Exhibit 10.1

EXECUTION VERSION

MASTER CREDIT FACILITY AGREEMENT

BY AND BETWEEN

BORROWERS SIGNATORY HERETO

AND

DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.

dated as of

April 7, 2009

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TABLE OF CONTENTS

 

          Page

ARTICLE 1 THE FIXED FACILITY COMMITMENT

   2

Section 1.01.

   The Fixed Facility Commitment    2

Section 1.02.

   [Reserved.]    3

Section 1.03.

   Maturity Date of Fixed Advances; Amortization; Prepayment    3

Section 1.04.

   Interest on Advances    4

Section 1.05.

   Notes    4

Section 1.06.

   Limitation on All Advances    4

ARTICLE 2 THE ADVANCES

   5

Section 2.01.

   [Reserved.]    5

Section 2.02.

   ERL; Breakage and Other Costs    5

Section 2.03.

   Advances    5

Section 2.04.

   Determination of Allocable Facility Amount and Valuations    6

Section 2.05.

   Additional Financing    7

Section 2.06.

   Increase in Fixed Facility Commitment    7

ARTICLE 3 COLLATERAL CHANGES

   7

Section 3.01.

   [Reserved.]    7

Section 3.02.

   [Reserved.]    7

Section 3.03.

   Right to Obtain Releases of Collateral    7

Section 3.04.

   Procedure for Obtaining Releases of Collateral    7

Section 3.05.

   Substitutions    10

ARTICLE 4 TERMINATION OF FACILITIES

   13

Section 4.01.

   Right to Terminate Credit Facility    13

Section 4.02.

   Procedure for Terminating Credit Facility    13

ARTICLE 5 CONDITIONS PRECEDENT TO ALL REQUESTS

   14

Section 5.01.

   Conditions Applicable to All Requests    14

Section 5.02.

   Conditions Precedent to Initial Advance    16

Section 5.03.

   Conditions Precedent to the Future Advance    16

Section 5.04.

   [Reserved.]    17

Section 5.05.

   Conditions Precedent to Release of Mortgaged Property from the Collateral
Pool    17

Section 5.06.

   Conditions Precedent to Substitution of a Substitute Mortgaged Property into
the Collateral Pool    18

 

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Section 5.07.

   Conditions Precedent to Termination of Credit Facility    19

Section 5.08.

   Opinion Relating to Initial Advance or Substitution Request    19

Section 5.09.

   Delivery of Property-Related Documents    20

Section 5.10.

   Conditions Precedent to Letters of Credit    21

ARTICLE 6 REPRESENTATIONS AND WARRANTIES

   22

Section 6.01.

   Representations and Warranties of Borrower Parties    22

Section 6.02.

   Representations and Warranties of Lender    23

ARTICLE 7 AFFIRMATIVE COVENANTS OF BORROWER

   23

Section 7.01.

   Compliance with Agreements    23

Section 7.02.

   Maintenance of Existence    23

Section 7.03.

   Maintenance of REIT Status    23

Section 7.04.

   Financial Statements; Accountants’ Reports; Other Information    24

Section 7.05.

   Confidentiality of Certain Information    26

Section 7.06.

   Access to Records; Discussions With Officers and Accountants    26

Section 7.07.

   Certificate of Compliance    27

Section 7.08.

   Maintain Licenses    27

Section 7.09.

   Inform Lender of Material Events    27

Section 7.10.

   Compliance with Applicable Laws    28

Section 7.11.

   Alterations to the Mortgaged Properties    28

Section 7.12.

   Loan Document Taxes    29

Section 7.13.

   Further Assurances    30

Section 7.14.

   Transfer of Ownership Interests in Borrower and Guarantor    30

Section 7.15.

   Transfer of Ownership of Mortgaged Property    33

Section 7.16.

   Change in Senior Management    36

Section 7.17.

   Date-Down Endorsements    36

Section 7.18.

   Ownership of Mortgaged Properties    36

Section 7.19.

   Change in Property Manager    36

Section 7.20.

   Term of BRE Property Investors LLC    36

Section 7.21.

   ROFO on Arizona Properties    37

ARTICLE 8 FINANCIAL COVENANTS

   37

Section 8.01.

   Cash on Hand    37

Section 8.02.

   Net Worth    37

ARTICLE 9 NEGATIVE COVENANTS OF BORROWER AND GUARANTOR

   38

Section 9.01.

   Other Activities    38

Section 9.02.

   Liens    38

Section 9.03.

   Indebtedness    38

Section 9.04.

   Principal Place of Business    39

Section 9.05.

   Condominiums    39

Section 9.06.

   Restrictions on Distributions    39

 

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Section 9.07.

   Conduct of Business    39

Section 9.08.

   Ownership of Property    39

ARTICLE 10 FEES

   39

Section 10.01.

   Origination Fee    39

Section 10.02.

   Due Diligence Fees    40

Section 10.03.

   Legal Fees and Expenses    40

Section 10.04.

   Failure to Close any Request    41

ARTICLE 11 EVENTS OF DEFAULT

   41

Section 11.01.

   Events of Default    41

ARTICLE 12 REMEDIES

   43

Section 12.01.

   Remedies; Waivers    43

Section 12.02.

   Waivers; Rescission of Declaration    44

Section 12.03.

   Lender’s Right to Protect Collateral and Perform Covenants and Other
Obligations    44

Section 12.04.

   No Remedy Exclusive    45

Section 12.05.

   No Waiver    45

Section 12.06.

   No Notice    45

ARTICLE 13 INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES

   45

Section 13.01.

   Insurance and Real Estate Taxes    45

Section 13.02.

   Replacement Reserves    45

ARTICLE 14 LIMITS ON PERSONAL LIABILITY

   46

Section 14.01.

   Personal Liability to Borrower    46

Section 14.02.

   Additional Borrowers    47

Section 14.03.

   Borrower Agency Provisions    48

Section 14.04.

   Waivers With Respect to Other Borrower Secured Obligation (for Mortgaged
Properties located in California)    48

Section 14.05.

   Joint and Several Obligation; Cross-Guaranty    52

Section 14.06.

   No Impairment    52

Section 14.07.

   Election of Remedies    53

Section 14.08.

   Subordination of Other Obligations    53

Section 14.09.

   Insolvency and Liability of Other Borrower    54

Section 14.10.

   Preferences, Fraudulent Conveyances, Etc.    55

Section 14.11.

   Maximum Liability of Each Borrower    55

Section 14.12.

   Liability Cumulative    56

 

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ARTICLE 15 MISCELLANEOUS PROVISIONS

   56

Section 15.01.

   Counterparts    56

Section 15.02.

   Amendments, Changes and Modifications    56

Section 15.03.

   Payment of Costs, Fees and Expenses    56

Section 15.04.

   Payment Procedure    57

Section 15.05.

   Payments on Business Days    57

Section 15.06.

   Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial    57

Section 15.07.

   Severability    59

Section 15.08.

   Notices    59

Section 15.09.

   Further Assurances and Corrective Instruments    61

Section 15.10.

   Term of this Agreement    61

Section 15.11.

   Assignments; Third-Party Rights    61

Section 15.12.

   Headings    62

Section 15.13.

   General Interpretive Principles    62

Section 15.14.

   Interpretation    62

Section 15.15.

   Standards for Decisions, Etc.    62

Section 15.16.

   Decisions in Writing    63

Section 15.17.

   Approval of Waivers    63

Section 15.18.

   USA Patriot Act    63

Section 15.19.

   All Asset Filings    63

Section 15.20.

   Recitals    63

 

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EXHIBITS

 

EXHIBIT A    Schedule of Initial Mortgaged Properties and Initial Valuations
EXHIBIT B-1    Fixed Facility Note (Standard Maturity) EXHIBIT B-2    Fixed
Facility Note (Fixed+1 Maturity) EXHIBIT C-1    Guaranty EXHIBIT C-2   
Confirmation of Guaranty EXHIBIT D    Compliance Certificate EXHIBIT E-1   
Organizational Certificate (Borrower) EXHIBIT E-2    Organizational Certificate
(Guarantor) EXHIBIT F    Certificate of Borrower Parties EXHIBIT G    Request
(Release/Substitution) EXHIBIT H    Confirmation of Obligations EXHIBIT I   
Credit Facility Termination Request EXHIBIT J    Form of Letter of Credit
EXHIBIT K    Arizona ROFO APPENDIX I    Definitions

 

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MASTER CREDIT FACILITY AGREEMENT

THIS MASTER CREDIT FACILITY AGREEMENT (this “Agreement”) is made as of the 7th
day of April, 2009, by and among (i) (a) BRE-FMCA, LLC, a Delaware limited
liability company, (b) BRE-FMAZ, LLC, a Delaware limited liability company, and
(c) such Additional Borrowers as may from time to time become borrowers under
this Agreement (individually and collectively, “Borrower”), (ii) BRE PROPERTIES,
INC., a Maryland corporation (“Guarantor”), and (iii) DEUTSCHE BANK BERKSHIRE
MORTGAGE, INC., a Delaware corporation (“Lender”).

RECITALS

A. Borrower owns one (1) or more Multifamily Residential Properties (unless
otherwise defined or the context clearly indicates otherwise, capitalized terms
shall have the meanings ascribed to such terms in Appendix I of this Agreement)
as more particularly described in Exhibit A to this Agreement.

B. Borrower has requested that Lender establish a Credit Facility in favor of
Borrower which shall be in the maximum amount of $620,000,000, as determined by
Lender pursuant to the terms of Section 1.01 of this Agreement.

C. To secure the obligations of Borrower under this Agreement and the other Loan
Documents issued in connection with the Credit Facility, Borrower shall create a
Collateral Pool in favor of Lender. The Collateral Pool shall be comprised of
(i) certain Multifamily Residential Properties owned by Borrower or any
Additional Borrower and (ii) any other collateral pledged to Lender from time to
time by any Borrower or Additional Borrower pursuant to this Agreement or any
other Loan Documents. As of the Initial Closing Date, the Collateral Pool shall
consist of the Mortgaged Properties listed on Exhibit A.

D. Each Note and Security Document shall be cross-defaulted (i.e., a default
under any Note, Security Document, or under this Agreement, shall constitute a
default under each Note, Security Document, and this Agreement) and
cross-collateralized (i.e., each Security Instrument shall secure all of
Borrower’s obligations under this Agreement and the other Loan Documents) and it
is the intent of the parties to this Agreement that Lender may accelerate any
Note without the obligation, but the right to accelerate any other Note and that
in the exercise of its rights and remedies under the Loan Documents, Lender may,
except as provided in this Agreement, exercise and perfect any and all of its
rights in and under the Loan Documents with regard to any Mortgaged Property
without the obligation (but with the right) to exercise and perfect its rights
and remedies with respect to any other Mortgaged Property and that any such
exercise shall be without regard to the Allocable Facility Amount assigned to
such Mortgaged Property and that Lender may recover an amount equal to the full
amount Outstanding in respect of any of the Notes in connection with such
exercise and any such amount shall be applied to the Obligations as determined
by Lender in its sole and absolute discretion.

E. Subject to the terms, conditions and limitations of this Agreement, Lender
has agreed to establish the Credit Facility.

 

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NOW, THEREFORE, Borrower and Lender, in consideration of the mutual promises and
agreements contained in this Agreement, hereby agree as follows:

ARTICLE 1

THE FIXED FACILITY COMMITMENT

Section 1.01. The Fixed Facility Commitment.

Subject to the terms, conditions and limitations of this Agreement:

(a) Fixed Facility Commitment Amount; No Increase. The amount of the Fixed
Facility Commitment shall be in an amount not to exceed $620,000,000. The
maximum amount of the Fixed Facility Commitment shall be determined by Lender
based on the Net Operating Income of the Mortgaged Properties in effect as of
the Initial Closing Date and the U.S. Treasury Index Rate for securities having
a maturity substantially similar to the maturity of the Fixed Advances. Once
determined, Borrower shall have no right to increase the amount of the Fixed
Facility Commitment. As of the Initial Closing Date, the amount advanced under
the Fixed Facility Commitment is $310,000,000.

(b) Future Advance Drawn from Fixed Facility Commitment. Subject to the terms
and conditions of this Agreement, including without limitation Section 1.01(c),
Section 1.06, Section 2.02 and Article 5, Borrower agrees that the remainder of
the Fixed Facility Commitment not advanced on the Initial Closing Date,
$310,000,000 shall be drawn on or before the Future Advance Expiration Date as a
Fixed Advance. The aggregate original principal amount of the Fixed Advances
Outstanding shall not exceed the Fixed Facility Commitment. The repayment, in
whole or in part, of a Fixed Advance shall permanently reduce the Fixed Facility
Commitment by the original principal amount of such Fixed Advance. Borrower may
not re-borrow any part of any Advance which it has previously borrowed and
repaid. Subject to the terms of Section 2.05, no Advance shall be made as a
result of increases in the Debt Service Coverage Ratio or decreases in the Loan
to Value Ratio of any Mortgaged Property.

(c) Failure to Rate Lock or Draw Full Amount of Future Advance. Failure by
Borrower to rate lock the Future Advance by the Rate Lock Deadline or failure by
Borrower to draw the Future Advance by the Future Advance Expiration Date shall
result in the following:

(i) if Borrower rate locks and/or draws $310,000,000 or less (including the
Initial Advance by the Rate Lock Deadline or Future Advance Expiration Date, as
applicable), the interest rate for the Initial Advance and the Future Advance
shall be increased by fifteen basis points (0.15%) per annum;

(ii) if Borrower rate locks and/or draws more than $310,000,000 but less than
$465,000,000 (including the Initial Advance by the Rate Lock Deadline or Future
Advance Expiration Date, as applicable), the interest rate for the Initial
Advance and Future Advance shall be increased by ten basis points (0.10%) per
annum (There shall be no increase to the interest rate if Borrower draws at
least $465,000,000 (including the Initial Advance).);

 

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(iii) a permanent and automatic reduction of the Fixed Facility Commitment by
the amount of the Future Advance or portion thereof not drawn by Borrower;

(iv) Borrower shall be liable for breakage and other costs in accordance with
Section 2.02; and

(v) Borrower shall be subject to the provisions of Section 3.04(g).

Section 1.02. [Reserved.]

Section 1.03. Maturity Date of Fixed Advances; Amortization; Prepayment.

(a) Maturity Date. The maturity date of any Fixed Advance shall be specified by
Borrower for such Fixed Advance, provided that such maturity date shall be no
earlier than the date that is the first day of the month following the date five
(5) years after the Closing Date of such Fixed Advance and not later than the
first day of the month following the date eleven (11) years after the Closing
Date of such Fixed Advance, provided that the maturity date of any Fixed Advance
shall not be later than the first day of the month following the date twelve
(12) years after the Initial Closing Date.

(b) Interest Only; Amortization of Fixed Advances. Amortization and interest
only payments for Fixed Advances shall be as follows:

(i) for a total term of less than seven (7) years, all payments shall include
amortization;

(ii) for a total term equal to or greater than seven (7) years but less than ten
(10) years, the first three (3) years shall be interest only payments and the
remainder of the term of the Fixed Advance shall include amortization; and

(iii) for a total term of ten (10) years or more, the first five (5) years shall
be interest only payments and the remainder of the term shall include
amortization.

All references to amortization in this Section 1.03(b) shall mean an amount
necessary to fully amortize the original principal amount of the Fixed Advance
over the Amortization Period.

(c) Prepayment. Subject to the terms and conditions of Section 3.04(d), Borrower
may prepay all or a portion of any Fixed Advance pursuant to the prepayment
provisions of the Fixed Facility Note. Any repaid Fixed Advances shall
automatically result in a permanent reduction of the Fixed Facility Commitment.

(d) Fixed Advance Executions. At such time as Borrower rate locks any Fixed
Advance, Borrower shall select either:

(i) a Fixed Advance with a fixed rate term that matures not earlier than the
date that is the first day of the month following the date five (5) years after
the Closing Date of such Fixed Advance, and not later than the date that is the
first day of the month following the

 

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date ten (10) years after the Closing Date of such Fixed Advance, provided that
no final maturity date of any Fixed Advance shall be later than the date that is
the first day of the month following the date eleven (11) years after the
Initial Closing Date (the “Fixed Standard Yield Maintenance Maturity Option”) as
more specifically set forth in the Fixed Facility Note, the form of which is
attached as Exhibit B-1 to this Agreement, or

(ii) a Fixed Advance with an initial fixed rate term with an initial maturity
date that is not earlier than the first day of the month following the date five
(5) years after the Closing Date and not later than the first day of the month
following the date that is ten (10) years after the Closing Date which initial
maturity date is automatically followed by a 1-year adjustable rate term, such
that the Fixed Advance has a final maturity date that is not earlier than the
first day of the month following the date six (6) years and not later than the
first day of the month following the date that is eleven (11) years after the
Closing Date of such Fixed Advance, provided that no final maturity date of any
Fixed Advance shall be later than the date that is the first day of the month
following the date twelve (12) years after the Initial Closing Date (the
“Fixed+1 Maturity Option”) as more specifically set forth in the Fixed Facility
Note, the form of which is attached as Exhibit B-2 to this Agreement.

Section 1.04. Interest on Advances.

(a) Partial Month Interest. Notwithstanding anything to the contrary in this
Section 1.04(a), if a Fixed Advance is not made on the first day of a calendar
month, Borrower shall pay interest on the original stated principal amount of
such Advance for the partial month period commencing on the Closing Date for
such Advance and ending on the last day of the calendar month in which the
Closing Date occurs. Borrower shall pay interest for such partial month on any
such Advance at a rate per annum equal to the interest rate described in the
applicable Note.

(b) Annual Interest Rate. The interest rate for the Initial Advance shall be
five and fifty-seven one hundredths percent (5.57%) per annum. The interest rate
for the Future Advance shall be five and sixty-nine one hundredths percent
(5.69%) per annum.

Section 1.05. Notes.

The obligation of Borrower to repay each Fixed Advance shall be evidenced by a
separate Fixed Facility Note. Each Fixed Facility Note shall be payable to the
order of Lender and shall be made in the original principal amount of such Fixed
Advance.

Section 1.06. Limitation on All Advances.

Notwithstanding anything in this Agreement or any other Loan Document to the
contrary, the Future Advance (if the Future Advance is not rate locked on or
before the Rate Lock Deadline Date) and any Additional Loans shall be subject to
the precondition that Lender must confirm with Fannie Mae that Fannie Mae is
generally offering to purchase in the marketplace Advances of the execution type
requested by Borrower at the time of the request and at the time of the rate
setting date for the requested Advance. In the event Fannie Mae is not
purchasing Advances of the type requested by Borrower, Lender agrees to offer,
to the extent available from Fannie Mae, alternative Advance executions based on
the types of executions Fannie Mae is

 

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generally offering to purchase in the marketplace at that time. Any alternative
execution offered would be subject to mutually agreeable documentation necessary
to implement the terms and conditions of such alternative execution.

ARTICLE 2

THE ADVANCES

Section 2.01. [Reserved.]

Section 2.02. ERL and Rate Lock Agreement.

(a) ERL Commitment. As of the Initial Closing Date, Guarantor has rate locked
the Future Advance pursuant to the terms of Fannie Mae’s “Early Rate Lock”
program as evidenced by that certain Rate Lock Agreement and Certification dated
as of March 27, 2009 (the “Rate Lock Agreement”). In connection with the Future
Advance and the Rate Lock Agreement, Lender has, at the request of Guarantor,
entered into a rate lock agreement with Fannie Mae (the “ERL Commitment”) to
sell to Fannie Mae the Future Advance originated by Lender under this Agreement
pursuant to the ERL Commitment, at the rate specified therein (the “Locked
Interest Rate”). The ERL Commitment entered into between Fannie Mae and Lender
allows Guarantor and Borrower to (i) lock the interest rate on the entire Future
Advance at the Locked Interest Rate, and (ii) close the Future Advance no later
than the Future Advance Expiration Date pursuant to the terms of the Rate Lock
Agreement and this Agreement. If Borrower fails to draw at least $465,000,000
(including the Initial Advance) on the terms and conditions contained in this
Agreement and the Rate Lock Agreement by the Future Advance Expiration Date,
Borrower and Guarantor shall be subject to the provisions of the Rate Lock
Agreement and the provisions set forth in Section 1.01(c) and Section 3.04(g)
hereof. Guarantor shall continue to be subject to all terms, conditions and
obligations set forth in the Rate Lock Agreement as provided therein. Borrower
and Guarantor agree that all Mortgaged Properties and the Collateral under this
Agreement shall also secure all of Guarantor’s obligations under the Rate Lock
Agreement. In the event of any express conflict between the terms of the Rate
Lock Agreement and this Agreement, the terms of this Agreement shall prevail,
except to the extent of Sections 4 and 5 of the Rate Lock Agreement, which
Sections shall control regardless of any provision to the contrary contained in
this Agreement.

(b) Right to Terminate ERL. Upon the occurrence of an Event of Default, Fannie
Mae shall have the right, in its sole discretion, to terminate the ERL
Commitment upon written notice to Borrower and Guarantor. Upon any termination
of the ERL Commitment due to an Event of Default, Guarantor shall be liable to
Lender (or to Fannie Mae, as assignee of Lender) pursuant to the terms of the
Rate Lock Agreement. Nothing herein shall affect in any manner any other rights
and remedies of Fannie Mae or Lender under this Agreement.

Section 2.03. Advances.

(a) Initial Advance. In connection with the Initial Advance if all conditions
precedent contained in Section 5.02 and the General Conditions contained in
Section 5.01 are satisfied on or before the Initial Closing Date for the Initial
Advance, Lender shall make the Initial Advance on the Initial Closing Date or on
such other date as Borrower and Lender may agree.

 

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(b) Future Advance. If all conditions precedent contained in Section 5.03 and
the General Conditions contained in Section 5.01 are satisfied, Lender shall
make the Future Advance, at a closing to be held at offices reasonably
designated by Lender on a Closing Date reasonably selected by Lender, but no
later than the Future Advance Expiration Date.

Section 2.04. Determination of Allocable Facility Amount and Valuations.

(a) Initial Determinations. On the Initial Closing Date, Lender shall determine
(i) the Allocable Facility Amount and Valuation for each Initial Mortgaged
Property, (ii) the Aggregate Debt Service Coverage Ratio and the Aggregate Loan
to Value Ratio, and (iii) the Advance Amount. The determinations made as of the
Initial Closing Date shall remain unchanged until the First Anniversary. Changes
in the Allocable Facility Amount, Valuations, the Aggregate Debt Service
Coverage Ratio and the Aggregate Loan to Value Ratio shall be made pursuant to
Section 2.04(b).

(b) Monitoring Determinations. Once each Calendar Quarter, or, if the Collateral
Pool has an Aggregate Debt Service Coverage Ratio equal to or greater than
1.25:1.0, once each Calendar Year, within twenty (20) Business Days after
Borrower has delivered to Lender the reports required in Section 7.04, Lender
shall determine the Aggregate Debt Service Coverage Ratio and the Aggregate Loan
to Value Ratio, the Valuations and the Allocable Facility Amounts and whether
Borrower is in compliance with the other covenants set forth in the Loan
Documents. After the First Anniversary, Lender shall redetermine Allocable
Facility Amounts and Valuations (i) quarterly, or (ii) if the Collateral Pool
has an Aggregate Debt Service Coverage Ratio equal to or greater than 1.25:1.0,
annually, or (iii) at such other time if Lender reasonably determines that
changed market or property conditions warrant. Lender shall also redetermine
Allocable Facility Amounts to take account of any release or substitution of
Collateral or other event that invalidates the outstanding determinations.
Notwithstanding the provisions of this Section 2.04, for purposes of reviewing
proposed Substitute Mortgaged Properties, if Lender reasonably determines market
conditions have changed in a manner adversely affecting any of the Mortgaged
Properties since the determination of the Allocable Facility Amounts, Lender may
make new determinations of Allocable Facility Amounts for purposes of
determining the Loan to Value Ratio and Debt Service Coverage Ratio of the
Release Mortgaged Property. In determining Valuations, Lender shall use Cap
Rates in its reasonable discretion based on its internal survey and analysis of
Cap Rates for comparable sales in the vicinity of the Mortgaged Property, with
such adjustments as Lender reasonably deems appropriate. If Lender is unable to
determine a Cap Rate for a Mortgaged Property, Lender shall have the right, not
more than once annually, to obtain, at Borrower’s expense, a third-party market
study in order to establish a Cap Rate. Lender shall promptly disclose its
determinations to Borrower. Until redetermined, the outstanding Allocable
Facility Amounts and Valuations determined by Lender shall remain in effect.
Notwithstanding anything in this Agreement to the contrary, no change in
Allocable Facility Amounts, Valuations, the Aggregate Loan to Value Ratio or the
Aggregate Debt Service Coverage Ratio shall, (A) result in a Potential Event of
Default or Event of Default, or (B) require the prepayment of any Advances.

 

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Section 2.05. Additional Financing.

During the period beginning on the First Anniversary and ending on the date five
(5) years prior to the Termination Date, not more than one (1) time per year and
not more than two (2) total times during such period, Borrower may request
additional financing with a fixed or variable interest rate without adding any
additional Mortgaged Properties to the Collateral Pool (each such loan, an
“Additional Loan”). Any such Additional Loan will be made in Lender and Fannie
Mae’s sole discretion and subject to all of Fannie Mae’s requirements and
guidelines in effect at the time of the request. Once made, any Additional Loan
will be deemed an advance hereunder and subject to this Agreement and shall be
secured by the Mortgaged Properties. Borrower agrees to pay any and all fees
that may be charged by Lender in connection with an Additional Loan.

Section 2.06. Increase in Fixed Facility Commitment.

Subject to the provisions of Section 2.05, Borrower shall have no right under
this Agreement to increase the Fixed Facility Commitment.

ARTICLE 3

COLLATERAL CHANGES

Section 3.01. [Reserved.]

Section 3.02. [Reserved.]

Section 3.03. Right to Obtain Releases of Collateral.

Subject to the terms and conditions of this Article 3 in connection with a
repayment or prepayment of a Note, or a Release of a Mortgaged Property pursuant
to Section 3.04, or a Substitution pursuant to Section 3.05, Borrower shall have
the right from time to time to obtain a release of a Mortgaged Property from the
Collateral Pool.

Section 3.04. Procedure for Obtaining Releases of Collateral.

(a) Request. To obtain a release of a Mortgaged Property from the Collateral
Pool (a “Release”), Borrower shall deliver a Release Request to Lender. The
delivery of the Release Request itself shall not result in a termination of all
or any part of the Credit Facility; however, any prepayments associated with
such Release shall automatically result in a permanent reduction of the Fixed
Facility Commitment by the amount of such prepayments, which repaid amount shall
not be available to be re-borrowed.

(b) Conditions Precedent; Closing. As a condition precedent to the release of a
Release Mortgaged Property, the Aggregate Loan to Value Ratio and Aggregate Debt
Service Coverage Ratio for the proposed resulting Collateral Pool must satisfy
the following conditions:

(i) from the Initial Closing Date until the day immediately prior to the Third
Anniversary, the Aggregate Loan to Value Ratio and Aggregate Debt Service
Coverage Ratio of the resulting Collateral Pool shall satisfy the Coverage and
LTV Tests;

 

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(ii) from the Third Anniversary to the day immediately prior to the Sixth
Anniversary, the Aggregate Loan to Value Ratio of the resulting Collateral Pool
shall be no greater than seventy percent (70%) and the Aggregate Debt Service
Coverage Ratio of the resulting Collateral Pool shall be no less than 1.30:1.0;
and

(iii) from the Sixth Anniversary until the Termination Date, the Aggregate Loan
to Value Ratio of the resulting Collateral Pool shall be no greater than
sixty-five percent (65%) and the Aggregate Debt Service Coverage Ratio of the
resulting Collateral Pool shall be no less than 1.35:1.0.

(iv) If Lender determines that all conditions precedent are satisfied, including
without limitation those in Section 5.01 and Section 5.05, Lender shall cause
the Release Mortgaged Property to be released, at a closing to be held at
offices designated by Lender on a Closing Date selected by Lender, and occurring
within thirty (30) days after Lender’s receipt of the Release Request (or on
such other date as Borrower and Lender may agree), by executing and delivering,
and causing all applicable parties to execute and deliver, all at the sole cost
and expense of Borrower, the Release Documents. At Lender’s option, Borrower
shall prepare the Release Documents and submit them to Lender for its review.

(c) Release Price. Subject to the terms of this Section 3.04(c), the “Release
Price” for each Release Mortgaged Property means the greater of:

(i) one hundred percent (100%) of the Allocable Facility Amount for the Release
Mortgaged Property; or

(ii) one hundred percent (100%) of the amount of Advances Outstanding that are
required to be repaid by Borrower to Lender in connection with the proposed
release of the Release Mortgaged Property from the Collateral Pool so that,
immediately after the release the conditions precedent of Section 3.04(b)
regarding Aggregate Loan to Value Ratio and Aggregate Debt Service Coverage
Ratio are satisfied.

In addition to the Release Price, Borrower shall pay to Lender all associated
prepayment premiums, accrued interest and other amounts due under the Notes
evidencing the Advances being repaid to and including the date such Advance may
be repaid.

(d) Application of Release Price.

(i) The Release Price for the Release Mortgaged Property shall be applied
against Outstanding Advances in the order selected by Borrower, provided that
(A) any Outstanding Advance which Borrower elects to prepay must be the only
Advance partially prepaid or must be prepaid in full or, if the Release Price is
not sufficient to do so, must be the only Advance partially prepaid; (B) such
prepayment is permitted (for example, not subject to a lock out period) under
the applicable Note; (C) any prepayment premium due and owing is paid; and
(D) interest must be paid through the end of the month.

 

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(ii) In the event Borrower desires to release a Release Mortgaged Property on a
date other than the last day of the month, or in the event that no Outstanding
Advances may be prepaid under the terms of the applicable Note (for example, due
to a lock out period), the Release Price or the remainder of the Release Price,
if any, shall be held by Lender (or its appointed collateral agent) as
substitute Collateral (“Substitute Cash Collateral”), in accordance with a
security agreement (if required by Lender) and other documents in form and
substance acceptable to Lender. Notwithstanding the foregoing, the release of
the Release Mortgaged Property may not be approved unless the aggregate
Valuation of all Mortgaged Properties remaining in the Collateral Pool is
greater than Outstanding Advances. Any Substitute Cash Collateral shall be used
to prepay the applicable Advance once such prepayment is permitted.

(e) Release of Borrower. Upon the Release of a Mortgaged Property, Borrower that
owns such Release Mortgaged Property shall automatically without further action
be released from its obligations under this Agreement and the other Loan
Documents with respect to the Release Mortgaged Property only except for (i) any
liabilities or obligations (other than the Indebtedness) of such Borrower which
arose prior to the Closing Date of such Release, and (ii) any Obligations that
survive release as specifically set forth in Section 18 (Environmental Hazards)
of the Security Instrument applicable to such Release Mortgaged Property.

(f) Title Insurance. Notwithstanding the other provisions of this Section 3.04,
no Release of any Mortgaged Property shall be made unless Borrower has provided
title insurance insuring Lender for the remaining Mortgaged Properties in the
Collateral Pool (i) if tie-in endorsements are available for all or a portion of
the remaining Mortgaged Properties in the Collateral Pool, in an aggregate
amount equal to the combined Allocable Facility Amounts for all of the remaining
Mortgaged Properties in the Collateral Pool covered by the tie-in endorsements,
not to exceed the Fixed Facility Commitment in the maximum amount then available
hereunder, or (ii) if tie-in endorsements are not available for any of the
remaining Mortgaged Properties in the Collateral Pool, then with respect to such
Mortgaged Properties not subject to the tie-in endorsement, an amount equal to
one hundred fifteen percent (115%) of the Valuation of such remaining Mortgaged
Properties not subject to the tie-in endorsement (or such lesser amount that is
the maximum allowed by law or regulation).

(g) Failure to Draw Full Amount of Fixed Facility Commitment. In the event that
Borrower fails to draw the full amount of the Fixed Facility Commitment of
$620,000,000 (including the Initial Advance) for any reason other than the
default by Lender, any Request by Borrower to Release a Mortgaged Property
pursuant to this Agreement as a result of such failure shall not include the
following Mortgaged Properties: (i) Westridge, (ii) MacArthur, (iii) Carmel
Creek, (iv) Avenue 64, (v) Sharon Green, (vi) Towne Center, and (vii) Bell
Centre.

 

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Section 3.05. Substitutions.

(a) Right to Substitute Collateral. Subject to the terms, conditions and
limitations of Article 3 and Article 5, Borrower shall have the right prior to
the date twelve (12) months before the Termination Date to obtain the Release of
one or more Release Mortgaged Properties from the Collateral Pool by replacing
such Release Mortgaged Property with one (1) or more additional Mortgaged
Properties that meet the requirements of this Agreement (the “Substitute
Mortgaged Property”) thereby effecting a “Substitution” of Collateral.

(b) Request. Borrower shall deliver to Lender a completed and executed
Substitution Request. Each Substitution Request shall be accompanied by the
following:

(i) the information required by the Underwriting Requirements with respect to
the proposed Substitute Mortgaged Property and any additional information Lender
reasonably requests; and

(ii) the payment of all Additional Collateral Due Diligence Fees.

(c) Underwriting.

(i) Borrower may add a Substitute Mortgaged Property to the Collateral Pool
provided that:

(A) after such Substitution:

(1) the Substitute Mortgaged Property satisfies the Individual Coverage and LTV
Tests,

(2) the Loan to Value Ratio of the Substitute Mortgaged Property is less than or
equal to the Loan to Value Ratio immediately prior to the Release of the Release
Mortgaged Property, and

(3) the Debt Service Coverage Ratio of the Substitute Mortgaged Property is
greater than or equal to the Debt Service Coverage Ratio immediately prior to
the Release of the Release Mortgaged Property;

(B) the Substitute Mortgaged Property is an asset of similar quality with
similar economic and market fundamentals and characteristics as the Release
Mortgaged Property, as determined by Lender in accordance with the Underwriting
Requirements; and

(C) all other terms and conditions set forth in this Agreement are satisfied.

(ii) Lender shall evaluate the proposed Substitute Mortgaged Property in
accordance with the Underwriting Requirements, including an exit analysis
performed by Lender and acceptable to Fannie Mae. Lender shall make underwriting
determinations as to the Debt

 

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Service Coverage Ratio and the Loan to Value Ratio of the proposed Substitute
Mortgaged Property on the basis of the lesser of (A) the acquisition price of
the proposed Substitute Mortgaged Property if purchased by Borrower within
twelve (12) months of the related Substitution Request, or (B) a Valuation made
with respect to the proposed Substitute Mortgaged Property. Borrower shall
promptly provide any information reasonably required by Lender to make the
determinations required in this Section.

(iii) After receipt of (A) the Substitution Request and (B) all reports,
certificates and documents required by the Underwriting Requirements, Lender
shall notify Borrower whether it has determined whether the proposed Substitute
Mortgaged Property meets the conditions for a Substitution. If Lender determines
that the proposed Substitute Mortgaged Property meets the conditions set forth
in this Agreement, Lender shall determine the Aggregate Debt Service Coverage
Ratio, and the Aggregate Loan to Value Ratio that Lender estimates shall result
from the addition of the proposed Substitute Mortgaged Property to the
Collateral Pool. Within ten (10) days after receipt of Lender’s written consent
to the proposed Substitution Request, Borrower shall notify Lender in writing
whether it elects to add the proposed Substitute Mortgaged Property to the
Collateral Pool and release the identified Mortgaged Property. If Borrower fails
to notify Lender of its election within the timeframe stated, then the Request
will be deemed withdrawn.

(iv) Notwithstanding the foregoing, if the tests identified in Section 3.05(c)
are not satisfied after the Substitution of a proposed Substitute Mortgaged
Property, such Substitution may be permitted by Lender if the Substitution
improves the Collateral Pool based on factors that are consistent with Lender’s
Underwriting Requirements and result in improvement in one or more of the
following areas: the then current Aggregate Debt Service Coverage Ratio or the
then current Aggregate Loan to Value Ratio.

(d) Closing. If, pursuant to this Section 3.05, Lender determines that the
conditions set forth herein for the Substitution of the proposed Substitute
Mortgaged Property into the Collateral Pool in replacement of the proposed
Release Mortgaged Property are satisfied, and Borrower timely elects to cause
such Substitution to occur and all conditions contained in this Section 3.05 and
Article 5 are satisfied, then the proposed Substitute Mortgaged Property shall
be substituted into the Collateral Pool in replacement of the proposed Release
Mortgaged Property, at a closing to be held at offices designated by Lender on a
Closing Date selected by Lender, and occurring —

(i) if the Substitution of the proposed Substitute Mortgaged Property is to
occur simultaneously with the release of the proposed Release Mortgaged
Property, within thirty (30) days after Lender’s receipt of Borrower’s election
to proceed with the Substitution (or on such other date to which Borrower and
Lender may agree); or

(ii) if the Substitution of the proposed Substitute Mortgaged Property is to
occur subsequent to the Release of the Release Mortgaged Property, within ninety
(90) days after the effective date of the release of such Release Mortgaged
Property (provided such date does not exceed one hundred eighty (180) days after
Lender’s receipt of Borrower’s Release Request, unless otherwise agreed to by
Lender) (the “Property Delivery Deadline”); provided that on a case by case
basis, Lender may consent in its sole discretion to extend the Property Delivery
Deadline by one (1) additional ninety (90) day period.

 

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(e) Substitution Deposit.

(i) The Deposit. If the addition of the proposed Substitute Mortgaged Property
is to occur subsequent to the Release of the Release Mortgaged Property pursuant
to Section 3.05(d), at the Closing Date of the Release of the Release Mortgaged
Property, Borrower shall deposit with Lender the “Substitution Deposit”
described in Section 3.05(e)(ii) in the form of cash or, in lieu of (and/or in
addition to) depositing cash for the Substitution Deposit, Borrower may post a
Letter of Credit in accordance with the terms of Section 5.10 of this Agreement,
having a face amount equal to the Substitution Deposit (less the amount that has
been deposited in cash). Funds deposited in cash shall be invested and
reinvested by and in the name of Lender in Permitted Investments.

(ii) Substitution Deposit Amount. The “Substitution Deposit” for each proposed
Substitution shall be an amount equal to the sum of:

(A) the Release Price relating to such proposed Release Mortgaged Property, plus

(B) any and all of the yield maintenance, fee maintenance or the prepayment
premium, as applicable, through the end of the month in which the Property
Delivery Deadline occurs as if the Fixed Advance were to be prepaid in such
month, plus

(C) interest on such Advance through the end of the month in which the Property
Delivery Deadline occurs. Borrower shall also be obligated to make any regularly
scheduled payments of principal and interest due under the applicable Note
during any period between the closing of the Release Mortgaged Property and the
earlier of the closing of the Substitute Mortgaged Property and the date of
prepayment of the Note.

(iii) Failure to Close Substitution. If the addition of the proposed Substitute
Mortgaged Property does not occur by the Property Delivery Deadline in
accordance with Section 3.05(d)(ii), then such Borrower shall have irrevocably
waived its right to substitute such Release Mortgaged Property with the proposed
Substitute Mortgaged Property, and the release of the Release Mortgaged Property
shall be deemed to be a Release pursuant to Section 3.04 and shall trigger a
prepayment of the Note, and if applicable, together with all yield maintenance,
fee maintenance or prepayment premium then due in connection with such payment.
Subject to the terms of Section 3.04(d), the Property Delivery Deadline shall be
no later than the date ninety (90) days after the effective date Lender’s lien
on such Release Mortgaged Property is released. Any Advance being prepaid shall
be deemed to be prepaid as of the end of the month in which the Property
Delivery Deadline falls. Lender shall follow standard Fannie Mae procedures for
the prepayment of the Note, including delivery of the Substitution Deposit,
together with all yield maintenance, fee maintenance, or prepayment premium, if
any, then due, to Fannie Mae in accordance with such procedures.

