Document:

exv10w3

Exhibit 10.3

MASTER SUBSTITUTION AGREEMENT

(Revision Date 02/23/2009)

     THIS MASTER SUBSTITUTION AGREEMENT (this “Agreement”) is made to be effective as of the 23rd
day of April, 2009, among DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation
(“Lender”), AVALONBAY TRAVILLE, LLC, a Maryland limited liability company (the “IDOT Guarantor”)
and the entities identified on Schedule B attached hereto and incorporated herein by
reference (each such entity is sometimes referred to individually as an “Original Borrower”, and
all are sometimes referred to collectively as the “Original Borrowers”). An Original Borrower, the
IDOT Guarantor or “New Borrower” described below, is sometimes referred to as a “Borrower”, and all
Original Borrowers, the IDOT Guarantor and New Borrowers are sometimes referred to collectively as
“Borrowers”.

RECITALS

     A. Lender has agreed to make certain loans to the Original Borrowers (each a “Loan” and
collectively, the “Loans”) described in the Substitution Schedule described in Schedule A
attached hereto and incorporated herein by reference.

     B. Each Loan will be secured by a Multifamily Mortgage, Deed to Secure Debt or Deed of Trust
(a “Security Instrument”) encumbering the multifamily residential rental project identified in the
Schedule A as an “Original Property” (collectively, the “Original Properties”).

     C. AvalonBay Communities, Inc. (“AvalonBay”) is a Borrower and each other Borrower is owned
directly or indirectly 100% by an entity controlled by AvalonBay. Each Borrower is an affiliate of
the other Borrowers.

     D. Each Loan will be subject to a Master Cross-Collateralization Agreement of even date with
this Agreement and executed by each of the Borrowers (the “Cross-Collateralization Agreement”).

     E. The Original Borrowers have requested, and Lender has consented to, certain limited rights
on the part of Borrowers to substitute other multifamily residential rental projects as security
for Loans. The purpose of this Agreement is to set forth the terms and conditions of such limited
rights.

     THEREFORE, Lender and the Borrowers agree as follows:

	1.	 	Definitions. With respect to each Loan, terms used in this Agreement and not defined herein
have the meanings given to those terms (i) in the Security Instrument initially securing such
Loan until such time, if ever, that a “Substitute Security Instrument” is delivered with
respect to such Loan; and thereafter (ii) in the then-effective Substitute Security
Instrument. As used herein, a “Substitution” means the substitution of another multifamily
residential rental project (the “Substitute Property”) for either an Original Property or a
previously substituted Substitute Property (as applicable, the “To-Be-Released Property”), as
security for a Loan, all in accordance with the terms and conditions of this Agreement.

 

 

	2.	 	Substitution Requirements. Not more than seven (7) times in the aggregate during the period
that any of the Loans remain outstanding (the “Substitution Number”), Lender will consent to a
Substitution upon the Borrowers’ satisfaction, as determined by Lender in its sole, but
reasonable, discretion based on Lender’s then-current underwriting standards, of all of the
requirements set forth below.

	 	(a)	 	The Borrower proposing to effect the Substitution must deliver to Lender a
written request for Lender’s approval of the proposed Substitution, such written
request (the “Substitution Request”) to be delivered to Lender not less than sixty (60)
days prior to the proposed effective date of the requested Substitution. The
Borrower’s Substitution Request must specifically identify the Loan to which the
Substitution Request relates and the To-Be-Released Property, and must include all of
the items set forth in subsections 2(i)(i) through (vii) below. The sixty (60) day
period will not be calculated until Lender receives the requirements of this subsection
and subsection 2(i) in full. Upon Borrowers’ written request, Lender will confirm in
writing that Borrower has delivered all required items pursuant to this Section 2(a)
and the date on which the sixty (60) day period commenced to run. The Borrower’s
Substitution Request must be accompanied by a non-refundable review fee in the amount
of $10,000. The Borrower may rescind its request for a Substitution by written notice
to Lender at any time prior to implementation of the Substitution, as set forth in
Section 4 below, but will not receive a refund of the review fee.
	 
	 	(b)	 	Lender will not consider Borrower’s Substitution Request if an Event of Default
under any Loan Document has occurred and is continuing or if an event or condition
that, with the giving of notice or the passage of time, or both, could constitute such
an Event of Default exists.
	 
