Document:

Exhibit 10.18

 

RECORDING
REQUESTED BY

CHICAGO TITLE COMPANY

 

RECORDING
REQUESTED BY

AND WHEN RECORDED RETURN TO:

 

L. Anthony Beall,
Esquire

Troutman Sanders LLP

P.O. Box 1122

Richmond, Virginia 23218-1122

 

 

59023906

 

 

ASSUMPTION AGREEMENT

 

 

Freddie Mac Loan No. 487798287

Waterford Place Apartments

 

ASSUMPTION
AGREEMENT

(for use with electronic mortgage documents only)

Revision Date 7-15-09

 

THIS ASSUMPTION AGREEMENT is made effective as of the 25th day of
August, 2009, by and among WATERFORD PLACE
APARTMENTS, LLC, a California limited liability company (“Original Borrower”); BEHRINGER HARVARD WATERFORD PLACE REIT, LLC,
a Delaware limited liability company (“New
Borrower”); and the FEDERAL HOME
LOAN MORTGAGE CORPORATION (“Noteholder”)
and is acknowledged and consented to by J. F.
SHEA CO., INC., a Nevada corporation (“Original Guarantor”).

 

RECITALS

 

A.                     Original
Borrower obtained a mortgage loan (the “Loan”)
from Deutsche Bank Berkshire Mortgage, Inc., a Delaware corporation (“Original Lender”), which loan is secured by
certain Land and Improvements (the “Property”),
located in Alameda County, California. The Land is more particularly described
in Exhibit A, attached to this Agreement.

 

B.                       Original
Borrower executed a promissory note evidencing the Loan, dated March 31,
2008, in the original principal amount of $13,245,000.00, payable to Original
Lender (the “Note”). The Original
Guarantor guaranteed payment of certain amounts due under the Note by executing
a Guaranty dated March 31, 2008 (the “Original
Guaranty”).

 

C.                       To secure
repayment of the Loan, Original Borrower executed and delivered to Original
Lender a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing (the “Security Instrument”)
of even  date with the Note, which
is recorded in the Official Records in the County of Alameda, State of
California (the “Land Records”) as
Instrument No. 2008-107745. Any capitalized terms used in this Agreement
and not defined shall have the meaning ascribed to them in the Security Instrument.

 

D.                      The Note,
Security Instrument and any other document executed by Original Borrower in
connection with the Loan that will be assumed by New Borrower, all as listed on
Exhibit B to this Agreement, are referred to collectively in this
Agreement as the “Loan Documents”.

 

E.                        Original
Lender endorsed the Note to the order of the Noteholder and by instrument dated
March 31, 2008 filed for record on March 31, 2008 in the Land Records
as Instrument No. 2008-107746 sold, assigned and transferred all right, title
and interest of the Original Lender in and to the Security Instrument and the
Loan Documents to the Noteholder. The Noteholder is now the owner and holder of
the Note and the Loan is serviced by Deutsche Bank Berkshire Mortgage, Inc.,
a Delaware corporation (the “Servicer”).

 

ASSUMPTION AGREEMENT

Multifamily - For Use with Electronic Mortgage
Documents (7/15/2009)

 

 

 

F.                        Original
Borrower has transferred or has agreed to transfer all of its right, title, and
interest in and to the Property to New Borrower (the “Transfer”).

 

G.                       New
Borrower has agreed to assume all of Original Borrower’s rights, obligations,
and liabilities created or arising under the Loan Documents, with certain
modifications, if any, as set forth in Exhibit C to this Agreement
(the “Assumption”).

 

H.                      Subject to
the full satisfaction of all conditions set forth below, the Noteholder has
agreed to consent to New Borrower’s Assumption.

 

I.                           Original
Borrower desires to be released by the Noteholder from any and all obligations
and liabilities under the terms and provisions of the Loan Documents, and
Noteholder has agreed to release Original Borrower from liability as provided
in Section 16 of this Agreement

 

NOW, THEREFORE, in consideration of these premises, the mutual
covenants contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties agree as follows:

 

1.                          Assumption
of Obligations.     New Borrower
covenants, promises and agrees that New Borrower, jointly and severally if more
than one, will unconditionally assume and be bound by all terms, provisions,
and covenants of the Loan Documents set forth in Exhibit B to this
Agreement, as if New Borrower had been the original maker of the Loan
Documents. New Borrower will pay all sums to be paid and perform each and every
obligation to be performed by Original Borrower under and in accordance with
the terms and conditions of the Loan Documents.

 

2.                          Affirmation
by New Borrower.     New Borrower agrees that the Loan Documents
set forth in Exhibit B to this Agreement are and will be and remain
in full force and effect, enforceable against New Borrower in accordance with
their terms, except as modified by Exhibit C to this Agreement. The
Property will remain subject to the lien, charge and encumbrance of the
Security Instrument. Nothing contained in this Agreement or done pursuant to
this Agreement will affect or be construed to affect the lien, charge, and
encumbrance of the Security Instrument or the priority of the Security
Instrument over other liens, charges and encumbrances. Nothing contained in
this Agreement or done pursuant to this Agreement will release or be construed
to release or affect the liability of any party or parties who may now or after
the date of this Agreement be liable under or on account of the Note and the
Security Instrument, except as expressly provided in this Agreement. New
Borrower will be liable for the payment of all sums and the performance of
every obligation required under the Loan Documents to the extent set forth in
the Loan Documents as modified by this Agreement.

