Document:

EX-10.6

EL DORADO APARTMENTS, LLC

(Borrower)

To

JONG S. KIM, ESQ.

(Trustee)

for the benefit of

ROYAL BANK OF CANADA

(Lender)

DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FINANCING STATEMENT

AND ASSIGNMENT OF LEASES AND RENTS

Dated as of November 29, 2006

Property Location: 3250 Hudson Crossing, McKinney, Texas 75070

DOCUMENT PREPARED BY

Andrews Kurth LLP

1717 Main Street, Suite 3700

Dallas, Texas 75201

Attention: Jong S. Kim, Esc

THIS INSTRUMENT CONTAINS INDEMNIFICATION PROVISIONS AND

PROVISIONS LIMITING LENDER’S LIABILITY FOR NEGLIGENCE

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL

PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING

INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR

RECORD IN THE PUBLIC RECORDS:

YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER

	 	 	 	 	 
	
 
	 	 	 	TABLE OF CONTENTS
	1 - DEFINITIONS:
	 	 
	2 - GRANTS OF SECURITY:
	 	 
	2.1

2.2

2.3

	 	Property Mortgaged

Leases and Rents

Security Agreement
	 	

2.4 Pledge of Monies Held

	 	 	 
	3 - BORROWER. COVENANTS, REPRESENTATIONS AND WARRANTIES:

	3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

	 	Payment of Debt

Warranty of Title

Insurance

Payment of Taxes, etc

Tax and Insurance Escrow Fund

Funds for Replacements, Tenant Improvements and Other Obligations

Condemnation

Leases and Rents

Maintenance of Property

	 	 	 
	3.10 Books, Records and Financial Reporting

	3.11 Change of Name, Identity or Structure

	3.12 Existence

3.13 OFAC

3.14 USA Patriot Act

3.15 ERISA Compliance

3.16 Business Purpose

3.17 Separate Tax Lot

4 OTHER. COVENANTS:

	 	

	4.1

4.2

4.3

4.4

	 	Compliance with Law

Single Purpose Entity Requirements

Restoration

Control and Management
	5 TRANSFER OR ENCUMBRANCE OF PROPERTY:

	5.1

5.2

5.3

5.4

5.5

6 — FURTHER ASSURANCES:

	 	Lender Reliance

No Sale/Encumbrance

Sale/Encumbrance Defined

Lender’s Rights

Assumption

	6.1

6.2

6.3

6.4

6.5

7 — DEFAULT:

	 	Estoppel Certificates

Changes in the Laws Regarding Taxation

Recording of Security Instrument, etc.

Third Party Reports

Performance of Other Agreements; Further Acts

	7.1

8 — RIGHTS AND REMEDIES:

	 	Events of Default

	8.1

8.2

8.3

8.4

8.5

8.6

9 — INDEMNIFICATION:

	 	Right to Cure Defaults

Remedies

Right of Entry

Actions and Proceedings

Additional Rights of Lender

Attorneys’ Fees for Enforcement

	9.1

9.2

9.3

	 	Indemnification

Mortgage and Intangible Tax

ERISA Indemnification

10 — WAIVERS:

10.1 Waiver of Counterclaim: Waiver of Trial by Jury

10.2 Marshalling and Other Matters

10.3 Sole Discretion of Lender

11 — MISCELLANEOUS PROVISIONS:

11.1 Notices

11.2 Authority; Legal Status; Not a Foreign Person

11.3 No Oral Change

11.4 Liability

11.5 Severability

11.6 Headings, etc.

11.7 Duplicate Originals; Counterparts

11.8 Number and Gender

11.9 Subrogation

11.10 Definitions

11.11 Transfer of Loan

11.12 Promotional Materials

11.13 Replacement Documents

11.14 Governing Law

11.15 Entire Agreement

11.16 The Trustee’s Fees

11.17 Certain Rights

11.18 Retention of Money

11.19 Perfection of Appointment

11.20 Succession Instruments

11.21 Reliance of Trustee

Exhibit A — Legal Description

1

DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FINANCING STATEMENT

AND ASSIGNMENT OF LEASES AND RENTS

DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FINANCING STATEMENT AND ASSIGNMENT OF LEASES AND
RENTS (this “Security Instrument”) is made as of the 29th day of November, 2006, by EL DORADO
APARTMENTS, LLC, a Texas limited liability company, as trustor (“Borrower”) to JONG S. KIM, ESQ.,
as trustee (“Trustee”), for the benefit of ROYAL BANK OF CANADA, a Canadian chartered bank, as
beneficiary (“Lender”).

WITNESSETH:

A. Borrower by its promissory note of even date herewith payable to the order of Lender is
indebted to Lender in the principal sum of THIRTEEN MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS
($13,600,000,00) in lawful money of the United States of America (the note and all extensions,
renewals, modifications, substitutions and amendments thereof shall collectively be referred to as
the “Note”), with interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in the Note.

B. This Security Instrument and the grants, assignments and transfers made hereinbelow are
given for the purpose of securing the payment of the Debt (as defined below) and the performance of
the Other Obligations (as defined below), in such order of priority as Lender may determine in its
sole discretion. All the covenants, conditions and agreements contained in the Note and the other
Loan Documents are hereby made a part of this Security Instrument to the same extent and with the
same force as if fully set forth herein.

1 — DEFINITIONS:

1.1 “Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly,
is in control of, is controlled by or is under common control with such Person or is a director or
officer of such Person or of an Affiliate of such Person.

1.2 “Bankruptcy Code” shall mean 11 U.S C § 101 et seq., as the same may be amended from time
to time

1.3 “Business Day” shall mean a day on which commercial banks are not authorized or required
by law to close in New York, New York.

1.4 “Casualty Consultant” shall mean an independent consulting engineer selected by Lender n
connection with a Restoration at the Property.

1.5 “Condemnation Proceeds” shall mean the net amount of all awards and payments received by
Lender with respect to a taking referenced in Section 3.7 of this Security Instrument, after
deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel
fees), if any, in collecting same.

1.6 “Debt” shall mean the aggregate of the indebtedness evidenced by the Note in lawful money
of the United States of America, interest, late charges, prepayment premiums and other sums, as
provided in the Note, this Security Instrument or the other Loan Documents, all other moneys agreed
or provided to be paid by Borrower in the Note, this Security Instrument or the other Loan
Documents and all sums advanced pursuant to this Security Instrument to protect and preserve the
Property and the lien and the security interest created hereby.

	 	 	 
	1.7

	 	“Deposits” shall have the meaning specified in Section 2 4 hereof.
	1.8

	 	“Event of Default” shall have the meaning specified in Section 7.1 hereof.
	1.9

	 	“Executive Order” shall have the meaning specified in Section 3 13(a) hereof

1.10 “Full Replacement Cost” shall have the meaning specified in Section 3 3(a) hereof

1.11 “Guarantor” shall mean Wendell A. Jacobson,

1.12 “Improvements” shall have the meaning specified in Section 2.1 hereof.

1.13 “Insurance Premiums” shall have the meaning specified in Section 3.3(d) hereof.

1.14 “Insurance Proceeds” shall mean the net amount of all insurance proceeds received by
Lender pursuant to Subsections 3,3(a)(i), (iii), (iv) and (vi) of this Security Instrument as a
result of damage or destruction to the Property (or any proceeds of self- insurance maintained in
lieu of such insurance policies), after deduction of its reasonable costs and expenses (including,
but not limited to, reasonable counsel fees), if any, in collecting same.

1.15 “Investor” shall have the meaning specified in Section 11.11 hereof.

1.16 “Land” shall mean the real property described in Exhibit A attached hereto and made a
part hereof;

1.17 “Lease Guaranty” or “Lease Guaranties” shall have the meaning specified in Section 2 1
hereof,

1.18 “Leases” shall mean all leases and other agreements affecting the use, enjoyment or
occupancy of the Land and the Improvements.

1.19 “Loan Documents” shall mean the Note, this Security Instrument and any other documents or
instruments which now or shall hereafter wholly or partially secure or guarantee payment of the
Note or which have otherwise been executed or are hereafter executed by Borrower and/or any other
Person in connection with the loan evidenced by the Note (the “Loan”) and any renewal, extension,
amendment, modification, consolidation, or change of, or substitution or replacement for, all or
any part thereof.

1.20 “Losses” shall mean all liabilities, obligations, claims, demands, damages, penalties,
causes of action, losses, fines, costs and expenses (including without limitation reasonable
attorneys’ fees and expenses), imposed upon or incurred by or asserted against Lender or Trustee,
whether before or after an action in mortgage foreclosure, sale of the Property, satisfaction of
this Security Instrument and/or cancellation of the Note.

1.21 “Material Action” means to file any insolvency, or reorganization case or proceeding, to
institute proceedings to have Borrower be adjudicated bankrupt or insolvent, to institute
proceedings under any applicable insolvency law, to seek any relief under any law relating to
relief from debts or the protection of debtors, to consent to the filing or institution of
bankruptcy or insolvency proceedings against Borrower, to file a petition seeking, or consent to,
reorganization or relief with respect to Borrower under any applicable federal or state law
relating to bankruptcy or insolvency, to seek or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or for Borrower
or a substantial part of its property, to make any assignment for the benefit of creditors of
Borrower, to admit in writing Borrower’s inability to pay its debts generally as they become due,
or to take action in furtherance of any of the foregoing.

1.22 “Minor Leases” shall have the meaning specified in Section 3.8(c) hereof.

1.23 “Net Proceeds” shall mean Insurance Proceeds or Condemnation Proceeds, whichever the case
may be.

1.24 “Note” shall have the meaning set forth in the introductory Section above.

1.25 “Obligations” shall mean Borrower’s obligations for the payment of the Debt and the
performance of the Other Obligations.

1.26 “OFAC” shall mean The Office of Foreign Assets Control of the U.S Department of the
Treasury.

1.27 “Other Charges” shall mean all ground rents, maintenance charges, other governmental
impositions, and other charges, now or hereafter levied or assessed or imposed against the Property
or any part thereof.

1.28 “Other Obligations” shall mean the obligations of Borrower (other than the obligation to
repay the Debt) contained in this Security Instrument, the Note and the other Loan Documents.

1.29 “Permitted Exceptions” shall mean the outstanding liens, easements, restrictions,
security interests and other exceptions to title set forth in the policy of title insurance
insuring the lien of this Security Instrument, together with the liens and security interests in
favor of Lender created by the Loan Documents, none of which, individually or in the aggregate,
materially interfere with the benefits of the security intended to be provided by this Security
Instrument, materially and adversely affect the value of the Property, impair the use or operation
of the Property or impair Borrower’s ability to pay its obligations in a timely manner.

1.30 “Person” shall mean any individual, corporation, partnership, joint venture, association,
joint stock company, trust, trustee, estate, limited liability company, unincorporated
organization, real estate investment trust, government or any agency or political subdivision
thereof, or any other form of entity

1.31 “Personal Property” shall have the meaning specified in Section 2.1 hereof.

1.32 “Principal” shall mean any Person which directly or indirectly controls Borrower by
operation of law or otherwise.

	 	 	 
	1.33

	 	“Prohibited Person” shall have the meaning specified in Section 3 1.3 hereof
	1.34

	 	“Property” shall have the meaning specified in Section 2.1 hereof.
	1.35

	 	“Qualified Insurer” shall have the meaning specified in Section 3.3(d) hereof.

1.36 “Rating Agency” shall mean each of Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc , Moody’s Investors Service, Inc., Fitch, Inc, and Dominion Bond Rating
Service, Inc , or any successor thereto or any other nationally- recognized statistical rating
agency which has been approved by Lender

	 	 	 
	1.37

	 	“Rents” shall have the meaning specified in Section 2,1 hereof.
	1.38

	 	“Residential Leases” shall have the meaning specified in Section 3.8(b) hereof.
	1.39

	 	“Restoration” shall have the meaning specified in Section 4.3(a) hereof.

1.40 “Secondary Market Transaction” shall have the meaning specified in Section 11.11 hereof.

1.41 “Securities” shall have the meaning specified in Section 11.11 hereof

1.42 “Single Purpose Entity Requirements” shall have the meaning specified in Section 4.2
hereof.

1.43 “Tax and Insurance Escrow Fund” shall have the meaning specified in Section 3.5 hereof,

1.44 “Taxes” shall mean all taxes, assessments, water charges, and sewer rents, now or
hereafter levied or assessed or imposed against the Property or any part thereof

1.45 “Transferee” shall have the meaning specified in Section 5 4 hereof

1.46 “Uniform Commercial Code” shall mean the Uniform Commercial Code as adopted and enacted
by the state or states where any of the Property is located.

