Exhibit 10.19


 


FHLMC
Loan No. 487798287

Waterford Place Apartments


 


MULTIFAMILY NOTE  

MULTISTATE - FIXED TO FLOAT 

(REVISION DATE 2-15-2008)


 




	
  US $13,245,000.00

  	
   

  	
  Effective Date:
  As of March 31, 2008

  






 


FOR VALUE
RECEIVED, the undersigned (together with such party’s or parties’ successors
and assigns, “Borrower”), jointly
and severally (if more than one) promises to pay to the order of DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.,  a Delaware corporation, the principal sum
of Thirteen Million Two Hundred Forty-Five Thousand and 00/100 Dollars (US
$13,245,000.00), with interest on the unpaid principal balance, as hereinafter
provided.


 


1.                         Defined
Terms.


 


(a)                     As used in
this Note:


 


“Adjustable
Interest Rate” means the variable annual interest rate
calculated for each Interest Adjustment Period so as to equal the Index Rate
for such Interest Adjustment Period (truncated at the fifth (5th) decimal place if necessary) plus the
Margin.


 


“Amortization
Period” means a period of 360 full consecutive calendar
months.


 


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


 


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


 


“Default
Rate” means (i) during the Fixed Rate Period, an annual
interest rate equal to four (4) percentage points above the Fixed Interest
Rate; and (ii) during the Extension Period, a variable annual interest
rate equal to four (4) percentage points above the Adjustable Interest
Rate in effect from time to time. However, at no time will the Default Rate
exceed the Maximum Interest Rate.


 


“Extended
Maturity Date” means, if the Extension Period becomes
effective pursuant to this Note, the earlier of (i) May 1, 2014, and (ii) the
date on which the unpaid principal balance of this Note becomes due and payable
by acceleration or otherwise pursuant to the Loan Documents or the exercise by
Lender of any right or remedy thereunder.


 


“Extension
Period” means the twelve (12) consecutive calendar months
period commencing on the Scheduled Initial Maturity Date.


 


“Fixed
Interest Rate” means the annual interest rate of five and
forty-five hundredths percent (5.45%).


 


“Fixed
Rate Period” means the period beginning on the date of this
Note and continuing through April 30, 2013.


 


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“Index
Rate” means, for any Interest Adjustment Period, the
Reference Bill® Index Rate for such Interest Adjustment Period.


 


“Initial
Maturity Date” means the earlier of (i) May 1, 2013
(the “Scheduled Initial Maturity Date”), and
(ii) the date on which the unpaid principal balance of this Note becomes
due and payable by acceleration or otherwise pursuant to the Loan Documents or
the exercise by Lender of any right or remedy thereunder.


 


“Installment
Due Date” means, for any monthly installment of interest only
or principal and interest, the date on which such monthly installment is due
and payable pursuant to Section 3 of this Note. The “First Installment Due Date” under this
Note is May 1, 2008.


 


“Interest
Adjustment Period” means each successive one calendar month
period during the Extension Period and until the entire Indebtedness is paid in
full.


 


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


 


“LIBOR
Index” means the British Bankers Association’s (BBA) one (1) month
LIBOR Rate for United States Dollar deposits, as displayed on the LIBOR Index Page used
to establish the LIBOR Index Rate.


 


“LIBOR
Index Rate” means, for any Interest Adjustment Period after
the first Interest Adjustment Period, the BBA’s LIBOR Rate for the LIBOR Index
released by the BBA most recently preceding the first day of such Interest
Adjustment Period, as such LIBOR Rate is displayed on the LIBOR Index Page. The
LIBOR Index Rate for the first Interest Adjustment Period means the British
Bankers Association’s (BBA) LIBOR Rate for the LIBOR Index released by the BBA
most recently preceding the first day of the month in which the first Interest
Adjustment Period begins, as such LIBOR Rate is displayed on the LIBOR Index
Page. “LIBOR Index Page” is the
Bloomberg L.P., page “BBAM”, or such other page for the LIBOR Index
as may replace page BBAM on that service, or at the option of Lender (i) the
applicable page for the LIBOR Index on another service which
electronically transmits or displays BBA LIBOR Rates, or (ii) any
publication of LIBOR rates available from the BBA. In the event the BBA ceases
to set or publish a LIBOR rate/interest settlement rate for the LIBOR Index,
Lender will designate an alternative index, and such alternative index shall
constitute the LIBOR Index Page.


