An environmental indemnity agreement is a legal agreement between a borrower and a lender that provides security or protection from losses or damage caused by environmental contamination or disaster. Environmental indemnity agreements allow lenders to enter into a loan agreement with a borrower where there may be risk involved they are unwilling to take unless another party compensates for any damages or losses.
If there is concern over the risk of environmental contamination with things like hazardous materials, a lender may refuse to enter into a loan agreement with a borrower. In some cases, the loan agreement is conditional to the borrower having another party willing to provide security concerning the environmental risk.
Below is a list of common sections included in Environmental Indemnity Agreements. These sections are linked to the below sample agreement for you to explore.
ENVIRONMENTAL INDEMNITY AGREEMENT
ENVIRONMENTAL INDEMNITY AGREEMENT (this “ Agreement ”) made as of July 14, 2011 by CARTER/VALIDUS OPERATING PARTNERSHIP, LP , a Delaware limited partnership (“ Carter Validus ”), and CARTER AND ASSOCIATES, L.L.C. , a Georgia limited liability company (“ Carter and Associates ”) (collectively, together with any permitted successors and assigns, “ Sponsor ”), and DC-3300 ESSEX, LLC , a Delaware limited liability company (together with its successors and assigns, “ Borrower ”, and, collectively with Sponsor, jointly and severally, the “ Indemnitor ”) in favor of GOLDMAN SACHS COMMERCIAL MORTGAGE CAPITAL, L.P. , a Delaware limited partnership (together with its successors and assigns under the Loan Agreement (as defined below), the “ Lender ”) and the other Indemnified Parties (as defined below).
A. WHEREAS, Lender is prepared to make a certain loan (the “ Loan ”) to Borrower, pursuant to a Loan Agreement of even date between Borrower and Lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), which Loan shall be evidenced by one or more promissory notes (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “ Note ”) and secured by certain real property (collectively, the “ Property ”).
B. WHEREAS, the Lender is unwilling to make the Loan unless Indemnitor agrees to provide the indemnification, representations, warranties, covenants and other matters described in this Agreement for the benefit of the Indemnified Parties.
C. WHEREAS, Indemnitor is entering into this Agreement to induce the Lender to make the Loan.
NOW THEREFORE, in consideration of the mutual premises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby represents, warrants, covenants and agrees for the benefit of the Indemnified Parties as follows:
1. Environmental Representations And Warranties . The representations and warranties of Borrower in Section 4.28 of the Loan Agreement are incorporated herein by this reference as if fully set forth herein and deemed to have been made as of the date hereof by Indemnitor.
2. Environmental Covenants . Indemnitor covenants that:
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(b) Borrower shall use commercially reasonable efforts to ensure that uses and operations by all tenants or other users of the Property are in material compliance with all applicable Environmental Laws and permits issued pursuant thereto, except as is not reasonably likely to result in a Material Adverse Effect;
(c) Borrower shall use commercially reasonable efforts to ensure that there shall be no Releases of Hazardous Substances in, on, under or from the Property in violation of Environmental Law, except as is not reasonably likely to result in a Material Adverse Effect;
(d) Borrower shall use commercially reasonable efforts to ensure that there shall be no Hazardous Substances in, on, or under the Property, except those that are (i) both (A) in compliance with all applicable Environmental Laws and with permits issued pursuant thereto, and (B) fully disclosed to Lender in writing or routinely used in the operation and maintenance of, or by tenants in, commercial properties similar to the Property, or (ii) not reasonably likely to result in a Material Adverse Effect. Notwithstanding the foregoing, it shall not be a default under the Loan Documents if any Hazardous Substances that fail to satisfy either clauses (i) or (ii) of the previous sentence are in, on or under the Property and Borrower (x) commences the Remediation of the same in accordance with applicable Environmental Law within thirty (30) days after written notice thereof (or, if Borrower is unable to secure any Permits or approvals of applicable Governmental Authorities required for such Remediation during such thirty (30) day period after reasonable effort, upon its securing such Permits, provided that Borrower continues to attempt to secure the same in a diligent manner), and (y) thereafter diligently and expeditiously proceeds to Remediate the same;
(e) Borrower shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether or not due to any act or omission of Borrower (the “ Environmental Liens ”), provided that it shall not be a default under the Loan Documents if any such Environmental Liens are imposed and Borrower either (i) commences to remove such Environmental Liens within thirty (30) days after written notice thereof and thereafter diligently and expeditiously proceed to remove the same, or (ii) after notice to Lender, contests by appropriate legal proceedings, promptly initiated and conducted in good faith and with due diligence, the imposition of such Environmental Liens, so long as (A) no Event of Default has occurred and is continuing, (B) such proceeding shall suspend the enforcement of such Environmental Liens, (C) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, and (D) Borrower shall have furnished such security as may be required in the proceeding, or as may be reasonably requested by Lender, to ensure the payment of any related costs or expenses, together with all interest or penalties thereon;