 

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Borrower shall comply with the requirements set forth in Section 3.04(c) and
Section 3.04(d) not previously satisfied with respect to the Release Mortgaged
Property, including payment of the Release Price. Such Release Price, or the
applicable portion thereof, shall be applied in the manner set forth in
Section 3.04(d) and the Substitution Deposit delivered by Borrower pursuant to
Section 3.05(e) of this Agreement shall be returned to Borrower. However, if
Borrower fails to timely pay the Release Price, Lender may draw upon the
Substitution Deposit delivered by Borrower in satisfaction of such obligation.

(iv) Substitution Deposit Disbursement. At closing of the Substitution, Lender
shall disburse or return the Substitution Deposit, as applicable, directly to
Borrower at such time as the conditions precedent for the Substitution have been
satisfied, which must occur no later than the Property Delivery Deadline.
Notwithstanding the foregoing, in the event that Borrower adds a Substitute
Mortgaged Property to the Collateral Pool prior to the Property Delivery
Deadline but the addition of such Substitute Mortgaged Property has not in and
of itself satisfied the requirements to close the Substitution, the Substitution
Deposit shall be reduced by the Allocable Facility Amount of such Substitute
Mortgaged Property as determined by Lender, and such reduction in the
Substitution Deposit shall be returned to Borrower, or in the case of a Letter
of Credit, such Letter of Credit shall be reduced by such reduction in the
Substitution Deposit. If Borrower has not completely satisfied the requirements
to close the Substitution by the Property Delivery Deadline, the terms of
Section 3.05(e)(iii) shall apply with respect to the remaining Substitution
Deposit.

(f) Conditions Precedent to Substitutions. The obligation of Lender to make a
requested Substitution is also subject to Lender’s determination that each of
the conditions precedent for additions of Substitute Mortgaged Properties and
Releases of Release Mortgaged Properties set forth in Section 5.01 and
Section 5.06 of this Agreement have been satisfied.

(g) Restriction on Borrowings. If the addition of the Substitute Mortgaged
Property to the Collateral Pool and the release of the Release Mortgaged
Property from the Collateral Pool do not occur simultaneously (i.e., within
thirty (30) days pursuant to Section 3.05(d) above) then, for so long as the
Substitution Deposit is in place, no Future Advance nor Additional Loans shall
be permitted.

ARTICLE 4

TERMINATION OF FACILITIES

Section 4.01. Right to Terminate Credit Facility.

Subject to the terms and conditions of this Article 4, Borrower shall have the
right to terminate this Agreement and the Credit Facility and receive a Release
of all of the Collateral.

Section 4.02. Procedure for Terminating Credit Facility.

(a) Request. To terminate this Agreement and the Credit Facility, Borrower shall
deliver a Credit Facility Termination Request to Lender.

 

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(b) Closing. If Lender determines that all conditions precedent contained in
Section 5.07 are satisfied, this Agreement shall terminate, and Lender shall
cause all of the Collateral to be released, at a closing to be held at offices
designated by Lender on a Closing Date selected by Lender, within thirty
(30) Business Days after Lender’s receipt of the Credit Facility Termination
Request (or on such other date as Borrower and Lender may agree), by executing
and delivering, and causing all applicable parties to execute and deliver, all
at the sole cost and expense of Borrower, the Credit Facility Termination
Documents.

ARTICLE 5

CONDITIONS PRECEDENT TO ALL REQUESTS

Section 5.01. Conditions Applicable to All Requests.

The obligation of Lender to close the transaction requested in a Request (other
than a Credit Facility Termination Request made pursuant to Section 4.02) shall
be subject to Lender’s determination that all of the following general
conditions precedent (“General Conditions”) have been satisfied in addition to
any other conditions precedent contained in this Agreement:

(a) Payment of Expenses. The payment by Borrower of Lender’s and Fannie Mae’s
reasonable third party out-of-pocket fees and expenses payable in accordance
with this Agreement, including, but not limited to, the legal fees and expenses
described in Section 10.03.

(b) No Material Adverse Effect. Except in connection with a Credit Facility
Termination Request, there has been no Material Adverse Effect on the financial
condition or business or prospects of Borrower or Guarantor or in the physical
condition, operating performance or value of any of the Mortgaged Properties
since the date of the most recent Compliance Certificate (or, with respect to
the conditions precedent to the Initial Advance, from the condition, business or
prospects reflected in the financial statements, reports and other information
obtained by Lender during its review of Borrower and Guarantor and the Initial
Mortgaged Properties).

(c) No Default. Except in connection with a Credit Facility Termination Request,
(i) there shall exist no Event of Default or Potential Event of Default on the
Closing Date for the Request, (ii) there shall have been no more than one
(1) monetary Event of Default (which Event of Default shall have been cured
within two (2) Business Days) involving the payment of principal or interest due
under any Loan Documents or any impound or reserve required to be paid under the
Loan Documents on or before the Closing Date for the Request, (iii) there shall
never have been any non-monetary defaults past any notice and grace periods
under the Loan Documents; and (iv) the closing of such Request shall not result
in an Event of Default or Potential Event of Default.

(d) No Insolvency. Receipt by Lender on the Closing Date for the Request of
evidence satisfactory to Lender that neither Borrower nor Guarantor is insolvent
(within the meaning of any applicable federal or state laws relating to
bankruptcy or fraudulent transfers) or will be rendered insolvent by the
transactions contemplated by the Loan Documents, including the making of a
Future Advance, or, after giving effect to such transactions, will be left with
an

 

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unreasonably small capital with which to engage in its business or undertakings,
or will have intended to incur, or believe that it has incurred, debts beyond
its ability to pay such debts as they mature or will have intended to hinder,
delay or defraud any existing or future creditor.

(e) No Untrue Statements. The Loan Documents shall not contain any untrue or
misleading statement of a material fact and shall not fail to state a material
fact necessary to make the information contained therein not misleading.

(f) Representations and Warranties. Except in connection with a Credit Facility
Termination Request, all representations and warranties made by Borrower and
Guarantor in the Loan Documents shall be true and correct in all material
respects on the Closing Date for the Request with the same force and effect as
if such representations and warranties had been made on and as of the Closing
Date for the Request. On the Closing Date of any Request, the representations
and warranties as referred to in this Section 5.01(f) shall be deemed remade by
Borrower and Guarantor.

(g) No Condemnation or Casualty. Except in connection with a Credit Facility
Termination Request, there shall not be pending or threatened any condemnation
or other taking, whether direct or indirect, against any Mortgaged Property
(other than a Release Mortgaged Property subject to a Release Request or a
Substitution Request) and there shall not have occurred any casualty to any
improvements located on any Mortgaged Property (other than a Release Mortgaged
Property subject to a Release Request or a Substitution Request), which
condemnation or casualty would have a Material Adverse Effect.

(h) Delivery of Closing Documents. The receipt by Lender of the following, each
dated as of the Closing Date for the Request, in form and substance satisfactory
to Lender in all respects:

(i) The Loan Documents required to be delivered in connection with the Request;

(ii) A Compliance Certificate;

(iii) An Organizational Certificate; and

(iv) Such other documents, instruments, approvals (and, if requested by Lender,
certified duplicates of executed copies thereof) and opinions as Lender may
reasonably request.

(i) Covenants. Except in connection with a Credit Facility Termination Request,
Borrower is in full compliance with each of the covenants contained in the Loan
Documents, without giving effect to any notice and cure rights of Borrower.

(j) Fannie Mae Commitment. Except in connection with the Future Advance thath as
been rate locked by the Rate Lock Deadline, the receipt by Lender of a Fannie
Mae Commitment, and the performance by Fannie Mae of its obligations to purchase
the Advance in accordance with the terms of the Fannie Mae Commitment.

 

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Section 5.02. Conditions Precedent to Initial Advance.

The obligation of Lender to make the Initial Advance is subject to Lender’s
determination that each of the following conditions precedent has been
satisfied:

(a) The Coverage and LTV Tests are satisfied;

(b) Delivery to the Title Company, for filing and/or recording in all applicable
jurisdictions, of all applicable Loan Documents required by Lender, including
duly executed and delivered original copies of the Initial Security Instruments
covering the Initial Mortgaged Properties and UCC-1 Financing Statements
covering the portion of the Collateral comprised of personal property, and other
appropriate instruments, in form and substance reasonably satisfactory to Lender
and in form proper for recordation, as may be necessary in the opinion of Lender
to perfect the Liens created by the applicable Security Instruments and any
other Loan Documents creating a Lien in favor of Lender, and the payment of all
taxes, fees and other charges payable in connection with such execution,
delivery, recording and filing;

(c) Receipt by Lender of any Lender required subordination, non-disturbance and
attornment agreements and/or estoppel certificates with respect to any
commercial leases or ground leases (if any) affecting the Initial Mortgaged
Property, provided that with respect to the Initial Mortgaged Properties, Lender
shall not require subordination, non-disturbance and attornment agreements on
the commercial leases in place as of the Initial Closing Date;

(d) Receipt by Lender of the portion of the Origination Fee due pursuant to
Section 10.01 and the Initial Due Diligence Fees pursuant to Section 10.02(a);
and

(e) Receipt by Lender of documentation acceptable to Lender evidencing the
status of the environmental issues pertaining to the dry cleaners adjacent to
the Mortgaged Property commonly known as Sharon Green.

Section 5.03. Conditions Precedent to the Future Advance.

The obligation of Lender to make the Future Advance is subject to Lender’s
determination that each of the following conditions precedent has been
satisfied:

(a) After giving effect to the requested Future Advance, the Coverage and LTV
Tests shall be satisfied;

(b) Delivery of a Fixed Facility Note, duly executed by Borrower, in the amount
and reflecting all of the terms of the Future Advance;

(c) Receipt by Lender of the balance of the Origination Fee, if any such fee is
due, pursuant to Section 10.01;

(d) For any Title Insurance Policy not containing a future advance endorsement,
the receipt by Lender of an endorsement to the Title Insurance Policy, amending
the effective date of the Title Insurance Policy to the Closing Date and showing
no additional exceptions to coverage other than Permitted Liens;

 

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(e) No Governmental Approval not already obtained or made is required for the
execution and delivery of the documents to be delivered in connection with the
Future Advance;

(f) Borrower or Guarantor is not under any cease or desist order or other orders
of a similar nature, temporary or permanent of any Governmental Authority which
would have the effect of preventing or hindering performance of the terms and
provisions of the Agreement or any other Loan Documents, nor are there any
proceedings presently in progress or, to its knowledge, contemplated which, if
successful, would lead to the issuance of any such order; and

(g) Receipt by Lender of a Confirmation of Guaranty for each Guaranty then in
effect.

Section 5.04. [Reserved.]

Section 5.05. Conditions Precedent to Release of Mortgaged Property from the
Collateral Pool.

The obligation of Lender to Release a Mortgaged Property from the Collateral
Pool by executing and delivering the Release Documents on the Closing Date is
subject to Lender’s determination that each of the following conditions
precedent has been satisfied:

(a) The requirements of Section 3.04 are satisfied;

(b) Receipt by Lender of the Release Price;

(c) Receipt by Lender of the Release Fee;

(d) Receipt by Lender of all legal fees and expenses payable by Borrower in
connection with the Release Request;

(e) Receipt by Lender on the Closing Date of one or more counterparts of each
Release Document, dated as of the Closing Date, signed by each of the parties
(other than Lender) who is a party to such Release Document;

(f) If required by Lender, amendments to the Notes and the Security Instruments,
reflecting the release of the Release Mortgaged Property from the Collateral
Pool and, as to any Security Instrument so amended, the receipt by Lender of an
endorsement to the Title Insurance Policy insuring the Security Instrument,
amending the effective date of the Title Insurance Policy to the Closing Date
and showing no additional exceptions to coverage other than Permitted Liens;

(g) If Lender determines the Release Mortgaged Property to be one phase of a
project, and one or more other phases of the project are Mortgaged Properties
which will remain in the Collateral Pool (“Remaining Mortgaged Properties”),
Lender must reasonably

 

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determine that the Remaining Mortgaged Properties can be operated separately
from the Release Mortgaged Property and any other phases of the project which
are not Mortgaged Properties and whether any cross use agreements or easements
are necessary. In making this determination, Lender shall evaluate access,
utilities, marketability, community services, ownership and operation of the
Release Mortgaged Properties and any other issues identified by Lender in
connection with similar loans anticipated to be sold to Fannie Mae;

(h) Receipt by Lender on the Closing Date of a Confirmation of Obligations,
dated as of the Closing Date, signed by Borrower and Guarantor, pursuant to
which Borrower and Guarantor confirm their remaining obligations under the Loan
Documents; and

(i) Receipt by Lender of endorsements to the tie-in endorsements of the Title
Insurance Policies, if deemed necessary by Lender, to reflect the release.
Notwithstanding anything to the contrary herein, no Release of any Mortgaged
Property shall be made unless Borrower has provided title insurance insuring
Lender for the remaining Mortgaged Properties in the Collateral Pool (i) if
tie-in endorsements are available for all or a portion of the remaining
Mortgaged Properties in the Collateral Pool, in an aggregate amount equal to the
combined Allocable Facility Amounts for all of the remaining Mortgaged
Properties in the Collateral Pool covered by the tie-in endorsements, not to
exceed the Fixed Facility Commitment in the maximum amount then available
hereunder, or (ii) if tie-in endorsements are not available for any of the
remaining Mortgaged Properties in the Collateral Pool, then with respect to such
Mortgaged Properties not subject to the tie-in endorsement, an amount equal to
one hundred fifteen percent (115%) of the Valuation of such remaining Mortgaged
Properties not subject to the tie-in endorsement (or such lesser amount that is
the maximum allowed by law or regulation).

Section 5.06. Conditions Precedent to Substitution of a Substitute Mortgaged
Property into the Collateral Pool.

The Substitution of a Substitute Mortgaged Property into the Collateral Pool is
subject to Lender’s determination that each of the following conditions
precedent has been satisfied:

(a) The provisions of Section 3.05(c) (including the Underwriting Requirements)
are satisfied;

(b) Receipt by Lender of the Substitution Deposit, if applicable;

(c) Receipt by Lender of the Substitution Fee;

(d) Delivery to the Title Company, with fully executed instructions directing
the Title Company to file and/or record in all applicable jurisdictions, all
applicable Substitution Loan Documents required by Lender, including duly
executed and delivered original copies of any Security Instruments and UCC-1
Financing Statements covering the portion of the Substitute Mortgaged Property
comprised of personal property, and other appropriate documents, in form and
substance satisfactory to Lender and in form proper for recordation, as may be
necessary in the opinion of Lender to perfect the Lien created by the applicable
additional Security Instrument, and any other Substitution Loan Document
creating a Lien in favor of Lender, and the payment of all taxes, fees and other
charges payable in connection with such execution, delivery, recording and
filing;

 

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(e) Receipt by Lender of the Additional Collateral Due Diligence Fee pursuant to
Section 10.02(b).

(f) Receipt by Lender of all legal fees and expenses payable by Borrower in
connection with the Substitution Request pursuant to Section 10.03;

(g) Receipt by Lender of any required subordination, non-disturbance and
attornment agreements and/or estoppel certificates with respect to any
commercial leases, laundry leases or ground leases (if any) affecting the
Substitute Mortgaged Property;

(h) If reasonably required by Lender, amendments to the Notes and the Security
Instruments, reflecting the Substitution of any Additional Borrower and/or the
Substitute Mortgaged Property to the Collateral Pool and, as to any Security
Instrument so amended, the receipt by Lender of an endorsement to the Title
Insurance Policy insuring the Security Instrument, amending the effective date
of the Title Insurance Policy to the Closing Date and showing no additional
exceptions to coverage other than Permitted Liens;

(i) If the Title Insurance Policy for the Substitute Mortgaged Property contains
a tie-in endorsement, receipt by Lender of an endorsement to every other Title
Insurance Policy containing a tie-in endorsement, adding a reference to the
Substitute Mortgaged Property.

Section 5.07. Conditions Precedent to Termination of Credit Facility.

The right of Borrower to terminate this Agreement and the Credit Facility and to
receive a release of all of the Collateral from the Collateral Pool and Lender’s
obligation to execute and deliver the Credit Facility Termination Documents on
the Closing Date are subject to Lender’s determination Borrower has paid in full
all of the Notes Outstanding on the Closing Date, including any associated
prepayment premiums or other amounts due under the Notes and all other amounts
owing by Borrower to Lender under this Agreement.

Section 5.08. Opinion Relating to Initial Advance or Substitution Request.

With respect to the Initial Closing or closing of a Substitution Request, it
shall be a condition precedent that Lender receives favorable opinions of
counsel (including local counsel, as applicable) to Borrower and Guarantor, as
to the due organization and qualification of Borrower and Guarantor, the due
authorization, execution, delivery and enforceability of each Loan Document
executed in connection with the Request and such other matters as Lender may
reasonably require, each dated as of the Closing Date for the Request, in form
and substance reasonably satisfactory to Lender in all respects.

 

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Section 5.09. Delivery of Property-Related Documents.

With respect to each of the Initial Mortgaged Properties or a Substitute
Mortgaged Property, it shall be a condition precedent that Lender receive from
Borrower each of the documents and reports required by Lender pursuant to the
Underwriting Requirements in connection with the pledge of such Mortgaged
Property and each of the following, each dated as of the Closing Date for the
Initial Mortgaged Property or a Substitute Mortgaged Property, as the case may
be, in form and substance satisfactory to Lender in all respects:

(a) A commitment for the Title Insurance Policy applicable to the Mortgaged
Property and a pro forma Title Insurance Policy based on the title commitment in
the amount of title insurance afforded by the Title Insurance Policy for each
Mortgaged Property in the Collateral Pool equal to (i) if tie-in endorsements
are available for all or a portion of the Mortgaged Properties, in an aggregate
amount equal to the combined Allocable Facility Amounts for all of the Mortgaged
Properties covered by the tie-in endorsements, not to exceed the Fixed Facility
Commitment in the maximum amount then available hereunder, or (ii) if tie-in
endorsements are not available for any of the Mortgaged Properties, then with
respect to such Mortgaged Properties not subject to the tie-in endorsement an
amount equal to one hundred fifteen percent (115%) of the Valuation of such
Mortgaged Properties not subject to the tie-in endorsement (or such lesser
amount that is the maximum allowed by law or regulation).

(b) The Insurance Policy (or a certified copy of the Insurance Policy)
applicable to the Mortgaged Property;

(c) Unless waived by Lender, the Survey applicable to the Mortgaged Property and
approved by Lender (which shall be last revised no less than forty-five
(45) days prior to the Closing Date); provided that Lender acknowledges that it
has waived Surveys with respect to each of the Initial Mortgaged Properties;

(d) Evidence satisfactory to Lender of compliance of the Mortgaged Property with
Applicable Laws;

(e) An Appraisal of the Mortgaged Property;

(f) A Replacement Reserve Agreement, providing for the establishment of a
replacement reserve account, to be pledged to Lender, in which the owner shall
(unless waived by Lender) periodically deposit amounts for replacements for
improvements at the Mortgaged Property and as additional security for Borrower’s
obligations under the Loan Documents;

(g) A Completion/Repair and Security Agreement, if required by Lender, together
with required escrows, on the standard form required by Lender;

(h) An Assignment of Management Agreement, on the standard form required by
Lender;

(i) An Assignment of Leases and Rents, if Lender determines one to be necessary
or desirable, provided that the provisions of any such assignment shall be
substantively identical to those in the Security Instrument covering the
Collateral, with such modifications as may be necessitated by applicable state
or local law;

(j) A Certificate of Borrower Parties; and

 

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(k) Any other document that Lender may reasonably determine is required in
connection with a Mortgaged Property.

Section 5.10. Conditions Precedent to Letters of Credit.

The right or requirement of Borrower to provide a Letter of Credit in connection
with this Agreement is subject to Lender’s determination that each of the
following conditions precedent has been satisfied:

(a) Letter of Credit Requirements. Any Letter of Credit shall be issued by a
financial institution satisfactory to Fannie Mae (the “Issuer”). If Borrower
provides Lender with a Letter of Credit pursuant to this Agreement, the Letter
of Credit shall be in form and substance satisfactory to Lender and Lender shall
be entitled, upon occurrence of circumstances in (b), to draw under such Letter
of Credit solely upon presentation of a sight draft to the Issuer. Any Letter of
Credit shall be for a term of at least three hundred sixty-four (364) days
(provided that in connection with a Substitution, the term of any Letter of
Credit shall be until the date five (5) days after the Property Delivery
Deadline).

(b) Draws Under Letter of Credit. Lender shall have the right in its sole
discretion to draw monies under the Letter of Credit:

(i) upon the occurrence of (A) an Event of Default, or (B) a Potential Event of
Default of which Borrower has knowledge has occurred and continued for two
(2) Business Days;

(ii) if thirty (30) days prior to the expiration of the Letter of Credit, either
the Letter of Credit has not been extended for a term of at least three hundred
sixty four (364) days (provided that in connection with a Substitution, the term
of any Letter of Credit shall be at least until the date five (5) days after the
Property Delivery Deadline) or Borrower has not delivered to Lender either
(A) an acceptable replacement Letter of Credit or (B) substitute cash collateral
in the amount required by Lender; or

(iii) upon the downgrading of the long-term obligations of the Issuer below a
level satisfactory to Lender; provided that Borrower shall have ten
(10) Business Days after notice of such downgrading to deliver to Lender either
(A) an acceptable replacement Letter of Credit or (B) substitute cash collateral
in the amount required by Lender.

(c) Deposit to Cash Collateral Account. If Lender draws under the Letter of
Credit pursuant to Section 5.10(b)(ii) or Section 5.10(b)(iii) above, Lender
shall deposit such draw monies into a Cash Collateral Account established
pursuant to a Cash Collateral Agreement entered into the first time Lender draws
any such monies. Lender shall hold the Letter of Credit drawn monies in the Cash
Collateral Account until the earliest of the following events occurs:

(i) Borrower presents an acceptable replacement Letter of Credit and Lender
agrees, in its sole discretion, to accept such Letter of Credit (provided that
any agreement by Lender to accept a replacement Letter of Credit will be
conditioned upon Borrower’s payment of all administrative and legal costs
incurred by Lender and Fannie Mae in connection with the replacement of the
Letter of Credit.)

 

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(ii) the applicable provisions of this Agreement pursuant to which the Letter of
Credit was provided are satisfied;

(iii) Borrower pays all amounts due and payable under the Loan Documents and
Lender releases the liens of all Security Instruments;

(iv) Lender, in its sole discretion, consents to Borrower’s request to apply the
funds to the principal balance of a Note and any prepayment premium due in
connection with such application; or

(v) an Event of Default occurs and Lender elects to apply the proceeds as
described below in Section 5.10(d);

During any period that Lender holds the cash proceeds resulting from a draw on
any Letter of Credit, Lender will not pay interest to, or on behalf of, Borrower
in connection with such funds.

(d) Default Draws. If Lender draws under the Letter of Credit pursuant to
Section 5.10(b)(i) above, Lender may in its sole discretion use monies drawn
under the Letter of Credit for any of the following purposes:

(i) to pay any amounts required to be paid by Borrower under the Loan Documents
(including, without limitation, any amounts required to be paid to Lender under
this Agreement);

(ii) to (on such Borrower’s behalf, or on its own behalf if Lender becomes the
owner of the Mortgaged Property) pre-pay any Note in whole or in part, including
any prepayment premium or yield maintenance;

(iii) to make improvements or repairs to any Mortgaged Property; or

(iv) deposit monies into the Cash Collateral Account.

(e) Legal Opinion. Prior to or simultaneous with the delivery of any new Letter
of Credit (but not the extension of any existing Letter of Credit), such
Borrower shall cause the Issuer’s counsel (or Issuer’s in-house counsel) to
deliver a legal opinion satisfactory in form and substance reasonably
satisfactory to Lender.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

Section 6.01. Representations and Warranties of Borrower Parties.

The representations and warranties of Borrower Parties are contained in the
Certificate of Borrower Parties, the form of which is attached to this Agreement
as Exhibit F.

 

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Section 6.02. Representations and Warranties of Lender.

Lender hereby represents and warrants to Borrower and Guarantor as follows:

(a) Due Organization. Lender is a corporation duly organized, validly existing
and in good standing under the laws of Delaware.

(b) Power and Authority. Lender has the requisite power and authority to execute
and deliver this Agreement and to perform its obligations under this Agreement.

(c) Due Authorization. The execution and delivery by Lender of this Agreement,
and the consummation by it of the transactions contemplated hereby, and the
performance by it of its obligations hereunder, have been duly and validly
authorized by all necessary action and proceedings by it or on its behalf.

ARTICLE 7

AFFIRMATIVE COVENANTS OF BORROWER

Borrower Parties agree and covenant with Lender that, at all times during the
Term of this Agreement:

Section 7.01. Compliance with Agreements.

Each of Borrower and Guarantor shall comply with all the terms and conditions of
each Loan Document to which it is a party or by which it is bound; provided,
however, that Borrower’s or Guarantor’s failure to comply with such terms and
conditions shall not be an Event of Default until the expiration of the
applicable notice and cure periods, if any, specified in the applicable Loan
Document.

Section 7.02. Maintenance of Existence.

Each Borrower Party shall maintain its existence and continue to be duly
organized under the laws of the state of its organization. Borrower and
Guarantor shall continue to be duly qualified to do business in each
jurisdiction in which such qualification is necessary to the conduct of its
business and where the failure to be so qualified would adversely affect the
validity of, the enforceability of, or the ability to perform, its obligations
under this Agreement or any other Loan Document.

Section 7.03. Maintenance of REIT Status.

During the Term of this Agreement, Guarantor shall qualify, and be taxed as, a
real estate investment trust under Subchapter M of the Internal Revenue Code,
and will not be engaged in any activities which would jeopardize such
qualification and tax treatment.

 

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Section 7.04. Financial Statements; Accountants’ Reports; Other Information.

Each Borrower Party shall keep and maintain at all times complete and accurate
books of accounts and records in sufficient detail to correctly reflect (i) such
Borrower Party’s financial transactions and assets and (ii) the results of the
operation of each Mortgaged Property and copies of all written contracts, Leases
and other instruments which affect each Mortgaged Property (including all bills,
invoices and contracts for electrical service, gas service, water and sewer
service, waste management service, telephone service and management services).
In addition, Borrower or Guarantor, as applicable, shall furnish, or cause to be
furnished, to Lender:

(a) Annual Financial Statements. As soon as available, and in any event within
ninety (90) days after the close of its fiscal year during the Term of this
Agreement, the balance sheet of Borrower, Guarantor and its Subsidiaries on a
consolidated basis as of the end of such fiscal year, the statement of income,
Borrower’s and Guarantor’s equity and retained earnings of Borrower, Guarantor
and its Subsidiaries on a consolidated basis for such fiscal year and the
statement of cash flows of Borrower, Guarantor and its Subsidiaries on a
consolidated basis for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in
the prior fiscal year, prepared in accordance with GAAP, consistently applied,
and with respect to the audited statements (as required below) accompanied by a
certificate of independent certified public accountants to the effect that such
financial statements have been prepared in accordance with GAAP, consistently
applied, and that such financial statements fairly present the results of its
operations and financial condition for the periods and dates indicated, with
such certification to be free of exceptions and qualifications as to the scope
of the audit or as to the going concern nature of the business. All financial
statements required by this subsection (a) with respect to Guarantor shall be
audited and all financial statements required by this subsection (a) with
respect to Borrower may be unaudited.

(b) Quarterly Financial Statements. As soon as available, and in any event
within forty-five (45) days after each of the first three fiscal quarters of
each fiscal year during the Term of this Agreement, the unaudited balance sheet
of Borrower, Guarantor and its Subsidiaries on a consolidated basis as of the
end of such fiscal quarter, the unaudited statement of income and retained
earnings of Borrower, Guarantor and its Subsidiaries on a consolidated basis and
the unaudited statement of cash flows of Borrower, Guarantor and its
Subsidiaries on a consolidated basis for the portion of the fiscal year ended
with the last day of such quarter, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in
the previous fiscal year, accompanied by a certificate of a Proper Officer to
the effect that such financial statements have been prepared in accordance with
GAAP, consistently applied and subject to customary exceptions, and that such
financial statements fairly present the results of its operations and financial
condition for the periods and dates indicated, subject to year end adjustments
in accordance with GAAP.

(c) Quarterly Property Statements. As soon as available, and in any event within
forty-five (45) days after each Calendar Quarter, a statement of income and
expenses presented monthly of each Mortgaged Property accompanied by a
certificate of a Proper Officer to the effect that each such statement of income
and expenses fairly, accurately and completely presents the operations of each
such Mortgaged Property in all material respects for the period indicated.

 

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(d) Annual Property Statements. On an annual basis within ninety (90) days of
the end of its fiscal year, an annual statement of income and expenses of each
Mortgaged Property accompanied by a certificate of a Proper Officer to the
effect that each such statement of income and expenses fairly, accurately and
completely presents the operations of each such Mortgaged Property in all
material respects for the period indicated.

(e) Updated Rent Rolls. As soon as available, and in any event within forty five
(45) days after each Calendar Quarter, a current Rent Roll for each Mortgaged
Property, showing the name of each tenant, and for each tenant, the space
occupied, the lease expiration date, the rent payable, the rent paid and any
other information requested by Lender and accompanied by a certificate of a
Proper Officer to the effect that each such Rent Roll fairly, accurately and
completely presents the information required therein in all material respects.

(f) Security Deposit Information. Upon Lender’s request, an accounting of all
security deposits held in connection with any Lease of any part of any Mortgaged
Property, including, to the extent applicable, the name and identification
number of the accounts (if any) in which such security deposits are held, the
name and address of the financial institutions in which such security deposits
are held and the name and telephone number of the person to contact at such
financial institution, along with any authority or release necessary for Lender
to access information regarding such accounts.

(g) Accountants’ Reports; Other Reports. Promptly upon receipt thereof:
(i) copies of any reports or management letters submitted to Borrower or
Guarantor by its independent certified public accountants in connection with the
examination of its financial statements made by such accountants (except for
reports otherwise provided pursuant to subsection (a) above); provided, however,
that Borrower or Guarantor shall only be required to deliver such reports and
management letters to the extent that they relate to Borrower or Guarantor or
any Mortgaged Property; and (ii) all schedules, financial statements or other
similar reports delivered by Borrower or Guarantor pursuant to the Loan
Documents or requested by Lender with respect to Guarantor’s business affairs or
condition (financial or otherwise) or any of the Mortgaged Properties.

(h) Annual Budgets. Prior to the start of its fiscal year, an annual budget for
each Mortgaged Property for such fiscal year, setting forth an estimate of all
of the costs and expenses, including capital expenses, of maintaining and
operating each Mortgaged Property.

(i) Statement of Ownership. At any time upon Lender’s request, a statement that
identifies: (i) all owners of any interest in Borrower and the interest held by
each and (ii) if Borrower is a corporation, all officers and directors of
Borrower, and if Borrower is a limited liability company, all managers who are
not members.

 

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(j) Other Information. Within forty-five (45) days after Lender’s request, but
not more frequently than once per Calendar Year, such other information
reasonably requested by Lender.

(k) Federal Tax Returns. Within forty-five (45) days after Lender’s request, the
Federal Tax Return of Borrower and Guarantor.

Section 7.05. Confidentiality of Certain Information.

Without express written consent of Lender and Fannie Mae, no Borrower Party
shall disclose any terms, conditions, underwriting requirements or underwriting
procedures of the Credit Facility or any of the Loan Documents; provided,
however, that such confidential information may be disclosed (a) as required by
law or pursuant to generally accepted accounting procedures, (b) to officers,
directors, employees, agents, partners, attorneys, accountants, engineers and
other consultants of Borrower who need to know such information, provided such
Persons are instructed to treat such information confidentially, (c) to any
regulatory authority having jurisdiction over Borrower, (d) in connection with
any filings with the Securities and Exchange Commission or other Governmental
Authorities, or (e) to any other Person to which such delivery or disclosure may
be necessary or appropriate (i) in compliance with any law, rule, regulation or
order applicable to Borrower, (ii) in response to any subpoena or other legal
process or information investigative demand or (iii) in connection with any
litigation to which Borrower is a party.

Section 7.06. Access to Records; Discussions With Officers and Accountants.

To the extent permitted by law and in addition to the applicable requirements of
the Security Instruments, Borrower shall permit Lender to:

(a) inspect, make copies and abstracts of, and have reviewed or audited, such of
Borrower’s or Guarantor’s books and records as may relate to the Obligations or
any Mortgaged Property;

(b) discuss Borrower’s affairs, finances and accounts with any Proper Officer of
Borrower or Guarantor or any other person performing the functions of the Proper
Officers;

(c) discuss Borrower’s affairs, finances and accounts with its independent
public accountants, provided that a Proper Officer has been given the
opportunity by Lender to be a party to such discussions;

(d) discuss the Mortgaged Properties’ conditions, operations or maintenance with
the Property Managers and/or asset manager of such Mortgaged Properties and the
officers and employees of Borrower and Guarantor, provided that a Proper Officer
or his/her designee has been given the opportunity by Lender to be a party to
such discussions; and

(e) receive any other information that Lender deems reasonably necessary or
relevant in connection with any Advance, any Loan Document or the Obligations
from the officers of Borrower or Guarantor or officers and employees of Property
Manager, provided that a Proper Officer or his/her designee has been given the
opportunity by Lender to be a party to such discussions.

 

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Notwithstanding the foregoing, prior to an Event of Default or Potential Event
of Default and in the absence of an emergency, all inspections and
communications shall be conducted at reasonable times during normal business
hours upon reasonable advance notice to Borrower or Guarantor, as appropriate.

Section 7.07. Certificate of Compliance.

Guarantor shall deliver to Lender concurrently with the delivery of the
financial statements and/or reports required by Section 7.04(a) and
Section 7.04(b) a certificate signed by a Proper Officer (i) setting forth in
reasonable detail the calculations required to establish whether Borrower and
Guarantor were in compliance with the requirements of Article 7 of this
Agreement on the date of such financial statements, and (ii) stating that, to
the best knowledge of such individual following reasonable inquiry, no Event of
Default or Potential Event of Default has occurred, or if an Event of Default or
Potential Event of Default has occurred, specifying the nature thereof in
reasonable detail and the action Borrower or Guarantor is taking or proposes to
take. Any certificate required by this Section 7.07 shall run directly to and be
for the benefit of Lender and Fannie Mae.

Section 7.08. Maintain Licenses.

Borrower shall procure and maintain in full force and effect all licenses,
Permits, charters and registrations which are material to the conduct of its
business and shall abide by and satisfy all terms and conditions of all such
licenses, Permits, charters and registrations.

Section 7.09. Inform Lender of Material Events.

Borrower shall promptly inform Lender in writing of any of the following (and
shall deliver to Lender copies of any related written communications,
complaints, orders, judgments and other documents relating to the following) of
which Borrower has actual knowledge:

(a) Defaults. The occurrence of any Event of Default or any Potential Event of
Default under this Agreement or any other Loan Document;

(b) Regulatory Proceedings. The commencement of any rulemaking or disciplinary
proceeding or the promulgation of any proposed or final rule which would have,
or may reasonably be expected to have, a Material Adverse Effect; the receipt of
written notice from any Governmental Authority having jurisdiction over Borrower
or Guarantor that (i) Borrower or Guarantor is being placed under regulatory
supervision, (ii) any license, Permit, charter, membership or registration
material to the conduct of Borrower’s or Guarantor’s business or the Mortgaged
Properties is to be suspended or revoked or (iii) Borrower or Guarantor is to
cease and desist any practice, procedure or policy employed by Borrower or
Guarantor in the conduct of its business;

 

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(c) Bankruptcy Proceedings. The commencement of any proceedings by or against
Borrower or Guarantor under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official is sought to be appointed for it;

(d) Environmental Claim. The receipt from any Governmental Authority or other
Person of any written notice of violation, claim, demand, abatement, order or
other order or direction (conditional or otherwise) for any damage the result of
which is to have a Material Adverse Effect, including personal injury (including
sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, pollution, contamination or other Material Adverse Effects on the
environment, removal, cleanup or remedial action or for fines, penalties or
restrictions, resulting from or based upon (i) the existence or occurrence, or
the alleged existence or occurrence, of a Hazardous Substance Activity on any
Mortgaged Property or (ii) the violation, or alleged violation, of any Hazardous
Materials Laws in connection with any Mortgaged Property or any of the other
assets of Borrower;

(e) Material Adverse Effects. The occurrence of any act, omission, change or
event (including the commencement or threat of any proceedings by or against
Borrower or Guarantor in any Federal, state or local court, or before any
Governmental Authority, or before any arbitrator), which has, or would have, a
Material Adverse Effect, subsequent to the date of the most recent financial
statements of Borrower or Guarantor delivered to Lender pursuant to
Section 7.04;

(f) Accounting Changes. Any material change in Borrower’s or Guarantor’s
accounting policies or financial reporting practices; and

(g) Legal and Regulatory Status. The occurrence of any act, omission, change or
event, including any Governmental Approval, the result of which is to have a
Material Adverse Effect on the legal or regulatory status of Borrower or
Guarantor or any Mortgaged Property.

Section 7.10. Compliance with Applicable Laws.

Borrower shall comply in all material respects with all Applicable Laws now or
hereafter affecting any Mortgaged Property or any part of any Mortgaged Property
or affecting any alterations, repairs or improvements to any Mortgaged Property.
Borrower shall procure and continuously maintain in full force and effect, and
shall abide by and satisfy all material terms and conditions of all Permits, and
shall comply with all written notices from Governmental Authorities.

Section 7.11. Alterations to the Mortgaged Properties.

Except as otherwise provided in the Loan Documents, Borrower shall have the
right to undertake any alteration, improvement, demolition, removal or
construction (collectively, “Alterations”) to the Mortgaged Property which it
owns without the prior consent of Lender; provided, however, that in any case,
no such Alteration shall be made to any Mortgaged Property without the prior
written consent of Lender if (i) such Alteration could reasonably be expected to

 

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materially and adversely affect the value of such Mortgaged Property or its
operation as a multifamily housing facility in substantially the same manner in
which it is being operated on the date such property became Collateral, (ii) the
construction of such Alteration could reasonably be expected to result in
interference to the occupancy of tenants of such Mortgaged Property such that
tenants in occupancy with respect to five percent (5%) or more of the Leases
would be permitted to terminate their Leases or to abate the payment of all or
any portion of their rent, or (iii) such Alteration is anticipated to be
completed in more than twelve (12) months from the date of commencement or in
the last year of the Term of this Agreement. Notwithstanding the foregoing,
Borrower must obtain Lender’s prior written consent to construct Alterations
(other than scheduled repairs and maintenance to existing improvements) with
respect to any Mortgaged Property costing in excess of the lesser of (A) five
percent (5%) of the Allocable Facility Amount of such Mortgaged Property, or
(B) $2,000 per unit for each unit at such Mortgaged Property, or (C) $1,000,000,
and Borrower must give prior written notice to Lender of its intent to construct
Alterations (other than scheduled repairs and maintenance to existing
improvements) with respect to such Mortgaged Property costing in excess of
$100,000; provided, however, that the preceding requirements shall not be
applicable to Alterations made, conducted or undertaken by Borrower as part of
Borrower’s routine maintenance and repair of the Mortgaged Properties as
required by or contemplated under the Loan Documents.