 


“Loan” means
the loan evidenced by this Note.


 


“Margin”
means two and one-half (2.5) percentage points (250 basis
points).


 


“Maturity
Date” means the Extended Maturity Date unless pursuant to Section 3(e) of
this Note the Extension Period does not or cannot become effective, in which
case the Maturity Date means the Initial Maturity Date.


 


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


 


“Prepayment
Premium Period” means the period during which, if a
prepayment of principal occurs, a prepayment premium will be payable by
Borrower to Lender. The Prepayment Premium Period is the period from and
including the


 


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date of this Note until
but not including the first day of the Window Period. For this Note, the
Prepayment Premium Period equals the Yield Maintenance Period.


 


“Reference
Bills®” means the unsecured general obligations of the
Federal Home Loan Mortgage Corporation (“Freddie
Mac”) designated by Freddie Mac as “Reference Bills® Securities” and
having original durations to maturity most comparable to the term of the
Reference Bill Index, and issued by Freddie Mac at regularly scheduled
auctions. In the event Freddie Mac shall at any time cease to designate any
unsecured general obligations of Freddie Mac as “Reference Bills Securities”,
then at the option of Lender (i) Lender may select from time to time
another unsecured general obligation of Freddie Mac having original durations
to maturity most comparable to the term of the Reference Bill Index and issued
by Freddie Mac at regularly scheduled auctions, and the term “Reference Bills”
as used in this Note shall mean such other unsecured general obligations as
selected by Lender; or (ii) for any one or more Interest Adjustment
Periods, Lender may use the applicable LIBOR Index Rate as the Index Rate for
such Interest Adjustment Period(s).


 


“Reference
Bill Index” means the one-month Reference Bills. One-month
reference bills have original durations to maturity of approximately 30 days.


 


“Reference
Bill Index Rate” means, for any Interest Adjustment Period
after the first Interest Adjustment Period, the Money Market Yield for the
Reference Bills as established by the Reference Bill auction conducted by
Freddie Mac most recently preceding the first day of such Interest Adjustment
Period, as displayed on the Reference Bill Index Page. The Reference Bill Index
Rate for the first Interest Adjustment Period means the Money Market Yield for
the Reference Bills as established by the Reference Bill auction conducted by
Freddie Mac most recently preceding the first day of the month in which the
first Interest Adjustment Period begins, as displayed on the Reference Bill
Index Page. The “Reference Bill Index Page” is
the Freddie Mac Debt Securities Web Page (accessed via the Freddie Mac
internet site at www.freddiemac.com), or at the option of Lender, any
publication of Reference Bills auction results available from Freddie Mac.
However, if Freddie Mac has not conducted a Reference Bill auction within the
60-calendar day period prior to the first day of an Interest Adjustment Period,
the Reference Bill Index Rate for such Interest Adjustment Period will be the
LIBOR Index Rate for such Interest Adjustment Period.


 


“Remaining
Amortization Period” means, at any point in time, the number
of consecutive calendar months equal to the number of months in the
Amortization Period minus the number of scheduled monthly installments of principal
and interest that have elapsed since the date of this Note.


 


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


 


“Treasury
Security” means the 4.25% U.S. Treasury Security due August 15,
2013.


 


“Window
Period” means the Extension Period.


 


“Yield
Maintenance Period” means the period from and including the
date of this Note until but not including the Scheduled Initial Maturity Date.


