EXHIBIT 10.16
FORM OF
ENVIRONMENTAL REMEDIATION AND INDEMNIFICATION AGREEMENT
by and between
PRIME GROUP REALTY, L.P.,
a Delaware limited partnership
and
THE PRIME GROUP, INC.,
an Illinois corporation
Dated as of: November __, 1997
EXHIBIT 10.16
FORM OF ENVIRONMENTAL REMEDIATION AND INDEMNIFICATION AGREEMENT
THIS ENVIRONMENTAL REMEDIATION AND INDEMNIFICATION AGREEMENT (this
"Agreement") made and entered into this ____ day of November, 1997, by and
between The Prime Group, Inc., an Illinois corporation ("Indemnitor"), and Prime
Group Realty, L.P., a Delaware limited partnership ("Indemnitee");
WITNESSETH:
WHEREAS, Indemnitor and Indemnitee, together with certain other
parties, have heretofore entered into an agreement (the "Formation Agreement")
which provides, in part, for the contribution of interests in partnerships which
own certain properties, commonly known as (i) the Chicago Enterprise Center,
located in Chicago, Illinois ("CEC"), (ii) the East Chicago Enterprise Center,
located in East Chicago, Indiana ("ECEC") and (iii) the Hammond Enterprise
Center, located in Hammond, Indiana ("HEC," and together with the CEC and the
ECEC, collectively known as the "Properties");
WHEREAS, as a condition to its entering into the Formation Agreement,
Indemnitee has required that Indemnitor remediate, or cause the remediation of,
certain Known Contamination (as defined below) which has been discovered on the
Properties, and to indemnify, save, and hold Indemnitee harmless from and
against certain obligations and liabilities which may be incurred by Indemnitee
(whether as owner, occupier, or operator of the Properties) by reason of such
Known Contamination.
WHEREAS, this Indemnification Agreement is entered into to provide the
Indemnitee with the indemnity, protections, and assurances it requires and as an
inducement to Indemnitee to enter into the Formation Agreement;
NOW, THEREFORE, in consideration of the Properties and of the mutual
promises and agreements herein contained, the agreements and covenants contained
in the Formation Agreement, TEN DOLLARS ($10.00), and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
1. Recitals. The recitals set forth above are true and correct and are by
this reference incorporated herein.
2. Definitions. As used in this Indemnification Agreement, the terms
"Hazardous Materials" "Release" and "Environmental Laws" are defined as follows:
(a) "Covenant Not to Xxx" means both a Certificate of Completion
from the IDEM to Indiana Code 13-25-5-20(b) and a Covenant Not to Xxx from the
Governor of the State of Indiana pursuant to Indiana Code 13-25-5-18.
(b) "Known Contamination" means the environmental conditions existing
on the Properties, as specifically identified in the Environmental Reports and
with respect to which Indemnitor is required to remediate (i) at CEC in order to
receive a NFR Letter for the environmental contamination listed in the
Environmental Reports as being present at CEC, and (ii) at ECEC and HEC in order
to receive a Covenant Not to Xxx for each of ECEC and HEC for the environmental
contamination listed in the Environmental Reports as being present at HEC and
ECEC.
(c) "Hazardous Materials" means any hazardous or toxic substances,
materials or wastes, including, but not limited to, those substances, materials
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 C.F.R. (S)172.101) and amendments thereto or designated by
the United States Environmental Protection Agency as hazardous substances (40
C.F.R. Part 302) and such substances, materials and wastes which are or become
regulated under Environmental Law including, without limitation, any material,
waste or substance which is: (i) petroleum; (ii) asbestos; (iii) polychlorinated
biphenyls; (iv) defined or regulated as a "hazardous waste" under Environmental
Law; (v) designated as a "hazardous substance" pursuant to Section 311 of the
Clean Xxxxx Xxx, 00 X.X.X. (X)0000 et seq. (33 U.S.C. (S)1321) or listed
pursuant to section 307 of the Clean Water Act (33 U.S.C. (S)1317); or (vi)
defined as a "hazardous substance" pursuant to section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S)9601 et
seq. (42 U.S.C. (S)9601).
(d) "IEPA" means the Illinois Environmental Protection Agency.
(e) "IDEM" means the Indiana Department of Environmental Management.
(f) "NFR Letter" means a No Further Remediation Letter from the IEPA
pursuant to the Illinois Environmental Protection Act (415 ILCS 5/58).
(g) "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment, including, without limitation, the abandonment or discarding of
barrels, containers, and other closed receptacles containing any Hazardous
Materials.
(h) "Environmental Laws" mean all federal, state, local and foreign
laws, statutes, ordinances, codes, rules, standards, and regulations, in effect
as of the date hereof, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree or judgment, imposing liability or standards of conduct
for or relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation).