	 	(c)	 	As the Substitution rights under this Agreement are personal to the Original
Borrowers, the IDOT Guarantor and to New Borrowers described herein, (i) all Borrowers
must continue to be owned directly or indirectly 100% by an entity controlled by
AvalonBay (or any successors to such entities permitted pursuant to Section 21(c) of
the Security Instrument), and (ii) an entity controlled by AvalonBay (or a successor to
such entity pursuant to Section 21(c) of the Security Instrument) must own, directly or
indirectly, not less than a 51% managing interest in all Borrowers and must be the sole
party controlling (directly or indirectly) the day to day management of the Borrower
and operation of each Original Property and each Substitute Property.
	 
	 	(d)	 	The aggregate LTV, at the time of the Substitution, of (i) the Substitute
Property, as determined by Lender using Lender’s then-standard underwriting procedures,
including an evaluation of market condition, and (ii) all remaining Original Properties
as the same may have been previously substituted in accordance with the terms hereof
(collectively, the “New Pool”), may not exceed seventy percent (70%). As used herein,
“LTV” means, the ratio, expressed as a percentage, of (1) the aggregate outstanding
principal balance of the Loans attributable to the properties comprising the New Pool,
to (2) the value of the properties comprising the New Pool, as determined by Lender
using Lender’s then-standard underwriting procedures. In the event the Substitute
Property fails to satisfy this requirement, Lender reserves the right, in its sole
discretion, to accept the Substitute Property and require additional credit
enhancement, including but not limited to additional guaranties, in such amounts as
shall be determined by Lender using Lender’s then-standard underwriting procedures.
	 
	 	(e)	 	The aggregate DCR, at the time of the Substitution, of the New Pool, may not be
less than 1.25:1.00, assuming the Loans are amortizing on a 30-year basis. As

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	 	 	 	used herein, the term “DCR” means, the ratio, expressed as a percentage, of (A) the
aggregate annual net operating income (“NOI”) from the operations of the properties
comprising the New Pool, calculated on an annual basis based upon December 31
operating statements of such properties, using Lender’s standard underwriting
procedures, to (B) the aggregate annual principal and interest payable on the Loans
attributable to the properties comprising the New Pool. In the event the
Substitute Property fails to satisfy this requirement, Lender reserves the right, in
its sole discretion, to accept the Substitute Property and require additional credit
enhancement, including but not limited to, additional guaranties, in such amounts as
shall be determined by Lender using Lender’s then-standard underwriting procedures.
	 
	 	 	 	Notwithstanding the foregoing, not more than once in any twelve (12) month period in
connection with a Substitution under this Agreement, a proposed Transfer of a
Mortgaged Property (as such terms are defined in each Security Instrument) under
Section 21(f) of the applicable Security Instrument or a release under Section 14 of
the Cross —Collateralization Agreement, a Borrower may request that Lender
calculate the DCR for purposes of the foregoing requirements using an updated NOI,
under Lender’s standard underwriting procedures, provided that such Borrower (1)
notifies Lender of such request and provides Lender with the applicable operating
statements not less than ninety (90) days prior to the proposed Substitution, (2)
pays to Lender a fee equal to the greater of (x) $1,800 per property in the New Pool
or (y) $25,000 and (3) pays to Loan Servicer an aggregate fee equal to $7,500.
	 
	 	(f)	 	Lender will not consider a Substitution Request for a Substitution for which
the effective date of such Substitution will occur earlier than twelve months after the
date of the Note evidencing the Loan to which the Substitution relates. The
Substitution must be completed no later than twelve (12) months prior to the Scheduled
Maturity Date set forth in the Note evidencing the Loan to which the Substitution
relates.
	 
	 	(g)	 	[Intentionally Deleted.]
	 
	 	(h)	 	The Substitute Property must be the same type of property as the To-Be-Released
Property (i.e., a seniors housing property must be replaced with another seniors
housing property and a multifamily property must be replaced with another multifamily
property)
	 
	 	(i)	 	Lender must have received, and in its sole discretion approved the following,
all meeting Lender’s then current requirements for such items:

	 	(i)	 	a detailed description of the Substitute Property, including
historical and year-to-date operating statements,
	 
	 	(ii)	 	a appraisal of the Substitute Property prepared by a member of
the Appraisal Institute (Borrower acknowledges that Lender is not bound by any
value set forth in such appraisal); provided, however, that Lender will not
require an appraisal of the To-Be-Released Property,
	 
	 	(iii)	 	a Phase I environmental report on the Substitute Property,
and, if, required by the Phase I environmental report, a Phase II environmental
report,
	 
	 	(iv)	 	an engineering report on the Substitute Property (unless waived
in writing by Lender),

