Exhibit 10.42

 

Freddie Mac Loan Number 534382037

 

MULTIFAMILY NOTE-CME

MULTISTATE – FIXED RATE

(REVISION DATE 8-14-2009)

 

 

US $27,000,000.00

Effective Date: as of March 25, 2010

 

 

            FOR VALUE RECEIVED, the undersigned (together with such party’s or
parties’ successors and assigns, “Borrower”) jointly and severally (if more than
one) promises to pay to the order of KEYCORP REAL ESTATE CAPITAL MARKETS, INC.,
an Ohio corporation, the principal sum of Twenty-Seven Million and No/100ths
Dollars (US $27,000,000.00), with interest on the unpaid principal balance, as
hereinafter provided.

 

            1.         Defined Terms. 

 

            (a)        As used in this Note:

                       

“Base Recourse” means a portion of the Indebtedness equal to zero percent (0%)
of the original principal balance of this Note.

 

“Business Day” means any day other than a Saturday, a Sunday or any other day on
which Lender or the national banking associations are not open for business. 

 

“Cut-off Date” means the twelfth (12th) Installment Due Date.

 

“Default Rate” means an annual interest rate equal to four (4) percentage points
above the Fixed Interest Rate.  However, at no time will the Default Rate exceed
the Maximum Interest Rate.

 

“Defeasance Period” is the period beginning the day after the Defeasance Date
until but not including the first day of the Window Period.  The Defeasance
Period only applies if this Note is assigned to a REMIC trust prior to the
Cut-off Date.

 

“Fixed Interest Rate” means the annual interest rate of five and forty-nine
hundredths percent (5.49%).

 

“Installment Due Date” means, for any monthly installment of interest only or
principal and interest, the date on which such monthly installment is due and
payable pursuant to Section 3 of this Note. The “First Installment Due Date”
under this Note is May 1, 2010.

 

“Lender” means the holder from time to time of this Note.

 

“Loan” means the loan evidenced by this Note.

 

“Lockout Period” means the period beginning on the day that this Note is
assigned to a REMIC trust until and including the Defeasance Date.  The Lockout
Period only applies if this Note is assigned to a REMIC trust prior to the
Cut-off Date.

 

“Maturity Date” means the earlier of (i) April 1, 2020 (the “Scheduled Maturity
Date”), and (ii) the date on which the unpaid principal balance of this Note
becomes due and payable by acceleration or otherwise pursuant to the Loan
Documents or the exercise by Lender of any right or remedy under any Loan
Document.

 

“Maximum Interest Rate” means the rate of interest that results in the maximum
amount of interest allowed by applicable law.

 

“Prepayment Premium Period” means the period during which, if a prepayment of
principal occurs, a prepayment premium will be payable by Borrower to Lender. 
The Prepayment Premium Period is the period from and including the date of this
Note until but not including the earlier to occur of the following (i) the day
that this Note is assigned to a REMIC trust if this Note is assigned to a REMIC
trust prior to the Cut-off Date or (ii) the first day of the Window Period.  The
Prepayment Premium Period only applies if this Note is not assigned to a REMIC
trust or if this Note is assigned to a REMIC trust on or after the Cut-off Date.

 

“Security Instrument” means the multifamily mortgage, deed to secure debt or
deed of trust effective as of the effective date of this Note, from Borrower to
or for the benefit of Lender and securing this Note.

 

                        “Treasury Security” means the 3.375% U.S. Treasury
Security due November 15, 2019.

 

“Window Period” means the three (3) consecutive calendar month period prior to
the Scheduled Maturity Date.

 

“Yield Maintenance Period” means the period from and including the date of this
Note until but not including the earlier to occur of the following (i) the first
day that the Note is assigned to a REMIC trust or (ii) October 1, 2019 (the
“Yield Maintenance Expiration Date”). The Yield Maintenance Period only applies
if this Note is not assigned to a REMIC trust or if this Note is assigned to a
REMIC trust on or after the Cut-off Date.

 

            (b)        Other capitalized terms used but not defined in this Note
shall have the meanings given to such terms in the Security Instrument.

 

            2.         Address for Payment.  All payments due under this Note
shall be payable at KeyBank Real Estate Capital, P.O. Box 145404, Cincinnati,
Ohio 45250, or such other place as may be designated by Notice to Borrower from
or on behalf of Lender.

 

            3.         Payments. 

 

            (a)        Interest will accrue on the outstanding principal balance
of this Note at the Fixed Interest Rate, subject to the provisions of Section 8
of this Note. 

           

            (b)        Interest under this Note shall be computed, payable and
allocated on the basis of a 360-day year consisting of twelve 30-day months.

           

            (c)        Unless disbursement of principal is made by Lender to
Borrower on the first day of a calendar month, interest for the period beginning
on the date of disbursement and ending on and including the last day of such
calendar month shall be payable by Borrower simultaneously with the execution of
this Note.  If disbursement of principal is made by Lender to Borrower on the
first day of a calendar month, then no payment will be due from Borrower at the
time of the execution of this Note.  The Installment Due Date for the first
monthly installment payment under Section 3(d) of interest only or principal and
interest, as applicable, will be the First Installment Due Date set forth in
Section 1(a) of this Note.  Except as provided in this Section 3(c), Section 10
and in Section 11, accrued interest will be payable in arrears.

