Document:

EX-10.4

	 	 	 	 	 
	RECORDING REQUESTED BY AND
	 	(El Dorado)

	WHEN RECORDED MAIL TO:
	 		(99-1069656	)

Ballard Spahr Andrews & Ingersoll, LLP

601 13th Street, N.W., Suite 1000 South

Washington, D.C. 20005-3607

Attention: John W. Gutowski, Esq.

Space Above This Line For Recorder’s Use

AGREEMENT OF ASSUMPTION AND

MODIFICATION OF SECURITY INSTRUMENT AND OTHER LOAN DOCUMENTS

by

EL DORADO APARTMENTS, LLC, a Texas limited liability company

(“Transferor”)

and

WENDELL A. JACOBSON, an Individual

(“Original Guarantor”)

and

APARTMENT REIT VILLAS OF EL DORADO, LLC, a Delaware limited liability company

(“New Borrower”)

and

NNN APARTMENT REIT, INC., a Maryland corporation

(“New Guarantor”)

and

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”)

Dated as of November 1, 2007

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 ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL

PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR

DRIVERS LICENSE NUMBER

1

THIS AGREEMENT OF ASSUMPTION AND MODIFICATION OF SECURITY INSTRUMENT AND OTHER LOAN
DOCUMENTS (“Agreement”) made as of the 1st day of November, 2007, by and among EL DORADO
APARTMENTS, LLC, a Texas limited liability company, with an address at P.O. Box 400, 400 North
State Street, Fountain Green, Utah 84632 (“Transferor”), WENDELL A. JACOBSON having an address at
P.O. Box 400, 400 North State Street, Fountain Green, Utah 84632 (“Original Guarantor”), APARTMENT
REIT VILLAS OF EL DORADO, LLC, a Delaware limited liability company, having an address at 1551 N.
Tustin Avenue, Suite 300, Santa Ana, California 92705, having a phone number of 877-888-7348 and
facsimile number of 714-667-6860 (“New Borrower”), NNN APARTMENT REIT, INC. a Maryland corporation,
having an address at 1551 N. Tustin Avenue, Suite 300, Santa Ana, California 92705 (“New
Guarantor”), 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 (“Lender”).

RECITALS

A. Lender is the present Lender under that certain Deed of Trust, Security Agreement, Fixture
Financing Statement and Assignment of Leases and Rents in the original principal sum of
$13,600,000.00, dated November 29, 2006, given by Transferor for the benefit of Royal Bank of
Canada, a Canadian chartered bank (“Original Lender”), as original lender, and recorded in Document
No. 20061129001688770 in the official records of Collin County, Texas (as amended, the “Mortgage”),
which Mortgage encumbers the real property described in Exhibit A attached hereto and the
improvements thereon and was given in connection with that certain first lien mortgage loan in the
amount of $13,600,000 made by Original Lender to Transferor (the “Loan”).

B. Lender is the owner and holder of that certain Promissory Note dated November 29, 2006
given by Transferor to Original Lender in the original principal sum of $13,600,000 (the “Note”)
which Note evidences the Loan, and is secured by, among other things, the Mortgage.

C. The Original Lender transferred Loan to Lender pursuant to that certain assignment recorded
in the official records of Collin County, Texas. The current servicer of the Loan is Capmark
Finance Inc., a California corporation (“Servicer”), acting as Master Servicer, pursuant to that
certain Pooling and Servicing Agreement dated May 1, 2007.

D. Original Guarantor is liable for Transferor’s obligations under the Note, Mortgage and all
other documents executed in connection with the Loan including, without limitation, those documents
listed in Exhibit B attached hereto and by this reference incorporated herein
(collectively, the “Loan Documents”) pursuant to the terms of (i) that certain Limited Guaranty
dated as of November 29, 2006, executed by Original Guarantor for the benefit of Original Lender
(the “Existing Guaranty”) and (ii) that certain Environmental Indemnity Agreement dated as of
November 29, 2006, executed by Original Guarantor and Transferor for the benefit of Original Lender
(the “Existing Environmental Indemnity”).

E. Transferor and New Borrower have requested (i) the consent of Lender to the transfer of the
Property (as that term is defined in the Mortgage) from Transferor to New Borrower, (ii) the
consent of Lender to the assumption by the New Borrower and New Guarantor of the obligations of the
Transferor and Original Guarantor, respectively, under the Loan Documents, and (iii) the release of
Transferor and Original Guarantor from all liability for the payment of the Loan and the
performance of the terms and conditions of the Loan Documents.

F. Lender has agreed to consent to the transfer of the Property, the assumption of the Loan
and to the release of Transferor and Original Guarantor provided, as a condition precedent to such
consent by Lender and in consideration of such consent, Transferor, Original Guarantor, New
Guarantor and New Borrower shall agree in the manner set forth herein that, (a) New Borrower shall
assume the obligations of Transferor to pay the indebtedness evidenced by the Note, (b) New
Borrower shall assume the Transferor’s liability and obligation for the performance of all terms
and conditions of the Note, the Mortgage, and all other Loan Documents, (c) New Guarantor shall
assume all liability of Original Guarantor under the Existing Guaranty and the Existing
Environmental Indemnity pursuant to a new guaranty and new environmental agreement to be entered
into of even date herewith and (d) the Loan Documents shall be modified in the manner set forth
herein.

AGREEMENT

NOW, THEREFORE, in pursuance of said agreement and, in consideration of Ten Dollars ($10.00),
the mutual covenants and agreements contained herein, and other valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Assumption of Obligations. New Borrower hereby assumes and agrees to pay all sums
owed under the Note, the Mortgage and the other Loan Documents, including all principal and
interest due under the terms of the Note as the same may be amended pursuant to the terms hereof,
and New Borrower hereby assumes and covenants to perform all the terms and conditions of the Note,
the Mortgage, and the other Loan Documents, as all or any of the same may be amended pursuant to
the terms hereof, and agrees to be personally bound for such performance to the same extent as if
said Loan Documents had originally been executed by New Borrower, notwithstanding any failure of
Transferor to perform on warranties or covenants running from Transferor to New Borrower.
Transferor also hereby assigns, transfers, sells, and sets over unto New Borrower all of
Transferor’s right, title and interest in and to the Escrow Accounts (as defined in Section 3(c)
below) held by Servicer. New Borrower accepts the assignment of Transferor’s right, title and
interest in and to the Escrow Accounts, and assumes all of the obligations of Transferor under the
Mortgage, pursuant to which such Escrow Accounts are maintained to the extent that such obligations
arise from and after the date hereof.

2. Assumption of Guaranteed Obligations. New Guarantor hereby assumes all obligations
under the provisions of the Existing Guaranty by entering into that certain Guaranty of even date
herewith in favor of Lender (the “New Guaranty”) and all obligations under the provisions of the
Existing Environmental Indemnity by entering into that certain Environmental Indemnity Agreement of
even date herewith in favor of Lender (the “New Environmental Indemnity”).

3. Transferor’s and Original Guarantor’s Representations and Warranties. Transferor
and Original Guarantor represent and warrant to Lender and Servicer as of the date of this
Agreement that to Transferor’s and Original Guarantor’s best knowledge:

	 	(a)	 	The Note has an unpaid principal balance of $13,600,000.00, and
prior to default bears interest at the rate of five and sixty-eight hundredths
percent (5.68%) per annum (the “Interest Rate”);

	 	(b)	 	The Note requires monthly payments of interest only for each
Monthly Payment Date (as defined in the Note), until the December 1, 2016
payment date (the “Maturity Date”);

	 	(c)	 	The escrows and reserves for the loan are as follows:
$292,615.20 for real estates taxes, $41,330.00 for reserves and $13,421.70 for
property insurance (collectively, the “Escrow Accounts”);

	 	(d)	 	The Mortgage is a valid first lien on the Property for the full
unpaid principal amount of the Loan and all other amounts stated in the
Mortgage and the other Loan Documents;

	 	(e)	 	There are no defenses, offsets or counterclaims to the Note,
the Mortgage or the other Loan Documents;

	 	(f)	 	There are no defaults by Transferor or Original Guarantor under
the provisions of the Note, the Mortgage or the other Loan Documents;

	 	(g)	 	All provisions of the Note, the Mortgage and other Loan
Documents are in full force and effect;

	 	(h)	 	There are no subordinate liens of any kind covering or relating
to the Property, nor are there any mechanics’ liens or liens for unpaid taxes
or assessments encumbering the Property, nor has notice of a lien or notice of
intent to file a lien been received;

	 	(i)	 	No consent, which has not been obtained, to the transfer of the
Property to New Borrower is required under any agreement to which Transferor is
a party, including, without limitation, under any trust agreement, lease,
construction agreement, operating or management agreement or deed of trust,
mortgage or security instrument (other than the Loan Documents); and

	 	(j)	 	Transferor and Original Guarantor have no knowledge that any of
the representations made by New Borrower in Section 4 below are not true and
correct.