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	 	(v)	 	a current ALTA/ACSM urban land survey of the Substitute
Property,
	 
	 	(vi)	 	a commitment for a mortgagee’s title insurance policy to insure
the first lien mortgage to be secured by and encumber the Substitute Property,
in the form (including endorsements) required by Lender, and containing only
such exceptions as are acceptable to Lender; provided, however, that Lender
will not require Borrower to provide date down endorsements with respect to the
other properties comprising the New Pool if no Supplemental Mortgage (as
defined in the Security Instruments) is being granted at such time on any of
the properties comprising the New Pool, and
	 
	 	(vii)	 	such other reports, certificates, and documents with respect
to the Substitute Property as Lender at any time may require in its sole
discretion.

	 	(j)	 	The physical condition, market condition, and other aspects of the Substitute
Property must be acceptable to Lender in Lender’s sole, but reasonable, discretion
based on Lender’s then-standard underwriting requirements. Lender will not require an
evaluation of the geographic diversity of the New Pool in connection with the
Substitution, however, market factors and conditions will be evaluated in Lender’s
sole, but reasonable, discretion.
	 
	 	(k)	 	Borrower must pay to Lender all of Lender’s and Loan Servicer’s attorneys’ fees
(including imputed fees of Lender’s salaried attorneys) and all other out of pocket
third party costs incurred by Lender in connection with the Substitution, including,
but not limited to, all costs of engineering reports, appraisals and environmental
reports, all title insurance charges and all recordation charges.
	 
	 	(l)	 	[Intentionally Deleted.]
	 
	 	(m)	 	[Intentionally Deleted.]
	 
	 	(n)	 	Notwithstanding Borrowers’ right, as set forth above to seven (7)
Substitutions, at any time, the unpaid principal balance of the Loans secured by the
Substitute Properties must not exceed $370,570,000.

	3.	 	Implementation of Substitution Approval. If Lender consents to a Substitution in accordance
with Section 2 of this Agreement, the Borrowers must comply with the requirements set forth
below with respect to such Substitution.

	 	(a)	 	Upon closing of the Substitution, the Borrower that requested the Substitution
must pay (i) a Substitution approval fee to Lender equal to (0.15%) of the unpaid
principal balance of the Loan to which the Substitution relates, but not to exceed
$100,000 per Substitution and (ii) a Substitution approval fee to Loan Servicer equal
to 0.15% of the unpaid principal balance of the Loan to which the Substitution relates,
but not to exceed $100,000 per Substitution. The review fee paid pursuant to Section
2(a) will be credited to the Substitution approval fee set forth in clause (i) of the
immediately preceding sentence.
	 
	 	(b)	 	The Borrower that requested the Substitution must execute and deliver to Lender
the following documents, all of which must be acceptable in form and substance to
Lender in its sole, but reasonable, discretion:

	 	(i)	 	an amendment to the Note, or an amended and restated note,
signed by the Borrower and acknowledged by the Guarantor, to change the
reference to

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	 	 	 	“Mortgaged Property” to the “Substitute Property”, to change the reference
to “Security Instrument” to the “Substitute Security Instrument” (described
below), to change the governing law to the law of the jurisdiction in which
the Substitute Property is located, and to incorporate any changes to the
Note necessitated by reason of the change in the governing law or by changes
in the form of the Substitute Security Instrument; provided, however, any
amended and restated note will include the document modifications contained
in Exhibit A to the Note (other than property-specific modifications);
	 
	 	(ii)	 	an amendment to the Security Instrument or a new security
instrument (the “Substitute Security Instrument”) encumbering the Substitute
Property, in the then-current Freddie Mac form of Security Instrument for the
jurisdiction in which the Substitute Property is located, and including all of
the document modifications contained in Exhibit B to the Security Instrument
(other than property-specific modifications) and such additional
property-specific modifications, as Lender may require, recorded among the
appropriate land records for the Substitute Property;
	 
	 	(iii)	 	a new Repair Agreement and/or Repair Escrow Agreement, as
applicable, with respect to the Substitute Property, in the then-current
Freddie Mac form of Repair Agreement and/or Repair Escrow Agreement including
all of the document modifications contained in the document modifications
exhibit forming part of any Repair Agreement or Repair Escrow Agreement
pertaining to the Mortgaged Property (other than property-specific
modifications);
	 