 

            (d)        Beginning on the First Installment Due Date, and
continuing until and including the monthly installment due on the Maturity Date,
principal and accrued interest shall be payable by Borrower in consecutive
monthly installments due and payable on the first day of each calendar month. 
The amount of the monthly installment of principal and interest payable pursuant
to this Section 3(d) on an Installment Due Date shall be One Hundred Fifty-Three
Thousand One Hundred Thirty-Three and 67/100ths Dollars ($153,133.67).

 

            (e)        All remaining Indebtedness, including all principal and
interest, shall be due and payable by Borrower on the Maturity Date. 

 

            (f)         All payments under this Note shall be made in
immediately available U.S. funds.

           

            (g)        Any regularly scheduled monthly installment of interest
only or principal and interest payable pursuant to this Section 3 that is
received by Lender before the date it is due shall be deemed to have been
received on the due date for the purpose of calculating interest due.

 

            (h)        Any accrued interest remaining past due for 30 days or
more, at Lender’s discretion, may be added to and become part of the unpaid
principal balance of this Note and any reference to “accrued interest” shall
refer to accrued interest which has not become part of the unpaid principal
balance.  Any amount added to principal pursuant to the Loan Documents shall
bear interest at the applicable rate or rates specified in this Note and shall
be payable with such interest upon demand by Lender and absent such demand, as
provided in this Note for the payment of principal and interest.   

 

            4.         Application of Payments.  If at any time Lender receives,
from Borrower or otherwise, any amount applicable to the Indebtedness which is
less than all amounts due and payable at such time, Lender may apply the amount
received to amounts then due and payable in any manner and in any order
determined by Lender, in Lender’s discretion.  Borrower agrees that neither
Lender’s acceptance of a payment from Borrower in an amount that is less than
all amounts then due and payable nor Lender’s application of such payment shall
constitute or be deemed to constitute either a waiver of the unpaid amounts or
an accord and satisfaction.

                       

            5.         Security.  The Indebtedness is secured by, among other
things, the Security Instrument, and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.

 

            6.         Acceleration.  If an Event of Default has occurred and is
continuing, the entire unpaid principal balance, any accrued interest, any
prepayment premium payable under Section 10 and Section 11, and all other
amounts payable under this Note and any other Loan Document, shall at once
become due and payable, at the option of Lender, without any prior Notice to
Borrower (except if notice is required by applicable law, then after such
notice).  Lender may exercise this option to accelerate regardless of any prior
forbearance.  For purposes of exercising such option, Lender shall calculate the
prepayment premium as if prepayment occurred on the date of acceleration.  If
prepayment occurs thereafter, Lender shall recalculate the prepayment premium as
of the actual prepayment date.

 

            7.         Late Charge.

 

            (a)        If any monthly installment of interest or principal and
interest or other amount payable under this Note or under the Security
Instrument or any other Loan Document is not received in full by Lender within
ten (10) days after the installment or other amount is due, counting from and
including the date such installment or other amount is due (unless applicable
law requires a longer period of time before a late charge may be imposed, in
which event such longer period shall be substituted), Borrower shall pay to
Lender, immediately and without demand by Lender, a late charge equal to five
percent (5%) of such installment or other amount due (unless applicable law
requires a lesser amount be charged, in which event such lesser amount shall be
substituted). 

 

            (b)        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 the late charge
payable pursuant to this Section represents a fair and reasonable estimate,
taking into account all circumstances existing on the date of this Note, of the
additional expenses Lender will incur by reason of such late payment.  The late
charge is payable in addition to, and not in lieu of, any interest payable at
the Default Rate pursuant to Section 8.

 

            8.         Default Rate. 

 

            (a)        So long as (i) any monthly installment under this Note
remains past due for thirty (30) days or more or (ii) any other Event of Default
has occurred and is continuing, then notwithstanding anything in Section 3 of
this Note to the contrary, interest under this Note shall accrue on the unpaid
principal balance from the Installment Due Date of the first such unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
the Default Rate. 

 

            (b)        From and after the Maturity Date, the unpaid principal
balance shall continue to bear interest at the Default Rate until and including
the date on which the entire principal balance is paid in full. 

 

            (c)        Borrower acknowledges that (i) its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the Loan, (ii) during the time that any monthly installment under
this Note is delinquent for thirty (30) days or more, Lender will incur
additional costs and expenses arising from its loss of the use of the money due
and from the adverse impact on Lender’s ability to meet its other obligations
and to take advantage of other investment opportunities; and (iii)  it is
extremely difficult and impractical to determine those additional costs and
expenses.  Borrower also acknowledges that, during the time that any monthly
installment under this Note is delinquent for thirty (30) days or more or any
other Event of Default has occurred and is continuing, Lender’s risk of
nonpayment of this Note will be materially increased and Lender is entitled to
be compensated for such increased risk.  Borrower agrees that the increase in
the rate of interest payable under this Note to the Default Rate represents a
fair and reasonable estimate, taking into account all circumstances existing on
the date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower’s delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.