Section 7.12. Loan Document Taxes.

If any tax, assessment or Imposition (other than a franchise tax or excise tax
imposed on or measured by, the net income or capital (including branch profits
tax) of Lender (or any transferee or assignee thereof, including a participation
holder)) (“Loan Document Taxes”) is levied, assessed or charged by the United
States, or any State in the United States, or any political subdivision or
taxing authority thereof or therein upon any of the Loan Documents or the
obligations secured thereby, the interest of Lender in the Mortgaged Properties,
or Lender by reason of or as holder of the Loan Documents, Borrower shall pay
all such Loan Document Taxes to, for, or on account of Lender (or provide funds
to Lender for such payment, as the case may be) as they become due and payable
and shall promptly furnish proof of such payment to Lender, as applicable. In
the event of passage of any law or regulation permitting, authorizing or
requiring such Loan Document Taxes to be levied, assessed or charged, which law
or regulation in the opinion of counsel to Lender may prohibit Borrower from
paying the Loan Document Taxes to or for Lender, Borrower shall enter into such
further instruments as may be permitted by law to obligate Borrower to pay such
Loan Document Taxes, provided that if for any reason payment by Borrower cannot
be required or if the payment thereof would constitute usury or render any of
the Loan Documents or the Obligations wholly or partially usurious under any of
the terms or provisions of the Loan Documents, or otherwise, Lender may, at its
option, upon thirty (30) days’ written notice to Borrower, (a) declare the whole
of the Obligations, together with interest thereon and any prepayment premiums
payable in connection therewith, to be immediately due and payable, or
(b) declare that portion of the Obligations which are responsible for triggering
the Loan Document Taxes immediately due and payable, in which event the
remaining lawful portion of the Obligations shall continue outstanding with
interest payable in accordance with the terms of the applicable Notes.

 

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Section 7.13. Further Assurances.

Borrower Parties, at the request of Lender, shall execute and deliver and, if
necessary, file or record such statements, documents, agreements, UCC financing
and continuation statements and such other instruments and take such further
action as Lender from time to time may request as reasonably necessary,
desirable or proper to carry out more effectively the purposes of this Agreement
or any of the other Loan Documents or to subject the Collateral to the lien and
security interests of the Loan Documents or to evidence, perfect or otherwise
implement, to assure the lien and security interests intended by the terms of
the Loan Documents or in order to exercise or enforce its rights under the Loan
Documents.

Section 7.14. Transfer of Ownership Interests in Borrower and Guarantor.

(a) Prohibition on Transfers. Subject to paragraph (b) of this Section 7.14,
Borrower and Guarantor shall not cause or permit a Transfer or a Change of
Control.

(b) Permitted Transfers. Notwithstanding the provisions of paragraph (a) of this
Section 7.14, the following Transfers of Ownership Interests in Borrower,
Guarantor, or Managing Member are permitted without the consent of Lender,
provided that Borrower shall provide fifteen (15) Business Days prior written
notice thereof to Lender (provided, however, that no such notice to Lender need
be given with respect to those Permitted Transfers that occur due to the
ordinary course of trading of a Publicly-Held Corporation or those Permitted
Transfers of non-managing member interests in BRE Property Investors LLC)
(“Permitted Transfers”):

(i) A Transfer that occurs by inheritance, devise, or bequest or by operation of
law upon the death of a natural person who is the owner of a direct or indirect
Ownership Interest in Borrower or Guarantor.

(ii) A Transfer to trusts or other entities established for the benefit of the
transferor and/or immediate family members for estate planning purposes.

(iii) A Transfer of any direct or indirect Ownership Interest in Borrower,
Guarantor, or Managing Member; provided, however, that no Change of Control
occurs as the result of such Transfer.

(iv) The issuance by Borrower or Guarantor of additional membership interests,
partnership interests or stock (including by creation of a new class or series
of interests or stock and all varieties of convertible debt, equity and other
similar securities), as the case may be, and the subsequent direct or indirect
Transfer of such interests or stock; provided, however, that no Change of
Control occurs as the result of such Transfer.

(v) Any amendment, modification or any other change in the governing instrument
or instruments of Borrower or Guarantor in connection with the creation of a new
class or series of interests of stock pursuant to (iv) above; provided, however,
that no Change of Control occurs as the result of such Transfer.

 

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(vi) A merger with or acquisition of another entity by Borrower or Guarantor
provided that (A) such Borrower or Guarantor, as the case may be, is the
surviving entity after such merger or acquisition, (B) no Change of Control
occurs, and (C) such merger or acquisition does not result in an Event of
Default, as such terms are defined in this Agreement.

(vii) A Transfer of any minority non-controlling Ownership Interest in Borrower
or Guarantor provided no Change of Control occurs as a result of such Transfer.

(viii) A conversion of Borrower from one type of legal entity into another type
of legal entity for tax or other structuring purposes, provided:

(A) no Change of Control occurs,

(B) Borrower provides Lender with prior written notice of such conversion,

(C) Borrower provides Lender any certificates evidencing such conversion filed
with the appropriate Secretary of State,

(D) Borrower provides Lender new certificates of good standing for such entity,

(E) Lender reserves the right to file UCC-3 amendments where necessary
reflecting the conversion,

(F) Borrower executes an amendment to this Agreement documenting the conversion,
and

(G) The Title Company shall confirm (via electronic mail or letter) that nothing
is needed in the land records (of each of the appropriate jurisdictions) at such
time to evidence such conversion, and no endorsements to the title policies are
necessary to maintain Lender’s coverage.

Notwithstanding anything in this Section 7.14 to the contrary, a “Permitted
Transfer” shall not include any transfer that Lender, in its reasonable
discretion, determines is unacceptable because it would overexpose the Lender or
Fannie Mae to the credit risk posed by a third party transferee or its
Affiliates, if any.

Notwithstanding anything in this Section 7.14 to the contrary, the occurrence of
any of the following transfers shall not constitute an Event of Default under
the Loan Documents: Transfers of Ownership Interests in Borrower to any BRE
Affiliate, provided that Lender receives at least fifteen (15) Business Days
prior written notice of such Transfer along with copies of the instruments
evidencing such transfer and is paid a $10,000 review fee. No transfer fee shall
be due in connection with any transfer satisfying the requirements of the
preceding sentence. As used in this Section 7.14, the term “BRE Affiliate” means
any entity (x) in which Guarantor owns no less than fifty-one percent (51%) of
the Ownership Interests of such entity, AND (y) which is controlled by
Guarantor. An entity will be deemed to “control” another entity

 

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if it possesses the ability, directly or indirectly, independently (A) to elect
the majority of directors of such other entity (if such other entity is a
corporation), provided the business and affairs of the corporation may be
directed and controlled by a majority of its directors; (B) to exercise
managerial authority over such other entity; (C) to select the managing partner
or managing member of a partnership or limited liability company (if such other
entity is a partnership of limited liability company), provided the business and
affairs of the partnership or limited liability company may be directed and
controlled by its managing partners or managing member, as applicable; or
(D) otherwise to remove and then select a majority of those individuals
exercising managerial authority over such other entity.

(c) Consent to Prohibited Transfers. Lender may, in its sole and absolute
discretion, consent to a Transfer that would otherwise violate this Section 7.14
if, prior to the Transfer, Borrower or Guarantor, as the case may be, has
satisfied each of the following requirements:

(i) the submission to Lender of all information required by Lender to make the
determination required by this Section 7.14;

(ii) the absence of any Event of Default or Potential Event of Default;

(iii) the transferee meets all of the eligibility (including the requirement
that the proposed transferee is not a Prohibited Person), credit, management and
other standards (including any standards with respect to previous relationships
between Lender and the transferee and the organization of the transferee)
customarily applied by Lender at the time of the proposed Transfer to the
approval of borrowers or guarantors, as the case may be, in connection with the
origination or purchase of similar mortgages, deeds of trust or deeds to secure
debt on multifamily properties;

(iv) in the case of a Transfer of direct or indirect Ownership Interests in
Borrower or Guarantor, as the case may be, if transferor has obligations under
any Loan Documents, the execution by the transferee or one (1) or more
individuals or entities acceptable to Lender of an assumption agreement that is
acceptable to Lender and that, among other things, requires the transferee to
perform all obligations of transferor or such person set forth in such Loan
Document, and may require that the transferee comply with any provisions of this
Instrument or any other Loan Document which previously may have been waived by
Lender;

(v) Lender’s receipt of all of the following:

(A) a transfer fee equal to:

(1) in the event that the Outstanding Advances immediately prior to the Transfer
are equal to or less than $200,000,000, the product of 75 basis points (0.75%)
multiplied by such amount of Outstanding Advances;

(2) in the event that the Outstanding Advances immediately prior to the Transfer
are greater than $200,000,000 but less than $400,000,000, the product of 50
basis points (0.50%) multiplied by such amount of Outstanding Advances; and

 

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(3) in the event that the Outstanding Advances immediately prior to the Transfer
are equal to or greater than $400,000,000, the product of 25 basis points
(0.25%) multiplied by such amount of Outstanding Advances;

(B) a $3,000 review fee; plus

(C) In addition, Borrower shall be required to reimburse Lender for all of
Lender’s reasonable out-of-pocket costs (including reasonable attorneys’ fees)
incurred in reviewing the Transfer request.

(vi) the Transfer will not result in a significant modification under section
1001 of the Internal Revenue Code of any Advance that has been securitized in a
mortgage-backed security.

For the purposes of Section 7.14 and Section 7.15, “Prohibited Person” means
(i) a Person that is the subject of, whether voluntary or involuntary, any case,
proceeding or other action against such Person under any existing or future law
of any jurisdiction relating to bankruptcy, insolvency, reorganization,
liquidation, rehabilitation, receivership, or relief of debtors, or (ii) any
Person with whom Lender is prohibited from doing business pursuant to any law,
rule, regulation, judicial proceeding or administrative directive, or (iii) any
Person identified on the federal “Excluded Parties List System,” the federal
“Office of Foreign Assets and Control Specially Designated Nationals and Blocked
Persons” list, the U.S. Department of Housing and Urban Development’s “Limited
Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions
List,” or on Lender’s “Multifamily Applicant Experience Check,” each of which
may be amended from time to time and any successor or replacement thereof, or
(iv) a Person that is determined by Fannie Mae to have an unacceptable level of
outstanding debt to Fannie Mae, or (v) a Person that has caused any
unsatisfactory experience of a material nature with Fannie Mae or Lender, such
as a default, fraud, intentional misrepresentation, material litigation,
material arbitration or other similar act, or (vi) a Person that is, or whose
senior management is, the subject of any pending criminal indictment or criminal
investigation relating to an alleged felony or has ever been convicted of a
felony or held liable for fraud in a civil or criminal action.

Section 7.15. Transfer of Ownership of Mortgaged Property.

(a) Prohibition on Transfers. Subject to subsection (b) of this Section 7.15,
neither Borrower nor Guarantor shall cause or permit a Transfer of all or any
part of a Mortgaged Property or interest in any Mortgaged Property without the
prior written consent of Lender.

(b) Permitted Transfers. Notwithstanding provision (a) of this Section 7.15 or
any other provisions of this Agreement or any other Loan Document to the
contrary, the following Transfers of a Mortgaged Property by Borrower or
Guarantor are permitted without the consent of Lender:

(i) The grant of a leasehold interest in individual dwelling units or commercial
spaces in accordance with the Security Instrument.

 

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(ii) A sale or other disposition of obsolete or worn out personal property which
is contemporaneously replaced by comparable personal property of equal or
greater value which is free and clear of liens, encumbrances and security
interests other than those created by the Loan Documents or Permitted Liens.

(iii) The creation of a mechanic’s or materialmen’s lien or judgment lien
against a Mortgaged Property which is released of record or otherwise remedied
to Lender’s satisfaction within forty-five (45) days of the date of creation.

(iv) The grant of an easement if, prior to the granting of the easement,
Borrower causes to be submitted to Lender all information required by Lender to
evaluate the easement, and if Lender consents to such easement based upon
Lender’s determination that the easement will not materially adversely affect
the operation of the Mortgaged Property or Lender’s interest in the Mortgaged
Property and Borrower pays to Lender, within ten (10) Business Days after demand
therefore, all reasonable third party out-of-pocket costs and expenses incurred
by Lender in connection with reviewing Borrower’s request. Lender shall not
unreasonably withhold its consent to or withhold its agreement to subordinate
the lien of a Security Instrument to (A) the grant of a utility easement serving
a Mortgaged Property to a publicly operated utility, or (B) the grant of an
easement related to expansion or widening of roadways, driveways and parking
areas, provided that any such easement is in form and substance reasonably
acceptable to Lender and does not materially and adversely affect the access,
use or marketability of a Mortgaged Property.

(v) Notwithstanding any provision to the contrary in this Agreement, but subject
to the terms of the Security Instrument, the entry into, and modification,
extension or termination of, the following leases and/or licenses with respect
to the Mortgaged Property in accordance with the Security Instrument:
(A) commercial leases with square footage of less than 3,000 square feet,
(B) cell tower licenses, (C) laundry leases, (D) vending machine leases, and
(E) solar facility leases.

(vi) The securing of purchase money financing and equipment leasing in the
aggregate amount of less than $75,000 in connection with any Mortgaged Property
provided that said financing or leasing is solely for office equipment used in
connection with the operation of said Mortgaged Property.

(c) Consent to Prohibited Transfers. Lender may, in its sole and absolute
discretion, consent to a Transfer that would otherwise violate this Section 7.15
if, prior to the Transfer, Borrower has satisfied each of the following
requirements:

(i) the Transfer is in connection with a Transfer of all of the Mortgaged
Properties in the Collateral Pool and is in connection with the full assumption
of the Credit Facility (no individual Mortgaged Property may be Transferred
subject to the lien of the Security Instrument);

 

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(ii) the submission to Lender of all information required by Lender to make the
determination required by this Section 7.15;

(iii) the absence of any Event of Default or Potential Event of Default;

(iv) the transferee meets all of the eligibility (including the requirement that
the proposed transferee is not a Prohibited Person), credit, management and
other standards (including any standards with respect to previous relationships
between Lender and the transferee and the organization of the transferee)
customarily applied by Lender at the time of the proposed Transfer to the
approval of Borrower or Guarantor, as the case may be, in connection with the
origination or purchase of similar mortgages, deeds of trust or deeds to secure
debt on multifamily properties;

(v) if transferor has obligations under any Loan Documents, the execution by the
transferee or one (1) or more individuals or entities acceptable to Lender of an
assumption agreement that is acceptable to Lender and that, among other things,
requires the transferee to perform all obligations of transferor or such person
set forth in such Loan Document, and may require that the transferee comply with
any provisions of this Agreement or any other Loan Document which previously may
have been waived by Lender;

(vi) the Mortgaged Properties, at the time of the proposed Transfer, meets all
standards as to physical condition that are customarily applied by Lender at the
time of the proposed Transfer to the approval of properties in connection with
the origination or purchase of similar mortgages on multifamily properties; and

(vii) Lender’s receipt of all of the following:

(A) a transfer fee equal to:

(1) in the event that the Outstanding Advances immediately prior to the Transfer
are equal to or less than $200,000,000, the product of 75 basis points (0.75%)
multiplied by such amount of Outstanding Advances;

(2) in the event that the Outstanding Advances immediately prior to the Transfer
are greater than $200,000,000 but less than $400,000,000, the product of 50
basis points (0.50%) multiplied by such amount of Outstanding Advances; and

(3) in the event that the Outstanding Advances immediately prior to the Transfer
are equal to or greater than $400,000,000, the product of 25 basis points
(0.25%) multiplied by such amount of Outstanding Advances;

(B) a $3,000 review fee; and

 

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(C) In addition, Borrower shall be required to reimburse Lender for all of
Lender’s reasonable out-of-pocket costs (including reasonable attorneys’ fees)
incurred in reviewing the Transfer request.

(viii) the Transfer will not result in a significant modification under section
1001 of the Internal Revenue Code of any Advance that has been securitized in a
mortgage-backed security.

Section 7.16. Change in Senior Management.

Borrower shall give Lender notice of any change in the identity of any of the
Senior Management of Borrower or Guarantor within ten (10) Business Days of the
occurrence thereof.

Section 7.17. Date-Down Endorsements.

At the closing of any Additional Loan, a Lender may, at its option, obtain an
endorsement to each Title Insurance Policy amending the effective date of the
Title Insurance Policy to the date of the title search performed in connection
with the endorsement. Borrower shall pay for the cost and expenses incurred by
Lender to the Title Company in obtaining such endorsement, provided that, for
each Title Insurance Policy, it shall not be liable to pay for more than one
(1) such endorsement in any consecutive twelve (12) month period.

Section 7.18. Ownership of Mortgaged Properties.

Borrower shall be the sole owner of each of the Mortgaged Properties, as set
forth on Exhibit A of this Agreement, free and clear of any Liens other than
Permitted Liens.

Section 7.19. Change in Property Manager.

No change in the Property Manager of each Mortgaged Property shall be made
without the prior written consent of Lender, which approval shall be based on
the criteria for approval of Property Managers as required by Lender for similar
loans anticipated to be sold to Fannie Mae.

Section 7.20. Term of BRE Property Investors LLC.

On or before March 25, 2012, Borrower shall cause the term of the Operating
Agreement for BRE Property Investors LLC to be extended to no earlier than the
Termination Date. If Borrower fails to extend the term as required, Borrower
agrees that each Mortgaged Property that is owned indirectly by BRE Property
Investors LLC shall be (a) Released or Substituted on or before September 1,
2012, pursuant to the provisions of Article 3, and Borrower shall comply with
Article 3 and Section 5.05 or Section 5.06 (as applicable) including the payment
of any Outstanding Advances required pursuant to such Sections, or
(b) transferred to a BRE Affiliate pursuant to the terms of Section 7.14 (or BRE
Property Investors LLC shall be replaced as the managing member of BRE-FMAZ, LLC
by a BRE Affiliate pursuant to the terms of Section 7.14).

 

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Section 7.21. ROFO on Arizona Properties.

Borrower represents and warrants that attached as Exhibit K to this Agreement is
a true, correct and complete copy of that certain Right of First Offer Agreement
dated April 27, 2006, that affects those two (2) Mortgaged Properties commonly
known as South Mountain and Towne Center (the “Arizona ROFO”) and it has not
been amended, modified or waived in any respect. Borrower shall not amend,
modify or waive any provision of the Arizona ROFO without Lender’s prior written
consent. Borrower shall provide Lender copies of any notices sent or received
pursuant to the Arizona ROFO within ten (10) Business Days after sending or
receiving such notices.

ARTICLE 8

FINANCIAL COVENANTS

Section 8.01. Cash on Hand.

Borrower and Guarantor covenant and agree that at all times during the Term of
this Agreement that they collectively shall maintain cash, Cash Equivalents, or
an immediately available line of credit with a reputable financial institution
acceptable to Lender and Fannie Mae in their sole discretion in an amount equal
to no less than $20,000,000 (cash, Cash Equivalents and/or the line of credit,
collectively, “Cash on Hand”). Lender and Fannie Mae acknowledge that
Guarantor’s existing revolving line of credit with Wells Fargo, N.A. as lead
lender is with an acceptable reputable financial institution(s). To the extent
not available in the public reports and statements filed by Guarantor under the
Securities Exchange Act of 1934, Borrower and Guarantor shall send quarterly
reports to Lender specifying the amount and type of Cash on Hand and shall
provide such other evidence of the existence of the Cash on Hand as Lender shall
request.

Section 8.02. Net Worth.

Guarantor covenants and agrees that at all times it shall maintain a
Consolidated Tangible Net Worth of no less than $300,000,000. Solely for the
purpose of this Section 8.02, the following terms shall have the meaning set
forth below:

“Consolidated Tangible Net Worth” means, as of any date of determination, for
the Guarantor and the Subsidiaries, (a) the Shareholders’ Equity of the
Guarantor and the Subsidiaries on that date, exclusive of minority interests,
minus (b) the Intangible Assets of the Guarantor and the Subsidiaries on that
date.

“Intangible Assets” means assets that are considered to be intangible assets
under GAAP, including customer lists, goodwill, computer software, copyrights,
trade names, trademarks, patents, franchises, licenses, unamortized deferred
charges, unamortized debt discount and capitalized research and development
costs.

“Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity, determined in accordance with GAAP.

 

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“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
the Guarantor.

ARTICLE 9

NEGATIVE COVENANTS OF BORROWER AND GUARANTOR

Borrower agrees and covenants with Lender that, at all times during the Term of
this Agreement:

Section 9.01. Other Activities.

No Borrower Party shall:

(a) amend its Organizational Documents in any material respect without the prior
written consent of Lender, except in connection with a Permitted Transfer;

(b) change its name without notifying Lender in writing prior to such change;

(c) dissolve or liquidate in whole or in part;

(d) except as otherwise provided in this Agreement, without the prior written
consent of Lender, merge or consolidate with any Person; or

(e) use, or permit to be used, any Mortgaged Property for any uses or purposes
other than as a Multifamily Residential Property and ancillary uses consistent
with Multifamily Residential Properties.

Section 9.02. Liens.

Borrower shall not create, incur, assume or suffer to exist any Lien on any
Mortgaged Property or any part of any Mortgaged Property, except the Permitted
Liens.

Section 9.03. Indebtedness.

Borrower shall not incur or be obligated at any time with respect to any
Indebtedness (other than the Credit Facility or Additional Loans) in connection
with or secured by any of the Mortgaged Properties. Neither Borrower nor any
owner of Borrower shall incur any indebtedness or issue any equity secured by a
pledge of the membership interests in Borrower (i.e., mezzanine debt) or by a
pledge of the cash flow of Borrower.

 

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Section 9.04. Principal Place of Business.

Borrower shall not change its principal place of business, state of formation,
legal name or the location of its books and records, each as set forth in the
Certificate of Borrower Parties, without first giving thirty (30) days’ prior
written notice to Lender.

Section 9.05. Condominiums.

Borrower shall not submit any Mortgaged Property to a condominium regime during
the Term of this Agreement.

Section 9.06. Restrictions on Distributions.

Except for distributions required by tax laws and regulations in order for
Guarantor to maintain its tax status as a real estate investment trust, Borrower
shall not make any distributions of any nature or kind whatsoever to the owners
of its Ownership Interests as such if, at the time of such distribution, a
Potential Event of Default or an Event of Default has occurred and remains
uncured.

Section 9.07. Conduct of Business.

The conduct of Borrower’s businesses shall not violate the Organizational
Documents pursuant to which it is formed.

Section 9.08. Ownership of Property.

Borrower shall not (i) acquire any real or personal property other than the
Mortgaged Properties and personal property related to the operation and
maintenance of the Mortgaged Properties and (ii) operate any business other than
the management and operation of the Mortgaged Properties.

ARTICLE 10

FEES

Section 10.01. Origination Fee.

Borrower shall pay to Lender an origination fee (“Origination Fee”) equal to
$1,860,000, which is the product of 30 basis points (0.30%) multiplied by
$620,000,000, the Fixed Facility Commitment. $1,550,000 of the Origination Fee
shall be due and payable on or before the Initial Closing Date and $310,000
shall be due and payable on the earlier of the Closing Date of the Future
Advance or the Future Advance Expiration Date.

 

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Section 10.02. Due Diligence Fees.

(a) Initial Due Diligence Fees. On the Initial Closing Date (or, if the proposed
Initial Mortgaged Properties do not become part of the Collateral Pool, on
demand), Borrower shall pay to Lender due diligence fees (“Initial Due Diligence
Fees”) with respect to each Initial Mortgaged Property in an amount equal to the
reasonable out-of-pocket costs incurred by Lender in connection with Lender’s
due diligence for such Initial Mortgaged Properties, including but not limited
to third party reports required by Lender plus a $1,500 fee payable by Lender to
Fannie Mae. On or before the Initial Closing Date, Borrower shall pay a deposit
toward the Initial Due Diligence Fees equal to the product obtained by
multiplying (i) $15,000, by (ii) the number of Initial Mortgaged Properties,
minus the portion of the estimated amount of Initial Due Diligence Fees
previously paid to Lender by Borrower . On or prior to the Initial Closing Date,
Lender shall notify Borrower of the actual amount of the Initial Due Diligence
Fees and Borrower shall, on the Initial Closing Date, pay to Lender the
remainder of such Initial Due Diligence Fees (if the actual amount of the
Initial Due Diligence Fees exceeds the deposit and the other amounts previously
paid to Lender by Borrower) or Lender shall promptly refund to Borrower any
amounts paid to Lender by Borrower in excess of the Initial Due Diligence Fees
(if the actual amount of the Initial Due Diligence Fees is less than the deposit
and the other amounts previously paid to Lender by Borrower).

(b) Additional Due Diligence Fees for Substitute Collateral. Borrower shall pay
to Lender additional due diligence fees (the “Additional Collateral Due
Diligence Fees”) with respect to each Substitute Mortgaged Property in an amount
equal to the reasonable out-of-pocket costs incurred by Lender in connection
with Lender’s due diligence for such Substitute Mortgaged Properties, including
but not limited to third party reports required by Lender plus a $1,500 fee
payable by Lender to Fannie Mae. In connection with any Substitution Request,
Borrower shall pay to Lender a deposit toward the Additional Collateral Due
Diligence Fees equal to the product obtained by multiplying (i) $15,000, by
(ii) the number of Substitute Mortgaged Properties. The Additional Collateral
Due Diligence Fees not covered by the deposit shall be paid by Borrower on the
Closing Date (or if the proposed Substitute Mortgaged Property does not become
part of the Collateral Pool, on demand) for the Substitute Mortgaged Property.
Any portion of the Additional Collateral Due Diligence Fee paid to Lender not
actually used by Lender to cover reasonable due diligence expenses shall be
promptly refunded to Borrower.

Section 10.03. Legal Fees and Expenses.

(a) Initial Legal Fees. Borrower shall pay, or reimburse Lender for, all
reasonable out-of-pocket legal fees and expenses incurred by Lender and by
Fannie Mae in connection with the preparation, review and negotiation of this
Agreement and any other Loan Documents executed on the date of this Agreement.

(b) Fees and Expenses Associated with Requests. Borrower shall pay, or reimburse
Lender and Fannie Mae for, all reasonable out-of-pocket costs and expenses
incurred by Lender and Fannie Mae, including legal fees and expenses incurred by
Lender and Fannie Mae in connection with the preparation, review and negotiation
of all documents, instruments and certificates to be executed and delivered in
connection with each Request, the performance by Lender of any of its
obligations with respect to the Request, the satisfaction of all conditions
precedent to Borrower’s rights or Lender’s obligations with respect to the
Request, and all transactions related to any of the foregoing, including the
cost of title insurance premiums and applicable recordation and transfer taxes
and charges and all other reasonable out-of-pocket costs

 

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and expenses in connection with a Request. The obligations of Borrower under
this subsection shall be absolute and unconditional, regardless of whether the
transaction requested in the Request actually occurs. Borrower shall pay such
costs and expenses to Lender on the Closing Date for the Request, or, as the
case may be, after demand by Lender if Lender determines that such Request will
not be approved or otherwise close.

Section 10.04. Failure to Close any Request.

If Borrower makes a Request to close the Future Advance or any Additional
Advance and fails to close on the Future Advance or any Additional Advance for
any reason other than the default by Lender, then Borrower shall pay to Lender
and Fannie Mae all breakage costs incurred by Lender and Fannie Mae in
connection with the failure to close.

ARTICLE 11

EVENTS OF DEFAULT

Section 11.01. Events of Default.

Each of the following events shall constitute an “Event of Default” under this
Agreement, whatever the reason for such event and whether it shall be voluntary
or involuntary, or within or without the control of Borrower or Guarantor or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority:

(a) the occurrence of a default under any Loan Document beyond the cure period,
if any, set forth therein; or

(b) the failure by Borrower to pay when due any amount payable by Borrower under
any Note, any Security Instrument, this Agreement or any other Loan Document,
including any fees, costs or expenses;

(c) the failure by Borrower to perform or observe any covenant set forth in
Section 7.09 (Inform Lender of Material Events), Section 7.14 (Transfer of
Ownership Interests in Borrower and Guarantor), Section 7.15 (Transfer of
Ownership of Mortgaged Property), Section 7.18 (Ownership of Mortgaged
Properties), Section 7.19 (Change in Property Manager), Section 8.01 (Cash on
Hand), Section 8.02 (Net Worth), Section 9.01 (Other Activities), Section 9.02
(Liens), Section 9.03 (Indebtedness), Section 9.06 (Restrictions on
Distributions), or Section 9.08 (Ownership of Property); provided that, with
respect to Section 7.09(d) and Section 7.09(e), the failure to promptly inform
Lender in writing shall not be an Event of Default if the circumstances, acts,
conditions or events with respect to which notice was required to be given under
Section 7.09(d) and Section 7.09(e) do not then have and are not likely to have
in the future a Material Adverse Effect on the Borrower, Guarantor or any
Mortgaged Property (as determined by Lender in its sole discretion) at the time
the written notice is actually given to Lender; or

 

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(d) the failure by Borrower to perform or observe any covenant contained in
Article 7 or Article 9 (other than those sections specifically referenced in
Section 11.01(c) above) for thirty (30) days after receipt of notice of such
failure by Borrower from Lender, provided that such period shall be extended for
up to sixty (60) additional days if Borrower, in the discretion of Lender, is
diligently pursuing a cure of such default within thirty (30) days after receipt
of notice from Lender; or

(e) any warranty, representation or other written statement made by or on behalf
of Borrower or Guarantor contained in this Agreement, any other Loan Document or
in any instrument furnished in compliance with or in reference to any of the
foregoing, is false or misleading in any material respect on any date when made
or deemed made; or

(f) (i) Any Borrower Party shall (A) commence a voluntary case, whether of such
Person or an Affiliate thereof, under the Federal bankruptcy laws (as now or
hereafter in effect), (B) file a petition as debtor seeking to take advantage of
any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, debt adjustment, winding up or composition or adjustment of
debts, (C) consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws, (D) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of a substantial part of
its property, domestic or foreign, (E) admit in writing its inability to pay, or
generally not be paying, its debts as they become due, (F) make a general
assignment for the benefit of creditors, (G) assert that any Borrower Party has
no liability or obligations under this Agreement or any other Loan Document to
which it is a party; or (H) take any action for the purpose of effecting any of
the foregoing; or (ii) a case or other proceeding shall be commenced against any
Borrower Party in any court of competent jurisdiction seeking (A) relief under
the Federal bankruptcy laws (as now or hereafter in effect) or under any other
laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding upon or composition or adjustment of debts, or (B) the appointment of a
trustee, receiver, custodian, liquidator or the like of any Borrower Party,
whether by such Person or an Affiliate thereof, or of all or a substantial part
of the property, domestic or foreign, of any Borrower Party, whether by such
Person or an Affiliate thereof, and any such case or proceeding shall continue
undismissed or unstayed for a period of sixty (60) consecutive calendar days, or
any order granting the relief requested in any such case or proceeding against
any Borrower Party, whether by such Person or an Affiliate thereof (including an
order for relief under such Federal bankruptcy laws) shall be entered; or

(g) if any provision of this Agreement or any other Loan Document or the lien
and security interest purported to be created hereunder or under any Loan
Document shall at any time for any reason in any material respect cease to be
valid and binding in accordance with its terms on Borrower or Guarantor, or
shall be declared to be null and void in any material respect, or the validity
or enforceability hereof or thereof or the validity or priority of the lien and
security interest created hereunder or under any other Loan Document shall be
contested by Borrower or Guarantor seeking to establish the invalidity or
unenforceability hereof or thereof, or Borrower or Guarantor (only with respect
to the Guaranty) shall deny that it has any further liability or obligation
hereunder or thereunder; or

 

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(h) (i) except as permitted under the Loan Documents, the execution by Borrower
of a chattel mortgage or other security agreement on any materials, fixtures or
articles used in the construction or operation of the improvements located on
any Mortgaged Property or on articles of personal property located therein, or
(ii) if any such materials, fixtures or articles are purchased pursuant to any
conditional sales contract or other security agreement or otherwise so that the
Ownership thereof will not vest unconditionally in Borrower free from
encumbrances, or (iii) if Borrower does not furnish to Lender upon request the
contracts, bills of sale, statements, receipted vouchers and agreements, or any
of them, under which Borrower claims title to any materials, fixtures, or
articles referred to in subsections (i) or (ii) of this paragraph (h); or

(i) the failure by Borrower to comply with any requirement of any Governmental
Authority within thirty (30) days after written notice of such requirement shall
have been given to Borrower by such Governmental Authority; provided that, if
action is commenced and diligently pursued by Borrower within such thirty
(30) days, then Borrower shall have an additional ninety (90) days to comply
with such requirement; or

(j) a dissolution or liquidation for any reason (whether voluntary or
involuntary) of any Borrower Party; or

(k) any judgment against Borrower or Guarantor, any attachment or other levy
against any portion of Borrower’s or Guarantor’s assets with respect to a claim
or claims in an amount in excess of $100,000 individually and/or $250,000 in the
aggregate remains unpaid, unstayed, unappealled, undischarged, unbonded, not
fully insured or undismissed for a period of ninety (90) days; or

(l) the failure by Borrower or Guarantor to perform or observe any material
term, covenant, condition or agreement hereunder, other than as contained in
subsections (a) through (k) above, or in any other Loan Document, within thirty
(30) days after receipt of notice from Lender identifying such failure, provided
such period shall be extended for up to sixty (60) additional days if Borrower,
in the discretion of Lender, is diligently pursuing a cure of such default
within thirty (30) days after receipt of notice from Lender.

ARTICLE 12

REMEDIES

Section 12.01. Remedies; Waivers.

Upon the occurrence of an Event of Default, Lender may do any one or more of the
following (without presentment, protest or notice of protest, all of which are
expressly waived by Borrower Party):

(a) Lender may, at its sole option, cease making Future Advances and Additional
Loans, permitting Substitutions under this Agreement, or closing any Requests
and/or not permitting any new Requests under this Agreement.

(b) by written notice to Borrower, to be effective upon dispatch, terminate the
Fixed Facility Commitment and declare the principal of, and interest on, the
Advances and all other sums owing by Borrower to Lender under any of the Loan
Documents forthwith due and payable, whereupon the Fixed Facility Commitment
will terminate and the principal of, and interest on, the Advances and all other
sums owing by Borrower to Lender under any of the Loan Documents will become
forthwith due and payable.

 

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(c) Lender may accelerate any Note without the obligation, but the right to
accelerate any other Note and that in the exercise of its rights and remedies
under the Loan Documents, Lender may, except as provided in this Agreement,
exercise and perfect any and all of its rights in and under the Loan Documents
with regard to any Mortgaged Property without the obligation (but with the
right) to exercise and perfect its rights and remedies with respect to any other
Mortgaged Property and that any such exercise shall be without regard to the
Allocable Facility Amount assigned to such Mortgaged Property and that Lender
may recover an amount equal to the full amount Outstanding in respect of any of
the Notes in connection with such exercise and any such amount shall be applied
to the Obligations as determined by Lender in its sole and absolute discretion.

(d) Lender shall have the right to pursue any other remedies available to it
under any of the Loan Documents.

(e) Lender shall have the right to pursue all remedies available to it at law or
in equity, including obtaining specific performance and injunctive relief.

Section 12.02. Waivers; Rescission of Declaration.

Lender shall have the right, to be exercised in its complete discretion, to
waive any breach hereunder (including the occurrence of an Event of Default), by
a writing setting forth the terms, conditions, and extent of such waiver signed
by Lender and delivered to Borrower. Unless such writing expressly provides to
the contrary, any waiver so granted shall extend only to the specific event or
occurrence which gave rise to the waiver and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver. This provision
shall not be construed to permit the waiver of any condition to a Request
otherwise provided for herein.

Section 12.03. Lender’s Right to Protect Collateral and Perform Covenants and
Other Obligations.

If Borrower or Guarantor fails to perform the covenants and agreements contained
in this Agreement or any of the other Loan Documents, then Lender at Lender’s
option may make such appearances, disburse such sums and take such action as
Lender deems necessary, in its sole discretion, to protect Lender’s interest,
including (a) disbursement of reasonable attorneys’ fees, (b) entry upon the
Mortgaged Property to make repairs and replacements, (c) procurement of
satisfactory insurance as provided in Section 5 of the Security Instrument
encumbering the Mortgaged Property, and (d) if the Security Instrument is on a
leasehold, exercise of any option to renew or extend the ground lease on behalf
of Borrower and the curing of any default of Borrower in the terms and
conditions of the ground lease. Any amounts disbursed by Lender pursuant to this
Section 12.03, with interest thereon, shall become additional Indebtedness of
Borrower secured by the Loan Documents. Unless Borrower and Lender agree to
other terms of payment, such amounts shall be immediately due and payable and
shall bear interest from the date of disbursement at the weighted average, as
determined by Lender, of the interest rates in

 

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effect from time to time for each Advance unless collection from Borrower of
interest at such rate would be contrary to Applicable Law, in which event such
amounts shall bear interest at the highest rate which may be collected from
Borrower under Applicable Law. Nothing contained in this Section 12.03 shall
require Lender to incur any expense or take any action hereunder.

Section 12.04. No Remedy Exclusive.

Unless otherwise expressly provided, no remedy herein conferred upon or reserved
is intended to be exclusive of any other available remedy, but each remedy shall
be cumulative and shall be in addition to other remedies given under the Loan
Documents or existing at law or in equity.

Section 12.05. No Waiver.

No delay or omission to exercise any right or power accruing under any Loan
Document upon the happening of any Event of Default or Potential Event of
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.

Section 12.06. No Notice.

To entitle Lender to exercise any remedy reserved to Lender in this Article, it
shall not be necessary to give any notice, other than such notice as may be
required under the applicable provisions of this Agreement or any of the other
Loan Documents or under Applicable Law.

ARTICLE 13

INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES

Section 13.01. Insurance and Real Estate Taxes.

Borrower shall (unless waived by Lender in the Security Instrument) establish
funds for Taxes, insurance premiums and certain other charges for each Mortgaged
Property in accordance with Section 7(a) of the Security Instrument for each
Mortgaged Property.

Section 13.02. Replacement Reserves.

Borrower shall execute a Replacement Reserve Agreement for the Mortgaged
Properties and shall (unless waived by Lender pursuant to the Replacement
Reserve Agreement) make all deposits for replacement reserves in accordance with
the terms of the Replacement Reserve Agreement.

 

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ARTICLE 14

LIMITS ON PERSONAL LIABILITY

Section 14.01. Personal Liability to Borrower.

(a) Limits on Personal Liability. Except as otherwise provided in this
Section 14.01, Borrower and Guarantor shall have no personal liability under the
Loan Documents for the repayment of any Indebtedness or for the performance of
any other Obligations of Borrower under the Loan Documents, and Lender’s only
recourse for the satisfaction of such Indebtedness and the performance of such
Obligations shall be Lender’s exercise of its rights and remedies with respect
to the Mortgaged Properties and any other Collateral held by Lender as security
for the Indebtedness under the Loan Documents.