	 	(iv)	 	a new Replacement Reserve Agreement with respect to the
Substitute Property, in the then-current Freddie Mac form of Replacement
Reserve Agreement and including all of the document modifications contained in
the document modifications exhibit forming part of the Replacement Reserve
Agreement pertaining to the Mortgaged Property (other than property-specific
modifications);
	 
	 	(v)	 	new Uniform Commercial Code financing statements properly filed
and recorded to perfect Lender’s security interest in the Substitute Property
to the extent that such security interests may be perfected by filing or
recording financing statements;
	 
	 	(vi)	 	an amendment to the Cross-Collateralization Agreement
substituting the Substitute Property for the To-Be-Released Property and
cross-defaulting and cross-collateralizing the Substitute Property with such
other Loans and properties as well as any other documentation that Lender may
reasonably require in connection with the Cross-Collateralization Agreement;
	 
	 	(vii)	 	opinion for Borrower and Guarantor, if applicable, in
substantially the same form delivered in connection with the origination of the
Loan;
	 
	 	(viii)	 	such additional documentation as Lender in its sole discretion may require to
grant to Lender a perfected first lien and security interest in the Substitute
Property and to otherwise implement the Substitution; and
	 
	 	(ix)	 	if requested by Lender, a ratification and confirmation of the
continued obligation of each Guarantor.

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	 	(c)	 	At the option of the Borrower, immediately prior to the Substitution, another
entity meeting the ownership requirements set forth in Section 2 (c) above (such entity
being a “New Borrower”), may assume the obligations of the Borrower under the Note for
the Loan to which the Substitution relates, pursuant to an endorsement to the Note
prepared by Lender and executed and delivered by the New Borrower. The New Borrower
will then execute, deliver, record, and file the documents referred to in subsection
3(b).
	 
	 	(d)	 	The Borrowers must cause to be delivered to Lender a mortgagee’s title
insurance policy, dated the date of the recording of the Substitute Security
Instrument, in accordance with the commitment for title insurance referred to in
subsection 2(i).
	 
	 	(e)	 	Any New Borrower must sign, and all other Borrowers must execute an update to
the Substitution Schedule prepared by Lender. The Substitution Schedule will be
updated to reflect the Substitution and will include, among other information required,
Lender’s underwritten LTV and DCR for the Substitute Property.
	 
	 	(f)	 	Upon completion of the Substitution, at the expense of the Borrowers, the
To-Be-Released Property will be released from the lien of the Security Instrument and
the Cross-Collateralization Agreement; provided that any document effecting such
release must expressly provide that the Indebtedness has not been paid in full and that
the recording of the release is not intended to create any presumption to the contrary.
	 
	 	(g)	 	If Lender consents to the Substitution pursuant to Section 2 of this Agreement,
but the Borrower that requested the Substitution is unable to effect a contemporaneous
Substitution of the Substitute Property for the To-Be-Released Property, such Borrower
will have the following option, subject to the conditions set forth below:

	 	(i)	 	Borrower must provide Lender with thirty (30) days prior
written notice that Borrower intends to complete the Substitution subsequent to
the release of the Mortgaged Property (“Release”).
	 
	 	(ii)	 	Borrower must deliver to Lender an unconditional, irrevocable
letter of credit (“Letter of Credit”) in form and content, from an issuer and
accompanied by an opinion of counsel to the Letter of Credit issuer, all
acceptable to Lender, for a term of not less than twelve (12) months, in an
amount determined by Lender in Lender’s discretion.
	 
	 	(iii)	 	Borrower must continue to make monthly payments under the
applicable Note in accordance with the terms of the Note until the Substitution
has been completed, and thereafter under the terms of the Note, as amended or
amended and restated pursuant to Section 3(b)(i) above.
	 
	 	(iv)	 	Borrower must complete the Substitution within six (6) months
after the Release. If Borrower completes the Substitution prior to the end of
the 6-month period, Lender will return the Letter of Credit to the Borrower.
	 
	 	(v)	 	If Borrower does not complete the Substitution within the
6-month period, or if an Event of Default occurs and is continuing, Lender will
provide written notice to Borrower of its intent to draw on the Letter of
Credit, and, if Borrower does not deposit with Lender cash in an amount equal
to the face amount of the Letter of Credit to be so drawn by Lender (the
“Substitute Cash”) within five (5) business days after such notice from Lender,
Lender shall have the right to thereafter draw on the Letter of

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	 	 	 	Credit and apply the proceeds to the Indebtedness and Borrower must pay any
prepayment premium due and payable as a result of such application. If
Borrower does deposit the Substitute Cash with Lender in accordance with the
foregoing provisions, (y) Lender shall have the right to apply the
Substitute Cash to the Indebtedness and Borrower must pay any prepayment
premium due and payable as a result of such application and (z) Lender shall
promptly return the original Letter of Credit to the Borrower. No portion
of the Letter of Credit proceeds or Substitute Cash may be used by Borrower
to satisfy the prepayment premium. If Lender draws on the Letter of Credit
or receives Substitute Cash in lieu thereof, under the circumstances set
forth in this Section, it will be deemed to be a “Release” of a Property
pursuant to Section 14 of the Cross-Collateralization Agreement.
	 