 

3.                          Subordination
of Rights of Original Borrower and New Borrower.     Any
indebtedness of Original Borrower to New Borrower, or of New Borrower to
Original Borrower, now or existing after the date of this Agreement, together
with any interest on such debt, is hereby subordinated to any indebtedness of
Original Borrower or New Borrower to the Noteholder under the Loan Documents.
Any collection or receipts with respect to any such indebtedness of Original
Borrower to New Borrower, or of New Borrower to Original Borrower, will be
collected, enforced and received by New Borrower or Original Borrower (as
applicable) in

 

2

 

trust
for the benefit of the Noteholder, and will be paid over to the Noteholder on
account of the indebtedness of Original Borrower and New Borrower to the
Noteholder, but without impairing or affecting in any manner the liability of
Original Borrower or New Borrower under the other provisions of the Loan
Documents and this Agreement. However, until the occurrence of an Event of
Default under the Security Instrument, Original Borrower or New Borrower (as
applicable) will be entitled to retain for its own account all payments made on
account of the principal of and interest on any such indebtedness; provided no
such payment is made more than ten (10) days in advance of the due date.

 

4.                          Modification
of Note and Security Instrument.     New Borrower and Noteholder agree that the
provisions of the Loan Documents are modified as set forth on Exhibit C
to this Agreement.

 

5.                          Replacement
Reserve.     New Borrower and Noteholder agree that a
Replacement Reserve Fund will be established with Servicer with payments to be
made by New Borrower to such account in the amount of Six Thousand Five Hundred
and 00/100 Dollars ($6,500.00) per month, in accordance with the terms and
provisions of the Replacement Reserve Agreement to be executed by New Borrower
and Noteholder on the same date as this Agreement.

 

6.                          Repairs.
    No Repairs are required and no Repair Escrow
will be established as of the date of this Agreement. Original Borrower
acknowledges and agrees that Noteholder is not holding any funds pursuant to
the Repair Escrow, if any, executed by Original Borrower.

 

7.                          Escrows
for Taxes, Insurance and Other Charges.     On or
prior to the execution of this Agreement, to ensure that sufficient funds are
available for the payment of real estate taxes, an escrow account will be established
with Servicer, with payments to be made by New Borrower to such account in the
amount required by Noteholder and/or Servicer. New Borrower will not be
required to establish and pay escrows for (i) fire, hazard or other
insurance premiums, (ii) water and sewer charges and (iii) assessments
or other charges (the “Impositions”); however, New Borrower and New Guarantor,
if any, will be personally liable for any loss or damage as the result of New
Borrower’s failure to pay any Imposition. The Note is hereby amended as set
forth in Exhibit C to evidence the personal liability of New
Borrower and New Guarantor (as defined below) for any taxes, hazard insurance,
flood insurance, ground rent or such other charges or assessments for which no
escrow is being collected, but which are not timely paid. By execution of this
Agreement, Original Borrower acknowledges and agrees that it relinquishes any
right, title or interest it has or may have in any escrow account held by
Servicer in connection with the Property.

 

8.                          Guaranty
Requirements.     On the date of execution of this Agreement,
Behringer Harvard Multifamily REIT I, Inc., a Maryland corporation
(jointly and severally if more than one, “New
Guarantor”) will execute and deliver to Noteholder the appropriate
version of the Guaranty (the “Guaranty”)
under which the New Guarantor guarantees the full and punctual payment when due
of the “Guaranteed Obligations” (as such term is defined in the Guaranty). The
Guaranty will provide that New Guarantor is personally liable for zero percent
(0%) of the outstanding principal balance of the Loan. New Guarantor
automatically will become liable for one hundred percent (100%) of all amounts
payable under the Loan Documents upon the occurrence of certain events more
specifically set forth in the Guaranty.

 

9.                          Original
Guaranty Released.     The original guaranty under which the
Original Guarantor guaranteed payments of certain amounts under the Loan
Documents (“Original Guaranty”) is
released and will not have any force or effect, all as more fully provided in Section 16
below.

 

3

 

10.                   Representations
and Acknowledgements.     Original Borrower, New Borrower and
Noteholder acknowledge that:

 

a)                        As of the
date of this Agreement, the amount of the unpaid indebtedness under the Note is
Thirteen Million Seventeen Thousand One Hundred Forty-Two and 48/100 Dollars
($13,017,142.48).

 

b)                       Interest at
the rate set forth in the Note has been paid to Noteholder in full through and
including July 31, 2009.

 

Original
Borrower represents and warrants to Noteholder that:

 

a)                        All of the
representations and warranties in the Loan Documents are true as of the date on
which Original Borrower executes this Agreement.

 

b)                       No Event of
Default (or event which, with the giving of notice or the passage of time or
both, would be an Event of Default) has occurred or is continuing under the
Security Instrument.

 

c)                        Original
Borrower has no claims, offsets, defenses, or counterclaims of any kind to its
performance under, or Noteholder’s enforcement of, the Note and the other Loan
Documents; and to the extent any such counterclaims, setoffs, defenses or other
causes of action may exist, whether known or unknown, Original Borrower waives
all such items. Original Borrower acknowledges that all of Noteholder’s actions
in connection with the Loan have been in compliance with the terms of the
applicable Loan Documents, and Original Borrower acknowledges and agrees that
Noteholder has not breached or failed to perform any duty or obligation that
Noteholder may owe Original
Borrower.