2 — GRANTS OF SECURITY:

2.1 Property Mortgaged. Borrower, for and in consideration of the sum of Ten Dollars ($10.00)
and other valuable consideration in hand paid, the receipt of which hereby is acknowledged, and the
further consideration, uses, purposes and trusts herein set forth and declared, has granted,
bargained, transferred, assigned, set-over and conveyed and by these presents does grant, bragain,
transfer, assign, set-over and convey unto Trustee and unto its successors in the trust hereby
created and its assigns, forever, all of the Borrower’s right, title and interest in, and to the
following property, rights, interests and estates now owned, or hereafter acquired by Borrower
(collectively, the “Property”):

(a) the Land;

(b) all additional lands, estates and development rights hereafter acquired by Borrower for
use in connection with the Land and the development of the Land and all additional lands and
estates therein which may, from time to time, by supplemental mortgage or otherwise be expressly
made subject to the lien of this Security Instrument;

(c) the buildings, structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and improvements now or hereafter erected or located on the Land (the
“Improvements”);

(d) all easements, rights of way or use, rights, strips and gores of land, streets, ways,
alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and
development rights, and all estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way now or hereafter
belonging, relating or pertaining to the Land and the Improvements and the reversion and
reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue,
opened or proposed, in front of or adjoining the Land, to the center line thereof and all the
estates, rights, titles, interests, property, possession, claim and demand whatsoever, both at law
and in equity, of Borrower of, in and to the Land and the Improvements and every part and parcel
thereof, with the appurtenances thereto;

(e) all furnishings, machinery, equipment, fixtures (including, but not limited to, all
heating, air conditioning, plumbing, lighting, communications and elevator fixtures) and other
property of every kind and nature whatsoever owned by Borrower, or in which Borrower has or shall
have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant
thereto, and usable in connection with the present or future operation and occupancy of the Land
and the Improvements and all building equipment, materials and supplies of any nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located
upon the Land and the Improvements, or appurtenant thereto, or usable in connection with the
present or future operation and occupancy of the Land and the Improvements (collectively, the
“Personal Property”), and the right, title and interest of Borrower in and to any of the Personal
Property which may be subject to any security interests, as defined in the Uniform Commercial Code,
superior in lien to the lien of this Security Instrument and all proceeds and products of the
above;

(f) all Leases heretofore or hereafter entered into, whether before or after the filing by or
against Borrower of any petition for relief under the Bankruptcy Code and all right, title and
interest of Borrower, its successors and assigns therein and thereunder, including, without
limitation, cash or securities deposited thereunder to secure the performance by the lessees of
their obligations thereunder and all rents, additional rents, revenues (including, but not limited
to, any payments made by tenants under the Leases in connection with the termination of any Lease),
issues and profits (including all oil and gas or other mineral royalties and bonuses) from the Land
and the Improvements (the “Rents”) whether paid or accruing before or after the filing by or
against Borrower of any petition for relief under the Bankruptcy Code and all proceeds from the
sale or other disposition of the Leases and the right to receive and apply the Rents to the payment
of the Debt; any and all lease guaranties, letters of credit and any other credit support
(individually, a “Lease Guaranty” and, collectively, the “Lease Guaranties”) given by any guarantor
in connection with any of the Leases; and all rights, powers, privileges, options and other
benefits of Borrower as lessor under the Leases and beneficiary under all Lease Guaranties;

(g) all awards or payments, including interest thereon, which may heretofore and hereafter be
made with respect to the Property, whether from the exercise of the right of eminent domain
(including but not limited to any transfer made in lieu of or in anticipation of the exercise of
the right), for a change of grade, or for any other injury to or decrease in the value of the
Property;

(h) all proceeds of and any unearned premiums on any insurance policies covering the Property,
including, without limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Property;

(i) all refunds, rebates or credits in connection with a reduction in real estate taxes and
assessments charged against the Property as a result of tax certiorari or any applications or
proceedings for reduction; all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing including, without limitation, proceeds of insurance and condemnation awards, into cash
or liquidation claims;

(j) all agreements, contracts, certificates, instruments, franchises, permits, licenses,
plans, specifications and other documents, now or hereafter entered into, and all rights therein
and thereto, respecting or pertaining to the use, occupation, construction, management or operation
of the Land and any part thereof and any Improvements or respecting any business or activity
conducted on the Land and any part thereof and all right, title and interest of Borrower therein
and thereunder, including, without limitation, the right, upon the happening of any default
hereunder, to receive and collect any sums payable to Borrower. thereunder;

(k) all tradenames, trademarks, servicemarks, logos, copyrights, goodwill, books and records
and all other general intangibles relating to or used in connection with the operation of the
Property; and

(l) any and all other rights of Borrower in and to the items set forth in Subsections (a)
through (m) above.

CONDITIONS TO GRANT:

TO HAVE AND TO HOLD the above granted and described Property unto Trustee, as trustee for the
benefit of Lender, to its successors in the trust created by this Security Instrument and to its or
their respective assigns, forever, in trust, upon the terms and conditions set forth herein;

IN TRUST, WITH THE POWER OF SALE, to secure payment to Lender of the Debt at the time and in
the manner provided for its payment in the Note and in this Security Instrument;

PROVIDED, HOWEVER, these presents are upon the express condition that, if Borrower shall well
and truly pay to Lender the Debt at the time and in the manner provided in the Note and this
Security Instrument, shall well and truly perform the Other Obligations as set forth in this
Security Instrument and shall well and truly abide by and comply with each and every covenant and
condition set forth herein and in the Note, these presents and the estate hereby granted shall
cease, terminate and be void.

2.2 Leases and Rents. Borrower does hereby absolutely and unconditionally assign to Lender
Borrower’s right, title and interest in all current and future Leases and Rents, it being intended
by Borrower that this assignment constitutes a present, absolute assignment and not an assignment
for additional security only. Such assignment to Lender shall not be construed to bind Lender to
the performance of any of the covenants, conditions or provisions contained in any such Lease or
otherwise impose any obligation upon Lender. Nevertheless, subject to the terms of this Section 2.2
and Section 3.8, Lender grants to Borrower a revocable license to operate and manage the Property
and to collect the Rents.. Borrower shall hold the Rents, or a portion thereof sufficient to
discharge all current sums due on the Debt, in trust for the benefit of Lender for use in the
payment of such sums. Upon an Event of Default, the license granted to Borrower herein shall
automatically be revoked, and Lender shall immediately be entitled to all Rents, whether or not
Lender enters upon or takes control of the Property. Lender is hereby granted and assigned by
Borrower the right, at its option, upon revocation of the license granted herein, to enter upon the
Property in person, by agent or by court-appointed receiver to collect the Rents. Any Rents
collected after the revocation of the license may be applied toward payment of the Debt in such
priority and proportions as Lender in its discretion shall deem proper.

2.3 Security Agreement. This Security Instrument is both a real property mortgage and a
“security agreement” within the meaning of the Uniform Commercial Code, The Property includes both
real and personal property and all other rights and interests, whether tangible or intangible in
nature, of Borrower in the Property. Borrower by executing and delivering this Security Instrument
has granted and hereby grants to Lender, as security for the Debt, a first and prior security
interest in the Property to the full extent that the Property may be subject to the Uniform
Commercial Code and agrees that Lender shall have all the rights and remedies of a secured party
under the Uniform Commercial Code with respect to the Property

2.4 Pledge of Monies Held. Borrower hereby pledges to Lender any and all monies now or
hereafter held by Lender, including, without limitation, any sums deposited in the Tax and
Insurance Escrow Fund, the Reserves (as defined in the Note), Net Proceeds, and condemnation awards
or payments described in Section 3,7 (collectively, “Deposits”), as additional security for the
Obligations until expended or applied as provided in this Security Instrument.

3 — BORROWER COVENANTS, REPRESENTATIONS AND WARRANTIES:

Borrower represents and warrants to and covenants and agrees with Lender as follows:

3.1 Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the
Note and in this Security Instrument.

3.2 Warranty of Title. Borrower has paid for and has good title to the Property and has the
right to mortgage, grant, bargain, sell, pledge, assign, warrant, set over, transfer and convey the
same. Borrower possesses an unencumbered fee simple absolute estate in the Land and the
Improvements and owns the Property free and clear of all liens, encumbrances and charges whatsoever
except for the Permitted Exceptions. Borrower shall forever warrant, defend and preserve the title
and the validity and priority of the lien of this Security Instrument and shall forever warrant and
defend the same to Lender against the claims of all Persons whomsoever.

3.3 Insurance. Borrower shall obtain and maintain, or cause to be obtained and maintained,
insurance for Borrower and the Property providing at least the coverages set forth herein.

(a) Casualty and Business Interruption Borrower shall keep the Property insured against damage
by fire and the other hazards covered by a standard extended coverage and all-risk insurance policy
and shall maintain such other casualty insurance as reasonably required by Lender. Borrower’s
insurance policy pursuant to this Subsection shall (i) be in an amount equal to 100% of the “Full
Replacement Cost,” which for purposes of this Security Instrument shall mean actual replacement
value (exclusive of costs of excavations, foundations, underground utilities and footings) without
reduction for depreciation or co-insurance, (ii) provide for a deductible not greater than $10,000,
and (iii) provide for inflation guard adjustment or coverage. Such insurance shall include coverage
against acts of terrorism. Lender reserves the right to require from time to time the following
additional insurance: boiler and machinery; flood; earthquake/sinkhole; workers’ compensation;
and/or building law or ordinance (which shall include sufficient coverage for (1) costs to comply
with building and zoning codes and ordinances, (2) demolition costs, and (3) increased costs of
construction). Borrower shall keep the Property insured against loss by flood if the Property is
located currently or at any time in the future in an area identified by the Federal Emergency
Management Agency as an area having special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of
1973 or the National Flood Insurance Reform Act of 1994 (as such acts may from time to time be
amended) in an amount at least equal to the lesser of (A) the maximum amount of the Loan and (B)
the maximum limit of coverage available under said acts. Any such flood insurance policy shall be
issued in accordance with the requirements and current guidelines of the Federal Insurance
Administration. Borrower shall maintain use and occupancy insurance covering, as applicable, rental
income or business interruption, with coverage in an amount not less than twelve months anticipated
gross rental income or gross business earnings, as applicable in each case, attributable to the
Property. All insurance proceeds payable to Lender pursuant to this Subsection shall be held by
Lender and shall be applied to the obligations secured hereunder; provided, however, that nothing
contained herein shall be deemed to relieve Borrower of its obligations to pay the obligations
secured hereunder on the respective dates of payment provided for in the Note except to the extent
such amounts are actually paid out of the proceeds of such insurance. Borrower shall not maintain
any separate or additional insurance which is contributing in the event of loss unless it is
properly endorsed and otherwise reasonably satisfactory to Lender in all respects. The proceeds of
insurance paid on account of any damage or destruction to the Property shall be paid to Lender to
be applied as provided in Section 4.3.

(b) Liability. Borrower shall maintain (i) commercial general liability insurance against
claims for personal injury, bodily injury, death or property damage occurring upon, in or about the
Property, providing for limits of liability of not less than $5,000,000 for both injury to or death
of a person and for property damage per occurrence, and to continue at not less than the aforesaid
limit until required to be changed by Lender in writing by reason of changed economic conditions
making such protection inadequate, and (ii) other liability insurance as reasonably required by
Lender.

(c) Other Insurance Borrower shall maintain such other insurance and in such amounts as Lender
from time to time may reasonably request against such other insurable hazards which at the time are
commonly insured against for property similar to the Property located in or around the region in
which the Property is located,

(d) Form and Quality All insurance shall be obtained under valid and enforceable insurance
policies and shall be endorsed in form and substance acceptable to Lender to name Lender as an
additional insured, loss payee or mortgagee thereunder, as its interest may appear, with loss
payable to Lender, without contribution, under a standard New York (or local equivalent) mortgagee
clause. All such insurance and endorsements shall be fully paid for and contain provisions and
expiration dates satisfactory to Lender and shall be issued by insurance companies licensed to do
business in the state where the Property is located, with a general company and financial size
rating of “A” or better by Standard & Poor’s Ratings Services Each such insurer shall be referred
to herein as a “Qualified Insurer.” Each policy shall provide that such policy may not be canceled
or materially changed except upon 15 days’ prior written notice of intention of non-renewal,
cancellation or material change to Lender and that no act or thing done by Borrower shall
invalidate any policy as against Lender. Blanket policies shall be permitted only if (i) Lender
receives appropriate endorsements and/or duplicate policies containing Lender’s right to continue
coverage on a pro rata pass-through basis and that coverage will not be affected by any loss on
other properties covered by the policies, (ii) the policy contains a sublimit equal to the
replacement cost of the Property in an amount approved by Lender which is expressly allocated for
the Property, and (iii) such policy is approved in advance in writing by Lender and Lender’s
interest is included therein as provided in this Security Instrument and such policy is issued by a
Qualified Insurer. Borrower authorizes Lender to pay the premiums for such policies (the “Insurance
Premiums”) from the Tax and Insurance Escrow Fund as the same become due and payable annually in
advance, Borrower shall assign the policies or proofs of insurance to Lender, in such manner and
form that Lender and its successors and assigns shall at all times have and hold the same as
security for the payment of the Loan. The proceeds of insurance policies coming into the possession
of Lender shall not be deemed trust fiends, and Lender shall be entitled to apply such proceeds as
herein provided. In addition, no later than 30 days prior to the expiration dates of the policies
which Borrower is now or hereafter required to maintain hereunder, Borrower shall deliver to Lender
certified copies of new or renewal policies (also marked “premium paid” or accompanied by evidence
satisfactory to Lender of payment of the Insurance Premiums due thereunder annually in advance),
together. with certificates of insurance therefor setting forth, among other things, the
amounts of insurance maintained, the risks covered by such insurance and the Qualified Insurer(s)
which carry such insurance.

(e) Other Insurance Matters. If at any time Borrower fails to deposit funds into the Tax and
Insurance Escrow Fund sufficient to permit Lender to pay the Insurance Premiums when due, or if
Lender is not in receipt of written evidence that all insurance required hereunder is in full force
and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender
deems necessary to protect its interest in the Property, including, without limitation, the
obtaining of such insurance coverage as Lender in its sole discretion deems appropriate, and all
expenses incurred by Lender in connection with such action or in obtaining such insurance and
keeping it in effect shall be paid by Borrower to Lender upon demand and until paid shall be
secured by this Security Instrument and shall bear interest at the Applicable Interest Rate (as
defined in the Note). In addition, in the event of foreclosure of this Security Instrument, or
other transfer of title to the Property in extinguishment in whole or in part of the Debt, all
right, title and interest of Borrower in and to such policies then in force concerning the Property
and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or
Lender or other transferee in the event of such other transfer of title.