	 	(vi)	 	At any time, (A) no more than two (2) Loans secured by Letters
of Credit under this Section may be outstanding, (B) the aggregate unpaid
principal balance of all Loans secured by Letters of Credit under this Section
must be less than fifty percent (50%) of the aggregate unpaid principal balance
of all Loans then outstanding, and (C) the number of Loans secured by Letters
of Credit under this Section must be less than fifty percent (50%) of the
aggregate number of Loans then subject to the Cross-Collateralization
Agreement.
	 
	 	(vii)	 	Except as set forth in this Section, Substitutions made
pursuant to this Section are subject to all other requirements for
Substitutions set forth in this Agreement.

	4.	 	Notices. All notices under this Agreement must be in writing and must be given in the manner
provided in the Security Instruments.
	 
	5.	 	Successors and Assigns. The Borrowers’ rights under this Agreement may not be assigned,
except that a New Borrower must become a Borrower as provided in this Agreement. This
Agreement shall be binding upon and shall inure to the benefit of Lender and Lender’s
successors and assigns.
	 
	6.	 	Governing Law; Jurisdiction and Venue. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. The Borrowers irrevocably submit to
the jurisdiction of any federal or state court (without intending to limit any right on the
part of Lender or any successor to Lender to remove a matter to a particular court) sitting in
the Commonwealth of Virginia, over any suit, action or proceeding arising out of or relating
to this Agreement. The Borrowers hereby submit to the in personam jurisdiction of each such
court in any matter involving this Agreement. Each Borrower irrevocably waives, to the
fullest extent permitted under applicable law, any objections it may now or hereafter have to
the venue of any suit, action or proceeding brought in any such court and any claim that the
same has been brought in an inconvenient forum. Each Borrower acknowledges that it has
received material and substantial consideration for the right to effect Substitutions under
this Agreement and that the foregoing venue provisions of this Section 6 are integral to
Lender’s entering into and performance of this Agreement.
	 
	7.	 	Course of Dealing. No course of dealing among the parties to this Agreement must operate as
a waiver of any rights of any party under this Agreement.
	 
	8.	 	WAIVER OF TRIAL BY JURY. EACH BORROWER AND LENDER (A) COVENANTS AND AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS AGREEMENT THAT IS

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	 	 	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.
	9.	 	Entire Agreement. This Agreement, together with the Note, Mortgage and Loan Documents
relating to each Loan, contain the entire agreement among the parties as to the rights granted
and the obligations assumed in this Agreement. To the extent that this Agreement conflicts
with the terms of the other Loan Documents, this Agreement shall govern and control.
	 
	10.	 	Counterparts. This Agreement may be executed in multiple counterparts, each of which shall
constitute an original document and all of which together shall constitute one agreement.

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

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	 	ORIGINAL BORROWER:

ALAMEDA FINANCING, L.P., a Delaware 

limited partnership

 	 
	 	By:  	California Multiple Financing, Inc., a Maryland
 	 
	 	 	corporation, its general partner 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

MISSION BAY NORTH FINANCING, L.P., a
 Delaware limited
partnership

 	 
	 	By:  	California Multiple Financing, Inc., a Maryland
 	 
	 	 	corporation, its general partner 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

GATES FINANCING, LLC, a Delaware
 limited liability
company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

HARBOR FINANCING, LLC, a Delaware
 limited liability
company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

4100 MASSACHUSETTS AVENUE 
ASSOCIATES, L.P., a
District of Columbia
 limited partnership

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its general partner 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

AVALONBAY COMMUNITIES, INC., a 

Maryland corporation 

 	 
	 	By:  	/s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 
	 	ORIGINAL IDOT GUARANTOR:

AVALONBAY TRAVILLE, LLC, a Maryland
 limited liability
company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 
	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

SHADY GROVE ROAD FINANCING, LLC, a 
Delaware limited
liability company

 	 
	 	By:  	AvalonBay Traville, LLC, a Maryland limited
 	 
	 	 	liability company, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	
AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                          /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance	 