 

d)                       There are
no suits or actions pending or, to the knowledge of Original Borrower after
diligent inquiry threatened against Original Borrower which affect the
enforcement or validity of the Note, the Security Instrument and/or the Loan
Documents.

 

11.                    Additional
Transfers.     Notwithstanding the Noteholder’s consent to
the Transfer of the Property to New Borrower, New Borrower understands and
agrees that such consent will in no way limit or operate as a waiver of the
Noteholder’s continuing rights under Section 21 of the Security
Instrument.

 

12.                    Continuing
Obligations.     New Borrower will execute, acknowledge and
deliver an Operations and Maintenance Plan for mold and such other documents as
Noteholder, or Servicer may require to document the Assumption described in
this Agreement and to more fully effectuate the provisions of this Agreement.
The failure of New Borrower to comply with the additional obligations contained
in this Section will constitute an Event of Default under the Security
Instrument, and the Noteholder will be entitled to exercise all remedies
available to it under the terms of the Loan Documents.

 

13.                    Additional
Obligations.

 

a)                        To induce
the Noteholder to consent to New Borrower’s Assumption, in addition to the
covenants and agreements set forth in the Loan Documents, New Borrower

 

4

 

agrees
that it will comply with the Additional Obligations set forth on Exhibit D
to this Agreement, if applicable.

 

b)                       The failure
of New Borrower to comply with the Additional Obligations, if applicable, will
constitute an Event of Default under the Security Instrument, and the
Noteholder will be entitled to exercise all remedies available to it under the
terms of the Loan Documents.

 

14.                   Release
of Original Borrower; Rights of Noteholder.

 

a)                        Original
Borrower is released from liability under the terms and provisions of the Loan
Documents, all as more fully provided in Section 16 below. If any material
element of Original Borrower’s representations and warranties are materially
false or misleading, this release will be canceled and Original Borrower will
remain obligated under the Loan Documents as though there had been no release.

 

b)                       If at any
time all or any part of any payment by Original Borrower which has been applied
by the Noteholder to payment of the Loan is or must be rescinded, repaid or
returned by the Noteholder for any reason whatsoever (including, without
limitation, the application of any bankruptcy, insolvency or other law), for
purposes of this Agreement, to the extent that such payment is or must be
rescinded, repaid or returned, such payment will be deemed to have continued to
be due and payable, notwithstanding such application by the Noteholder and this
Agreement will continue to be effective as to such payment as though such
application by the Noteholder had not been made. Original Borrower and New
Borrower will each remain liable to the Noteholder for the amount so rescinded,
repaid, or returned to the same extent as if such amount had never originally
been received by the Noteholder, notwithstanding any cancellation of the Note,
release or satisfaction of the Security Instrument, or the cancellation of any
other Loan Document.

 

15.                   Expenses.     New Borrower’s execution of this
Agreement will constitute New Borrower’s agreement to pay all expenses incurred
by the Noteholder in connection with this Assumption, including without
limitation the payment of any title endorsement costs, legal costs (including
in-house legal costs) attorney’s fees, and assumption fees required by the
Noteholder.

 

16.                    Release.

 

a)                        Release
of Original Borrower and Original Guarantor.     Noteholder and Servicer each fully,
finally, and forever releases and discharges Original Borrower and Original
Guarantor (collectively, the “Original Loan
Parties”), and their successors, assigns, members, managers,
directors, officers, employees, agents and representatives from any and all
actions, causes of action, claims, debts, demands, liabilities, obligations,
and suits, of whatever kind or nature, in law or equity, that Noteholder and
Servicer have or in the future may have, whether known or unknown in respect of
the Loan, the Loan Documents, or the acts or omissions of the Original Loan
Parties in respect of the Loan or the Loan Documents (the “Released Claims”). Noteholder and Servicer
agree that the above release shall be effective as a full and final release of
each and every matter specifically and generally referred to above.
Notwithstanding the foregoing, (i) the Released Claims shall not include,
and nothing contained in this Section

 

5

 

16(a) shall
be deemed to be a release of the Original Loan Parties and their successors and
assigns from, any liability and obligations of any Original Loan Party (i) arising
pursuant to this Agreement, (ii) resulting from the fraud or any material
misrepresentation of any Original Loan Party, or (iii) arising from any
and all actions, causes of action, claims, debts, demands, liabilities,
obligations, and suits, of whatever kind or nature, in law or equity, that
Noteholder or Servicer have or in the future may have, whether known or unknown
in connection with the ownership or operation of Units 2, 3 and 4 as shown on
the Condominium Instruments.

 

b)                       Release
of Lenders.     The Original Loan
Parties each fully, finally, and forever releases and discharges Noteholder and
Servicer, and their successors, assigns, members, managers, directors,
officers, employees, agents and representatives from any and all actions,
causes of action, claims, debts, demands, liabilities, obligations, and suits,
of whatever kind or nature, in law or equity, that the Original Loan Parties
have or in the future may have, whether known or unknown in respect of the
Loan, the Loan Documents, or the acts or omissions of the Noteholder or
Servicer in respect of the Loan or the Loan Documents (the “Lenders’ Released Claims”). The Original
Loan Parties each agree that the above release shall be effective as a full and
final release of each and every matter specifically and generally referred to
above. Notwithstanding the foregoing, (i) the Lenders’ Released Claims
shall not include, and nothing contained in this Section 16(b) shall
be deemed to be a release of the Noteholder or Servicer and their successors
and assigns from, any liability and obligations of Noteholder or Service (i) arising
pursuant to this Agreement, or (ii) resulting from the fraud or any
material misrepresentation of Noteholder or Servicer.