 


3

















 


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


 


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


 


3.                         Payments.


 


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


 


(b)                    Interest under
this Note shall be computed, payable and allocated on the basis of an
actual/360 interest calculation schedule (interest is payable for the actual
number of days in each month, and each month’s interest is calculated by
multiplying the unpaid principal amount of this Note as of the first day of the
month for which interest is being calculated by the Fixed Interest Rate (during
the Fixed Rate Period) or the applicable Adjustable Interest Rate (during the
Extension Period), dividing the product by 360, and multiplying the quotient by
the number of days in the month for which interest is being calculated). For
convenience in determining the amount of a monthly installment of principal and
interest under this Note, Lender will use a 30/360 interest calculation payment
schedule (each year is treated as consisting of twelve 30-day months). However,
as provided above, the portion of the monthly installment actually payable as
and allocated to interest will be based upon an actual/360 interest calculation
schedule, and the amount of each installment attributable to principal and the
amount attributable to interest will vary based upon the number of days in the
month for which such installment is paid. Each monthly payment of principal and
interest will first be applied to pay in full interest due, and the balance of
the monthly payment paid by Borrower will be credited to principal.


 


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


 


(d)                    Beginning on
the First Installment Due Date, and continuing until and including the monthly
installment due on the Initial Maturity Date, principal and accrued interest
shall be payable by Borrower in consecutive monthly installments due and
payable on the first day of each calendar month. The amount of the monthly
installment of principal and interest payable pursuant to this Section 3(d) on
an Installment Due Date shall be Seventy-Four Thousand Seven Hundred
Eighty-Eight and 67/100 Dollars ($74,788.67).


 


(e)                     Except as
otherwise provided in this Section 3(e), all remaining Indebtedness,
including all principal and interest, shall be due and payable by Borrower on
the Initial Maturity Date. However, so long as (i) the Initial Maturity
Date has not occurred prior to the Scheduled Initial Maturity Date, and (ii) no
Event of Default or event or circumstance which, with the giving of notice or
passage of time or both, could constitute an Event of Default exists on the
Scheduled Initial Maturity Date, then the Extension Period automatically will
become effective and the date for full payment of the Indebtedness
automatically shall be extended until the Extended Maturity Date. If the
Extension Period becomes effective, monthly installments of


 


4

















 


principal and interest or
interest only will be payable during the Extension Period as provided in Section 3(f).
Anything in Section 21 of the Security Instrument to the contrary
notwithstanding, during the Extension Period, Borrower will not request that
Lender consent to, and Lender will not consent to, a Transfer that, absent such
consent, would constitute an Event of Default.


 


(f)                       If the
Extension Period becomes effective, beginning on June 1, 2013, and
continuing until and including the monthly installment due on the Extended
Maturity Date, principal and accrued interest shall be payable by Borrower in
consecutive monthly installments due and payable on the first day of each
calendar month. The amount of the monthly installment of principal and interest
payable pursuant to this Section 3(f) on an Installment Due Date
shall be calculated so as to equal the monthly payment amount which would be
payable on the Installment Due Date as if the unpaid principal balance of this
Note as of the first day of the Interest Adjustment Period immediately
preceding the Installment Due Date was to be fully amortized, together with
interest thereon at the Adjustable Interest Rate in effect for such Interest
Adjustment Period, in equal consecutive monthly payments paid on the first day
of each calendar month over the Remaining Amortization Period.


 


(g)                    During the
Extension Period, Lender shall provide Borrower with Notice, given in the
manner specified in the Security Instrument, of the amount of each monthly
installment due under this Note. However, if Lender has not provided Borrower
with prior notice of the monthly payment due on any Installment Due Date, then
Borrower shall pay on that Installment Due Date an amount equal to the monthly
installment payment for which Borrower last received notice. If Lender at any
time determines that Borrower has paid one or more monthly installments in an
incorrect amount because of the operation of the preceding sentence, or because
Lender has miscalculated the Adjustable Interest Rate or has otherwise
miscalculated the amount of any monthly installment, then Lender shall give
notice to Borrower of such determination. If such determination discloses that
Borrower has paid less than the full amount due for the period for which the
determination was made, Borrower, within 30 calendar days after receipt of the
notice from Lender, shall pay to Lender the full amount of the deficiency. If
such determination discloses that Borrower has paid more than the full amount
due for the period for which the determination was made, then the amount of the
overpayment shall be credited to the next installment(s) of interest only
or principal and interest, as applicable, due under this Note (or, if an Event
of Default has occurred and is continuing, such overpayment shall be credited
against any amount owing by Borrower to Lender).