(b) Exceptions to Limits on Personal Liability. Borrower and Guarantor shall be
personally liable to Lender for the repayment of a portion of the Advances and
other amounts due under the Loan Documents equal to any loss or damage suffered
by Lender as a result of (i) failure of Borrower 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 encumbering the Mortgaged Property and
the amount of all security deposits collected by Borrower from tenants then in
residence; (ii) failure of Borrower to apply all insurance proceeds,
condemnation proceeds or security deposits from tenants as required by the
Security Instrument encumbering the Mortgaged Property; (iii) failure of such
Borrower or Guarantor to comply with its obligations under the Loan Documents
with respect to the delivery of books and records and financial statements;
(iv) fraud or written material misrepresentation by Borrower or Guarantor, or
any officer, director, partner, member or employee of Borrower or Guarantor in
connection with the application for or creation of the Obligations or any
request for any action or consent by Lender; (v) failure to apply Rents
(including pre-paid rents), first, to the payment of reasonable operating
expenses and then to amounts (“Debt Service Amounts”) payable under the Loan
Documents (except that Borrower or Guarantor will not be personally liable
(A) to the extent that Borrower or Guarantor lacks the legal right to direct the
disbursement of such sums because of a bankruptcy, receivership or similar
judicial proceeding, or (B) with respect to Rents of a Mortgaged Property that
are distributed in any Calendar Quarter if Borrower has paid all operating
expenses and Debt Service Amounts for that Calendar Quarter); or (vi) Borrower’s
failure to honor any and all indemnification obligations contained in Section 18
(environmental) of any Security Instrument.

(c) Full Recourse. Borrower and Guarantor shall be personally liable to Lender
for the payment and performance of all Obligations upon the occurrence of any of
the following: (i) Borrower acquisition of any property or operation of any
business not permitted by the Single Purpose requirements in the Loan Documents;
or (ii) a Transfer that is an Event of Default under any Loan Documents; or
(iii) any of the items identified in Section 11.01(f)(i)(A) through (H),
inclusive.

(d) Miscellaneous. To the extent that Borrower or Guarantor has personal
liability under this Section 14.01, or Guarantor has liability under the
Guaranty, such liability shall be joint and several and Lender may exercise its
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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 the Loan Documents or
Applicable Law. For purposes of this Article 14, the term “Mortgaged Property”
shall not include any funds that (i) have been applied by Borrower as required
or permitted by the Loan Documents prior to the occurrence of an Event of
Default, or (ii) are owned by Borrower or Guarantor and which Borrower was
unable to apply as required or permitted by the Loan Documents because of a
bankruptcy, receivership, or similar judicial proceeding.

(e) Permitted Transfer Not Release. No Transfer by any Person of its Ownership
Interests in Borrower shall release Borrower or Guarantor from liability under
this Article, this Agreement or any other Loan Document, unless Lender shall
have approved the Transfer and shall have expressly released Borrower or
Guarantor in connection with the Transfer.

Section 14.02. Additional Borrowers.

If the owner of a Substitute Mortgaged Property is a new Borrower, the owner of
such Substitute Mortgaged Property must demonstrate to the satisfaction of
Lender that:

(a) such new Borrower complies with the definition of “Additional Borrower;” and

(b) the Additional Borrower is a Single-Purpose entity, unless otherwise
approved by Lender.

In addition, on the Closing Date of the addition of a Substitute Mortgaged
Property, the owner of such Substitute Mortgaged Property, if such owner is an
Additional Borrower, shall become a party to a contribution agreement in a
manner satisfactory to Lender, shall deliver a Certificate of Borrower in form
and substance satisfactory to Lender, and execute and deliver, along with the
other Borrowers, Fixed Facility Notes. Any Additional Borrower of a Substitute
Mortgaged Property which becomes added to the Collateral Pool shall be a
Borrower for purposes of this Agreement and shall execute and deliver to Lender
an amendment adding such Additional Borrower as a party to this Agreement and
revising the Exhibits hereto, as applicable, to reflect the Substitute Mortgaged
Property and Additional Borrower, in each case satisfactory to Lender.

Upon the release of a Mortgaged Property, in the event that the Borrower which
owns the Release Mortgaged Property owns no other Mortgaged Property in the
Collateral Pool, such Borrower shall automatically without further action be
released from its obligations under this Agreement and the other Loan Documents
except for (i) any liabilities or obligations other than the Indebtedness of
such Borrower which arose prior to the Closing Date of such release and (ii) any
Obligations that survive release as specifically set forth in Section 18
(Environmental Hazards) of the Security Instrument applicable to such Release
Mortgaged Property.

 

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Section 14.03. Borrower Agency Provisions.

(a) Each Borrower and Additional Borrower hereby irrevocably designates BRE
PROPERTIES, INC., a Maryland corporation, as the borrower agent (the “Borrower
Agent”) to be its agent and in such capacity to receive on behalf of Borrower
all proceeds, receive all notices on behalf of Borrower under this Agreement,
make all Requests under this Agreement, and execute, deliver and receive all
instruments, certificates, Requests, documents, amendments, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower, and
hereby authorizes Lender to pay over all loan proceeds hereunder in accordance
with the direction of Borrower Agent. Each Borrower hereby acknowledges that all
notices required to be delivered by Lender to any Borrower shall be delivered to
Borrower Agent and thereby shall be deemed to have been received by such
Borrower.

(b) The handling of this Credit Facility as a co-borrowing facility with a
Borrower Agent in the manner set forth in this Agreement is solely as an
accommodation to Borrower and is at their request. Lender shall not incur
liability to Borrower as a result thereof. To induce Lender to do so and in
consideration thereof, each Borrower hereby indemnifies Lender and holds Lender
harmless from and against any and all liabilities, expenses, losses, damages and
claims of damage or injury asserted against Lender by any Person arising from or
incurred by reason of Borrower Agent handling of the financing arrangements of
Borrower as provided herein, reliance by Lender on any request or instruction
from Borrower Agent or any other action taken by Lender with respect to this
Section 14.03 except due to willful misconduct or gross negligence of the
indemnified party.

Section 14.04. Waivers With Respect to Other Borrower Secured Obligation (for
Mortgaged Properties located in California).

To the extent that a Security Instrument or any other Loan Document executed by
one Borrower secures an Obligation of another Borrower (the “Other Borrower
Secured Obligation”), and/or to the extent that a Borrower has guaranteed the
debt of another Borrower pursuant to Article 14, Borrower who executed such Loan
Document and/or guaranteed such debt (the “Waiving Borrower”) hereby agrees, to
the extent permitted by law, to the provisions of this Section 14.04. To the
extent that any Mortgaged Properties are located in California, and to the
extent permitted by law, the references to the California Code below shall apply
to this Agreement and any California Security Instrument securing a California
Mortgaged Property, otherwise the California Code shall have no effect on this
Agreement or any other Loan Document.

(a) The Waiving Borrower hereby waives any right it may now or hereafter have to
require the beneficiary, assignee or other secured party under such Loan
Document, as a condition to the exercise of any remedy or other right against it
thereunder or under any other Loan Document executed by the Waiving Borrower in
connection with the Other Borrower Secured Obligation: (i) to proceed against
the other Borrower or any other person, or against any other collateral assigned
to Lender by either Borrower or any other person; (ii) to pursue any other right
or remedy in Lender’s power; (iii) to give notice of the time, place or terms of
any public or private sale of real or personal property collateral assigned to
Lender by the other Borrower or any other person (other than the Waiving
Borrower), or otherwise to comply with Section 9615 of the California Commercial
Code (as modified or recodified from time to time) with respect to any such
personal property collateral located in the State of California to the

 

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extent permitted by law; or (iv) to make or give (except as otherwise expressly
provided in the Security Documents) any presentment, demand, protest, notice of
dishonor, notice of protest or other demand or notice of any kind in connection
with the Other Borrower Secured Obligation or any collateral (other than the
Collateral described in such Security Document) for the Other Borrower Secured
Obligation.

(b) The Waiving Borrower hereby waives any defense it may now or hereafter have
that relates to: (i) any disability or other defense of the other Borrower or
any other person; (ii) the cessation, from any cause other than full
performance, of the Other Borrower Secured Obligation; (iii) the application of
the proceeds of the Other Borrower Secured Obligation, by the other Borrower or
any other person, for purposes other than the purposes represented to the
Waiving Borrower by the other Borrower or otherwise intended or understood by
the Waiving Borrower or the other Borrower; (iv) any act or omission by Lender
which directly or indirectly results in or contributes to the release of the
other Borrower or any other person or any collateral for any Other Borrower
Secured Obligation; (v) the unenforceability or invalidity of any Security
Document or Loan Document (other than the Security Instrument executed by the
Waiving Borrower that secures the Other Borrower Secured Obligation) or guaranty
with respect to any Other Borrower Secured Obligation, or the lack of perfection
or continuing perfection or lack of priority of any Lien (other than the Lien of
such Security Instrument) which secures any Other Borrower Secured Obligation;
(vi) any failure of Lender to marshal assets in favor of the Waiving Borrower or
any other person; (vii) any modification of any Other Borrower Secured
Obligation, including any renewal, extension, acceleration or increase in
interest rate; (viii) any and all rights and defenses arising out of an election
of remedies by Lender, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Waiving Borrower’s rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure or otherwise; (ix) any law which provides that the obligation of
a surety or guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a surety’s or
guarantor’s obligation in proportion to the principal obligation; (x) any
failure of Lender to file or enforce a claim in any bankruptcy or other
proceeding with respect to any person; (xi) the election by Lender, in any
bankruptcy proceeding of any person, of the application or non-application of
Section 1111(b)(2) of the Bankruptcy Code; (xii) any extension of credit or the
grant of any lien under Section 364 of the Bankruptcy Code; (xiii) any use of
cash collateral under Section 363 of the Bankruptcy Code; or (xiv) any agreement
or stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any person. The Waiving Borrower further waives any and
all rights and defenses that it may have because the Other Borrower Secured
Obligation is secured by real property; this means, among other things, that:
(A) Lender may collect from the Waiving Borrower without first foreclosing on
any real or personal property collateral pledged by the other Borrower; (B) if
Lender forecloses on any real property collateral pledged by the other Borrower,
then (C) the amount of the Other Borrower Secured Obligation may be reduced only
by the price for which that collateral is sold at the foreclosure sale, even if
the collateral is worth more than the sale price; and (D) Lender may foreclose
on the real property encumbered by the Security Instrument executed by the
Waiving Borrower and securing the Other Borrower Secured Obligation even if
Lender, by foreclosing on the real property collateral of the Other Borrower,
has destroyed any right the Waiving Borrower may have to collect from the Other
Borrower. Subject to the last

 

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sentence of Section 14.03, the foregoing sentence is an unconditional and
irrevocable waiver of any rights and defenses the Waiving Borrower may have
because the Other Borrower Secured Obligation is secured by real property. These
rights and defenses being waived by the Waiving Borrower include, but are not
limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of
the California Code of Civil Procedure. Without limiting the generality of the
foregoing or any other provision hereof, the Waiving Borrower further expressly
waives, except as provided in Section 14.04(g) below, to the extent permitted by
law any and all rights and defenses, which might otherwise be available to it
under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or
under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or
any of such sections.

(c) The Waiving Borrower hereby waives any and all benefits and defenses under
California Civil Code Section 2810 and agrees that by doing so the Security
Instrument executed by the Waiving Borrower and securing the Other Borrower
Secured Obligation shall be and remain in full force and effect even if the
other Borrower had no liability at the time of incurring the Other Borrower
Secured Obligation, or thereafter ceases to be liable. The Waiving Borrower
hereby waives any and all benefits and defenses under California Civil Code
Section 2809 and agrees that by doing so the Waiving Borrower’s liability may be
larger in amount and more burdensome than that of the other Borrower. The
Waiving Borrower hereby waives the benefit of all principles or provisions of
law, which are or might be in conflict with the terms of any of its waivers, and
agrees that the Waiving Borrower’s waivers shall not be affected by any
circumstances, which might otherwise constitute a legal or equitable discharge
of a surety or a guarantor. The Waiving Borrower hereby waives the benefits of
any right of discharge and all other rights under any and all statutes or other
laws relating to guarantors or sureties, to the fullest extent permitted by law,
diligence in collecting the Other Borrower Secured Obligation, presentment,
demand for payment, protest, all notices with respect to the Other Borrower
Secured Obligation, which may be required by statute, rule of law or otherwise
to preserve Lender’s rights against the Waiving Borrower hereunder, including
notice of acceptance, notice of any amendment of the Loan Documents evidencing
the Other Borrower Secured Obligation, notice of the occurrence of any default
or Event of Default, notice of intent to accelerate, notice of acceleration,
notice of dishonor, notice of foreclosure, notice of protest, notice of the
incurring by the other Borrower of any obligation or indebtedness and all rights
to require Lender to (i) proceed against the other Borrower, (ii) proceed
against any managing member of the other Borrower, (iii) proceed against or
exhaust any collateral held by Lender to secure the Other Borrower Secured
Obligation, or (iv) if the other Borrower is a partnership, pursue any other
remedy it may have against the other Borrower, or any managing member of the
other Borrower, including any and all benefits under California Civil Code
Sections 2845, 2849 and 2850.

(d) The Waiving Borrower understands that the exercise by Lender of certain
rights and remedies contained in a Security Instrument executed by the other
Borrower (such as a nonjudicial foreclosure sale) may affect or eliminate the
Waiving Borrower’s right of subrogation against the other Borrower and that the
Waiving Borrower may therefore incur a partially or totally nonreimburseable
liability. Nevertheless, the Waiving Borrower hereby authorizes and empowers
Lender to exercise, in its sole and absolute discretion, any right or remedy, or
any combination thereof, which may then be available, since it is the intent and
purpose of the Waiving Borrower that its waivers shall be absolute, independent
and unconditional under any and all circumstances.

 

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(e) In accordance with Section 2856 of the California Civil Code, the Waiving
Borrower also waives any right or defense based upon an election of remedies by
Lender, even though such election (e.g., nonjudicial foreclosure with respect to
any collateral held by Lender to secure repayment of the Other Borrower Secured
Obligation) destroys or otherwise impairs the subrogation rights of the Waiving
Borrower to any right to proceed against the other Borrower for reimbursement,
or both, by operation of Section 580d of the California Code of Civil Procedure
or otherwise.

(f) In accordance with Section 2856 of the California Civil Code, the Waiving
Borrower waives any and all other rights and defenses available to the Waiving
Borrower by reason of Sections 2787 through 2855, inclusive, of the California
Civil Code, including any and all rights or defenses the Waiving Borrower may
have by reason of protection afforded to the other Borrower with respect to the
Other Borrower Secured Obligation pursuant to the antideficiency or other laws
of the State of California limiting or discharging the Other Borrower Secured
Obligation, including Sections 580a, 580b, 580d, and 726 of the California Code
of Civil Procedure.

(g) In accordance with Section 2856 of the California Civil Code and pursuant to
any other Applicable Law, the Waiving Borrower agrees to withhold the exercise
of any and all subrogation, contribution and reimbursement rights against the
other Borrower, against any other person, and against any collateral or security
for the Other Borrower Secured Obligation, including any such rights pursuant to
Sections 2847 and 2848 of the California Civil Code, until the Other Borrower
Secured Obligation has been indefeasibly paid and satisfied in full, all
obligations owed to Lender under the Loan Documents have been fully performed,
and Lender has released, transferred or disposed of all of their right, title
and interest in such collateral or security.

(h) Each Borrower hereby irrevocably and unconditionally agrees that in the
event that, notwithstanding Section 14.04(g) hereof, to the extent its agreement
and waiver set forth in Section 14.04(g) is found by a court of competent
jurisdiction to be void or voidable for any reason and such Borrower has any
subrogation or other rights against any other Borrower, any such claims, direct
or indirect, that such Borrower may have by subrogation rights or other form of
reimbursement, contribution or indemnity, against any other Borrower or to any
security or any such Borrower, shall be and such rights, claims and indebtedness
are hereby deferred, postponed and fully subordinated in time and right of
payment to the prior payment, performance and satisfaction in full of the
Obligations. Until payment and performance in full with interest (including
post-petition interest in any case under any chapter of the Bankruptcy Code) of
the Obligations, each Borrower agrees not to accept any payment or satisfaction
of any kind on Indebtedness of any other Borrower in respect of any such
subrogation rights arising by virtue of payments made pursuant to this Article
14, and hereby assigns such rights or indebtedness to Lender, including the
right to file proofs of claim and to vote thereon in connection with any case
under any chapter of the Bankruptcy Code, including the right to vote on any
plan of reorganization. In the event that any payment on account of any such
subrogation rights shall be received by any Borrower in violation of the
foregoing, such payment shall be held in trust for the benefit of Lender, and
any amount so collected should be turned over to Lender for application to the
Obligations.

 

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(i) At any time without notice to the Waiving Borrower, and without affecting or
prejudicing the right of Lender to proceed against the Collateral described in
any Loan Document executed by the Waiving Borrower and securing the Other
Borrower Secured Obligation, (i) the time for payment of the principal of or
interest on, or the performance of, the Other Borrower Secured Obligation may be
extended or the Other Borrower Secured Obligation may be renewed in whole or in
part; (ii) the time for the other Borrower’s performance of or compliance with
any covenant or agreement contained in the Loan Documents evidencing the Other
Borrower Secured Obligation, whether presently existing or hereinafter entered
into, may be extended or such performance or compliance may be waived; (iii) the
maturity of the Other Borrower Secured Obligation may be accelerated as provided
in the related Note or any other related Loan Document; (iv) the related Note or
any other related Loan Document may be modified or amended by Lender and the
other Borrower in any respect, including an increase in the principal amount;
and (v) any security for the Other Borrower Secured Obligation may be modified,
exchanged, surrendered or otherwise dealt with or additional security may be
pledged or mortgaged for the Other Borrower Secured Obligation.

(j) It is agreed among each Borrower and Lender that all of the foregoing
waivers are of the essence of the transaction contemplated by this Agreement and
the Loan Documents and that but for the provisions of this Article 14 and such
waivers Lender would decline to enter into this Agreement.

Section 14.05. Joint and Several Obligation; Cross-Guaranty.

Notwithstanding anything contained in this Agreement or the other Loan Documents
to the contrary (but subject to the last sentence of this Section 14.05 and the
provisions of Section 14.01 and Section 14.12), each Borrower shall have joint
and several liability for all Obligations. Notwithstanding the intent of all of
the parties to this Agreement that all Obligations of each Borrower under this
Agreement and the other Loan Documents shall be joint and several Obligations of
each Borrower, each Borrower, on a joint and several basis, hereby irrevocably
guarantees to Lender and its successors and assigns, the full and prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of,
all Obligations owed or hereafter owing to Lender by each other Borrower, but
subject to the provisions of Section 14.01. Subject to the provisions of
Section 14.01, each Borrower agrees that its guaranty obligation hereunder is an
unconditional guaranty of payment and performance and not merely a guaranty of
collection. The Obligations of each Borrower under this Agreement shall not be
subject to any counterclaim, set-off, recoupment, deduction, cross-claim or
defense based upon any claim any Borrower may have against Lender or any other
Borrower.

Section 14.06. No Impairment.

Each Borrower agrees that the provisions of this Article 14 are for the benefit
of Lender and their successors, transferees, endorsees and assigns, and nothing
herein contained shall impair, as between any other Borrower and Lender, the
obligations of such other Borrower under the Loan Documents.

 

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Section 14.07. Election of Remedies.

(a) Lender, in its discretion, may (i) bring suit against any one or more
Borrower, jointly and severally, without any requirement that Lender first
proceed against any other Borrower or any other Person; (ii) compromise or
settle with any one or more Borrower, or any other Person, for such
consideration as Lender may deem proper; (iii) release one or more Borrower, or
any other Person, from liability; and (iv) otherwise deal with any Borrower and
any other Person, or any one or more of them, in any manner, or resort to any of
the Collateral at any time held by it for performance of the Obligations or any
other source or means of obtaining payment of the Obligations, and no such
action shall impair the rights of Lender to collect from any Borrower any amount
guaranteed by any Borrower under this Article 14.

(b) If, in the exercise of any of its rights and remedies, Lender shall forfeit
any of its rights or remedies, including its rights to enter a deficiency
judgment against any Borrower or any other Person, whether because of any
Applicable Laws pertaining to “election of remedies” or the like, each Borrower
hereby consents to such action by Lender and waives any claim based upon such
action, even if such action by Lender shall result in a full or partial loss of
any rights of subrogation which each Borrower might otherwise have had but for
such action by Lender. Any election of remedies which results in the denial or
impairment of the right of Lender to seek a deficiency judgment against any
Borrower shall not impair any other Borrower’s obligation to pay the full amount
of the Obligations. In the event Lender shall bid at any foreclosure or
trustee’s sale or at any private sale permitted by law or any of the Loan
Documents, Lender may bid all or less than the amount of the Obligations and the
amount of such bid need not be paid by Lender but shall be credited against the
Obligations. The amount of the successful bid at any such sale, whether Lender
or any other party is the successful bidder, shall be conclusively deemed to be
fair market value of the Collateral and the difference between such bid amount
and the remaining balance of the Obligations shall be conclusively deemed to be
amount of the Obligations guaranteed under this Article 14, notwithstanding that
any present or future law or court decision or ruling may have the effect of
reducing the amount of any deficiency claim to which Lender might otherwise be
entitled but for such bidding at any such sale.

Section 14.08. Subordination of Other Obligations.

(a) Each Borrower hereby irrevocably and unconditionally agrees that all amounts
payable from time to time to such Borrower by any other Borrower pursuant to any
agreement, whether secured or unsecured, whether of principal, interest or
otherwise, other than the amounts referred to in this Article 14 (collectively,
the “Subordinated Obligations”), shall be and such rights, claims and
indebtedness are, hereby deferred, postponed and fully subordinated in time and
right of payment to the prior payment, performance and satisfaction in full of
the Obligations; provided, however, that payments may be received by any
Borrower in accordance with, and only in accordance with, the provisions of
Section 14.08(b) hereof.

 

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(b) Until the Obligations under all the Loan Documents have been finally paid in
full or fully performed and all the Loan Documents have been terminated, each
Borrower irrevocably and unconditionally agrees it will not ask, demand, sue
for, take or receive, directly or indirectly, by set-off, redemption, purchase
or in any other manner whatsoever, any payment with respect to, or any security
or guaranty for, the whole or any part of the Subordinated Obligations, and in
issuing documents, instruments or agreements of any kind evidencing the
Subordinated Obligations, each Borrower hereby agrees that it will not receive
any payment of any kind on account of the Subordinated Obligations, so long as
any of the Obligations under all the Loan Documents are Outstanding or any of
the terms and conditions of any of the Loan Documents are in effect; provided,
however, that, notwithstanding anything to the contrary contained herein, if no
Potential Event of Default or Event of Default or any other event or condition
which would constitute an Event of Default after notice or lapse of time or both
has occurred and is continuing under any of the Loan Documents, then
(i) payments may be received by such Borrower in respect of the Subordinated
Obligations in accordance with the stated terms thereof, and (ii) each Borrower
and Guarantor shall be permitted to make distributions in accordance with the
terms of the applicable Organizational Documents. Except as aforesaid, each
Borrower agrees not to accept any payment or satisfaction of any kind of
indebtedness of any other Borrower in respect of the Subordinated Obligations
and hereby assigns such rights or indebtedness to Lender, including the right to
file proofs of claim and to vote thereon in connection with any case under any
chapter of the Bankruptcy Code, including the right to vote on any plan of
reorganization. In the event that any payment on account of Subordinated
Obligations shall be received by any Borrower in violation of the foregoing,
such payment shall be held in trust for the benefit of Lender, and any amount so
collected shall be turned over to Lender upon demand.

Section 14.09. Insolvency and Liability of Other Borrower.

So long as any of the Obligations are Outstanding, if a petition under any
chapter of the Bankruptcy Code is filed by or against any Borrower (the “Subject
Borrower” for the purposes of Section 14.09, Section 14.10, Section 14.11 and
Section 14.12 of this Agreement), each other Borrower (each, an “Other Borrower”
for the purposes of Section 14.09, Section 14.10, Section 14.11 and
Section 14.12 of this Agreement) agrees to file all claims against the Subject
Borrower in any bankruptcy or other proceeding in which the filing of claims is
required by law in connection with indebtedness owed by the Subject Borrower and
to assign to Lender all rights thereunder up to the amount of such indebtedness.
In all such cases, the Person or Persons authorized to pay such claims shall pay
to Lender the full amount thereof and Lender agrees to pay such Other Borrower
any amounts received in excess of the amount necessary to pay the Obligations.
Each Other Borrower hereby assigns to Lender all of such Borrower’s rights to
all such payments to which such Other Borrower would otherwise be entitled but
not to exceed the full amount of the Obligations. In the event that,
notwithstanding the foregoing, any such payment shall be received by any Other
Borrower before the Obligations shall have been finally paid in full, such
payment shall be held in trust for the benefit of and shall be paid over to
Lender upon demand. Furthermore, notwithstanding the foregoing, the liability of
each Borrower hereunder shall in no way be affected by:

(a) the release or discharge of any Other Borrower in any creditors’,
receivership, bankruptcy or other proceedings; or

 

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(b) the impairment, limitation or modification of the liability of any Other
Borrower or the estate of any Other Borrower in bankruptcy resulting from the
operation of any present or future provisions of any chapter of the Bankruptcy
Code or other statute or from the decision in any court.

Section 14.10. Preferences, Fraudulent Conveyances, Etc.

If Lender is required to refund, or voluntarily refunds, any payment received
from any Borrower because such payment is or may be avoided, invalidated,
declared fraudulent, set aside or determined to be void or voidable as a
preference, fraudulent conveyance, impermissible setoff or a diversion of trust
funds under the bankruptcy laws or for any similar reason, including without
limitation any judgment, order or decree of any court or administrative body
having jurisdiction over any Borrower or any of its property, or upon or as a
result of the appointment of a receiver, intervenor, custodian or conservator
of, or trustee or similar officer for, any Borrower or any substantial part of
its property, or otherwise, or any statement or compromise of any claim effected
by Lender with any Borrower or any other claimant (a “Rescinded Payment”), then
each Other Borrower’s liability to Lender shall continue in full force and
effect, or each Other Borrower’s liability to Lender shall be reinstated and
renewed, as the case may be, with the same effect and to the same extent as if
the Rescinded Payment had not been received by Lender, notwithstanding the
cancellation or termination of any of the Loan Documents, and regardless of
whether Lender contested the order requiring the return of such payment. In
addition, each Other Borrower shall pay, or reimburse Lender for, all expenses
(including all reasonable attorneys’ fees, court costs and related
disbursements) incurred by Lender in the defense of any claim that a payment
received by Lender in respect of all or any part of the Obligations must be
refunded. The provisions of this Section 14.10 shall survive the termination of
the Loan Documents and any satisfaction and discharge of any Borrower by virtue
of any payment, court order or any federal or state law.

Section 14.11. Maximum Liability of Each Borrower.

Notwithstanding anything contained in this Agreement or any of the Loan
Documents to the contrary, if the obligations of any Borrower under this
Agreement or any of the other Loan Documents or any Security Instruments granted
by any Borrower are determined to exceed the reasonably equivalent value
received by such Borrower in exchange for such obligations or grant of such
Security Instruments under any Fraudulent Transfer Law (as hereinafter defined),
then such liability of such Borrower shall be limited to a maximum aggregate
amount equal to the largest amount that would not render its obligations under
this Agreement or all the Other Loan Documents subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the United
States Code or any applicable provisions of comparable state law (collectively,
the “Fraudulent Transfer Laws”), in each case after giving effect to all other
liabilities of such Borrower, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of such Borrower in respect of Indebtedness to any Other Borrower or any other
Person that is an Affiliate of the Other Borrower to the extent that such
Indebtedness would be discharged in an amount equal to the amount paid by such
Borrower in respect of the Obligations) and after giving effect (as assets) to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of such Borrower pursuant to Applicable Law or pursuant to the
terms of any agreement including any contribution agreement.

 

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Section 14.12. Liability Cumulative.

The liability of each Borrower under this Article 14 is in addition to and shall
be cumulative with all liabilities of such Borrower to Lender under this
Agreement and all the other Loan Documents to which such Borrower is a party or
in respect of any Obligations of any Other Borrower.

ARTICLE 15

MISCELLANEOUS PROVISIONS

Section 15.01. Counterparts.

To facilitate execution, this Agreement may be executed in any number of
counterparts. It shall not be necessary that the signatures of, or on behalf of,
each party, or that the signatures of all persons required to bind any party,
appear on each counterpart, but it shall be sufficient that the signature of, or
on behalf of, each party, appear on one or more counterparts. All counterparts
shall collectively constitute a single agreement. It shall not be necessary in
making proof of this Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto.

Section 15.02. Amendments, Changes and Modifications.

This Agreement may be amended, changed, modified, altered or terminated only by
written instrument or written instruments signed by all of the parties hereto.

Section 15.03. Payment of Costs, Fees and Expenses.

Borrower shall pay, on demand, all reasonable fees, costs, charges or expenses
(including the fees and expenses of attorneys, accountants and other experts)
incurred by Lender in connection with:

(a) Any amendment, consent or waiver to this Agreement or any of the Loan
Documents (whether or not any such amendments, consents or waivers are entered
into).

(b) Defending or participating in any litigation arising from actions by third
parties and brought against or involving Lender with respect to (i) any
Mortgaged Property, (ii) any event, act, condition or circumstance in connection
with any Mortgaged Property or (iii) the relationship between Lender and
Borrower and Guarantor in connection with this Agreement or any of the
transactions contemplated by this Agreement.

(c) The administration or enforcement of, or preservation of rights or remedies
under, this Agreement or any other Loan Documents or in connection with the
foreclosure upon, sale of or other disposition of any Collateral granted
pursuant to the Loan Documents.

 

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(d) Any disclosure documents, including fees payable to any rating agencies,
including the fees and expenses of Lender’s attorneys and accountants.

Borrower shall also pay, on demand, any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution, delivery, filing, recordation, performance or enforcement of any of
the Loan Documents or the Advances. Any attorneys’ fees and expenses payable by
Borrower pursuant to this Section 15.03 shall be recoverable separately from and
in addition to any other amount included in such judgment, and such obligation
is intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment. Any amounts payable by
Borrower pursuant to this Section 15.03, with interest thereon if not paid when
due, shall become additional Indebtedness of Borrower secured by the Loan
Documents. Such amounts shall bear interest from the date such amounts are due
until paid in full at the weighted average, as determined by Lender, of the
interest rates in effect from time to time for each Advance unless collection
from Borrower of interest at such rate would be contrary to Applicable Law, in
which event such amounts shall bear interest at the highest rate which may be
collected from Borrower under Applicable Law. The provisions of this
Section 15.03 are cumulative with, and do not exclude the application and
benefit to Lender of, any provision of any other Loan Document relating to any
of the matters covered by this Section 15.03.

Section 15.04. Payment Procedure.

All payments to be made to Lender pursuant to this Agreement or any of the Loan
Documents shall be made in lawful currency of the United States of America and
in immediately available funds by wire transfer before 2:00 p.m. (Eastern
Standard Time or Eastern Daylight Savings Time, as applicable) on the date when
due to an account designated by Lender.

Section 15.05. Payments on Business Days.

In any case in which the date of payment to Lender or the expiration of any time
period hereunder occurs on a day which is not a Business Day, then such payment
or expiration of such time period need not occur on such date but may be made on
the next succeeding Business Day with the same force and effect as if made on
the day of maturity or expiration of such period, except that interest shall
continue to accrue for the period after such date to the next Business Day.

Section 15.06. Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.

NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE
OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND
RIGHTS AND OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT AND THE NOTES, GUARANTOR
UNDER THE GUARANTY, AND BORROWER, GUARANTOR AND LENDER UNDER THE OTHER LOAN
DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED, CONSTRUED AND ENFORCED PURSUANT TO
AND IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA (EXCLUDING THE LAW
APPLICABLE TO CONFLICTS OR

 

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CHOICE OF LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS
RELATING ONLY TO (a) THE CREATION, PERFECTION AND FORECLOSURE OF LIENS AND
SECURITY INTERESTS, AND ENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE
MORTGAGED PROPERTIES, WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION IN WHICH THE MORTGAGED PROPERTY IS LOCATED, (b) THE PERFECTION, THE
EFFECT OF PERFECTION AND NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON
PERSONAL PROPERTY (OTHER THAN DEPOSIT ACCOUNTS), WHICH MATTERS SHALL BE GOVERNED
BY THE LAWS OF THE JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF
THE UNIFORM COMMERCIAL CODE IN EFFECT FOR THE JURISDICTION IN WHICH THE
MORTGAGED PROPERTY IS LOCATED AND (c) THE PERFECTION, THE EFFECT OF PERFECTION
AND NON-PERFECTION AND FORECLOSURE OF DEPOSIT ACCOUNTS, WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE DEPOSIT ACCOUNT IS
LOCATED. BORROWER, GUARANTOR AND LENDER AGREE THAT ANY CONTROVERSY ARISING UNDER
OR IN RELATION TO THE NOTES, THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY
INSTRUMENTS) OR ANY OTHER LOAN DOCUMENT SHALL BE, EXCEPT AS OTHERWISE PROVIDED
HEREIN, LITIGATED IN DISTRICT OF COLUMBIA. THE LOCAL AND FEDERAL COURTS AND
AUTHORITIES WITH JURISDICTION IN DISTRICT OF COLUMBIA SHALL, EXCEPT AS OTHERWISE
PROVIDED HEREIN, HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER
OR IN RELATION TO THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIES RELATING TO
THE EXECUTION, JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH THE NOTES,
THE SECURITY DOCUMENTS (OTHER THAN THE SECURITY INSTRUMENTS) OR ANY OTHER ISSUE
ARISING UNDER, RELATING TO, OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS.
BORROWER, GUARANTOR AND LENDER IRREVOCABLY CONSENT TO SERVICE, JURISDICTION, AND
VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM THE NOTES, THE SECURITY
DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVES ANY OTHER VENUE TO
WHICH IT MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL RESIDENCE OR
OTHERWISE. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING
ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST BORROWER AND
GUARANTOR AND AGAINST THE COLLATERAL IN ANY OTHER JURISDICTION. INITIATING SUCH
SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER JURISDICTION SHALL
IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS
OF DISTRICT OF COLUMBIA SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF BORROWER AND
GUARANTOR AND LENDER AS PROVIDED HEREIN OR THE SUBMISSION HEREIN BY BORROWER AND
GUARANTOR TO PERSONAL JURISDICTION WITHIN DISTRICT OF COLUMBIA. BORROWER AND
GUARANTOR (i) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO
ANY ISSUE ARISING UNDER ANY OF THE LOAN DOCUMENTS TRIABLE BY A JURY AND
(ii) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW

 

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OR HEREAFTER EXIST. THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. FURTHER, BORROWER AND GUARANTOR HEREBY CERTIFY THAT NO REPRESENTATIVE OR
AGENT OF LENDER (INCLUDING, BUT NOT LIMITED TO, LENDER’S COUNSEL) HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER AND GUARANTOR THAT LENDER WILL
NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION 15.06. THE FOREGOING
PROVISIONS WERE KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREED TO BY BORROWER AND
GUARANTOR UPON CONSULTATION WITH INDEPENDENT LEGAL COUNSEL SELECTED BY
BORROWER’S AND GUARANTOR’S FREE WILL.

Section 15.07. Severability.

In the event any provision of this Agreement or in any other Loan Document shall
be held invalid, illegal or unenforceable in any jurisdiction, such provision
will be severable from the remainder hereof as to such jurisdiction and the
validity, legality and enforceability of the remaining provisions will not in
any way be affected or impaired in any jurisdiction.

Section 15.08. Notices.

(a) Manner of Giving Notice. Each notice, direction, certificate or other
communication hereunder (in this Section 15.08 referred to collectively as
“notices” and singularly as a “notice”) which any party is required or permitted
to give to the other party pursuant to this Agreement shall be in writing and
shall be deemed to have been duly and sufficiently given if:

(i) personally delivered with proof of delivery thereof (any notice so delivered
shall be deemed to have been received at the time so delivered);

(ii) sent by Federal Express (or other similar reputable overnight courier)
designating morning delivery (any notice so delivered shall be deemed to have
been received on the Business Day it is delivered by the courier);

(iii) sent by telecopier or facsimile machine which automatically generates a
transmission report that states the date and time of the transmission, the
length of the document transmitted, and the telephone number of the recipient’s
telecopier or facsimile machine (to be confirmed with a copy thereof sent in
accordance with paragraphs (i) or (ii) above within two (2) Business Days) (any
notice so delivered shall be deemed to have been received (A) on the date of
transmission, if so transmitted before 5:00 p.m. (local time of the recipient)
on a Business Day, or (B) on the next Business Day, if so transmitted on or
after 5:00 p.m. (local time of the recipient) on a Business Day or if
transmitted on a day other than a Business Day), addressed to the parties as
follows:

 

As to Borrower:

   BRE Properties, Inc.    525 Market Street, 4th Floor    San Francisco, CA
94105    Attention:        Pete Olson    Telecopy No.: (415) 520-9154   
Attention:        Kerry Fanwick, Esq.    Telecopy No.: (415) 520-9154

 

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with a copy to:

   Sheppard Mullin Richter & Hampton LLP    Four Embarcadero Center, 17th Floor
   San Francisco, CA 94111    Attention:        Geraldine Freeman, Esq.   
Telecopy No.: (415) 434-3947

As to Lender:

   Deutsche Bank Berkshire Mortgage, Inc.    One Beacon Street, 14th Floor   
Boston, Massachusetts 02108    Attention:        Vice President, Loan Servicing
   Telecopy No.: (617) 556-1507

As to Guarantor:

   BRE Properties, Inc.    525 Market Street, 4th Floor    San Francisco, CA
94105    Attention:        Pete Olson    Telecopy No.: (415) 520-9154   
Attention:        Kerry Fanwick, Esq.    Telecopy No.: (415) 520-9154

with a copy to:

   Sheppard Mullin Richter & Hampton LLP    Four Embarcadero Center, 17th Floor
   San Francisco, CA 94111    Attention:        Geraldine Freeman, Esq.   
Telecopy No.: (415) 434-3947

As to Fannie Mae:

   Fannie Mae    3900 Wisconsin Avenue, N.W.    Washington, D.C. 20016-2899   
Attention:        Vice President for Multifamily Asset Management    Telecopy
No.: (301) 280-2064

with a copy to:

   Venable LLP    575 7th Street, N.W.    Washington, D.C. 20004   
Attention:        Stephanie L. DeLong, Esq.    Telecopy No.: (202) 344-8300

(b) Change of Notice Address. Any party may, by notice given pursuant to this
Section 15.08, change the person or persons and/or address or addresses, or
designate an

 

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additional person or persons or an additional address or addresses, for its
notices, but notice of a change of address shall only be effective upon receipt.
Each party agrees that it shall not refuse or reject delivery of any notice
given hereunder, that it shall acknowledge, in writing, receipt of the same upon
request by the other party and that any notice rejected or refused by it shall
be deemed for all purposes of this Agreement to have been received by the
rejecting party on the date so refused or rejected, as conclusively established
by the records of the U.S. Postal Service, the courier service or facsimile.

Section 15.09. Further Assurances and Corrective Instruments.

(a) Further Assurances. To the extent permitted by law, the parties hereto agree
that they shall, from time to time, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, such supplements hereto and such
further instruments as Lender or Borrower may request and as may be required in
the opinion of Lender or its counsel to preserve Lender’s perfected lien status,
or effectuate the intention of or facilitate the performance of this Agreement
or any Loan Document.

(b) Further Documentation. Without limiting the generality of subsection (a), in
the event any further documentation or information is required by Lender to
correct patent mistakes in the Loan Documents, materials relating to the Title
Insurance Policies or the funding of the Advances, Borrower shall provide, or
cause to be provided to Lender, at its cost and expense, such documentation or
information. Borrower shall execute and deliver to Lender such documentation,
including any amendments, corrections, deletions or additions to the Notes, the
Security Instruments or the other Loan Documents as is reasonably required by
Lender.