 

c)                        General
Release.    Each of the Original Loan
Parties, Noteholder and Servicer, having consulted with their respective
counsel, is aware of the contents of Section 1542 of the Civil Code of the
State of California. Section 1542 reads as follows:

 

Section 1542.
(General Release - Claims Extinguished.) A general release does not extend to
claims which the creditor does not know or suspect to exist in his or her favor
at the time of executing the release, which if known by him or her must have
materially affected his or her settlement with the debtor.

 

Noteholder
and Servicer each expressly waives and relinquishes all rights and benefits
under that section and any law or legal principle of similar effect in any jurisdiction,
with respect to the Released Claims. Noteholder has executed this Agreement
voluntarily, with full knowledge of its significance, and with the express
intention of effecting the legal consequences provided by a waiver of
California Civil Code Section 1542.

 

Each
of the Original Loan Parties expressly waives and relinquishes all rights and
benefits under that section and any law or legal principle of similar effect in
any jurisdiction, with respect to the Lenders’ Released Claims. Each of the Original
Loan Parties has executed this Agreement voluntarily, with full knowledge of
its significance, and with the express intention of effecting the legal
consequences provided by a waiver of California Civil Code Section 1542.

 

6

 

17.                   Miscellaneous.

 

a)                        This
Agreement will be binding upon and  will
inure to the benefit of the parties to the Agreement and their respective
heirs, successors and permitted assigns.

 

b)                       Except as
expressly modified by this Agreement, the Note, the Security Instrument and all
other Loan Documents will be unchanged and remain in full force and effect, and
are hereby expressly approved, ratified and confirmed. No provision of this
Agreement that is held to be inoperative, unenforceable or invalid will affect
the remaining provisions, and to this end all provisions of this Agreement are
declared to be severable.

 

c)                        Time is of
the essence of this Agreement.

 

d)                       This
Agreement may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.

 

e)                        This
Agreement will be construed in accordance with the laws of the jurisdiction in
which the Property is located.

 

f)                          This
Agreement may be executed in counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same document.

 

g)                       All notices
given pursuant to the Agreement must be in writing and will be effectively
given if personally delivered or, if mailed, postage prepaid, certified or
registered mail, return receipt requested, to the addresses of the parties set
forth below or to such other address as any party subsequently may designate in
writing.

 

h)                       The failure
of New Borrower to comply with the additional obligations contained in this
Agreement will constitute an Event of Default under the Security Instrument,
and the Noteholder will be entitled to exercise all remedies available to it
under the terms of the Loan Documents.

 

18.                   Executed
Originals.     An executed original
of this Agreement will be (i) attached permanently to the Note as an
amendment to the Note, and (ii) recorded in the Land Records as a
modification to the Security Instrument.

 

19.                   State
Specific Requirements.     N/A.

 

ATTACHED EXHIBITS. The following Exhibits
are attached to this Instrument:

 

	
  x Exhibit A

  	
   

  	
  Legal Description of
  the Land (required).

  
	
   

  	
   

  	
   

  
	
  x Exhibit B

  	
   

  	
  List of Loan Documents
  (required).

  
	
   

  	
   

  	
   

  
	
  x Exhibit C

  	
   

  	
  Modifications to Note
  and Security Instrument, (required).

  
	
   

  	
   

  	
   

  
	
  o Exhibit D

  	
   

  	
  Additional Obligations
  of New Borrower – [check box if applicable]

  

 

7

 

	
  x Exhibit E

  	
   

  	
  Modification to
  Assumption Agreement Borrower – [check box
  if applicable]

  

 

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

 

8

 

	
   

  	
  ORIGINAL
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice to Original Borrower:

  
	
   

  	
   

  
	
   

  	
  c/o J. F. Shea Co., Inc. 

  
	
   

  	
  655 Brea Canyon Road 

  
	
   

  	
  Walnut, California 91789

  

 

9

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of California

  
	
   

  
	
  County of Los Angeles

  
	
   

  
	
  On August 14, 2009
  before me, Christine Rodriguez, Notary Public,

  
	
            DATE                              NAME,
  TITLE OF OFFICER- E.G. JANE DOE, NOTARY PUBLIC personally appeared

  
	
  James G. Shontere,

  
	
  NAME(S) OF
  SIGNER(S)

  

who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

 

I certify under PENALTY
OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and
official seal.

 

	
  [SEAL]

  	
  /s/ Christine Rodriguez

  
	
   

  	
  Signature of Notary

  

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of California

  
	
   

  
	
  County of Los Angeles

  
	
   

  
	
  On August 14, 2009
  before me, Christine Rodriguez, Notary Public,

  
	
            DATE                              NAME,
  TITLE OF OFFICER- E.G. JANE DOE, NOTARY PUBLIC personally appeared

  
	
  Robert R. O’Dell,

  
	
  NAME(S) OF
  SIGNER(S)

  

who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

 

I certify under PENALTY
OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and
official seal.