(f) In the event of foreclosure of this Security Instrument, or other transfer of
title to the Property in extinguishment in whole or in part of the Debt, all right, title and
interest of Borrower in and to such policies then in force concerning the Property and all proceeds
payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other
transferee in the event of such other transfer of title.

3.4 Payment of Taxes, etc. Borrower shall pay all Taxes and all Other Charges as same become
due and payable. Borrower shall not suffer and shall promptly cause to be paid and discharged any
lien or charge whatsoever which may be or become a lien or charge against the Property. Except to
the extent sums sufficient to pay all Taxes have been deposited with Lender in accordance with the
terms of this Security Instrument, Borrower shall furnish to Lender receipts for the payment of the
Taxes and Other Charges prior to the date the same shall become delinquent and upon request by
Lender.

3.5 Tax and Insurance Escrow Fund. Borrower shall pay to Lender on each date that a regularly
scheduled payment of principal or interest is due under the Note (i) one-twelfth of an amount which
would be sufficient to pay the Taxes payable, or estimated by Lender to be payable, during the next
ensuing twelve (12) months and (ii) one-twelfth of an amount which would be sufficient to pay the
Insurance Premiums due for the renewal of the coverage afforded by the insurance policies upon the
expiration thereof (said amounts in (i) and (ii) above herein called the “Tax and Insurance Escrow
Fund”). The Tax and Insurance Escrow Fund shall not constitute a trust fund and may be commingled
with other monies held by Lender. No earnings or interest on the Tax and Insurance Escrow Fund
shall be payable to Borrower Lender will apply the Tax and insurance Escrow Fund to payments of
Taxes and Insurance Premiums required to be made by Borrower. If the amount of the Tax and
Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums, Lender shall
credit such excess against future payments to be made to the Tax and Insurance Escrow Fund. If the
Tax and Insurance Escrow Fund is not sufficient to pay the items set forth in (i) and (ii) above,
Borrower shall promptly pay to Lender, upon demand, an amount which Lender shall estimate as
sufficient to make up the deficiency. Upon the occurrence of an Event of Default Lender may apply
any sums then present in the Tax and Insurance Escrow Fund in such priority and proportions as
Lender in its discretion shall deem proper

3.6 Funds for Replacements, Tenant Improvements and Other Obligations. In addition to
Borrower’s covenants and agreements hereunder, Borrower shall pay to Lender on the first day of
each calendar month on which a scheduled payment is due, until the Note is paid in full, the
amount(s), if any, designated by Lender in Section 8 of the Note, to maintain the funds described
therein for required repairs, capital improvements, tenant improvements, brokerage commissions,
leasing obligations and/or any other obligations with respect to the Property.

3.7 Condemnation. Borrower shall promptly give Lender notice of the actual or threatened
commencement of any condemnation or eminent domain proceeding and shall deliver to Lender copies of
any and all papers served in connection with such proceedings. Notwithstanding any taking by any
public or quasi-public authority through eminent domain or otherwise (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall
continue to pay the Debt at the time and in the manner provided for its payment in the Note and in
this Security Instrument and the Debt shall not be reduced until any award or payment therefor
shall have been actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be limited to the interest
paid on the award by the condemning authority but shall be entitled to receive out of the award,
interest at the rate or rates provided herein and in the Note,

3.8 Leases and Rents.

(a) Borrower represents and warrants as follows: (i) Borrower is the sole owner of the entire
lessor’s interest in the Leases; (ii) the Leases are valid and enforceable; (iii) the terms of all
alterations, modifications and amendments to the Leases are reflected in the certified occupancy
statement delivered to and approved by Lender; (iv) none of the Rents reserved in the Leases have
been assigned or otherwise pledged or hypothecated; (v) none of the R.ents have been collected for
more than one month in advance; (vi) the premises demised under the Leases have been completed and
the tenants under the Leases have accepted the same and have taken possession of the same on a rent
paying basis; (vii) there exist no offsets or defenses to the payment of any portion of the Rents;
(viii) no Lease contains an option to purchase, right of first refusal to purchase, or any other
similar provision; and (ix) no Person has any possessory interest in, or right to occupy, the
Property except under and pursuant to a Lease,

(b) Except as otherwise consented to by Lender, all Leases shall be written on the
standard form of lease which shall have been approved by Lender. Upon request, Borrower shall
furnish Lender with executed copies of all Leases. No material changes may be made to the Lender
approved standard lease without the prior written consent of Lender, which approval shall not be
unreasonably withheld or delayed. In addition, all renewals of Leases and all proposed Leases shall
provide for rental rates and terms comparable to existing local market rates and terms and shall be
arm’s-length transactions with bona fide, independent third party tenants All proposed Leases and
renewals of existing Leases, other than Minor Leases and Leases for residential purposes only
(“Residential Leases”), shall be subject to the prior approval of Lender and its counsel, at
Borrower’s expense, which approval shall not be unreasonably withheld or delayed if the proposed
Lease or renewal Lease (i) is on the Lender-approved form, subject only to commercially reasonable
variations therefrom, (ii) is negotiated in an arm’s-length transaction with an independent third
party tenant and (iii) provides for rental rates and terms comparable to existing local market
terms All Leases entered into after the date hereof shall provide that they are subordinate to this
Security Instrument and that the lessee agrees to attorn to Lender, Borrower (i) shall observe and
perform all the obligations imposed upon the lessor under the Leases and shall not do or permit to
be done anything to impair the value of the Leases as security for the Obligations; (ii) shall
enforce all of the terms, covenants and conditions contained in the Leases upon the part of the
lessee thereunder to be observed or performed, short of termination thereof; however, Borrower may
terminate Residential Leases in the ordinary course of business and terminate Leases other than
Residential Leases as the result of a default by the lessee thereunder or in connection with the
replacement of a Lease with a substitute Lease entered into in accordance with the requirements of
this Security Instrument; (iii) shall not collect any of the Rents more than one month in advance;
(vi) shall not execute any other assignment of the lessor’s interest in the Leases or the Rents;
(iv) shall not alter, modify or change the terms of the Leases without the prior written consent of
Lender, or cancel or terminate the Leases or accept a surrender thereof; (vi) shall not alter,
modify or change the terms of any Lease Guaranty with respect to any Lease other than a Residential
Lease or cancel or terminate any Lease Guaranty without the prior written consent of Lender

(c) Notwithstanding the provisions of Subsection 3,8(b), renewals of existing
commercial Leases and proposed Leases for commercial space covering less than twenty percent (20%)
of the total rentable space for the Property and accounting for rental income which in the
aggregate is less than twenty percent (20%) of the total rental income for the Property shall not
be subject to the prior approval of Lender provided that (i) the renewal Lease or proposed Lease
shall provide for rental rates and terms comparable to existing local market rates and terms and
(ii) the renewal Lease or proposed Lease shall be an arm’s-length transaction with a bona fide,
independent third party tenant (Leases meeting the foregoing requirements shall be referred to
herein as “Minor Leases”).

(d) All security deposits of tenants, whether held in cash or any other form, shall not be
commingled with any other funds of Borrower and, if cash, shall be deposited by Borrower at such
commercial or savings bank or banks as may be reasonably satisfactory to Lender. Borrower shall,
upon request, provide Lender with evidence reasonably satisfactory to Lender of Borrower’s
compliance with the foregoing. Following the occurrence and during the continuance of any Event of
Default, Borrower shall, upon Lender’s request, if permitted by any applicable legal requirements,
turn over to Lender the security deposits (and any interest theretofore earned thereon) with
respect to all or any portion of the Property, to be held by Lender subject to the terms of the
Leases

3.9 Maintenance of Property. Borrower shall cause the Property to be used, operated, occupied
and maintained in a good and safe condition and repair and in accordance with all applicable laws
and regulations, and shall neither commit nor suffer any waste The Improvements and the Personal
Property shall not be removed, demolished or materially altered (except for normal replacement of
the Personal Property) without the consent of Lender. Borrower shall not initiate, join in,
acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made of the Property or
any part thereof. If under applicable zoning provisions the use of all or any portion of the
Property is or shall become a nonconforming use, Borrower will not cause or permit such
nonconforming use to be discontinued or abandoned without the express written consent of Lender.

3.10 Books, Records and Financial Reporting.

(a) Borrower shall keep accurate books and records of account and furnish to Lender its
financial statements as follows:

	 	(i)	 	Until the Loan is sold in a Secondary Market Transaction, Borrower
shall furnish to Lender within fifteen days after the end of each calendar
month, a current rent roll and a detailed operating statement (showing monthly
activity and year to date) stating operating revenues, operating expenses,
operating income and net cash flow for the calendar month just ended.

	 	(ii)	 	Within 45 days after the end of each calendar quarter,
Borrower. Shall furnish to Lender a current rent roll and a detailed
operating statement (showing quarterly activity and year to date) stating
operating revenues, operating expenses, operating income and net cash flow for
the calendar quarter just ended.

	 	(iii)	 	Within 90 days after the end of each fiscal year of Borrower,
Borrower shall furnish to Lender a current (as of the end of such fiscal year)
balance sheet and profit and loss statement of Borrower prepared and certified
by Borrower, and a detailed operating statement stating operating revenues,
operating expenses, operating income and net cash flow for each of Borrower and
the Property, and, if required by Lender, prepared on a review basis and
certified by an independent public accountant reasonably satisfactory to
Lender.

All certified rent rolls required by this Section shall be signed and dated by Borrower,
detailing the names of all tenants of the Improvements, the portion of the Improvements
occupied by each tenant, the rent and any other charges payable under each Lease, and the
term of each Lease,

	 	(iv)	 	At least 30 days prior to the commencement of each such fiscal
year, Borrower will provide to Lender its proposed annual operating and capital
improvements budget for such fiscal year for review and approval by Lender.

(b) Each such financial statement shall be in scope and detail reasonably satisfactory to
Lender and certified by the chief’ financial representative of Borrower.

(c) All financial statements shall be prepared in accordance with generally accepted
accounting principles in the United States of America in effect on the date of such statement and
consistently applied (or such other accounting basis reasonably acceptable for Lender),

(d) Upon Lender’s request, Borrower shall cause each Guarantor to furnish to Lender no later
than 90 days after the end of the fiscal year for such Guarantor a financial statement for said
fiscal year certified to Lender and prepared in a form reasonably acceptable to Lender.

(e) Borrower, its Affiliates and any Guarantor shall furnish Lender with such other additional
financial or management information as may, from time to time, be reasonably required by Lender, in
form and substance reasonably satisfactory to Lender.

3.11 Change of Name, Identity or Structure. Borrower will not change Borrower’s name, identity
(including its trade name or names), state of formation, or organizational structure unless
Borrower shall have obtained the prior written consent of Lender to such change and shall have
taken all actions necessary or requested by Lender to file or amend any financing statement or
continuation statement to assure perfection and the continuation of the perfection of security
interests under the Loan Documents.

3.12 Existence. Borrower will continuously preserve its existence as an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction where it is organized and
shall maintain its rights to do business in the state where the Property is located together with
its franchises and trade names

3.13 OFAC. Borrower represents and warrants that neither Borrower or any of its respective
Affiliates is a Prohibited Person and Borrower and all of its respective Affiliates are in full
compliance with all applicable orders, rules, regulations and recommendations of OFAC. At all times
throughout the term of the Loan, Borrower and all of its respective Affiliates shall (i) not be a
Prohibited Person and (ii) be in full compliance with all applicable orders, rules, regulations and
recommendations of OFAC

The term “Prohibited Person” shall mean any Person:

(a) listed in the Annex to, or otherwise subject to the provisions of, Executive

Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (the “Executive Order”);

(b) that is owned or controlled by, or acting for or on behalf of, any Person
that is listed to the Annex to, or is otherwise subject to the provisions of, the Executive
Order.

(c) with whom Lender is prohibited from dealing or otherwise engaging in any
transaction by any terrorism or money laundering law, including the Executive Order;

(d) who commits, threatens or conspires to commit or supports “terrorism” as
defined in the Executive Order;

(e) that is named as a “specially designated national and blocked person” on the
most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its
official website, www.ustreas.gov/offices/enforcement/ofac, or at any replacement website or other
replacement official publication of such list; or

	 	(f)	 	who is an Affiliate of or affiliated with a Person listed above,

As used herein, the term “control” means the possession, directly or indirectly, of the power
to direct or cause the direction of management, policies or activities of a Person, whether through
ownership of voting securities, by contract or otherwise.

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

3.15 ERISA Compliance. As of the date hereof and throughout the term of this Security
Instrument, 0) Borrower is not and will not be an “employee benefit plan” as defined in Section
3(3) of ERISA, that is subject to Title I of ERISA; (ii) the assets of Borrower do not and will not
constitute “plan assets” of one or more such plans for purposes of Title I of ERISA; (iii) Borrower
is not and will not be a “governmental plan” within the meaning of Section 3(32) of ERISA; and (iv)
transactions by or with Borrower are not and will not be subject to state statutes applicable to
Borrower regulating investments of and fiduciary obligations with respect to governmental plans.
Borrower shall deliver to Lender such certifications or other evidence as requested by Lender from
time to time of Borrower’s compliance with the foregoing representations and covenants

3.16 Business Purpose. The Loan is solely for the business purpose of Borrower and is not for
personal, family, household, or agricultural purposes

3.17 Separate Tax Lot. The Property is assessed for real estate tax purposes as one or more
wholly independent tax lot or lots, separate from any adjoining land or improvements not
constituting a part of such lot or lots, and no other land or improvements are assessed and taxed
together with the Property or any portion thereof.

4 — OTHER COVENANTS:

Borrower covenants and agrees that:

4.1 Compliance with Law. Borrower has all requisite licenses, permits, franchises,
qualifications, certificates of occupancy or other governmental authorizations to own, lease and
operate the Property and carry on its business, and the Property is in compliance with all
applicable legal requirements and is free of structural defects, and all building systems contained
therein are in good working order, subject to ordinary wear and tear.. The Property does not
constitute, in whole or in part, a legally non conforming use under applicable legal requirements

4.2 Single Purpose Entity Requirements. Borrower shall comply with the following single
purpose entity requirements (“Single Purpose Entity Requirements”) in order to maintain its status
as a separate entity and to avoid any confusion or potential consolidation with any Affiliate.
Borrower’s organizational documents shall contain the Single Purpose Entity Requirements.

(a) Limited Purpose. The sole purpose conducted or promoted by Borrower since its
organization and at least during the term of the Loan is to engage only in the following
activities:

(i) to acquire, own, hold, lease, operate, manage, maintain, develop and
improve the Property;

(ii) to enter into and perform its obligations under the Loan Documents;

(iii) to sell, transfer, service, convey, dispose of pledge, assign, borrow
money against, finance, refinance or otherwise deal with the Property to the extent
permitted under the Loan Documents; and

(iv) to engage in any lawful act or activity and to exercise any powers
permitted to corporations/limited partnerships/limited liability companies organized
under the laws of the state of its formation that are related or incidental to and necessary,
convenient or advisable for the accomplishment of the above mentioned purposes.

(b) Limitations on Debt, Actions. Notwithstanding anything to the contrary in

the Loan Documents or in any other document governing the formation, management or operation of
Borrower, Borrower shall not:

(i) guarantee any obligation of any Person, including any Affiliate, or
become

obligated for the debts of any other Person or hold out its credit as being available to pay
the obligations of any other Person;

(ii) engage, directly or indirectly, in any business other than as required
or permitted to be performed under this Section;

(iii) incur, create or assume any indebtedness or liabilities other than
(A) the Loan and (B) unsecured trade payables incurred in the ordinary course of its
business that are related to the ownership and operation of the Property not to exceed two
percent (2%) of the outstanding balance of the Loan, and which are not evidenced by a note,
must be paid within 60 days and are otherwise expressly permitted under the Loan Documents;

(iv) make or permit to remain outstanding any loan or advance to, or own or
acquire any stock or securities of, any Person, except that Borrower may invest in those
investments permitted under the Loan Documents;

(v) to the fullest extent permitted by law, engage in any dissolution,
liquidation, consolidation, merger, sale or other transfer of any of its assets outside the
ordinary course of Borrower’s business;

(vi) buy or hold evidence of indebtedness issued by any other Person (other
than cash or investment-grade securities);

(vii) form, acquire or hold any subsidiary (whether corporate, partnership,
limited liability company or other) or own any equity interest in any other Person;

(viii) own any asset or property other than the Property and incidental personal
property necessary for the ownership or operation of the Property;

(ix) take any Material Action without the unanimous written approval of all
members of Borrower;

(x) amend, modify or otherwise change its organizational documents with
respect to the Single Purpose Entity Requirements; or

(xi) permit any indebtedness, other than the Loan, to be secured by the Property

(c) Separateness Covenants. Borrower agrees that in the conduct of its operations since
its organization and so long as any obligation under the Loan is outstanding it has observed and
will continue to observe the following covenants:

(i) maintain books and records and bank accounts separate from those of any other
Person;

(ii) maintain its assets in such a manner that it is not costly or
difficult to segregate, identify or ascertain such assets;

(iii) comply with all organizational formalities necessary to maintain its
separate existence;

(iv) hold itself out to creditors and the public as a legal entity separate
and distinct from any other Person;

(v) maintain separate financial statements, showing its assets and
liabilities separate and apart from those of any other Person and not have its assets listed
on any financial statement of any other Person; except that Borrower’s assets may be
included in a consolidated financial statement of its Affiliate so long as appropriate
notation is made on such consolidated financial statements to indicate the separateness of
Borrower from such Affiliate and to indicate that Borrower’s assets and credit are not
available to satisfy the debts and other obligations of such Affiliate or any other Person;

(vi) prepare and file its own tax returns separate from those of any Person
to the extent required by applicable law and pay any taxes required to be paid by applicable
law;

(vii) allocate and charge fairly and reasonably any common employee or
overhead shared with Affiliates;

(viii) not enter into any transaction with Affiliates except on an
arm’s-length basis on terms which are intrinsically fair and no less favorable than would be
available for unaffiliated third parties, and pursuant to written, enforceable agreements;

(ix) conduct business in its own name and use separate stationery, invoices
and

checks;

(x) not commingle its assets or funds with those of any other Person;

(xi) not assume, guarantee or pay the debts or obligations of any other
Person;

(xii) correct any known misunderstanding as to its separate identity;

(xiii) not permit any Affiliate to guarantee or pay its obligations (other
than limited guarantees and indemnities set forth in the Loan Documents);

(xiv) not make loans or advances to any other Person;

(xv) pay its liabilities and expenses out of and to the extent of its
own fluids;

(xvi) maintain a sufficient number of employees in light of its
contemplated business purpose and pay the salaries of its own employees, if any, only from
its own funds;

(xvii) maintain adequate capital in light of its contemplated business
purpose, transactions and liabilities; provided, however, that the foregoing shall not
require any equity owner to make additional capital contributions to Borrower; and

(xviii) cause the managers, officers, employees, agents and other representatives of
Borrower to act at all times with respect to Borrower consistently and in furtherance of the
foregoing and in its best interests of Borrower,

Failure of Borrower to comply with any of the foregoing covenants or any other covenants contained
in this Agreement shall not affect the status of Borrower as a separate legal entity.

4.3 Restoration. The following provisions shall apply in connection with the

Restoration of the Property:

(a) If the Property shall be damaged or destroyed, in whole or in part, by fire
or other casualty or the Property or any portion thereof is taken by a condemning authority,
Borrower shall promptly furnish notice of such event to Lender and commence and diligently
prosecute the completion of the repair and restoration of the Property as nearly as possible to the
condition the Property was in immediately prior to such fire or other casualty or taking, with such
alterations as may be approved by Lender (the “Restoration”) and otherwise in accordance with this,
except in instances where Lender has failed or elected not to disburse Net Proceeds to Borrower
under this Section 4.3 (provided that such exception shall not apply if the failure to disburse is
attributable to Borrower’s failure to comply with the conditions set forth in Clauses (A), (D) and
(I) of Subsection 4.3(c)(1) or in Subsection 4.3(c)(ii) or any other conditions set forth in this
Section 4.3 which Borrower has the practical ability to satisfy). Lender may, but shall not be
obligated to make proof of loss if not made promptly by Borrower,

(b) If the Net Proceeds shall be less than five percent (5%) of the outstanding

principal balance of the Debt and the costs of completing the Restoration shall be less than five
percent (5%) of the outstanding principal balance of the Debt, the Net Proceeds will be disbursed
by Lender to Borrower upon receipt, provided that all of the conditions set forth in Subsection
4.3(c)(i) are met and Borrower delivers to Lender a written undertaking to expeditiously commence
and to satisfactorily complete with due diligence the Restoration in accordance with the terms of
this Security Instrument.

(c) If the Net Proceeds are equal to or greater than five percent (5%) of the
outstanding principal balance of the Debt or the costs of completing the Restoration is
equal to or greater than five percent (5%) of the outstanding principal balance of the Debt, Lender
shall make the Net Proceeds available for the Restoration in accordance with the provisions of this
Subsection 4.3(c)

(i) The Net Proceeds shall be made available to Borrower for the Restoration
provided that each of the following conditions is met: (A) no Event of Default shall have
occurred and be continuing under the Note, this Security Instrument or any of the other Loan
Documents; (B) (1) in the event that the Net Proceeds are Insurance Proceeds, less than fifty
percent (50%) of the total floor area of the Improvements has been damaged, destroyed, or
rendered unusable as a result of such fire or other casualty or (2) in the event the Net
Proceeds are Condemnation Proceeds, less than ten percent (10%) of the land constituting the
Property is taken, and such land is located along the perimeter or periphery of the Property;
(C) Leases demising in the aggregate a percentage amount equal to or greater than fifty
percent (50%) (with respect to casualties) or ninety percent (90%) (with respect to
condemnation) of the total net rentable space in the Property which has been demised under
executed and delivered Leases in effect as of the date of the occurrence of such fire or
other casualty or taking, as the case may be, shall remain in full force and effect during
and after the completion of the Restoration; (D) Borrower shall have commenced the
Restoration as soon as reasonably practicable (but in no event later than ninety (90) days
after such damage or destruction or taking, whichever the case may be, occurs) and shall
diligently pursue the same to satisfactory completion; (F) Lender shall be satisfied that any
operating deficits, including all scheduled payments of principal and interest under the Note
at the Applicable Interest Rate, which will be incurred with respect to the Property as a
result of the occurrence of any such fire or other casualty or taking, whichever the case may
be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in
Subsection 3.3(a)(iii), if applicable, or (3) by other funds of Borrower; (F) Lender shall be
satisfied that following the completion of the Restoration, the ratio of sustainable net cash
flow for the Property (after deduction for underwritten reserves) to debt service payable
under the Note shall be at least 1,20 to 1,0; (G) Lender shall be reasonably satisfied that
the Restoration will be completed on or before the earliest to occur of (1) twelve (12)
months prior to the Maturity Date (as defined in the Note), (2) twelve (12) months after the
occurrence of such fire or other casualty or taking, whichever the case may be, (3) the
earliest date required for such completion under the terms of any Leases which are required
in accordance with the provisions of this Subsection 4.3(c) to remain in effect subsequent to
the occurrence of such fire or other casualty or taking, whichever the case may be and the
completion of the Restoration and (4) such time as may be required under any applicable
zoning laws, ordinances, rules or regulations in order to repair and restore the Property to
the condition it was in immediately prior to such fire or other casualty or to as nearly as
possible the condition it was in immediately prior to such taking, as applicable; (H) the
Property and the use thereof after the Restoration will be in compliance with and permitted
under all applicable zoning laws, ordinances, rules and regulations; (1) the Restoration
shall be done and completed by Borrower in an expeditious and diligent fashion and in
compliance with all applicable laws, rules and regulations; and (I) such fire or other
casualty or taking, as applicable, does not result in the loss of access to the Property or
the Improvements,

(ii) The Net Proceeds shall be held by Lender and, until disbursed in accordance with
the provisions of this Subsection 43(c), shall constitute additional security for the
Obligations. The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower
from time to time during the course of the Restoration, upon receipt of evidence satisfactory
to Lender. that (A) all materials installed and work and labor performed (except
to the extent that they are to be paid for out of the requested disbursement) in connection
with the Restoration have been paid for in full, and (B) there exist no notices of pendency,
stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out of the
Restoration which have not either been fully bonded to the satisfaction of Lender and
discharged of record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument

(iii) All plans and specifications required in connection with the
Restoration shall be subject to prior review and approval in all respects by Lender and by
the Casualty Consultant, which approval shall not be unreasonably withheld or delayed Lender
shall have the use of the plans and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. The identity of the contractors,
subcontractors and materialmen engaged in the Restoration, as well as the contracts under
which they have been engaged, shall be subject to prior review and acceptance by Lender and
the Casualty Consultant, which approval shall not be unreasonably withheld or delayed. All
costs and expenses incurred by Lender in connection with making the Net Proceeds available
for the Restoration including, without limitation, reasonable counsel fees and disbursements
and the Casualty Consultant’s fees, shall be paid by Borrower.