 

 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

GARDENS FINANCING, LLC, a Delaware
 limited liability
company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

EDGEWATER FINANCING, LLC, a Delaware
 limited
liability company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

FREEHOLD FINANCING, LLC, a Delaware
 limited liability
company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

RUN EAST II FINANCING, LLC, a Delaware 

limited liability company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

BELLEVUE FINANCING, LLC, a Delaware 

limited liability company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

AVALONBAY SHREWSBURY, INC., a 

Maryland corporation

 	 
	 	By:  	/s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ORIGINAL BORROWER:

WOBURN FINANCING, LLC, a Delaware 
limited liability
company

 	 
	 	By:  	AvalonBay Communities, Inc., a Maryland
 	 
	 	 	corporation, its sole member 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	LENDER:

DEUTSCHE BANK BERKSHIRE 
MORTGAGE, INC., a Delaware
corporation

 	 
	 	By:  	/s/ Steven B. Wendel
 	 
	 	 	Steven B. Wendel 	 
	 	 	Officer 	 
	 	 	 
	 	By:  	                                                    /s/ Denis G. Leger
 	 
	 	 	Denis G. Leger 	 
	 	 	Officerexv10w4

Exhibit 10.4

FORM OF MULTIFAMILY NOTE

MULTISTATE — FIXED RATE

(REVISION DATE 2-15-2008)

	 	 	 
	US $[Loan Amount]
	 	Effective Date: As of April 24, 2009

     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 [Loan Amount]
(US $[Loan Amount]), with interest on the unpaid principal balance, as hereinafter provided.

     1. Defined Terms.

	 	(a)	 	As used in this Note:
	 
	 	 	 	“Base Recourse” means a portion of the Indebtedness equal to zero percent (0%) of
the original principal balance of this Note.
	 
	 	 	 	“Business Day” means any day other than a Saturday, a Sunday or any other day on
which Lender or the national banking associations are not open for business.
	 
	 	 	 	“Default Rate” means an annual interest rate equal to four (4) percentage points
above the Fixed Interest Rate. However, at no time will the Default Rate exceed the
Maximum Interest Rate.
	 
	 	 	 	“Fixed Interest Rate” means the annual interest rate of five and eighty-six
hundredths percent (5.86%).
	 
	 	 	 	“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 June 1, 2009.
	 
	 	 	 	“Lender” means the holder from time to time of this Note.
	 
	 	 	 	“Loan” means the loan evidenced by this Note.
	 
	 	 	 	“Maturity Date” means the earlier of (i) May 1, 2019 (the “Scheduled Maturity
Date”), and (ii) the date on which the unpaid principal balance of this Note becomes
due and payable by acceleration or otherwise pursuant to the Loan Documents or the
exercise by Lender of any right or remedy under any Loan Document.
	 
	 	 	 	“Maximum Interest Rate” means the rate of interest that results in the maximum
amount of interest allowed by applicable law.
	 
	 	 	 	“Prepayment Premium Period” means the period during which, if a prepayment of
principal occurs, a prepayment premium will be payable by Borrower to

PAGE 1

 

	 	 	 	Lender. The Prepayment Premium Period is the period from and including the date of
this Note until but not including the first day of the Window Period.
	 	 	 	“Security Instrument” means the multifamily mortgage, deed to secure debt or deed of
trust effective as of the effective date of this Note, from Borrower to or for the
benefit of Lender and securing this Note.
	 
	 	 	 	“Treasury Security” means the 3.750% U.S. Treasury Security due November 15, 2018.
	 
	 	 	 	“Window Period” means the three (3) consecutive calendar month period prior to the
Scheduled Maturity Date.
	 
	 	 	 	“Yield Maintenance Period” means the period from and including the date of this Note
until but not including November 1, 2018.

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

     (b) Interest under this Note shall be computed, payable and allocated on the basis of 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, dividing the product by 360, and multiplying the quotient by the number of days in the month
for which interest is being calculated). The portion of the monthly installment of principal and
interest under this Note attributable to principal and the portion 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 installment 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 1(a) of this Note. Except as provided in this Section 3(c) and in Section 10,
accrued interest will be payable in arrears.

	 	(d)	 	(i)	 	Beginning on the First Installment Due Date, and continuing until and
including the monthly installment due on May 1, 2011, accrued interest only shall be
payable by Borrower in consecutive monthly installments due and payable on the first
day of each calendar month. The amount of each monthly installment of interest only
payable pursuant to this

PAGE 2

 

	 	 	 	Subsection 3(d)(i) on an Installment Due Date shall vary, and shall
equal $[                    ] multiplied by the number of days in the month prior to the
Installment Due Date.

