Exhibit 10.4

 

 

CONSTRUCTION LOAN AGREEMENT

 

MADE BY AND BETWEEN

 

CJUF II STRATUS BLOCK 21 LLC

c/o

Stratus Properties, Inc.

 

98 San Jacinto, Suite 200

 

Austin, Texas 78701

 

AND

 

COR US BANK, N.A., as Lender

 

3959 North Lincoln Avenue

 

Chicago, Illinois 60613

 

Dated as of May 2, 2008

 

 

 

 

Table of Contents

Page

EXHIBITS TO LOAN AGREEMENT

 

Exhibit A                                Legal Description of Land

Exhibit B                                Permitted Exceptions

Exhibit C                                Title Requirements

Exhibit D                                Form of Survey Certification

Exhibit E                                Insurance Requirements

Exhibit F                                Architect’s Certificate

Exhibit G                                Initial Budget

Exhibit H                                Draw Request Forms

Exhibit I                                Partial Plans and Specifications

Exhibit J                                Proposed Finish Standards

Exhibit K                                Bailment Letter (Warehousemen)

Exhibit L                                Bailment Letter (Other Than Warehousemen)

Exhibit M                                List of Sales Agreements and Price List Schedule

Exhibit N                                Subcontract Delivery Deadline Dates

Exhibit O                                Approved Form of Sales Agreement

 

 

 

Exhibit P                                Materials Purchases Not Subject to Retainage

Exhibit Q                                Allowable Tenant Improvements

Exhibit R                                Delivery Schedule for Plans and Specifications

Exhibit S                                Form of Second Estoppel and Agreement from City of Austin

 

 

 

CONSTRUCTION LOAN AGREEMENT

 

Project Commonly Known as

 

“W Hotel and Residences”

 

Block 21, Austin, Texas

 

THIS CONSTRUCTION LOAN AGREEMENT (“ Agreement ”) is made as of May 2, 2008, by and between CJUF II STRATUS BLOCK 21 LLC, a Delaware limited liability company (“ Borrower ”), and COR US BANK, N.A., a national banking association, its successors and assigns (“ Lender ”).

 

W I T N E S S E T H :

 

RECITALS

 

A.           Borrower is the owner in fee simple of an approximately 76,176 square foot parcel of land commonly known as “Block 21,” bounded by Second, Third, Guadalupe and Lavaca Streets, City of Austin, County of Travis, State of Texas, and legally described in Exhibit A attached hereto (the “ Land ”).  Borrower proposes to construct on the Land a mixed use project to be known as the “W Hotel and Residences,” consisting of a building of thirty-six (36) stories (the “ Building ”) and other facilities containing:  (i) one hundred ninety-eight (198) residential condominium units (each, a “ Residential Unit ”) on twenty (20) floors, from floor 18 through floor 37 of the Building, containing at least 272,272 Saleable Square Feet (with each capitalized term used and not defined in these Recitals being defined hereinbelow) of interior space and with interior finished ceiling heights of at least ten (10) feet (outside of areas containing mechanical runs),  (ii) a “W” flagged hotel with two hundred fifty-two (252) guest rooms, situated on ten (10) floors, from floor 6 through floor 16 of the Building, to be furnished and managed pursuant to the Hotel Operating Agreement (as hereinafter defined), and containing at least 100,408 square feet of interior room space and 88,212 square feet of hotel operating space, collectively with, on floor 2 through floor 4 of the Building, 9,583 square feet of meeting space, a 8,060 square foot fitness facility, a 9,935 square foot pool and pool deck, and a business center (collectively, the “ Hotel ”), (iii) on floor 1 through floor 3 of the Building, 18,341 net rentable square feet of retail space (the “ Retail Space ”) and 37,382 net Rentable Square Feet of office space (the “ Office Space ”), (iv) a live performance venue, on the top three (3) floors of an attached 4-story structure, containing at least 50,336 square feet and a minimum capacity of 2,480 people, with seating for approximately 2,160 people (the “ Venue ”), (v) 10,995 square feet of storage space, and (vi) a three (3)-level subterranean parking garage (the “ Parking Garage ”), with a direct connection to elevators servicing the Residential Units, and containing parking spaces for at least 480 automobiles (each, a “ Parking Space ”), of which, 306 Parking Spaces shall be allocated for the Residential Units, and 116 Parking Spaces shall be allocated, collectively, for the Hotel, the Commercial Space, and the Venue.  The Residential Units shall have a la carte access to the Hotel amenities on a pay-by-use basis, as provided in the Hotel Operating Agreement.

 

B.           Borrower has applied to Lender for a loan in the aggregate amount of up to One Hundred Sixty-Five Million Dollars ($165,000,000) to fund construction, development   and marketing costs of the Project, and Lender is willing to make the Loan on the terms and conditions hereinafter set forth.

 

 

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

 

 

Article 1

 

 

INCORPORATION OF RECITALS AND EXHIBITS

 

1.1   Incorporation of Recitals.

 

The foregoing preambles and all other recitals set forth herein are made a part hereof by this reference.

 

1.2   Incorporation of Exhibits.

 

Exhibits A through S to this Agreement, attached hereto, are incorporated in this Agreement and expressly made a part hereof by this reference.

 

 

Article 2

 

 

DEFINITIONS

 

2.1   Defined Terms.

 

The following terms as used herein shall have the following meanings:

 

Additional Equity Investment :  As such term is defined in Section 11.2 .

 

Affiliate :  With respect to a specified person or entity, any individual, partnership, corporation, limited liability company, trust, unincorporated organization, association or other entity that, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such person or entity, including, without limitation, any general or limited partnership in which such person or entity is a partner.

 

Agreement :  This Construction Loan Agreement.

 

Allowable Tenant Improvements :  As such term defined in Section 12.8.

 

Appraisal :  An MAI certified appraisal of the Project performed in accordance with FIRREA and Lender’s appraisal requirements by an appraiser selected and retained by Lender.

 

Approved Finish Standards :  As such term is defined in Section 9.2(f) .

 

Approved Lease :  As such term is defined in Section 15.1(m) .

 

Approved Plans and Specifications :  As such term is defined in Section 9.2(e) .

 

Architect :  BOKA Powell, L.L.C.

 

Architect’s Certificate :  A certificate in the form of Exhibit F attached hereto executed by the Architect in favor of Lender.

 

 

 

Authorized Representative :  William H. Armstrong, an individual, or such other individual that is designated in accordance with Section 15.3 of this Agreement.

 

Available Sources of Funds :  As such term is defined in Section 11.1(c) .

 

Bankruptcy Code :  Title 11 of the United States Code entitled “Bankruptcy” as now or hereafter in effect, or any successor thereto or any other present or future bankruptcy or insolvency statute.

 

Bonds :  As such term is defined in Section 9.1(d) .

 

Borrower :  As such term is defined in the opening paragraph of this Agreement.

 

Budget :  The budget for the Project specifying all costs and expenses of every kind and nature whatsoever to be incurred by Borrower in connection with the Project prior to the Maturity Date, as approved by Lender as set forth in Section 10.1 .

 

Budget Line Item :  As such term is defined in Section 10.2 .

 

Building :  As such term is defined in Recital A .

 

Business Day :  Any Monday through Friday, excluding days on which Lender is closed for business.

 

Change Order :  Shall mean any of the following: (i) a request for changes in the Approved Plans and Specifications (other than minor field changes involving no extra cost) or for a change to the General Contract Price, (ii) an amendment to the General Contract, (iii) a construction change directive or (iv) a written order for a minor change in the work issued by the architect.

 

CJUF :  Canyon-Johnson Urban Fund II L.P., a Delaware limited partnership.

 

Closing : The date of the Closing Funding.

 

Closing Funding : The first disbursement of Loan proceeds in an amount of $2,000,000, which shall be advanced on or about the date hereof.

