitted without Lender’s approval in writing in Lender’s sole
discretion except (1) in connection with the sale of all of the equity
interests in Mortgagor and Senior Mezz Borrower by Borrower to Lender (the “Option Interests”) after Completion pursuant to the Option
Agreement or the Put Option (as defined in the Option Agreement) or (ii) at any
time after 150 days after Completion. Borrower shall be required to prepay this
Note upon earlier to occur of: (a) the sale of the Option Interests to Lender
or its assignee pursuant to the Option Agreement or the Put Option, (b) an
uncured default by Borrower under the Option Agreement and the commencement of
the pursuit by Lender or its assignee of its remedies in connection with such
default, (c) the sale of the Option Interests (other than in connection with
the Option Agreement or Put Option) or the sale of the Property or (d) the
event of an uncured default by Borrower under the Loan Agreement (after the
expiration of any applicable grace and cure periods).

1.8   No Usury. The provisions of this Note and of all other
agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, including, but not limited to, the Loan
Documents, are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of demand or acceleration of the maturity of this
Note or otherwise, shall the amount contracted for, charged, taken, reserved,
paid, or agreed to be paid to Lender for the use, forbearance, retention or
detention of the money loaned under this Note and related indebtedness exceed
the maximum amount permissible under applicable law. If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between Borrower and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled shall
be reduced to such limit; and if, from any circumstance whatsoever, Lender
shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal balance owing under this
Note in the inverse order of its maturity (whether or not then due) or at the
option of Lender be paid over to Borrower, and not to the

 3
 

 

 

payment of interest. All Interest (including any amounts or payments
judicially or otherwise under the law deemed to be interest) contracted for,
charged, taken, reserved, paid or agreed to be paid to Lender shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Note, including any extensions or
renewals thereof, until payment in full of the Indebtedness so that the
Interest thereof for such full period will not exceed at any time the maximum
amount permitted by applicable law. This paragraph 1.8 will control all
agreements between Borrower and Lender.

SECTION 2 - DEFAULT;
REMEDIES

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

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

(b)           If any monthly installment of Interest
due hereunder is not received by Lender on or before the tenth (10th) day after such installment
becomes due, Borrower shall pay to Lender, immediately and without demand by
Lender, the Late Charge on such outstanding monthly. Borrower acknowledges that
its failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the Loan, and that it is extremely
difficult and impractical to determine those additional expenses. Borrower
agrees that any such Late Charges payable pursuant to this Section 2.2(b)
represents a fair and reasonable estimate, taking into account all
circumstances existing on the date hereof, of the additional expenses Lender
will incur by reason of such late payment. Any such Late Charge is payable in
addition to, and not in lieu of, any Interest payable at the Default Rate
pursuant to Section 2.2(a).

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

SECTION 3 - SECURITY

Borrower’s
obligations under this Note are secured by, among other instruments, the Pledge
Agreement and other Loan Documents. The covenants of the Pledge Agreement and the
Loan Agreement are incorporated by reference into this Note.

 4
 

 

 

SECTION 4 - WAIVER

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

SECTION 5 - EXCULPATION

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

5.2   Borrower Exculpation. Borrower’s
liability in connection with this Note and the other Loan Documents (including
Borrower’s liability for all amounts due hereunder or thereunder) is
collectible only from the collateral against which a security interest is
created by the Pledge Agreement. In no case will any person who holds a direct
or indirect ownership interest in Borrower, or any officer, director, manager,
trustee, employee, agent or affiliate of Borrower or any such direct or
indirect owner, have any responsibility for Borrower’s obligations in
connection with this Note and the other Loan Documents (including Borrower’s
liability for any amounts due hereunder or thereunder); provided, however, that
nothing in this Section 5.2 limits the liability of any person under a guaranty
or other agreement executed by such person.

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

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

6.2   SUBMISSION TO
JURISDICTION/SERVICE OF PROCESS. BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE PERSONAL JURISDICTION OF THE STATE COURTS OF THE STATE OF NEVADA

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

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

 6
 

 

 

CONTEMPLATED HEREBY OR
THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

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

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

SECTION 7 - NOTICES

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

7.2   Any party to this Agreement may change the
address to which Notice is intended for it are to be directed by means of Notice
given to the other party in accordance with this Section 7. Each party agrees
that it will not refuse or reject delivery of any Notice given in accordance
with this Section 7, that it will acknowledge, in writing, the receipt of any Notice
upon request by the other party and that any Notice rejected or refused by it
shall be deemed for purposes of this Section 7 to have been received by the
rejecting party on the date so refused or rejected, as conclusively established
by the records of the U.S. Postal Service or the courier service. Any Notice
under any other Loan Document which does not specify how Notices are to be
given shall be given in accordance with this Section 7.

SECTION 8 - MISCELLANEOUS

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

 7
 

 

 

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

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

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

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

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

[Signature Follows on Next Page.]

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

	
   

  	
  BORROWER

  
	
   

  	
   

  
	
   

  	
  SW 108 WAGON WHEEL JM LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  SW 105 Wagon Wheel Limited Partnership,

  
	
   

  	
   

  	
  a Delaware limited partnership,

  
	
   

  	
   

  	
  its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  SW 104 Development GP LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware limited liability company,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Timothy J. Hogan, Vice President

  

 

 9

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