 

	
  [SEAL]

  	
  /s/ Christine Rodriguez

  
	
   

  	
  Signature of Notary

  

 

10

 

	
   

  	
  NEW BORROWER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD WATERFORD

  PLACE REIT, LLC, a Delaware limited liability

  company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Behringer
  Harvard Waterford Place Venture,

  LLC, a Delaware limited liability company, its

  manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Behringer
  Harvard Waterford Place,

  LLC, a Delaware limited liability

  company, its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Mark T. Alfieri

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Mark T. Alfieri

  
	
   

  	
   

  	
   

  	
   

  	
  Title: Chief Operating
  Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tax identification number for New Borrower:

  
	
   

  	
  27-0318723

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice to New Borrower:

  
	
   

  	
   

  
	
   

  	
  15601 Dallas Parkway, Suite 600 

  
	
   

  	
  Addison, Texas 75001

  

 

11

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of Texas

  
	
   

  
	
  County of Dallas

  
	
   

  
	
  On August 19, 2009
  before me, Mary Lee Hackedorn, Notary Public,

  
	
            DATE                              NAME,
  TITLE OF OFFICER- E.G. JANE DOE, NOTARY PUBLIC personally appeared 

  
	
  Mark T. Alfieri,

  
	
  NAME(S) OF
  SIGNER(S)

  

who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.

 

I certify under PENALTY
OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and
official seal.

 

	
  [SEAL]

  	
  /s/ Mary Lee Hackedorn

  
	
   

  	
  Signature of Notary

  

 

12

 

	
   

  	
  CONSENTED
  TO BY NOTEHOLDER:

  
	
   

  	
   

  
	
   

  	
  FEDERAL HOME LOAN MORTGAGE

  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Goozman

  
	
   

  	
   

  	
  Name: David J. Goozman

  
	
   

  	
   

  	
  Title: Manager of
  Multifamily Portfolio Services

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notice to
  Noteholder:

  
	
   

  	
   

  
	
   

  	
  8200 Jones Branch Drive

  
	
   

  	
  McLean, Virginia
  22102-3110

  

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of Virginia

  
	
   

  
	
  County of Fairfax

  
	
   

  
	
  On August 24, 2009
  before me, Jennifer Lam, Notary Public,

  
	
       DATE                                   NAME,
  TITLE OF OFFICER- E.G. JANE DOE, NOTARY PUBLIC personally appeared 

  
	
  David J. Goozman,

  
	
  NAME(S) OF
  SIGNER(S)

  

who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.

 

I certify under PENALTY
OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and
official seal.

 

	
   

  	
  /s/ Jennifer Michelle
  Lam

  
	
   

  	
  Signature of Notary

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  

 

13

 

	
   

  	
  ACKNOWLEDGED
  AND CONSENTED TO:

  
	
   

  	
   

  
	
   

  	
  ORIGINAL
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  J. F.
  SHEA CO., INC., a
  Nevada corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James G. Shontere

  
	
   

  	
   

  	
  James G. Shontere

  
	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert R. O’Dell

  
	
   

  	
   

  	
  Robert R. O’Dell

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
  Address for Notice to
  Original Guarantor:

  
	
   

  	
   

  
	
   

  	
  655 Brea Canyon Road

  Walnut, California 91789

  

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of
                                      

  
	
   

  
	
  County of
                                  

  
	
   

  
	
  On
                                before
  me,                                                                                                                                     ,

  
	
              DATE                              NAME,
  TITLE OF OFFICER- E.G. JANE DOE, NOTARY PUBLIC personally appeared

  
	
                                                                                                                                      
  ,

  
	
  NAME(S) OF
  SIGNER(S)

  

who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity (ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.

 

I certify under PENALTY
OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and
official seal.

 

	
   

  	
   

  
	
   

  	
  Signature of Notary

  

 

14

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of California

  
	
   

  
	
  County of Los Angeles

  
	
   

  
	
  On August 14, 2009
  before me, Christine Rodriguez, Notary Public,

  
	
             DATE                             NAME,
  TITLE OF OFFICER- E.G. JANE DOE, NOTARY PUBLIC personally appeared 

  
	
  James G. Shontere &
  Robert R. O’Dell,

  
	
  NAME(S) OF
  SIGNER(S)

  

who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) are
subscribed to the within instrument and acknowledged to me that they executed
the same in their authorized capacity (ies), and that by their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.

 

I certify under PENALTY
OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and
official seal.

 

	
  [SEAL]

  	
  /s/ Christine Rodriguez

  
	
   

  	
  Signature of Notary

  

 

15

 

	
   

  	
  NEW
  GUARANTOR:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  REIT I, INC., a
  Maryland corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark T. Alfieri

  
	
   

  	
   

  	
  Name: Mark T. Alfieri

  
	
   

  	
   

  	
  Title: Chief Operating
  Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice to
  New Guarantor:

  
	
   

  	
   

  
	
   

  	
  15601 Dallas Parkway,
  Suite 600

  Addison, Texas 75001

  

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of Texas

  
	
   

  
	
  County of Dallas

  
	
   

  
	
  On August 19, 2009
  before me, Mary Lee Hackedorn, Notary Public,

  
	
            DATE                              NAME,
  TITLE OF OFFICER- E.G. JANE DOE, NOTARY PUBLIC personally appeared 

  
	
  Mark T. Alfieri,

  
	
  NAME(S) OF
  SIGNER(S)

  

who proved to me on the
basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity (ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.