(iv) In no event shall Lender be obligated to make disbursements of the Net
Proceeds more frequently than once every thirty (30) days or in excess of an amount equal to
the costs actually incurred from time to time for work in place as part of the Restoration,
as certified by the Casualty Consultant, minus a construction retainage to be held back from
contractors, subcontractors and materialmen engaged in the Restoration until the Casualty
Consultant certifies to Lender that the Restoration has been completed in accordance with
the provisions of this Subsection 43(c) and that all approvals necessary for the
re-occupancy and use of the Property have been obtained from all appropriate governmental
and quasi governmental authorities, and Lender receives evidence reasonably satisfactory to
Lender that the costs of the Restoration have been paid in full or will be paid in full out
of the Casualty Retainage

(v) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in
the reasonable opinion of Lender, be sufficient to pay in full the balance of the costs
which are estimated by the Casualty Consultant to be incurred in connection with the
completion of the Restoration, Borrower shall deposit the deficiency with Lender before any
further disbursement of the Net Proceeds shall be made. The deficiency deposited with Lender
shall be held by Lender and shall be disbursed for costs actually incurred in connection
with the Restoration on the same conditions applicable to the disbursement of the Net
Proceeds and until so disbursed pursuant to this Subsection 43(c) shall constitute
additional security for the Obligations, With respect to Restorations following a casualty
in which the Improvements are restored to substantially the same condition as they existed
prior to the casualty, the excess, if any, of the Net Proceeds and the remaining balance, if
any, of the deficiency deposited with Lender after the Casualty Consultant certifies to
Lender that the Restoration has been completed in accordance with the provisions of this
Subsection 43(c), and the receipt by Lender of evidence reasonably satisfactory to
Lender that all costs incurred in connection with the Restoration have been paid in full,
shall be remitted by Lender to Borrower, provided no Event of Default shall have occurred
and shall be continuing under the Note, this Security Instrument or any of the other Loan
Documents

(d) All Net Proceeds not required (i) to be made available for the Restoration or (ii) to
be returned to Borrower as excess Net Proceeds pursuant to Subsection 43(c)(v) may be retained and
applied by Lender toward the payment of the Debt whether or not then due and payable in such order,
priority and proportions as Lender in its discretion shall deem proper or, at the discretion of
Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender
shall designate, in its discretion.. Provided no Event of Default exists under the Note, this
Security Instrument or the other Loan Documents, Borrower shall not be obligated to pay any
prepayment premium or other prepayment consideration in connection with a prepayment resulting from
the application of Net Proceeds to the Debt pursuant to the preceding sentence Any such prepayment
shall be applied to the principal last due under the Note and shall not release Borrower from the
obligation to pay the Constant Monthly Payments (as defined in the Note) next becoming due under
the Note and the Constant Monthly Payment shall not be adjusted or recalculated as a result of such
partial prepayment. If Lender shall receive and retain Net Proceeds, the lien of this Security
Instrument shall be reduced only by the amount thereof received and retained by Lender and actually
applied by Lender in reduction of the Debt.

4.4 Control and Management. There shall be no change in the day-to-day control and management
of Borrower or Borrower’s general partner or managing member without the prior written consent of
Lender. Borrower shall not terminate, replace or appoint any manager or terminate or amend the
management agreement for the Property without Lender’s prior written approval, which approval shall
not be unreasonably withheld. Any change in ownership or control of the manager shall be cause for
Lender to re-approve such manager and management agreement. Each manager shall hold and maintain
all necessary licenses, certifications and permits required by law.. Borrower shall fully perform
all of its covenants, agreements and obligations under the management agreement. The management fee
payable under the property management agreement shall not exceed four percent (4%) of rental
collections, with 3% payable as a management fee and 1% as an asset management fee (the l% asset
management fee shall only be payable if, and to the extent, net cash flow from the Property (after
the payment of any and all operating expenses, debt service, capital expenditures and impounds) is
available). No deferred fees shall be permitted

5 — TRANSFER OR ENCUMBRANCE OF PROPERTY:

5.1 Lender Reliance. Borrower acknowledges that Lender has examined and relied on the
experience of Borrower and its general partners, managing members, principals and (if Borrower is a
trust) beneficial owners in owning and operating properties such as the Property in agreeing to
make the Loan, and will continue to rely on Borrower’s ownership of the Property as a means of
maintaining the value of the Property as security for payment and performance of the Obligations.
Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so
as to ensure that, should Borrower default in the payment or the performance of the Obligations,
Lender can recover. the Debt by a sale of the Property.

5.2 No Sale/Encumbrance. Borrower agrees that Borrower shall not, without the prior written
consent of Lender, sell, convey, mortgage, grant, bargain, encumber, pledge, assign, or
otherwise transfer the Property or any part thereof or permit the Property or any part thereof to
be sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred.

5.3 Sale/Encumbrance Defined. A sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment, or transfer within the meaning of this Article 5 shall be deemed to include,
but not be limited to, (a) an installment sales agreement wherein Borrower agrees to sell the
Property or any part thereof for a price to be paid in installments; (b) an agreement by Borrower
leasing all or a substantial part of the Property for other than actual occupancy by a space tenant
thereunder or a sale, assignment or other transfer of, or the grant of a security interest in,
Borrower’s right, title and interest in and to any Leases or any Rents; (c) if Borrower or any
general partner or managing member of Borrower is a corporation, the voluntary or involuntary sale,
conveyance, transfer or pledge of such corporation’s stock (or the stock of any corporation
directly or indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such corporation’s
stock shall become vested in another party; (d) if Borrower or any general partner or managing
member of Borrower is a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or managing partner, or the transfer or pledge of the partnership
interest of any general partner or managing partner of such partnership or any profits or proceeds
relating to such partnership interest or the transfer or pledge of more than 49% in the aggregate
of any limited partnership interests in such partnership or any profits or proceeds related to such
interests whether in one transfer or pledge or a series of transfers or pledges; (e) if Borrower or
any general partner or managing member of Borrower is a limited liability company, the change,
removal or resignation of the managing member of such company, or the transfer or pledge of the
membership interest of the managing member of such company or any profits or proceeds relating to
such membership interest or the transfer or pledge of more than 49% in the aggregate of any
membership interests in such company or any profits or proceeds related to such interests whether
in one transfer or pledge or a series of transfers or pledges; and (f) without limitation to the
foregoing, any voluntary or involuntary sale, transfer, conveyance or pledge by any Principal of
its direct or indirect controlling interest in Borrower. Notwithstanding the foregoing, the
following transfers shall not be deemed to be a sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment or transfer within the meaning of this Article 5: (A) transfer by
devise or descent or by operation of law upon the death of a partner, member or stockholder of
Borrower or any general partner or managing member thereof provided that Borrower immediately
notifies Lender of such transfer, and (B) with the exception of the general partner/managing member
interests in Borrower, a sale, transfer or hypothecation for estate planning purposes of a
partnership, shareholder or membership interest in Borrower by the current partner(s),
shareholder(s) or member(s), as applicable, to an immediate family member (i.e., parents, spouses,
siblings, children or grandchildren) of such partner, shareholder or member (or a trust for the
benefit of any such persons) Any of the transfers contemplated herein may be done in one or more
transfers during the term of the Loan so long as it complies with the foregoing provisions.

5.4 Lender’s Rights. Lender reserves the right to condition the consent required under this
Article 5 upon a modification of the terms hereof and on assumption of the Note, this Security
Instrument and the other Loan Documents as so modified by the proposed transferee, (“Transferee”)
as further described below. Lender shall not be required to demonstrate any actual impairment of
its security or any increased risk of default hereunder in order to declare the Debt immediately
due and payable upon Borrower’s sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property without Lender’s consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of
the Property regardless of whether voluntary or not, and whether or not Lender has consented to any
previous sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer
of the Property. Borrower agrees to bear and shall pay or reimburse Lender on demand for all
reasonable expenses (including, without limitation, reasonable attorneys’ fees and disbursements,
title search costs and title insurance endorsement premiums and Rating Agency fees and expenses)
incurred by Lender in connection with the review, approval and documentation of any such sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property
or any interest in Borrower. Lender’s consent to one such sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment, or transfer shall not be deemed to be a waiver of
Lender’s light to require such consent to any future occurrence of same. Any such sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property or any
interest in Borrower made in contravention of this Article 5 shall be null and void and of no force
and effect.

5.5 Assumption. Lender’s consent to the sale or transfer of the Property will not be
unreasonably withheld after consideration of all relevant factors, provided that:

(a) Borrower delivers to Lender no less than 60 days’ prior written notice of the
proposed sale or transfer;

(b) no Event of Default has occurred and remains uncured;

(c) Transferee and the proposed guarantor(s), if any, and the Property all
satisfy Lender’s then applicable credit review and underwriting standards, taking into
consideration, among other things, that Transferee and the proposed guarantor(s) shall be reputable
Persons of good character, creditworthy, with sufficient financial worth considering the
obligations assumed and undertaken, as evidenced by financial statements and other information
reasonably requested by Lender, and Transferee shall satisfy Lender’s then applicable criteria for
a single purpose entity;

(d) Lender’s reasonable determination that Transferee possesses satisfactory recent
experience in the ownership and operation of properties similar to the Property;

(e) Transferee shall have executed and delivered to Lender an assumption agreement in
form and substance acceptable to Lender, evidencing such Transferee’s agreement to abide and be
bound by the terms of the Note, this Security Instrument and the other Loan Documents, and a
consent to the sale or transfer by each existing guarantor(s) and a reaffirmation of each
guarantor’s obligations and liabilities under the Loan Documents or the execution of new guaranties
by new guarantors reasonably satisfactory to Lender, together with such legal opinions and title
insurance endorsements as may be reasonably requested by Lender;

(f) Lender shall have received an assumption fee equal to one-third of one percent (.33%)
of the then unpaid principal balance of the Note in addition to the payment of all costs and
expenses incurred by Lender in connection with such assumption (including reasonable attorneys’
fees and costs); and

(g) if required by Lender, Lender shall have received confirmation in writing from
the Rating Agencies to the effect that such transfer will not result in a qualification, downgrade
or withdrawal of any rating initially assigned or to be assigned in a Secondary Market Transaction.

Subject to Section 9 of the Note, Lender shall fully release Borrower and each existing
guarantor from any further obligation or liability to Lender under the Note and the other Loan
Documents upon the assumption by Transferee and each new guarantor of all such obligations and
liabilities and the satisfaction of all other conditions precedent to a sale or transfer in
accordance with the provisions of this Section.

6 — FURTHER ASSURANCES:

	 	6.1	 	Estoppel Certificates.

(a) Borrower, shall furnish to Lender, within ten days following demand, a
certified statement, (A) setting forth (i) the amount of the original principal amount of the Note,
(ii) the unpaid principal amount of the Note (if known to Borrower), (iii) the rate of interest on
the Note, (iv) the date installments of interest and/or principal were last paid, and (v) any
offsets or defenses to the payment of the Debt, if any, and (B) stating that the Note and this
Security Instrument are valid, legal and binding obligations and have not been modified or if
modified giving the particulars of such modification.

(b) Borrower shall use its best efforts to deliver to Lender, promptly upon request, duly
executed estoppel certificates from any one or more lessees as required by Lender attesting to such
facts regarding the Lease as Lender may reasonably require, provided that (i) Borrower shall not be
required to honor more than two requests made by Lender in any twelvemonth period and (ii) in no
event shall Borrower be required to obtain estoppel certificates from lessees containing more
information than that required to be certified pursuant to the tern-is of the related
Lease.

6.2 Changes in the Laws Regarding Taxation.

(a) If any law is enacted or adopted or amended after the date of this Security Instrument
which deducts the Debt from the value of the Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Lender’s interest in the Property, Borrower
will pay the tax, with interest and penalties thereon, if any. If Lender is advised by counsel
chosen by it that the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall have the option by
written notice of not less than 90 days to declare the Debt immediately due and payable.

(b) Borrower will not claim or demand or be entitled to any credit or credits
against the Debt for any part of the Taxes or Other Charges assessed against the Property, or any
part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt, If such claim, credit or deduction shall be required by law, Lender shall have the
option, by written notice of not less than 90 days, to declare the Debt immediately due and
payable.

(c) If at any time the United States of America, any State thereof or any
subdivision of any such State shall require revenue or other stamps to be affixed to the Note, this
Security Instrument, or any of the other Loan Documents or impose any other tax or charge on the
same, Borrower will pay for the same, with interest and penalties thereon, if any

6.3 Recording of Security Instrument etc. Borrower shall, at its expense, cause this Security
Instrument, and any security instrument creating a lien or security interest or evidencing the lien
hereof upon the Property and each instrument of further assurance, to be filed, registered or
recorded in such manner and in such places as may be required by any present or future law in order
to publish notice of and fully to protect the lien or security interest hereof upon, and the
interest of Lender in, the Property. Borrower will pay all filing, registration or recording fees,
and all taxes and expenses incident to the preparation, execution and acknowledgment of this
Security Instrument and the Note, any mortgage supplemental hereto, any security instrument with
respect to the Property and any instrument of further assurance

6.4 Third Party Reports. Lender may commission new or updated appraisals, phase I and phase II
environmental reports, property condition surveys and (if the Property is located in an area with a
high degree of seismic activity) seismic risk assessments of the Property to be prepared by third
parties designated by Lender after the date hereof. Borrower shall cooperate with each third party
and Lender in the preparation of such reports and shall reimburse Lender within ten days after
Lender’s demand for all costs incurred by Lender in connection with such reports, provided that
Borrower shall not be obligated to reimburse Lender for the cost of more than one appraisal, one
phase I environmental report, one phase II environmental report, one property condition survey and
one seismic risk assessment following the date hereof.

6.5 Performance of Other Agreements; Further Acts. Borrower shall observe and perform each and
every term to be observed or performed by Borrower pursuant to the terms of any agreement or
recorded instrument affecting or pertaining to the Property. Borrower will, at no cost or expense
to Lender, do any act or execute any additional documents as may be required by Lender to confirm
the lien of this Security Instrument and any of the agreements set forth herein. Borrower, on
demand, will execute and deliver and hereby authorizes Lender to execute in the name of Borrower or
without the signature of Borrower to the extent Lender may lawfully do so, and to file in the
appropriate filing or recording offices, one or more financing statements, chattel mortgages or
other instruments, to evidence more effectively the security interest of Lender in the Property.
Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose
of exercising and perfecting any and all rights and remedies available to Lender at law and in
equity, including without limitation such rights and remedies available to Lender pursuant to this
Section.