	 	 	(ii)	 	Beginning on June 1, 2011, and continuing until and including
the monthly installment due on the Maturity Date, principal and accrued
interest shall be payable by Borrower in consecutive monthly installments due
and payable on the first day of each calendar month. The amount of the monthly
installment of principal and interest payable pursuant to this Subsection
3(d)(ii) on an Installment Due Date shall be                      and ___/100 Dollars
($                    ).

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

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

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

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

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

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

     6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid
principal balance, any accrued interest, any prepayment premium payable under Section 10, and 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

PAGE 3

 

received in full by Lender within ten (10) days after the installment or other amount is due,
counting from and including the date such installment or other amount is due (unless applicable law
requires a longer period of time before a late charge may be imposed, in which event such longer
period shall be substituted), Borrower shall pay to Lender, immediately and without demand by
Lender, a late charge equal to five percent (5%) of such installment or other amount due (unless
applicable law requires a lesser amount be charged, in which event such lesser amount shall be
substituted).

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

     8. Default Rate.

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

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

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

     9. Limits on Personal Liability.

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

PAGE 4

 

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

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

	 	(i)	 	Borrower fails to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the
Security Instrument and the amount of all security deposits collected by
Borrower from tenants then in residence. However, Borrower will not be
personally liable for any failure described in this subsection (i) if Borrower
is unable to pay to Lender all Rents and security deposits as required by the
Security Instrument because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding.
	 
	 	(ii)	 	Borrower fails to apply all insurance proceeds and condemnation
proceeds as required by the Security Instrument. However, Borrower will not be
personally liable for any failure described in this subsection (ii) if Borrower
is unable to apply insurance or condemnation proceeds as required by the
Security Instrument because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding.
	 
	 	(iii)	 	Borrower fails to comply with Section 14(g) or (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),
	 
	 	 	 	[N/A]              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.

PAGE 5

 

     (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.

     (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 1(a)) falls on a day which is not a Business Day, then with respect
to payments made under this Section 10 only, the term “Installment Due Date” shall mean the
Business Day immediately preceding the scheduled Installment Due Date.

     (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

PAGE 6

 

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 computed as follows:

	 	(i)	 	For any prepayment made during the Yield Maintenance 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
	 
	 	(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

PAGE 7

 

	 	 	 	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

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

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

PAGE 8

 

     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 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.

PAGE 9

 

     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, 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. [Vary by state where property is located.]

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

	 	 	 	 	 
	þ

	 	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.

PAGE 10

 

	 	 	 	 	 
	 	[Borrower]	 
	 
	 	By:  	/s/ Joanne M. Lockridge
 	 
	 	 	Joanne M. Lockridge 	 
	 	 	Senior Vice President-Finance 	 
	 
	 	 	 
	 	Borrower’s Social Security/Employer ID Number
 	 
	 	 	 
	 	 	 
	 	 	 

PAGE 11

 

	 	 	 	 	 

Endorsement page to that Multifamily Note dated as of April ___, 2009 in the amount of $[Loan
Amount].

	 	 	 	 	 
	PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE

CORPORATION, WITHOUT RECOURSE.

DEUTSCHE BANK BERKSHIRE MORTGAGE, INC., a Delaware corporation

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

FHLMC Loan No. 968714285

PAGE 12

 

EXHIBIT A

MODIFICATIONS TO MULTIFAMILY NOTE

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

	1.	 	[Intentionally omitted.]
	 
	2.	 	[Intentionally omitted.]
	 
	3.	 	[Intentionally omitted.]
	 
	4.	 	Section 7(a) is modified by inserting “(other than the payment of principal due on the
Maturity Date)” after the word “Note”.
	 
	5.	 	[Intentionally omitted.]
	 
	6.	 	Section 9(c) is modified by inserting “(including any costs and expenses incurred by Lender
in collecting any amounts for which Borrower is personally liable under this Section 9)”
before the words “as a result” in the introductory language.
	 
	7.	 	Section 9(c)(iii) is modified by
	 
	 	 	inserting “(including with respect to the payment of the costs of audits)” after “Section
14(g)”;
	 
	 	 	and
	 
	 	 	by inserting “and such failure continues beyond the notice and cure period provided for in
Section 14(g) of the Security Instrument” after the word “reports” and before the period at
the end of the Section.
	 