 

I certify under PENALTY
OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and
official seal.

 

	
  [SEAL]

  	
  /s/ Mary Lee Hackedorn

  
	
   

  	
  Signature of Notary

  

 

16

 

EXHIBIT B

 

REQUIRED

 

(List of Loan Documents that will be Assumed)

 

1.         Multifamily Note dated as
of March 31, 2008 in the original principal amount of $13,245,000.00 by
Original Borrower to Original Lender.

 

2.         Multifamily Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of March 31,
2008, by Original Borrower for the benefit of Original Lender.

 

B-1

 

EXHIBIT C

 

REQUIRED

 

(Changes to Loan Documents)

 

Modifications to all Loan
Documents

 

As used in the Loan
Documents, all references to Borrower will be deemed to refer to New Borrower.

 

All modifications
currently set forth in Exhibit A to the Note and Exhibit B to the
Security Instrument are hereby deleted.

 

Modification to Note:

 

1.         Section 9(c)(iv) is
deleted in its entirety and restated as follows:

 

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

 

	
  [Deferred]

  	
   

  	
  Hazard Insurance premiums or other insurance
  premiums,

  
	
  [Collect]

  	
   

  	
  Taxes,

  
	
  [Deferred]

  	
   

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

  
	
  [N/A]

  	
   

  	
  ground rents,

  
	
  [Deferred]

  	
   

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

  

 

Modifications to Security
Instrument:

 

1.         The second sentence of Section 4(e) is
modified to read as follows:

 

All Leases for
residential dwelling units shall be on forms approved by Lender, shall be for
initial terms of at least three months and not more than two years, and
shall not include
options to purchase; provided,  however, that as many as 2.5
percent of the total units
in the Mortgaged Property may be leased on a month-to-month basis as corporate
units at any one time.

 

2.         Section 14(a) is
modified to read as follows:

 

Borrower shall keep and
maintain at all times at the Mortgaged Property or the management agent’s
office, and upon Lender’s request shall make available at the Mortgaged
Property (or, at Borrower’s option, at the management agent’s office or at the
corporate offices of Behringer Harvard Multifamily Management services, LLC, in

 

C-1

 

Addison, Texas), complete
and accurate books of account and records (including copies of supporting bills
and invoices) adequate to reflect correctly the operation of the Mortgaged
Property, and copies of all written contracts, Leases, and other instruments
which affect the Mortgaged Property; provided, however, that
each of the following must be maintained on and available at the Mortgaged
Property:

 

i.         lease files,

ii.        information regarding the
leasing status of each unit,

iii.       documentation regarding
marketing efforts,

iv.       the Moisture Management
Plan (MMP),

v.        all operations &  maintenance (O&M) plans,

vi.       lead-based paint (LBP)
compliance documentation, and

vii.      income compliance reports
for income-restricted units.

 

The books, records,
contracts, Leases and other instruments shall be subject to examination and
inspection by Lender at any reasonable time.

 

3.         Section 21(c)(vii) is
hereby deleted in its entirety.

 

4.         Section 21(e)(vii) is
modified to read as follows:

 

(vii)    a Transfer of any interest in
a Controlling Entity which, if such Controlling Entity were Borrower, would
result in an Event of Default under any of the Sections 21(e)(i) through
(vi), above; provided, however, that the following will
not constitute an Event of Default:

 

A.       a Transfer under Section 21(e)(v) with
respect to Behringer Harvard Multifamily REIT I, Inc., a Maryland
corporation (“BH REIT I”), or

B.        a Transfer under Section 21(e)(ii)(B) with
respect to Behringer Harvard Multifamily OP I LP, a Delaware limited partnership
(“BHMOP”),

 

but only if in each case (X) Behringer
Harvard Multifamily Advisors I LP, a Texas limited partnership (the “Advisor”)
is managing the day-to-day operations, either internally or externally, of BH
REIT I or BHMOP, as applicable, and (Y) there is not a Transfer of a
Controlling Interest in the Advisor; Provided, however, that
it will not be an Event of Default if a Transfer of the Advisor is made to BH
REIT I or BHMOP.

 

5.         A new Section 53 is
hereby added as follows:

 

“53.   SUPPLEMENTAL LIEN PROVISIONS.

 

(a)        Definitions. For purposes of this Section only, the
following terms have the meanings set forth below:

 

i.         Event of Default means an Event of Default
described in this Instrument and the Senior Instrument and if the Senior
Instrument is documented on the FNMA/FHLMC Uniform Instrument dated 1/77, any
breach by Borrower of any covenant or agreement in the

 

C-2

 

Senior Instrument, Senior
Note or any other Senior Loan Document after the expiration of any applicable
cure period.

 

ii.        Supplemental Instrument means the Instrument to which this Exhibit B
is attached.

 

iii.       Supplemental Loan Documents means all documents relating to
the loan evidenced by the Supplemental Note.

 

iv.       Supplemental Note means the Multifamily Note secured by the
Supplemental Instrument.

 

v.        Supplemental Lender means the Lender named in this
Supplemental Instrument and its successors, assigns and transferees.

 

(b)       Subordination of Lien. Notwithstanding any provisions of this
Supplemental Instrument or the Supplemental Loan Documents to the contrary, it
is understood and agreed that the lien, terms, covenants and conditions of this
Supplemental Instrument are and shall be subordinate in all respects, including
right of payment, to the indebtedness (“Senior
Indebtedness”) evidenced by a Multifamily Note dated April 1,
2004, in the original principal amount of $52,000,000.00 (as modified or
amended the “Senior Note”) made by
or assumed by the Borrower and secured by a Multifamily Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing, dated April 1,
2004 (the “Senior Instrument”) to
or for the benefit of Berkshire Mortgage Finance Limited Partnership, a
Massachusetts limited partnership, which was recorded on April 15, 2004 in
the Office of Alameda County, California as Document No. 2004-159476 and
was assigned to the Federal Home Loan Mortgage Corporation (together with its
successors, assigns and transferees, the “Senior
Lender”) by assignment dated April 1, 2004 and recorded on April 15,
2004 in the Office of Alameda County, California as Document No. 2004-159477.

 

(c)       Default Under Other Liens. If there is an Event of Default,
under (i) the Senior Note, the Senior Instrument or any other loan
document executed in connection with the Senior Indebtedness (the “Senior Loan Documents”); or (ii) any
loan document related to another loan in connection with the Mortgaged Property
(regardless of whether Borrower has obtained Supplemental Lender’s approval of
the placement of such lien on the Mortgaged Property), then such Event of
Default shall be an Event of Default under this Supplemental Instrument and
shall entitle Supplemental Lender to invoke any and all remedies permitted to
Supplemental Lender by applicable law, the Supplemental Note, this Supplemental
Instrument or any other Supplemental Loan Documents.

 

(d)       Cross Default of Senior Instrument with Supplemental Instrument.
As Borrower under both this Supplemental Instrument and the Senior Instrument,
Borrower hereby acknowledges and agrees that if there is an Event of Default
under the Supplemental Note, this Supplemental Instrument or any other
Supplemental Loan Document, such Event of Default shall be an Event of Default
under the terms of the Senior Instrument and shall entitle Senior Lender to
invoke any and all remedies permitted to Senior Lender by applicable law, the
Senior Note, the Senior Instrument or any of the other Senior Loan Documents.

 

C-3

 

(e)       No Merger.

 

(i)        It is the intent of
Borrower and Supplemental Lender that if Supplemental Lender obtains title to
the Mortgaged Property (by virtue of a foreclosure sale, a deed in lieu of
foreclosure or otherwise) and Supplemental Lender is also or subsequently becomes
the holder of the Senior Note and Senior Instrument, Supplemental Lender’s
title interest and lien interest shall not automatically merge so as to effect
an extinguishment of the Senior Instrument by operation of the doctrine of
merger.

 

(ii)       It is the intent of
Borrower and Supplemental Lender that if Senior Lender obtains title to the
Mortgaged Property (by virtue of a foreclosure sale, a deed in lieu of
foreclosure or otherwise) and Senior Lender is also or subsequently becomes the
holder of the Supplemental Note and Supplemental Instrument, Senior Lender’s
title interest and lien interest shall not automatically merge so as to effect
an extinguishment of this Supplemental Instrument by operation of the doctrine
of merger.

 

(iii)      Borrower acknowledges and
agrees that no course of conduct by Borrower, Supplemental Lender or Senior
Lender subsequent to the date of this Supplemental Instrument shall be used to
demonstrate any intent contrary to the express intent stated in this Section.
Borrower further agrees that the holder of the Senior Note is a third party
beneficiary of the provisions of this Section and that no amendments,
modifications, waivers or other limitations of this Section shall be
effective without the prior written agreement of the holder of the Senior Note.

 

(f)        Collection of Escrows for Impositions and Replacement Reserves.

 

(i)        For so long as the same
person or entity is both Senior Lender and Supplemental Lender, monthly
payments made by Borrower under the Senior Instrument from and after the
effective date of this Supplemental Instrument as deposits for the payment of
any Impositions shall be credited to the monthly deposits for the payment of
such Impositions under this Supplemental Instrument.

 

(ii)       For so long as the same
person or entity is both Senior Lender and Supplemental Lender, monthly
payments made by Borrower from and after the effective date of this
Supplemental Instrument pursuant to the Replacement Reserve Agreement executed
in connection with the Senior Note (“Senior
Replacement Reserve Agreement”) shall be credited to the monthly
amounts due by Borrower in connection with the Replacement Reserve Agreement
executed in connection with the Supplemental Indebtedness (“Supplemental Replacement Reserve Agreement”).

 

C-4

 

(g)       Additional Collateral.

 

(i)       Subject to Senior Lender’s
interest, Borrower hereby assigns and grants to Supplemental Lender a security
interest in all Imposition Deposits, all amounts in the Replacement Reserve
Fund (as such term is defined in the Senior Replacement Reserve Agreement) and
any amount in any repair escrow in connection with the Senior Indebtedness as
additional security for all of the Borrower’s obligations under the
Supplemental Note.

 

(ii)       In addition, Borrower
hereby assigns and grants to Senior Lender a security interest in all
Imposition Deposits, all amounts in the Replacement Reserve Fund (as such term
is defined in the Supplemental Replacement Reserve Agreement) and any amount in
any repair escrow in connection with the Supplemental Indebtedness as
additional security for all of the Borrower’s obligations under the Senior
Note.