 

            9.         Limits on Personal Liability.

 

            (a)        Except as otherwise provided in this Section 9, Borrower
shall have no personal liability under this Note, the Security Instrument or any
other Loan Document for the repayment of the Indebtedness or for the performance
of any other obligations of Borrower under the Loan Documents and Lender’s only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender’s exercise of its rights and remedies with respect
to the Mortgaged Property and to any other collateral held by Lender as security
for the Indebtedness.  This limitation on Borrower’s liability shall not limit
or impair Lender’s enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any other obligations of Borrower.

 

            (b)        Borrower shall be personally liable to Lender for the
amount of the Base Recourse, plus any other amounts for which Borrower has
personal liability under this Section 9.

 

            (c)        In addition to the Base Recourse, Borrower shall be
personally liable to Lender for the repayment of a further portion of the
Indebtedness equal to any loss or damage suffered by Lender as a result of the
occurrence of any of the following events:

 

(i)         Borrower fails to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence.  However, Borrower will not be personally liable for
any failure described in this subsection (i) if Borrower is unable to pay to
Lender all Rents and security deposits as required by the Security Instrument
because of a valid order issued in a bankruptcy, receivership, or similar
judicial proceeding.

 

(ii)        Borrower fails to apply all insurance proceeds and condemnation
proceeds as required by the Security Instrument.  However, Borrower will not be
personally liable for any failure described in this subsection (ii) if Borrower
is unable to apply insurance or condemnation proceeds as required by the
Security Instrument because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding.

 

(iii)       Borrower fails to comply with Section 14(g) or (i) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports. 

 

 (iv)      Borrower fails to pay when due in accordance with the terms of the
Security Instrument the amount of any item below marked “Deferred”; provided
however, that if no item is marked “Deferred”, this Section 9(c)(iv) shall be of
no force or effect.   

            [Deferred]        Hazard Insurance premiums or other insurance
premiums,

[Collect]           Taxes,

[Deferred]        water and sewer charges (that could become a lien on the
Mortgaged Property),

[N/A]               ground rents,

[Deferred]        assessments or other charges (that could become a lien on the
Mortgaged Property)

 

(v)        Borrower engages in any willful act of material waste of the
Mortgaged Property.

 

            (d)        In addition to the Base Recourse, Borrower shall be
personally liable to Lender for:

 

                        (i)         the performance of all of Borrower’s
obligations under Section 18 of the Security Instrument (relating to
environmental matters);

 

                        (ii)        the costs of any audit under Section 14(g)
of the Security Instrument; and

 

                        (iii)       any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Section 9, including Attorneys’ Fees and Costs and the costs
of conducting any independent audit of Borrower’s books and records to determine
the amount for which Borrower has personal liability.

 

            (e)        All payments made by Borrower with respect to the
Indebtedness and all amounts received by Lender from the enforcement of its
rights under the Security Instrument and the other Loan Documents shall be
applied first to the portion of the Indebtedness for which Borrower has no
personal liability.  

 

            (f)         Notwithstanding the Base Recourse, Borrower shall become
personally liable to Lender for the repayment of all of the Indebtedness upon
the occurrence of any of the following Events of Default:

 

                        (i)         Borrower or any SPE Equity Owner fails to
comply with Section 33 of the Security Instrument;

 

                        (ii)        a Transfer (including, but not limited to, a
lien or encumbrance) that is an Event of Default under Section 21 of the
Security Instrument, other than a Transfer consisting solely of the involuntary
removal or involuntary withdrawal of a general partner in a limited partnership
or a manager in a limited liability company;

 

(iii)               fraud or written material misrepresentation by Borrower or
any officer, director, partner, member or employee of Borrower in connection
with the application for or creation of the Indebtedness or any request for any
action or consent by Lender;

 

(iv)              Borrower or any SPE Equity Owner voluntarily files for
bankruptcy protection under the United States Bankruptcy Code;

 

(v)                Borrower or any SPE Equity Owner voluntarily becomes subject
to any reorganization, receivership, insolvency proceeding, or other similar
proceeding pursuant to any other federal or state law affecting debtor and
creditor rights;

 

(vi)              The Mortgaged Property or any part thereof becomes an asset in
a voluntary bankruptcy or becomes subject to any reorganization, receivership,
insolvency proceeding, or other similar proceeding pursuant to any other federal
or state law affecting debtor and creditor rights;

 

(vii)             an order of relief is entered against Borrower or any SPE
Equity Owner pursuant to the United States Bankruptcy Code or other federal or
state law affecting debtor and creditor rights in any involuntary bankruptcy
proceeding initiated or joined in by a “Related Party;” or

 

(viii)           an involuntary bankruptcy or other involuntary insolvency
proceeding is commenced against Borrower or any SPE Equity Owner (by a party
other than Lender) but only if Borrower or such SPE Equity Owner has failed to
use commercially reasonable efforts to dismiss such proceeding or has consented
to such proceeding.

