Loan No.: 50-2860302 Walker
Ranch Apartments
ENVIRONMENTAL INDEMNITY
AGREEMENT
THIS
ENVIRONMENTAL INDEMNITY AGREEMENT (as the same may from time to
time be amended, consolidated, renewed or replaced, this “
Agreement ”), made as of April 12, 2007,
by NNN APARTMENT REIT, INC., a Maryland corporation (“
Indemnitor ”) whose address is 1551 North
Tustin Avenue, Suite 300, Santa Ana, California 92705, in favor of
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association
(together with its successors and assigns, “
Lender ”), whose address is Commercial Real
Estate Services, 8739 Research Drive URP - 4,
NC 1075, Charlotte, North Carolina 28262.
W I T N E S S E T H :
WHEREAS, Apartment REIT Walker Ranch, LP, a
Texas limited partnership (“ Borrower ”),
has obtained a loan (the “ Loan ”) in the
principal amount of Twenty Million and No/100 Dollars
($20,000,000.00) from Lender; and
WHEREAS, the Loan is evidenced by a Promissory
Note (as the same may from time to time be amended, consolidated,
renewed or replaced, the “ Note ”) dated
of even date herewith, executed by Borrower and payable to the
order of Lender, in the stated principal amount of Twenty Million
and No/100 Dollars ($20,000,000.00), and is secured by a Deed of
Trust, Security Agreement and Fixture Filing (as the same may from
time to time be amended, consolidated, renewed or replaced, the
“ Security Instrument ”) dated of even
date herewith, from Borrower for the benefit of Lender, encumbering
that certain real property situated in the County of Bexar, State
of Texas, as is more particularly described on
Exhibit “A” attached hereto and
incorporated herein by this reference, together with the buildings,
structures and other improvements now or hereafter located thereon
(said real property, buildings, structures and other improvements
being hereinafter collectively referred to as the “
Property ”), and by other documents and
instruments (the Note, the Security Instrument and such other
documents and instruments, as the same may from time to time be
amended, consolidated, renewed or replaced, being collectively
referred to herein as the “ Loan Documents
”); and
WHEREAS, as a condition to making the Loan,
Lender has required that Indemnitor indemnify Lender with respect
to any past, present or future environmental conditions or
liabilities on, in, under, affecting or in any way associated with
the Property as herein set forth; and
WHEREAS, the extension of the Loan to Borrower
is of substantial benefit to Indemnitor and, therefore, Indemnitor
desires to indemnify Lender with respect to any past, present or
future environmental conditions or liabilities on, in, under,
affecting or in any way associated with the Property as herein set
forth.
NOW,
THEREFORE, to induce Lender to extend the Loan to Borrower and in
consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Indemnitor hereby covenants and agrees for the
benefit of Lender, as follows:
1 .
Indemnity . Indemnitor hereby assumes liability for, and
hereby agrees to pay, protect, defend (at trial and appellate
levels and with attorneys, consultants and experts acceptable to
Lender), and save Lender harmless from and against, and hereby
indemnify Lender from and against any and all liens, damages
(including, without limitation, punitive or exemplary damages),
losses, liabilities (including, without limitation, strict
liability), obligations, settlement payments, penalties, fines,
assessments, citations, directives, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs, disbursements and
expenses of any kind or of any nature whatsoever (including,
without limitation, reasonable attorneys’, consultants’
and experts’ fees and disbursements actually incurred in
investigating, defending, settling or prosecuting any claim,
litigation or proceeding) (collectively “ Costs
”) which may at any time be imposed upon, incurred by or
asserted or awarded against Lender, Borrower, Indemnitor or the
Property, and arising directly or indirectly from or out of,
whether now, hereafter or heretofore occurring: (i) any
violation or alleged violation of, or liability or alleged
liability under, any local, state or federal law, rule or
regulation or common law duty pertaining to human health, natural
resources or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. §9601 et seq .) (“
CERCLA ”), the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. §6901 et seq .),
the Federal Water Pollution Control Act (33 U.S.C. §1251
et seq .), the Clean Air Act (42 U.S.C.