Transferor and Original Guarantor understand and intend that Lender will rely on the
representations and warranties contained herein.

4. New Borrower Representations. New Borrower represents and warrants to Lender and
Servicer as of the date of this Agreement that:

	 	(a)	 	New Borrower is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has full power and
authority to own, lease and operate the Property, and to conduct its affairs as
now being conducted and as proposed to be conducted;

	 	(b)	 	New Borrower has full power and authority to enter into,
execute, deliver and carry out this Agreement and the other Loan Documents to
which it is a party, by assumption or otherwise, and to perform its obligations
hereunder and thereunder and all such actions have been duly authorized by all
necessary corporate action on its part;

	 	(c)	 	This Agreement and the other documents executed in connection
herewith have been duly executed and delivered by New Borrower, and the
execution, delivery and performance of the respective terms thereof will not
violate, conflict with, or constitute any default under any law, governmental
regulation, the governing instruments of New Borrower, or any other agreement
or instrument binding upon New Borrower;

	 	(d)	 	No consent, approval, or authorization of, or registration or
declaration with, any governmental authority is required in connection with the
execution, delivery and performance by New Borrower of this Agreement and the
other documents executed in connection herewith, and no other consent, which
has not been obtained, is required to the transfer of the Property to New
Borrower, or the assumption by New Borrower of the obligations under the Loan
Documents, under any agreement to which New Borrower is a party;

	 	(e)	 	This Agreement and the other Loan Documents to which it is a
party, by assumption or otherwise, constitute legal, valid and binding
obligations of New Borrower enforceable against it in accordance with their
respective terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally;

	 	(f)	 	New Borrower’s purchase of the Property has been conducted as
an arms-length transaction with Transferor;

	 	(g)	 	New Borrower is purchasing the property with funds that are a
capital contribution and are not secured directly or indirectly by an interest
in the New Borrower or the Property; and

	 	(h)	 	New Borrower has no knowledge that any of the representations
made by Transferor and Original Guarantor in Section 3 above are not true and
correct.

New Borrower understands and intends that Lender will rely on the representations and warranties
contained herein.

5. New Guarantor Representations. New Guarantor represents and warrants to Lender and
Servicer as of the date of this Agreement that:

	 	(a)	 	New Guarantor is duly organized, validly existing and in good
standing under the laws of the State of Maryland, and has full power and
authority to enter into, execute, deliver and carry out this Agreement and the
other Loan Documents to which it is a party, by assumption or otherwise, and to
perform its obligations hereunder and thereunder;

	 	(b)	 	This Agreement and the other documents executed in connection
herewith have been duly executed and delivered by New Guarantor, and the
execution, delivery and performance of the respective terms thereof will not
violate, conflict with, or constitute any default under any law, governmental
regulation, the governing instruments of New Guarantor, or any other agreement
or instrument binding upon New Guarantor;

	 	(c)	 	No consent, approval, or authorization of, or registration or
declaration with, any governmental authority is required in connection with the
execution, delivery and performance by New Guarantor of this Agreement and the
other documents New Guarantor has executed in connection herewith, and no other
consent, which has not been obtained, is required in connection with New
Guarantor’s execution and delivery of any other agreement to which New
Guarantor is a party;

	 	(d)	 	This Agreement and the other Loan Documents to which it is a
party, by assumption or otherwise, constitute legal, valid and binding
obligations of New Guarantor enforceable against New Guarantor in accordance
with their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally; and

	 	(e)	 	New Guarantor has no knowledge that any of the representations
made by Transferor and Original Guarantor in Section 3 above are not true and
correct.

New Guarantor understands and intends that Lender will rely on the representations and warranties
contained herein.

6. Consent to Transfer. Lender hereby consents to the transfer of the Property and to
the assumption by the New Borrower of all of the obligations of the Transferor under the Loan
Documents as described in paragraph 1 above, subject to the terms and conditions set forth in this
Agreement. Lender’s consent to the transfer of the Property to the New Borrower is not intended to
be and shall not be construed as a consent to any subsequent transfer of the Property which
requires the Lender’s consent pursuant to the terms of the Mortgage. Transferor agrees that the
execution and delivery of this Agreement shall in no way release Transferor from any liability it
has under the Loan Documents, except as otherwise provided in this Agreement.

7. Release of Transferor and Original Guarantor. In reliance on the Transferor’s and
Original Guarantor’s representations and warranties in Section 3 above, New Borrower’s
representations and warranties in Section 4 above, and New Guarantor’s representations and
warranties in Section 5 above, Lender hereby releases Transferor and Original Guarantor from all
their respective obligations under the Loan Documents, provided, however, Transferor and Original
Guarantor are not released from any liability pursuant to the Existing Environmental Indemnity
relating to the period of time prior to the date hereof, regardless of when any condition giving
rise to such liability is discovered. If any material element of the representations and
warranties made by Transferor or Original Guarantor contained in Section 3 above is false as of the
date of this Agreement, then the releases set forth in this Section 7 will be canceled as of the
date of this Agreement and the Transferor and the Original Guarantor will remain obligated under
the Loan Documents as though there has been no such releases; further, a breach of New Borrower’s
representations and warranties in Section 4 or New Guarantor’s representations and warranties in
Section 5, will not affect the release of Transferor and Original Guarantor set-forth in this
Section 7. This Agreement shall in no way affect, impair or diminish the priority or validity of
the liens or covenants of title evidenced by the Loan Documents, nor, except as expressly set forth
herein, release or discharge the liability of any party who may now be or after the date of this
Agreement, become liable, primarily or secondarily, under the Loan Documents.

8. Modification to the Mortgage. Section 5.3 of the Mortgage is hereby amended by
adding the following provisions:

	 	(a)	 	The second to last sentence in Section 5.3 the of the Mortgage
is hereby amended to include the following phrase at the end the sentence:

“and (C) any such statement that identifies all owners of any interest in
Borrower and the interest held by each need not include an identification of any of
the owners of the shares of a real estate investment trust of the type described in
this Section 5.3 below.”

	 	(b)	 	The following three paragraphs shall be added to the end of Section 5.3 of
the Mortgage:

“Notwithstanding anything to the contrary in this Article 5 or any other provision of any
of the other Loan Documents (A) NNN Apartment REIT, Inc., a Maryland corporation (the “REIT”),
shall remain as, or directly or indirectly own 100% of, the sole general partner of NNN Apartment
REIT Holdings, L.P., a Virginia limited partnership (the “Borrower Manager” and the sole member of
the Borrower), and shall directly or indirectly own (through the Borrower Manager or any
wholly-owned subsidiary thereof) not less than 51% of the issued and outstanding limited liability
company membership interests in the Borrower, and (B) the REIT (as the sole general partner of the
Borrower Manager) shall at all relevant times during which the Loan secured hereby is outstanding,
maintain a comparable right and ability to manage and control the Borrower and the Property as
existed as of the date of this Security Instrument.”

“Notwithstanding anything in this Security Instrument to the contrary, shares in an entity
that is a real estate investment trust may be offered and sold to investors in an offering of such
shares which has been registered with the Securities and Exchange Commission, or is exempt from
registration, without regard to the limitations and/or restrictions on transfer set forth in
Article 5 and any such sale or offering shall not constitute a transfer or sale of ownership
interests in the Borrower.”