7 — DEFAULT:

7.1 Events of Default. The occurrence of any one or more of the following events shall
constitute an “Event of Default”: (a) if any portion of the Debt is not paid on the date the same
is due or if the entire Debt is not paid on or before the Maturity Date; (b) if any of the Taxes or
Other Charges is not paid prior to the date the same becomes delinquent except to the extent sums
sufficient to pay such Taxes and Other Charges have been deposited with Lender in accordance with
the terms of this Security Instrument; (c) if the insurance policies are not kept in full force and
effect, or if the insurance policies are not delivered to Lender upon request or Borrower has not
delivered evidence of the renewal of the insurance policies 30 days prior to their expiration as
provided in Section 3.3(e); (d) if Borrower violates or does not comply with any of the prOvisions
of Sections 3.8 or 4.2 or Article 5 or 9; (e) if any representation or warranty of Borrower or any
Guarantor, or any general partner, principal or beneficial owner of any of the foregoing, made
herein or in any guaranty, environmental indemnity or any certificate, report, financial statement
or other instrument or document furnished to Lender shall have been false or misleading in any
material respect when made; (f) if Borrower or any Guarantor shall make an assignment for the
benefit of creditors or if Borrower or any Guarantor shall generally not be paying its debts as
they become due; (g) if a receiver, liquidator, or trustee is appointed for Borrower or any
Guarantor or for the Property or any material portion of the assets of Borrower. or of
any Guarantor, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower or any Guarantor or if any proceeding for the dissolution or liquidation
of Borrower or of any Guarantor shall be instituted; however, if such appointment, adjudication,
petition or proceeding was involuntary and not consented to by Borrower or such Guarantor, upon the
same not being discharged, stayed or dismissed within 60 days; (h) if Borrower shall be in default
beyond any applicable notice or cure period under any other mortgage, deed of trust, deed to secure
debt or other security agreement covering any part of the Property whether it be superior or junior
in lien to this Security Instrument; (i) if the Property becomes subject to any mechanic’s,
materialman’s or other lien other than a lien for local real estate taxes and assessments not then
delinquent and the lien shall remain undischarged of record (by payment, bonding or otherwise) for
a period of 30 days after Borrower has first received notice thereof; (j) if any federal tax lien
is filed against the Property and same is not discharged of record within 30 days after Borrower
has first received notice thereof; (k) if within ten days of Lender’s demand therefor Borrower
fails to provide Lender with the written certification and evidence referred to in Section 3..14
hereof or Borrower fails to comply with its obligations under Section 11.11; (I) if any default
beyond any applicable notice or cure period occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of applicable grace periods, if
any; or (m) if for more than ten days after notice from Lender, Borrower shall continue to be in
default under any other term, covenant or condition of the Note, this Security Instrument or the
other Loan Documents in the case of any default which can be cured by the payment of a sum of money
or for 30 days after notice fit:Tr] Lender in the case of any other default, provided that if such
default cannot reasonably be cured within such .30 day period and Borrower shall have commenced to
cure such default within such .30 day period and thereafter diligently and expeditiously proceeds
to cure the same, such 30 day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to cure such default, it being agreed that no such extension shall be
for a period in excess of 60 days.

8 — RIGHTS AND REMEDIES:

8.1 Right to Cure Defaults. Upon the occurrence of any Event of Default or if Borrower fails
to make any payment or to do any act as herein provided, Lender may, but without any obligation to
do so and without notice to or demand on Borrower and without releasing Borrower from any
obligation hereunder, make or do the same in such manner and to such extent as Lender may deem
necessary to protect the security hereof Lender is authorized to enter upon the Property for such
purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the
Property or to foreclose this Security Instrument or collect the Debt, and the cost and expense
thereof (including reasonable attorneys’ fees to the extent permitted by law), whether incurred
before or after a mortgage foreclosure, with interest at the Applicable Interest Rate, shall
constitute a portion of the Debt and shall be due and payable to Lender upon demand. All such costs
and expenses incurred by Lender in remedying such Event of Default or in appearing in, defending,
or bringing any such action or proceeding shall bear interest at the Applicable Interest Rate, for
the period after notice from Lender that such cost or expense was incurred to the date of payment
to Lender. All such costs and expenses incurred by Lender together with interest thereon calculated
at the Applicable Interest Rate shall constitute a portion of the Debt and be secured by this
Security Instrument and the other Loan Documents and shall be immediately due and payable upon
demand by Lender therefor.

8.2 Remedies.

(a) Upon the occurrence of any Event of Default, Borrower agrees that Trustee or Lender may
take such action, without notice or demand, as Lender deems advisable to protect and enforce
Trustee’s or Lender’s rights against Borrower and in and to the Property, including, but not
limited to, the following actions, each of which may be pursued concurrently or otherwise, at such
time and in such order as Lender. may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Trustee or Lender: (a) declare the entire
unpaid Debt to be immediately due and payable; (b) with or without entry, institute proceedings,
        .judicial or otherwise, for the complete or partial foreclosure of this Security Instrument under
any applicable provision of law in which case the Property or any interest therein may be sold for
cash or upon credit in one or more parcels or in several interests or portions and in any order or
manner, any partial foreclosure to be subject to the continuing lien and security interest of this
Security Instrument for the balance of the Debt not then due, unimpaired and without loss of
priority; (c) sell for cash or upon credit the Property or any part thereof and all estate, claim,
demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to
power of sale, judicial decree or otherwise, at one or more sales, as an entirety or in one or more
parcels; (d) institute an action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein, in the Note or in the other Loan Documents; (e)
recover judgment on the Note either before, during or after any proceedings for the enforcement of
this Security Instrument or the other Loan Documents; (f) apply for the appointment of a receiver,
trustee, liquidator or conservator of the Property, without notice and without regard for the
adequacy of the security for the Debt and without regard for the solvency of Borrower, any
Guarantor, Indemnitor or of any Person liable for the payment of the Debt; (g) enter into or upon
the Property, either personally or by its agents, nominees or attorneys, and dispossess Borrower
and its agents and servants therefrom, without liability for trespass, damages or otherwise, and
exclude Borrower and its agents or servants wholly therefrom, and take possession of all books,
records and accounts relating thereto and Borrower agrees to surrender possession of the Property
and of such books, records and accounts to Lender upon demand, and thereupon Lender may exercise
all rights and powers of Borrower with respect to the Property including, without limitation, (I)
the right to use, operate, manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Property and conduct the business thereat; (2) the right to make or
complete any construction, alterations, additions, renewals, replacements and improvements to or on
the Property as Lender deems advisable; and (3) the right to make, cancel, enforce or modify
Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents of the
Property and every part thereof; (11) require Borrower to pay monthly in advance to Lender, or any
receiver appointed to collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Property as may be occupied by Borrower; (i) require Borrower to
vacate and surrender possession of the Property to Lender or to such receiver and, in default
thereof, Borrower may be evicted by summary proceedings or otherwise; (j) apply the receipts from
the Property, any Deposits and interest thereon and/or any unearned Insurance Premiums paid to
Lender upon the surrender of any insurance policies maintained hereof (it being agreed that Lender
shall have the right to surrender such policies upon the occurrence of an Event of Default), to the
payment of the Obligations, in such order, priority and proportions as Lender shall deem
appropriate in its sole discretion; or (k) exercise any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (I) the right to take possession of the Personal Property or any part
thereof, and to take such other measures as Lender may deem necessary for the care, protection and
preservation of the Personal Property, and (2) request Borrower at its expense to assemble the
Personal Property and make it available to Lender at a convenient place acceptable to Lender Any
notice of sale, disposition or other intended action by Lender with respect to the Personal
Property sent to Borrower in accordance with the provisions hereof at least five (5) days prior to
such action, shall constitute commercially reasonable notice to Borrower, Upon any foreclosure or
other sale of the Property pursuant to the terms hereof, Lender may bid for and purchase the
Property and shall be entitled to apply all or any part of the secured indebtedness as a credit
against the purchase price. If Lender elects to sell or offer for sale the Property in such
portions, order and parcels as Lender may determine pursuant to this subsection, with or without
having first taken possession of same, such sale shall be made in accordance with the applicable
provisions of Section 51.002 of the Texas Property Code, as amended, or, if and to the extent such
statute is not then in force, with the applicable requirements, at the time of the sale, of the
successor statute or statutes, if any, governing sales of Texas real property under powers of sale
conferred by deeds of trust relating to the sale of real estate or by Chapter 9 of the UCC relating
to the sale of collateral after default by a debtor (as such laws now exist or may be hereafter
amended or succeeded), or by any other present or subsequent articles or enactments relating to
same,

(b) In the event of a sale, by foreclosure, power of sale, or otherwise, of less than all of
the Property, this Security Instrument shall continue as a lien and security interest on the
remaining portion of the Property unimpaired and without loss of priority Notwithstanding the
provisions of this Section 8.2 to the contrary, if any Event of Default as described in Subsection
71(f) or Subsection 7.1(g) shall occur, the entire unpaid Debt shall be automatically due and
payable, without any further notice, demand or other action by Lender.

(c) Except as prohibited by law, the proceeds of any sale made under or by virtue
of this Section 8.2, together with any other sums which then may be held by Lender under this
Security Instrument, whether under the provisions of this Section 8.2 or otherwise, shall be
applied by Lender to the payment of the Debt in such priority and proportions as Lender in its
discretion shall deem proper.

(d) Lender may adjourn from time to time any sale by it to be made under or by
virtue of this Security Instrument by announcement at the time and place appointed for such sale or
sales being adjourned; and, except as otherwise provided by any applicable provision of law,
Lender, without further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.

8.3 Right of Entry. Lender and its agents shall have the right to enter and inspect the
Property at all reasonable times

8.4 Actions and Proceedings. Lender has the right to appear in and defend any action or
proceeding brought with respect to the Property and to bring any action or proceeding, in the name
and on behalf of Borrower, which Lender, in its discretion, decides should be brought to protect
its interest in the Property,

8.5 Additional Rights of Lender.

(a) The failure of Lender to insist upon strict performance of any term hereof
shall not be deemed to be a waiver of any term of this Security Instrument. Borrower shall not be
relieved of Borrower’s obligations hereunder by reason of (i) the failure of Lender to comply with
any request of Borrower or any Guarantor to take any action to foreclose this Security Instrument
or otherwise enforce any of the provisions hereof or of the Note or the other Loan Documents, (ii)
the release, regardless of consideration, of the whole or any part of the Property, or of any
Person liable for the Debt or any portion thereof, or (iii) any agreement or stipulation by Lender
extending the time of payment or otherwise modifying or supplementing the terms of the Note, this
Security Instrument or the other Loan Documents

(b) It is agreed that the risk of loss or damage to the Property is on Borrower,
and Lender shall have no liability whatsoever for decline in value of the Property, for failure to
maintain the insurance policies, or for failure to determine whether insurance in force is adequate
as to the amount of risks insured,

(c) Trustee or Lender may resort for the payment of the Debt to any other security for the
debt held by Trustee or Lender in such order and manner as Trustee or Lender, in its discretion,
may elect Lender may take action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the right of Trustee or Lender thereafter to foreclose this
Security Instrument. The rights of Lender and Trustee under this Security Instrument shall be
separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No
act of Trustee or Lender shall be construed as an election to proceed under any one provision
herein to the exclusion of any other provision. Lender and Trustee shall not be limited exclusively
to the rights and remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded at law or in equity

8.6 Attorneys’ Fees for Enforcement. Borrower shall pay to Lender on demand any and all
expenses, including legal expenses and attorneys’ fees, incurred or paid by Lender in protecting
its interest in the Property or in collecting any amount payable hereunder or in enforcing its
rights hereunder with respect to the Property, whether or not any legal proceeding is commenced
hereunder or thereunder and whether or not any default or Event of Default shall have occurred and
be continuing, together with interest thereon at the Default Rate (as defined in the Note) from the
date paid or incurred by Lender until such expenses are paid by Borrower.

9 — INDEMNIFICATION:

9.1 Indemnification. Borrower shall protect, defend, indemnify and save harmless Lender and
Trustee from and against any and all Losses, including those arising from the joint, concurrent, or
comparative negligence of Lender, except to the extent any Losses are caused by Lender’s gross
negligence or willful misconduct, by reason of (a) ownership of this Security Instrument, the
Property or any interest therein or receipt of any Rents; (b) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property or any part thereof
or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(c) any use, nonuse or condition in, on or about the Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (d) any
failure on the part of Borrower to perform or comply with any of the terms of this Security
Instrument; (e) performance of any labor or services or the furnishing of any materials or other
property in respect of the Property or any part thereof; (f) the failure of any Person to file
timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of
Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in
connection with this Security Instrument, or to supply a copy thereof in a timely fashion to the
recipient of the proceeds of the transaction in connection with which this Security Instrument is
made; or (g) any failure of the Property to be in compliance with any Applicable Law.. Any amounts
payable to Lender or Trustee by reason of the application of this Section 9.1 shall be secured by
this Security Instrument and the other Loan Documents and shall become immediately due and payable
and shall bear interest at the Applicable Interest Rate from the date loss or damage is sustained
by Lender or Trustee until paid. The obligations and liabilities of Borrower under this Section 9.1
shall survive any termination, satisfaction, assignment, entry of a judgment of foreclosure,
delivery of a deed in a non-judicial foreclosure or delivery of a deed in lieu of foreclosure of
this Security Instrument

9.2 Mortgage and Intangible Tax. Borrower shall, at its sole cost and expense, protect,
defend, indemnify, release and hold harmless Lender and Trustee from and against any and all Losses
imposed upon or incurred by or asserted against Lender or Trustee and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording of this Security
Instrument, the Note or any of the other Loan Documents.

9.3 ERISA Indemnification. Borrower shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless Lender and Trustee from and against any and all Losses,
including those arising from the joint, concurrent, or comparative negligence of Lender, except to
the extent any Losses are caused by Lender’s gross negligence or willful misconduct (including,
without limitation, attorneys’ fees and costs incurred in the investigation, Deed of Trust,
Security Agreement, defense, and settlement of Losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Lender’s sole discretion) that Lender
may incur, directly or indirectly, as a result of a default under Section 114.

10 — WAIVERS:

10.1 Waiver of Counterclaim: Waiver of Trial by Jury. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or
proceeding brought against it by Lender. EACH OF BORROWER AND LENDER WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM
ASSERTED BY LENDER AGAINST BORROWER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS SECURITY INSTRUMENT, THE NOTE, ANY OF THE OTHER LOAN DOCUMENTS OR THE DEBT.

10.2 Marshalling and Other Matters. Borrower hereby waives, to the extent permitted by law,
the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now
or hereafter in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein. Further, Borrower hereby expressly waives any
and all rights of redemption from sale under any order or decree of foreclosure of this Security
Instrument on behalf of Borrower, on behalf of each and every Person acquiring any interest in or
title to the Property subsequent to the date of this Security Instrument and on behalf of all
Persons to the extent permitted by applicable law.

10.3 Sole Discretion of Lender. Wherever pursuant to this Security Instrument, Lender
exercises any right given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of
Lender and shall be final and conclusive, except as may be otherwise expressly and specifically
provided herein.

11 — MISCELLANEOUS PROVISIONS:

11.1 Notices. All notices or other written communications hereunder shall be deemed to have
been properly given (i) upon delivery, if delivered in person, (ii) one Business Day (as defined
below) after having been deposited for overnight delivery with any reputable overnight courier
service, (iii) three Business Days after having been deposited in any post office or mail
depository regularly maintained by the U S Postal Service and sent by registered or certified mail,
postage prepaid, return receipt requested, or (iv) if by telecopy, upon transmittal to the
recipient’s telecopy number. All such communications shall be mailed, sent or delivered, addressed
to the party for whom it is intended at its address set forth below.

	 	 	 
	If to Borrower:

	 	El Dorado Apartments, LLC P.O. Box 400

400 North State Street

Fountain Green, Utah 84632

Attention: Wendell A Jacobson

Telecopy: (435) 445-3507
	If to Lender:

	 	Royal Bank of Canada

c/o Midland Loan Services, Inc.

10851 Mastin, Suite 700

Overland Park, Kansas 66210

Attention: Director of Servicing

Telecopy: (913) 253-9001
	With a copy to:

	 	Royal Bank of Canada

New York Branch

One Liberty Plaza, .3rd Floor

New York, New York 10006-1404

Attention: Manager, Loans Administration

Telecopy: (212) 428-2372

or addressed as either party may from time to time designate by written notice to the other party.

11.2 Authority; Legal Status; Not a Foreign Person. Borrower has full power, authority and
right to execute, deliver and perform its obligations pursuant to this Security Instrument, to
mortgage, give, grant, bargain, sell, convey, confirm, hypothecate and assign the Property
pursuant to the terms hereof and to keep and observe all of the terms of this Security Instrument
on Borrower’s part to be performed. Borrower (a) is duly organized, validly existing and in good
standing under the laws of its state of organization or incorporation; (b) is duly qualified to
transact business and is in good standing in the State where the Property is located; and (c) has
all necessary approvals, governmental and otherwise, and full power and authority to own the
Property and carry on its business as now conducted and proposed to be conducted Borrower now has
and shall continue to have the full right, power and authority to operate and lease the Property,
to encumber the Property as provided herein and to perform all of the other obligations to be
performed by Borrower under the Note, this Security Instrument and the other Loan Documents,
Borrower represents and warrants that Borrower is not a “foreign person” within the meaning of
1445(f)(3) of the Internal Revenue Code of 1986, as amended and the related Treasury Department
regulations, including temporary regulations.

11.3 No Oral Change. This Security Instrument, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by
the party against whom enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.

11.4 Liability. If Borrower consists of more than one Person, the obligations and liabilities
of each such person hereunder shall be joint and several. This Security Instrument shall be
binding upon and inure to the benefit of Borrower and Lender and their respective successors and
assigns forever.

11.5 Severability. Wherever possible, each provision of this Security Instrument shall be
interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Security Instrument is held to be illegal, invalid or unenforceable in any
respect, such provision shall be fully severable and shall be ineffective to the extent of such
illegality, invalidity or unenforceability without invalidating the remainder of such provision or
the remaining provisions of this Security Instrument

11.6 Headings, etc. The headings and captions of various sections of this Security Instrument
are for convenience of reference only and are not to be construed as defining or limiting, in any
way, the scope or intent of the provisions hereof,

11.7 Duplicate Originals; Counterparts. This Security Instrument may be executed in any
number of duplicate originals and each duplicate original shall be deemed to be an original, This
Security Instrument may be executed in several counterparts, each of which counterparts shall be
deemed an original instrument and all of which together shall constitute a single Security
Instrument.

11.8 Number and Gender. Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and
pronouns shall include the plural and vice versa

11.9 Subrogation. If any or all of the proceeds of the Note have been used to extinguish,
extend or renew any indebtedness heretofore existing against the Property, then, to the extent of
the funds so used, Lender shall be subrogated to all of the rights, claims, liens, titles, and
interests existing against the Property heretofore held by, or in favor of, the holder of such
indebtedness, and such former rights, claims, liens, titles, and interests, if any, are not waived
but rather are continued in full force and effect in favor of Lender and are merged with the lien
and security interest created herein as cumulative security for the payment and performance of the
Obligations,

11.10 Definitions. Unless the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, words used in this Security Instrument may be used interchangeably
in singular or plural form and the word “Borrower” shall mean “each Borrower and any subsequent
owner or owners of the Property or any part thereof or any interest therein”, the word “Lender”
shall mean “Lender and its successors and any subsequent holder of the Note”, the word “Note”
shall mean “the Note and any other evidence of indebtedness secured by this Security Instrument”,
the word “Person” shall include an individual, corporation, partnership, trust, unincorporated
association, government, governmental authority, and any other entity, the word “Property” shall
include any portion of the Property and any interest therein and the phrases “attorneys’ fees”,
“legal fees” and “counsel fees” shall include any and all reasonable attorneys’, paralegal and law
cleric fees and disbursements, including, but not limited to, fees and disbursements at the
pre-trial, trial and appellate levels incurred or paid by Lender in protecting its interest in the
Property, the Leases and the Rents and enforcing its rights hereunder Whenever the context may
require, any pronouns used herein shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural and vice versa.

11.11 Transfer of Loan. Borrower acknowledges that Lender and its successors and assigns may
(i) sell the Note, this Security Instrument and the other Loan Documents and any and all servicing
rights thereto to one or more investors as a whole loan, (ii) participate the Loan to one or more
investors, (iii) deposit the Note, this Security Instrument and the other Loan Documents with a
trust, which trust may sell certificates to investors evidencing an ownership interest in the trust
assets, or (iv) otherwise sell the Loan or interest therein to investors (the transactions referred
to in clauses (i) through (iv) are herein each referred to as a “Secondary Market Transaction”). In
connection with a Secondary Market Transaction, Lender and its successors and assigns may, at any
time, issue mortgage pass through certificates or other securities evidencing a beneficial interest
in a rated or unrated public offering or private placement (the “Securities”). Lender may forward
to each purchaser, transferee, assignee, servicer, participant, investor in such Securities or any
Rating Agency rating such Securities (all of the foregoing entities collectively referred to as the
“investor”) and each prospective Investor, all documents and information which Lender now has or
may hereafter acquire relating to the Debt and to Borrower, any Guarantor and the Property, whether
furnished by Borrower, any Guarantor or otherwise, as Lender determines necessary or desirable.
Borrower agrees to cooperate with Lender in connection with any transfer made or any Securities
created pursuant to this Section Borrower shall also promptly furnish and Borrower consents to
Lender furnishing to such Investors or such prospective Investors or any Rating Agency any and all
available information concerning the Property, the Leases, the financial condition of Borrower and
any Guarantor as may be requested by Lender, any Investor, any prospective Investor or any Rating
Agency (including, but not limited to, copies of information previously supplied to Lender) in
connection with any sale, transfer or participation interest. In addition to any other obligations
Borrower may have under this Section, Borrower shall execute such amendments to the Loan Documents
and Borrower’s organizational documents as may be requested by the holder of the Note or any
Investor to effect the assignment of the Note and the other Loan Documents and/or issuance of
Securities; provided, however, that Borrower shall not be required to modify or amend any Loan
Document if the overall effect of such modification or amendment would modify or amend any material
economic term of the Note or the other Loan Documents

11.12 Promotional Materials. Borrower authorizes Lender to issue press releases,
advertisements and other marketing materials in connection with Lender’s own promotional
activities, including in connection with a Secondary Market Transaction. Such materials may
describe the Loan terms and Lender’s participation therein in the Loan. All references to Lender
contained in any press release, advertisement or marketing material prepared by Borrower shall be
approved in writing by Lender in advance of issuance

11.13 Replacement Documents. Upon receipt of an affidavit of an officer of Lender as to the
loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of
public record, and, in the case of any such mutilation, upon surrender and cancellation of such
Note or other Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other Loan
Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document,
in the same principal amount thereof and otherwise of like tenor.

11.14 Governing Law. This Security Instrument shall be governed by the laws of the State in
which the Land is located, without regard to rules pertaining to conflicts of law.

11.15 Entire Agreement. The Note, this Security Instrument and the other Loan Documents
constitute the entire understanding and agreement between Borrower and Lender with respect to the
transactions arising in connection with the Debt and supersede all prior written or oral
understandings and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security Instrument and the
other Loan Documents, there are not, and were not, made, and no Persons are or were authorized by
Lender to make, any representations, understandings, stipulations, agreements or promises, oral or
written, with respect to the transaction which is the subject of the Note, this Security
Instrument and the other Loan Documents

11.16 The Trustee’s Fees. Borrower shall pay all reasonable costs, fees and expenses incurred
by the Trustee and the Trustee’s agents and counsel in connection with the performance by the
Trustee of the Trustee’s duties hereunder and all costs, fees and expenses shall be secured by
this Security Instrument.

11.17 Certain Rights. With the approval of Lender, the Trustee shall have the right to take
any and all of the following actions: (i) to select, employ, and advise with counsel (who may be,
but need not be, counsel for Lender) upon any matters arising hereunder, including the
interpretation of the Note, this Security Instrument or the other Loan Documents, and shall be
fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of
the trusts and powers hereof and to perform any duty hereunder either directly or through its
agents or attorneys, (iii) to select and employ, in and about the execution of its duties
hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either
corporate or individual, not regularly in the employ of the Trustee, and the Trustee shall not be
answerable for any act, default, negligence, or misconduct of any such accountant, engineer or
other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of
judgment or act done by the Trustee in good faith, or be otherwise responsible or accountable
under any circumstances whatsoever, except for the Trustee’s gross negligence or bad faith, and
(iv) any and all other lawful action as Lender may instruct the Trustee to take to protect or
enforce Lender’s rights hereunder, The Trustee shall not be personally liable in case of entry by
the Trustee, or anyone entering by virtue of the powers herein granted to the Trustee, upon the
Property for debts contracted for or liability or damages incurred in the management or operation
of the Property. The Trustee shall have the right to rely on any instrument, document, or
signature authorizing or supporting an action taken or proposed to be taken by the Trustee
hereunder, believed by the Trustee in good faith to be genuine. The Trustee shall be entitled to
reimbursement for actual expenses incurred by the Trustee in the performance of the Trustee’s
duties hereunder and to reasonable compensation for such of the Trustee’s services hereunder as
shall be rendered.

11.18 Retention of Money. All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required by applicable law)
and the Trustee shall be under no liability for interest on any moneys received by the Trustee
hereunder.

11.19 Perfection of Appointment. Should any deed, conveyance, or instrument of any nature be
required from Borrower by any Trustee or substitute trustee to more fully and certainly vest in and
confirm to the Trustee or substitute trustee such estates rights, powers, and duties, then, upon
request by the Trustee or substitute trustee, any and all such deeds, conveyances and instruments
shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or
filed by Borrower.

11.20 Succession Instruments. Any substitute trustee appointed pursuant to any of the
provisions hereof shall, without any further act, deed, or conveyance, become vested with all the
estates, properties, rights, powers, and trusts of its predecessor in the rights hereunder with
like effect as if originally named as the Trustee herein; but nevertheless, upon the written
request of Lender or of the substitute trustee, the Trustee ceasing to act shall execute and
deliver any instrument transferring to such substitute trustee, upon the trusts herein expressed,
all the estates, properties, rights, powers, and trusts of the Trustee so ceasing to act, and shall
duly assign, transfer and deliver any of the property and moneys held by such Trustee to the
substitute trustee so appointed in the Trustee’s place

11.21 Reliance of Trustee. As to all matters concerning the existence of defaults hereunder
and the amount of the Debt subject to the Note and secured hereby, as well as similar or related
matters, the Trustee is hereby authorized by Borrower to rely conclusively upon, without further
inquiry, the affidavit of any officer of Lender.