3. Remediation and Indemnification. Indemnitor agrees to exonerate,
indemnify, pay and protect, defend (with counsel reasonably approved by
Indemnitee), and save and hold
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Indemnitee and the directors, officers, shareholders, employees, and agents of
Indemnitee harmless from and against any claims (including, without limitation,
third party claims for personal injury or real or personal property damage),
actions, administrative proceedings (including informal proceedings), judgments,
damages, punitive damages, penalties, fines, costs, liabilities (including sums
paid in settlement of claims), interest, or losses, including reasonable
attorneys' and paralegals' fees and expenses (including, without limitation, any
such fees and expenses incurred in enforcing this Indemnification Agreement or
collecting any sums due hereunder), investigation and remediation costs,
consultants' fees and experts' fees, together with all other costs and expenses
of any kind or nature (collectively, the "Costs") that arise directly or
indirectly from or in connection with the Known Contamination. The
indemnification provided in this Paragraph 3 shall specifically apply to and
include claims or actions brought by or on behalf of employees of Indemnitor. In
the event Indemnitee shall suffer or incur any such Costs, Indemnitor shall
immediately pay to Indemnitee the total of all such Costs suffered or incurred
by Indemnitee upon demand by Indemnitee. Without limiting the generality of the
foregoing, the indemnification provided in this Paragraph 3 shall specifically
cover Costs, including capital, operating, supervision and maintenance costs,
incurred in connection with any investigation or monitoring of site conditions,
any clean-up, containment, remediation, removal, or restoration work required or
performed by any federal, state or local governmental agency or political
subdivision or performed by any nongovernmental entity or person because of
Known Contamination.
4. Remedial Work. Indemnitor shall perform any investigation or
monitoring of site conditions and any clean-up, containment, restoration,
removal, treatment, stabilization, or other remedial work relating to the Known
Contamination (collectively, the "Remedial Work") required at CEC to obtain the
NFR Letter and at the HEC and ECEC to obtain a Covenant Not to Xxx. Indemnitor
shall perform or cause to be performed the required Remedial Work in compliance
with all Environmental Laws. All required Remedial Work shall be performed by
one or more contractors, selected by Indemnitor and approved (such approval not
to be unreasonably withheld or delayed) in advance in writing by Indemnitee, and
under the supervision of a consulting engineer, selected by Indemnitee and
approved (such approval not to be unreasonably withheld or delayed) in advance
in writing by Indemnitor. All costs and expenses of such required Remedial Work
shall be paid by Indemnitor including, without limitation, the charges of such
contractor(s) and/or the consulting engineer, and Indemnitee's reasonable
consultant, attorney and paralegal fees and costs incurred in connection with
monitoring or review of such Remedial Work. In the event Indemnitor shall fail
to timely commence, or cause to be commenced, or fail to diligently prosecute to
completion, such Remedial Work, Indemnitee may, but shall not be required to,
cause such Remedial Work to be performed, and all costs and expenses thereof, or
incurred in connection therewith shall be Costs within the meaning of Paragraph
3 above. All such Costs shall be immediately due and payable upon demand by
Indemnitee.
5. Limitations of Remedial Work. Notwithstanding anything in this
Agreement to the contrary, Indemnitor and Indemnitee agree that Indemnitor shall
not be required to remediate
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Known Contamination under buildings or paved parking areas on the properties
except to the extent required by IEPA or IDEM, as applicable. In addition,
Indemnitor and Indemnitee agree that certain of the Known Contamination may,
with the approval of IEPA or IDEM, as applicable, be remediated by utilizing
appropriate engineered barriers over or around such Known Contamination instead
of actually removing it. Indemnitee agrees that the NFR Letter for CEC and the
Covenant Not to Xxx for ECEC and HEC may contain certain limitations and
requirements relating to Known Contamination underneath, or contained by, such
buildings, parking areas and engineered barriers (collectively, "Caps")
including, but not necessarily limited to, a requirement that restrictions on
removing such Caps be recorded against the relevant portions of the Properties.
The NFR Letter and Covenant Not to Xxx xxx also include a requirement that a
restrictive covenant be recorded against the Properties limiting their use to
industrial and other approved uses. Indemnitee agrees that in the event that
IEPA or IDEM requires that any such restrictive covenants or other limitations
(the "Restrictive Covenants") be recorded against any or all of the Properties,
Indemnitee shall cause the fee simple title holders of the relevant portions of
the Properties to record such Restrictive Covenants against all or any such
portions of the Properties as required by IEPA or IDEM. Indemnitor agrees to
provide Indemnitee in advance with the form of each NFR Letter, Covenant Not to
Xxx and Restrictive Covenant requested by IEPA or IDEM (the "EPA Documents") for
Indemnitee's approval, and Indemnitee shall have the right to negotiate the form
and substance of such EPA Documents with Indemnitor and IEPA or IDEM, as
applicable; provided, however, that Indemnitee's approval of such EPA Documents
shall not be unreasonably withheld or delayed.
6 Notice of Claims. All notices, approvals, consents, requests, and
demands upon the respective parties hereto shall be in writing; sent by personal
delivery (including, without limitation, nationally recognized courier services
such as Federal Express), or by certified or registered mail, postage prepaid
and return receipt requested; and addressed as follows:
To Indemnitor: The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
With a copy to: The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
To Indemnitee: Prime Group Realty Trust
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
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Attn: President
With a copy to: Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
or to such other address as may be furnished in writing for such purpose with a
copy to one additional person each as Indemnitor or Indemnitee shall specify in
writing.
