Environmental Indemnity Agreement

ENVIRONMENTAL INDEMNITY AGREEMENT

Table of Contents

1. Parties and Property
2. Definitions
3. Environmental Representations
4. Indemnification Obligations
5. Scope and Limitations
6. Notice and Defense
7. Remediation Standards
8. Insurance
9. General Provisions

ARTICLE I: PARTIES AND PROPERTY

Effective Date: [__/__/____]

INDEMNITOR:
Name: [________________________________]
Address: [________________________________]
City: [________________________________] State: [____] ZIP: [__________]
Relationship to Property: ☐ Seller ☐ Borrower ☐ Guarantor ☐ Tenant ☐ Other: [________]

INDEMNITEE:
Name: [________________________________]
Address: [________________________________]
City: [________________________________] State: [____] ZIP: [__________]
Relationship to Property: ☐ Buyer ☐ Lender ☐ Landlord ☐ Other: [________]

PROPERTY:
Address: [________________________________]
Legal Description: [________________________________]
Parcel ID: [________________________________]

Related Transaction: [________________________________]
Related Transaction Date: [__/__/____]

ARTICLE II: DEFINITIONS

"Environmental Claims": Any claims, demands, actions, suits, investigations, or proceedings arising under Environmental Laws or relating to Hazardous Materials on, at, under, or migrating from the Property.

"Environmental Laws": All federal, state, and local statutes, regulations, ordinances, and common law relating to pollution, protection of the environment, or human health and safety, including but not limited to:

• CERCLA, 42 U.S.C. § 9601 et seq.
• RCRA, 42 U.S.C. § 6901 et seq.
• Clean Water Act, 33 U.S.C. § 1251 et seq.
• Clean Air Act, 42 U.S.C. § 7401 et seq.
• TSCA, 15 U.S.C. § 2601 et seq.
• EPCRA, 42 U.S.C. § 11001 et seq.
• Applicable state environmental statutes

"Environmental Losses": All losses, liabilities, damages, costs, and expenses (including reasonable attorneys' fees, consultant fees, investigation costs, and remediation costs) arising from Environmental Claims.

"Hazardous Materials": Any substance defined as a "hazardous substance" under CERCLA § 101(14), "hazardous waste" under RCRA § 1004(5), "pollutant" under the Clean Water Act, or any petroleum product, asbestos, PCBs, mold, radon, or other substance regulated under Environmental Laws.

ARTICLE III: ENVIRONMENTAL REPRESENTATIONS

Indemnitor Represents and Warrants:

☐ To the best of Indemnitor's knowledge, the Property is in compliance with all Environmental Laws, except as disclosed in Exhibit A

☐ No Hazardous Materials have been released, disposed of, or stored on the Property in violation of Environmental Laws, except as disclosed in Exhibit A

☐ There are no underground storage tanks on the Property, except as disclosed in Exhibit A

☐ No environmental liens have been filed against the Property

☐ No governmental notices, orders, or directives regarding Environmental Claims have been received, except as disclosed in Exhibit A

☐ No pending or threatened Environmental Claims or litigation exist, except as disclosed in Exhibit A

☐ Indemnitor has provided Indemnitee with copies of all environmental reports, assessments, and correspondence in Indemnitor's possession

☐ The Property is not listed on any federal or state environmental cleanup list (NPL, CERCLIS, state equivalent), except as disclosed in Exhibit A

Exhibit A — Disclosed Environmental Conditions:
[________________________________]

ARTICLE IV: INDEMNIFICATION OBLIGATIONS

A. Scope of Indemnity

Indemnitor shall indemnify, defend, and hold harmless Indemnitee and its successors, assigns, officers, directors, employees, and agents from and against any and all Environmental Losses arising from or related to:

☐ The presence of Hazardous Materials on, at, under, or migrating from the Property as of the Effective Date

☐ Any release or threatened release of Hazardous Materials on, at, or from the Property occurring during Indemnitor's ownership, operation, or control

☐ Any violation of Environmental Laws with respect to the Property occurring during Indemnitor's ownership, operation, or control

☐ Any inaccuracy in or breach of Indemnitor's environmental representations and warranties

☐ Any third-party claims arising from Environmental Conditions related to Indemnitor's activities

B. Covered Costs

Environmental Losses subject to indemnification include:

1. Investigation and assessment costs
2. Remediation and cleanup costs
3. Government-imposed fines, penalties, and assessments
4. Natural resource damages
5. Third-party bodily injury and property damage claims
6. Diminution in property value attributable to Environmental Conditions
7. Reasonable attorneys' fees and expert witness costs
8. Costs of compliance with governmental orders
9. Business interruption losses directly caused by remediation activities