 

            For purposes of this Section, the term “Related Party” means:

 

(A)       Borrower, any guarantor or any SPE Equity Owner; and

(B)       any Person that holds, directly or indirectly, any ownership interest
in or right to manage Borrower, any guarantor or any SPE Equity Owner, including
without limitation, any shareholder, member or partner of Borrower, any
guarantor or any SPE Equity Owner; and

(C)       any Person in which any ownership interest (direct or indirect) or
right to manage is held by Borrower, any guarantor, any SPE Equity Owner or any
partner, shareholder or member of, or any other Person holding an interest in,
Borrower, any guarantor or any SPE Equity Owner; and

(D)       any other creditor of Borrower that is related by blood, marriage or
adoption to Borrower, any guarantor, any SPE Equity Owner or any partner,
shareholder or member of, or any other Person holding an interest in, Borrower,
any guarantor or any SPE Equity Owner. 

 

            If Borrower, any guarantor, any SPE Equity Owner or any Related
Party has solicited creditors to initiate or participate in any proceeding
referred to in this Section 9, regardless of whether any of the creditors
solicited actually initiates or participates in the proceeding, then such
proceeding shall be considered as having been initiated by a Related Party.

 

            (g)        To the extent that Borrower has personal liability under
this Section 9, Lender may exercise its rights against Borrower personally
without regard to whether Lender has exercised any rights against the Mortgaged
Property or any other security, or pursued any rights against any guarantor, or
pursued any other rights available to Lender under this Note, the Security
Instrument, any other Loan Document or applicable law.  To the fullest extent
permitted by applicable law, in any action to enforce Borrower’s personal
liability under this Section 9, Borrower waives any right to set off the value
of the Mortgaged Property against such personal liability.

 

10.       Voluntary and Involuntary Prepayments During the Prepayment Premium
Period (Section Applies Prior to Securitization and if Loan is Assigned to REMIC
Trust On or After the Cut-off Date). 

 

(a)                This Section 10 shall apply (i) prior to the date that this
Note is assigned to a REMIC trust and (ii) if this Note is assigned to a REMIC
trust on or after the Cut-off Date.  This Section 10 shall be of no effect if
this Note is assigned to a REMIC trust prior to the Cut-off Date.

 

(b)        Any receipt by Lender of principal due under this Note prior to the
Maturity Date, other than principal required to be paid in monthly installments
pursuant to Section 3, constitutes a prepayment of principal under this Note. 
Without limiting the foregoing, any application by Lender, prior to the Maturity
Date, of any proceeds of collateral or other security to the repayment of any
portion of the unpaid principal balance of this Note constitutes a prepayment
under this Note.

 

(c)        During the Prepayment Premium Period, the Borrower may voluntarily
prepay all of the unpaid principal balance of this Note on an Installment Due
Date so long as Borrower designates the date for such prepayment in a Notice
from Borrower to Lender given at least 30 days prior to the date of such
prepayment.  Unless Lender has previously notified Borrower of the expiration of
the Prepayment Premium Period, upon receipt of such Notice from Borrower, Lender
will notify Borrower if the Note has been assigned to a REMIC trust and the
Prepayment Premium Period has expired.  If an Installment Due Date (as defined
in Section 1(a)) falls on a day which is not a Business Day, then with respect
to payments made under this Section 10 only, the term “Installment Due Date”
shall mean the Business Day immediately preceding the scheduled Installment Due
Date.

 

(d)        Notwithstanding Section 10(c) above, Borrower may voluntarily prepay
all of the unpaid principal balance of this Note on a Business Day other than an
Installment Due Date if Borrower provides Lender with the Notice set forth in
Section 10(c) above and meets the other requirements set forth in this
subsection.  Borrower acknowledges that Lender has agreed that Borrower may
prepay principal on a Business Day other than an Installment Due Date only
because Lender shall deem any prepayment received by Lender on any day other
than an Installment Due Date to have been received on the Installment Due Date
immediately following such prepayment and Borrower shall be responsible for all
interest that would have been due if the prepayment had actually been made on
the Installment Due Date immediately following such prepayment.

 

(e)        Unless otherwise expressly provided in the Loan Documents, Borrower
may not voluntarily prepay less than all of the unpaid principal balance of this
Note.  In order to voluntarily prepay all of the principal of this Note,
Borrower must pay to Lender, together with the amount of principal being
prepaid, (i) all accrued and unpaid interest due under this Note, plus (ii) all
other sums due to Lender at the time of such prepayment, plus (iii) any
prepayment premium calculated pursuant to Section 10(f).

 

(f)         Except as provided in Section 10(g) below, a prepayment premium
shall be due and payable by Borrower in connection with any prepayment of
principal under this Note during the Prepayment Premium Period.  The prepayment
premium shall be in the form of U.S. currency.  The prepayment premium shall be
computed as follows: 

 

(i)         For any prepayment made during the Yield Maintenance Period, the
prepayment premium shall be equal to the following:

 

the product obtained by multiplying:

 

(1)        the amount of principal being prepaid or accelerated,

            by

(2)        the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate,

            by

(3)        the Present Value Factor.

 

For purposes of this Section 10(f)(i), the following definitions shall apply:

 

Monthly Note Rate: one-twelfth (1/12) of the Fixed Interest Rate, expressed as a
decimal calculated to five digits.