7. Participation in Defense of Claims/Duty to Cooperate Notice of
Indemnitor. In the event that any claim, action, administrative proceeding
(including informal proceedings), or other demand is made by any governmental
agency or other third party against Indemnitee involving Costs, Indemnitor shall
cooperate with Indemnitee in any defense or other response to any such claim or
other demand. Indemnitor shall have the right to participate in the defense or
other response to any such claim or demand provided that Indemnitee shall have
the right, but not the obligation, to direct and control the defense or response
to any such claim or demand. Indemnitor's right to participate in the defense
or response to any such claim or demand shall not be deemed to limit or
otherwise modify Indemnitor's obligations under this Indemnification Agreement.
Indemnitee shall give notice to Indemnitor of any claim or demand governed by
this Paragraph 6 within a reasonable period after such claim or other demand
first becomes known to Indemnitee.
8. Subrogation of Indemnity Rights. If Indemnitor fails to perform its
obligations under Paragraph 4 above and Indemnitee performs in its stead,
Indemnitee shall be subrogated to any rights Indemnitor may have under any
indemnifications from any present, future or former owners, tenants, or other
occupants or users of the Properties (or any portion thereof) relating to the
matters covered by this Indemnification Agreement.
9. Assignment by Indemnitee. No consent by Indemnitor shall be required
for any assignment or reassignment of the rights of Indemnitee hereunder to one
or more parties.
10. Litigation Matters. Indemnitee acknowledges that Indemnitor and
certain affiliates of Indemnitor are currently engaged in litigation against
certain past or present tenants of the Properties, as specified on Exhibit A
attached hereto. Indemnitee acknowledges and agrees that any cash or other
property received by Indemnitor or such affiliates pursuant to such litigation
shall be retained by Indemnitor or such affiliates, even if the value of such
cash or property exceeds the amounts due to Indemnitee under this Agreement.
Indemnitee also agrees that Indemnitor has the right to receive all cash or
securities held in escrow pursuant to any agreement between Indemnitor and IEPA,
IDEM or any other governmental authority regarding environmental matters
relating to the Properties. Indemnitee also agrees to cooperate fully with
Indemnitor or any affiliate of Indemnitor, at Indemnitor's expense, in any
litigation regarding environmental matters related to the Properties.
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11. Merger, Consolidation, or Sale of Assets. In the event of a
dissolution of Indemnitor or other disposition involving Indemnitor or all or
substantially all of the assets of Indemnitor to one or more persons or other
entities, the surviving entity or transferee of such assets, as the case may be,
shall deliver to Indemnitee an acknowledged instrument in recordable form
assuming all covenants, agreements, responsibilities, liabilities and
obligations of Indemnitor under this Indemnification Agreement.
12. Independent Obligations: Survival. The obligations of Indemnitor
under this Indemnification Agreement shall survive the consummation of the
Formation Agreement, and the obligations of Indemnitor under this
Indemnification Agreement are separate and distinct from the obligations of
Indemnitor under the Formation Agreement. This Indemnification Agreement may be
enforced by Indemnitee without regard to any other rights and remedies
Indemnitee may have against Indemnitor under the Formation Agreement and without
regard to any limitations on Indemnitee's recourse as may be provided in the
Formation Agreement.
13. Miscellaneous. If any term of this Indemnification Agreement or any
application thereof shall be invalid, illegal, or unenforceable, the remainder
of this Indemnification Agreement and any other application of such term shall
not be affected thereby. No delay or omission in exercising any right hereunder
shall operate as a waiver of such right or any other right. This
Indemnification Agreement shall be binding upon, inure to the benefit of, and be
enforceable by Indemnitor and Indemnitee, and their respective successors and
assigns, including, without limitation, any assignee or Indemnitee of all or any
portion of the Indemnitee's interest in the Properties. This Indemnification
Agreement shall be governed and construed in accordance with the laws of the
State of Illinois.
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IN WITNESS WHEREOF, Indemnitor and Indemnitee have caused this
Indemnification Agreement to be executed as of the day and year first above
written.
INDEMNITOR:
The Prime Group, Inc.,
an Illinois corporation
By:
-----------------------------
Its:
----------------------------
INDEMNITEE:
Prime Group Realty, L.P.,
a Delaware limited partnership
By:
-----------------------------
Its:
----------------------------
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EXHIBIT A
Environmental Reports
---------------------
1. Removal Site Evaluation and Preliminary Assessment C Event Two Report,
April 1997, by Xxxxxxx Environmental, regarding the Chicago Enterprise
Center
2. Remediation Work Plan, February 1997, by Heritage Environmental Services,
regarding the East Chicago Enterprise Center
3. Remediation Work Plan, February 1997, by Heritage Environmental Services,
regarding the Hammond Enterprise Center
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