“Notwithstanding anything in this Security Instrument to the contrary, the REIT may acquire
and/or dispose of shares of a real estate investment trust of the type described in Section 5.3,
including its own shares, and/or any interests in NNN Apartment REIT Advisor, LLC and/or ROC REIT
Advisors, LLC, or their successors, in each case without regard to the limitations and/or
restrictions on transfer set forth in this Article 5 and any such acquisition or disposition shall
not constitute a transfer or sale prohibited by this Article 5.”

9. Additional Conditions to Consent. In addition to the other conditions
required under this Agreement, Lender requires: (a) New Borrower to use Servicer’s Auto Debit
Service to make payments, (b) New Borrower to maintain insurance as required under the Mortgage and
(c) New Borrower to provide Lender with a survey certified to Lender within 30 days of the date
hereof.

10. Lender’s Rights and Remedies. Lender’s rights hereunder shall be reinstated and
revived, with respect to any amount at any time paid on account of the Loan which thereafter shall
be required to be restored or returned by Lender upon the bankruptcy, insolvency or reorganization
of Transferor, as though such amount had not been paid. Lender’s rights hereunder shall be
reinstated and revived, with respect to any amount at any time paid on account of the Loan which
thereafter shall be required to be restored or returned by Lender upon the bankruptcy, insolvency
or reorganization of New Borrower, as though such amount had not been paid. The lien created or
granted by, and the enforceability of the Loan Documents at all times shall remain effective as to
the full amount of the indebtedness evidenced and/or secured thereby, even though the indebtedness,
including any part thereof or any other security or guaranty therefore, may be or hereafter may
become invalid or otherwise unenforceable as against any of Transferor and/or New Borrower and
whether or not any of them shall have any personal liability with respect thereto.

11. Costs. Transferor and/or New Borrower agree to pay all fees and costs (including
reasonable attorney’s fees) incurred by Lender and Servicer in connection with Lender’s consent to
and approval of the transfer of the Property, including an assumption fee equal to thirty-three
hundredths percent (0.33%) of the outstanding principal balance of the Loan.

12. Payment of Interest and Principal. New Borrower shall pay and hereby promises to
pay to Lender, or order, at the office of Servicer located at 116 Welsh Road, Horsham, Pennsylvania
19044 or at such other place as may be designated from time to time in writing by Lender, the
outstanding principal balance of the Loan in the amount of $13,600,000.00 in lawful money of the
United States of America, with interest thereon from the date of this Agreement to and including
the Maturity Date payable in the manner as set forth in the Note and the Loan Agreement. During
the term of the Loan, New Borrower shall establish and maintain a deposit account with a bank or
other financial institution acceptable to Lender and authorize such bank or financial institution
to permit Lender to debit said deposit account for all principal, interest, escrow and reserve
payments due Lender under the Loan on the due dates for such payments through servicer’s automatic
mortgage payment service.

13. No Impairment of Lien. Nothing set forth herein shall affect the priority or
extent of the lien of any of the Loan Documents, nor, except as expressly set forth herein, release
or change the liability of any party who may now be or after the date of this Agreement, become
liable, primarily or secondarily, under the Loan Documents.

14. Information and Materials Accurate. New Borrower and New Guarantor each represent
and warrant to Lender and Servicer that all information and materials regarding New Borrower, New
Guarantor and/or the Property provided to Servicer were true and correct in all respects as of the
date provided to Servicer and remain true and correct as of the date of this Agreement.

15. References to Transferor. All references to Transferor, having an address at P.O.
Box 400, 400 North State Street, Fountain Green, Utah 84632 as “Borrower” under the Note, the
Mortgage and the other Loan Documents (except the “Existing Environmental Indemnity”) are hereby
deleted in their entirety and all references to “Borrower” under the Note, the Mortgage and the
other Loan Documents (except for the Existing Environmental Indemnity) shall be deemed to refer to
Apartment REIT Villas of El Dorado, LLC, having an address at 1551 N. Tustin Avenue, Suite 300,
Santa Ana, California 92705.

16. References to Original Guarantor. All references to the term “Guaranty” contained
in any of the Loan Documents shall be deemed to refer to the New Guaranty, as defined above. All
references to the Original Guarantor in the Note, the Mortgage and the other Loan Documents are
hereby deleted in their entirety and shall be deemed to refer to the New Guarantor.

17. Notice. Each notice given hereunder and under the other Loan Documents shall be
addressed to the intended recipient at its address set forth in this Agreement and shall be given
in accordance with the requirements for notice set forth in the Mortgage.

18. No Offsets, Counterclaims or Defenses. New Borrower represents, warrants and
covenants that there are no offsets, counterclaims or defenses against the Loan, this Agreement,
the Mortgage, the Note, or any of the other Loan Documents and that New Borrower (and the
undersigned representative of New Borrower) has full power, authority and legal right to execute
this Agreement and to keep and observe all of the terms of this Agreement on New Borrower’s part to
be observed and/or performed, and that the Note, the Mortgage and all other Loan Documents, and
this Agreement constitute valid and binding obligations of New Borrower. New Guarantor represents,
warrants and covenants that there are no offsets, counterclaims, or defenses against the New
Guaranty or this Agreement and that New Guarantor has full power, authority and legal right to
execute this Agreement and observe all of the terms of this Agreement on New Guarantor’s part to be
observed and/or performed, and that the New Guaranty and this Agreement constitute valid and
binding obligations of New Guarantor. All of the covenants, representations and warranties set
forth in the Mortgage, the Note, and the other Loan Documents, as the same may have been modified
or amended by the terms of this Agreement, are hereby restated, ratified and confirmed in all
respects by New Borrower as of the date hereof and are and shall remain in full force and effect.