[INTENTIONALLY LEFT BLANK]

2

IN WITNESS WHEREOF, this Security Instrument has been executed as an instrument under
seal by Borrower the day and year first above written

BORROWER:

EL DORADO APARTMENTS, LLC, a Texas limited
liability company

By: /s/ Wendell A. Jacobson

	 	 	Wendell A. Jacobson, Manager

STATE OF Utah

COUNTY OF Sanpete

This instrument was acknowledged before me this 24th-day of November 2006, by
Wendell A Jacobson, Manager of EL DORADO APARTMENTS, LLC, a Texas limited liability company on

behalf of said limited liability company.

/s/ Jenny Bailey

Notary Public in and for the State of Utah

Jenny Bailey

Print name of Notary

My Commission Expires: 5-26-08

[Seal] Jenny J. Bailey

[Seal] Notary Public, State of Utah

[Seal] My Commission Expires

[Seal] May 26, 2008

[Seal] 400 North State St., Fountain Green, UT 84632

3EX-10.7

(El Dorado)

(99-1069656)

THIS INSTRUMENT CONTAINS INDEMNIFICATION PROVISIONS AND

PROVISIONS LIMITING LENDER’S LIABILITY FOR NEGLIGENCE

LIMITED GUARANTY

	 	 	 
	
 
	 	November 1, 2007
	THE BANK OF NEW YORK TRUST COMPANY,

	NATIONAL ASSOCIATION,

	 	

	AS TRUSTEE FOR THE REGISTERED

	HOLDERS OF MORGAN STANLEY

	 	

	CAPITAL I INC., COMMERCIAL

	MORTGAGE PASS-THROUGH CERTIFICATES,

	SERIES 2007-IQ14, having an address at

	c/o Capmark Finance Inc.

116 Welsh Road

	 	

	Horsham, Pennsylvania 19044

	Attention: Servicing Department (99-1069656)

	RE:

	 	Loan in the original principal amount of THIRTEEN MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS

($13,600,000.00) (the “Loan”) currently held by THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION,

AS TRUSTEE FOR THE REGISTERED HOLDERS OF MORGAN STANLEY CAPITAL I INC., COMMERCIAL MORTGAGE PASS-THROUGH

CERTIFICATES, SERIES 2007-IQ14 (“Lender”), assumed by APARTMENT REIT VILLAS OF EL DORADO, LLC, a Delaware

limited liability company (“Borrower”), secured by a Deed of Trust, Security Agreement, Fixture Financing

Statement and Assignment of Leases and Rents (the “Security Instrument”) encumbering real property

commonly known as Villas of El Dorado (the “Property”)

Ladies and Gentlemen:

FOR VALUE RECEIVED, and to induce Lender to consent to the assumption of the Loan by Borrower
pursuant to that certain Agreement of Assumption and Modification of Security Instrument and Other
Loan Documents, dated as of the date hereof (the “Assumption Agreement”), such Loan evidenced by
that certain promissory note dated November 29, 2006 made by El Dorado Apartments, LLC, a Texas
limited liability company (“Original Borrower”) to the order of Royal Bank of Canada, a Canadian
chartered bank (“Original Lender”) in the original principal amount of THIRTEEN MILLION SIX HUNDRED
THOUSAND AND NO/100 DOLLARS ($13,600,000.00) (the “Note”) and secured by the Security Instrument
and by certain other Loan Documents (as defined in the Security Instrument), the undersigned, NNN
APARTMENT REIT, INC., a Maryland corporation having an address at 1551 N. Tustin Avenue, Suite 300,
Santa Ana, California 92705 (hereinafter individually referred to as “Guarantor”) hereby enters
into this Limited Guaranty (“Guaranty”) in favor of Lender and hereby absolutely and
unconditionally guarantees to Lender the prompt and unconditional payment of the Guaranteed
Obligations (hereinafter defined) of Borrower. Capitalized terms used herein and not specifically
defined herein shall have the respective meanings ascribed to those terms in the Security
Instrument.

Guarantor, as a primary obligor and not merely as a surety, for consideration received, the
receipt and sufficiency of which is hereby acknowledged, and at the request of Borrower, hereby
absolutely, unconditionally and irrevocably guarantees AND PROMISES TO PAY TO Lender or order, on
demand, in lawful money of the United States of America, in immediately available funds, all sums
for which Borrower is now or hereafter liable to Lender with respect to the matters specifically
set forth in Sections 9.1 and 9.2 of the Note (the “Guaranteed Obligations”).

It is expressly understood and agreed that this is a continuing guaranty and that the
obligations of Guarantor hereunder are and shall be absolute under any and all circumstances,
without regard to the validity, regularity or enforceability of the Note, the Assumption Agreement,
the Security Instrument or the other Loan Documents. Guarantor hereby acknowledges having received
and reviewed true copies of the Note, the Security Instrument and the other Loan Documents.

Any and all present and future debts and obligations of Borrower to Guarantor are hereby
waived and postponed in favor of and subordinated to the full payment and performance of all
present and future debts and obligations of Borrower to Lender. Until payment in full of the Debt
(as such term is defined in the Security Instrument) (including interest accruing on the Note after
the commencement of a proceeding by or against Borrower under the Bankruptcy Reform Act of 1978, as
amended, 11 U.S.C. Sections 101 et seq., and the regulations adopted and promulgated pursuant
thereto (collectively, the “Bankruptcy Code”), which interest the parties agree shall remain a
claim that is prior and superior to any claim of Guarantor notwithstanding any contrary practice,
custom or ruling in cases under the Bankruptcy Code generally), Guarantor agrees not to accept any
payment or satisfaction of any kind of indebtedness of Borrower to Guarantor and hereby assigns
such indebtedness to Lender, including the right to file proof of claim and to vote thereon in
connection with any such proceeding under the Bankruptcy Code, including the right to vote on any
plan of reorganization. Further, if Guarantor shall comprise more than one person, firm or
corporation, Guarantor agrees that until such payment in full of the Debt, (a) no one of them shall
accept payment from the others by way of contribution on account of any payment made hereunder by
such party to Lender, (b) no one of them will take any action to exercise or enforce any rights to
such contribution, and (c) if any of Guarantor should receive any payment, satisfaction or security
for any indebtedness of Borrower to any of Guarantor or for any contribution by the others of
Guarantor for payment made hereunder by the recipient to Lender, the same shall be delivered to
Lender in the form received, endorsed or assigned as may be appropriate for application on account
of, or as security for, the Debt and until so delivered, shall be held in trust for Lender as
security for the Debt.

Guarantor agrees that, with or without notice or demand, Guarantor will reimburse Lender, to
the extent that Borrower does not make such reimbursement, for all expenses (including attorneys’
fees) incurred by Lender in connection with collection of the Guaranteed Obligations or any portion
thereof or enforcement of this Guaranty.

Lender may apply all moneys available to Lender for application in payment or reduction of the
Debt, in such manner and in such amounts and at such time or times and in such order and priority
as Lender may see fit, to the payment or reduction of such portion of the Debt as Lender may elect

Guarantor hereby waives: notice of acceptance hereof, presentment and protest of any
instrument and notice thereof, notice of default and all other notices to which Guarantor might
otherwise be entitled; any and all defenses, including, without limitation, any and all defenses
which Borrower or any other party may have to the fullest extent permitted by law; and any rights
to any homestead exemptions on record or by operation of law as of the date of this Guaranty
respecting any property owned by Guarantor.

Guarantor further agrees that the validity of this Guaranty and the obligations of Guarantor
hereunder shall in no way be terminated, affected or impaired by reason of (a) the assertion by
Lender of any rights or remedies which it may have under or with respect to the Note, the Security
Instrument, or the other Loan Documents, against any person obligated thereunder or against the
owner of the Property, (b) any failure to file or record any of such instruments or to take or
perfect any security intended to be provided thereby, (c) the release or exchange of any property
covered by the Security Instrument or other collateral for the Loan, (d) Lender’s failure to
exercise, or delay in exercising, any such right or remedy or any right or remedy Lender may have
hereunder or in respect of this Guaranty, or (e) the commencement of a case under the Bankruptcy
Code by or against any person obligated under the Note, the Security Instrument or the other Loan
Documents, or the death of any Guarantor, or (f) any payment made on the Debt or any other
indebtedness arising tinder the Note, the Security Instrument or the other Loan Documents, whether
made by Borrower or Guarantor or any other person or entity, which is required to be refunded
pursuant to any bankruptcy or insolvency law; it being understood that no payment so refunded shall
he considered as a payment of any portion of the Debt, nor shall it have the effect of reducing the
liability of Guarantor hereunder, it is further understood, that if Borrower shall have taken
advantage of, or be subject to the protection of, any provision in the Bankruptcy Code, the effect
of which is to prevent or delay Lender from taking any remedial action against Borrower, including
the exercise of any option Lender has to declare the Debt due and payable on the happening of any
default or event by which under the terms of the Note, the Security Instrument or the other Loan
Documents, the Debt shall become due and payable, Lender may, as against Guarantor, nevertheless,
declare the Debt due and payable and enforce any or all of its rights and remedies against
Guarantor provided for herein.

This is a continuing guaranty of payment and not of collection and upon any default of
Borrower under the Note, the Security Instrument or the other Loan Documents, Lender may, at its
option, proceed directly and at once, without notice, against Guarantor to collect and recover the
full amount of the liability hereunder or any portion thereof, without proceeding against Borrower
or any other person or entity, or foreclosing upon, selling, or otherwise disposing of or
collecting or applying against the Debt any of the Property or other collateral for the Loan.
Guarantor hereby waives the pleading of any statute of limitations as a defense to the obligation
hereunder.

Guarantor further covenants that this Guaranty shall remain and continue in full force and
effect as to any modification, extension or renewal of the Note, the Security Instrument, or any of
the other Loan Documents, that Lender shall not be under a duty to protect, secure or insure any
security or lien provided by the Security Instrument or other such collateral, and that other
indulgences or forbearances may be granted under any or all of such documents, all of which may be
made, done or suffered without notice to, or further consent of, Guarantor.

Guarantor and its representative executing below have full power, authority and legal right to
execute this Guaranty and to perform all its obligations under this Guaranty.

All understandings, representations and agreements heretofore had with respect to this
Guaranty are merged into this Guaranty which alone fully and completely expresses the agreement of
Guarantor and Lender.

This Guaranty may be executed in one or more counterparts by some or all of the parties
hereto, each of which counterparts shall be an original and all of which together shall constitute
a single agreement of Guaranty. The failure of any party hereto to execute this Guaranty, or any
counterpart hereof, shall not relieve the other signatories from their obligations hereunder.

This Guaranty may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Lender or Borrower, but only by an
agreement in writing signed by the party against whom enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.

Lender’s delay or omission in exercising any of Lender’s rights and remedies shall not
constitute a waiver of those rights and remedies, nor shall Lender’s waiver of any right or remedy
operate as a waiver of any other right or remedy available to Lender. Lender’s waiver of any right
or remedy on any one occasion shall not be considered a waiver of same on any subsequent occasion,
nor shall this be considered to be a continuing waiver.

The term “Lender” as used in this Guaranty shall mean and include the party named above as
Lender and its successors and assigns, in whose favor the provisions of this Guaranty shall also
inure. The term “Guarantor” as used in this Guaranty shall mean and include the party and/or
parties named above as Guarantor and their respective heirs, executors, administrators, legal
representatives, successors and assigns, all of whom shall be bound by the provisions of this
Guaranty. The term “Borrower” as used in this Guaranty shall mean and include the party referenced
above as Borrower and its successors and assigns as permitted in accordance with the terms of the
Note, the Security Instrument and other Loan Documents.

This Guaranty, all acts and transactions hereunder, and the rights and obligations of the
parties hereto shall be governed, construed and interpreted according to the laws of the State
where the Property is located.

Wherever possible, each provision of this Guaranty shall be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision of this Guaranty is held to be
illegal, invalid or unenforceable in any respect, such provision shall be fully severable and shall
be ineffective to the extent of such illegality, invalidity or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of this Guaranty.

Guarantor irrevocably submits to the nonexclusive jurisdiction of any federal or state court
sitting in the state where the Property is located over any suit, action or proceeding arising out
of or relating to this Guaranty. Guarantor irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such Court and any claim that the
same has been brought in an inconvenient forum. Guarantor irrevocably appoints the Secretary of
State of the state where the Property is located as its authorized agent to accept and acknowledge
on its behalf any and all process which may be served in any such suit, action or proceeding,
consents to such process being served (i) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to Guarantor’s address shown above or as notified
to the Lender in writing and (ii) by serving the same upon such agent, and agrees that such service
shall in every respect be deemed effective service upon Guarantor.

For purposes of this Guaranty, the term “attorneys’ fees” shall include any and all reasonable
attorneys’, paralegal and law clerk fees and disbursements, including, but not limited to, fees and
disbursements at the pre-trial, trial and appellate levels incurred or paid by Lender in protecting
its interest in the Property, the Leases (as defined in the Security Instrument) and the Rents (as
such term is defined in the Security Instrument) and enforcing its rights hereunder.

EACH OF GUARANTOR AND, BY ITS ACCEPTANCE HEREOF, LENDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVES ANY AND ALL RIGHTS TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS GUARANTY, THE GUARANTEED
OBLIGATIONS, ALL MATTERS CONTEMPLATED HEREBY AND ALL DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
GUARANTOR CERTIFIES THAT NEITHER LENDER NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.

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IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of the date first above
set-forth.

GUARANTOR:

NNN APARTMENT REIT, INC., a Maryland corporation

	 	 	 	 	 
	By:	 	/s/ S. Jay Olander
	
 
	 	Name:

Title:
	 	S. Jay Olander

Chief Executive Officer

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