 

(iii)      It is the intention of
Borrower that so long as the same person or entity is both Senior Lender and
Supplemental Lender, that all amounts deposited by Borrower in connection with
either the Senior Loan Documents, the Supplemental Loan Documents or both,
constitute collateral for the Indebtedness secured by the Supplemental
Instrument and the Senior Indebtedness secured by the Senior Instrument, with
the application of such amounts to such Senior Indebtedness or Indebtedness to
be at the discretion of Senior Lender and Supplemental Lender.”

 

6.         A new Section 54 is
hereby added as follows:

 

“54. CONDOMINIUM PROVISIONS.

 

(a)       Borrower represents and
warrants that, to the best of its knowledge, the Mortgaged Property is a
condominium (the “Condominium”) and constitutes all of Unit 1 (as defined in
the Condominium Instruments) and a 97% tenancy-in-common interest in the common
elements comprising the Waterford Place Condominiums, a Condominium, as
established under the applicable Condominium Act codified in California Civil
Code Sections 1350 et seq., as from time to time amended (the “Condominium Act”).
The Declaration, as recorded in the official records of Alameda County, State
of California as Document No. 2003653881, Bylaws and Plats establishing
and describing the Condominium, are collectively referred to below as the “Condominium
Instruments.”

 

(b)       Borrower hereby agrees that
the Condominium Instruments will not be modified or amended without the prior
written consent of Lender until the Indebtedness has been paid in full.

 

(c)       Borrower represents and
warrants that none of the units in Unit 1 and its 97% tenancy-in-common
interest in the common elements comprising the Condominium have been sold,
conveyed or encumbered or are subject to any agreement to convey or encumber.
Borrower agrees that it will not in any way

 

C-5

 

pledge, sell, convey or
encumber or enter into a contract or agreement to pledge, sell, convey or
encumber any unit in Unit 1 or any of its 97% tenancy-in-common interest in the
common elements of the Condominium unless expressly agreed to in writing by Lender.

 

(d)       Borrower agrees that it
shall own, operate and maintain the Mortgaged Property in accordance with the
terms of this Instrument and operate the Mortgaged Property solely as a rental
apartment project.

 

(e)       The Mortgaged Property
granted, conveyed and assigned to Lender hereunder shall include all rights,
easements, rights of way, reservations and powers of the Borrower under the
Condominium Act and the Condominium Instruments in Borrower’s capacity as owner
of the Mortgaged Property and as Declarant as well as any rights that Borrower
may have, in any capacity, under the Condominium Act and the Condominium
Instruments in addition to Borrower’s rights as owner of any of the units or
the Condominium, specifically including but not limited to all rights to
approve any amendments to the Condominium Instruments and all rights to expand
the Condominium.

 

(f)        Borrower hereby
irrevocably constitutes and appoints Lender as Borrower’s proxy and
attorney-in-fact (which appointment shall be deemed coupled with an interest)
for and in its behalf to perform all of the obligations of Borrower and to
exercise all of the rights and powers of Borrower under the Condominium
Instruments without any liability therefor or thereunder (except for gross
negligence or willful misconduct). Borrower hereby instructs and grants and
gives to Lender full power and authority to do and perform all and every act
and thing whatsoever authorized, permitted, requisite or necessary to be done
by Borrower under the provisions of the Condominium Instruments to all intents
and purposes the same as Borrower might do, hereby ratifying and confirming all
such attorney shall lawfully do or choose to do or be done by virtue hereof, it
being understood and agreed that the aforesaid provisions impose no burden or
obligation on the Lender to do or perform any act whatsoever. It shall be a
default under this Instrument if (i) Borrower terminates or revokes or
attempts to terminate or revoke the aforesaid appointment of Lender as Borrower’s
proxy or attorney-in-fact either permanently or as to any election in the
Condominium Act or Condominium Instruments or (ii) Borrower attempts to
modify the terms of the Condominium Instruments without the prior written
consent of Lender. Notwithstanding anything in this paragraph to the contrary,
the rights and powers of Borrower granted in this paragraph may not be
exercised by Lender prior to the occurrence of an Event of Default.

 

(g)       Borrower hereby agrees that
it shall maintain insurance in accordance with Lender’s requirements on all of
the Mortgaged Property, including any common areas.

 

(h)       Nothing contained herein is
intended to or shall be construed to constitute Lender as the “Declarant” under
the Condominium Act and/or the Condominium Instruments or as owner of the
Condominium, a partner or joint venturer of Borrower.

 

C-6

 

(i)       Borrower hereby agrees to
indemnify and hold Lender harmless from and against any and all losses, cost,
liabilities, or damages (including attorney’s fees and disbursements) arising
out of (i) the failure of the Borrower to comply with any state or local
law, ordinance, statute, or regulation by any governmental authority covering
the condominium at the Mortgaged Property; or (ii) any claim of any unit
owner or tenant of any unit owner as a result of any violation, breach,
misrepresentation, fraud, act, or omission of any obligation of Borrower, as
set forth in the Condominium Instruments.

 

C-7Exhibit 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.

 

1

 

“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

 

2

 

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.

 

7

 

(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.

 

8

 

(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

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