(f) Borrower shall fully, expeditiously and reasonably cooperate in all activities pursuant to Section 3 of this Agreement, including but not limited to providing all relevant information and making knowledgeable persons available for interviews;
(g) Borrower shall perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any reasonable request of Lender made in the event that Lender reasonably believes that an environmental hazard exists on the Property (including but not limited to sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), and share with Lender the reports and other results thereof, and Lender and the other Indemnified Parties shall be entitled to rely on such reports and other results thereof;
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(h) Borrower shall comply with all reasonable requests of Lender made in the event of the presence of any Hazardous Substance or other environmental hazard on the Property in violation of Environmental Law to: (i) reasonably effectuate Remediation of such Hazardous Substance or condition in violation of applicable Environmental Law; (ii) comply in all material respects with any applicable Environmental Law; and (iii) comply with any directive from any applicable Governmental Authority, provided that with respect to (h)(ii) and (iii) above, after notice to Lender, Borrower may suspend such compliance and contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the applicability of such Environmental Law, and provided further that (A) no Event of Default (as defined in the Loan Agreement) has occurred and is continuing, (B) the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, and (C) Borrower shall have furnished the security as may be required in the proceeding, or as may be reasonably requested by Lender to ensure the payment of any related costs or expenses, together with all interest and penalties thereon;
(i) Borrower shall not do, and shall use commercially reasonable efforts to prevent any tenant or other user of the Property from doing, any act, that is in material non-compliance of applicable Environmental Law, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement relating to any environmental matters and applicable to the Property and which is reasonably likely, in any such case, to result in a Material Adverse Effect;
(j) Borrower shall promptly notify Lender as it becomes aware of (i) any presence of or Releases of Hazardous Substances in, on, under, or from the Property; (ii) any material non-compliance with any Environmental Laws related in any way to the Property; (iii) any actual Environmental Lien; (iv) any Remediation of environmental conditions required by a Governmental Authority relating to the Property; and (v) any written notice or other written communication relating to (A) the Property of which it becomes aware from any source whatsoever (including but not limited to a Governmental Authority) relating in any way to the presence of any Hazardous Substances on the Property, or Remediation thereof, (B) possible liability of any Person pursuant to any Environmental Law with respect to the Property, (C) other environmental conditions in connection with the Property, or (D) any actual or threatened administrative or judicial proceedings in connection with the Property and any environmental matters addressed in this Agreement.
3. Indemnified Rights/Cooperation and Access . In the event that Lender reasonably believes that there is a violation of Environmental Law at the Property that will have a Material Adverse Effect, or that endangers any tenants or other occupants of such Property, upon reasonable notice from Lender, Indemnitor shall promptly cause an engineer or consultant satisfactory to Lender to conduct an environmental assessment or audit to assess any and all aspects of the condition giving rise to such belief (the scope of which shall be determined in the reasonable discretion of Lender) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Lender and promptly deliver the
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results of any such assessment, audit, sampling or other testing to Lender; provided , however , that, if such results are not delivered to Lender within a reasonable period, upon reasonable notice to Indemnitor, Lender and any other Person designated by Lender, including but not limited to any receiver, any representative of a Governmental Authority, and any environmental consultant shall have the right, but not the obligation, to enter upon the Property at all reasonable times (subject to the rights of tenants) to assess any and all aspects of the environmental condition of the applicable Property, including but not limited to, by conducting any environmental assessment or audit (the scope of which shall be determined in the reasonable discretion of Lender) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing. Indemnitor shall cooperate with and provide, upon advance notice to each of them, Lender and any such Person designated by Lender with such access to the Property.