 


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


 


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


 


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


 


(k)                     In accordance
with Section 14, interest charged under this Note cannot exceed the
Maximum Interest Rate. If the Adjustable Interest Rate at any time exceeds the
Maximum Interest Rate, resulting in the charging of interest hereunder to be
limited to the Maximum Interest Rate, then any subsequent reduction in the
Adjustable Interest Rate shall not reduce the rate at which interest under this
Note accrues below the Maximum Interest Rate until the total


 


5

















 


amount of interest
accrued hereunder equals the amount of interest which would have accrued had
the Adjustable Interest Rate at all times been in effect.


 


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


 


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


 


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


 


7.                         Late
Charge.


 


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


 


(b)                    Borrower
acknowledges that its failure to make timely payments will cause Lender to
incur additional expenses in servicing and processing the Loan and that it is
extremely difficult and impractical to determine those additional expenses.
Borrower agrees that the late charge payable pursuant to this Section represents
a fair and reasonable estimate, taking into account all circumstances existing
on the date of this Note, of the additional expenses Lender will incur by
reason of such late payment. The late charge is payable in addition to, and not
in lieu of, any interest payable at the Default Rate pursuant to Section 8.


 


8.                         Default
Rate.


 


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


 


6

















 


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


 


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


 


9.                         Limits on
Personal Liability.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


	
  [Deferred]

  	
  Hazard Insurance
  premiums or other insurance premiums,

  
	
  [Deferred]

  	
  Taxes,

  
	
  [Deferred]

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

  
	
  [Deferred]

  	
  ground rents,

  
	
  [Deferred]

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

  



 


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


 


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


 


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


 


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


 


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


 


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


 


(i)                          Borrower’s
ownership of any property or operation of any business not permitted by Section 33
of the Security Instrument;


 


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


 


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


 


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


 


10.                  Voluntary and
Involuntary Prepayments.


 


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


 


(b)                    Borrower may
voluntarily prepay all of the unpaid principal balance of this Note on an
Installment Due Date so long as Borrower designates the date for such
prepayment in a Notice from Borrower to Lender given at least 30 days prior to
the date of such prepayment. If an Installment Due Date (as defined in Section l
(a)) falls on a day which is not a Business Day, then with respect to payments
made under this Section 10 only, the term “Installment Due Date” shall
mean the Business Day immediately preceding the scheduled Installment Due Date.


 


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


 


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


 


(e)                     Except as
provided in Section 10(f), a prepayment premium shall be due and payable
by Borrower in connection with any prepayment of” principal under this Note
during the Prepayment Premium Period. The prepayment premium shall be whichever
is the greater of subsections (A) and (B) below:


 


(A)      1.0%
of the amount of principal being prepaid; or


 


(B)       the
product obtained by multiplying:


 


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


 


by


 


9

















 


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


 


by


 


(3)                     the Present
Value Factor.


 


For purposes of
subsection (B), the following definitions shall apply:


 


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


 


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


 


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


 


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


 





 


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


 


ARR = Assumed Reinvestment Rate


 


10

















 


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


 


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


 


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


 


11.                  Costs and
Expenses. To the fullest extent allowed by applicable law, Borrower shall
pay all expenses and costs, including Attorneys’ Fees and Costs incurred by
Lender as a result of any default under this Note or in connection with efforts
to collect any amount due under this Note, or to enforce the provisions of any
of the other Loan Documents, including those incurred in post-judgment
collection efforts and in any bankruptcy proceeding (including any action for
relief from the automatic stay of any bankruptcy proceeding) or judicial or
non- judicial foreclosure proceeding.