§ 7401 et seq .), the Emergency Planning
and Community-Right-to-Know Act (42 U.S.C. § 11001
et seq .), the Endangered Species Act (16 U.S.C.
§ 1531 et seq .), the Toxic Substances
Control Act (15 U.S.C. § 2601 et seq .),
the Occupational Safety and Health Act (29 U.S.C. § 651
et seq .) and the Hazardous Materials Transportation
Act (49 U.S.C. §1801 et seq .), the Texas Solid
Waste Disposals Act (V.T.C.A. Health and Safety Code §361 et
seq.) and the Texas Water Code/Water Quality Control (V.T.C.A.
Water Code §26.001 et seq.), and those relating to Lead Based
Paint (as hereinafter defined), and those relating to Lead Based
Paint (as hereinafter defined) and the regulations promulgated
pursuant to said laws, all as amended from time to time,
(collectively, “ Environmental Laws ”),
relating to or affecting the Property, whether or not caused by or
within the control of Borrower or Indemnitor; (ii) the
presence, release or threat of release of or exposure to any
hazardous, toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos
or asbestos-containing materials, polychlorinated biphenyls,
petroleum or petroleum products or byproducts, flammable
explosives, radioactive materials, paint containing more than .05%
lead by dry weight (“ Lead Based Paint
”), Toxic Mold (as hereinafter defined), infectious
substances or raw materials which include hazardous constituents)
or any other substances or materials which are included under or
regulated by Environmental Laws (collectively, “
Hazardous Substances ”) or radon, on, in, under
or affecting all or any portion of the Property or any surrounding
areas, regardless of whether or not caused by or within the control
of Borrower or Indemnitor; (iii) any transport, treatment,
recycling, storage, disposal or arrangement therefor of Hazardous
Substances whether on the Property, originating from the Property,
or otherwise associated with the Borrower or Indemnitor or any
operations conducted on the Property at any time; (iv) the
failure by Borrower or Indemnitor to comply fully with the terms
and conditions of this Agreement; (v) the breach of any
representation or warranty contained in this Agreement;
(vi) the enforcement of this Agreement, or (vii) any
environmental investigation, assessment, audit or review conducted
in connection with the Property or the operations conducted at any
time thereon, including, without limitation, the cost of
assessment, investigation, containment, removal and/or remediation
of any and all Hazardous Substances from all or any portion of the
Property or any surrounding areas, the cost of any actions taken in
response to the presence, release or threat of release of any
Hazardous Substances on, in, under or affecting any portion of the
Property or any surrounding areas to prevent or minimize such
release or threat of release so that it does not migrate or
otherwise cause or threaten danger to present or future public
health, safety, welfare or the environment, and costs incurred to
comply with Environmental Laws in connection with all or any
portion of the Property or any surrounding areas. “
Costs ” as used in this Agreement shall also
include, but not be limited to, any diminution in the value of the
security afforded by the Property or any future reduction of the
sales price of the Property by reason of any matter set forth in
this Section 1 . The foregoing indemnity shall
specifically not include any such costs relating to Hazardous
Substances which are initially placed on, in or under the Property
after foreclosure or other taking of title to the Property by
Lender or its successor or assigns. For the purposes hereof,
“ Toxic Mold ” shall mean any mold or
fungus at the Property which is of a type (i) that might pose
a significant risk to human health or the environment or
(ii) that would negatively impact the value of the
Property.
2 .
Representations and Warranties . Indemnitor hereby agrees
that the representations, warranties and covenants contained in
Section 2.27 of the Security Instrument are hereby made
a part of this Agreement to the same extent and with the same force
as if fully set forth herein and the Indemnitor hereby represents,
warrants and covenants to said provisions as if specifically set
forth herein.
3 .
Indemnification Procedures .
(a) If any action shall be brought against
Lender based upon any of the matters for which Lender is
indemnified hereunder, Lender shall notify Indemnitor in writing
thereof and Indemnitor shall promptly assume the defense thereof,
including, without limitation, the employment of counsel acceptable
to Lender and the negotiation of any settlement; provided ,
however , that any failure of Lender to notify Indemnitor of
such matter shall not impair or reduce the obligations of
Indemnitor hereunder. Lender shall have the right, at the expense
of Indemnitor (which expense shall be included in Costs), to employ
separate counsel in any such action and to participate in the
defense thereof. In the event Indemnitor shall fail to discharge or
undertake to defend Lender against any claim, loss or liability for
which Lender is indemnified hereunder, Lender may, at its sole
option and election, defend or settle such claim, loss or
liability. The liability of Indemnitor to Lender hereunder shall be
conclusively established by such settlement, provided such
settlement is made in good faith, the amount of such liability to
include both the settlement consideration and the costs and
expenses, including, without limitation reasonable attorney’s
fees and disbursements, incurred by Lender in effecting such
settlement. In such event, such settlement consideration, costs and
expenses shall be included in Costs and Indemnitor shall pay the
same as hereinafter provided. Lender’s good faith in any such
settlement shall be conclusively established if the settlement is
made on the advice of independent legal counsel for
Lender.
(b) Indemnitor shall not, without the prior
written consent of Lender: (i) settle or compromise any
action, suit, proceeding or claim or consent to the entry of any
judgment that does not include as an unconditional term thereof the
delivery by the claimant or plaintiff to Lender of a full and
complete written release of Lender (in form, scope and substance
satisfactory to Lender in its sole discretion) from all liability
in respect of such action, suit, proceeding or claim and a
dismissal with prejudice of such action, suit, proceeding or claim;
or (ii) settle or compromise any action, suit, proceeding or
claim in any manner that may adversely affect Lender or obligate
Lender to pay any sum or perform any obligation as determined by
Lender in its sole discretion.
(c) All Costs shall be immediately
reimbursable to Lender when and as incurred and, in the event of
any litigation, claim or other proceeding, without any requirement
of waiting for the ultimate outcome of such litigation, claim or
other proceeding, and Indemnitor shall pay to Lender any and all
Costs within ten (10) days after written notice from Lender
itemizing the amounts thereof incurred to the date of such notice.
In addition to any other remedy available for the failure of
Indemnitor to periodically pay such Costs, such Costs, if not paid
within said ten-day period, shall bear interest at the Default
Interest Rate (as defined in the Note) and such costs and interest
shall be additional indebtedness of Borrower secured by the
Security Instrument and by the other Loan Documents securing all or
part of the Loan.
4 .
Reinstatement of Obligations . If at any time all or any
part of any payment made by Indemnitor or received by Lender from
Indemnitor under or with respect to this Agreement is or must be
rescinded or returned for any reason whatsoever (including, but not
limited to, the insolvency, bankruptcy or reorganization of
Indemnitor), then the obligations of Indemnitor hereunder shall, to
the extent of the payment rescinded or returned, be deemed to have
continued in existence, notwithstanding such previous payment made
by Indemnitor, or receipt of payment by Lender, and the obligations
of Indemnitor hereunder shall continue to be effective or be
reinstated, as the case may be, as to such payment, all as though
such previous payment by Indemnitor had never been made.
5 .
Waivers by Indemnitor . To the fullest extent permitted by
law, Indemnitor hereby waives and agrees not to assert or take
advantage of:
(a) Any right to require Lender to proceed
against any other person or to proceed against or exhaust any
security held by Lender at any time or to pursue any other remedy
in Lender’s power or under any other agreement before
proceeding against Indemnitor hereunder;
(b) Any defense that may arise by reason of
the incapacity, lack of authority, death or disability of any other
person or persons or the failure of Lender to file or enforce a
claim against the estate (in administration, bankruptcy or any
other pr
