Supplemental Environmental Indemnity Agreement

Supplemental Environmental Indemnity Agreement

This Supplemental Environmental Indemnity Agreement (this " Agreement" ) is made as of the 29th day of June, 2007 (the " Effective Date" ), by APARTMENT REIT RESIDENCES AT BRAEMAR, LLC, a North Carolina limited liability company (the " Borrower" ), with its principal place of business at c/o Triple Net Properties, LLC, 1606 Santa Rosa Drive, Suite 109, Richmond, Virginia 23229, and NNN APARTMENT REIT, INC., a Maryland corporation (" Carveout Obligor" ), whose address is c/o Triple Net Properties, LLC, 1551 N. Tustin Ave., Suite 300, Santa Ana, CA 92705, in favor of TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, an Iowa corporation, and its successors and assigns (the " Lender" ), whose address is c/o AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.

1. RECITALS

A. The Lender funded a certain loan in the original principal amount of TEN MILLION AND NO/100THS DOLLARS ($10,000,000) (the " Loan" ), and to evidence the Loan, Braemar Housing Limited Partnership, an Ohio limited partnership (the " Grantor" ), made and delivered to the Lender a certain Secured Promissory Note dated May 25, 2005, in the original principal amount of $10,000,000 (the " Note" ) and certain additional documents (together with the Note, the " Loan Documents" ). The Loan is secured, inter alia, by the Deed of Trust, Security Agreement and Fixture Filing given by Grantor to Lender encumbering certain real property (the " Real Property" ) in the City of Charlotte, County of Mecklenburg, North Carolina, and recorded in Book 18849, Page 135, in the Registry of Mecklenburg County, North Carolina (the " Deed of Trust" ).

B. The Loan was assumed by the Borrower and modified pursuant to the Loan Assumption and Modification Agreement dated as of the Effective Date among the Lender, the Borrower, the Grantor and Phillip I. Levin, Bradley J. Schram and Norman A. Pappas (collectively, the " Original Carveout Obligors" ).

C. The Borrower has purchased the Property from the Grantor, and the Lender has consented to such purchase pursuant to the terms of the Deed of Trust subject to certain conditions.

D. To fulfill a condition of the Lender to the granting of such consent, the Borrower and the Carveout Obligor desire to (a) assume full personal liability for the repayment of that portion of the Indebtedness that arises because the Lender has advanced funds or incurred expenses as a result of the failure of the Borrower to meet its obligations under the Loan Documents with respect to environmental matters and (b) indemnify the Lender and hold it harmless from actual damages suffered as a result of environmental matters.

2. AGREEMENT

NOW THEREFORE, in consideration of the premises, to induce the Lender to consent to both the conveyance of the Property to the Borrower and the Borrower' s assumption of the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Borrower and the Carveout Obligor agree as follows:

3. DEFINITIONS

The following capitalized terms shall have the meanings set forth below:

" Bankruptcy Code" means 11 U.S.C. a7a7101-1330 or any successor statute.

" Business Day" means any weekday when state and federal banks are open for business in Cedar Rapids, Iowa.

" Claim" means any action, suit, proceeding, demand, assessment, adjustment, penalty, judgment or other assertion of liability.

" Default Rate" means the lesser of (i) eighteen percent (18%) per annum and (ii) the maximum rate allowed by law.

" Environmental Laws" means all present and future laws, statutes, ordinances, rules, regulations, orders, guidelines, rulings, decrees, notices and determinations of any Governmental Authority to the extent that they pertain to: (A) the protection of health against environmental hazards; (B) the protection of the environment, including air, soils, wetlands, and surface and underground water, from contamination by any substance that may have any adverse health effect on humans, livestock, fish, wildlife, or plant life, or which may disturb an ecosystem; (C) underground storage tank regulation or removal; (D) wildlife conservation; (E) protection or regulation of natural resources; (F) the protection of wetlands; (G) management, regulation and disposal of solid and hazardous wastes; (H) radioactive materials; (I) biologically hazardous materials; (J) indoor air quality; (K) the manufacture, possession, presence, use, generation, storage, transportation, treatment, release, emission, discharge, disposal, abatement, cleanup, removal, remediation or handling of any Hazardous Substances. " Environmental Laws" include, the Comprehensive Environmental Response, Compensation, and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. a79601 et seq ., the Resource Conservation and Recovery Act, 42 U.S.C. a76901 et seq ., the Federal Water Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. a71251 et seq ., the Clean Air Act, 42 U.S.C. a77401 et seq ., the Toxic Substances Control Act, 15 U.S.C. a72601 et seq ., all similar state statutes and local ordinances, and all regulations promulgated under any of those statutes, and all administrative and judicial actions respecting such legislation, all as amended from time to time.