4. Indemnification . Indemnitor covenants and agrees to protect defend, indemnify, release and hold the Indemnified Parties harmless from and against, any and all Losses and costs of Remediation (whether or not performed voluntarily), engineers’ fees, environmental consultants’ fees and costs of investigation (including but not limited to sampling, testing and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas) imposed upon, incurred by or asserted against any of the Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following:
(a) any presence of any Hazardous Substances in, on, above, or under the Property;
(b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Property;
(c) any use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling on or at or transfer or transportation to or from the Property of any Hazardous Substances at any time located in, under, on or above the Property;
(d) any actual or proposed Remediation of any Hazardous Substances at any time located in, under, on or above the Property, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action;
(e) any present non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Laws) in connection with the Property or operations thereon, including but not limited to any failure by Borrower, any Person affiliated with Borrower, or any tenant or other user of the Property to comply with any order of any Governmental Authority in connection with any Environmental Laws;
(f) the imposition, recording or filing of any Environmental Lien encumbering the Property;
(g) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Agreement;
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(h) any act of Borrower, any Person affiliated with Borrower, or any tenant or other user of the Property in arranging for disposal or treatment, or arranging with a transporter for transport, disposal or treatment, of Hazardous Substances relating to the Property, which are owned or possessed by Borrower, any Person affiliated with Borrower or any tenant or other user of the Property, in each case, at any disposal or treatment facilities, incineration vessels or sites owned or operated by another Person and containing such or any similar Hazardous Substances;
(i) any act of Borrower, any Person affiliated with Borrower, or any tenant or other user of the Property in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites selected by Borrower or such other users from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation;
(j) any personal injury, wrongful death, or property or other damage arising under any statutory or common law or tort law theory by reason of the wrongful acts or omissions of Borrower, any Person affiliated with Borrower or any tenant or other user of the Property with respect to environmental matters, including but not limited to damages assessed for private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Property;
(k) any misrepresentation or inaccuracy in any representation or warranty in this Agreement or material breach or failure to perform any covenants or other obligations of Borrower or Indemnitor pursuant to this Agreement; and
(l) any presence of mold or mold spores at the Property including, without limitation, the cost and expense of any repair, replacement, removal, cleanup, abatement, disposal, relocation or other remedial actions required at the Property for purposes of addressing any medical or legal concerns resulting therefrom.
Notwithstanding any other provision of this Agreement to the contrary, the indemnity provided by this Section 4 shall not apply to any Losses, costs of Remediation or other liabilities of any Indemnified Party in the circumstances described above if the Release or other environmental matter giving rise to same shall occur on, at or under the Property subsequent to the time that Borrower ceases to be in possession of the Property as a result of the exercise by Lender of any remedies provided in the Loan Documents.
5. Duty to Defend and Attorneys’ and Other Fees and Expenses . Indemnitor agrees that, upon request by any Indemnified Party, the Indemnitor shall defend such Indemnified Party against any claim for which Indemnitor is indemnifying the Indemnified Parties pursuant to Section 4 above (if requested by any Indemnified Party, in the name of such Indemnified Party) by attorneys and other professionals reasonably approved by the Indemnified Parties. Notwithstanding the foregoing, if the defendants in a claim include Borrower and any Indemnified Party shall have reasonably concluded that (A) there are legal defenses available to it that are materially different from those available to Indemnitor, or (B) the use of the attorneys engaged by Indemnitor would present such attorneys with a conflict of interest, such Indemnified Party may, in its sole and absolute discretion, engage its own attorneys and other professionals to assume its legal defenses and to defend or assist it, and, at the option of such Indemnified Party,
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its attorneys shall control the resolution of any claim or proceeding against such Indemnified Party, provided that no compromise or settlement shall be entered without the Indemnitor’s consent, which consent shall not be unreasonably withheld. Upon demand, Indemnitor shall be liable to, and shall, pay or, in the sole and absolute discretion of any Indemnified Party, reimburse, such Indemnified Party for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith.
6. Definitions . Capitalized terms used herein and not specifically defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement. As used in this Agreement, the following terms shall have the following meanings: