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APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Mark L. Wolf, U.S. District Judge]

This case was brought in the district court to interpret a note whose prepayment terms were poorly drafted. The note, in the amount of $5.4 million for a period of years, was issued in 1991 by One Needham Place Realty Trust (the “borrower”) to Confederation Life Insurance Company. It is now owned by LaSalle National Bank (the “holder”). A loan agreement reflected in a loan commitment letter preceded the note. The note was later modified but only to extend the term of the loan.

The note permitted prepayment but required the borrower to pay a “prepayment premium” for the privilege of early payment. In 1998, the borrower sought to refinance the note to take advantage of lower prevailing interest rates, but the parties disagreed as to how to calculate the prepayment premium. The note set the premium as the greater of one percent of the outstanding principal balance or a “yield maintenance prepayment premium” computed in accordance with a formula. The pertinent language follows:

 
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