19. INDEMNIFICATION. NEW BORROWER, TRANSFEROR, ORIGINAL GUARANTOR AND NEW GUARANTOR,
JOINTLY AND SEVERALLY, UNCONDITIONALLY AND IRREVOCABLY RELEASE AND FOREVER DISCHARGE LENDER AND
SERVICER AND THEIR RESPECTIVE SUCCESSORS, ASSIGNS, AGENTS, DIRECTORS, OFFICERS, EMPLOYEES, AND
ATTORNEYS, AND EACH CURRENT OR SUBSTITUTE TRUSTEE UNDER THE MORTGAGE (COLLECTIVELY, THE
“INDEMNITEES”) FROM ALL CLAIMS, AS DEFINED BELOW, AND JOINTLY AND SEVERALLY AGREE TO INDEMNIFY
INDEMNITEES, AND HOLD THEM HARMLESS FROM ANY AND ALL CLAIMS, LOSSES, CAUSES OF ACTION, COSTS AND
EXPENSES OF EVERY KIND OR CHARACTER IN CONNECTION WITH THE CLAIMS OR THE TRANSFER OF THE PROPERTY.
NOTWITHSTANDING THE FOREGOING, TRANSFEROR AND/OR ORIGINAL GUARANTOR SHALL NOT BE RESPONSIBLE FOR
ANY CLAIMS ARISING FROM THE ACTION OR INACTION OF NEW BORROWER AND/OR NEW GUARANTOR, AND NEW
BORROWER AND NEW GUARANTOR SHALL NOT BE RESPONSIBLE FOR ANY CLAIMS ARISING FROM THE ACTION OR
INACTION OF TRANSFEROR AND/OR ORIGINAL GUARANTOR. AS USED IN THIS AGREEMENT, THE TERM “CLAIMS”
SHALL MEAN ANY AND ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, COSTS, EXPENSES AND LIABILITIES
WHATSOEVER, KNOWN OR UNKNOWN, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART, ON OR BEFORE
THE DATE OF THIS AGREEMENT, WHICH THE TRANSFEROR, ORIGINAL GUARANTOR, NEW BORROWER AND NEW
GUARANTORS, OR ANY OF THEIR RESPECTIVE PARTNERS, MEMBERS, OFFICERS, AGENTS OR EMPLOYEES, MAY NOW OR
HEREAFTER HAVE AGAINST THE INDEMNITEES, IF ANY AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE
OUT OF CONTRACT, TORT, VIOLATION OF LAWS, OR REGULATIONS, OR OTHERWISE IN CONNECTION WITH ANY OF
THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE THERETO
AND ANY LOSS, COST OR DAMAGE, OF ANY KIND OR CHARACTER, ARISING OUT OF OR IN ANY WAY CONNECTED WITH
OR IN ANY WAY RESULTING FROM THE ACTS, ACTIONS OR OMISSIONS OF INDEMNITEES, INCLUDING ANY
REQUIREMENT THAT THE LOAN DOCUMENTS BE MODIFIED AS A CONDITION TO THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, ANY CHARGING, COLLECTING OR CONTRACTING FOR PREPAYMENT PREMIUMS, TRANSFER FEES, OR
ASSUMPTION FEES, ANY BREACH OF FIDUCIARY DUTY, BREACH OF ANY DUTY OF FAIR DEALING, BREACH OF
CONFIDENCE, BREACH OF FUNDING COMMITMENT, UNDUE INFLUENCE, DURESS, ECONOMIC COERCION, VIOLATION OF
ANY FEDERAL OR STATE SECURITIES OR BLUE SKY LAWS OR REGULATIONS, CONFLICT OF INTEREST, NEGLIGENCE,
BAD FAITH, MALPRACTICE, VIOLATIONS OF THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT,
INTENTIONAL OR NEGLIGENT INFLICTION OF MENTAL DISTRESS, TORTIOUS INTERFERENCE WITH CONTRACTUAL
RELATIONS, TORTIOUS INTERFERENCE WITH CORPORATE GOVERNANCE OR PROSPECTIVE BUSINESS ADVANTAGE,
BREACH OF CONTRACT, DECEPTIVE TRADE PRACTICES, LIBEL, SLANDER, CONSPIRACY OR ANY CLAIM FOR
WRONGFULLY ACCELERATING THE NOTE OR WRONGFULLY ATTEMPTING TO FORECLOSE ON ANY COLLATERAL RELATING
TO THE NOTE, BUT IN EACH CASE ONLY TO THE EXTENT PERMITTED BY APPLICABLE LAW. TRANSFEROR AND NEW
BORROWER AGREE THAT LENDER AND SERVICER HAVE NO FIDUCIARY OR SIMILAR OBLIGATIONS TO TRANSFEROR AND
NEW BORROWER AND THAT THEIR RELATIONSHIP IS STRICTLY THAT OF CREDITOR AND DEBTOR. THIS RELEASE AND
DISCHARGE IS ACCEPTED BY LENDER AND SERVICER PURSUANT TO THIS AGREEMENT AND SHALL NOT BE CONSTRUED
AS AN ADMISSION OF LIABILITY ON THE PART OF EITHER. TRANSFEROR AND NEW BORROWER AND THE ORIGINAL
GUARANTOR AND NEW GUARANTOR HEREBY REPRESENT AND WARRANT THAT THEY ARE THE CURRENT LEGAL AND
BENEFICIAL OWNERS OF ALL CLAIMS, IF ANY, RELEASED HEREBY AND HAVE NOT ASSIGNED, PLEDGED OR
CONTRACTED TO ASSIGN OR PLEDGE ANY SUCH CLAIM TO ANY OTHER PERSON.

20. No Modification or Waiver. This Agreement 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 Transferor, Original Guarantor, New Borrower, New Guarantor or
Lender, but only by an agreement in writing executed by the party against whom the enforcement of
any modification, amendment, waiver, extension, change, discharge or termination is sought.

21. Insurance. Notwithstanding anything to the contrary contained in the Loan
Documents the “all-risk” policy of insurance or the policy covering “special” causes against loss
or damage by fire, casualty and other hazards must not exclude coverage for mold and terrorism.

22. Entire Agreement. This Agreement embodies and constitutes the entire
understanding among the parties with respect to the transactions contemplated herein, and all prior
or contemporaneous agreements, understandings, representations, and statements, oral or written,
are merged into this Agreement. Except as expressly modified hereby, the Note, Mortgage and other
Loan Documents shall remain in full force and effect. Transferor and Original Guarantor hereby
ratify the agreements made by them to Lender in connection with the Loan and agree that, except to
the extent modified hereby, all of such agreements remain in full force and effect.

23. Same Indebtedness: Priority of Liens Not Affected. This Agreement and the
execution of other documents contemplated hereby do not constitute the creation of a new debt or
the extinguishment of the debt evidenced by the Loan Documents, nor will they in any way affect or
impair the liens and security interests created by the Loan Documents, which New Borrower
acknowledges to be valid and existing liens on and security interests in the Property. New
Borrower agrees that the lien and security interests created by the Mortgage continue to be in full
force and effect, unaffected and unimpaired by this Agreement or by the transfer of the Property or
any collateral described in financing statements filed in connection with the Loan Documents and
that said liens and security interests shall so continue in their perfection and priority until the
debt secured by the Loan Documents is fully discharged.

24. Incorporation of Recitals. The Recitals above are hereby incorporated herein and
made a part hereof by this reference.

25. Severability. If any term, covenant or condition of this Agreement shall be held
to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without
such provision.

26. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas and the applicable laws of the United States of America.

27. Terms Not Defined. All capitalized words and phrases not otherwise defined herein
shall have the meaning ascribed to them in the Note and/or the Mortgage.

28. Successors and Assignees Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their, respective heirs, legal representatives, successors
and assigns.

29. Counterparts. This Agreement may be executed in any number of counterparts with
the same effect as if all parties hereto had signed the same document. All such counterparts shall
be construed together and shall constitute one instrument, but in making proof hereof it shall only
be necessary to produce one such counterpart.

30. Conflicting Provisions. It is hereby agreed that the terms and conditions of the
Mortgage, the Note and other Loan Documents not specifically modified herein shall remain in full
force and effect and shall be binding upon New Borrower. It is understood and agreed that in the
event there are any conflicting or omitted provisions or variations between the terms, conditions,
rights, or remedies in the Mortgage, the Note or any other Loan Document and the terms of this
Agreement (other than those specifically modified herein), those terms, conditions, rights or
remedies which are most favorable to Lender shall remain in full force and effect and shall
prevail. A default under the terms and conditions of this Agreement shall constitute a default
under the terms and conditions of the aforesaid Mortgage, Note and other Loan Documents.

31. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, TRANSFEROR,
ORIGINAL GUARANTOR, NEW GUARANTOR, NEW BORROWER, AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE
BY ANY PARTY OD THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN
OR THE PROPERTY (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND
ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR
VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER THIS AGREEMENT.

32. Final Agreement. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED
HEREBY, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

2

IN WITNESS WHEREOF, Transferor, New Borrower, Original Guarantor, New Guarantor and
Lender have duly executed this Agreement the day and year first above written.