 

Prepayment Date:  in the case of a voluntary prepayment, the date on which the
prepayment is made; in the case of the application by Lender of collateral or
security to a portion of the principal balance, the date of such application.

 

Assumed Reinvestment Rate:  one-twelfth (1/12) of the yield rate, as of the
close of the trading session which is 5 Business Days before the Prepayment
Date, on the Treasury Security, as reported in The Wall Street Journal,
expressed as a decimal calculated to five digits.  In the event that no yield is
published on the applicable date for the Treasury Security, Lender, in its
discretion, shall select the non-callable Treasury Security maturing in the same
year as the Treasury Security with the lowest yield published in The Wall Street
Journal as of the applicable date.  If the publication of such yield rates in
The Wall Street Journal is discontinued for any reason, Lender shall select a
security with a comparable rate and term to the Treasury Security.  The
selection of an alternate security pursuant to this Section 10 shall be made in
Lender’s discretion.

 

Present Value Factor:  the factor that discounts to present value the costs
resulting to Lender from the difference in interest rates during the months
remaining in the Yield Maintenance Period using the Assumed Reinvestment Rate as
the discount rate, with monthly compounding, expressed numerically as follows:

 

 [1-{1/(1+ARR)}n]/ARR

 

                        n = the number of months remaining in the Yield
Maintenance Period; provided, however, if a prepayment occurs on an Installment
Due Date, then the number of months remaining in the Yield Maintenance Period
shall be calculated beginning with the month in which such prepayment occurs and
if such prepayment occurs on a Business Day other than an Installment Due Date,
then the number of months remaining in the Yield Maintenance Period shall be
calculated beginning with the month immediately following the date of such
prepayment.

                       

                                    ARR = Assumed Reinvestment Rate

 

(ii)        For any prepayment made after the expiration of the Yield
Maintenance Period but during the remainder of the Prepayment Premium Period,
the prepayment premium shall be 1.0% of the amount of principal being prepaid.

           

(g)        Notwithstanding any other provision of this Section 10, no prepayment
premium shall be payable with respect to (i) any prepayment made during the
Window Period, or (ii) any prepayment occurring as a result of the application
of any insurance proceeds or condemnation award under the Security Instrument.

 

(h)        Unless Lender agrees otherwise in writing, a permitted or required
prepayment of less than the unpaid principal balance of this Note shall not
extend or postpone the due date of any subsequent monthly installments or change
the amount of such installments.

 

(i)         Borrower recognizes that any prepayment of any of the unpaid
principal balance of this Note, whether voluntary or involuntary or resulting
from an Event of Default by Borrower, will result in Lender’s incurring loss,
including reinvestment loss, additional expense and frustration or impairment of
Lender’s ability to meet its commitments to third parties.  Borrower agrees to
pay to Lender upon demand damages for the detriment caused by any prepayment,
and agrees that it is extremely difficult and impractical to ascertain the
extent of such damages.  Borrower therefore acknowledges and agrees that the
formula for calculating prepayment premiums set forth in this Note represents a
reasonable estimate of the damages Lender will incur because of a prepayment. 
Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and that the terms
of this Note are in other respects more favorable to Borrower as a result of the
Borrower’s voluntary agreement to the prepayment premium provisions.

 

11.       Voluntary and Involuntary Prepayments During the Lockout Period and
During the Defeasance Period (Section Applies if Loan is Assigned to REMIC Trust
Prior to the Cut-off Date). 

 

(a)        This Section 11 shall apply in the event this Note is assigned to a
REMIC trust prior to the Cut-off Date.  This Section 11 shall be of no effect if
this Note is assigned to a REMIC trust on or after the Cut-off Date.

 

            (b)        Any receipt by Lender of principal due under this Note
prior to the Maturity Date, other than principal required to be paid in monthly
installments pursuant to Section 3, constitutes a prepayment of principal under
this Note.  Without limiting the foregoing, any application by Lender, prior to
the Maturity Date, of any proceeds of collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note
constitutes a prepayment under this Note.

 

(c)        Borrower may not voluntarily prepay any portion of the principal
balance of this Note during the Lockout Period or during the Defeasance Period;
provided, however, any prepayment occurring as a result of the application of
any insurance proceeds or condemnation award under the Security Instrument shall
be permitted during the Lockout Period and during the Defeasance Period.  If any
portion of the principal balance of this Note is prepaid during the Lockout
Period or during the Defeasance Period by reason of the application by Lender of
any proceeds of collateral or other security to any portion of the unpaid
principal balance of this Note or following a determination that the prohibition
on voluntary prepayments during the Lockout Period or during the Defeasance
Period is in contravention of applicable law, then Borrower must also pay to
Lender upon demand by Lender, a prepayment premium equal to five percent (5.0%)
of the amount of principal being prepaid. 

 

(d)        Notwithstanding any other provision of this Section 11, no prepayment
premium shall be payable with respect to (i) any prepayment made during the
Window Period, or (ii) any prepayment occurring as a result of the application
of any insurance proceeds or condemnation award under the Security Instrument.