(c) Compliance with Investor Requirements. Without limiting the generality of
subsection (a), Borrower shall do anything necessary to comply with the
reasonable requirements of Lender to enable Lender to sell any Advance or
Additional Loan to Fannie Mae.

Section 15.10. Term of this Agreement.

This Agreement shall continue in effect until the Termination Date.

Section 15.11. Assignments; Third-Party Rights.

Borrower shall not assign this Agreement, or delegate any of its obligations
hereunder, without the prior written consent of Lender. Lender may assign its
rights and obligations under this Agreement separately or together, without
Borrower’s consent, only to Fannie Mae or other entity if such assignment is
made with the intent that such entity will further assign rights and obligations
to Fannie Mae, but may not delegate its obligations under this Agreement unless
it first receives Fannie Mae’s written approval. Upon assignment to Fannie Mae,
Fannie Mae shall be permitted to further assign its rights and obligations under
this Agreement.

 

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Section 15.12. Headings.

Article and Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.

Section 15.13. General Interpretive Principles.

For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires, (i) the terms defined in Appendix I and
elsewhere in this Agreement have the meanings assigned to them in this Agreement
and include the plural as well as the singular, and the use of any gender herein
shall be deemed to include the other genders; (ii) accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP; (iii) references herein to “Articles,” “Sections,” “subsections,”
“paragraphs” and other subdivisions without reference to a document are to
designated Articles, Sections, subsections, paragraphs and other subdivisions of
this Agreement; (iv) a reference to a subsection without further reference to a
Section is a reference to such subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions; (v) a reference to an Exhibit or a Schedule without a
further reference to the document to which the Exhibit or Schedule is attached
is a reference to an Exhibit or Schedule to this Agreement; (vi) the words
“herein,” “hereof,” “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular provision; and (vii) the word
“including” means “including, but not limited to.”

Section 15.14. Interpretation.

The parties hereto acknowledge that each party and their respective counsel have
participated in the drafting and revision of this Agreement and the Loan
Documents. Accordingly, the parties agree that any rule of construction which
disfavors the drafting party shall not apply in the interpretation of this
Agreement and the Loan Documents or any amendment or supplement or exhibit
hereto or thereto.

Section 15.15. Standards for Decisions, Etc.

Unless otherwise provided herein, if Lender’s approval is required for any
matter hereunder, such approval may be granted or withheld in Lender’s sole and
absolute discretion. Unless otherwise provided herein, if Lender’s designation,
determination, selection, estimate, action or decision is required, permitted or
contemplated hereunder, such designation, determination, selection, estimate,
action or decision shall be made in Lender’s sole and absolute discretion.

 

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Section 15.16. Decisions in Writing.

Any approval, designation, determination, selection, action or decision of
Lender or Borrower must be in writing to be effective.

Section 15.17. Approval of Waivers.

Unless otherwise agreed by Lender, any modifications set forth in this Agreement
and the other Loan Documents which are modifications to or waivers from the
terms and conditions applicable to similar loans made by Lender and sold to
Fannie Mae shall remain in effect with respect to a Mortgaged Property or an
Advance only for so long as such Mortgaged Property and Advance are subject to
this Agreement and such Borrower is controlled by Guarantor and is a party to
this Agreement.

Section 15.18. USA Patriot Act.

Lender hereby notifies each Borrower that pursuant to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)), it is required to obtain, verify and record information that identifies
each Borrower, which information includes the name and address of each Borrower
and other information that will allow such Lender to identify each Borrower in
accordance with such Act.

Section 15.19. All Asset Filings.

If Lender believes that an “all-asset” collateral description, as contemplated
by Section 9-504(2) of the UCC, is appropriate as to any Collateral under any
Loan Document, Lender is irrevocably authorized to use such a collateral
description, whether in one or more separate filings or as part of the
collateral description in a filing that particularly describes the Collateral.

Section 15.20. Recitals.

The Recitals set forth in this Agreement are incorporated herein as if fully set
forth in the body of the Agreement.

[Remainder of page intentionally left blank.]

 

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

 

BORROWER: BRE–FMCA, LLC, a Delaware limited liability company By:  

BRE Properties, Inc., a Maryland

corporation, its sole member

  By:   /s/ Edward F. Lange, Jr.   Name:   Edward F. Lange, Jr.   Its:  
Executive Vice President and Chief Operating Officer BRE–FMAZ, LLC, a Delaware
limited liability company By:  

BRE Property Investors LLC,

a Delaware limited liability company, its

sole member

  By:   BRE Properties, Inc., a Maryland corporation, its managing member    
By:   /s/ Edward F. Lange, Jr.     Name:   Edward F. Lange, Jr.     Its:  
Executive Vice President and Chief Operating Officer

--------------------------------------------------------------------------------

GUARANTOR: BRE PROPERTIES, INC., a Maryland corporation By:   /s/ Edward F.
Lange, Jr. Name:   Edward F. Lange, Jr. Its:  

Executive Vice President and

Chief Operating Officer

--------------------------------------------------------------------------------

LENDER:

DEUTSCHE BANK BERKSHIRE

MORTGAGE, INC., a Delaware corporation

By:   /s/ Heidi Marrin Name:   Heidi Marrin Title:   Assistant Vice President
By:   /s/ Jeffrey C. Day Name:   Jeffrey C. Day Title:   Managing Director

--------------------------------------------------------------------------------

APPENDIX I

DEFINITIONS

For all purposes of the Agreement, the following terms shall have the respective
meanings set forth below:

“Additional Borrower” means the owner of a Substitute Mortgaged Property, which
entity has been approved by Lender and becomes a Borrower under the Agreement
and the applicable Loan Documents.

“Additional Collateral Due Diligence Fees” means the due diligence fees paid by
Borrower to Lender with respect to each Substitute Mortgaged Property, as set
forth in Section 10.02(b).

“Additional Loan” shall have the meaning set forth in Section 2.05.

“Advance” means each Initial Advance and Future Advance.

“Advance Amount” means the lesser of (a) the amount that would result in an
Aggregate Loan to Value Ratio of not more than seventy-five percent (75%), or
(b) the amount that would result in (x) an Aggregate Debt Service Coverage Ratio
of not less than 1.25:1.0.

“Affiliate” or “Affiliated” means, when used with reference to a specified
Person, (a) any Person that, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the specified Person, (b) any Person that is an officer of, partner in or
trustee of, or serves in a similar capacity with respect to, the specified
Person or of which the specified Person is an officer, partner or trustee, or
with respect to which the specified Person serves in a similar capacity, (c) any
Person that, directly or indirectly, is the beneficial owner of twenty percent
(20%) or more of any class of equity securities of, or otherwise has a
substantial beneficial interest in, the specified Person or of which the
specified Person is, directly or indirectly, the owner of twenty percent
(20%) or more of any class of equity securities or in which the specified Person
has a substantial beneficial interest, and (d) for the specified Person, any of
the individual’s spouse, issue, parents, siblings and a trust for the benefit of
the individual’s spouse or issue, or both. For the purposes of this definition,
“control” (including with correlative meanings, the terms “controlling,”
“controlled by” and “under common control with”), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management (other than property management) and policies of
that Person, whether through the ownership of voting securities, ownership
interests or by contract or otherwise.

“Aggregate Debt Service Coverage Ratio” means, for any specified date, the ratio
of —

 

  (a) the aggregate of the Net Operating Income for the Mortgaged Properties

to

 

  (b) the Facility Debt Service on the specified date.

 

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“Aggregate Loan to Value Ratio” means, for any specified date, the ratio
(expressed as a percentage) of —

 

  (a) the Advances Outstanding on the specified date,

to

 

  (b) the aggregate of the Valuations most recently obtained prior to the
specified date for all of the Mortgaged Properties.

“Agreement” means the Master Credit Facility Agreement, as it may be amended,
supplemented or otherwise modified from time to time, including all Recitals,
Appendices and Exhibits to the Agreement, each of which is hereby incorporated
into the Agreement by this reference.

“Allocable Facility Amount” means the portion of the then Outstanding Advances
allocated to a particular Mortgaged Property by Lender in accordance with the
Agreement.

“Alterations” shall have the meaning set forth in Section 7.11.

“Amortization Period” means the period of thirty (30) years.

“Applicable Law” means (a) all applicable provisions of all constitutions,
statutes, rules, regulations and orders of all governmental bodies, all
Governmental Approvals and all orders, judgments and decrees of all courts and
arbitrators, (b) all applicable zoning, building, environmental and other laws,
ordinances, rules, regulations and restrictions of any Governmental Authority
affecting the ownership, management, use, operation, maintenance or repair of
any Mortgaged Property, including the Americans with Disabilities Act (if
applicable), the Fair Housing Amendment Act of 1988 and Hazardous Materials Laws
(as defined in the Security Instrument), (c) any building permits or any
conditions, easements, rights-of-way, covenants, restrictions of record or any
recorded or unrecorded agreement affecting or concerning any Mortgaged Property
including planned development permits, condominium declarations, and reciprocal
easement and regulatory agreements with any Governmental Authority, (d) all
applicable laws, ordinances, rules and regulations, whether in the form of rent
control, rent stabilization or otherwise, that limit or impose conditions on the
amount of rent that may be collected from the units of any Mortgaged Property,
and (e) requirements of insurance companies or similar organizations, affecting
the operation or use of any Mortgaged Property or the consummation of the
transactions to be effected by the Agreement or any of the other Loan Documents.

“Appraisal” means an appraisal of Multifamily Residential Property conforming to
the requirements of Lender for similar loans anticipated to be sold to Fannie
Mae and accepted by Lender.

“Appraised Value” means the value set forth in an Appraisal.

“Arizona ROFO” shall have the meaning set forth in Section 7.21 of this
Agreement.

 

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“Assignment of Management Agreement” means an Assignment of Management Agreement
in form and substance satisfactory to Lender.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”
as now and hereafter in effect, or any successor statute.

“Borrower” means, individually and collectively, (a) BRE-FMCA, LLC, a Delaware
limited liability company, (b) BRE-FMAZ, LLC, a Delaware limited liability
company, and (c) any Additional Borrower becoming a party to this Agreement and
any other Loan Documents.

“Borrower Agent” shall have the meaning set forth in Section 14.03(a).

“Borrower Parties” means Borrower and Guarantor.

“Borrower Party” shall mean any of the Borrower Parties, individually.

“Business Day” means a day on which Fannie Mae is open for business.

“Calendar Quarter” means, with respect to any year, any of the following three
month periods: (a) January-February-March; (b) April-May-June;
(c) July-August-September; and (d) October-November-December.

“Calendar Year” means the twelve (12) month period from the first day of January
to and including the last day of December, and each twelve (12) month period
thereafter.

“Cap Rate” means, for each Mortgaged Property, a capitalization rate reasonably
selected by Lender for use in determining the Valuations, as disclosed to
Borrower from time to time.

“Cash Collateral Account” means the cash collateral account established pursuant
to the Cash Collateral Agreement.

“Cash Collateral Agreement” means a cash collateral, security and custody
agreement by and among Fannie Mae, Borrower and a collateral agent for Fannie
Mae.

“Cash Equivalents” means:

 

  (a) securities issued or fully guaranteed or insured by the United States
Government or any agency thereof and backed by the full faith and credit of the
United States having maturities of not more than twelve (12) months from the
date of acquisition. (For the purposes of this definition, agency securities
shall mean “Government Securities within the meaning of the Investment Act of
1940 or Section 1.860G-2(a)(8)(1) of the Treasury Regulations.

 

  (b) certificates of deposit, time deposits, demand deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or bankers’
acceptances, having in each case a term of not more than twelve (12) months,
issued by any commercial bank having membership in the FDIC, or by any U.S.
commercial lender (or any branch or agency of a non-U.S. bank licensed to
conduct business in the U.S.) having combined capital and surplus of not less
than $100,000,000 whose short-term securities are rated at least A-1 by S&P or
P-1 by Moody’s Investors Service, Inc.; and

 

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  (c) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody’s
Investors Service, Inc. and in either case having a term of not more than twelve
(12) months.

“Certificate of Borrower Parties” means the written instrument substantially in
the form of Exhibit F to the Agreement.

“Change of Control” means, with respect to any individual or entity, the
earliest to occur of the following, as applicable:

 

  (i) if such entity is a general partnership or a joint venture, a Transfer of
any general partnership interest or joint venture interest which would cause the
Initial Owners to own less than fifty-one percent (51%) of all general
partnership or joint venture interests in such entity;

 

  (ii) if such entity is a limited partnership, a Transfer (A) of any general
partnership interest, or (B) in which the General Partner ceases for any reason
to the sole general partner of Guarantor;

 

  (iii) if such entity is a limited liability company or a limited liability
partnership, a Transfer of (A) any managing member’s ownership interest, or
(B) any membership or other ownership interest which would cause the Initial
Owners to own less than fifty-one percent (51%) of all membership or other
ownership interests in such entity;

 

  (iv) if such entity is a corporation (other than a Publicly-Held Corporation)
with only one class of voting stock, a Transfer of any voting stock which would
cause the Initial Owners to own less than fifty-one percent (51%) of voting
stock in such corporation;

 

  (v) if such entity is a corporation (other than a Publicly-Held Corporation)
with more than one class of voting stock, a Transfer of any voting stock which
would cause the Initial Owners to own less than a sufficient number of shares of
voting stock having the power to elect the majority of directors of such
corporation;

 

  (vi) if such entity is a trust, the removal, appointment or substitution of a
trustee of such trust other than (A) in the case of a land trust, or (B) if the
trustee of such trust after such removal, appointment or substitution is a
trustee identified in the trust agreement approved by Lender;

 

  (vii) the date on which Guarantor ceases for any reason to be the holder,
directly or indirectly, of at least ninety percent (90%) of the voting interests
of any Borrower or to own, directly or indirectly at least ninety percent
(90%) of the equity, profits or other partnership or member interest in, or
Voting Equity Capital (or any other Securities or ownership interests) of any
Borrower;

 

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  (viii) the date on which Managing Member ceases for any reason to be the
holder, directly or indirectly, of at least one hundred percent (100%) of the
voting interests of Borrower or to own, directly or indirectly at least one
hundred percent (100%) of the Voting Equity Capital (or any other Securities or
ownership interests) of Borrower, or ceases for any reason to be the sole
general partner of Borrower;

 

  (ix) with respect to the Managing Member or Guarantor, any merger,
consolidation or acquisition of the Managing Member or Guarantor with or by a
Person that is an unrelated third party;

 

  (x) the date on which a Person or Persons become (by acquisition,
consolidation, merger or otherwise), directly or indirectly, the beneficial
owner of more than, in the aggregate, twenty percent (20%) of the total Voting
Equity Capital (or of any other Securities or ownership interest) of the
Managing Member (except as to a Publicly-Held Corporation) then outstanding; or

 

  (xi) the replacement (other than solely by reason of retirement at age
sixty-five or older, death or disability) of fifty percent (50%) (or such lesser
percentage as is required for decision-making by the board of directors or an
equivalent governing body) of the members of the board of directors (or an
equivalent governing body) of Guarantor or of the Managing Member over a
one-year period from the directors who constituted such board of directors at
the beginning of such period (it being understood and agreed that in the case of
any entity governed by a trustee, board of managers, or other similar governing
body, the foregoing clause (c) shall apply thereto by substituting such
governing body and the members thereof for the board of directors and members
thereof, respectively).

 

  (a) “Initial Owners” means, with respect to Borrower, Guarantor, or any other
entity, the persons or entities who on the date of the Agreement own in the
aggregate one hundred percent (100%) of the Ownership Interests in Borrower,
Guarantor or that entity.

 

  (b) “Publicly-Held Corporation” shall mean a corporation the outstanding
voting stock of which is registered under Section 12(b) or 12(g) of the
Securities and Exchange Act of 1934, as amended.

“Chief Executive Officer” means the chief executive officer of Guarantor or any
other person with responsibility for any of the functions typically performed in
a corporation by the chief executive officer.

 

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“Chief Financial Officer” means the chief financial officer of Guarantor or any
other person with responsibility for any of the functions typically performed in
a corporation by the chief financial officer.

“Closing Date” means the Initial Closing Date and each date after the Initial
Closing Date on which the funding or other transaction requested in a Request is
required to take place.

“Collateral” means the Mortgaged Properties and other collateral from time to
time or at any time encumbered by the Security Instruments, or any other
property securing Borrower’s obligations under the Loan Documents.

“Collateral Pool” means all of the Collateral.

“Compliance Certificate” means a certificate of Borrower substantially in the
form of Exhibit D to the Agreement.

“Confirmation of Guaranty” means a confirmation of any Guaranty executed by
Guarantor in connection with any Request after the Initial Closing,
substantially in the form of Exhibit C-2 to the Agreement.

“Confirmation of Obligations” means a document substantially in the form of
Exhibit H to the Agreement.

“Coverage and LTV Tests” means, for any specified date, each of the following
financial tests:

 

  (a) The Aggregate Debt Service Coverage Ratio is not less than 1.25:1.0.

 

  (b) The Aggregate Loan to Value Ratio does not exceed seventy-five percent
(75%).

“Credit Facility” means the agreement of Lender to make Fixed Advances to
Borrower pursuant to Section 1.01.

“Credit Facility Termination Documents” means the instruments releasing the
Security Instruments as liens on the Mortgaged Properties, UCC-3 Termination
Statements terminating the UCC-1 Financing Statements in favor of Lender, and
such other documents and instruments necessary to evidence the release of the
Collateral from any lien securing the Obligations, and the Notes, all in
connection with the termination of the Agreement and the Credit Facility
pursuant to Article 4.

“Credit Facility Termination Request” means a written request, substantially in
the form of Exhibit I to the Agreement, to terminate the Agreement and the
Credit Facility pursuant to Section 4.02(a).

“Debt Service Amounts” shall have the meaning set forth in Section 14.01(b).

 

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“Debt Service Coverage Ratio” means for any Mortgaged Property, for any
specified date, the ratio (expressed as a percentage) of –

 

  (a) the aggregate of the Net Operating Income for the preceding twelve
(12) month period for the subject Mortgaged Property

to

 

  (b) the Facility Debt Service on the specified date, assuming, for the purpose
of calculating the Facility Debt Service for this definition, that Advances
Outstanding shall be the Allocable Facility Amount for the subject Mortgaged
Property.

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

“ERL Commitment” shall have the meaning set forth in Section 2.02(a) of the
Agreement.

“Event of Default” means any event defined to be an “Event of Default” under
Article 11.

“Executive Vice President” means any executive vice president of Guarantor or
any other person with responsibility for any of the functions typically
performed in a corporation by an executive vice president.

“Facility Debt Service” means –

 

  (a) For use in determining the Advance Amount for the Initial Advance and
Future Advance, the sum of the amount of interest and principal amortization
that would be payable during the twelve (12) month period immediately succeeding
the Initial Closing Date, with respect to the full amount of the Initial Advance
and Future Advance, except that, for these purposes: each Fixed Advance to be
obtained shall be deemed to require level monthly payments of principal and
interest at the interest rate determined at rate lock in an amount necessary to
fully amortize the original principal amount of the Fixed Facility Commitment
over the Amortization Period, with such amortization to commence on the first
day of the twelve (12) month period.

 

  (b) For use in determining the Release Price pursuant to Section 3.04(c) and
Substitution requirements pursuant to Section 3.05, the sum of the amount of
interest and principal amortization, during the twelve (12) month period
immediately succeeding the specified date, with respect to the Advances
Outstanding on the specified date, except that, for these purposes: each Fixed
Advance Outstanding shall require level monthly payments of principal and
interest (at the rate set forth in the Note for the Fixed Advance) in an amount
necessary to fully amortize the original principal amount of the Fixed Advance
over the Amortization Period, with such amortization to commence on the first
day of the twelve (12) month period.

 

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  (c) For use in determining the Aggregate Debt Service Coverage Ratio for
purposes of Section 2.04(b) of the Agreement, for purposes of determining
compliance with the Coverage and LTV Tests (other than with respect to
Advances), and for other ongoing monitoring purposes, as of any specified date,
the sum of the amount of interest and principal amortization, during the twelve
(12) month period immediately succeeding the specified date, with respect to the
Advances Outstanding on the specified date, except that, for these purposes each
Fixed Advance Outstanding shall require level monthly payments of principal and
interest (at the interest rate set forth in the applicable Fixed Facility Note
for such Fixed Advance) in an amount necessary to fully amortize the original
principal amount of the Fixed Advance over the Amortization Period, with such
amortization to commence on the first day of the twelve (12) month period.

“Fannie Mae” means the body corporate duly organized under the Federal National
Mortgage Association Charter Act, as amended, 12 U.S.C. §1716 et seq. and duly
organized and existing under the laws of the United States.

“Fees” means Additional Collateral Due Diligence Fee, Initial Due Diligence Fee,
Origination Fee, Release Fee, Substitution Fee, and any and all other fees
specified in the Agreement.

“First Anniversary” means the date that is the first day of the month following
the date one (1) year after the Initial Closing Date.

“Fixed+1 Maturity Option” shall have the meaning set forth in
Section 1.03(d)(ii).

“Fixed Advance” means a fixed rate loan made by Lender to Borrower under the
Fixed Facility Commitment evidenced by a Fixed Facility Note.

“Fixed Facility Commitment” means up to $620,000,000 as determined pursuant to
Section 1.01 of this Agreement.

“Fixed Facility Note” means a promissory note, in the form attached as Exhibit
B-1 or Exhibit B-2 to the Agreement, which will be issued by Borrower to Lender,
concurrently with the funding of each Fixed Advance.

“Fixed Standard Yield Maintenance Maturity Option” shall have the meaning set
forth in Section 1.03(d)(i).

“Fraudulent Transfer Laws” shall have the meaning set forth in Section 14.11 of
the Agreement.

“Future Advance” means the $310,000,000.00 Advance made on or before Future
Advance Expiration Date.

“Future Advance Expiration Date” means August 6, 2009.

 

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“GAAP” means generally accepted accounting principles in the United States in
effect from time to time, consistently applied.

“General Conditions” shall have the meaning set forth in Article 5.

“Governmental Approval” means an authorization, permit, consent, approval,
license, registration or exemption from registration or filing with, or report
to, any Governmental Authority.

“Governmental Authority” means any court, board, agency, commission, office or
authority of any nature whatsoever for any governmental unit (federal, state,
county, district, municipal, city or otherwise) whether now or hereafter in
existence having jurisdiction over Borrower and/or Mortgaged Properties.

“Gross Revenues” means, for any specified period and for any specified purpose,
with respect to any Multifamily Residential Property, all income in respect of
such Multifamily Residential Property determined in accordance with the
Underwriting Requirements based on the certified operating statement for such
specified period.

“Guarantor” means BRE Properties, Inc., a Maryland corporation.

“Guaranty” means that certain Guaranty to be executed by Guarantor in the form
of Exhibit C-1 to this Agreement.

“Hazardous Materials,” with respect to any Mortgaged Property, shall have the
meaning given that term in the Security Instrument encumbering the Mortgaged
Property.

“Hazardous Materials Law,” with respect to any Mortgaged Property, shall have
the meaning given that term in the Security Instrument encumbering the Mortgaged
Property.

“Hazardous Substance Activity” shall have the meaning given to the term
“Prohibited Activities or Conditions” in the Security Instrument encumbering the
Mortgaged Property.

“Impositions” means, with respect to any Mortgaged Property, all (a) water and
sewer charges which, if not paid, may result in a lien on all or any part of the
Mortgaged Property, (b) premiums for fire and other hazard insurance, rent loss
insurance and such other insurance as Lender may require under any Security
Instrument, (c) Taxes, and (d) amounts for other charges and expenses which
Lender at any time reasonably deems necessary to protect the Mortgaged Property,
to prevent the imposition of liens on the Mortgaged Property, or otherwise to
protect Lender’s interests.

“Indebtedness” means, with respect to any Person, as of any specified date,
without duplication, all:

 

  (a)

indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than (i) current trade liabilities
(including, but not limited to, service contracts, property management
agreements, and employment contracts) incurred in the ordinary course of
business and payable in

 

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accordance with customary practices, (ii) for construction of improvements to
property, if such Person has a non-contingent contract to purchase such
property, or (iii) amounts to be paid by such Person, in performance stages or
upon completion, pursuant to a written contract for the making of capital
improvements to a Mortgaged Property permitted by this Agreement or the other
Loan Documents);

 

  (b) other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument;

 

  (c) obligations of such Person under any lease of property, real or personal,
the obligations of the lessee in respect of which are required by GAAP to be
capitalized on a balance sheet of the lessee or to be otherwise disclosed as
such in a note to such balance sheet;

 

  (d) obligations of such Person in respect of acceptances (as defined in
Article 3 of the Uniform Commercial Code of the District of Columbia) issued or
created for the account of such Person;

 

  (e) liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment of
such liabilities; and

 

  (f)

as to any Person (“guaranteeing person”), any obligation of (i) the guaranteeing
person or (ii) another Person (including any bank under any letter of credit) to
induce the creation of a primary obligation (as defined below) with respect to
which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing, or in effect guaranteeing, any
indebtedness, lease, dividend or other obligation (“primary obligations”) of any
third person (“primary obligor”) in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent,
to (A) purchase any such primary obligation or any property constituting direct
or indirect security therefor, (B) advance or supply funds for the purchase or
payment of any such primary obligation or to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (C) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (D) otherwise assure or hold harmless the owner of any such
primary obligation against loss in respect of the primary obligation
((“Contingent Obligation”), provided, however, that the term “Contingent
Obligation” shall not include endorsements of instruments for deposit or
collection in the ordinary course of business). The amount of any Contingent
Obligation of any guaranteeing person shall be deemed to be the lesser of (1) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or (2) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Contingent Obligation, unless such

 

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primary obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Contingent Obligation shall be such guaranteeing person’s maximum reasonably
anticipated liability in respect thereof as determined by Lender in good faith.

“Individual Coverage and LTV Tests” means, in connection with the Substitution
of one or more proposed Mortgaged Properties, each of the following tests:
(a) the Debt Service Coverage Ratio is not less than 1.25:1.0; and (b) the Loan
to Value Ratio does not exceed eighty percent (80%).

“Initial Advance” means the Fixed Advance made on the Initial Closing Date in
the aggregate amount of $310,000,000.

“Initial Closing Date” means the date of the Agreement.

“Initial Due Diligence Fees” shall have the meaning set forth in
Section 10.02(a).

“Initial Mortgaged Properties” means the Multifamily Residential Properties
described on Exhibit A to the Agreement and which represent the Multifamily
Residential Properties which are made part of the Collateral Pool on the Initial
Closing Date.

“Initial Security Instruments” means the Security Instruments covering the
Initial Mortgaged Properties.

“Initial Valuation” means, when used with reference to specified Collateral, the
Valuation initially performed for the Collateral as of the date on which the
Collateral was added to the Collateral Pool. The Initial Valuation for each of
the Initial Mortgaged Properties is as set forth in Exhibit A to the Agreement.

“Insurance Policy” means, with respect to a Mortgaged Property, the insurance
coverage and insurance certificates evidencing such insurance required to be
maintained pursuant to the Security Instrument encumbering the Mortgaged
Property.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.
Each reference to the Internal Revenue Code shall be deemed to include (a) any
successor internal revenue law and (b) the applicable regulations whether final,
temporary or proposed.

“Issuer” shall have the meaning set forth in Section 5.10(a).

“Lease” means any lease, any sublease or subsublease, license, concession or
other agreement (whether written or oral and whether now or hereafter in effect)
pursuant to which any Person is granted a possessory interest in, or right to
use or occupy all or any portion of any space in any Mortgaged Property, and
every modification, amendment or other agreement relating to such lease,
sublease, subsublease or other agreement entered into in connection with such
lease, sublease, subsublease or other agreement, and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.

 

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“Lender” shall have the meaning set forth in the first paragraph of the
Agreement, but shall refer to any replacement Lender.

“Letter of Credit” means a letter of credit issued by a financial institution
satisfactory to Fannie Mae, naming Fannie Mae as beneficiary in form and
substance as attached hereto as Exhibit J, or as otherwise reasonably and
customarily acceptable to Fannie Mae.

“Lien” means any mortgage, deed of trust, deed to secure debt, security interest
or other lien or encumbrance (including both consensual and non-consensual liens
and encumbrances).

“Loan Document Taxes” shall have the meaning set forth in Section 7.12.

“Loan Documents” means the Agreement, the Notes, the Guaranty, the Security
Documents, all documents executed by Borrower or Guarantor pursuant to the
General Conditions set forth in Article 5 of the Agreement and any other
documents executed by Borrower or Guarantor from time to time in connection with
the Agreement or the transactions contemplated by the Agreement.

“Loan to Value Ratio “ means, for a Mortgaged Property, for any specified date,
the ratio (expressed as a percentage) of —

 

  (a) the Allocable Facility Amount of the subject Mortgaged Property on the
specified date,

to

 

  (b) the Valuation most recently obtained prior to the specified date for the
subject Mortgaged Property.

“Locked Interest Rate” shall have the meaning set forth in Section 2.02(a) of
the Agreement.

“Managing Member” shall mean, to the extent applicable, (a) BRE Properties,
Inc., a Maryland corporation, with respect to BRE-FMCA, LLC, a Delaware limited
liability company, so long as such entity is a Borrower, and (b) BRE Properties
Investors LLC, a Delaware limited liability company, with respect to BRE-FMAZ,
LLC, a Delaware limited liability company, so long as such entity is a Borrower.

“Material Adverse Effect” means, with respect to any circumstance, act,
condition or event of whatever nature (including any adverse determination in
any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, or circumstance or circumstances, whether or not
related, a change or effect which does or would materially impair (a) the
business, operations, property or condition (financial or otherwise) of Borrower
or Guarantor, (b) the present or future ability of Borrower or Guarantor to
perform the Obligations for which it is liable, (c) the validity, priority,
perfection or enforceability of the Agreement or any other Loan Document or the
rights or remedies of Lender under any Loan Document, or (d) Lender’s ability to
have recourse against any Mortgaged Property subject to Section 14.01.

 

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“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, and its successors and
assigns, if such successors and assigns shall continue to perform the functions
of a securities rating agency.

“Mortgaged Properties” means, collectively, the Substitute Mortgaged Properties
and the Initial Mortgaged Properties, but excluding each Release Mortgaged
Property from and after the date of its release from the Collateral Pool.

“Multifamily Residential Property” means a residential property, located in the
United States, containing five or more dwelling units in which not more than
twenty percent (20%) of the net rentable area is or will be rented to
non-residential tenants, and conforming to the requirements of Lender for
similar loans anticipated to be sold to Fannie Mae.

“Net Operating Income” means, for any specified period, with respect to any
Multifamily Residential Property, the aggregate net income during such period
equal to Gross Revenues during such period less the aggregate Operating Expenses
during such period. If a Mortgaged Property is not owned by a Borrower or an
Affiliate of a Borrower for the entire specified period, the Net Operating
Income for the Mortgaged Property for the time within the specified period
during which the Mortgaged Property was owned by a Borrower or an Affiliate of a
Borrower shall be the Mortgaged Property’s pro forma net operating income
determined by Lender in accordance with the underwriting procedures set forth by
Lender for similar loans anticipated to be sold to Fannie Mae.

“Note” means any Fixed Facility Note.

“Obligations” means the aggregate of the obligations of Borrower and Guarantor
under the Agreement and the other Loan Documents.

“Operating Expenses” means, for any period, with respect to any Multifamily
Residential Property, all expenses in respect of the Multifamily Residential
Property, as reasonably determined by Lender based on Lender’s then current
methodology consistently applied, based on the certified operating statement for
such specified period as adjusted to include expenses and deposits required
pursuant to the Replacement Reserve Agreement (whether funded or not), and
excluding from such calculations depreciation, amortization, interest expenses,
non-recurring items and capital expenses.

“Organizational Certificate” means, collectively, certificates from Borrower and
Guarantor to Lender, in the form of Exhibit E-1 and Exhibit E-2 to the
Agreement, certifying as to certain organizational matters with respect to
Borrower and Guarantor.

“Organizational Documents” means all certificates, instruments and other
documents in effect on the date of the Agreement, pursuant to which an entity is
organized or operates, including but not limited to, (a) with respect to a
corporation, its articles of incorporation and bylaws, (b) with respect to a
limited partnership, its limited partnership certificate and partnership
agreement, (c) with respect to a general partnership or joint venture, its
partnership or joint venture agreement and (d) with respect to a limited
liability company, its articles of organization and operating agreement.

 

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“Origination Fee” shall have the meaning set forth in Section 10.01 of the
Agreement.

“Other Borrower” shall have the meaning set forth in Section 14.09 of the
Agreement.

“Other Borrower Secured Obligation” shall have the meaning set forth in
Section 14.04 of the Agreement.

“Outstanding” means, when used in connection with promissory notes, other debt
instruments or Advances, for a specified date, promissory notes or other debt
instruments which have been issued, or Advances which have been made, but have
not been repaid in full as of the specified date.

“Ownership Interests” means, with respect to any entity, any direct or indirect
ownership interests in the entity and any economic rights (such as a right to
distributions, net cash flow or net income) to which the owner of such ownership
interests is entitled.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

“Permits” means all permits, or similar licenses or approvals issued and/or
required by an applicable Governmental Authority or any Applicable Law in
connection with the ownership, use, occupancy, leasing, management, operation,
repair, maintenance or rehabilitation of any Mortgaged Property or any
Borrower’s business.

“Permitted Investments” means the following (excluding the exceptions set out in
under the heading, “Exclusions from Permitted Investments” below):

 

  (a) Government Obligations. Direct obligations of, and obligations on which
the full and timely payment of principal and interest is unconditionally
guaranteed by, the full faith and credit of the United States of America.

 

  (b) Agencies. Direct obligations of, and obligations on which the full and
timely payment of principal and interest is unconditionally guaranteed by, any
agency or instrumentality of the United States of America (other than the
Federal Home Loan Mortgage Corporation). These obligations must be rated in the
Highest Rating Category.

 

  (c) State and Local Obligations. Obligations of any state or territory of the
United States of America, obligations of any agency, instrumentality, authority
or political subdivision of a state or territory, and obligations of any public
benefit or municipal corporation. Interest must be payable on a current basis
and the obligations must be rated in the Highest Rating Category.

 

  (d) Bank Deposits. Interest-bearing negotiable certificates of deposit,
interest-bearing time deposits, interest-bearing savings accounts or bankers’
acceptances, issued by a Qualified Financial Institution whose unsecured
short-term obligations are rated in the Highest Rating Category.
Interest-bearing negotiable certificates of deposit, interest-bearing time
deposits or interest-bearing savings accounts, issued by a Qualified Financial
Institution, if such deposits or accounts are fully insured by the Federal
Deposit Insurance Corporation.

 

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  (e) Money Market Funds. Money market mutual funds registered under the
Investment Company Act of 1940 approved in writing by Fannie Mae.

 

  (f) Any other Investment Approved by Fannie Mae. Any other investment approved
by Fannie Mae.

Exclusions From Permitted Investments.

Permitted Investments may not include any of the following:

(1) Any investment with a final maturity or any agreement with a term greater
than thirty (30) days from the date of the investment. This exclusion does not
apply to (a) obligations that provide for the optional or mandatory tender, at
par, by the holder at least once within thirty (30) days of the date of
purchase, and (b) Government Obligations irrevocably deposited with a bond
trustee for the defeasance of Bonds pursuant to a bond trust indenture.

(2) Any obligation (other than obligations described in paragraphs (a) and (b))
with a purchase price greater or less than the par value of such obligation.

(3) Mortgage-backed securities, real estate mortgage investment conduits or
collateralized mortgage obligations.

(4) Interest-only or principal-only stripped securities.

(5) Obligations bearing interest at inverse floating rates.

(6) Any investment which may be prepaid or called at a price less than its
purchase price prior to stated maturity.

(7) Any investment the interest rate on which is variable, and is established
other than by reference to a single interest rate index plus a single fixed
spread, if any, and which interest rate moves proportionately with that index.

(8) Any investment to which S&P has added an “r” highlighter (denotes a
derivative, hybrid and certain other obligations S&P believes may experience
high volatility or high variability in expected returns as a result of noncredit
risks).

Definition of a Qualified Financial Institution.

“Qualified Financial Institution” means any of the following having a senior
unsecured debt rating in the Highest Rating Category and approved by Fannie Mae:

 

  (a) bank or trust company organized under the laws of any state of the United
States of America,

 

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  (b) national banking association,

 

  (c) savings bank, a savings and loan association, or an insurance company or
association chartered or organized under the laws of any state of the United
States of America,

 

  (d) federal branch or agency pursuant to the International Banking Act of 1978
or any successor provisions of law or a domestic branch or agency of a foreign
bank which branch or agency is duly licensed or authorized to do business under
the laws of any state or territory of the United States of America,

 

  (e) government bond dealer reporting to, trading with, and recognized as a
primary dealer by the Federal Reserve Bank of New York, and

 

  (f) securities dealer approved in writing by Fannie Mae the liquidation of
which is subject to the Securities Investors Protection Corporation or other
similar corporation.

Definition of Highest Rating Category.

“Highest Rating Category” means an S&P rating category of “A-1+” for instruments
having a term of one year or less and “AAA” for instruments having a term of
greater than one year, and a Moody’s rating category of “P-1” for instruments
having a term of one year or less and “Aaa” for instruments having a term
greater than one year.

“Permitted Liens” means, with respect to a Mortgaged Property, (a) the
exceptions to title to the Mortgaged Property set forth in the Title Insurance
Policy for the Mortgaged Property which are approved by Lender, (b) the Security
Instrument encumbering the Mortgaged Property, (c) mechanic’s or materialmen’s
liens or judgment liens against a Mortgaged Property which are released of
record or otherwise remedied to Lender’s satisfaction within forty-five
(45) days of the date of creation, (d) real estate taxes and water and sewer and
other utility charges that are liens but not yet due and payable, and (e) leases
and licenses otherwise permitted under this Agreement.

“Permitted Transfers” shall have the meaning set forth in Section 7.14 of the
Agreement.

“Person” means an individual, an estate, a trust, a corporation, a partnership,
a limited liability company or any other organization or entity (whether
governmental or private).

“Plan” means a “multiemployer plan” as defined in Section 4001(3) of ERISA and a
“single employee plan” as defined in Section 4001(5) of ERISA.

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

 

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“Prohibited Person” shall have the meaning set forth in Section 7.14 of the
Agreement.

“Proper Officer” means of any of the Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer, Senior Vice President, Executive Vice
President or Treasurer.

“Property” means any estate or interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.

“Property Delivery Deadline” shall have the meaning set forth in
Section 3.05(d)(ii) of the Agreement.

“Property Manager” means, if any, the entity hired to operate and manage the
Mortgaged Property, whose hiring is subject to the written approval and consent
of Lender.

“Publicly-Held Corporation” shall have the meaning set forth in the definition
of Change of Control.

“Rate Lock Agreement” shall have the meaning set forth in Section 2.02(a) of
this Agreement.

“Rate Lock Deadline” shall have the meaning set forth in Section 1.01(b) of this
Agreement.

“Release Documents” mean instruments releasing the applicable Security
Instrument as a Lien on the Release Mortgaged Property, and UCC-3 Termination
Statements terminating the UCC-1 Financing Statements, and such other documents
and instruments to evidence the release of the Release Mortgaged Property from
the Collateral Pool.

“Release Fee” means, in connection with the Release of one (1) Mortgaged
Property, $15,000, and in connection with the simultaneous Release of two (2) or
more Mortgaged Properties, $25,000.

“Release Mortgaged Property” means the Mortgaged Property to be released
pursuant to Section 3.04.

“Release Price” shall have the meaning set forth in Section 3.04(c).

“Release Request” means a written request, substantially in the form of Exhibit
G to the Agreement, to obtain a release of Collateral from the Collateral Pool
pursuant to Section 3.04(a).

“Remaining Mortgaged Properties” shall have the meaning set forth in
Section 5.05(g).

“Rent Roll” means, with respect to any Multifamily Residential Property, a rent
roll prepared and certified by the owner of the Multifamily Residential Property
on a form approved by Lender.

 

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“Replacement Reserve Agreement” means a Replacement Reserve and Security
Agreement, reasonably required by Lender, and completed in accordance with the
requirements of Lender for similar loans anticipated to be sold to Fannie Mae.

“Request” means the request to close the Initial Advance, a Substitution
Request, a Release Request, or a Credit Facility Termination Request or a
request to close an Additional Loan.

“Rescinded Payment” has the meaning given that term in Section 14.10 of this
Agreement.

“S&P” shall mean Standard & Poor’s Credit Markets Services, a division of The
McGraw-Hill Companies, Inc., a New York corporation, and its successors and
assigns, if such successors and assigns shall continue to perform the functions
of a securities rating agency.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
together with all rules and regulations issued thereunder.

“Security” means a security as set forth in Section 2(1) of the Securities Act.

“Security Documents” means the Security Instruments, the Completion Reserve
Agreements, the Replacement Reserve Agreements and any other documents executed
by Borrower and Guarantor from time to time to secure any of Borrower’s and
Guarantor’s obligations under the Loan Documents.

“Security Instrument” means, for each Mortgaged Property, a separate Multifamily
Mortgage, Deed of Trust or Deed to Secure Debt, Assignment of Leases and Rents
and Security Agreement given by a Borrower to or for the benefit of Lender to
secure the obligations of Borrower under the Loan Documents. With respect to
each Mortgaged Property owned by a Borrower, the Security Instrument shall be
substantially in the form published by Fannie Mae for use in the state in which
the Mortgaged Property is located.

“Senior Management” means (a) the Chief Executive Officer, President or Chief
Financial Officer, or Chief Operating Officer, and (b) any other individuals
with responsibility for any of the functions typically performed by the officers
described in clause (a).

“Senior Vice President” means any senior vice president of Guarantor or any
other person with responsibility for any of the functions typically performed in
a corporation by a senior vice president.

“Single-Purpose” means, with respect to a Person which is any form of
partnership or corporation or limited liability company, that such Person at all
times since its formation:

 

  (a) has been a duly formed and existing partnership, corporation or limited
liability company, as the case may be;

 

  (b) has been duly qualified in each jurisdiction in which such qualification
was at such time necessary for the conduct of its business;

 

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  (c) has complied with the provisions of its organizational documents and the
laws of its jurisdiction of formation in all respects;

 

  (d) has observed all customary formalities regarding its partnership or
corporate existence, as the case may be;

 

  (e) has accurately maintained its financial statements, accounting records and
other partnership or corporate documents separate from those of any other
Person;

 

  (f) has not commingled its assets or funds with those of any other Person
provided that after any assets or funds are deposited in a separate account of
any Person such assets or funds may be transferred to an account which account
may hold the assets or funds of more than one Person;

 

  (g) has identified itself in all dealings with creditors (other than trade
creditors in the ordinary course of business and creditors for the construction
of improvements to property on which such Person has a non-contingent contract
to purchase such property) under its own name and as a separate and distinct
entity;

 

  (h) has been adequately capitalized in light of its contemplated business
operations;

 

  (i) has not assumed, guaranteed or become obligated for the liabilities of any
other Person (except in connection with the Credit Facility or the endorsement
of negotiable instruments in the ordinary course of business) or held out its
credit as being available to satisfy the obligations of any other Person;

 

  (j) has not acquired obligations or securities of any other Person;

 

  (k) in relation to a Borrower, except for loans and advances made in the
ordinary course of business to Affiliates and deposits and investments in Cash
Equivalents made in the ordinary course of business, has not made loans or
advances to any other Person;

 

  (l) has not entered into and was not a party to any transaction with any
Affiliate of such Person, except in the ordinary course of business and on terms
which are no less favorable to such Person than would be obtained in a
comparable arm’s-length transaction with an unrelated third Party;

 

  (m) has paid the salaries of its own employees, if any, and maintained a
sufficient number of employees or has entered into binding agreements with third
parties or Affiliates to provide all required services that would otherwise be
provided by employees in light of its contemplated business operations;

 

  (n) has allocated fairly and reasonably any overhead for shared office space;

 

  (o) has not engaged in a non-exempt prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code to the extent
it is subject to ERISA;

 

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  (p) has conducted its own business in its own name;

 

  (q) except as permitted under this Agreement, has not pledged its assets for
the benefit of any other entity or made any loans or advances to any person or
entity except in connection with the Credit Facility; and

 

  (r) in relation to Borrower shall not (i) acquire any real or personal
property other than the Mortgaged Properties and personal property related to
the operation and maintenance of the Mortgaged Properties, (ii) operate any
business other than the management and operation of the Mortgaged Properties,
and (iii) shall not maintain its assets in a way difficult to segregate and
identify.

“Sixth Anniversary” means the date that is the first day of the month following
the date six (6) years after the Initial Closing Date.

“Subject Borrower” shall have the meaning set forth in Section 14.09 of the
Agreement.

“Subordinated Obligations” shall have the meaning set forth in Section 14.08(a)
of the Agreement.

“Substitute Cash Collateral” shall have the meaning set forth in
Section 3.04(d)(ii) of the Agreement.

“Substitute Mortgaged Property” means each Multifamily Residential Property
owned by Borrower (either in fee simple or as tenant under a ground lease
meeting all of the requirements of Lender for similar loans anticipated to be
sold to Fannie Mae) and added to the Collateral Pool after the Initial Closing
Date in connection with a substitution of Collateral as permitted by
Section 3.05.

“Substitution” shall have the meaning set forth in Section 3.05(a).

“Substitution Deposit” shall have the meaning set forth in Section 3.05(e).

“Substitution Fee” means a fee equal to the greater of (i) the product of 25
basis points (0.25%) multiplied by the Allocable Facility Amount of each
Substitute Mortgaged Property added as part of a Substitution, or (ii) $20,000
for each Substitute Mortgaged Property.

“Substitution Loan Documents” means the Security Instrument covering a
Substitute Mortgaged Property and any other documents, instruments or
certificates reasonably required by Lender in form and substance satisfactory to
Lender and Borrower in connection with the Substitution of the Substitute
Mortgaged Property to the Collateral Pool pursuant to Article 3.

“Substitution Request” means a written request, substantially in the form of
Exhibit G to the Agreement to obtain a substitution of Collateral from the
Collateral Pool pursuant to Section 3.05.

“Surveys” means the as-built surveys of the Mortgaged Properties prepared in
accordance with Lender’s requirements for similar loans that are anticipated to
be sold to Fannie Mae.

 

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“Taxes” means all taxes, assessments, vault rentals and other charges, if any,
general, special or otherwise, including all assessments for schools, public
betterments and general or local improvements, which are levied, assessed or
imposed by any public authority or quasi-public authority, and which, if not
paid, will become a lien, on the Mortgaged Properties.

“Term of this Agreement” shall be determined as provided in Section 15.10.

“Termination Date” means the latest maturity date for any Advance Outstanding.

“Third Anniversary” means the date that is the first day of the month following
the date three (3) years after the Initial Closing Date.

“Title Company” means First American Title Insurance Company.

“Title Insurance Policies” means the mortgagee’s policies of title insurance
issued by the Title Company from time to time relating to each of the Security
Instruments, conforming to Lender’s requirements for similar loans anticipated
to be sold to Fannie Mae, together with such endorsements, coinsurance,
reinsurance and direct access agreements with respect to such policies as Lender
may, from time to time, consider necessary or appropriate, including variable
credit endorsements, if available, and tie-in endorsements, if available, and
with a limit of liability under the policy (subject to the limitations contained
in the Conditions of the policy relating to a Determination and Extent of
Liability) equal to the Fixed Facility Commitment.

“Transfer” means —

 

  (a) as used with respect to Ownership Interests in Borrower, Guarantor or
Managing Member means (i) a sale, assignment, pledge, transfer or other
disposition of any Ownership Interest in Borrower, Guarantor or Managing Member
or in any entity (including without limitation or Managing Member) that has a
direct or indirect Ownership Interest in Borrower, or (ii) the issuance or other
creation of new Ownership Interests in Borrower or Guarantor or in any entity
that has a direct or indirect Ownership Interest in Borrower or Guarantor that
is not in compliance with the laws of the United States, or (iii) a merger or
consolidation of Borrower, Guarantor or Managing Member or of any entity that
has a direct or indirect Ownership Interest in Borrower, as the case may be,
into another entity or of another entity into Borrower, Guarantor or Managing
Member or into any entity that has a direct or indirect Ownership Interest in
Borrower, as the case may be, or (iv) the reconstitution of Borrower, Guarantor
or Managing Member or of any entity that has a direct or indirect Ownership
Interest in Borrower, Guarantor or Managing Member from one type of entity to
another type of entity, or (v) the amendment, modification or any other change
in the governing instrument or instruments of a Person which has the effect of
changing the relative powers, rights, privileges, voting rights or economic
interests of the Ownership Interests in such Person.

 

  (b)

as used with respect to a Mortgaged Property means a sale (except with respect
to a Mortgaged Property for which a Release has been requested), assignment,
lease, pledge, transfer or other disposition (whether voluntary or by operation
of law) of,

 

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or the granting or creating of a lien, encumbrance or security interest in, any
estate, rights, title or interest in a Mortgaged Property, or any portion
thereof. Transfer does not include (i) a conveyance of a Mortgaged Property at a
judicial or non-judicial foreclosure sale under any security instrument,
(ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of
law under the United States Bankruptcy Code, or (iii) a lien against the
Mortgaged Property for local taxes and/or assessments not then due and payable.

“Treasurer” means the treasurer of Guarantor or any other person with
responsibility for any of the functions typically performed in a corporation by
the treasurer.

“Underwriting Requirements” means Lender’s overall underwriting requirements for
Multifamily Residential Properties in connection with loans anticipated to be
sold to Fannie Mae as such requirements may be amended, modified, updated,
superseded, supplemented or replaced from time to time.

“Valuation” means, for any specified date, with respect to a Multifamily
Residential Property, (a) if an Appraisal of the Multifamily Residential
Property was more recently obtained than a Cap Rate for the Multifamily
Residential Property, the Appraised Value of such Multifamily Residential
Property, or (b) if a Cap Rate for the Multifamily Residential Property was more
recently obtained than an Appraisal of the Multifamily Residential Property, the
value derived by dividing—

 

  (i) the Net Operating Income of such Multifamily Residential Property, by

 

  (ii) the most recent Cap Rate determined by Lender.

Notwithstanding the foregoing, any Valuation for a Multifamily Residential
Property calculated for a date occurring before the first anniversary of the
date on which the Multifamily Residential Property becomes a part of the
Collateral Pool shall equal the Appraised Value of such Multifamily Residential
Property, unless Lender determines that changed market or property conditions
warrant that the value be determined as set forth in the preceding sentence.

“Voting Equity Capital” means Securities, membership interests or partnership
interests of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the board of directors
(or Persons performing similar functions).

“Waiving Borrower” shall have the meaning set forth in Section 14.04.

 

22

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EXHIBIT A TO MASTER CREDIT FACILITY AGREEMENT

SCHEDULE OF INITIAL MORTGAGED PROPERTIES

AND INITIAL VALUATIONS

 

Property Name

  

Borrower/Owner

  

Address

   Initial Valuation Pinnacle at South Mountain    BRE-FMAZ, LLC, a Delaware
limited liability company   

5151 East Guadalupe Road, Phoenix, Maricopa County,

Arizona 85044

   $ 37,073,000 Pinnacle at Towne Center    BRE-FMAZ, LLC, a Delaware limited
liability company   

1601 East Highland Avenue, Phoenix, Maricopa County,

Arizona 85016

   $ 31,766,000 Pinnacle at BellCentre    BRE-FMCA, LLC, a Delaware limited
liability company   

308 108th Avenue, NE,

Bellevue, King County,

Washington 98004

   $ 44,800,112 Pinnacle on Lake Washington    BRE-FMCA, LLC, a Delaware limited
liability company   

1400 Lake Washington

Boulevard North, Renton,

King County, Washington

98056

   $ 26,181,000 Avenue 64    BRE-FMCA, LLC, a Delaware limited liability company
  

6399 Christie Avenue,

Emeryville, Alameda County,

California 94608

   $ 48,149,840 Bridgeport Coast    BRE-FMCA, LLC, a Delaware limited liability
company   

24100 Newhall Ranch Road,

Santa Clarita, Los Angeles County,

California 91355

   $ 37,800,000 Pinnacle at Carmel Creek    BRE-FMCA, LLC, a Delaware limited
liability company   

11724 Carmel Creek Road,

San Diego, San Diego County,

California 92130

   $ 84,213,174 Pinnacle at Fullerton    BRE-FMCA, LLC, a Delaware limited
liability company   

229 East Commonwealth

Avenue, Fullerton, Orange

County, California 92832

   $ 47,428,514 Palms at Laguna Niguel    BRE-FMCA, LLC, a Delaware limited
liability company   

28188 Moulton Parkway,

Laguna Niguel, Orange

County, California 92677

   $ 81,930,000 Pinnacle at MacArthur Place    BRE-FMCA, LLC, a Delaware limited
liability company   

31 MacArthur Crescent, Santa

Ana, Orange County,

California 92707

   $ 57,724,308 Pinnacle at Otay Ranch    BRE-FMCA, LLC, a Delaware limited
liability company   

1310 Santa Rita Drive, Chula

Vista, San Diego County,

California 91913

   $ 67,203,000 Selby Ranch    BRE-FMCA, LLC, a Delaware limited liability
company   

258 Selby Ranch Road,

Sacramento, Sacramento

County, California 95864

   $ 46,206,241

--------------------------------------------------------------------------------

Sharon Green   

BRE-FMCA, LLC, a Delaware

limited liability company

  

350 Sharon Park Drive, Menlo

Park, San Mateo County,

California

   $ 105,963,780 Pinnacle at Talega    BRE-FMCA, LLC, a Delaware limited
liability company   

120 Calle Amistad, San

Clemente, Orange County,

California 92673

   $ 73,950,378 Pinnacle at Westridge    BRE-FMCA, LLC, a Delaware limited
liability company   

25343 Silver Aspen Way,

Valencia, Los Angeles County,

California 91381

   $ 51,600,000

 

2

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EXHIBIT B-1 TO MASTER CREDIT FACILITY AGREEMENT

FIXED FACILITY NOTE

(Standard Maturity)

[Includes I/O language.]

 

US $                                   , 20    

FOR VALUE RECEIVED, the undersigned (individually and collectively, “Borrower”)
jointly and severally (if more than one) promises to pay to the order of
DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation (“Lender”) the
principal sum of                                          AND NO/100 DOLLARS (US
$            ), with interest accruing on the unpaid principal balance from the
Disbursement Date until fully paid at the Interest Rate.

This Note is executed and delivered by Borrower pursuant to that certain Master
Credit Facility Agreement, dated as of April 7, 2009, by and between Borrower,
Lender and others (as amended, restated or otherwise modified from time to time,
the “Master Agreement”), to evidence the obligation of Borrower to repay a Fixed
Advance made by Lender to Borrower in accordance with the terms of the Master
Agreement. This Note is entitled to the benefit and security of the Loan
Documents provided for in the Master Agreement, to which reference is hereby
made for a statement of all of the terms and conditions under which the Fixed
Advance evidenced hereby is made.

1. Defined Terms. In addition to defined terms found elsewhere in this Note, as
used in this Note, the following definitions shall apply:

Advance: The advance evidenced by this Note.

Advance Term:                                          months.

Amortization Period:                     . [Three hundred sixty (360) months or
N/A depending on term.]

Business Day: Any day other than a Saturday, Sunday or any other day on which
Lender is not open for business.

Debt Service Amounts: Amounts payable under this Note, the Security Instrument
or any other Loan Document.

Default Rate: A rate equal to the lesser of 4 percentage points above the
Interest Rate or the maximum interest rate which may be collected from Borrower
under applicable law.

Disbursement Date: The date of disbursement of Advance proceeds hereunder.

First Payment Date: The first day of                     , 20    . [For example:
If the Note date is January 1, then the First Payment Date will be February 1.
If the Note date is any day other than January 1, then the First Payment Date
will be March 1.]

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Indebtedness: The principal of, interest on, or any other amounts due at any
time under, this Note, the Security Instrument or any other Loan Document,
including prepayment premiums, late charges, default interest, and advances to
protect the security of the Security Instrument under Section 12 of the Security
Instrument.

Interest Rate: The annual rate of                      percent (            %).

Lender: The holder of this Note.

Maturity Date: The first day of                     ,                     , or
any earlier date on which the unpaid principal balance of this Note becomes due
and payable by acceleration or otherwise.

Security Instrument: Individually and collectively, various multifamily
mortgages, deeds to secure debt or deeds of trust described in the Master
Agreement.

Yield Maintenance Period Term or Prepayment Premium Period Term:
                     months. [Typically 54, 90, or 114 months]

Yield Maintenance Period End Date or Prepayment Premium Period End Date: The
last day of                 ,             . [Insert the appropriate month and
year, calculating from the Maturity Date, e.g., if the advance is a 10-year
advance with a Maturity Date of July 1, 2015, and the yield maintenance period
is 9.5 years, then the month and year to insert is December, 2014]

Event of Default and other capitalized terms used but not defined in this Note
shall have the meanings given to such terms in the Master Agreement or, if not
defined in the Master Agreement, as defined in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at c/o
DB Mortgage Services, LLC, One Beacon Street, 14th Floor, Boston, Massachusetts
02108, or such other place as may be designated by written notice to Borrower
from or on behalf of Lender.

3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:

(a) Short Month Interest. If disbursement of principal is made by Lender to
Borrower on any day other than the first day of the month, interest for the
period beginning on the Disbursement Date and ending on and including the last
day of the month in which such disbursement is made shall be payable
simultaneously with the execution of this Note.

 

2

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(b) Interest Computation. Interest under this Note shall be computed on the
basis of (check one only):

 

  ¨ 30/360. A 360-day year consisting of twelve 30-day months.

 

  ¨ Actual/360. A 360-day year. The amount of each monthly payment made by
Borrower pursuant to Section 3(c) below will be based on the actual number of
calendar days during such month and shall be calculated by multiplying the
unpaid principal balance of this Note by the per annum Interest Rate, dividing
the product by three hundred sixty (360) and multiplying the quotient by the
actual number of days elapsed during the month. Borrower understands that the
amount of interest for each month will vary depending on the actual number of
calendar days during such month.

(c) Monthly Installments (check one only):

 

  ¨ 30/360. [Select only if 30/360 is selected in Section 3(b) above.] If
interest accrues based on a 30/360 interest computation, then consecutive
monthly installments of interest only, each in the amount of
                                                              Dollars
(US $            ), shall be payable on the First Payment Date and on the first
day of every month thereafter, until the entire unpaid principal balance
evidenced by this Note is fully paid. The entire principal balance and accrued
but unpaid interest shall be due and payable on the Maturity Date. The unpaid
principal balance shall continue to bear interest after the Maturity Date at the
Default Rate set forth in this Note until and including the date on which it is
paid in full.

 

  ¨ Actual/360. [Select only if Actual/360 is selected in Section 3(b) above.]
If interest accrues based on an Actual/360 interest computation, the amount of
                                         Dollars (US $            ) shall be
payable on the First Payment Date and thereafter consecutive monthly
installments of interest only, shall be payable as follows:

 

  (1)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 28-day month;

 

  (2)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 29-day month,

 

3

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  (3)                                          Dollars (US $            ), shall
be payable on the first day of each month during the term hereof which follows a
30-day month, or

 

  (4)                                          Dollars (US $            ), shall
be payable on the first day of each month during the term hereof which follows a
31-day month,

until the entire unpaid principal balance evidenced by this Note is fully paid.
The entire principal balance and accrued but unpaid interest shall be due and
payable on the Maturity Date. The unpaid principal balance shall continue to
bear interest after the Maturity Date at the Default Rate set forth in this Note
until and including the date on which it is paid in full.

(d) Payments Before Due Date. Any regularly scheduled monthly installment of
interest that is received by Lender before the date it is due shall be deemed to
have been received on the due date solely for the purpose of calculating
interest due.

(e) Accrued Interest. Any accrued interest remaining past due for thirty
(30) days or more shall be added to and become part of the unpaid principal
balance and shall bear interest at the rate or rates specified in this Note. Any
reference herein 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 that is less than all
amounts due and payable at such time, Lender may apply that payment 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, among other things, by the Security
Instrument, and reference is made to the Security Instrument for other rights of
Lender concerning the collateral for the Indebtedness.

6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Section 10, if any, 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. Lender may exercise this option
to accelerate regardless of any prior forbearance.

 

4

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7. Late Charge. If any monthly installment due hereunder is not received by
Lender on or before the 5th day of each month or if any other amount payable
under this Note or under the Security Instrument or any other Loan Document is
not received by Lender within 5 days after the date such amount is due, counting
from and including the date such amount is due, Borrower shall pay to Lender,
immediately and without demand by Lender, a late charge equal to 5 percent of
such monthly installment or other amount due. Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the Advance 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. So long as any monthly installment or any other payment due
under this Note remains past due for thirty (30) days or more, interest under
this Note shall accrue on the unpaid principal balance from the earlier of the
due date of the first unpaid monthly installment or other payment due, as
applicable, at the Default Rate. If the unpaid principal balance and all accrued
interest are not paid in full on the Maturity Date, the unpaid principal balance
and all accrued interest shall bear interest from the Maturity Date at the
Default Rate. Borrower also acknowledges that its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the Advance, that, during the time that any monthly installment or
payment under this Note is delinquent for more than thirty (30) days, 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 that it
is extremely difficult and impractical to determine those additional costs and
expenses. Borrower also acknowledges that, during the time that any monthly
installment or other payment due under this Note is delinquent for more than
thirty (30) days, 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 Borrower’s delinquent payment
and the additional compensation Lender is entitled to receive for the increased
risks of nonpayment associated with a delinquent advance.

9. Limits on Personal Liability. The provisions of Article 14 of the Master
Agreement (entitled “Limits on Personal Liability”) are hereby incorporated into
this Note by this reference to the fullest extent as if the text of such Article
were set forth in its entirety herein.

10. Voluntary and Involuntary Prepayments.

(a) A prepayment premium shall be payable in connection with any prepayment made
under this Note as provided below:

(1) Subject to the terms of the Master Agreement, Borrower may voluntarily
prepay all (or a portion) of the unpaid principal balance of this Note only on
the last calendar day of a calendar month (the “Last Day of the Month”) and only
if Borrower has complied with all of the following:

 

  (i) Borrower must give Lender at least thirty (30) days (if given via U.S.
Postal Service) or twenty (20) days (if given via facsimile, email or overnight
courier), but not more than sixty (60) days, prior written notice of Borrower’s
intention to make a prepayment (the “Prepayment Notice”). The Prepayment Notice
shall be given in writing (via facsimile, email, U.S. Postal Service or
overnight courier) and addressed to Lender. The Prepayment Notice shall include,
at a minimum, the Business Day upon which Borrower intends to make the
prepayment (the “Intended Prepayment Date”).

 

5

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  (ii) Borrower acknowledges that the Lender is not required to accept any
voluntary prepayment of this Note on any day other than the Last Day of the
Month even if Borrower has given a Prepayment Notice with an Intended Prepayment
Date other than the Last Day of the Month or if the Last Day of the Month is not
a Business Day. Therefore, even if Lender accepts a voluntary prepayment on any
day other than the Last Day of the Month, for all purposes (including the
accrual of interest and the calculation of the prepayment premium), any
prepayment received by Lender on any day other than the Last Day of the Month
shall be deemed to have been received by Lender on the Last Day of the Month and
any prepayment calculation will include interest to and including the Last Day
of the Month in which such prepayment occurs. If the Last Day of the Month is
not a Business Day, then Borrower must make the payment on the Business Day
immediately preceding the Last Day of the Month.

 

  (iii) Any prepayment shall be made by paying (A) the amount of principal being
prepaid, (B) all accrued interest (calculated to the Last Day of the Month),
(C) all other sums due Lender at the time of such prepayment, and (D) the
prepayment premium calculated pursuant to Schedule A.

 

  (iv) If, for any reason, Borrower fails to prepay this Note (A) within five
(5) Business Days after the Intended Prepayment Date or (B) if the prepayment
occurs in a month other than the month stated in the original Prepayment Notice,
then Lender shall have the right, but not the obligation, to recalculate the
prepayment premium based upon the date that Borrower actually prepays this Note
and to make such calculation as described in Schedule A attached hereto. For
purposes of such recalculation, such new prepayment date shall be deemed the
“Intended Prepayment Date.”

 

6

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(2) Upon Lender’s exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (i) all accrued
interest and all other sums due Lender under this Note and the other Loan
Documents, and (ii) the prepayment premium calculated pursuant to Schedule A.

(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.

(b) Notwithstanding the provisions of Section 10(a), no prepayment premium shall
be payable (1) with respect to any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument, or (2) as provided in subparagraph (c) of Schedule A.

(c) Schedule A is hereby incorporated by reference into this Note.

(d) Any required prepayment of less than the entire 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, unless Lender agrees
otherwise in writing.

(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a 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 on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.

(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Advance evidenced by this
Note, and acknowledges that the terms of this Note are in other respects more
favorable to Borrower as a result of Borrower’s voluntary agreement to the
prepayment premium provisions.

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, 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.

 

7

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12. 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.

13. Waivers. Except as expressly provided in the Master Agreement, 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 are waived by
Borrower and all endorsers and guarantors of this Note and all other third party
obligors.

14. Advance Charges. Borrower agrees to pay an effective rate of interest equal
to the sum of the Interest Rate provided for in this Note and any additional
rate of interest resulting from any other charges of interest or in the nature
of interest paid or to be paid in connection with the Advance evidenced by this
Note and any other fees or amounts to be paid by Borrower pursuant to any of the
other Loan Documents. 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 permitted to be charged under applicable law. If any applicable law
limiting the amount of interest or other charges permitted to be collected from
Borrower in connection with the Advance 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 the
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 the Note.

15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.

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

17. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. The provisions
of Section 15.06 of the Master Agreement (entitled “Choice of Law; Consent to
Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by
this reference to the fullest extent as if the text of such Section were set
forth in its entirety herein.

 

8

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

19. Notices. All notices, demands and other communications required or permitted
to be given by Lender to Borrower pursuant to this Note shall be given in
accordance with Section 15.08 of the Master Agreement.

20. Security for this Note. The indebtedness evidenced by this Note is secured
by other Security Documents executed by Borrower or its Affiliates. Reference is
made hereby to the Master Agreement and the Security Documents for additional
rights and remedies of Lender relating to the Indebtedness evidenced by this
Note. Each Security Document shall be released in accordance with the provisions
of the Master Agreement and the Security Documents.

21. No Reborrowing. Advances borrowed under this Note may not be reborrowed.

22. Fixed Advance. This Note is issued to evidence a Fixed Advance made in
accordance with the terms of the Master Agreement.

23. Cross-Default with Master Agreement. The occurrence of an Event of Default
under the Master Agreement shall constitute an “Event of Default” under this
Note, and, accordingly, upon the occurrence of an Event of Default under the
Master Agreement, the entire principal amount outstanding hereunder and accrued
interest thereon shall at once become due and payable, at the option of the
holder hereof.

[Remainder of page intentionally left blank.]

 

9

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IN WITNESS WHEREOF, 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. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.

 

BORROWER: [INSERT BORROWER SIGNATURE BLOCK]

 

10

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Pay to the order of                                          
                                         
                                                               , without
recourse.

 

LENDER:

DEUTSCHE BANK BERKSHIRE

MORTGAGE, INC., a Delaware corporation

By:     Name:     Title:     By:     Name:     Title:    

 

11

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ATTACHED SCHEDULES. The following Schedules are attached to this Note:

 

  x Schedule A        Prepayment Premium (required)

 

  ¨ Schedule B        Modifications to Multifamily Note

 

12

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SCHEDULE A

PREPAYMENT PREMIUM

[FOR STANDARD YIELD MAINTENANCE]

Any prepayment premium payable under Section 10 of this Note shall be computed
as follows:

 

  (a) If the prepayment is made at any time after the date of this Note and
before the Yield Maintenance Period End Date, the prepayment premium shall be
the greater of:

 

  (i) one percent (1%) of the amount of principal being prepaid; or

 

  (ii) The product obtained by multiplying:

 

  (A) the amount of principal being prepaid,

by

 

  (B) the difference obtained by subtracting from the Interest Rate on this Note
the yield rate (the “Yield Rate”) on the             % U.S. Treasury Security
due                                                       (the “Specified U.S.
Treasury Security”), on the twenty-fifth (25th) Business Day preceding (x) the
Intended Prepayment Date, or (y) the date Lender accelerates the Advance or
otherwise accepts a prepayment pursuant to Section 10(a)(3) of this Note, as the
Yield Rate is reported in The Wall Street Journal,

by

 

  (C) the present value factor calculated using the following formula:

 

1 - (1+ r)-n/12    r   

[r = Yield Rate

n = the number of months remaining between (1) either of the following: (x) in
the case of a voluntary prepayment, the Last Day of the Month during which the
prepayment is made, or (y) in any other case, the date on which Lender
accelerates the unpaid principal balance of this Note and (2) the Yield
Maintenance Period End Date]

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In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent non-callable U.S. Treasury Security having
a maturity date closest to the Yield Maintenance Period End Date of this Note
shall be selected at Lender’s discretion. If the publication of such Yield Rates
in The Wall Street Journal is discontinued, Lender shall determine such Yield
Rates from another source selected by Lender.

 

  (b) If the prepayment is made on or after the Yield Maintenance Period End
Date but before the last calendar day of the fourth (4th) month prior to the
month in which the Maturity Date occurs, the prepayment premium shall be one
percent (1%) of the amount of principal being prepaid.

 

  (c) Notwithstanding the provisions of Section 10(a) of this Note, no
prepayment premium shall be payable with respect to any prepayment made on or
after the last calendar day of the fourth (4th) month prior to the month in
which the Maturity Date occurs.

[Remainder of page intentionally left blank.]

 

14

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[Initial Page to Schedule A to Fixed Facility Note (Standard Maturity)]

 

   INITIALS

 

15

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EXHIBIT B-2 TO MASTER CREDIT FACILITY AGREEMENT

FIXED FACILITY NOTE

(Fixed+1 Maturity)

 

US [$___________________________]   [_______________, ____]

FOR VALUE RECEIVED, the undersigned (individually and collectively, “Borrower”)
jointly and severally (if more than one) promises to pay to the order of
DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation (“Lender”), the
principal sum of                                                              
Dollars (US $            ), with interest accruing at the Interest Rate on the
unpaid principal balance from the Disbursement Date until fully paid.

This Note is executed and delivered by Borrower pursuant to that certain Master
Credit Facility Agreement, dated as of April 7, 2009, by and between Borrower,
Lender and others (as amended, restated or otherwise modified from time to time,
the “Master Agreement”), to evidence the obligation of Borrower to repay a Fixed
Advance made by Lender to Borrower in accordance with the terms of the Master
Agreement. This Note is entitled to the benefit and security of the Loan
Documents provided for in the Master Agreement, to which reference is hereby
made for a statement of all of the terms and conditions under which the Fixed
Advance evidenced hereby is made.

1. Defined Terms. In addition to defined terms found elsewhere in this Note, as
used in this Note, the following definitions shall apply:

Adjustable Rate. From and after each Rate Change Date until the next Rate Change
Date, the Adjustable Rate shall be the sum of (i) the Current Index, and
(ii) the Margin, which sum is then rounded to three decimal places, subject to
the limitations that the Adjustable Rate shall not be less than the Margin.

Adjustable Rate Period: The period commencing on the First Rate Change Date and
ending on the Maturity Date.

Advance: The Advance evidenced by this Note.

Advance Term:                      months. [Note: Include both Fixed Rate Period
and Adjustable Rate Period.]

Amortization Period:                     . [Three hundred sixty (360) months or
N/A depending on term.]

Business Day: Any day other than a Saturday, Sunday or any other day on which
Lender is not open for business.

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Current Index: The published Index that is effective on the fifteenth (15th) day
before the applicable Rate Change Date.

Debt Service Amounts: Amounts payable under this Note, the Security Instrument
or any other Loan Document.

Default Rate: A rate equal to the lesser of four (4) percentage points above the
Interest Rate or the maximum interest rate which may be collected from Borrower
under applicable law.

Disbursement Date: The date of disbursement of the Advance hereunder.

First Payment Change Date: The first day of                     , 20    .
[Insert the calendar month and year immediately following the First Rate Change
Date. For example: If the First Rate Change Date is January 1, 2010, then the
First Payment Change Date is February 1, 2010.]

First Payment Date or First Interest Only Payment Date: The first day of
                    , 20    . [For example: If the Note date is January 1, 2009,
then the First Payment Date or First Interest Only Payment Date will be
February 1, 2009. If the Note date is any other day in the month of January,
then the First Payment Date or First Interest Only Payment Date will be March 1,
2009.]

First Principal and Interest Payment Date: The first day of
                    , 20    . [Applicable only if there is a Partial
Interest-Only Period. If a Partial Interest-Only Period applies, insert the
calendar month and year immediately following the Last Interest-Only Payment
Date. For example: If the Last Interest-Only Payment Date is January 1, 2009,
then the First Principal and Interest Payment Date is February 1, 2009.]

First Rate Change Date: The first day of                     , 20    . [Insert
the calendar month that is twelve months prior to the Maturity Date. For
example: If the Maturity Date is March 1, 2016, then the First Rate Change Date
is March 1, 2015.]

Fixed Rate: The annual rate of                      percent (            %).

Indebtedness: The principal of, interest on, or any other amounts due at any
time under, this Note, the Security Instrument or any other Loan Document,
including prepayment premiums, late charges, default interest, and advances to
protect the security of the Security Instrument under Section 12 of the Security
Instrument.

Index: The British Bankers Association fixing of the London Inter-Bank Offered
Rate for 1-month U.S. Dollar-denominated deposits as reported by Telerate
through electronic transmission. If the Index is no longer available, or is no
longer posted through electronic transmission, Lender will choose a new index
that is based upon comparable information and provide notice thereof to
Borrower.

 

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Last Interest-Only Payment Date: The first day of                     , 20    .
[Only applies if there is a Partial Interest-Only Period. Insert the date that
the last interest-only payment is due.]

Lender: The holder of this Note.

Margin: The Adjustable Rate Period margin is three percent (3%).

Maturity Date: The first day of                     ,             , or any
earlier date on which the unpaid principal balance of this Note becomes due and
payable by acceleration or otherwise. [Insert the final Maturity Date of the
Note including the Adjustable Rate Period.]

Payment Change Date: The first day of the month following each Rate Change Date
until this Note is repaid in full.

Remaining Amortization Period: For an amortizing Advance, as of each Payment
Change Date, the Amortization Period minus the number of scheduled monthly
principal and interest payments that have elapsed since the date of this Note.

Rate Change Date: The First Rate Change Date and the first day of each month
thereafter until this Note is repaid in full.

Security Instrument: Individually and collectively, various multifamily
mortgage, deeds to secure debt or deeds of trust described in the Master
Agreement.

Yield Maintenance Period Term or Prepayment Premium Period Term:
                     months. [Note: This must be equal to the Fixed Rate
Period.]

Yield Maintenance Period End Date or Prepayment Premium Period End Date: The
last day of                     ,             . [Insert the last day of the
calendar month immediately preceding the First Rate Change Date]

Event of Default and other capitalized terms used but not defined in this Note
shall have the meanings given to such terms in the Master Agreement or, if not
defined in the Master Agreement, as defined in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at DB
Mortgage Services, LLC, One Beacon Street, 14th Floor, Boston, Massachusetts
02108, or such other place as may be designated by written notice to Borrower
from or on behalf of Lender.

 

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3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:

(a) Short Month Interest. If disbursement of principal is made by Lender to
Borrower on any day other than the first day of the month, interest for the
period beginning on the Disbursement Date and ending on and including the last
day of the month in which such disbursement is made shall be payable
simultaneously with the execution of this Note.

(b) Interest Computation. Interest under this Note shall be computed on the
basis of (check one only):

 

  ¨ 30/360. A 360-day year consisting of twelve 30-day months.

 

  ¨ Actual/360. A 360-day year. The amount of each monthly payment made by
Borrower pursuant to Section 3(d) below that is allocated to interest will be
based on the actual number of calendar days during such month and shall be
calculated by multiplying the unpaid principal balance of this Note by the per
annum Interest Rate, dividing the product by three hundred sixty (360) and
multiplying the quotient by the actual number of days elapsed during the month.
Borrower understands that the amount allocated to interest for each month will
vary depending on the actual number of calendar days during such month.

(c) Interest Accrual. Interest shall accrue on the unpaid principal balance of
this Note at the Fixed Rate or the Adjustable Rate, as applicable. Interest
shall accrue at the Fixed Rate until the First Rate Change Date. Thereafter,
interest shall accrue at the Adjustable Rate. During the Adjustable Rate Period,
the Adjustable Rate shall change on each Rate Change Date until the Advance is
repaid in full.

(d) Monthly Installments.

 

  (1) Fixed Rate Period. (Check one only.)

 

  ¨ Amortizing Advance.

Consecutive monthly installments of principal and interest, each in the amount
of                                                       Dollars (US
$            ), shall be payable on the First Payment Date and on the first day
of every month thereafter, until and including the First Rate Change Date

 

  ¨ Interest Only Advance. (Check one only)

 

  ¨

30/360. [Select only if 30/360 is selected in Section 3(b) above.] If interest
accrues based on a 30/360 interest computation, then consecutive monthly
installments of interest only, each in the amount of

 

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                                          Dollars (US $            ), shall be
payable on the First Payment Date and on the first day of every month
thereafter, until and including the First Rate Change Date.

 

  ¨ Actual/360. [Select only if Actual/360 is selected in Section 3(b) above.]
If interest accrues based on an Actual/360 interest computation, the amount of
                                         Dollars (US $            ) shall be
payable on the First Payment Date and thereafter consecutive monthly
installments of interest only, shall be payable as follows:

 

  (1)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 28-day month;

 

  (2)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 29-day month,

 

  (3)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 30-day month, or

 

  (4)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 31-day month,

until and including the First Rate Change Date.

 

  ¨ Partial Interest Only Advance.

 

  (1) Interest Only Period. Commencing on the First Interest Only Payment Date
and on the first day of every month until and including the Last Interest Only
Payment Date, consecutive monthly installments of interest only shall be payable
and in an amount equal to one of the following (check one only):

 

  ¨ 30/360. [Select only if 30/360 is selected in Section 3(b) above.] If
interest accrues based on a 30/360 interest computation, then consecutive
monthly installments of interest only, each in the amount of
                                         Dollars (US $            ).

 

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  ¨ Actual/360. [Select only if Actual/360 is selected in Section 3(b) above.]
If interest accrues based on an Actual/360 interest computation, the amount of
                                         Dollars (US $            ) shall be
payable on the First Interest Only Payment Date and thereafter consecutive
monthly installments of interest only shall be payable as follows:

 

  (i)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 28-day month;

 

  (ii)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 29-day month,

 

  (iii)                                          Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 30-day month, or

 

  (iv)                                           Dollars (US $            ),
shall be payable on the first day of each month during the term hereof which
follows a 31-day month,

 

  (2) Amortizing Period. Commencing on the First Principal and Interest Payment
Date and on the first day of every month thereafter, until and including the
First Rate Change Date, consecutive monthly installments of principal and
interest shall be due and payable, each in the amount of
                                         Dollars (US $            ).