TRANSFEROR:

EL DORADO APARTMENTS, LLC, a Texas limited liability
company

By: /s/ Wendell K. Jacobson

Name: Wendell K. Jacobson

Title: Vice President

ACKNOWLEDGMENT

STATE OF TEXAS

COUNTY OF DALLAS

On October 31, 2007, before me Joanna Clements, Notary Public, personally appeared EVAN K.
JACOBSON, personally known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity(ies) and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

/s/ Joanna Clements

	 	 	Notary Public

[Seal] Jo-Anna Clements

[Seal] Notary Public, State of Texas

[Seal] My Commission Expires

[Seal] October 25, 2011

3

NEW BORROWER:

APARTMENT REIT VILLAS OF EL DORADO, LLC, a Delaware

limited liability company

	 	 	 	By:
NNN Apartment REIT Holdings, L.P., a Virginia
limited partnership, its sole member

	 	 	 	By:
NNN Apartment REIT, Inc., a Maryland
corporation, its general partner

By: /s/ S. Jay Olander

Name: S. Jay Olander

Title: Chief Executive Officer

ACKNOWLEDGMENT

STATE OF VIRGINIA

CITY OF RICHMOND

On October 31, 2007, before me Brenda S. Holmes, Notary Public, personally appeared S. Jay Olander
personally known to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he executed the same
in his authorized capacity(ies) and that by his signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

/s/ Brenda M. Holmes

	 	 	Notary Public

Registration Number:      

[Seal] Brenda M. Holmes

[Seal] Notary Public

[Seal] Reg # 224930

[Seal] My Commission Expires

[Seal] 09/30/2011

[Seal] Commonwealth of Virginia

4

ORIGINAL GUARANTOR:

/s/ Wendell A. Jacobson

	 	 	WENDELL A. JACOBSON

ACKNOWLEDGMENT

STATE OF Utah

COUNTY OF Sanpete

On October 30, 2007, before me Tina Stephensen, Notary Public, personally appeared WENDELL A.
JACOBSON personally known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity(ies) and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

/s/ Tina Stephensen

	 	 	Notary Public

[Seal] Tina Stephensen

[Seal] Notary Public -State of Utah

[Seal] 255 West Center POB 194

[Seal] Fountain Green, UT 84632

[Seal] Comm. Exp. 08-24 2010

5

NEW GUARANTOR:

NNN APARTMENT REIT, INC., a Maryland corporation

	 	 	 	 	 
	By:	 	/s/ S. Jay Olander
	
 
	 	Name:

Title:
	 	S. Jay Olander

Chief Executive Officer

ACKNOWLEDGMENT

STATE OF VIRGINIA

CITY OF RICHMOND

On October 31, 2007, before me Brenda M. Holmes, Notary Public, personally appeared S. Jay Olander
personally known to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he executed the same
in his authorized capacity(ies) and that by his signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

/s/ Brenda M. Holmes

	 	 	Notary Public

Registration Number:      

[Seal] Brenda M. Holmes

[Seal] Notary Public

[Seal] Reg # 224930

[Seal] My Commission Expires

[Seal] 09/30/2011

[Seal] Commonwealth of Virginia

6

LENDER:

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

	 	 	 	By:
Capmark Finance Inc., a California corporation
(f/k/a GMAC Commercial Mortgage Corporation), as
Master Servicer

	 	 	 	 	 	 	 
	ATTEST:

	 	

	 	

	 	

	 	 	By:	 	/s/ Gary A. Routzahn
	By:      

Name:

	 	 	 	Title:
	 	Name:Gary A. Routzahn

Vice President, Manager

ACKNOWLEDGMENT

	 	 	 
	State of Pennsylvania

	 	:
	County of Montgomery

	 	:ss

:

On this the 30th day of October, 2007, before me, a Notary Public, the undersigned
officer, personally appeared Gary A. Routzahn, known to me or satisfactorily proven
to be the person whose name is subscribed to the within instrument, and who
acknowledged to me that he is the Vice President of CAPMARK FINANCE INC., a
California corporation, and that he, being duly authorized to do so, did execute the
same on behalf of CAPMARK FINANCE INC. by signing his/her name as such Vice
President, for all the purposes therein contained.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

/s/ Sandy (illegible)

	 	 	Notary Public

[Seal] Notarial Seal

[Seal] Sandy (illegible), Notary Public

[Seal] (illegible), Montgomery County

[Seal] My Commission Expires April 25, 2009

7EX-10.5

Loan No. 104149

THIS INSTRUMENT CONTAINS INDEMNIFICATION PROVISIONS AND

PROVISIONS LIMITING LENDER’S LIABILITY FOR NEGLIGENCE

PROMISSORY NOTE

$13,600,000.00 November 29, 2006

FOR VALUE RECEIVED and intending to be legally bound, EL DORADO APARTMENTS, LLC, a Texas
limited liability company (“Borrower”), promises to pay to the order of ROYAL BANK OF CANADA, a
Canadian chartered bank (“Lender”), at such place as Lender or any subsequent holder hereof may
from time to time designate in writing, 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, with interest
thereon to be computed from the date of this Note at the Applicable Interest Rate (as hereinafter
defined), and to be paid in installments as provided herein.

1 — CERTAIN DEFINED TERMS:

1.1 Applicable Interest Rate” shall mean an interest rate equal to five and sixty-eight

hundredths percent (5.68%) per annum.

1.2 “Business Day” shall mean a day on which commercial banks are not authorized or

required by law to close in New York, New York.

1.3 “Capital Reserves Fund” shall have the meaning specified in Section 8.1(b) hereof.

1.4 “Constant Monthly Payment” shall mean an interest only payment as determined by

Lender as described in Section 2.2 hereof.

1.5 “Debt” shall have the meaning specified in Section 3.1 hereof

1.6 “Default Rate” shall have the meaning specified in Section 4.1 hereof.

1.7 “Default Repayment” shall mean a repayment of all or any portion of the principal amount
of this Note made during the continuance of any Event of Default or after an acceleration of the
Maturity Date under any circumstances, including, without limitation, a repayment occurring in
connection with reinstatement of the Security Instrument provided by statute under foreclosure
proceedings or exercise of a power of sale, any statutory right of redemption exercised by Borrower
or any other person or entity having a statutory right to redeem or prevent foreclosure and any
sale in foreclosure or under exercise of a power of sale or otherwise.

1.8 “Defeasance Deposit” shall mean an amount equal to the sum of (1) the amount which will be
sufficient to purchase Government Securities necessary to meet the Scheduled Defeasance Payments;
and (2) any revenue, documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of this Note or otherwise required to accomplish the agreements of
Section 5.2, all fees, costs and expenses incurred or to be incurred by Lender in the purchase of
such Government Securities and the assumption payments referred to in Section 5.2(ii) hereof.

1.9 “Event of Default” shall have the meaning specified in Section 3.1 hereof.

1

1.10 “Government Securities” shall mean “Government Securities” as defined in Treasury

Regulations Section 1.860G-2(a)(8)(i), as amended.

1.11 “Guarantor” shall mean Wendell A. Jacobson.

1.12 “Loan” shall mean the loan evidenced by this Note.

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

1.14 “Lockout Period Expiration Date” shall mean the earlier of (a) the third anniversary of
the date hereof and (b) two years after the “startup day” of any “real estate mortgage investment
conduit” (as such terms are defined in Sections 860G and 860D, respectively, of the Internal
Revenue Code of 1986, as amended, or any successor statute thereto) which may acquire the Loan.

1.15 “Maturity Date” shall mean December 1, 2016.

1.16 “Monthly Payment Date” shall mean the first day of each calendar month prior to the
Maturity Date, commencing on January 1, 2007.

1.17 “Open Prepayment Date” shall mean the date which is three months prior to the Maturity

Date.

1.18 “Payment Differential” shall mean, with respect to any Repayment Date, (x) the Applicable
Interest Rate minus the Reinvestment Yield, divided by (y) 12, and multiplied by (z) the principal
sum being repaid on such Repayment Date after application of the Constant Monthly Payment (if any)
due on the date of the Default Repayment, provided that the Payment Differential shall in no event
be less than zero.

1.19 “Pledge Agreement” shall have the meaning specified in Section 5.2(i)(5)(A) hereof.

1.20 “Property” shall mean certain premises located in McKinney, County of Collin, State of
Texas, and other property, all as more particularly described in the Security Instrument.

1.21 “Reinvestment Yield” shall mean the lesser of (a)(i) the yield on the U.S. Treasury issue
(primary issue) with the same maturity date as the Maturity Date or (ii) if no such U.S. Treasury
issue is available, then the interpolated yield on the two U.S. Treasury issues (primary issues)
with maturity dates (one prior to and one following) that are closest to the Maturity Date and
(b)(i) the yield on the U.S. Treasury issue (primary issue) with a term equal to the remaining
average life of the Debt or (ii) if no such U.S. Treasury issue is available, then the interpolated
yield on the two U.S. Treasury issues (primary issues) with terms (one prior to and one following)
that are closest to the remaining average life of the Debt, with each such yield being based on the
bid price for such issue as published in The Wall Street Journal on the date that is 14 days prior
to the Repayment Date (or, if such bid price is not published on that date, the next preceding date
on which such bid price is so published) and converted to a monthly compounded nominal yield.