 

(e)        After the expiration of the Lockout Period and the Defeasance Period,
Borrower may voluntarily prepay all of the unpaid principal balance of this Note
on an Installment Due Date so long as Borrower designates the date for such
prepayment in a Notice from Borrower to Lender given at least 30 days prior to
the date of such prepayment.  If an Installment Due Date (as defined in Section
1(a)) falls on a day which is not a Business Day, then with respect to payments
made under this Section 11 only, the term “Installment Due Date” shall mean the
Business Day immediately preceding the scheduled Installment Due Date.

 

            (f)         Notwithstanding Section 11(e) above, following the end
of the Lockout Period and the Defeasance Period, Borrower may voluntarily prepay
all of the unpaid principal balance of this Note on a Business Day other than an
Installment Due Date if Borrower provides Lender with the Notice set forth in
Section 11(e) and meets the other requirements set forth in this subsection. 
Borrower acknowledges that Lender has agreed that Borrower may prepay principal
on a Business Day other than an Installment Due Date only because Lender shall
deem any prepayment received by Lender on any day other than an Installment Due
Date to have been received on the Installment Due Date immediately following
such prepayment and Borrower shall be responsible for all interest that would
have been due if the prepayment had actually been made on the Installment Due
Date immediately following such prepayment. 

 

            (g)        Unless otherwise expressly provided in the Loan
Documents, Borrower may not voluntarily prepay less than all of the unpaid
principal balance of this Note.  In order to voluntarily prepay all of the
principal of this Note, Borrower must also pay to Lender, together with the
amount of principal being prepaid, (i) all accrued and unpaid interest due under
this Note, plus (ii) all other sums due to Lender at the time of such
prepayment.

 

(h)        Unless Lender agrees otherwise in writing, a permitted or required
prepayment of less than the unpaid principal balance of this Note shall not
extend or postpone the due date of any subsequent monthly installments or change
the amount of such installments.

 

(i)         Borrower recognizes that any prepayment of any of the unpaid
principal balance of this Note, whether voluntary or involuntary or resulting
from an Event of Default by Borrower, will result in Lender’s incurring loss,
including reinvestment loss, additional expense and frustration or impairment of
Lender’s ability to meet its commitments to third parties.  Borrower agrees to
pay to Lender upon demand damages for the detriment caused by any prepayment,
and agrees that it is extremely difficult and impractical to ascertain the
extent of such damages.  Borrower therefore acknowledges and agrees that the
formula for calculating prepayment premiums set forth in Section 11(c) of this
Note represents a reasonable estimate of the damages Lender will incur because
of a prepayment.  Borrower further acknowledges that the lockout and prepayment
premium provisions of this Note are a material part of the consideration for the
Loan, and that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower’s voluntary agreement to the prepayment
premium provisions.

 

(j)                 If, after the expiration of the Lockout Period, the Borrower
defeases the Loan as described in Section 44 of the Security Instrument during
the Defeasance Period, Borrower shall not have the right to voluntarily prepay
any of the principal of this Note at any time. 

 

12.       DEFEASANCE (Section Applies if Loan is Assigned to REMIC Trust Prior
to the Cut-off Date). 

(a)        This Section 12 shall apply in the event this Note is assigned to a
REMIC trust prior to the Cut-off Date.  This Section 12 shall be of no effect if
this Note is assigned to a REMIC trust on or after the Cut-off Date.

 

(b)        Section 5 of this Note is amended by adding a new paragraph at the
end thereof as follows:

If Borrower obtains a release of the Mortgaged Property from the lien of the
Security Instrument pursuant to Section 44 of the Security Instrument, the
Indebtedness shall be secured by the Pledge Agreement and reference shall be
made to the Pledge Agreement for other rights of Lender as to collateral for the
Indebtedness.

 

            (c)        Section 9 of this Note is amended by adding a new
paragraph at the end thereof as follows:

 

If Borrower obtains a release of the Mortgaged Property from the lien of the
Security Instrument pursuant to Section 44 of the Security Instrument, Borrower
shall have no personal liability under this Note or the Pledge Agreement for the
repayment of the Indebtedness or for the performance of any other obligations of
Borrower under this Note or the Pledge Agreement (other than any liability under
Section 18 of the Security Instrument for events that occur prior to the
Defeasance Closing Date, whether discovered before or after the Defeasance
Closing Date), and Lender’s only recourse for the satisfaction of the
Indebtedness and the performance of such obligations shall be Lender’s exercise
of its rights and remedies with respect to the collateral held by Lender under
the Pledge Agreement as security for the Indebtedness.             

 

            (d)        Section 21(a) of this Note is amended by adding a new
paragraph at the end thereof as follows:

 

If Borrower obtains a release of the Mortgaged Property from the lien of the
Security Instrument pursuant to Section 44 of the Security Instrument, all
Notices, demands and other communications required or permitted to be given
pursuant to this Note shall be given in accordance with the Pledge Agreement. 

 

            13.       Costs and Expenses.  To the fullest extent allowed by
applicable law, Borrower shall pay all expenses and costs, including Attorneys’
Fees and Costs incurred by Lender as a result of any default under this Note or
in connection with efforts to collect any amount due under this Note, or to
enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.  Borrower
acknowledges and agrees that, in connection with each request by Borrower under
this Note or any Loan Document, Borrower shall pay all reasonable Attorneys’
Fees and Costs and expenses incurred by Lender, including any fees charged by
the Rating Agencies, regardless of whether the matter is approved, denied or
withdrawn.

 

            14.       Forbearance.  Any forbearance by Lender in exercising any
right or remedy under this Note, the Security Instrument, or any other Loan
Document or otherwise afforded by applicable law, shall not be a waiver of or
preclude the exercise of that or any other right or remedy.  The acceptance by
Lender of any payment after the due date of such payment, or in an amount which
is less than the required payment, shall not be a waiver of Lender’s right to
require prompt payment when due of all other payments or to exercise any right
or remedy with respect to any failure to make prompt payment.  Enforcement by
Lender of any security for Borrower’s obligations under this Note shall not
constitute an election by Lender of remedies so as to preclude the exercise of
any other right or remedy available to Lender.

 

            15.       Waivers.  Borrower and all endorsers and guarantors of
this Note and all other third party obligors waive presentment, demand, notice
of dishonor, protest, notice of acceleration, notice of intent to demand or
accelerate payment or maturity, presentment for payment, notice of nonpayment,
grace, and diligence in collecting the Indebtedness.

 

            16.       Loan Charges.  Neither this Note nor any of the other Loan
Documents shall be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate greater than the
Maximum Interest Rate.  If any applicable law limiting the amount of interest or
other charges permitted to be collected from Borrower in connection with the
Loan is interpreted so that any interest or other charge provided for in any
Loan Document, whether considered separately or together with other charges
provided for in any other Loan Document, violates that law, and Borrower is
entitled to the benefit of that law, that interest or charge is hereby reduced
to the extent necessary to eliminate that violation.  The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid principal balance of this Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
Indebtedness that constitutes interest, as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to be
allocated and spread ratably over the stated term of this Note.  Unless
otherwise required by applicable law, such allocation and spreading shall be
effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of this Note. 

 

            17.       Commercial Purpose.  Borrower represents that Borrower is
incurring the Indebtedness solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family, household, or agricultural
purposes.

 

            18.       Counting of Days.  Except where otherwise specifically
provided, any reference in this Note to a period of “days” means calendar days,
not Business Days.

 

            19.       Governing Law.  This Note shall be governed by the law of
the Property Jurisdiction.

 

            20.       Captions.  The captions of the Sections of this Note are
for convenience only and shall be disregarded in construing this Note.

 

            21.       Notices; Written Modifications.  

 

            (a)        All Notices, demands and other communications required or
permitted to be given pursuant to this Note shall be given in accordance with
Section 31 of the Security Instrument. 

 

            (b)        Any modification or amendment to this Note shall be
ineffective unless in writing signed by the party sought to be charged with such
modification or amendment; provided, however, in the event of a Transfer under
the terms of the Security Instrument that requires Lender’s consent, any or some
or all of the Modifications to Multifamily Note set forth in Exhibit A to this
Note may be modified or rendered void by Lender at Lender’s option, by Notice to
Borrower and the transferee, as a condition of Lender’s consent.

 

            22.       Consent to Jurisdiction and Venue.  Borrower agrees that
any controversy arising under or in relation to this Note may be litigated in
the Property Jurisdiction.  The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have jurisdiction over all
controversies that shall arise under or in relation to this Note.  Borrower
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence or otherwise.  However, nothing in this
Note is intended to limit any right that Lender may have to bring any suit,
action or proceeding relating to matters arising under this Note in any court of
any other jurisdiction.

 

23.       WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

 

            24.       State-Specific Provisions.  N/A

 

 

 

            ATTACHED EXHIBIT.  The Exhibit noted below, if marked with an “X” in
the space provided, is attached to this Note: 

 

            [X]         Exhibit A       Modifications to Multifamily Note

 

 

[DOCUMENT EXECUTION OCCURS ON THE FOLLOWING PAGE]

 

 

            IN WITNESS WHEREOF, and in consideration of the Lender’s agreement
to lend Borrower the principal amount set forth above, Borrower has signed and
delivered this Note under seal or has caused this Note to be signed and
delivered under seal by its duly authorized representative. 

 

AP XII TWIN LAKE TOWERS, LLC

a Delaware limited liability company

 

By:       ANGELES PARTNERS XII

            a California limited partnership

            Sole Member

 

            By:       Angeles Realty Corporation II

                        a California corporation

                        Managing General Partner

 

                       

                        By:       /s/Patti K. Fielding

                                    Patti K. Fielding

                                    Executive Vice President and

                                    Treasurer

 

 

                                                                       

                                               

EXHIBIT A

 

MODIFICATIONS TO MULTIFAMILY NOTE

 

The following modifications are made to the text of the Note that precedes this
Exhibit.

 

1.         Section 1(a) is modified to delete the definition of “Lockout Period”
in its entirety and insert the following in its place:

 

“Lockout Period” means the period beginning on the day that this Note is
assigned to a REMIC trust until and including the earlier of either (i) the
Defeasance Date or (ii) the fourth (4th) anniversary of the date of this Note. 
The Lockout Period only applies if this Note is assigned to a REMIC trust prior
to the Cut-off Date.