	8.	 	Section 9(c) is modified by replacing the first sentence of Section 9(c)(iv) with the
following:

	 	 	 	“Borrower fails to apply Rents 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” (excluding any of such “Deferred” items for
which Borrower has deposited funds in escrow with Lender, to the extent of such
deposited funds), this Section 9(c)(iv) shall be of no force or effect. However,
Borrower will not be personally liable for any failure described in this subsection
(iv) if (1) Borrower is unable to apply such Rents to any item below marked
“Deferred” as required by the Security Instrument because of a valid order issued in
a bankruptcy, receivership, or similar judicial proceeding; or (2) Borrower has,
within the applicable calendar year during which such Rents became available to
Borrower, paid and is current with respect to all operating expenses of the
Mortgaged Property and amounts due and payable in respect of the Indebtedness for
such calendar year.

	 	 	and

PAGE A-1

 

	 	 	by adding in Section 9(c)(iv) the words “or that are otherwise provided for in recorded
covenants affecting the Land” after the words Mortgaged Property” in the following
provision:
	 
	 	 	[Deferred]      assessments or other charges (that could become a lien on the Mortgaged Property)
	 
	 	 	and
	 
	 	 	by adding new Section 9(c)(v) as follows:

“(v) 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, to
the extent relied upon by Lender to its detriment.”

	9.	 	Section 9(d)(i) is modified by adding the following proviso at the end of the Section:
	 
	 	 	“provided, that, notwithstanding anything to the contrary set forth in this Note or in
Section 18 of the Security Instrument, Lender agrees that Borrower’s obligations under this
subsection (d) shall be limited to the assets of Borrower; and Lender further agrees that
Lender shall not seek to recover any deficiency from any natural persons who are (i) general
or limited partners, members, managers, principals, officers, directors or shareholders in
Borrower; or (ii) general or limited partners, members, managers, principals, officers,
directors or shareholders of any entity general partner, member or manager of Borrower.”
	 
	10.	 	Sections 9(d)(ii) and (iii) are deleted in their entirety.
	 
	11.	 	Section 9(f)(iii) is modified by (i) deleting the phrase “or written material
misrepresentation” and (ii) adding the following phrase immediately before the period:
	 
	 	 	“, provided that, notwithstanding anything to the contrary set forth in any
cross-collateralization agreement to which this Note may be subject (if any), the Borrower’s
liability under this Section 9(f)(iii) shall not exceed the Indebtedness evidenced by (and
defined in) this Note.”
	 
	12.	 	Section 9 is modified by adding a new Section 9(h):
	 
	 	 	“(h) To the extent Borrower has personal liability under this Note or any of the other Loan
Documents, such personal liability shall be limited to the assets of Borrower; and Lender
further agrees that Lender shall not seek to recover any deficiency from any natural persons
who are (i) general or limited partners, members, managers, principals, officers, directors
or shareholders in Borrower; or (ii) general or limited partners, members, managers,
principals, officers, directors or shareholders of any entity general partner, member or
manager of Borrower; provided, however, the foregoing shall not affect the obligations of
any guarantor under any guaranty or indemnity executed on or after the date hereof in
connection with the Loan”
	 
	13.	 	[Intentionally omitted.]
	 
	14.	 	Section 13 is modified by inserting ”, except as otherwise set forth in this Note or the
other Loan Documents” before the period.

PAGE A-2

 

	15.	 	Section 19(b) is modified by replacing the words “Transfer under the terms of the Security
Instrument that requires Lender’s consent” with the words “Section 21(f) Transfer”.
	 
	16.	 	Section 20 is modified by:
	 
	 	 	changing “may” to “shall” in the first sentence;
	 
	 	 	inserting “exclusive” before the second “jurisdiction” in the second sentence;
	 
	 	 	inserting “and Lender” after “Borrower” in third sentence; and
	 
	 	 	deleting the last sentence and replacing it with —“Nothing in this Section 20 is intended
to limit Lender’s right to remove a matter to federal court within the Property
Jurisdiction.”.
	 
	17.	 	Section 1(a) is amended to delete the definition of “Security Instrument” in its entirety and
replace it with the following:
	 
	 	 	“Security Instrument” means, collectively, 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, together with all of the other Mortgages (as defined in that certain
Master Cross-Collateralization Agreement dated as of the date of this Note, by and among the
Lender, the Borrower and the other entities identified as Borrower on Exhibit A attached
thereto), each of which is securing this Note.

PAGE A-3

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