	 	 	 
	1.22

	 	“Release Date” shall have the meaning specified in Section 5.2(i)(1) hereof.
	1.23

	 	“Repayment Date” shall have the meaning specified in Section 5.3 hereof.
	1.24

	 	“Reserves” shall mean the Immediate Repairs Fund and the Capital Reserves Fund, all as

more fully described in Section 8 hereof.

1.25 “Scheduled Defeasance Payments” shall have the meaning specified in Section 5.2 hereof.

1.26 “Security Instrument” shall mean, as applicable, the Mortgage, Security Agreement Fixture
Financing Statement and Assignment of Leases and Rents, the Deed of Trust, Security Agreement,
Fixture Financing Statement and Assignment of Leases and Rents, or the Deed to Secure Debt,
Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents, of even date
executed by Borrower in favor of Lender, covering the Property.

1.27 “State” shall mean the State of Texas.

1.28 Whenever used, the singular number shall include the plural, the plural the singular, and
the words “Lender” and “Borrower” shall include their respective successors, assigns, heirs,
executors and administrators.

2 — PAYMENT TERMS:

2.1 If this Note is dated a date other than the first day of a calendar month, an initial
payment shall be due from Borrower to Lender on the date hereof on account of all interest
scheduled to accrue on the principal sum of this Note from and after the date hereof through and
including the last day of the current month.

2.2 Commencing on January 1, 2007, and continuing on each Monthly Payment Date thereafter
until the Maturity Date, Borrower shall pay interest only in arrears computed at the Applicable
Interest Rate on the outstanding principal. The balance of said principal sum and all interest and
other sums payable under this Note and the other Loan Documents shall be due and payable on the
Maturity n Date. Interest on the principal sum of this Note shall be calculated by multiplying
the actual number of days elapsed in the period for which interest is being calculated by a daily
rate based on a 360-day year.

2.3 Unless payments are made in the required amount in immediately available funds, in lawful
money of the United States of America, at the place where this Note is payable, remittances in
payment of all or any part of the Debt shall not, regardless of any receipt or credit issued
therefore, constitute payment until the required amount is actually received by Lender in such
money and funds immediately available at the place where this Note is payable (or any other place
as Lender, in Lender’s sole discretion, may have established by delivery of written notice thereof
to Borrower) and shall be made and accepted subject to the condition that any check or draft may be
handled for collection in accordance with the practice of the collecting bank or banks. Lender
reserves the right to require any payment on this Note, whether such payment is a regular
installment, prepayment or final payment, to be by wired federal funds or other immediately
available funds.

2.4 All payments made by Borrower hereunder shall be made free and clear of, and without
reduction for, or on account of, any income, stamp or other taxes, charges, fees, deductions or
withholdings hereafter imposed, collected, withheld or assessed by any government or taxing
authority (other than taxes on the overall net income or overall gross receipts of Lender imposed
as a result of a present or former connection between Lender and the jurisdiction of the government
or taxing authority imposing such taxes, provided, however, that this exclusion shall not apply to
a connection arising solely from Lender’s having executed, delivered, performed its obligations
under, received a payment under, or enforced this Note or any other Loan Document. If any such
amounts are required to be withheld from amounts payable to Lender, the amounts payable to Lender
under the Loan Documents shall be increased to the extent necessary to yield to Lender, after
payment of such amounts, interest or any such other amounts payable at the rates or in the amounts
specified herein. If any such amounts are payable by Borrower, Borrower shall pay all such amounts
by their due date and promptly send Lender a certified copy of an original official receipt showing
payment thereof. If Borrower fails to pay such amounts when due or to deliver the required receipt
to Lender, Borrower shall indemnify Lender for any incremental taxes, interest or penalties that
may become payable by Lender as a result of any such failure.

3 — DEFAULT AND ACCELERATION:

3.1 The whole of the principal sum of this Note, together with all interest accrued and unpaid
thereon and all other sums due under the Security Instrument and this Note (all such sums herein
collectively referred to as the “Debt”) shall without notice become immediately due and payable at
the option of Lender upon the occurrence of an Event of Default. Each of the following shall
constitute an “Event of Default” under this Note: (i) Borrower’s failure to pay any amounts owed
pursuant to this Note within five days after such payment is due; (ii) Borrower’s failure to pay
the outstanding principal amount and all accrued and unpaid interest in full on the Maturity Date;
or (iii) the occurrence of any Event of Default under any of the other Loan Documents. All of the
terms, covenants and conditions contained in the Security Instrument and the other Loan Documents
are hereby made part of this Note to the same extent and with the same force as if they were fully
set forth herein. In the event that it should become necessary to employ counsel to collect the
Debt or to protect or foreclose the security hereof, Borrower also agrees to pay reasonable
attorneys’ fees for the services of such counsel whether or not suit is brought.

4 — DEFAULT INTEREST:

4.1 Borrower agrees that upon the occurrence of an Event of Default, Lender shall be entitled
to receive and Borrower shall pay interest on the entire unpaid principal sum at a rate (the
“Default Rate”) equal to the lesser of (i) the Applicable Interest Rate plus five percent (5%) and
(ii) the maximum interest rate that Borrower is permitted by law to pay. The Default Rate shall be
computed from the occurrence of the Event of Default until the earlier of the upon which the Event
of Default is cured or the date upon which the Debt is paid in full. Interest calculated at the
Default Rate shall be added to the Debt and shall be secured by the Security Instrument. This
provision, however, shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt nor as a waiver of any other right or remedy accruing to Lender by reason of
the occurrence of any Event of Default.

5 — PREPAYMENT; DEFEASANCE:

5.1 Borrower shall not have the right or privilege to prepay all or any portion of the unpaid
principal balance of this Note until the Open Prepayment Date. From and after the Open Prepayment
Date, provided no Event of Default exists, the principal balance of this Note may be prepaid, in
whole but not in part, on any Monthly Payment Date upon: (i) not more than 60 days and not less
than 30 days prior written notice to Lender specifying the date on which prepayment is to be made
(the “Prepayment Date”); (ii) payment of all accrued and unpaid interest on the outstanding
principal balance of this Note to and including the Prepayment Date; and (iii) payment of all other
sums then due under this Note, the Security Instrument and the other Loan Documents. Lender shall
not be obligated to accept any prepayment of the principal balance of this Note unless it is
accompanied by all sums due in connection therewith.

5.2 (1) At any time from and after the Lockout Period Expiration Date and provided no Event of
Default exists at the time, Borrower may obtain the release of the Property from the lien of the
Security Instrument upon the satisfaction of the following conditions precedent:

	 	(1)	 	Borrower shall have provided Lender with not less than 30
days and not more than 60 days prior written notice specifying the
date (the “Release Date”) on which the Defeasance Deposit is to be
made;

	 	(2)	 	Borrower shall have paid to Lender all interest accrued
and unpaid on the principal balance of this Note to and including the
Release Date;

	 	(3)	 	Borrower shall have paid to Lender all other sums due and
payable under this Note, the Security Instrument and the other Loan
Documents through and including the Release Date (including, but not
limited to, any Constant Monthly Payment which may be due and
payable on the Release Date);

	 	(4)	 	Borrower shall have paid to Lender the Defeasance Deposit
and a $5,000 non-refundable processing fee; and

	 	(5)	 	Borrower shall have delivered to Lender the following:

	 	(A)	 	a security agreement, in form and substance
satisfactory to Lender, creating a first priority lien on the
Defeasance Deposit and the Government Securities purchased on
behalf of Borrower with the Defeasance Deposit in accordance
with the provisions of this Section 5.2 (the “Pledge
Agreement”);

	 	(B)	 	a release of the Property from the lien of the
Security Instrument (for execution by Lender) in a form
appropriate for the jurisdiction in which the Property is
located;

	 	(C)	 	an officer’s certificate of Borrower certifying that
the requirements set forth in this Section 5.2 have been
satisfied;