 

2.         Section 9(f) is modified to delete clauses (v), (vi), and (vii) and
replace them with the following:

‎

(v)                Borrower or any SPE Equity Owner voluntarily becomes subject
to any reorganization, receivership, insolvency, or other similar proceeding
pursuant to any federal non-bankruptcy law or state law affecting debtor and
creditor rights;

 

(vi)‎       The Mortgaged Property or any part thereof becomes an asset in a
voluntary proceeding under the United States Bankruptcy Code or becomes subject
to any voluntary or involuntary reorganization, receivership, insolvency
proceeding, or other similar proceeding pursuant to any other federal law or
state law affecting debtor and creditor rights  however, with respect to any
such involuntary proceedings. only if Borrower has failed to use commercially
reasonable efforts to dismiss any such proceeding or has consented to such
proceeding; 

 

(vii)             an order for relief is entered against Borrower or any SPE
Equity Owner pursuant to the United States Bankruptcy Code or other federal law
or state law affecting debtor and creditor rights in any involuntary bankruptcy
proceeding initiated or joined in by a “Related Party”; or

 

3.         Section 9(f) is modified to replace clause (D) of the definition of
the term “Related Party” with the following:

 

(D)       any creditor of Borrower that is a member of the immediate family
(which for purposes hereof shall mean solely a parent, sibling, child or
spouse), by blood, marriage or adoption, of Borrower, any guarantor, any SPE
Equity Owner or any partner, shareholder or member of, or any other Person
holding an interest in, Borrower, any guarantor or any SPE Equity Owner

 

4.         Section 9(f) is modified to add the following unnumbered sentence at
the end of the term “Related Party”:

 

For purposes of the preceding clauses (B) or (C), no Person shall be considered
a Related Party on the basis of the provisions thereof unless such Person holds
a Controlling Interest or has more than a 11% equity interest in the applicable
entity. 

 

5.         The last paragraph of Section 9(f) is deleted and replaced with the
following:

If Borrower, any guarantor, any SPE Equity Owner or any other Related Party has
solicited creditors to initiate or participate in support of initiating or not
dismissing any proceeding referred to in this Section 9, regardless of whether
any of the creditors solicited actually initiates or participates in support of
initiating or not dismissing the proceeding, then such proceeding shall be
considered as having been initiated by a Related Party.

6.         Section 10(a) is modified to add the following at the end thereof:

If this Note is partially assigned to a REMIC trust prior to the Cut-off Date,
Section 11 hereof shall apply with respect to the portion of this Note that is
so assigned prior to the Cut-off Date, and any portion of this Note that is not
assigned to a REMIC trust prior to the Cut-off Date shall be governed by this
Section 10. 

 

7.         Section 11(a) is modified to add the following at the end thereof:

If this Note is partially assigned to a REMIC trust prior to the Cut-off Date,
this Section 11 shall apply with respect to the portion of this Note that is so
assigned prior to the Cut-off Date, and any portion of this Note that is not
assigned to a REMIC trust prior to the Cut-off Date shall be governed by Section
10 hereof. 

 

8.         Section 9(c) is hereby modified to add the following new subsection
(vi):

 

(vi)       The Declaration of Easements and Agreement for Maintenance dated May
1, 1986 and recorded in the land records of DuPage County, Illinois as
instrument number R86-68461 ("Declaration") not having been terminated and a
release recorded in the land records of DuPage County, Illinois.

 

9.         Section 9(c) is hereby modified add the following new subsection
(vii):

 

(vii)      A casualty occurs resulting in damage to the Mortgaged Property, as a
result of which, the Mortgaged Property, due to its legal non-conforming zoning
status, cannot be rebuilt in whole or in part, and proceeds from Hazard
Insurance available to Lender under the terms of the Security Instrument are not
sufficient to repay the Indebtedness.

 

10.       Section 9(d)(i) is hereby deleted in its entirety and replaced with
the following:

 

(i)                  the performance of all of Borrower’s obligations under
Section 18 of the Security Instrument (relating to environmental matters) and
under Section 17 of the Security Instrument relating to galvanized steel
piping/polybutylene piping; as well as for any costs, loss or damage incurred or
suffered by Lender as a result of the existence at the Mortgaged Property of
galvanized steel piping/polybutylene piping, such loss or damage to include the
cost of replacing all such piping and the cost of repairing any damage
associated with the leaks in or other failure of any galvanized steel
piping/polybutylene piping;”

FHLMC Loan No. 534382037

 

ENDORSEMENT

 

TO MULTIFAMILY NOTE

 

Dated as of March 25, 2010,

 

Given by

 

AP XII TWIN LAKE TOWERS, LLC, a Delaware limited liability company,

 

to

 

KEYCORP REAL ESTATE CAPITAL MARKETS, INC.,

an Ohio corporation,

 

in the original principal amount of $27,000,000.00

 

 

          Pay to the order of FEDERAL HOME LOAN MORTGAGE CORPORATION, without
recourse.

 

KEYCORP REAL ESTATE CAPITAL

MARKETS, INC.

an Ohio corporation

 

 

By:       /s/Crystal L. Williams

            Crystal L. Williams

            Vice President

 

 

Date: as of March 25, 2010