 

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  (2) Adjustable Rate Period. (Check one only)

 

  ¨ Amortizing Advance. If the Advance is an amortizing Advance, consecutive
monthly installments of principal and interest, each in the amount of the
Required Monthly Payment (defined below), shall be payable on the first day of
each month beginning on the First Payment Change Date and on each Payment Change
Date thereafter until the entire unpaid principal balance evidenced by this Note
is fully paid. The initial Required Monthly Payment shall be the amount required
to pay the unpaid principal balance of this Note in equal monthly installments,
including accrued interest at the Adjustable Rate over the Remaining
Amortization Period. Thereafter, to the extent that the Adjustable Rate has
changed, the Required Monthly Payment shall change on each Payment Change Date,
and shall be in such amount as shall cause the unpaid principal balance of the
Note to be amortized over the Remaining Amortization Period. Notwithstanding the
interest accrual method selected in Section 3(b) above, the amount of the
initial and all other Required Monthly Payments shall be calculated utilizing a
30/360 interest calculation payment schedule whether the amount allocated to
interest on the loan is based on a 360-day year consisting of twelve 30-day
months or on a 360-day year consisting of the actual number of days in each
month. Any remaining principal and interest, if not sooner paid, shall be due
and payable on the Maturity Date.

 

  ¨ Interest-Only Advance. If the Advance is an interest-only Advance,
consecutive monthly installments of interest only, each in the amount of the
Required Monthly Payment (defined below), shall be payable on the First Payment
Change Date and on each Payment Change Date thereafter until the entire unpaid
principal balance evidenced by this Note is fully paid. The initial Required
Monthly Payment shall be calculated based on the outstanding principal balance
and the then-applicable Adjustable Rate. Thereafter, to the extent that the
Adjustable Rate has changed, the Required Monthly Payment shall change on each
Payment Change Date based on the then-applicable Adjustable Rate. The amount of
the initial and any changed Required Monthly Payment shall be calculated
utilizing the interest accrual method selected in Section 3(b) above. The entire
unpaid principal balance and accrued but unpaid interest, if not sooner paid,
shall be due and payable on the Maturity Date.

(i) Adjustable Rate. The Adjustable Rate shall be in effect beginning on the
First Rate Change Date. From and after each Rate Change Date until the next Rate
Change Date, the Adjustable Rate shall be

 

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the sum of (a) the Current Index, and (b) the Margin, which sum is then rounded
to three decimal places, subject to the limitations that the Adjustable Rate
shall not be less than the Margin. Accrued interest on this Note shall be paid
in arrears.

(ii) Notice of Interest Rate Change. Before each Payment Change Date, Lender
shall re-calculate the Adjustable Rate and shall notify Borrower (in the manner
specified in the Security Instrument for giving notices) of any change in the
Adjustable Rate and the Required Monthly Payment.

(iii) Correction to Required Monthly Payment. If Lender at any time determines,
in its sole but reasonable discretion, that it has miscalculated the amount of
the Required Monthly Payment (whether because of a miscalculation of the
Adjustable Rate or otherwise), then Lender shall give notice to Borrower of the
corrected amount of the Required Monthly Payment (and the corrected Adjustable
Rate, if applicable) and (a) if the corrected amount of the Required Monthly
Payment represents an increase, then Borrower shall, within thirty (30) calendar
days thereafter, pay to Lender any sums that Borrower would have otherwise been
obligated under this Note to pay to Lender had the amount of the Required
Monthly Payment not been miscalculated, or (b) if the corrected amount of the
Required Monthly Payment represents a decrease thereof and Borrower is not
otherwise in breach or default under any of the terms and provisions of the
Note, the Security Instrument or any other loan document evidencing or securing
the Note, then Borrower shall thereafter be paid the sums that Borrower would
not have otherwise been obligated to pay to Lender had the amount of the
Required Monthly Payment not been miscalculated.

(e) Payments Before Due Date. Any regularly scheduled monthly installment of
principal and interest that is received by Lender before the date it is due
shall be deemed to have been received on the due date solely for the purpose of
calculating interest due.

(f) Accrued Interest. Any accrued interest remaining past due for thirty
(30) days or more shall be added to and become part of the unpaid principal
balance and shall bear interest at the rate or rates specified in this Note. Any
reference herein 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 that is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender’s discretion. Borrower agrees that

 

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

6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Section 10, if any, 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. Lender may exercise this option
to accelerate regardless of any prior forbearance.

7. Late Charge. If any monthly installment due hereunder is not received by
Lender on or before the fifth (5th) day of each month or if any other amount
payable under this Note or under the Security Instrument or any other Loan
Document is not received by Lender before or on the date such amount is due,
counting from and including the date such amount is due, Borrower shall pay to
Lender, immediately and without demand by Lender, a late charge equal to five
percent (5%) of such monthly installment or other amount due. Borrower
acknowledges that its failure to make timely payments will cause Lender to incur
additional expenses in servicing and processing the Advance 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. So long as any monthly installment or any other payment due
under this Note remains past due for thirty (30) days or more, interest under
this Note shall accrue on the unpaid principal balance from the earlier of the
due date of the first unpaid monthly installment or other payment due, as
applicable, at the Default Rate. If the unpaid principal balance and all accrued
interest are not paid in full on the Maturity Date, the unpaid principal balance
and all accrued interest shall bear interest from the Maturity Date at the
Default Rate. Borrower also acknowledges that its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the Advance, that, during the time that any monthly installment or
payment under this Note is delinquent for more than thirty (30) days, 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 that it
is extremely difficult and impractical to determine those additional costs and
expenses. Borrower also acknowledges that, during the time that any monthly
installment or other payment due under this Note is delinquent for more than
thirty (30) days, 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 Borrower’s delinquent payment
and the additional compensation Lender is entitled to receive for the increased
risks of nonpayment associated with a delinquent Advance.

 

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9. Limits on Personal Liability. The provisions of Article 14 of the Master
Agreement (entitled “Limits on Personal Liability”) are hereby incorporated into
this Note by this reference to the fullest extent as if the text of such Article
were set forth in its entirety herein.

10. Voluntary and Involuntary Prepayments.

(a) A prepayment premium shall be payable in connection with any prepayment made
under this Note as provided below:

(1) Subject to the terms of the Master Agreement, Borrower may voluntarily
prepay all or a portion of the unpaid principal balance of this Note only on the
last calendar day of a calendar month (the “Last Day of the Month”) and only if
Borrower has complied with all of the following:

 

  (i) Borrower must give Lender at least thirty (30) days (if given via U.S.
Postal Service) or twenty (20) days (if given via facsimile, email or overnight
courier), but not more than sixty (60) days, prior written notice of Borrower’s
intention to make a prepayment (the “Prepayment Notice”). The Prepayment Notice
shall be given in writing (via facsimile, email, U.S. Postal Service or
overnight courier) and addressed to Lender. The Prepayment Notice shall include,
at a minimum, the Business Day upon which Borrower intends to make the
prepayment (the “Intended Prepayment Date”).

 

  (ii) Borrower acknowledges that Lender is not required to accept any voluntary
prepayment of this Note on any day other than the Last Day of the Month even if
(A) Borrower has given a Prepayment Notice with an Intended Prepayment Date
other than the Last Day of the Month or (B) the Last Day of the Month is not a
Business Day. Therefore, even if Lender accepts a voluntary prepayment on any
day other than the Last Day of the Month, for all purposes (including the
accrual of interest and the calculation of the prepayment premium), any
prepayment received by Lender on any day other than the Last Day of the Month
shall be deemed to have been received by Lender on the Last Day of the Month and
any prepayment calculation will include interest to and including the Last Day
of the Month in which such prepayment occurs. If the Last Day of the Month is
not a Business Day, then Borrower must make the payment on the Business Day
immediately preceding the Last Day of the Month.

 

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  (iii) Any prepayment shall be made by paying (A) the amount of principal being
prepaid, (B) all accrued interest (calculated to the Last Day of the Month),
(C) all other sums due Lender at the time of such prepayment, and (D) the
prepayment premium calculated pursuant to Schedule A.

 

  (iv) If, for any reason, Borrower fails to prepay this Note (A) within five
(5) Business Days after the Intended Prepayment Date or (B) if the prepayment
occurs in a month other than the month stated in the original Prepayment Notice,
then Lender shall have the right, but not the obligation, to recalculate the
prepayment premium based upon the date that Borrower actually prepays this Note
and to make such calculation as described in Schedule A attached hereto. For
purposes of such recalculation, such new prepayment date shall be deemed the
“Intended Prepayment Date.”

(2) Upon Lender’s exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (i) all accrued
interest and all other sums due Lender under this Note and the other Loan
Documents, and (ii) the prepayment premium calculated pursuant to Schedule A.

(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.

(b) Notwithstanding the provisions of Section 10(a), no prepayment premium shall
be payable (1) with respect to any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument, or (2) as provided in subparagraph (b) of Schedule A.

(c) Schedule A is hereby incorporated by reference into this Note.

(d) Any required prepayment of less than the entire 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, unless Lender agrees
otherwise in writing.

(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a 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 on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.

 

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(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Advance evidenced by this
Note, and acknowledges that the terms of this Note are in other respects more
favorable to Borrower as a result of Borrower’s voluntary agreement to the
prepayment premium provisions.

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs,
including fees and out-of-pocket expenses of attorneys and expert witnesses and
costs of investigation, 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.

12. 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.

13. Waivers. Except as expressly provided in the Master Agreement, 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 are waived by
Borrower and all endorsers and guarantors of this Note and all other third party
obligors.

14. Advance Charges. Borrower agrees to pay an effective rate of interest equal
to the sum of the Interest Rate provided for in this Note and any additional
rate of interest resulting from any other charges of interest or in the nature
of interest paid or to be paid in connection with the Advance evidenced by this
Note and any other fees or amounts to be paid by Borrower pursuant to any of the
other Loan Documents. 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 permitted to be charged under applicable law. If any applicable law
limiting the amount of interest or other charges permitted to be collected from
Borrower in connection with the Advance 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

 

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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 the 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 the Note.

15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.

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

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

18. Notices. All notices, demands and other communications required or permitted
to be given by Lender to Borrower pursuant to this Note shall be given in
accordance with accordance with Section 15.08 of the Master Agreement.

19. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. The provisions
of Section 15.06 of the Master Agreement (entitled “Choice of Law; Consent to
Jurisdiction; Waiver of Jury Trial”) are hereby incorporated into this Note by
this reference to the fullest extent as if the text of such Section were set
forth in its entirety herein.

20. Security for this Note. The indebtedness evidenced by this Note is secured
by other Security Documents executed by Borrower or its Affiliates. Reference is
made hereby to the Master Agreement and the Security Documents for additional
rights and remedies of Lender relating to the Indebtedness evidenced by this
Note. Each Security Document shall be released in accordance with the provisions
of the Master Agreement and the Security Documents.

21. No Reborrowing. Advances borrowed under this Note may not be reborrowed.

22. Fixed Advances. This Note is issued to evidence a Fixed Advance made in
accordance with the terms of the Master Agreement.

23. Cross-Default with Master Agreement. The occurrence of an Event of Default
under the Master Agreement shall constitute an “Event of Default” under this
Note, and, accordingly, upon the occurrence of an Event of Default under the
Master Agreement, the entire principal amount outstanding hereunder and accrued
interest thereon shall at once become due and payable, at the option of the
holder hereof.

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ATTACHED SCHEDULES. The following Schedules are attached to this Note:

 

  x Schedule A        Prepayment Premium (required)

 

  ¨ Schedule B        Modifications to Multifamily Note

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, 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. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.

 

BORROWER: [INSERT BORROWER SIGNATURE BLOCK]

 

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Pay to the order of                                          
                                         
                                                           , without recourse.

 

LENDER:

DEUTSCHE BANK BERKSHIRE

MORTGAGE, INC., a Delaware corporation

By:     Name:     Title:     By:     Name:     Title:    

 

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SCHEDULE A

PREPAYMENT PREMIUM

Any prepayment premium payable under Section 10 of this Note shall be computed
as follows:

 

  (a) If the prepayment is made at any time after the date of this Note and
before the Yield Maintenance Period End Date, the prepayment premium shall be
the greater of:

 

  (i) one percent (1%) of the amount of principal being prepaid; or

 

  (ii) The product obtained by multiplying:

 

  (A) the amount of principal being prepaid,

by

 

  (B) the difference obtained by subtracting from the Fixed Rate on this Note
the yield rate (the “Yield Rate”) on the             % U.S. Treasury Security
due                                  (the “Specified U.S. Treasury Security”),
on the twenty-fifth (25th) Business Day preceding (x) the Intended Prepayment
Date, or (y) the date Lender accelerates the Advance or otherwise accepts a
prepayment pursuant to Section 10(a)(3) of this Note, as the Yield Rate is
reported in The Wall Street Journal,

by

 

  (C) the present value factor calculated using the following formula:

 

  1 - (1 + r)-n/12     r  

[r = Yield Rate

n = the number of months remaining between (1) either of the following: (x) in
the case of a voluntary prepayment, the Last Day of the Month during which the
prepayment is made, or (y) in any other case, the date on which Lender
accelerates the unpaid principal balance of this Note and (2) the Yield
Maintenance Period End Date]

In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent non-callable U.S. Treasury Security having
a maturity date closest to the Yield Maintenance Period End Date of this Note
shall be selected at Lender’s discretion. If the publication of such Yield Rates
in The Wall Street Journal is discontinued, Lender shall determine such Yield
Rates from another source selected by Lender.

 

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  (b) Notwithstanding the provisions of Section 10(a) of this Note, no
prepayment premium shall be payable with respect to any prepayment made on or
after the Yield Maintenance Period End Date.

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[Initial Page to Schedule A to Fixed Facility Note (Fixed+1 Maturity)]

 

   INITIALS

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EXHIBIT C-1 TO MASTER CREDIT FACILITY AGREEMENT

GUARANTY

This Guaranty (the “Guaranty”) is made and entered into as of             ,
2009, by BRE PROPERTIES, INC., a Maryland corporation (the “Guarantor”), for the
benefit of DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation
(“Lender”).

RECITALS

A. Lender has agreed to execute that certain Master Credit Facility Agreement,
dated as of April 7, 2009, (as amended, supplemented or otherwise modified or
amended and restated from time to time, the “Master Agreement”), pursuant to
which, inter alia, Lender has agreed, subject to the terms, conditions and
limitations of the Master Agreement, to loan to the borrowers signatory thereto
(individually and collectively, “Borrower”) from time to time Advances (each, an
“Advance” and, collectively, the “Advances”) to be evidenced by various
promissory notes by Borrower for the benefit of Lender (individually and
collectively, the “Note”).

B. The repayment of the Advances and all of the other Obligations of Borrower
under the Master Agreement or the other Loan Documents are guaranteed by this
Guaranty to the extent of Borrower’s personal liability as provided in Article
14 of the Master Agreement.

C. Guarantor owns, directly or indirectly, an ownership interest in Borrower and
will receive a direct and material benefit from the Advances to Borrower.

D. Lender is willing to make the Advances to Borrower only if Guarantor agrees
to enter into this Guaranty.

NOW, THEREFORE, in order to induce Lender to make the Advances to Borrower, and
in consideration thereof, Guarantor hereby agrees as follows:

Section 1. Definitions. All capitalized terms used but not defined in this
Guaranty shall have the meanings ascribed to such terms in the Master Agreement.

Section 2. Guaranty of Payment and Performance. Guarantor irrevocably,
absolutely and unconditionally guarantees to Lender all of the following
(collectively, the “Guaranteed Obligations”):

(a) The due and punctual payment of all amounts for which Borrower is personally
liable under Section 14.01 of the Master Agreement; and

(b) Subject to the limitations on the personal liability of Borrower in
Section 14.01 of the Master Agreement and, solely to the extent of Borrower’s
personal liability thereunder, (i) the due and punctual performance of all the
Obligations of Borrower under the Master Agreement, and (ii) all of the
obligations of Borrower under any other Loan Documents from time to time
executed by Borrower.

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This Guaranty shall be an unconditional guaranty of payment and performance, and
not of collection, and is in no way conditioned upon any attempt by Lender to
pursue or exhaust any remedy against Borrower. This Guaranty is a continuing
guaranty which shall remain in full force and effect until all of the Guaranteed
Obligations have been paid and performed in full; and Guarantor shall not be
released from any Guaranteed Obligations to Lender under this Guaranty as long
as any amount payable by Borrower to Lender, or any Obligation by Borrower,
under the Loan Documents is not performed, satisfied, settled or paid in full.

Section 3. Form of Payment. All payments under this Guaranty shall be made to
Lender in immediately available funds, without reduction by any recoupment,
set-off, counterclaim or cross-claim against Lender.

Section 4. Guarantor’s Obligations are Absolute. The obligations of Guarantor
under this Guaranty shall be absolute and unconditional, shall not be subject to
any counterclaim, set-off, recoupment, deduction, or defense based upon any
claim Guarantor may have against Lender or Borrower and shall remain in full
force and effect without regard to, and shall not be released, discharged or
terminated or in any other way affected by, any circumstance or condition
(whether or not Guarantor shall have any knowledge or notice thereof),
including, without limitation:

(a) any amendment or modification of, or extension of time for payment of any of
the principal of, interest on or other amounts payable under the Loan Documents;

(b) any exercise or non-exercise by Lender of any right, power or remedy under
or in respect of the Loan Documents, or any waiver, consent, forbearance,
indulgence or other action, inaction or omission by Lender under or in respect
of the Loan Documents;

(c) any assignment, sale or other transfer of Borrower’s interest in all or any
part of the real or personal property which at any time constitutes collateral
for the payment of the Guaranteed Obligations, including, without limitation, a
conveyance of such property by Borrower to Lender by deed in lieu of
foreclosure;

(d) any bankruptcy, insolvency, reorganization, adjustment, dissolution,
liquidation or other like proceeding involving or affecting Borrower or Lender
or their respective properties or creditors, or any action taken with respect to
the Loan Documents by any trustee or receiver of Borrower or Lender, or by any
court, in any such proceeding;

(e) any invalidity or unenforceability, in whole or in part, of any term or
provision of the Loan Documents or Borrower’s incapacity or lack of authority to
enter into the Loan Documents;

(f) any release, compromise, settlement or discharge with respect to all or any
portion of Borrower’s obligations under the Loan Documents;

(g) any acceptance of additional or substituted collateral for payment of the
Guaranteed Obligations or any release or subordination of any collateral held at
any time by Lender as security for the payment of the Guaranteed Obligations; or

 

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(h) any resort to Guarantor for payment of all or any portion of the Guaranteed
Obligations, whether or not Lender shall have resorted to any collateral
securing the Guaranteed Obligations, if any, or shall have proceeded to pursue
or exhaust its remedies against Borrower (or any other Person) primarily or
secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby
given it, no dealing by Lender with Borrower, Guarantor or any other Person, no
change, impairment or suspension of any right or remedy of Lender, and no act or
thing which, but for this provision, could act as a release or exoneration of
the liabilities of Guarantor hereunder, shall in any way affect, decrease,
diminish or impair any of the obligations of Guarantor hereunder or give
Guarantor or any other Person any recourse or defense against Lender.

Section 5. Waiver. Guarantor unconditionally waives the following:

(a) notice of acceptance of this Guaranty and notice of any of the matters
referred to in Section 4 hereof;

(b) all notices which may be required by statute, rule of law or otherwise to
preserve intact any rights which Lender may have against Guarantor under this
Guaranty, including, without limitation, any demand, proof or notice of
non-payment of any of the principal of, interest on or other amounts payable
under the Loan Documents, and notice of any failure on the part of Borrower to
perform and comply with any covenant, agreement, term or condition of the Loan
Documents;

(c) any right to the enforcement, assertion or exercise of any right, power or
remedy conferred upon Lender in the Loan Documents or otherwise;

(d) any requirement that Lender act with diligence in enforcing its rights under
the Loan Documents or this Guaranty;

(e) any right to require Lender to proceed against or exhaust its recourse
against Borrower or any security or collateral held by Lender, if any, at any
time for the payment of the Guaranteed Obligations or to pursue any other remedy
in its power before being entitled to payment from Guarantor under this Guaranty
or before proceeding against Guarantor;

(f) any failure by Lender to file or enforce a claim against the estate (either
in administration, bankruptcy or any other proceeding) of Borrower or any other
Person;

(g) any defense based upon an election of remedies by Lender which destroys or
otherwise impairs the subrogation rights of Guarantor or the right of Guarantor
(after payment of the Guaranteed Obligations) to proceed against Borrower for
reimbursement, or both;

(h) any defense based upon any taking, modification or release of any collateral
for the Guaranteed Obligations, if any, or any failure to perfect any security
interest in, or the taking of, or failure to take any other action with respect
to, any collateral securing payment of the Guaranteed Obligations, if any;

 

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(i) any defense based upon the addition, substitution or release, in whole or in
part, of any Person(s), including, without limitation, another guarantor,
primarily or secondarily liable for or in respect of the Guaranteed Obligations;

(j) any rights or defenses based upon an offset by Guarantor against any
obligation now or hereafter owed to Guarantor by Borrower; and

(k) all other notices which may or might be lawfully waived by Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal,
to the extent set forth in this Guaranty, until the payment and performance in
full of the Guaranteed Obligations, notwithstanding any act, omission or thing
which might otherwise operate as a legal or equitable discharge of Guarantor
other than the payment and performance in full of the Guaranteed Obligations. No
delay by Lender in exercising any rights and/or powers hereunder or in taking
any action to enforce Borrower’s obligations under the Loan Documents shall
operate as a waiver as to such rights or powers or in any manner prejudice any
and all of Lender’s rights and powers hereunder against Guarantor. The intention
of Guarantor under this Guaranty is that, so long as any of the Guaranteed
Obligations remains unsatisfied, the obligations of Guarantor hereunder shall
not be discharged except by payment or performance and then only to the extent
of such performance. Guarantor agrees that Guarantor’s obligations hereunder
shall not be affected by any circumstances, whether or not referred to in this
Guaranty, which might constitute a legal or equitable discharge of a surety or
guarantor.

Section 6. Election of Remedies. This Guaranty may be enforced from time to
time, as often as occasion therefor may arise, and without any requirement that
Lender must first pursue or exhaust any remedies available to it against
Borrower under the Loan Documents or against any other Person or resort to any
collateral at any time held by it for performance of the Guaranteed Obligations,
if any, or any other source or means of obtaining payment of any of the
Guaranteed Obligations.

Section 7. Representations and Warranties of Guarantor. Guarantor hereby
represents and warrants to Lender as follows:

(a) Due Organization; Qualification. Guarantor is qualified to transact business
and is in good standing in the state in which it is organized and in each other
jurisdiction in which such qualification and/or standing is necessary to the
conduct of its business and where the failure to be so qualified would adversely
affect the validity of, the enforceability of, or the ability of Guarantor to
perform the Guaranteed Obligations.

(b) Power and Authority. Guarantor has the requisite power and authority (i) to
own its properties and to carry on its business as now conducted and as
contemplated to be conducted in connection with the performance of the
Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and to
carry out the transactions contemplated by this Guaranty.

(c) Due Authorization. The execution, delivery and performance of this Guaranty
has been duly authorized by all necessary action and proceedings by or on behalf
of Guarantor, and to the best of Guarantor’s knowledge, no further approvals or
filings of any kind, including any approval of or filing with any Governmental
Authority, are required by or on behalf of Guarantor as a condition to the valid
execution, delivery and performance by Guarantor of this Guaranty.

 

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(d) Valid and Binding Obligations. This Guaranty has been duly authorized,
executed and delivered by Guarantor and constitutes the legal, valid and binding
obligations of Guarantor, enforceable against Guarantor in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles
affecting the enforcement of creditors’ rights generally or by equitable
principles or by the exercise of discretion by any court.

(e) Non-contravention: No Liens. Neither the execution and delivery of this
Guaranty, nor the fulfillment of or compliance with the terms and conditions of
this Guaranty nor the payment or performance of the Guaranteed Obligations:

(i) does or will conflict with, in any material respect, or result in any
material breach or violation of any Applicable Law enacted or issued by any
Governmental Authority or other agency having jurisdiction over Guarantor, any
of the Mortgaged Properties or any other portion of the Collateral or assets of
Guarantor, or any judgment or order applicable to Guarantor or to which
Guarantor is subject;

(ii) does or will conflict with, in any material respect, or result in any
material breach or violation of, or constitute a default under, any of the
terms, conditions or provisions of Guarantor’s Organizational Documents, any
indenture, existing agreement or other instrument to which Guarantor is a party
or to which Guarantor, any of the Mortgaged Properties or any other portion of
the Collateral or other assets of Guarantor is subject; or

(iii) does or will require the consent or approval of any creditor of Guarantor,
any Governmental Authority or any other Person except such consents or approvals
which have already been obtained.

(f) Pending Litigation or Other Proceedings. There is no pending or, to the best
knowledge of Guarantor, threatened action, suit, proceeding or investigation, at
law or in equity, before any court, board, body or official of any Governmental
Authority or arbitrator which, if decided adversely to Guarantor, would have, or
may reasonably be expected to have, a Material Adverse Effect on Guarantor.
Guarantor is not in default with respect to any order of any Governmental
Authority.

(g) Solvency. Guarantor is not insolvent and will not be rendered insolvent by
the transaction contemplated by this Guaranty and after giving effect to such
transaction, Guarantor will not be left with an unreasonably small amount of
capital with which to engage in its business or undertakings, nor will Guarantor
have incurred, have intended to incur, or believe that it has incurred, debts
beyond its ability to pay such debts as they mature. Guarantor did not receive
less than a reasonably equivalent value in exchange for incurrence of the
Guaranteed Obligations. There (i) is no contemplated, pending or, to the best of
Guarantor’s knowledge, threatened bankruptcy, reorganization, receivership,
insolvency or like proceeding, whether voluntary or involuntary, affecting
Guarantor and (ii) has been no assertion or exercise of jurisdiction over
Guarantor by any court empowered to exercise bankruptcy powers.

 

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(h) No Contractual Defaults. There are no material defaults by Guarantor or, to
the knowledge of Guarantor, by any other Person under any material contract to
which Guarantor is a party other than defaults which do not permit the
non-defaulting party to terminate the contract or which do not have, and are not
reasonably be expected to have, a Material Adverse Effect on Guarantor.
Guarantor has not received notice, and does not have any knowledge, of any
existing circumstances in respect of which it could receive any notice of
default or breach in any material respect of any material contracts to which
Guarantor is a party.

(i) Representations True and Correct. The representations and warranties made by
Guarantor in this Guaranty are true, complete and correct as of the Initial
Closing Date and do not contain any untrue statement or omit to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.

(j) ERISA. Guarantor is in compliance in all material respects with all
applicable provisions of ERISA and has not incurred any liability to the PBGC on
a Plan under Title IV of ERISA. None of the assets of Guarantor constitute plan
assets (within the meaning of Department of Labor Regulation § 2510.3-101) of
any employee benefit plan subject to Title I of ERISA.

(k) Financial Information. The financial statements of Guarantor which have been
furnished to Lender are complete and accurate in all material respects and
present fairly the financial condition of Guarantor, as of its date in
accordance with GAAP, applied on a consistent basis, and since the date of the
most recent of such financial statements no event has occurred which would have,
or may reasonably be expected to have, a Material Adverse Effect on Guarantor,
and there has not been any material transaction entered into by Guarantor other
than transactions related to the business of owning, managing and operating real
estate. Guarantor has no material contingent obligations (other than the
obligations evidenced by this Guaranty) which are not otherwise disclosed in its
most recent financial statements.

(l) Accuracy of Information. No information, statement or report furnished in
writing to Lender by Guarantor in connection with this Guaranty or any other
Loan Document or in connection with the consummation of the transactions
contemplated hereby and thereby contains any material misstatement of fact or
omits to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.

(m) No Conflicts of Interest. To the best of Guarantor’s knowledge, no member,
officer, agent or employee of Lender has been or is in any manner interested,
directly or indirectly, in that Person’s own name, or in the name of any other
Person, in the Guaranty, the Loan Documents, or any Mortgaged Property, in any
contract for property or materials to be furnished or used in connection with
such Mortgaged Property or in any aspect of the transactions contemplated by the
Loan Documents.

(n) Governmental Approvals. To the best of Guarantor’s knowledge, no
Governmental Approval not already obtained or made is required for the execution
and delivery of this Guaranty or the performance of the terms and provisions
hereof by Guarantor.

 

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(o) Governmental Orders. Guarantor is not presently under any cease or desist
order or other orders of a similar nature, temporary or permanent, of any
Governmental Authority which would have the effect of preventing or hindering
performance of its duties hereunder, nor are there any proceedings presently in
progress or to its knowledge contemplated which would, if successful, lead to
the issuance of any such order.

(p) No Reliance. Guarantor acknowledges, represents and warrants that it
understands the nature and structure of the transactions contemplated by this
Guaranty and the other Loan Documents; that it is familiar with the provisions
of all of the documents and instruments relating to such transactions; that it
understands the risks inherent in such transactions, including the risk of loss
of all or any of the Mortgaged Properties; and that it has not relied on Lender
or Fannie Mae for any guidance or expertise in analyzing the financial or other
consequences of the transactions contemplated by this Guaranty or any other Loan
Document or otherwise relied on Lender or Fannie Mae in any manner in connection
with interpreting, entering into or otherwise in connection with this Guaranty,
any other Loan Document or any of the matters contemplated hereby or thereby.

(q) Compliance with Applicable Law. Guarantor is in compliance with Applicable
Law, including all Governmental Approvals, if any, except for such items of
noncompliance that, singly or in the aggregate, have not had and are not
reasonably expected to cause, a Material Adverse Effect on Guarantor.

(r) Contracts with Affiliates. Unless otherwise consented to by Lender,
Guarantor has not entered into and is not a party to any contract, lease or
other agreement with Borrower or any other Affiliate of Guarantor for the
provision of any service, materials or supplies relating to any Mortgaged
Property.

Section 8. Affirmative Covenants of Guarantor. Guarantor agrees and covenants
with Lender that, at all times during the Term of this Guaranty:

(a) Maintenance of Existence. Guarantor shall maintain its existence and
continue to be a corporation organized under the laws of the state of its
organization. Guarantor shall continue to be duly qualified to do business in
each jurisdiction in which such qualification is necessary to the conduct of its
business and where the failure to be so qualified would materially and adversely
affect the validity of, the enforceability of, or the ability to perform, its
obligations under this Guaranty.

(b) Financial Statements; Accountants’ Reports: Other Information. The Guarantor
shall keep and maintain at all times complete and accurate books of accounts and
records in sufficient detail to correctly reflect all of the Guarantor’s
financial transactions and assets. In addition, the Guarantor shall furnish, or
cause to be furnished, to Lender the financial statements required by the Master
Agreement.

(c) Maintain Licenses. Guarantor shall procure and maintain in full force and
effect all licenses, Permits, charters and registrations which are material to
the conduct of its business and shall abide by and satisfy all terms and
conditions of all such licenses, Permits, charters and registrations.

 

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(d) Access to Records; Discussions With Officers and Accountants. To the extent
permitted by law, Guarantor shall permit Lender to take all actions set forth in
Section 7.06 of the Master Agreement.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event
of Default, all inspections shall be conducted at reasonable times during normal
business hours and upon reasonable advance notice to the Guarantor.

(e) Inform Lender of Material Events. Guarantor shall promptly, but in any event
within five (5) Business Days, inform Lender in writing of any of the following
(and shall deliver to Lender copies of any related written communications,
complaints, orders, judgments and other documents relating to the following) of
which Guarantor has actual knowledge:

(i) Defaults. The occurrence of any Event of Default or any Potential Event of
Default under any Loan Document;

(ii) Regulatory Proceedings. Upon obtaining actual knowledge thereof, the
commencement of any rulemaking or disciplinary proceeding or the promulgation of
any proposed or final rule which would have, or may reasonably be expected to
have, a Material Adverse Effect on Guarantor;

(iii) Legal Proceedings. The commencement or threat of, or amendment to, any
proceedings by or against Guarantor in any Federal, state or local court or
before any Governmental Authority, or before any arbitrator, which, if adversely
determined, would have, or at the time of determination may reasonably be
expected to have, a Material Adverse Effect on Guarantor;

(iv) Bankruptcy Proceedings. The commencement of any proceedings by or against
Guarantor under any applicable bankruptcy, reorganization, liquidation,
insolvency or other similar law now or hereafter in effect or of any proceeding
in which a receiver, liquidator, trustee or other similar official is sought to
be appointed for it;

(v) Regulatory Supervision or Penalty. The receipt of notice from any
Governmental Authority having jurisdiction over Guarantor that (A) Guarantor is
being placed under regulatory supervision, (B) any license, Permit, charter,
membership or registration material to the conduct of Guarantor’s business or
the Mortgaged Properties is to be suspended or revoked or (C) Guarantor is to
cease and desist any practice, procedure or policy employed by Guarantor, as the
case may be, in the conduct of its business, and such cessation would have, or
may reasonably be expected to have, a Material Adverse Effect;

(vi) Material Adverse Effect. The occurrence of any act, omission, change or
event which has a Material Adverse Effect on Guarantor subsequent to the date of
the most recent audited financial statements delivered to Lender pursuant to the
Master Agreement;

(vii) Accounting Changes. Any material change in Guarantor’s accounting policies
or financial reporting practices;

 

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(viii) Legal and Regulatory Status. The occurrence of any act, omission, change
or event, including any Governmental Approval, the result of which is to have a
Material Adverse Effect in any way on the legal or regulatory status of
Guarantor; and

(ix) Default on Indebtedness. The occurrence of any event that results in or,
with the giving of notice, if applicable, or the passing of time, or both, would
result in (i) any imminent default, default or waiver of default in respect of
any Indebtedness of Guarantor having an aggregate principal amount in excess of
$250,000, (ii) the failure of Guarantor to pay when due or within any applicable
grace period any Indebtedness of Guarantor, having an aggregate principal amount
in excess of $250,000, or (iii) any Indebtedness of Guarantor having an
aggregate principal amount in excess of $250,000 becoming due and payable before
its normal maturity by reason of a default or event of default, however
described, or any other event of default shall occur and continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness.

(x) Restructuring of Guarantor. Any restructuring or reorganization of any
Guarantor.

(f) ERISA. Guarantor shall at all times remain in compliance in all material
respects with all applicable provisions of ERISA and similar requirements of the
PBGC.

(g) Further Assurances. Guarantor, at the request of Lender, but without
incurring any liability beyond the Guaranteed Obligations, shall execute and
deliver and, if necessary, file or record such statements, documents,
agreements, UCC financing and continuation statements and such other instruments
and take such further action as Lender from time to time may request as
reasonably necessary, desirable or proper to carry out more effectively the
purposes of this Guaranty or any of the other Loan Documents or to the extent
Guarantor owns any Collateral, (i) to subject such Collateral to the lien and
security interests of the Loan Documents or (ii) to evidence, perfect or
otherwise implement, to assure the lien and security interests intended by the
terms of the Loan Documents or in order to exercise or enforce its rights under
the Loan Documents.

(h) Monitoring Compliance. Upon the request of Lender, but without incurring any
liability beyond the Guaranteed Obligations, from time to time, Guarantor shall
promptly provide to Lender such documents, certificates and other information as
may be deemed reasonably necessary to enable Lender to perform its functions
under that certain MATS Addendum to Mortgage Selling and Servicing Contract
executed by Lender and Fannie Mae.

(i) Guarantor shall comply with the provisions of Article 8 (Financial
Covenants) of the Master Agreement regarding Cash on Hand and Net Worth
requirements.

Section 9. Negative Covenants of Guarantor.

(a) Other Activities. Guarantor shall not violate the provisions of Section 9.01
of the Master Agreement.

 

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(b) Material Adverse Effect. Guarantor shall not take or permit any action which
could reasonably be expected to have any Material Adverse Effect on Guarantor.

(c) Principal Place of Business. Guarantor shall not change its principal place
of business or the location of its books and records, each as set forth in
Section 18, without first giving thirty (30) days’ prior written notice to
Lender.

Section 10. Expenses. Guarantor agrees to pay all reasonable costs and
out-of-pocket expenses, including court costs and expenses and the reasonable
fees and disbursements of legal counsel, incurred by or on behalf of Lender in
connection with the enforcement of Guarantor’s obligations under this Guaranty
or the protection of Lender’s rights under this Guaranty. The covenants
contained in this Section shall survive the payment of the Guaranteed
Obligations.

Section 11. Condition of Borrower. Guarantor is fully aware of the financial
condition of Borrower and is executing and delivering this Guaranty based solely
upon Guarantor’s own independent investigation of all matters pertinent hereto
and is not relying in any manner upon any representation or statement made by
Lender. Guarantor represents and warrants that Guarantor is in a position to
obtain, and Guarantor hereby assumes full responsibility for obtaining, any
additional information concerning Borrower’s financial condition and any other
matters pertinent hereto as Guarantor may desire and Guarantor is not relying
upon or expecting Lender to furnish to Guarantor any information now or
hereafter in Lender’s possession concerning the same or any other matter. By
executing this Guaranty, Guarantor knowingly accepts the full range of risks
encompassed within a contract of this type, which risks Guarantor acknowledges.

Section 12. Further Assurances. Guarantor agrees at any time and from time to
time upon request by Lender to take, or cause to be taken, any action and to
execute and deliver any additional documents which, in the reasonable opinion of
Lender, may be necessary in order to assure to Lender the full benefits of this
Guaranty.

Section 13. Subordination. Guarantor hereby irrevocably and unconditionally
agrees that any claims, direct or indirect, Guarantor may have by subrogation or
other form of reimbursement, against Borrower or to any security or any interest
therein, by virtue of this Guaranty or as a consequence of any payment made by
Guarantor pursuant to this Guaranty, shall, until such time as the Guaranteed
Obligations have been paid in full, be fully subordinated in time and right of
payment to the payment in full of the Guaranteed Obligations and all other
obligations of Guarantor to Lender under this Guaranty.

Section 14. No Subrogation. Guarantor shall not have any right of subrogation
against Borrower by reason of any payment by Guarantor under this Guaranty until
such time as all of the Guaranteed Obligations have been satisfied in full.
Nothing in the foregoing shall affect any claim which any Guarantor has against
Borrower under the terms of the Organizational Documents of Borrower.

Section 15. Insolvency and Liability of Borrower. So long as any of the
Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the
extent not prohibited by the applicable bankruptcy court, Guarantor agrees to
file all claims against Borrower in any

 

10

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bankruptcy or other proceeding in which the filing of claims is required by law
in connection with Indebtedness owed by Borrower to Guarantor and to assign to
Lender all rights of Guarantor thereunder up to the lesser of (i) the amount of
such Indebtedness or (ii) the amount of the Guaranteed Obligations. In all such
cases the Person or Persons authorized to pay such claims shall pay to Lender
the full amount thereof to the full extent necessary to pay the Guaranteed
Obligations, and Guarantor hereby assigns to Lender all of Guarantor’s rights to
all such payments to which Guarantor would otherwise be entitled.
Notwithstanding the foregoing, and except to the extent that any sums owed by
Borrower to Lender under the Loan Documents shall have been fully satisfied
thereby, the liability of Guarantor hereunder shall in no way be affected by

(a) the release or discharge of Borrower in any creditors’, receivership,
bankruptcy or other proceedings; or

(b) the impairment, limitation or modification of the liability of Borrower or
the estate of Borrower in bankruptcy resulting from the operation of any present
or future provisions of the Bankruptcy Code or other statute or from the
decision in any court.