	 	(D)	 	a certificate by Borrower’s nationally recognized
independent public accountant acceptable to Lender, in form and
substance acceptable to Lender, certifying that the cash flow
from the Government Securities will be sufficient to timely meet
all Scheduled Defeasance Payments;

	 	(E)	 	an opinion of counsel in form and substance, and
rendered by counsel satisfactory, to Lender at Borrower’s
expense stating, among other things, that Lender will have a
perfected first priority security interest in the Defeasance
Deposit and the Government Securities to be purchased on behalf
of Borrower and pledged to Lender and as to the enforceability
of the Pledge Agreement and other related documents to be
delivered in connection therewith;

	 	(F)	 	if required by the Rating Agencies (as defined in the
Security Instrument) and/or pooling and servicing agreement
relating to the securitization of the Loan, evidence in writing
from the applicable Rating Agencies to the effect that such
release will not result in a qualification, downgrade or
withdrawal of any rating in effect immediately prior to such
defeasance with respect to any security backed by the Loan;

	 	(G)	 	if the Loan has been sold in a Secondary Market
Transaction (as defined in the Security Instrument), an opinion
of counsel acceptable to Lender in form satisfactory to Lender
stating, among other things, that the substitution of collateral
will not cause the holder of the Loan to fail to maintain its
status as a real estate mortgage investment conduit; and

	 	(H)	 	such other certificates, documents or instruments as
Lender may reasonably request.

The Defeasance Deposit shall be used to purchase Government Securities which provide payments
which are (A) payable on or prior to, but as close as possible to, all successive Monthly Payment
Dates after the Release Date and the Maturity Date and (B) in amounts necessary to meet the
scheduled payments of principal and interest due under this Note on such dates (the “Scheduled
Defeasance Payments”). Borrower, pursuant to the Pledge Agreement or other appropriate documents,
shall authorize and direct that the payments received from the Government Securities be made
directly to Lender and applied to satisfy the obligations of the Borrower under this Note.

(ii) Upon compliance with the requirements of this Section 5.2, the Property
shall be released from the lien of the Security Instrument and the pledged Defeasance Deposit and
the Government Securities purchased therewith shall be the sole source of collateral securing this
Note. In connection with such release, Lender, or its designee, shall establish or designate a
successor entity (the “Successor Borrower”) and Borrower shall transfer and assign all
obligations, rights and duties under and to this Note together with the pledged Defeasance Deposit
and/or Government Securities to such Successor Borrower. Such Successor Borrower shall assume the
obligations of Borrower under this Note and the Pledge Agreement, and Borrower shall be relieved
of its obligations hereunder and thereunder, except that Borrower shall be required to perform its
obligations pursuant to this Section 5. Borrower shall pay $1,000.00 to any such Successor
Borrower as consideration for assuming the obligations under this Note and the Pledge Agreement
pursuant to such assignment. Borrower shall pay all costs and expenses incurred by Lender,
including Lender’s attorneys’ fees and expenses and, if applicable, Rating Agency fees and
expenses, if any, incurred in connection with this Section 5.2.

(iii) Following the delivery of the Defeasance Deposit to Lender, Borrower shall
not have any right to prepay this Note.

5.3 Simultaneously with each Default Repayment occurring prior to the Monthly Payment Date
which is one month prior to the Maturity Date, Borrower shall pay to Lender an amount equal to the
greater of: (A) five percent (5%) of the principal amount of this Note being prepaid and (B) the
present value of a series of payments each equal to the Payment Differential and payable on each
Monthly Payment Date over the remaining original term of this Note and on the Maturity Date
discounted at the Reinvestment Yield for the number of months remaining from the date of the
Default Repayment (the “Repayment Date”) to each such Monthly Payment Date and the Maturity Date.
In no event shall Lender be required to reinvest any repayment proceeds in U.S. Treasury
obligations or otherwise.

6 — LATE CHARGE:

6.1 If any installment payable under this Note is not paid in full within five days after the
date on which it is due, Borrower shall pay to Lender upon demand an amount equal to five percent
(5%) of the full amount that was due. Such amount shall be added to the Debt and secured by the
Security Instrument and the other Loan Documents.

7 — SECURITY:

7.1 This Note is secured by the liens and security interests created under the Loan Documents
(including those arising under the Security Instrument).

8 – RESERVES:

8.1 Borrower shall establish the following reserves with Lender, to be held by Lender as
further security for the Loan:

(a) Borrower shall deposit with Lender, on the first day of each calendar month on which a
scheduled payment is due, the amount of $4,133.00, which shall be held by Lender for replacements
and repairs required to be made to the Property during the calendar year (the “Capital Reserves
Fund”).

8.2 Borrower hereby pledges to Lender, and grants a security interest in, any and all funds
now or hereafter deposited in the Reserves as additional security for the payment of the Loan.
Provided that no Event of Default has occurred and upon request by Borrower, Lender shall make
disbursements from the Reserves as approved by Lender in its reasonable discretion, on a quarterly
basis in amounts of no less than $2,500.00 upon delivery by Borrower of Borrower’s written request
for such release, including a description and cost breakdown in reasonable detail of the costs
and/or work covered by such request, accompanied by copies of paid invoices for the amounts
requested and, if required by Lender, lien waivers and releases from all parties furnishing
materials and/or services in connection with the requested payment. Lender may require an
inspection of the Project at Borrower’s expense prior to making a quarterly disbursement in order
to verify completion of the work for which reimbursement is sought. Lender may reasonably reassess
its estimate of the amount necessary for the Reserves from time to time and may revise the monthly
amounts required to be deposited into the Reserves upon 30 days notice to Borrower. The Reserves
shall be held without interest in Lender’s name and may be commingled with Lender’s own funds at
financial institutions selected by Lender in its reasonable discretion. Notwithstanding anything to
the contrary contained herein, if an Event of Default has occurred and is continuing, (i) any
amounts deposited into or remaining in any of the Reserves shall be held for the account of Lender
and may be withdrawn by Lender to be applied in any manner as Lender may elect in its discretion,
and (ii) Borrower shall have no further right with respect to the Reserves. Lender shall have no
obligation to release any of the Reserves while any Event of Default exists or any material adverse
change has occurred in Borrower, any Guarantor or the Property. All of Lender’s costs and expenses
incurred in connection with the disbursement of the Reserves shall be promptly paid by Borrower or,
at Lender’s sole discretion, deducted from the Reserves. No disbursement from the Reserves shall be
made without Lender’s prior written consent, provided that Lender shall promptly refund to Borrower
any sums held by Lender under this section upon Borrower’s payment in full of all sums secured by
the Loan Documents. The Reserves shall not be, and do not constitute, trust funds held by Lender
for the benefit of the Borrower.

9 — LIMITATION ON LIABILITY:

9.1 Except as set forth herein, Borrower shall not be personally liable for amounts due under
the Loan Documents, and Lender’s recovery against Borrower under this Note and the other Loan
Documents shall be limited solely to the Property (as such term is defined in the Security
Instrument); provided, however, that the limitation on recourse set forth in this Section 9 shall
be null and void and completely inapplicable, and this Note shall be with full recourse to
Borrower, in the event of (i) Borrower’s failure to comply with provisions of the Loan Documents
prohibiting the sale, transfer or encumbrance of the Property, any other collateral, or any direct
or indirect ownership interest in Borrower or (ii) the voluntary filing by Borrower, or the filing
against Borrower by any Guarantor or any affiliate of any Guarantor, or an involuntary filing
against Borrower in which Borrower or any Guarantor acts in collusion with the filing party with
respect to the filing, of any proceeding for relief under any federal or state bankruptcy,
insolvency or receivership laws or any assignment for the benefit of creditors made by Borrower.