 


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


 


14.                  Loan Charges. Neither
this Note nor any of the other Loan Documents shall be construed to create a
contract for the use, forbearance or detention of money requiring payment of
interest at a rate greater than the Maximum Interest Rate. If any applicable
law limiting the amount of interest or other charges permitted to be collected
from Borrower in connection with the Loan is interpreted so that any interest
or other charge provided for in any Loan Document, whether considered
separately or together with other charges provided for in any other Loan
Document, violates that law, and Borrower is entitled to the benefit of that
law, that interest or charge is hereby reduced to the extent necessary to
eliminate that violation. The amounts, if any, previously paid to Lender in
excess of the permitted amounts shall be applied by Lender to reduce the unpaid
principal balance of this Note. For the purpose of determining whether any


 


11

















 


applicable law limiting
the amount of interest or other charges permitted to be collected from Borrower
has been violated, all Indebtedness that constitutes interest, as well as all
other charges made in connection with the Indebtedness that constitute
interest, shall be deemed to be allocated and spread ratably over the stated
term of this Note. Unless otherwise required by applicable law, such allocation
and spreading shall be effected in such a manner that the rate of interest so
computed is uniform throughout the stated term of this Note.


 


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


 


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


 


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


 


19.                  Notices; Written
Modifications.


 


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


 


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


 


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


 


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


 


22.                  State-Specific
Provisions. If a guarantor is liable for only a portion of the
Indebtedness, Borrower hereby waives its rights under California Civil Code Section 2822(a) to
designate the portion of the Indebtedness that shall be satisfied by Borrower’s
partial payment.


 


12

















 


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


 


	
  x

  	
   

  	
  Exhibit A

  	
  Modifications to
  Multifamily Note

  



 


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


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


 


13





















 


	
   

  	
  WATERFORD PLACE APARTMENTS, LLC, a California limited liability
  company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Shea Properties
  Management Company, Inc., a Delaware corporation, its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James G. Shontere

  
	
   

  	
   

  	
   

  	
  James G. Shontere 

  
	
   

  	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert R. O’Dell

  
	
   

  	
   

  	
   

  	
  Robert R. O’Dell 

  
	
   

  	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  95-4869325

  
	
   

  	
  Borrower’s Social
  Security/Employer ID Number

  



 


14

















 


Endorsement page to
that Multifamily Note dated as of March 31, 2008 in the amount of
$13,245,000.00


 


PAY TO THE ORDER OF
FEDERAL HOME LOAN 

MORTGAGE CORPORATION, WITHOUT 

RECOURSE.


 


	
  DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Thomas J. White

  	
   

  
	
   

  	
  Name: Thomas J. White

  	
   

  
	
   

  	
  Title: Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Heidi Marrin

  	
   

  
	
   

  	
  Name: Heidi Marrin

  	
   

  
	
   

  	
  Title: Assistant Vice President

  	
   

  



 


 


FHLMC Loan No. 487798287


 


15

















 


EXHIBIT A


 


MODIFICATIONS TO MULTIFAMILY NOTE


 


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


 


1.                          After
the word “prepayment” in the third sentence of Section 10(h), insert the
following: “, and such prepayment premium shall be the only amount payable by
Borrower with respect to any damages Lender may incur because of a prepayment.”


 


2.                          After
the second reference to “Lender” in the third sentence of Paragraph 14, insert
the following: “,without prepayment premium or penalty,”.


 


3.                          The modifications
set forth in this Exhibit A shall become ineffective upon a Transfer under
the Security Instrument that requires Lender’s consent or upon any Transfer
that constitutes an Event of Default under Section 21(e) of the
Security Instrument.


 


4.                          The following
modification may be made to the exhibit to the Note:


 


A new Section 9(h) is
added as follows:


 


“(h)             Notwithstanding any
provision in this Section 9 to the contrary, Lender’s recourse for any and
all obligations of Borrower under this Section 9 shall be limited to (i) the
assets of Borrower, (ii) the assets of J.F. Shea Co., Inc., a Nevada
corporation, as guarantor of Borrower’s obligations hereunder and (iii) the
assets of any other guarantors of Borrower’s obligations hereunder, and in no
event shall Lender have recourse to the assets of any of the general partners
of Borrower in satisfaction of any such obligations of Borrower.”


 


A-1