Section 16. Preferences, Fraudulent Conveyances, Etc. If Lender is required to
refund, or voluntarily refunds, any payment received from Borrower because such
payment is or may be avoided, invalidated, declared fraudulent, set aside or
determined to be void or voidable as a preference, fraudulent conveyance,
impermissible setoff or a diversion of trust funds under the bankruptcy laws or
for any similar reason, including, without limitation, any judgment, order or
decree of any court or administrative body having jurisdiction over Lender or
any of its property, or any settlement or compromise of any claim effected by
Lender with Borrower or other claimant (a “Rescinded Payment”), then Guarantor’s
liability to Lender shall continue in full force and effect, or Guarantor’s
liability to Lender shall be reinstated, as the case may be, with the same
effect and to the same extent as if the Rescinded Payment had not been received
by Lender, notwithstanding the cancellation or termination of any Note or any of
the other Loan Documents. In addition, Guarantor shall pay, or reimburse Lender
for, all expenses (including all reasonable attorneys’ fees, court costs and
related disbursements) incurred by Lender in the defense of any claim that a
payment received by Lender in respect of all or any part of the Guaranteed
Obligations from Guarantor must be refunded. The provisions of this Section
shall survive the termination of this Guaranty and any satisfaction and
discharge of Borrower by virtue of any payment, court order or any federal or
state law.

Section 17. Waiver. Neither this Guaranty nor any term hereof may be changed,
waived, discharged or terminated except by an instrument in writing signed by
Lender and Guarantor expressly referring to this Guaranty and to the provisions
so changed or limited. No such waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of Lender in exercising any right under
this Guaranty shall operate as a waiver thereof or otherwise by prejudice
thereto.

Section 18. Notices. All notices or other communications hereunder shall be
sufficiently given and shall be deemed given when sent in the manner and to the
addresses prescribed by the Master Agreement.

 

11

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Section 19. Assignability by Lender. Lender may, without notice to Guarantor,
assign or transfer the Advances and the Loan Documents, in whole or in part. In
such event, each and every immediate and successive assignee, transferee or
holder of all or any part of the Advances and the Loan Documents shall have the
right to enforce this Guaranty, by legal action or otherwise, as fully as if
such assignee, transferee, or holder were by name specifically given such right
and power in this Guaranty. Lender shall have an unimpaired right to enforce
this Guaranty for its benefit as to so much of the Advances and the Loan
Documents as Lender has not sold, assigned or transferred. Guarantor shall not
assign this Guaranty, or delegate any of its obligations hereunder, without the
prior written consent of Lender.

Section 20. Guarantor Bound by Judgment Against Borrower. Guarantor shall be
conclusively bound, in any jurisdiction, by the judgment in any action by Lender
against Borrower in connection with the Loan Documents (wherever instituted) as
if Guarantor were a party to such action even if not so joined as a party.

Section 21. Governing Law. The provisions of Section 15.06 of the Master
Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury
Trial”) are hereby incorporated into this Agreement by this reference to the
fullest extent as if the text of such Section were set forth in its entirety
herein.

Section 22. Invalid Provisions. If any provision of this Guaranty or the
application thereof to Guarantor or any circumstance in any jurisdiction whose
laws govern this Guaranty shall, to any extent, be invalid or unenforceable
under any applicable statute, regulation or rule of law, then such provision
shall be deemed inoperative to the extent of such invalidity or unenforceability
and shall be deemed modified to conform to such statute, regulation or rule or
law. The remainder of this Guaranty and the application of any such invalid or
unenforceable provision to parties, jurisdictions or circumstances other than
those to whom or to which it is held invalid or unenforceable, shall not be
affected by such invalidity or unenforceability nor shall such invalidity or
unenforceability affect the validity or enforceability of any other provision of
this Guaranty.

Section 23. General Provisions. This Guaranty shall be binding upon the
respective successors and assigns of Guarantor, and shall inure to the benefit
of Lender and its successors and assigns, including, without limitation, each
successive holder of the Notes. The descriptive headings of the Sections of the
Guaranty have been inserted herein for convenience of reference only and shall
not define or limit the provisions hereof.

Section 24. Obligations Joint and Several. The obligations of Guarantor
hereunder shall be joint and several with the obligations of any other
guarantors under this and any other guaranty and the obligations of Borrower
under the Loan Documents.

[Remainder of page intentionally left blank.]

 

12

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IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of the day
and year first above written.

 

GUARANTOR: [INSERT GUARANTOR SIGNATURE BLOCK]

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EXHIBIT C-2 TO MASTER CREDIT FACILITY AGREEMENT

CONFIRMATION OF GUARANTY

THIS CONFIRMATION OF GUARANTY is made as of the      day of             ,
20    , by (i) BRE PROPERTIES, INC., a Maryland corporation (“Guarantor”), for
the benefit of DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation
(“Lender”).

Guarantor entered into that certain Guaranty dated as of [Guaranty Date], for
the benefit of Lender (the “Guaranty”) to guaranty the Guaranteed Obligations
(as defined in the Guaranty) under that certain Master Credit Facility Agreement
dated as of April 7, 2009, by and between borrowers signatory thereto
(individually and collectively, the “Borrower”) and Lender (as amended, restated
or otherwise modified from time to time, the “Master Agreement”).

[Borrower and Lender have modified the credit facility under the Master
Agreement and made certain other changes to the terms and conditions of the
Master Agreement pursuant to that certain [                ] Amendment to Master
Agreement dated as of even date herewith (the “[                ] Amendment”).
As a condition to the entering into the [                ] Amendment, Guarantor
is required to confirm its obligations under the Guaranty.][Lender has agreed to
make a Future Advance to Borrower under the Master Agreement. As a condition to
making the Future Advance, Guarantor is required to confirm its obligations
under the Guaranty.]

Guarantor hereby (i) acknowledges and consents to the [addition of the
Additional Borrower under the Master Agreement][making of the Future Advance],
[(ii) acknowledges and consents to the [explain change] other changes and the
terms and conditions of the Master Agreement all as set forth in the
[                ] Amendment,] and (iii) confirms to Lender and Fannie Mae that
the terms and provisions of the Guaranty remain in full force and effect.

Guarantor hereby confirms and ratifies the Loan Documents it has previously
executed in connection with the Master Agreement.

[Remainder of page intentionally left blank.]

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Dated as of                     , 2      

 

GUARANTOR: [INSERT GUARANTOR SIGNATURE BLOCK]

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EXHIBIT D TO MASTER CREDIT FACILITY AGREEMENT

COMPLIANCE CERTIFICATE

The undersigned (individually and collectively, “Borrower”) hereby certifies to
DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation (“Lender”) and
Fannie Mae as follows:

Section 1. Master Agreement. Borrower is a party to or has joined into that
certain Master Credit Facility Agreement, dated as of April 7, 2009, by and
between Borrower, Lender and others (as amended, restated, modified or
supplemented from time to time, the “Master Agreement”). The rights of Lender
under the Master Agreement have been assigned to Fannie Mae. This Certificate is
issued pursuant to the terms of the Master Agreement.

Section 2. Satisfaction of Conditions. Borrower hereby represents, warrants and
covenants to Lender that all conditions to the Request with respect to which
this Certificate is issued have been satisfied.

Section 3. Capitalized Terms. All capitalized terms used but not defined in this
Certificate shall have the meanings ascribed to such terms in the Master
Agreement.

[Remainder of page intentionally left blank.]

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Dated:                     

 

BORROWER: [INSERT BORROWER SIGNATURE BLOCK]

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EXHIBIT E-1 TO MASTER CREDIT FACILITY AGREEMENT

ORGANIZATIONAL CERTIFICATE

(Borrower)

I, the undersigned,                                 , hereby certify as follows:

Section 1. Position. I am the [Secretary/Officer] of
                                 (individually and collectively, “Borrower”),
and I am authorized to deliver this Certificate on behalf of Borrower.

Section 1. Master Agreement. Borrower entered into that certain Master Credit
Facility Agreement, dated as of April 7, 2009, by and between Borrower and
DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation (“Lender”) (as
amended, restated or otherwise modified from time to time, the “Master
Agreement”). The rights of Lender under the Master Agreement have been assigned
to Fannie Mae. This Certificate is issued pursuant to the terms of the Master
Agreement.

Section 2. Due Authorization of Request. I hereby certify that no action by the
directors, general partners or members, as applicable, of Borrower is necessary
to duly authorize the execution and delivery of, and the consummation of the
transaction contemplated by the Request with respect to which this Certificate
is delivered, or, if necessary, that attached as Exhibit A to this Certificate
is a true copy of resolutions duly adopted at a meeting of the board of
directors, partners or members, as the case may be, that authorize the action.
Any such resolutions are in full force and effect and are unmodified as of the
date of this Certificate.

Section 3. No Changes. Since the date of the most recent Organizational
Certificate delivered to Lender, or, if there are none, since the date of the
Master Agreement, there have been no changes in any of the Organizational
Documents of Borrower, except as set forth in Exhibit B to this Certificate, and
Borrower remains duly qualified in the jurisdictions in which it is required to
be qualified under the terms of the Master Agreement.

Section 4. Incumbency Certificate. One or more of the persons authorized to
execute and deliver any documents required to be delivered in connection with
the Request are set forth below:

 

Name

  

Title

____________________

  

____________________

Section 5. Capitalized Terms. All capitalized terms used but not defined in this
Certificate shall have the meanings ascribed to such terms in the Master
Agreement.

[Remainder of page intentionally left blank.]

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Dated:                     

 

By:     Name:     Title:   [Secretary/Officer]

 

2

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Exhibit A

Resolutions

See attached.

 

3

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Exhibit B

Changes to Organizational Documents

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EXHIBIT E-2 TO MASTER CREDIT FACILITY AGREEMENT

ORGANIZATIONAL CERTIFICATE

(Guarantor)

I, the undersigned,                                 , hereby certify as follows:

Section 1. Position. I am the                                  of BRE
PROPERTIES, INC., a Maryland corporation (“Guarantor”), and I am authorized to
deliver this Certificate on behalf of Guarantor.

Section 2. Guaranty. Guarantor entered into that certain Guaranty, dated as of
April 7, 2009, by Guarantor for the benefit of DEUTSCHE BANK BERKSHIRE MORTGAGE,
INC., a Delaware corporation (“Lender”) (as amended from time to time, the
“Guaranty”). The rights of Lender under the Guaranty have been assigned to
Fannie Mae. This Certificate is issued pursuant to the terms of the Guaranty.

Section 3. Due Authorization of Request. I hereby certify that no action by the
directors, partners or members, as the case may be, of Guarantor is necessary to
duly authorize the execution and delivery of, and the consummation of the
transaction contemplated by the Request with respect to which this Certificate
is delivered, or, if necessary, that attached as Exhibit A to this Certificate
is a true copy of resolutions duly adopted at a meeting of the board of
directors, partners or members, as the case may be, that authorize the action.
Any such resolutions are in full force and effect and are unmodified as of the
date of this Certificate.

Section 4. No Changes. Since the date of the most recent Organizational
Certificate delivered to Lender, or, if there are none, since the date of the
Guaranty, there have been no changes in any of the Organizational Documents of
Guarantor, except as set forth in Exhibit B to this Certificate, and Guarantor
remains in existence and is duly qualified in the jurisdictions in which it is
required to be qualified under the terms of the Guaranty.

Section 5. Incumbency Certificate. One or more of the persons authorized to
execute and deliver any documents required to be delivered by Guarantor in
connection with the Request are as follows:

 

Name

  

Office

____________________

  

____________________

Section 6. Capitalized Terms. All capitalized terms used but not defined in this
Certificate shall have the meanings ascribed to such terms in the Master Credit
Facility Agreement dated as of April 7, 2009, by and among (i) (a) BRE-FMCA,
LLC, a Delaware limited liability company, and (b) BRE-FMAZ, LLC, a Delaware
limited liability company (individually and collectively, “Borrower”),
(ii) Guarantor, and (iii) Lender.

[Remainder of page intentionally left blank.]

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Dated:                     , 2009

 

By:     Name:     Title:   [Secretary/Officer]

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Exhibit A

Resolutions

 

2

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Exhibit B

Changes to Organizational Documents

None.

 

3

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EXHIBIT F TO MASTER CREDIT FACILITY AGREEMENT

CERTIFICATE OF BORROWER PARTIES

All Capitalized Terms used in this Certificate of Borrower Parties have the
meanings given to those terms in the Master Credit Facility Agreement (as
amended, restated or otherwise modified from time to time, the “Master
Agreement”) or elsewhere in this Certificate of Borrower Parties unless the
context or use clearly indicates a different meaning.

In addition to all other representations, warranties and covenants made by
(i) BRE-FMCA, LLC, a Delaware limited liability company, and BRE-FMAZ, LLC, a
Delaware limited liability company (individually and collectively, “Borrower”)
and (ii) BRE PROPERTIES, INC., a Maryland corporation (the “Guarantor”; together
with Borrower, individually and together, “Borrower Parties”) in connection
with:

(a) the making by Lender of the Advance(s) in the amount of
$                     pursuant to the Master Agreement;

(b) the securing of the Obligations of Borrower and Guarantor under the Master
Agreement and the other Loan Documents by the Security Instruments and any other
Security Documents; and

(c) the purchase by Fannie Mae of the Notes.

Borrower Parties hereby represent, warrant and covenant to Lender and Fannie
Mae, as of                     , 2009, with respect to themselves individually,
as follows:

Section 1. Review of Documents. Borrower has reviewed the Note, the Security
Instruments, the Master Agreement, and each of the other Loan Documents and
Security Documents, and Guarantor has reviewed the Guaranty and the Master
Agreement.

Section 2. Purpose of Certificate. This Certificate is delivered to Lender and
Fannie Mae, in order to induce (a) Lender to enter into the Master Agreement and
to make the Advances to Borrower; and (b) Fannie Mae to agree to purchase the
Notes.

Section 3. Due Organization; Qualification.

(a) Borrower Parties are qualified to transact business and are in good standing
in the State in which each is organized and in each other jurisdiction in which
such qualification and/or standing is necessary to the conduct of its business
with respect to the Mortgaged Properties and where the failure to be so
qualified would adversely affect the validity of, the enforceability of, or the
ability of Borrower Parties to perform the Obligations under the Master
Agreement and the other Loan Documents. Borrower is qualified to transact
business and is in good standing in each State in which it owns a Mortgaged
Property.

(b) Borrower’s and Guarantor’s principal place of business, principal office and
office where it keeps its books and records as to the Collateral is located at
the address set out in Section 15.08 of the Master Agreement.

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Section 4. Power and Authority. Each Borrower Party has the requisite power and
authority (a) to own its properties and to carry on its business as now
conducted and as contemplated to be conducted in connection with the performance
of the Obligations under the Master Agreement or Guaranty, as applicable, and
under the other Loan Documents to which it is a party and (b) to execute and
deliver the Master Agreement or Guaranty, as applicable, and the other Loan
Documents and to carry out the transactions contemplated by the Master Agreement
and the other Loan Documents to which it is a party.

Section 5. Due Authorization. The execution, delivery and performance of the
Master Agreement and the other Loan Documents to which it is a party by each
Borrower Party have been duly authorized by all necessary action and proceedings
by or on behalf of each Borrower Party, and no further approvals or filings of
any kind, including any approval of or filing with any Governmental Authority,
are required by or on behalf of each Borrower Party as a condition to the valid
execution, delivery and performance by each Borrower Party of the Master
Agreement or any of the other Loan Documents to which it is a party, except
filings required to perfect and maintain the Liens to be granted under the Loan
Documents and routine filings to maintain good standing and Permits.

Section 6. Valid and Binding Obligations. The Master Agreement and the other
Loan Documents to which it is a party have been duly authorized, executed and
delivered by each Borrower Party and constitute the legal, valid and binding
obligations of each Borrower Party, enforceable against each Borrower Party in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles affecting the enforcement of creditors’
rights generally or by equitable principles or by the exercise of discretion by
any court.

Section 7. Single-Purpose Status. Except as otherwise expressly approved by
Fannie Mae in writing, each Borrower is a Single-Purpose entity and each does
not own any real property or assets other than the Mortgaged Properties and each
does not operate any business other than the management and operation of the
Mortgaged Properties which it owns.

Section 8. No Default. The execution, delivery and performance of the
Obligations imposed on any Borrower Party under the Loan Documents to which it
is a party and the Security Documents will not cause such Borrower Party to be
in default under the provisions of any agreement, judgment or order to which
such Borrower Party is a party or by which such Borrower Party is bound.

Section 9. Financial Statements. The financial statements of each Borrower Party
furnished to Lender, are, in each case, complete and accurate in all material
respects and present fairly the financial condition of such entities or persons,
as of its date in accordance with GAAP, applied on a consistent basis.

Section 10. Financial Condition. No adverse change in the financial condition of
any Borrower Party has occurred between the respective dates of the most recent
financial statements which were furnished to Lender relating to such entities or
persons and the date hereof which has had or would reasonably be expected to
have a Material Adverse Effect.

 

2

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Section 11. No Insolvency or Judgment. Neither Borrower, nor Guarantor, nor any
general partner, nor any managing member of Borrower (if applicable) is
currently (a) the subject or a party as debtor to any completed or pending
bankruptcy, reorganization or insolvency proceeding; or (b) the subject of any
judgment in an amount in excess of $100,000 individually and/or $250,000 in the
aggregate which is unpaid, unstayed, unappealed, undischarged, unbonded, not
fully insured or undismissed for a period of ninety (90) days.

Section 12. Taxes Paid. Borrower has filed all federal, state, county and
municipal tax returns required to have been filed by Borrower, and has paid all
taxes which have become due pursuant to such returns or to any notice of
assessment received by Borrower, and Borrower has no knowledge of any basis for
additional assessment with respect to such taxes. To the best of Borrower’s
knowledge, there are not presently pending any new special assessments against
any Mortgaged Property or any part thereof, except those special assessments
included in the regularly scheduled tax payments shown on tax bills due with
respect to such Mortgaged Property.

Section 13. Insolvency. Each Borrower Party is not presently insolvent, and the
proposed Advance will not render any Borrower Party insolvent.

Section 14. Working Capital. After the Advance is made, each Borrower Party will
have sufficient working capital to pay all of such Borrower Party’s outstanding
debts as they come due and payable.

Section 15. ERISA. Each Borrower Party is in compliance in all material respects
with all applicable provisions of ERISA and has not incurred any liability to
the PBGC on a Plan under Title IV of ERISA. None of the assets of Borrower
constitute plan assets (within the meaning of Department of Labor Regulation §
2510.3-101) of any employee benefit plan subject to Title I of ERISA.

Section 16. Governmental Approvals; Governmental Orders. No Governmental
Approval not already obtained or made is required for the execution and delivery
of the Master Agreement or any other Loan Document or the performance of the
terms and provisions thereof by Borrower. Borrower is not presently under any
cease or desist order or other orders of a similar nature, temporary or
permanent, of any Governmental Authority which would have the effect of
preventing or hindering performance of the terms and provisions of the Master
Agreement or any other Loan Document, nor are there any proceedings presently in
progress or to its knowledge contemplated which would, if successful, lead to
the issuance of any such order.

Section 17. Impositions. Borrower has paid all of the following items which have
become due and payable regarding any Mortgaged Property (or is in good faith
contesting same): taxes, government assessments; insurance premiums; water,
sewer and municipal charges; leasehold payments; ground rents; all parties
furnishing labor and materials and, except for such liens or claims insured
against by the policy of title insurance to be issued in connection with the
Master Agreement, there are no mechanics’, laborers’ or materialmen’s liens or
claims outstanding for work, labor or materials affecting any Mortgaged
Property, whether prior to, equal with or subordinate to the lien of any
Security Instrument; and any other charges affecting any Mortgaged Property,
except for liens securing unpaid taxes and statutory liens for amounts not yet
due and payable or being contested in good faith.

 

3

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Section 18. Compliance with Applicable Laws. To Borrower’s knowledge, each
Mortgaged Property complies in all material respects with all Applicable Laws
affecting such Mortgaged Property. Without limiting the foregoing, to Borrower’s
knowledge, all material Permits, including certificates of occupancy, to the
extent issued by the relevant jurisdiction, have been issued and are in full
force and effect. Except as previously disclosed to Lender in writing, to
Borrower’s knowledge, neither Borrower nor any former owner of any Mortgaged
Property, has received any written notification or written threat of any pending
actions or proceedings regarding the noncompliance or nonconformity of any
Mortgaged Property with any Applicable Laws or Permits, nor is Borrower
otherwise aware of any such pending actions or proceedings.

Section 19. Leases.

(a) Borrower has delivered to Lender a true and correct copy of the current form
apartment lease for each Mortgaged Property, and each Lease with respect to such
Mortgaged Property that Borrower will enter into will be in the form thereof,
with no material modifications thereto, except as previously disclosed in
writing to Lender. Except as set forth in a Rent Roll, no Lease for any unit in
any Mortgaged Property (i) is for a term in excess of two (2) years, including
any renewal or extension period unless such renewal or extension period is
subject to termination by Borrower Parties upon not more than thirty (30) days’
written notice, (ii) provides for prepayment of more than two (2) months rent
(other than security deposits), or (iii) was entered into in other than the
ordinary course of business.

(b) Except for any assignment of leases and rents which is a Permitted Lien or
which is to be released in connection with the consummation of the transactions
contemplated by the Master Agreement, Borrower is the owner and holder of the
landlord’s interest under each of the Leases and there are no prior outstanding
assignments of any such Lease, or any portion of the rents, additional rents,
charges, issues or profits due and payable or to become due and payable
thereunder.

(c) Each Lease constitutes the legal, valid and binding obligation of Borrower
and, to the knowledge of Borrower, of each of the other parties thereto,
enforceable in accordance with its terms, subject only to bankruptcy,
insolvency, reorganization or other similar laws relating to creditors’ rights
generally, and equitable principles, and except as disclosed in writing to
Lender, no notice of any default by Borrower which remains uncured has been sent
by any tenant under any such Lease, other than defaults which do not have, and
are not reasonably expected to have, a Material Adverse Effect on the Mortgaged
Property subject to the Lease.

(d) To Borrower’s knowledge, all premises demised to tenants under Leases are
occupied by such tenants as tenants only. No Lease contains any option or right
to purchase, right of first refusal or any other similar provisions.

 

4

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Section 20. Non-Residential Leases.

(a) Not more than twenty percent (20%) of the net rentable space of any
Mortgaged Property is being used for non-residential purposes and copies of all
commercial leases, if any, have been delivered to Lender.

(b) Neither Borrower, nor any general partner of Borrower, nor any Guarantor,
nor any individual having a ten percent (10%) or greater interest in Borrower is
an affiliate or otherwise related to (i) the lessee under any leases for laundry
equipment or (ii) the lessee or provider of any telecommunications, television
or similar systems or services on or about any Mortgaged Property.

(c) Any lease for laundry services at each Mortgaged Property has been supplied
to Lender and either: (i) currently contains language which by its terms
subordinates the interest of the lessee thereunder to Lender’s lien, (ii) is not
below market rent and provides for termination by Borrower for cause; or
(iii) has been subordinated to the terms of the Security Instrument. Borrower
further certifies that any future leases of laundry space at any Property (or
any renewals of the current lease) shall either include language, acceptable to
Lender, subordinating the interest of the lessee thereunder to the lien of the
Security Instrument or shall be at or above market rent and contain provisions
for termination for cause.

Section 21. Condition of the Mortgaged Properties. Except as disclosed in any
third party report delivered to Lender prior to the date on which any Mortgaged
Property is added to the Collateral Pool, or otherwise disclosed in writing by
Borrower to Lender prior to such date, each Mortgaged Property is in good
condition, order and repair, there exist no structural or other material defects
in such Mortgaged Property (whether patent or, to the best knowledge of
Borrower, latent or otherwise) and Borrower has not received notice from any
insurance company or bonding company of any defects or inadequacies in such
Mortgaged Property, or any part of it, which would adversely affect the
insurability of such Mortgaged Property or cause the imposition of extraordinary
premiums or charges for insurance or of any termination or threatened
termination of any policy of insurance or bond. No claims have been made by
Borrower against any contractor, architect or other party with respect to the
condition of any Mortgaged Property or the existence of any structural or other
material defect therein which has not been satisfied. No Mortgaged Property has
been materially damaged by casualty which has not been fully repaired or for
which insurance proceeds have not been received or are not expected to be
received except as previously disclosed in writing to Lender. There are no
proceedings pending for partial or total condemnation of any Mortgaged Property
except as disclosed in writing to Lender.

Section 22. Operations and Maintenance Plan. Borrower agrees that it has adopted
any operations and maintenance plan for asbestos, lead-based paint, mold or
other environmental concern that Lender has required (if any) in writing.

Section 23. Representations and Warranties True. Each and every representation
and warranty contained herein will remain true and correct at all times from the
date hereof until all Obligations have been performed in full in accordance with
the terms of the Loan Documents and the Security Documents. In the event that
any representation or warranty contained herein becomes untrue, in whole or in
part, after the date hereof, Borrower will so advise Lender and Fannie Mae in
writing immediately.

 

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Section 24. Ratification. Borrower covenants that it shall, promptly upon the
request of Lender or Fannie Mae ratify and affirm this Certificate of Borrower
in writing, as of such date or dates as such Person shall specify.

Section 25. Survival. The representations, warranties and covenants set forth in
this Certificate of Borrower shall survive the execution and delivery of the
Loan Documents, regardless of any investigation made by Lender or Fannie Mae.

Section 26. OFAC Requirements.

(a) Representations and Warranties. Borrower, Guarantor, any general partner of
Borrower or any managing member of Borrower, as applicable, Mortgaged Property
manager and, to the best of Borrower’s knowledge, after having made reasonable
inquiry, (a) each Person owning a direct or indirect interest of twenty percent
(20%) or more in Borrower, Guarantor, any general partner of Borrower or any
managing member of Borrower, the Mortgaged Property manager (if the Mortgaged
Property manager is an affiliate of Borrower), and (b) each commercial tenant at
the Mortgaged Property: (i) is not currently identified on OFAC List, and
(ii) is not a Person with whom a citizen of the United States is prohibited to
engage in transactions by any trade embargo, economic sanction, or other
prohibition of United States law, regulation, or Executive Order of the
President of the United States. Borrower and Guarantor shall confirm this
representation and warranty in writing on an annual basis.

(b) Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws. Each Borrower Party shall comply with all Requirements of Law relating to
money laundering, anti-terrorism, trade embargos and economic sanctions, now or
hereafter in effect. Without limiting the foregoing, no Borrower Party shall
take any action, or permit any action to be taken, that would cause any Borrower
Party’s representations and warranties, as set forth in subsection (a) above, to
become untrue or inaccurate at any time during the term of the Advance. Each
Borrower Party shall notify Lender promptly of Borrower Party’s actual knowledge
that such representations and warranties may no longer be accurate or that any
other violation of the foregoing Requirements of Law has occurred or is being
investigated by Governmental Authorities. In connection with such an event, each
Borrower Party shall comply with all Requirements of Law and directives of
Governmental Authorities and, at Lender’s request, provide to Lender copies of
all notices, reports and other communications exchanged with, or received from,
Governmental Authorities relating to such event. Each Borrower Party shall also
reimburse Lender for any expense incurred by Lender in evaluating the effect of
such an event on the Advance and Lender’s interest in the collateral for the
Advance, in obtaining any necessary license from Governmental Authorities as may
be necessary for Lender to enforce its rights under the Loan Documents, and in
complying with all Requirements of Law applicable to Lender as the result of the
existence of such an event and for any penalties or fines imposed upon Lender as
a result thereof.

 

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(c) Definitions. As used in this Section 26, certain defined terms shall have
the following meanings:

(1) “Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to such
government having jurisdiction over Borrower or the Mortgaged Properties.

(2) “OFAC List” means the list of specially designated nationals and blocked
persons subject to financial sanctions that is maintained by the U.S. Treasury
Department, Office of Foreign Assets Control and any other similar list
maintained by the U.S. Treasury Department, Office of Foreign Assets Control
pursuant to any Requirements of Law, including, without limitation, trade
embargo, economic sanctions, or other prohibitions imposed by Executive Order of
the President of the United States. The OFAC List is currently accessible
through the internet website www.treas.gov/ofac/t11sdn.pdf.

(3) “Person” means an individual, partnership, limited partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority or other
entity of whatever nature.

(4) “Requirements of Law” means (a) the organizational documents of an entity,
and (b) any law, regulation, ordinance, code, decree, treaty, ruling or
determination of an arbitrator, court or other Governmental Authority, or any
Executive Order issued by the President of the United States, in each case
applicable to or binding upon such Person or to which such Person, any of its
property or the conduct of its business is subject including, without
limitation, laws, ordinances and regulations pertaining to the zoning, occupancy
and subdivision of real property.

Section 27. Joint and Several. The provisions of Article 14 of the Master
Agreement hereby are incorporated into this Certificate of Borrower Parties by
this reference.

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, Borrower Parties have executed this Certificate of Borrower
Parties as of the day and year first above written.

BORROWER:

[INSERT BORROWER SIGNATURE BLOCK]

 

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GUARANTOR:

[INSERT GUARANTOR SIGNATURE BLOCK]

 

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EXHIBIT G TO MASTER CREDIT FACILITY AGREEMENT

REQUEST

(Substitution/Release)

                    ,             

Deutsche Bank Berkshire Mortgage, Inc. (“Lender”)

c/o DB Mortgage Services, LLC

One Beacon Street

14th Floor

Boston, Massachusetts 02108

[Note: Subject to change in the event Lender or its address changes]

 

Re: REQUEST issued pursuant to that certain Master Credit Facility Agreement,
dated as of April 7, 2009, by and between the undersigned (“Borrower”), Lender
and others (as amended, restated or otherwise modified from time to time, the
“Master Agreement”)

Ladies and Gentlemen:

This constitutes [a Substitution][a Release] Request pursuant to the terms of
the above-referenced Master Agreement.

[SELECT APPROPRIATE SECTIONS]

Section 1. Substitution Request. Borrower hereby requests that the Multifamily
Residential Property described in this Request be added to the Collateral Pool
in connection with a substitution of Collateral in accordance with the terms of
the Master Agreement. Following is the information required by the Master
Agreement with respect to this Request:

(a) Property Description Package. Attached to this Request is the information
and documents relating to the proposed Substitute Mortgaged Property required by
Lender and the Master Agreement;

(b) Due Diligence Fees. Enclosed with this Request is a check in payment of all
Additional Collateral Due Diligence Fees required to be submitted with this
Request pursuant to Section 10.02(b) of the Master Agreement; and

(c) Accompanying Documents. All reports, certificates and documents required to
be delivered pursuant to the conditions contained in Sections 3.05(f) and 5.06
of the Master Agreement will be delivered on or before the Closing Date.

Section 2. Substitution Fee. If Lender consents to the addition of the proposed
Substitute Mortgaged Property to the Collateral Pool, and Borrower elects to add
the Substitute Mortgaged Property to the Collateral Pool, Borrower shall pay the
Substitution Fee to Lender as one of the conditions to the closing of the
Substitute Mortgaged Property.

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OR

Section 1. Release Request. Borrower hereby requests that the Release Property
described in this Request be released from the Collateral Pool in accordance
with the terms of the Master Agreement. Following is the information required by
the Master Agreement with respect to this Request:

(a) Description of Release Property. The name, address and location (county and
state) of the Mortgaged Property, or other designation of the proposed Release
Property is as follows:

 

Name:

    

Address:    

         

Location:

    

(b) Accompanying Documents. All documents, instruments and certificates required
to be delivered pursuant to the conditions contained in Section 3.04(b) and
Section 5.05 of the Master Agreement will be delivered on or before the Closing
Date.

Section 2. Release Price and Release Fee. Borrower shall pay the Release Price,
if applicable, and the Release Fee as a condition to the closing of the release
of the Release Property from the Collateral Pool.

[Remainder of page intentionally left blank.]

 

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Sincerely,

BORROWER:

[INSERT BORROWER SIGNATURE BLOCK]

 

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EXHIBIT H TO MASTER CREDIT FACILITY AGREEMENT

CONFIRMATION OF OBLIGATIONS

THIS CONFIRMATION OF OBLIGATIONS (the “Confirmation of Obligations”) is made as
of the              day of                     ,             , by and among
(i)                                 , a Delaware limited liability company
(individually and collectively, “Borrower”), for the benefit of DEUTSCHE BANK
BERKSHIRE MORTGAGE, INC., a Delaware corporation (“Lender”).

RECITALS

A. Borrower and Lender are parties to that certain Master Credit Facility
Agreement, dated as of April 7, 2009, (as amended, restated or otherwise
modified from time to time, the “Master Agreement”).

B. All of Lender’s right, title and interest in the Master Agreement and the
Loan Documents executed in connection with the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Fannie
Mae pursuant to that certain Assignment of Master Credit Facility Agreement and
other Loan Documents, dated as of April 7, 2009, (the “Assignment”). Nothing in
the Assignment shall be construed as an assumption by Fannie Mae of (i) the
obligations of Lender under the Master Agreement to make further advances of
Loans in the future, or (ii) any of the obligations under the Loan Documents
which are servicing obligations delegated to Lender as servicer of the Loans.
Fannie Mae has designated Lender as the servicer of the Advances contemplated by
the Master Agreement.

C. Borrower has delivered to Lender a Release Request pursuant to the Master
Agreement to release a Release Property from the Collateral Pool.

D. Lender has consented to the Release Request.

E. The parties are executing this Confirmation of Obligations pursuant to the
Master Agreement to confirm that each remains liable for all of its obligations
under the Master Agreement and the other Loan Documents notwithstanding the
release of the Release Property from the Collateral Pool.

NOW, THEREFORE, Borrower, in consideration of Lender’s consent to the release of
the Release Property from the Collateral Pool and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
hereby agree as follows:

Section 1. Confirmation of Obligations. Borrower confirms that, except with
respect to the Release Property, none of its respective obligations under the
Master Agreement and the Loan Documents is affected by the release of the
Release Property from the Collateral Pool, and each of its respective
obligations under the Master Agreement and the Loan Documents shall remain in
full force and effect, and it shall be fully liable for the observance of all
such obligations, notwithstanding the release of the Release Property from the
Collateral Pool.

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Section 2. Beneficiaries. This Confirmation of Obligations is made for the
express benefit of both Lender and Fannie Mae.

Section 3. Capitalized Terms. All capitalized terms used in this Confirmation of
Obligations which are not specifically defined herein shall have the respective
meanings set forth in the Master Agreement.

Section 4. Counterparts. This Confirmation of Obligations may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

[Remainder of page intentionally left blank.]

 

2

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IN WITNESS WHEREOF, the parties hereto have executed the Confirmation of
Obligations as an instrument under seal as of the day and year first above
written.

BORROWER:

[INSERT BORROWER SIGNATURE BLOCK]

 

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LENDER: DEUTSCHE BANK BERKSHIRE
MORTGAGE, INC., a Delaware corporation By:     Name:     Title:     By:    
Name:     Title:    

 

4

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EXHIBIT I TO MASTER CREDIT FACILITY AGREEMENT

CREDIT FACILITY TERMINATION REQUEST

THE MASTER AGREEMENT THAT THIS AGREEMENT SHALL TERMINATE, AND YOU SHALL CAUSE
ALL OF THE COLLATERAL TO BE RELEASED FROM THE COLLATERAL POOL, AT A CLOSING TO
BE HELD AT OFFICES DESIGNATED BY YOU ON A CLOSING DATE SELECTED BY YOU, WITHIN
THIRTY (30) BUSINESS DAYS AFTER YOUR RECEIPT OF THE CREDIT FACILITY TERMINATION
REQUEST (OR ON SUCH OTHER DATE AS WE MAY AGREE), AS LONG AS ALL CONDITIONS
CONTAINED IN SECTION 4.02(b) AND 5.07 OF THE MASTER AGREEMENT ARE SATISFIED.
REFERENCE IS MADE TO THE MASTER AGREEMENT FOR THE SCOPE OF LENDER’S OBLIGATIONS
WITH RESPECT TO THIS REQUEST.

                    ,             

VIA:                             

Deutsche Bank Berkshire Mortgage, Inc. (“Lender”)

c/o DB Mortgage Services, LLC

One Beacon Street

14th Floor

Boston, Massachusetts 02108

[Note: Subject to change in the event Lender or its address changes]

 

Re: CREDIT FACILITY TERMINATION REQUEST issued pursuant to that certain Master
Credit Facility Agreement, dated as of April 7, 2009, by and among the
undersigned (“Borrower”), Lender and others (as amended, restated or otherwise
modified from time to time, the “Master Agreement”)

Ladies and Gentlemen:

This constitutes a Credit Facility Termination Request pursuant to the terms of
the above-referenced Master Agreement.

Section 1. Request. Borrower hereby requests a termination of the Master
Agreement and the Credit Facility in accordance with the terms of the Master
Agreement. All documents, instruments and certificates required to be delivered
pursuant to the conditions contained in Section 4.02(b) and 5.07 of the Master
Agreement will be delivered on or before the Closing Date.

Section 2. Prepayments. Borrower shall, in accordance with the terms of the
Master Agreement, pay in full all Notes Outstanding and any required prepayment
premiums as a condition to the termination of the Master Agreement and the
Credit Facility.

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Section 3. Capitalized Terms. All capitalized terms used but not defined in this
Request shall have the meanings ascribed to such terms in the Master Agreement.

Sincerely,

BORROWER:

[INSERT BORROWER SIGNATURE BLOCK]

 

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EXHIBIT J TO MASTER CREDIT FACILITY AGREEMENT

FORM OF LETTER OF CREDIT

[Bank’s letterhead]

IRREVOCABLE LETTER OF CREDIT NO.                     

DATE

Fannie Mae

3900 Wisconsin Avenue, N.W.

Washington, DC 20016-2899

Ladies and Gentlemen:

For the account of                                          [Insert name of
account party/customer], we hereby open in your favor our Irrevocable Letter of
Credit No.                      (“Credit”) for an amount not exceeding a total
of U.S. $                    , effective immediately and expiring on
                    , 20        .

Funds under this Credit are available to you against a sight draft(s) on us
completed by you or                      [Insert Lender’s name] on your behalf,
completed in substantially the form attached as Exhibit 1, for all or any part
of this Credit.

We will promptly honor all drafts drawn in compliance with the terms of this
Credit if received on or before the expiration date at
                                         
                                         
                                         
                                         
                                                 
                                         
                                         
                                                                [Insert Bank’s
address].

Drafts presented at our office at the address set forth above no later than
10:00 a.m. shall be honored on the date of presentation, by payment in
accordance with your payment instructions that accompany each such draft. If
requested by you, payment under this Credit may be made by wire transfer of
immediately available funds to your account as specified in the draft (whether
executed by you or                      [Insert Lender’s name]), or by deposit
of same days funds in your designated account that you maintain with us.

This Credit shall be governed by and subject to the Uniform Customs and Practice
for Documentary Credits (2007 revision), International Chamber of Commerce
Publication No. 600 (“UCP 600”), and to the extent not inconsistent with the UCP
600, laws of the State of                     .

Sincerely,

[Insert Bank’s name]

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By:     Name:     Title:    

 

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SIGHT DRAFT

[Insert Issuing Bank’s name and address]

                    , 20    

Pay on demand to Fannie Mae the sum of U.S. $                    . This draft is
drawn under your Irrevocable Letter of Credit No.                     .

Fannie Mae

 

By:     Name:     Title:     -OR-   [Insert Lender’s name] By:     Name:    
Title:    

 

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