9.2 Borrower shall be personally liable for any losses, liabilities or damages incurred by
Lender (including, without limitation, attorneys’ fees and expenses) with respect to any of the
following matters: (i) fraud or willful misrepresentation by Borrower or any Guarantor in
connection with the Loan; (ii) material physical waste of the Property (as such term is defined in
the Security Instrument) caused by the acts or omissions of Borrower, its agents, affiliates,
officers or employees; (iii) Borrower’s failure to apply proceeds of rents or any other payments in
respect of the leases and other income of the Property or any other collateral when received to the
costs of maintenance and operation of the Property and to the payment of taxes, lien claims,
insurance premiums, debt service, escrows, and other amounts due under the Loan Documents to the
extent the Loan Documents require such proceeds to be then so applied; (iv) Borrower’s failure to
deliver any insurance or condemnation proceeds or awards or any security deposits received by
Borrower to Lender or to otherwise apply such sums as required under the terms of the Loan
Documents or any other instrument now or hereafter securing this Note; (v) any breach by Borrower
of any covenant in the Loan Documents regarding Hazardous Substances (as defined in the
Environmental Indemnity Agreement of even date herewith to which Borrower and Lender are parties)
or any representation or warranty of Borrower regarding Hazardous Substances proving to have been
untrue when made; (vi) Borrower’s collection of rents more than one month in advance or entering
into or modifying leases, or receipt of monies by Borrower or its general partner or managing
member in connection with the modification of any leases, in violation of the Loan Documents; and
(vii) Borrower’s failure to =maintain insurance as required by the Loan Documents.

9.3 Nothing contained in Section 9 shall be deemed to release, affect or impair the Debt
evidenced by this Note, the obligations of Borrower under, or the liens and security interests
created by, the Loan Documents, or Lender’s rights to enforce its remedies under this Note and the
other Loan Documents, including, without limitation, the right to pursue any remedy for injunctive
or other equitable relief, or any suit or action in connection with the preservation, enforcement
or foreclosure of the liens, mortgages, assignments and security interests which are now or at any
time hereafter security for the payment and performance of all obligations under this Note or the
other Loan Documents.

9.4 The provisions of this Section 9 shall prevail and control over any contrary provisions
elsewhere in this Note or the other Loan Documents.

10 — SAVINGS CLAUSE:

10.1 This Note is subject to the express condition that at no time shall Borrower be obligated
or required to pay interest on the principal balance due hereunder at a rate which could subject
Lender to either civil or criminal liability as a result of being in excess of the maximum interest
rate which Borrower is permitted by applicable law to contract or agree to pay. Accordingly, all
agreements between Borrower and Lender with respect to the Loan are expressly limited so that in no
event, whether by reason of acceleration of maturity or otherwise, shall the amount paid or agreed
to be paid to Lender or charged by Lender for the use, forbearance or detention of the money to be
loaned hereunder or otherwise, exceed the maximum amount allowed by law. If the Loan would be
usurious under applicable law (including the laws of the State and the laws of the United States of
America), then, notwithstanding anything to the contrary in the Loan Documents: (a) the aggregate
amount of all consideration which constitutes interest under applicable law that is contracted for,
taken, reserved, charged or received under the Loan Documents shall under no circumstances exceed
the maximum amount of interest allowed by applicable law, and any excess shall be credited on this
Note by the holder thereof; and (b) if maturity is accelerated as elected by Lender, or in the
event of any prepayment, then any consideration which constitutes interest may never include more
than the maximum amount allowed by applicable law. In such case, any excess interest provided for
in the Loan Documents or otherwise, to the extent permitted by applicable law, shall be amortized,
prorated, allocated and spread throughout the full stated term of this Note until payment in full
so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful
rate of interest from time to time in effect and applicable to the Debt for so long as the Debt is
outstanding. If such amortization, proration, allocation and spreading is not permitted under
applicable law, then such excess interest shall be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited on this Note. The terms and
provisions of this Section 10.1 shall control and supersede every other provision of the Loan
Documents. The Loan Documents are contracts made under and shall be construed in accordance with
and governed by the laws of the State, except that if at any time the laws of the United States of
America permit Lender to contract for, take, reserve, charge or receive a higher rate of interest
than is allowed by the laws of the State (whether such federal laws directly so provide or refer to
the law of any state), then such federal laws shall to such extent govern as to the rate of
interest which Lender may contract for, take, reserve, charge or receive under the Loan Documents.

11 — NO ORAL CHANGE:

11.1 This Note 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.

12 — JOINT AND SEVERAL LIABILITY:

12.1 If Borrower consists of more than one person or entity, the obligations and liabilities
of each such person or entity shall be joint and several.

13 — WAIVERS:

13.1 Borrower and all others who may become liable for the payment of all or any part of the
Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest,
notice of protest, notice of non-payment, notice of intent to accelerate the maturity hereof,
notice of the acceleration of the maturity hereof, bringing of suit and diligence in taking any
action to collect amounts called for hereunder. No release of any security for the Debt or
extension of time for payment of this Note or any installment hereof, and no alteration, amendment
or waiver of any provision of this Note, the Security Instrument or any other Loan Document made by
agreement between Lender and any other person or entity shall release, modify, amend, waive,
extend, change, discharge, terminate or affect the liability of Borrower or any other person or
entity who may become liable for the payment of all or any part of the Debt under this Note, the
Security Instrument or the other Loan Documents.

14 — TRANSFER:

14.1 Upon the transfer of this Note, Borrower hereby waiving notice of any such transfer,

Lender may deliver all the collateral mortgaged, granted, pledged or assigned pursuant to the
Security Instrument and the other Loan Documents, or any part thereof, to the transferee who shall
thereupon become vested with all the rights herein or under applicable law given to Lender with
respect thereto, and Lender shall thereafter forever be relieved and fully discharged from any
liability or responsibility in the matter; but Lender shall retain all rights hereby given to it
with respect to any liabilities and collateral not so transferred.

14.2 By acceptance of this Note, Lender and any subsequent holder of this Note agree that, if
so requested in writing by the Borrower upon any refinancing of the Loan, upon full and final
payment to Lender or such holder, as the case may be, of all principal, interest, expenses, fees
and all other amounts owing to Lender or any subsequent holder on account of the Loan, the holder
shall assign this Note, the Security Instrument, and such other Loan Documents as may be necessary
to vest in such new lender the holder’s rights in the Loan, all at the expense of Borrower and
without any representation, warranty or recourse to Lender or any holder hereunder or otherwise.

15 — NOTICES

15.1 All notices or other written communications hereunder shall be deemed to have been
properly given and shall be effective for all purposes (i) upon delivery, if delivered in person,
(ii) one Business Day 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:

If to Lender:

With a copy to:

	 	El Dorado Apartments, LLC

P.O. Box 400

400 North State Street

Fountain Green, Utah 84632

Attention: Wendell A. Jacobson

Telecopy: (435) 445-3507

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

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.

16 — SEVERABILITY:

16.1 Wherever possible, each provision of this Note shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this Note 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 Note.

17 — ATTORNEYS’ FEES:

17.1 For purposes of this Note, 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 such term is defined in the Security
Instrument) and the Rents (as such term is defined in the Security Instrument) and enforcing its
rights hereunder and under the Security Instrument and the other Loan Documents.

18 — APPLICABLE LAW; SUBMISSION TO JURISDICTION:

18.1 This Note shall be governed and construed in accordance with the laws of the State and
the applicable laws of the United States of America

18.2 Borrower irrevocably submits to the nonexclusive jurisdiction of any federal or state
court sitting in the county and State where the Property is located over any suit, action or
proceeding arising out of or relating to this Note, the Security Instrument or any other Loan
Document. Borrower 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. Borrower irrevocably appoints the Secretary of State of the State 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 Borrower’s
address shown above or 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
Borrower. Nothing herein shall, however, preclude or prevent Lender from bringing actions against
Borrower in any other jurisdiction as may be necessary to enforce any of the Loan Documents or to
realize upon the security for the Loan provided in any of the Loan Documents.

19 — WAIVER OF TRIAL BY JURY:

19.1 BORROWER AND LENDER HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN
EVIDENCED BY THIS NOTE, THIS NOTE, THE SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS OR ANY ACTS
OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

2

EXECUTED as of the date first written above.

BORROWER:

EL DORADO APARTMENTS, LLC, a Texas
limited liability company

By: /s/ Wendell A. Jacobson

	 	 	Wendell A. Jacobson, Manager

3

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