" Governmental Authority" means any political entity with the legal authority to impose any requirement on the Property, including the governments of the United States, the State of North Carolina, Mecklenburg County, the City of Charlotte, and any other entity with jurisdiction to decide, regulate, or affect the ownership, construction, use, occupancy, possession, operation, maintenance, alteration, repair, demolition or reconstruction of any portion or element of the Real Property.

" Hazardous Substance" means any substance the release of or the exposure to which is prohibited, limited or regulated by any Environmental Law, or which poses a hazard to human health, including (A) any " oil," as defined by the Federal Water Pollution Control Act and regulations promulgated thereunder (including crude oil or any fraction of crude oil), (B) any radioactive substance and (C) Stacchybotris chartarum and other molds. However, the term " Hazardous Substance" does not include (A) a substance used in the cleaning and maintenance of the Real Property, if the quantity and manner of its use are customary, prudent, and do not violate applicable law, or (B) automotive motor oil in immaterial quantities, if leaked from vehicles in the ordinary course of the operation of the Real Property and cleaned up in accordance with reasonable property management procedures and in a manner that violates no applicable law.

" Indebtedness" means all sums that are owed or become due pursuant to the terms of the Loan Documents, which sums include any amounts advanced by the Lender to cure defaults or to pay attorneys' fees and expenses (including any such fees or expenses incurred in connection with enforcing or protecting any of the Loan Documents in any bankruptcy proceeding), receivership costs, fees and costs of the Trustee and other collection costs.

" Net Worth Requirement" means the lesser of (i) the aggregate net worth of the Original Carveout Obligors most recently represented to the Lender at the time of the approval of the Loan by AEGON' s Investments Committee and (ii) the principal balance of the Loan at the time of determination.

" Notice" means a notice given in accordance with Subsection 12.4 below.

" Obligation" means any obligation under this Agreement.

" Property" means the Real Property and any other property now or hereafter subjected to any lien or security interest created by any of the Loan Documents.

" Trustee" means J. Lindsay Stradley, Jr. and his successors and assigns.

4. LIABILITY FOR REPAYMENT OF INDEBTEDNESS

In consideration of the benefits which the Borrower and the Carveout Obligor receive as a result of the Loan (including the benefit of the Loan' s non-recourse feature), the Borrower expressly assumes personal liability for, and the Carveout Obligor irrevocably, absolutely and unconditionally guarantees the full and prompt payment to the Lender of the Indebtedness, to the extent of that amount of the Indebtedness which arises because the Borrower fails, or the Grantor has prior to the Effective Date failed, to perform their respective obligations under the Loan Documents with respect to environmental matters. Such Indebtedness includes interest on the Loan which accrues at the Default Rate, minus interest that would otherwise have accrued in the absence of Default, during a period in which a " Default" exists under the Deed of Trust as a result of the Borrower' s or the Grantor' s failure to meet their respective obligations under the Loan Documents with respect to environmental matters.

5. INDEMNITY AND HOLD HARMLESS

The Borrower and the Carveout Obligor jointly and severally agree to indemnify the Lender, the Trustee, and their respective directors, officers, employees, agents, successors and assigns and to hold them harmless, to the extent of the Lender' s actual damages and losses, from any Claim, cost, expense or liability of whatever kind or nature, known or unknown, contingent or otherwise, directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence (whether prior to or after the date of this Agreement) of Hazardous Substances on, in, under or about the Real Property. Obligation ...