 

Collateral Assignment of Hotel Documents :  That certain Assignment of Hotel Documents collaterally assigning Borrower’s interests in the Hotel Documents (and related documents) to Lender.

 

Commercial Space :  Together, the Office Space and the Retail Space.

 

Commitment :  Lender’s maximum aggregate funding obligation hereunder of up to One Hundred Sixty-Five Million Dollars ($165,000,000), less any reduction thereof in accordance with the terms of this Agreement.

 

Completion Date :  With respect to the Residential Units, July 25, 2011; with respect to the Hotel, January 7, 2011; with respect to the Venue May 25, 2011; with respect to the

 

 

 

Commercial Space, January 7, 2011; and with respect to the entire Project, the Initial Maturity Date.

 

Completion and Carveout Guaranty :  A guaranty of performance and completion, executed by Guarantor and pursuant to which Guarantor guarantees the lien-free and timely completion of the Project in accordance with all provisions of this Agreement and Borrower’s obligation to keep the Loan In Balance and to pay for all cost overruns, subject to the limits stated therein, and guarantees specified non-recourse carve-out obligations.

 

Condominium Documents :  As such term is defined in Section 8.1(s) .

 

Condominium Marketing License Agreement :  That certain Condominium Marketing License Agreement dated as of October 26, 2006 by and between Stratus Block 21 Investments, L.P. (predecessor in interest to Borrower), and Starwood Hotels & Resorts Worldwide, Inc.

 

Construction or construction :  The construction and equipping of the Improvements in accordance with the Approved Plans and Specifications, and related improvements required to be performed by Borrower under Sales Agreements (including all off-site improvements reasonably required for use and operation of the Improvements) and the installation of all personal property, fixtures and equipment required for the operation of the Project or required under Sales Agreements.

 

Construction Disbursement :  As such term is defined in Section 7.3 .

 

Construction Schedule :  A schedule reasonably satisfactory to Lender, establishing a timetable for completion of the Construction, showing, on a monthly basis, the anticipated progress of the Construction, and showing that the Improvements can be completed on or before the Completion Date and that the Residential Units will be delivered prior to any outside dates, if any, provided for in the Sales Agreements.

 

Contingency Fund :  As such term is defined in Section 10.3 .

 

Contractor’s Contingency :  As such term is defined in Section 10.3 .

 

Control :  As such term is used with respect to any person or entity, including the correlative meanings of the terms “controlled by” and “under common control with,” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such person or entity, whether through the ownership of voting securities, by contract or otherwise.

 

Declaration of Condominium :  The Master Condominium Declaration and the Residential Condominium Declaration, individually or collectively, as the context shall infer.

 

Deed of Trust :  A construction deed of trust, assignment of rents, security agreement and fixture filing executed by Borrower for the benefit of Lender securing this Agreement, the Note, and all obligations of Borrower in connection with the Loan, granting a first priority lien on Borrower’s fee interest in the Project, subject only to the Permitted Exceptions.

 

 

 

Default or default :  Any event, circumstance or condition, which, if it were to continue uncured, would, with notice or lapse of time or both, constitute an Event of Default hereunder.

 

Default Rate :  As such term is defined in the Note.

 

Deficiency Deposit :  As such term is defined in Section 11.1(b) .

 

Deposits :  The Earnest Money Deposits and the Upgrade Deposits.

 

Design Professionals :  As such term is defined in Section 9.1(a) .

 

Earnest Money Deposits :  As such term is defined in Section 14.3 (a) .

 

Environmental Indemnity :  An environmental indemnity from Borrower and Guarantor, jointly and severally, indemnifying Lender with regard to all matters related to Hazardous Material and other environmental matters.

 

Environmental Proceedings :  Any environmental proceedings, whether civil (including actions by private parties), criminal, or administrative proceedings, relating to the Project.

 

Environmental Report :  An environmental report prepared at Borrower’s expense by a qualified environmental consultant approved by Lender in its sole discretion addressed to Lender (or subject to separate letter agreement permitting Lender to rely on such environmental report), which complies with the USEPA “all appropriate inquiry” rule contained in 40 CRF Part 312.

 

Equity Investment :  As such term is defined in Section 11.2 .

 

ERISA :  The Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder from time to time.

 

Escrow Agent :  As such term is defined in Section 14.3(a) .

 

Escrow Agreement :  As such term is defined in Section 8.1(v) .

 

Event of Default :  As such term is defined in Article 19 .

 

Excess Parking Spaces : As such term is defined in Section 14.1 .

 

Exit Fee :  As such term is defined in Section 7.4 .

 

Extended Maturity Date :  The date that is forty-six (46) months after the date of this Agreement, as the Initial Maturity Date may be extended by Borrower subject to the conditions contained in Section 4.3 .

 

Extension Fee :  As such term is defined in Section 4.3(b)(iii) .

 

Extension Option :  As such term is defined in Section 4.3(a) .

 

 

 

FIRREA :  The Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended from time to time.

 

Full Loan Opening Date :  The date of Full Loan Opening.

 

Full Loan Opening or Full Opening of the Loan :  The second disbursement of Loan proceeds, being the first disbursement of Loan proceeds other than the Closing Funding.

 

General Contract :  As such term is defined in Section 9.1(a) .

 

General Contract Price :  As such term is defined in Section 9.1(a) .

 

General Contractor:   Austin Building Company.

 

Governmental Approvals :  Collectively, all consents, licenses, and permits and all other authorizations or approvals required from any Governmental Authority for the Construction in accordance with the Approved Plans and Specifications or the sale of the Residential Units.

 

Governmental Authority :  Any federal, state, county or municipal government, or political subdivision thereof, any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, or public body, or any court, administrative tribunal, or public utility.

 

Guarantor :  Stratus Properties, Inc., a Delaware corporation.

 

Guarantor Financial Covenants : The covenants of Guarantor set forth in Section 16 of the Limited Payment Guaranty.

 

Hard Costs :  Any and all costs related to or incurred in connection with the construction of the Project, including, without limitation, the cost of all labor, materials and equipment, but excluding any fees for architectural and engineering services, marketing fees, financing costs, developers’ fees and other similar soft fees and costs.  The Hard Costs include the items delineated as such on the Budget.

 

Hazardous Material :  Means and includes gasoline, petroleum, asbestos containing materials, explosives, radioactive materials or any hazardous or toxic material, substance or waste which is defined by those or similar terms or is regulated as such under any Law of any Governmental Authority having jurisdiction over the Project or any portion thereof or its use, including: (i) any “hazardous substance” defined as such in (or for purposes of) the Compre­hensive Environmental Response, Compensation and Liability Act, 42 U.S.C.A. § 9601(14) as may be amended from time to time, or any so-called “superfund” or “superlien” Law, including the judicial interpretation thereof; (ii) any “pollutant or contaminant” as defined in 42 U.S.C.A. § 9601(33); (iii) any material now defined as “hazardous waste” pursuant to 40 C.F.R. Part 260; (iv) any petroleum, including crude oil or any fraction thereof; (v) natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel; (vi) any “hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910; (vii) any mold or fungus that may cause an allergic, toxic or inflammatory response in humans arising from exposure to such mold or fungus in indoor air; and (viii) any other toxic substance or contaminant that is subject to any other Law or

 

 

 

other past or present requirement of any Governmental Authority.  Any reference above to a Law, includes the same as it may be amended from time to time, including the judicial interpretation thereof.

 

Hotel :  As such term is defined in Recital A .

 

Hotel Documents : The Condominium Marketing License Agreement, the Hotel Operating Agreement, and/or the Technical Services Agreement, individually or collectively, as the context may infer.