ARTICLE V: SCOPE AND LIMITATIONS

A. Temporal Scope

Indemnification obligations under this Agreement apply to Environmental Conditions:

☐ Existing as of the Effective Date, regardless of when discovered
☐ Arising during the period from [__/__/____] to [__/__/____]
☐ Without temporal limitation

B. Cap on Liability

☐ No cap on indemnification liability
☐ Indemnification capped at $[________________________________]
☐ Indemnification capped at [____]% of the purchase price/loan amount

C. Deductible/Basket

☐ No deductible
☐ Indemnitor responsible only for Environmental Losses exceeding $[________________________________] (deductible)
☐ First-dollar coverage once the aggregate threshold of $[________________________________] is exceeded (basket)

D. Exclusions

Indemnitor shall NOT be liable for Environmental Losses to the extent arising from:

☐ Indemnitee's own negligence or willful misconduct
☐ Hazardous Materials introduced to the Property by Indemnitee after the Effective Date
☐ Changes in Environmental Laws enacted after the Effective Date that create new liability for pre-existing conditions
☐ Natural background concentrations of substances
☐ Migration of Hazardous Materials from off-site sources not attributable to Indemnitor

E. CERCLA Limitation Acknowledgment

The Parties acknowledge that pursuant to CERCLA § 107(e)(1), 42 U.S.C. § 9607(e)(1), this Agreement does not transfer from Indemnitee to Indemnitor any liability imposed under CERCLA as against the United States Government. This Agreement solely allocates liability between the Parties.

ARTICLE VI: NOTICE AND DEFENSE

A. Notice Requirements

Indemnitee shall provide Indemnitor with prompt written notice of any Environmental Claim within [____] business days of Indemnitee's discovery thereof.

B. Defense Obligations

Upon receipt of notice, Indemnitor shall, at its sole cost and expense:

☐ Assume the defense of Environmental Claims using counsel reasonably acceptable to Indemnitee
☐ Keep Indemnitee informed of the status of all Environmental Claims
☐ Not settle any Environmental Claim without Indemnitee's prior written consent (not to be unreasonably withheld)

C. Cooperation

Indemnitee shall cooperate with Indemnitor in the defense and resolution of Environmental Claims, including providing access to the Property and relevant documents.

ARTICLE VII: REMEDIATION STANDARDS

If remediation is required, Indemnitor shall remediate the Property to:

☐ Applicable state cleanup standards for [residential/commercial/industrial] use
☐ Standards sufficient to obtain a No Further Action letter from [State Agency]
☐ Risk-based standards acceptable to [State Agency]
☐ Standards required by Indemnitee's lender

Remediation shall be performed by qualified environmental consultants approved by Indemnitee (approval not to be unreasonably withheld).

ARTICLE VIII: INSURANCE

A. Environmental Insurance

☐ Environmental insurance policy required — Minimum coverage: $[________________________________]
☐ Environmental insurance recommended but not required
☐ Not applicable

B. Policy Requirements (if applicable)

• Named insured: [________________________________]
• Additional insured: [________________________________]
• Coverage period: [________________________________]
• Policy type: ☐ Pollution Legal Liability ☐ Cleanup Cost Cap ☐ Secured Creditor ☐ Other

ARTICLE IX: GENERAL PROVISIONS

Survival: This Agreement shall survive the closing of the Related Transaction and shall remain in full force and effect for [____] years from the Effective Date, or until [________________________________], whichever occurs [first/last].

Successors and Assigns: This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.

Joint and Several Liability: If there are multiple Indemnitors, their obligations shall be joint and several.

Governing Law: This Agreement shall be governed by the laws of the State of [________________________________].

Waiver of Defenses: Indemnitor waives any defense based upon the statute of limitations applicable to the Related Transaction.

Entire Agreement: This Agreement constitutes the entire agreement between the Parties regarding environmental indemnification for the Property.

SIGNATURES

INDEMNITOR:

Signature: [________________________________]
Printed Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

INDEMNITEE:

Signature: [________________________________]
Printed Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

SOURCES AND REFERENCES

• 42 U.S.C. § 9607, CERCLA Liability Provisions
• 42 U.S.C. § 9607(e)(1), Limitations on Indemnification Agreements
• CERCLA Liability and Hold Harmless Indemnity Clauses, Lion Technology
• Environmental Indemnification in Property Transactions, Hylant, https://hylant.com/insights/blog/environmental-indemnification-a-crucial-consideration-in-property-transactions
• Environmental Liability Transfers: Buyer and Seller Perspectives, Babst Calland