 

Hotel Operator :  W Hotel Management, Inc., a Delaware corporation, an Affiliate of Starwood Hotel & Resorts Worldwide, Inc.,

 

Hotel Operating Agreement :  That certain W Austin Hotel Operating Agreement by and between Stratus Block 21 Investments, L.P., and Starwood Hotel & Resorts Worldwide, Inc., dated as of October 26, 2006, as amended by First Amendment to Operating Agreement dated January 30, 2008,   as such agreement was assigned by Stratus Block 21 Investments, L.P. to Borrower by virtue of that certain Assignment and Assumption Agreement dated as of July 30, 2007; and as such agreement was assigned by Starwood Hotel & Resorts Worldwide, Inc. to Hotel Operator by virtue of that certain Assignment and Assumption Agreement dated as of July 30, 2007.

 

HUD :  United States Department of Housing and Urban Development.

 

ILSA :  The Interstate Land Sales Full Disclosure Act, 42 USC 1701 et . seq ., as amended.

 

Improvements :  All of the improvements referred to in Recital A hereto and more particularly described in the Approved Plans and Specifications and any offsite improvements reasonably required to be constructed by Borrower for the use or operation of the improvements described in Recital A .

 

In Balance or in balance :  As such term is defined in Article 11 .

 

Including or including :  Means “including, but not limited to”.

 

Indemnified Party :  As such term is defined in Section 15.1(t) .

 

Initial Equity Investment :  As such term is defined in Section 8.1(a) .

 

Initial Maturity Date :  The date that is forty (40) months from the date of this Agreement.

 

Insurance Policy :  As such term is defined in Section 8.1(e) .

 

Interest Rate :  As such term is defined in the Note.

 

Interest Reserve Budget Line Item :  As such term is defined in Section 10.4 .

 

Internal Revenue Code :  The Internal Revenue Code of 1986, as amended from time to time.

 

 

 

Land :  As such term is defined in Recital A .

 

Laws :  Collectively, all federal, state and local laws, statutes, codes, ordinances, orders, rules and regulations, including judicial opinions or precedential authority in the applicable jurisdiction.

 

Leases :  The collective reference to all leases, subleases and occupancy agreements affecting the Project or any part thereof now existing or hereafter executed and all amendments, modifications or supplements thereto approved in writing by Lender.

 

Lender :  As such term is defined in the opening paragraph of this Agreement and including any successor holder of the Loan from time to time.

 

Lender’s Consultant :  An independent consulting architect, inspector, and/or engineer designated by Lender in Lender’s sole discretion.

 

Lender’s Estimate of Remaining Costs :  As such term is defined in Section 11.1(d) .

 

Lender’s Remaining Exposure :  The sum, at any date, of the outstanding principal balance of the Loan and the Unfunded Commitment.

 

Limited Payment Guaranty :  A guaranty of payment, executed by Guarantor and pursuant to which Guarantor guarantees the repayment of the Loan, in an amount up to $20,000,000 of the principal amount of the Loan, plus accrued interest thereon (including default interest, if any), and the cost of the enforcement of such guaranty, all in accordance with the terms and provisions more particularly described therein.

 

List Price :  As such term is defined in Section 14.1 .

 

Loan :  As such term is defined in Recital B .

 

Loan Documents :  The collective reference to this Agreement, the documents and instruments listed in Section 4.2 , and all the other documents and instruments entered into from time to time, evidencing or securing the Loan or any obligation of payment thereof or per­formance of Borrower’s or Guarantor’s obligations in connection with the transaction con­templated hereunder, each as amended.

 

Loan Term :  The period of time commencing on the date of this Agreement through and including the date the Loan is repaid in full.

 

Master Condominium Declaration :  That certain Declaration of Condominium Regime for Block 21 Master Condominiums to be recorded against the Project upon completion thereof, which will subdivide the Project into thirteen (13) “Master Units.”

 

Material Adverse Change or material adverse change :  If, in Lender’s sole and reasonable discre­tion, the operations or financial condition of a person, entity, or property has changed in a manner likely to impair materially the value of Lender’s security for the Loan, prevent timely

 

 

 

repayment of the Loan, or otherwise prevent the applicable person or entity from timely performing any of its material obligations under the Loan Documents.

 

Maturity Date :  As such term is defined in Section 4.3 .

 

Mezzanine Borrower :  One or more constituent entities of Borrower, as agreed to between Borrower and Mezzanine Lender.

 

Mezzanine Lender :  A institutional lender experienced in condominium development selected by Borrower and approved in writing by Lender in its reasonable discretion.

 

Mezzanine Loan :  A loan from a Mezzanine Lender to Mezzanine Borrower in an aggregate principal amount such that the Qualifying Portion thereof is equal to or greater than Twenty Million Dollars ($20,000,000), but no greater than Fifty Million Dollars ($50,000,000), maturing on a date no earlier than the Maturity Date, and secured by pledges of the membership interests in Borrower.

 

Mezzanine Loan Documents :  The collective reference to the documents and instruments entered into from time to time, evidencing or securing the Mezzanine Loan or any obligation of payment thereof or per­formance of Mezzanine Borrower’s or Guarantor’s obligations in connection with the transaction con­templated thereunder, each as amended.

 

Mezzanine Loan Intercreditor Agreement .  A subordination and intercreditor agreement by and between Lender and Mezzanine Lender, prepared by counsel to Lender, in form and substance acceptable to Lender in its reasonable discretion, which provides, without limitation, that (i) the Mezzanine Loan is fully subordinate in right of payment and priority of lien to the Loan; (ii) Mezzanine Lender has no interest in any collateral which is unrelated to the Project and shall not accept any payments of the Mezzanine Loan until Lender is indefeasibly paid in full and Lender has released its Deed of Trust, except interest payments to be funded solely from the Mezzanine Loan interest reserve, if any; (iii) Mezzanine Lender shall not interfere in any manner with the enforcement of Lender’s remedies; (iv) Mezzanine Lender shall not enforce any remedies with respect to its collateral or any other collateral (or against Guarantor), except that Mezzanine Lender may foreclose on the pledges of ownership interest in Borrower, provided that (A) any monetary default under the Loan (including any payment due to make the Loan In Balance) is cured by Mezzanine Lender, and (B) Mezzanine Lender delivers to Lender a replacement guaranty substantially similar to the Completion and Carveout Guaranty, and (v) provided that Lender consents to such price reduction in its sole discretion, Mezzanine Lender shall permit Borrower to enter into contracts and thereafter close on any Residential Unit provided that the gross purchase price (exclusive of Upgrades) is greater than or equal to 80% of the List Price for such Residential Unit as specified on the approved Price List Schedule attached hereto as Exhibit M ;   (vi) Mezzanine Lender shall be authorized (but not required) by the terms of the Mezzanine Loan to make protective advances with respect to the Project and the Loan; (vii) a default under the Loan shall be a default under the Mezzanine Loan; and (viii) Mezzanine Lender shall not be permitted to (A) sell, transfer, or otherwise assign its interest in the Mezzanine Loan, (B) sell or otherwise offer any participations in the Mezzanine Loan, except at par to a Qualified Transferee, or (C) cause or permit the sale, assignment or other transfer of any of the ownership interests in a Mezzanine Lender which is a single purpose entity; in each case,

 

 

 

without the express prior written approval of Lender.  Notwithstanding the foregoing, Lender shall permit the transfer of an economic interest of less than fifty percent (50%) in the Mezzanine Loan to a Qualified Transferee, provided (x) the identity, ownership, and financial profile of such Qualified Transferee is disclosed to Lender prior to such transfer, (y) the Loan is In Balance, and (z) there is no Default or Event of Default.

 

Net Operating Income :  For the applicable month, the gross income from the Project less a prorated management fee (not to exceed 4% of annual gross revenues), customary monthly operating expenses, and reasonable prorated tax and insurance reserves; provided, however, for the Hotel, Net Operating Income shall be deemed the amount distributable by Hotel Operator to Borrower pursuant to the Hotel Operating Agreement.

 

Net Sales Proceeds :  The gross sales price paid by any Residential Unit Purchaser for its respective Residential Unit (exclusive of Residential Unit customization items paid for from Upgrade Deposits, but inclusive of all Upgrade Profits and inclusive of all fees and other amounts paid by Residential Unit Purchasers in excess of the purchase price) minus brokerage commissions, title costs, legal fees and other customary closing costs associated with the sale of such Residential Unit that are paid or incurred by Borrower, provided that in calculating Net Sales Proceeds closing costs shall be excluded from this clause to the extent funded from the Loan (rather than being paid from gross sales proceeds).

 

Non-Disturbance Agreement :  That certain subordination, non-disturbance and attornment agreement by and among Hotel Operator, Lender and Borrower.

 

Note :  A promissory note in the amount of One Hundred Sixty-Five Million Dollars ($165,000,000), executed by Borrower and payable to the order of Lender, evidencing the Loan.

 

OFAC :  As such term is defined in Section 3.1(x) .

 

Office Space :  As such term is defined in Recital A .

 

Owner’s Hard Cost Contingency :  As such term is defined in Section 10.3 .

 

Parking Garage :  As such term is defined in Recital A .

 

Parking Space :  As such term is defined in Recital A .

 

Partial Plans and Specifications :  Those certain partially completed Plans and Specifications set forth on Exhibit I hereto.

 

Partial Proposed Finish Standards :  Those certain partially completed Proposed Finish Standards set forth on Exhibit J hereto.

 

Permitted Affiliate Expenses :  As such term is defined in Section 12.7 .

 

Permitted Exceptions :  Those matters listed on Exhibit B attached hereto, to which title to the Project may be subject at the Closing, and thereafter such other title exceptions as are acceptable to Lender in its sole discretion and approved by Lender in writing.

 

 

 

Person :  Any natural person, partnership, limited liability company, corporation, trust, Governmental Authority or other entity.

 

Plans and Specifications :  As such term is defined in Section 9.2(e) .

 

Pre-sale Requirement :  As such term is defined in Section 8.1(u) .

 

Price List Schedule :  As such term is defined in Section 14.1 .

 

Proceeding :  As such term is defined in Section 21.12 .

 

Proceeds :  As such term is defined in Section 16.1(a) .

 

Project :  The collective reference to (i) the Land, together with all buildings, structures and improvements located or to be located thereon, including the Improvements, (ii) all rights, privileges, easements and hereditaments relating or appertaining thereto, and (iii) all personal property, fixtures and equipment required or beneficial for the operation thereof.

 

Proposed Finish Standards :  As such term is defined in Section 9.2(f) .

 

Qualified Transferee :  As such term shall be defined in the Mezzanine Loan Intercreditor Agreement.

 

Qualifying Portion :  As such term is defined in Section 8.1(a) .

 

Qualifying Sales Agreement :  As such term is defined in Section 14.4 .

 

Reinvested Proceeds : As such term is defined in Section 14.10(a) .

 

Release Price :  As such term is defined in Section 14.9 or Section 14.9A , as applicable for the component of the Project being released.

 

Remaining Units :  Residential Units which have not been conveyed to Residential Unit Purchasers as of the time of determination of the Remaining Units (and, therefore, remain as collateral for the Loan).

 

Rentable Square Feet :  The number of indoor net rentable square feet in any particular portion of the Commercial Space or other space, as measured from the interior of the glass in the exterior walls, the middle of demising walls between rentable spaces and to the public side of any common area walls, but excluding balconies, terraces, hallways, common areas, lobbies, loft space or “loft walls” and the structural walls and areas of exit stairs, elevator shafts, and common mechanical shafts.  (One such rentable square foot is referred to in the singular as a “ Rentable Square Foot ”.)

 

Replacement Lender :  As such term is defined in Section 4.8(b).

 

Required Construction Commencement Date :  The date that is thirty (30) days after the date hereof.

 

 

 

Required Permits :  Each building permit, environmental permit, utility permit, land use permit and any other permits, approvals or licenses issued by any Governmental Authority that are required in connection the Construction, marketing, sale or operation of the Project.

 

Residential Condominium Declaration :  That certain sub-condominium declaration, entitled the “Subordinate Declaration of Condominium Regime for Block 21 Hotel Residential Condominiums,” to be recorded against the Residential Units and Hotel.

 

Residential Unit :  As such term is defined in Recital A .  For the sake of clarity, the Hotel is not included in the defined term “Residential Units.”

 

Residential Unit Purchaser :  The contract purchaser(s) under each Sales Agreement.

 

Retail Space :  As such term is defined in Recital A .

 

Retainage :  As such term is defined in Section 12.4 .

 

Revised GMP : As such term is defined in Section 9.2(a) .

 

Saleable Square Feet :  The number of indoor net saleable square feet in a Residential Unit or other space, as measured from the exterior of the exterior walls, the middle of demising walls between Residential Units and to the public side of any common area walls, but excluding balconies, terraces, common hallways, common mechanical shafts, lobbies, loft space or “loft walls” and the structural walls and areas of exit stairs, elevator shafts, and other common areas.  (One such saleable square foot is referred to in the singular as a “ Saleable Square Foot ”.)

 

Sales Agreement :  As such term is defined in Section 14.2 .

 

Sales Report :  As such term is defined in Section 14.6 .

 

Soft Cost Contingency :  As such term is defined in Section 10.3 .

 

Soft Costs :  All costs incurred or to be incurred in connection with the Project, other than the Hard Costs, including, without limitation, interest on the Loan, fees incurred in connection with the Loan, commissions, appraisal fees, architectural and engineering fees, title and recording charges, legal fees, real estate taxes and other impositions and sales and marketing costs.  Soft Costs shall include the items delineated as such on the Budget.

 

Soil Report :  A soil test report prepared by a licensed engineer satisfactory to Lender indicating to the satisfaction of Lender that the soil and subsurface conditions underlying the Project will support the Improvements.

 

State :  The state in which the Land is located.

 

Subcontracts :  Subcontracts for labor or materials to be furnished to the Project.

 

Substantial Completion :  The satisfaction of all of the following conditions: (a) the date when the Construction shall have been completed (except for Punch List Items and minor items

 

 

 

which can be fully completed without material interference with the use and operation of the Project) in accordance with the Approved Plans and Specifications; and (b) all material permits and approvals required for the normal use and occupancy of the Project (including a temporary certificate of occupancy) shall have been issued by the appropriate Governmental Authority and shall be in full force and effect to such extent under items (a) and (b) so that Borrower has the absolute right and ability under applicable Laws to convey and deliver Residential Units to the respective Residential Unit Purchasers and open and operate the Hotel.

 

Technical Services Agreement : That certain Technical Services Agreement dated as of October 26, 2006 by and between Stratus Block 21 Investments, L.P. (predecessor in interest to Borrower), and Starwood Hotels & Resorts Worldwide, Inc.

 

Tenant :  The tenant under a Lease.

 

Title Insurer :  Commonwealth Land Title Insurance Company, or such other title insurance company licensed in the State as may be approved in writing by Lender.

 

Title Policy :  An ALTA 2006 Lender’s Title Insurance Policy, or an equivalent Texas Lender’s Title Insurance Policy, with extended coverage issued by the Title Insurer insuring the lien of the Deed of Trust as a valid first, prior and paramount lien upon the Project and all appurtenant easements, and subject to no other exceptions other than the Permitted Exceptions and otherwise satisfying the requirements of Exhibit C attached hereto and made a part hereof, all to the extent permitted by the Laws of the State.

 

Transfer :  Any sale, transfer, lease (other than a Lease approved by Lender), conveyance, alienation, pledge, assignment, Deed of Trust, encumbrance, hypothecation or other disposition of (a) all or any portion of the Project or any portion of any other security for the Loan, (b) all or any portion of Borrower’s right, title and interest (legal or equitable) in and to the Project or any portion of any other security for the Loan, or (c) any interest in Borrower or any interest in any entity, including, without limitation, Guarantor, which directly or indirectly holds an interest in, or directly or indirectly controls, Borrower.

 

Unavoidable Delay :  Any delay in the construction of the Project, caused by natural disaster, fire, earthquake, hurricanes, tropical storms, floods, war, acts of terrorism, explosion, extraordinary adverse weather conditions, inability to procure or a general shortage of labor, equipment, facilities, energy, materials or supplies in the open market, failure of transportation, strikes or lockouts, or like causes, so long as such cause is not within the reasonable control of Borrower, but in no event to exceed ninety (90) days in the aggregate.  In no event shall lack of funds be deemed an Unavoidable Delay.

 

Unfunded Commitment :  The Commitment less all disbursements of the Loan made prior to the date on which the amount of the Unfunded Commitment is being calculated.

 

Upgrade Deposits :  As such term is defined in Section 14.3(c) .

 

Upgrade :  As such term is defined in Section 14.3(c) .

 

 

 

Upgrade Profit :  The amount by which Borrower’s costs of providing any upgrades is less than the cost charged to the Residential Unit Purchaser for any upgrades.

 

Venue :  As such term is defined in Recital A .

 

Waste Management Plan : As such term is defined in Section 9.2(e).

 

2.2   Other Definitional Provisions.

 

All terms defined in this Agreement shall have the same meanings when used in the Note, Deed of Trust, any other Loan Documents, or any certificate or other document made or delivered pursuant hereto.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement.

 

 

Article 3

 

 

BORROWER’S REPRESENTATIONS AND WARRANTIES

 

3.1   Representations and Warranties.

 

To induce Lender to execute this Agreement and perform its obligations hereunder, Borrower hereby represents and warrants to Lender as follows:

 

(a)   Borrower has good and indefeasible fee simple title to the Project, subject only to the Permitted Exceptions.

 

(b)   Except as previously disclosed to Lender in writing, no litigation or proceedings are pending, or to the best of Borrower’s actual knowledge threatened in writing, against Borrower or Guarantor, that could, if adversely determined, be reasonably expected to cause a Material Adverse Change with respect to Borrower, Guarantor or the Project.  There are no pending Environmental Proceedings and Borrower has no actual knowledge of any threatened Environmental Proceedings or any facts or circumstances that are reasonably likely give rise to any future Environmental Proceedings.

 

(c)   Borrower is a duly organized and validly existing limited liability company and has full power and authority to execute, deliver and perform all Loan Documents to which Borrower is a party, and such execution, delivery and performance have been duly authorized by all requisite action on the part of Borrower; Borrower has been a single purpose entity in compliance with Section 15.2 hereof since its formation.

 

(d)   No consent, approval or authorization of or declaration, registration or filing with any Governmental Authority or nongovernmental person or entity, including any creditor, partner, member or shareholder of Borrower or Guarantor, is required in connection with the execution, delivery and performance of this Agreement or any of the Loan Documents other than the recordation of the Deed of Trust and Declaration of Condominium for the Project and the filing of UCC-1 Financing Statements, except for such consents, approvals or authorizations of or declarations or filings with any Governmental Authority or non-governmental person or entity

 

 

 

where the failure to so obtain would not have a material adverse effect on Borrower or Guarantor or which have been obtained as of any date on which this representation is made or remade.

 

(e)   The execution, delivery and performance of this Agreement, the execution and payment of the Note and the granting of the Deed of Trust and other security interests under the other Loan Documents have not constituted and will not constitute, upon the giving of notice or lapse of time or both, a breach or default under any other agreement to which Borrower or Guarantor is a party or may be bound or affected, or a violation of any law or court order that may affect the Project, any part thereof, any interest therein, or the use thereof.

 

(f)   There is no default under this Agreement or the other Loan Documents, nor any condition that, after notice or the passage of time or both, would constitute a default or an Event of Default under said documents.

 

(g)   (i) No condemnation of any portion of the Project, (ii) no condemnation or relocation of any roadways abutting the Project, and (iii) no proceeding to deny access to the Project from any point or planned point of access to the Project, has commenced or, to Borrower’s actual knowledge, is contemplated by any Governmental Authority.

 

(h)   The amounts set forth in the Budget present a full and complete itemization by category of all costs, expenses and fees that Borrower reasonably expects to pay or reasonably anticipates becoming obligated to pay to complete the Construction (including all off-site improvements to be paid for by Borrower), operate the Project and market and sell the Residential Units.  Borrower is unaware of any other such costs, expenses or fees that are material and are not covered by the Budget.  Borrower further warrants that neither Borrower, Guarantor, nor any of their respective Affiliates are receiving any other payments, distributions, or other consideration directly or indirectly from Borrower, the Project, its seller, contractors or any other party associated with the Project other than the Permitted Affiliate Expenses.

 

(i)   Neither the construction of the Improvements nor the use of the Project when completed in accordance with the Approved Plans and Specifications and the contemplated accessory uses will violate (i) any Laws (including subdivision, zoning, building, environmental protection and wetland protection Laws), or (ii) any building permits, restrictions of record, or agreements affecting the Project or any part thereof.  Neither the zoning authorizations, approvals or variances nor any other right to construct or to use the Project is to any extent dependent upon or related to any real estate other than the Land.  All Governmental Approvals required for the Construction in accordance with the Approved Plans and Specifications have been obtained or will be obtained prior to Closing (except for those Governmental Approvals that cannot or need not be obtained until a later stage of the Construction or completion of Construction, in which case such Governmental Approvals will be obtained by Borrower on a timely basis and copies will be delivered to Lender on the earliest possible date) and all Laws relating to the Construction and operation of the Improvements have been complied with in all material respects and to Borrower’s knowledge, after due inquiry, all permits and licenses, required for the operation of the Project that cannot be obtained until the Construction is completed can be obtained if the Improvements are completed in accordance with the Approved Plans and Specifications.

 

 

 

 

 

(j)   The Project will have adequate water, gas, if applicable, and electrical supply, storm and sanitary sewerage facilities, other required public utilities, fire and police protection, and means of access between the Project and public highways, and none of the foregoing will be foreseeably delayed or impeded by virtue of any requirements under any applicable Laws.

 

(k)   No brokerage fees or commissions are payable by or to any person in connection with this Agreement or the Loan to be disbursed hereunder, other than to Holliday Fenoglio Fowler, who will be paid by Borrower.

 

(l)   All financial statements and other information previously furnished by Borrower or Guarantor to Lender in connection with the Loan are true, complete and correct in all material respects and fairly present the financial conditions of the subjects thereof as of the respective dates thereof and do not fail to state any material fact necessary to make such statements or information not misleading, and no Material Adverse Change with respect to Borrower or Guarantor has occurred since the respective dates of such statements and information.  Neither Borrower nor Guarantor has any material liability, contingent or otherwise, not disclosed in such financial statements and that all charges payable with respect to the Project are current and not in default.  Except as previously disclosed in writing to Lender, neither Borrower, nor Guarantor, nor any officer or director of Borrower, nor any equity owner of Borrower or Guarantor, or any of Borrower’s or Guarantor’s respective Affiliates (excluding investors in CJUF and any shareholders of Guarantor other than those that are considered “insiders” under SEC regulations): (i) has ever been the subject of any criminal proceedings (other than minor traffic violations); (ii) has ever been the owner, whether directly or indirectly, of a parcel of real property that has been the subject of foreclosure proceedings (whether judicial or non-judicial); (iii) has ever been a party, whether directly or indirectly, to a deed in lieu of foreclosure; or (iv) is currently a party to any material pending litigation or administrative proceedings, or subject to any judicial or non-judicial orders or consent agreements.

 

(m)   Except as disclosed in any Environmental Report delivered by Borrower to Lender prior to the date hereof, (i) to Borrower’s actual knowledge, the Project is in a safe condition, and, except for small quantities of Hazardous Materials lawfully used in the ordinary course of construction, maintenance and operation of the Project, is free of all Hazardous Material and is in compliance with all applicable Laws; (ii) except for small quantities of Hazardous Materials lawfully used in the ordinary course of construction, maintenance and operation of the Project, neither Borrower nor, to the actual knowledge of Borrower, any other person or entity, has ever caused or permitted any Hazardous Material to be placed, held, located or disposed of on, under, at or in a manner to affect the Project, or any part thereof, and the Project has never been used (whether by Borrower or, to the actual knowledge of Borrower, by any other person or entity) for any activities involving, directly or indirectly, the use, generation, treatment, storage, transportation, or disposal of any Hazardous Material; (iii) neither the Project nor Borrower is subject to any existing, pending, or, to Borrower’s actual knowledge, threatened investigation or inquiry by any Governmental Authority, and the Project is not subject to any remedial obligations under any applicable Laws pertaining to health or the environment; and (iv) to the actual knowledge of Borrower, there are no underground tanks, vessels, or similar facilities for the storage, containment or accumulation of Hazardous Materials of any sort on, under or affecting the Project.

 

 

 

 

 

(n)   For all purposes the Project may be mortgaged, conveyed and otherwise dealt with as an independent parcel and is a separate real estate tax parcel.

 

(o)   Borrower and its agents have not entered into any Leases, subleases or other arrangements for occupancy of space within the Project (other than Sales Agreements that   permit occupancy by the Residential Unit Purchasers following closing thereunder and the Hotel Operating Agreement).

 

(p)   When the Construction is completed substantially in accordance with the Approved Plans and Specifications, no building or other improvement will encroach upon any property line, building line, setback line, side yard line or any recorded or visible easement (or other easement of which Borrower is aware or has reason to believe may exist) in violation thereof.

 

(q)   The Loan is not being made for the purpose of purchasing or carrying “margin stock” within the meaning of Regulation T, U or X issued by the Board of Governors of the Federal Reserve System, and Borrower agrees to execute all instruments necessary to comply with all the requirements of Regulation U of the Federal Reserve System.

 

(r)   Borrower is not a party in interest to any plan defined or regulated under ERISA, and the assets of Borrower are not “plan assets” of any employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code.

 

(s)   Borrower is not a “foreign person” within the meaning of Section 1445 or 7701 of the Internal Revenue Code.

 

(t)   Borrower uses no trade name other than (i) its actual name set forth herein and (ii) “W Hotel and Residences.”  The principal place of business of Borrower is as stated in Article 22 .

 

(u)   Borrower’s place of organization is Delaware.

 

(v)   Except as set forth in Exhibit M , there are no Sales Agreements to purchase Residential Units.  The Sales Agreements listed on Exhibit M are in full force and effect and such Sales Agreements are not subject to any rights of rescission.  Borrower hereby represents that Exhibit M is a true, accurate and complete schedule of all Sales Agreements and sets forth:  (i) the name of Residential Unit Purchaser, (ii) the Residential Unit being purchased, (iii) any upgrades, (iv) any Upgrade Deposit, (v) the purchase price, and (vi) the Earnest Money Deposit.  All Sales Agreements are (or when entered into, and after expiration of statutory rescission periods, will be) Qualifying Sales Agreements.  No event of default, or any event that, with the passage of time or the giving of notice, or both, would constitute an event of default, has occurred pursuant to the terms of any of the Sales Agreements on the part of Borrower or, to Borrower’s actual knowledge, the other parties thereto.  No Residential Unit Purchaser under the Sales Agreements listed on Exhibit M has terminated its respective Sales Agreement and there are no side agreements with any Residential Unit Purchasers modifying any of the terms of the Sales Agreements or otherwise.

 

 

 

 

 

(w)   All Sales Agreements are exempt from or will comply with the requirements of ILSA,   and Laws of the State (and any applicable local Laws), so that (i) the sale of the Residential Units is lawful and will not be subject to interruption due to a violation of Laws, (ii) no Sales Agreement is terminable under any of such Laws (other than the termination rights contained in such Sales Agreement), and (iii) neither Borrower nor the Project will be subject to any civil or criminal penalties by reason of failure to comply with such Laws.  The marketing and sale of Residential Units by Borrower (and any marketing or sales of Residential Units) is, and at all times has been, in compliance with all Laws pertaining to the sale of condominiums (and/or residential real estate generally).  All consents and approvals needed for the sale of Residential Units under applicable federal, state and local Laws have been received and remain in full force and effect.

 

(x)   The Hotel Documents are in full force and effect.  No event of default, or any event that, with the passage of time or the giving of notice, or both, would constitute an event of default, has occurred pursuant to the terms of the Hotel Documents, either on the part of Borrower or, to Borrower’s actual knowledge, the other parties thereto.  Hotel Operator, or any other party to any Hotel Document, has not sent to Borrower any notices of default under any Hotel Document, nor has Hotel Operator, or any other party to any Hotel Document, sent to Borrower any other written notices of a material nature.  The Hotel Documents have not been amended (except as set forth in the definition of Hotel Documents).  There are no other agreements, written or oral, with Hotel Operator, Starwood Hotels & Resorts Worldwide, Inc., or any Affiliates of the foregoing, that supplement or modify any of the terms of any of the Hotel Documents or otherwise.

 

(y)   Neither Borrower, Guarantor or any other person owning an interest in Borrower is (or will be) a person with whom Lender is restricted from doing business with under regulations of the Office of Foreign Asset Control (“ OFAC ”) of the Department of the Treasury of the United States of America (including, those persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not knowingly engage in any dealings or transactions or otherwise be associated with such persons.  In addition, Borrower hereby agrees to provide Lender with any additional information that Lender deems reasonably necessary from time to time in order to ensure compliance with all applicable Laws concerning money laundering and similar activities.

 

(z)   Borrower shall have complied, in all respects, with the provisions of the USA PATRIOT Act of 2001, as applicable to Borrower and the Project.

 

(aa)   The Project complies and, when constructed, shall comply with all requirements of that certain Declaration of Restrictive Covenants by the City of Austin, dated December 15, 2006 recorded in the official public records of Travis County, Texas as Instrument No. 2006240877.

 

(bb)   All statements set forth in the Recitals are true and correct in all material respects.

 

 

 

 

3.2   Survival of Representations and Warranties.

 

Borrower agrees that all of the representations and warranties set forth in Section 3.1 and elsewhere in this Agreement are true in all material respects as of the date hereof, will be true in all material respects at Closing and, except for matters that have been disclosed by Borrower and approved by Lender in writing, will be true in all material respects at all times thereafter (including at Full Loan Opening) until the Loan has been repaid and Borrower’s obligations hereunder have been satisfied in full.  Each request for a disbursement under the Loan Documents shall constitute a reaffirmation of such representations and warranties, as deemed modified in accordance with the disclosures made and approved as aforesaid, as of the date of such request.  It shall be a condition precedent to the Closing Funding and each subsequent disbursement that each of said representations and warranties is true and correct in all material respects as of the date of such requested disbursement.  In addition, at Lender’s request, Borrower shall reaffirm such representations and warranties in writing prior to each disbursement hereunder.

 

 

Article 4

 

 

LOAN AND LOAN DOCUMENTS

 

4.1   Agreement to Borrow and Lend; Lender’s Obligation to Disburse; Excess Disbursements.

 

Subject to the terms, provisions and conditions of this Agreement and the other Loan Documents, Borrower agrees to borrow from Lender and Lender agrees to lend to Borrower the Loan, for the purposes and subject to all of the terms, provisions and conditions contained in this Agreement.  If Lender consists of more than one party, the obligations of each such party with respect to the amount it has agreed to loan to Borrower shall be several (and not joint and several) and each lending party’s obligations shall be limited to its proportionate share of the Loan and of each advance.

 

(a)   The maximum aggregate principal amount of the Loan to be funded hereunder shall be the lesser of (i) the Commitment, or (ii) the total costs associated with the Project (as described in the Budget) less the required Equity Investment.

 

(b)   Lender agrees, upon Borrower’s compliance with and satisfaction of all conditions precedent to the Closing Funding set forth in this Agreement and provided (i) the Loan is In Balance, (ii) no Material Adverse Change has occurred and is continuing with respect to Borrower, Guarantor or the Project, (iii) no material casualty to the Project has occurred that has not been repaired and there is no existing or threatened condemnation or taking which could cause a Material Adverse Change with respect to the Project and (iv) no Default or Event of Default has occurred and is continuing hereunder, to make the Closing Funding.

 

(c)   After the Closing Funding, Borrower shall be entitled to receive further successive disbursements of the proceeds of the Loan in accordance with Articles 8, 9, 12 and 13 following compliance with all conditions precedent thereto set forth in this Agreement, provided that (i) the Loan remains In Balance, (ii) Borrower has complied with all conditions precedent to disbursement from time to time set forth in this Agreement including the requirements of Section

 

 

 

3.2 and Articles 8, 9, 12 and 13 , (iii) no Material Adverse Change has occurred and is continuing with respect to Borrower, Guarantor or the Project, (iv) no material casualty to the Project has occurred that has not been repaired or is not being repaired in accordance with Article 16 hereof, and there is no existing or threatened condemnation or taking which could cause a Material Adverse Change with respect to the Project and (v) no Event of Default and no material Default has occurred and is continuing hereunder or under any other Loan Document.  Lender shall make commercially reasonable efforts to fund such subsequent disbursements within ten (10) Business Days after receipt of all of the documents required under this Agreement, including a draw request together with all items listed in Section 12.3 .

 

(d)   To the extent that Lender may acquiesce in noncompliance with any requirements set forth in this Agreement precedent to the Closing Funding, the Full Opening of the Loan, or any subsequent disbursement of Loan proceeds, such acquiescence shall not constitute a waiver by Lender, and Lender may at any time after such acquiescence require Borrower to comply with all such requirements.

 

(e)   All payments by Borrower on account of the Loan shall be made as such amounts become due or are declared due pursuant to the terms of this Agreement and the other Loan Documents.  All payments shall be made without deduction, defense, setoff or counterclaim as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.2   Loan Documents.

 

Borrower agrees that it will, on or before the date hereof, execute and deliver or cause to be executed and delivered to Lender the following documents in form and substance acceptable to Lender:

 

(a)   The Note.

 

(b)   The Deed of Trust.

 

(c)   The Completion and Carveout Guaranty.

 

(d)   The Limited Payment Guaranty.

 

(e)   The Environmental Indemnity.

 

(f)   The Collateral Assignment of Hotel Documents.

 

(g)   A collateral assignment, to the extent assignable, of construction documents, including, without limitation, the General Contract, all architecture, Design Professional and engineering contracts, Plans and Specifications, permits, licenses, approvals and development rights, together with consents to the assignment and continuation agreements from the General Contractor, the architect, real estate broker and other parties reasonably specified by Lender.

 

(h)   A collateral assignment, to the extent assignable, of all Sales Agreements, Earnest Money Deposits, Upgrade Deposits and all other documents relating to the establishment of a condominium regime at the Project.

 

(i)   Such UCC financing statements as Lender determines are advisable or necessary to perfect or notify third parties of the security interests intended to be created by the Loan Documents.

 

(j)   A collateral assignment, to the extent assignable, of any management contract entered into with respect to the Project.

 

(k)   Such other documents, instruments or certificates as Lender and its counsel may reasonably require, including such documents as Lender in its reasonable discretion deems necessary or appropriate to effectuate the terms and conditions of this Agreement and the Loan Documents, and to comply with the laws of the State.

 

4.3   Term of the Loan.

 

(a)   All principal, interest and other sums due under the Loan Documents shall be due and payable in full on the Initial Maturity Date, provided that Borrower shall have the option to extend the Maturity Date for one (1) additional six-month period (the “ Extension Option ”), provided Borrower has satisfied the conditions set forth in subparagraph (b) below.  All references herein to the “ Maturity Date ” shall mean the Initial Maturity Date, or, in the event Borrower satisfies the conditions to the exercise of the Extension Option in accordance with this

 

Section 4.3 , the “ Maturity Date ” shall mean the Extended Maturity Date.  Interest only payments shall continue to be due and payable on the first of the month according to the Interest Rate then in effect on the outstanding principal balance of the Loan during the extension period.

 

(b)   Borrower may only exercise the Extension Option upon satisfying the following conditions:

 

(i)   The Project has been completed in accordance with the Approved Plans and Specifications in all material respects, the Project is lien free (other than liens for the benefit of Lender and Permitted Exceptions), and certificates of occupancy shall have been issued by the appropriate Governmental Authority for all of the Project sufficient, among other things, to allow operation of the Hotel and Venue, leasing and occupancy of the Commercial Space, the conveyance and occupancy of the Residential Units, and the use and occupancy of the Parking Garage and all Parking Spaces, and to allow satisfaction of item (vii) below (any certificate of occupancy for the Commercial Space may be conditioned upon the completion of tenant finish improvements);

 

(ii)   The Hotel is open and operating in accordance with the Hotel Documents, and the Hotel Operator, on behalf of Starwood Hotel & Resorts Worldwide, Inc., has accepted and confirmed the completion of the Hotel in accordance with the Hotel Documents;

 

(iii)   Borrower shall have delivered to Lender written notice of such election no earlier than seventy-five (75) days and no later than thirty (30) days prior to the Initial Maturity Date;

 

(iv)   Borrower shall pay, together with its written notice of such election, an extension fee (the “ Extension Fee ”) equal to 0.5% of Lender’s Remaining Exposure at the time the Extension Option is requested;

 

(v)   If there is a Mezzanine Loan, the Mezzanine Lender extends the maturity date of the Mezzanine Loan to a date no earlier than the Extended Maturity Date;

 

(vi)   The Loan has not matured and no Event of Default or material Default has occurred and is continuing under the Loan Documents;

 

(vii)   Following the full funding of the Reinvested Proceeds pursuant to Section 14.10(b) hereof, Borrower has closed and conveyed, pursuant to Qualifying Sales Agreements and each at no less than 90% of the applicable List Price, Residential Units in an amount sufficient to generate aggregate gross sales proceeds of at least $55,000,000 (apart from and in addition to the gross sales proceeds which generated the Reinvested Proceeds), and Borrower shall have paid to Lender the Release Prices for each such Residential Unit sold; and

 

(viii)   Borrower has funded the Additional Equity Investment, as and to the extent required hereunder.

 

(c)   Notwithstanding the above provisions of this Section 4.3 , in the event that (x) Borrower does not repay the Loan in full on or before the Initial Maturity Date and (y) the Maturity Date is not extended pursuant to the provisions of Section 4.3(b) (whether because

 

 

 

Borrower did not request the extension or Borrower requested the extension but did not qualify for such extension) then the Maturity Date shall nevertheless be extended from the Initial Maturity Date to a date that is thirty (30) days after the Initial Maturity Date and the Extension Fee shall be due and payable from Borrower to Lender on the Initial Maturity Date.  The Deed of Trust will not be released until the Extension Fee and all other amounts due under the Loan have been paid in full.  In such event, Borrower shall not be entitled to any further extensions of the Maturity Date.  No such extension shall occur if the Loan has been accelerated prior to the Initial Maturity Date.

 

(d)   If Borrower timely sends written notice of Borrower’s election to exercise the Extension Option in accordance with Section 4.3(b) , Lender, no later than twenty (20) days prior to the Initial Maturity Date, shall notify Borrower (“ Lender’s Response Notice ”) whether, with respect to the Extension Option, the conditions set forth in Section 4.3(b) have been satisfied and accordingly the Maturity Date has been extended to the Extended Maturity Date.

 

(e)   If Lender fails to timely send Lender’s Response Notice, but Borrower has not qualified for such Extension Option, then Lender shall not thereby be deemed to have waived the Extension Fee payable under subparagraph 4.3(c) ; provided, however, that in such circumstance, if (x) Borrower repays the Loan in full prior to its receipt of Lender’s Response Notice or (y) Borrower repays the Loan in full no later than the date twenty (20) days after its receipt of Lender’s Response Notice, then no Extension Fee shall be owed under subparagraph 4.3(c) .

 

4.4   Prepayments.

 

Borrower shall have the right to make prepayments of the Loan in accordance with and subject to the terms of the Note.

 

4.5   Required Principal Payments.

 

All principal shall be paid on or before the Maturity Date.

 

4.6   Receipt of Payments.

 

All payments received by Lender prior to or at 3:00 p.m. (Chicago time) on a Business Day shall be credited to Borrower on the day of receipt; all payments received after 3:00 p.m. (Chicago time) on a Business Day shall be deemed received on the next succeeding Business Day.

 

4.7   Termination of Lender’s Unfunded Commitment.

 

Upon the repayment in full of the outstanding principal balance of the Loan, Lender’s obligation to fund the Unfunded Commitment shall thereupon terminate and Lender shall have no further obligation to fund Loan proceeds hereunder.  If, in Lender’s sole discretion, Lender agrees (in writing) that the Commitment shall not so terminate, all Release Prices for the sale of Residential Units or any other part of the Project shall be escrowed with Lender until such time as Lender’s obligation to fund the Commitment expires or is terminated and the Loan has been repaid.

 

 

 

 

4.8   Lender Default.

 

If Lender is prevented from funding the Unfunded Commitment by reason of bankruptcy or insolvency proceedings or an order from regulatory authorities in connection with Lender’s insolvency or failure to meet regulatory requirements, then Lender shall notify Borrower and, so long as no Event of Default exists, Borrower shall have the right to do either of the following no later than ninety (90) days after receipt of such notice:

 

(a)   Borrower may prepay the Loan in full without the payment of any Prepayment Charge (as such term is defined in the Note) or the remaining Exit Fee; or

 

(b)   Borrower may cause another financial institution experienced at making similar construction loans and reasonably acceptable to Lender (the “ Replacement Lender ”) to agree to fund the Unfunded Commitment.  Pursuant to a standard Assignment and Assumption Agreement, Lender shall assign to Replacement Lender, without recourse, and Replacement Lender shall assume, Lender’s rights and obligations with respect to the Unfunded Commitment and whereupon Lender shall be released therefrom.  Lender and Replacement Lender shall execute a co-lender agreement in form and substance reasonably acceptable to Lender and Replacement Lender, providing, among other things, for the priority of the Unfunded Commitment to the previously advanced Loan proceeds.

 

 

Article 5

 

 

INTEREST

 

5.1   Interest Rate.

 

The Loan shall bear interest as set forth in the Note.  Interest shall be paid on the Loan when and as set forth in the Note.

 

 

Article 6

 

 

COSTS OF MAINTAINING LOAN

 

6.1   Increased Costs and Capital Adequacy.

 

(a)   Borrower recognizes that the cost to Lender of maintaining the Loan or any portion thereof may fluctuate, and Borrower agrees to pay Lender additional amounts to compensate Lender for any increase in its actual costs incurred in maintaining the Loan or any portion thereof outstanding or for the reduction of any amounts received or receivable from Borrower as a result of any change after the date hereof in any applicable Law, regulation or treaty, or in the interpretation or administration thereof, or by any domestic or foreign court, (i) changing the basis of taxation of payments under this Agreement and/or the Note to Lender (other than taxes imposed on all or any portion of the overall net income or receipts of Lender), or (ii) imposing, modifying or applying any reserve (other than a loan loss reserve), special deposit or similar requirement against assets of, deposits with or for the account of, credit extended by, or any other acquisition of funds for loans by Lender (which includes the Loan or any applicable portion thereof) or (iii) imposing on Lender any other condition affecting the Loan, provided that the result of the foregoing is to increase the cost to Lender of maintaining the

 

 

 

Loan or any portion thereof or to reduce the amount of any sum received or receivable from Borrower by Lender under the Loan Documents.

 

(b)   If the adoption after the date hereof of any Law, rule, regulation or guideline regarding capital adequacy, or any change after the date hereof in any of the foregoing, or in the interpretation or administration thereof by any domestic or foreign Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has the effect of reducing the rate of return on Lender’s capital to a level below that which Lender would have achieved but for such application, adoption, change or compliance, then, from time to time Borrower shall pay to Lender such additional amounts as will compensate Lender for such reduction with respect to any portion of the Loan outstanding.

 

(c)   Any amount payable by Borrower under subsection (a) or subsection (b) of this Section 6.1 shall be paid within ten (10) Business Days of receipt by Borrower of a certificate signed by an authorized officer of Lender setting forth the amount due and the basis for the determination of such amount, which statement shall be conclusive and binding upon Borrower absent manifest error.  Lender shall also provide to Borrower copies of any applicable invoices, bills, demands or statements of account.  Failure on the part of Lender to demand payment from Borrower for any such amount attributable to any particular period shall not constitute a waiver of Lender’s right to demand payment of such amount for any subsequent or prior period.

 

6.2   Borrower Withholding.

 

If by reason of a change in any applicable Laws occurring after the date hereof, Borrower is required by Law to make any deduction or withholding in respect of any taxes (other than taxes imposed on or measured by the net income of Lender or any franchise tax imposed on Lender), duties or other charges from any payment due under the Note to the maximum extent permitted by law, the sum due from Borrower in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, Lender receives and retains a net sum equal to the sum that it would have received had no such deduction or withholding been required to be made.

 

 

Article 7

 

 

LOAN EXPENSE AND ADVANCES

 

7.1   Loan and Administration Expenses.

 

Borrower unconditionally agrees to pay all reasonable expenses of the Loan, including all amounts payable pursuant to Sections 7.2 and 7.3 and any and all other fees owing to Lender pursuant to the Loan Documents, and also including, without limiting the generality of the foregoing, all recording, filing and registration fees and charges, Deed of Trust, intangible or documentary taxes, escrow charges, title charges, all insurance premiums, title insurance premiums and other charges of the Title Insurer, printing and photocopying expenses, survey fees and charges, cost of certified copies of instruments, cost of premiums on the Title Policy, charges of the Title Insurer or other escrowee for administering disbursements, all reasonable

 

 

 

fees and disbursements of Lender’s Consultant, all appraisal fees, insurance consultant’s fees, investigator’s fees, environmental consultant’s fees, reasonable travel related expenses and all reasonable costs and expenses incurred by Lender in connection with the determination of whether or not Borrower has performed the obligations undertaken by Borrower hereunder or has satisfied any conditions precedent to the obligations of Lender hereunder.  Borrower shall pay the airfare and other reasonable travel expenses for each officer or analyst of Lender who inspects the Project as part of Lender’s due diligence.  The amount charged for airfare shall be the lesser of (i) the actual cost thereof incurred by Lender, or (ii) $1,200   per person per visit.  Borrower