Environmental Compliance And Indemnity Agreement

Exhibit 10.5


ENVIRONMENTAL COMPLIANCE AND INDEMNITY AGREEMENT


This environmental compliance and indemnity agreement ("Environmental Indemnity" or "Agreement") is given pursuant to the terms and conditions of the agreement dated as of even date captioned "Acquisition and Construction Loan Agreement" (the "Loan Agreement") by and among 830 WINTER STREET LLC, a Delaware limited liability company having an address at c/o PRAECIS PHARMACEUTICALS INCORPORATED, One Hampshire Street, Cambridge, Massachusetts 02139 (the "Borrower"), PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation having an address at One Hampshire Street, Cambridge, Massachusetts 02139 ("Guarantor") and ANGLO IRISH BANK CORPORATION PLC ("Lender"; which term shall include any other lenders that become "Lenders" in the future under the Loan Agreement) having an address at Stephen Court, 18-21 St. Stephen's Green, Dublin 2, Ireland.


As used herein:


A. The term "Environmental Legal Requirements" shall mean all applicable past (which have current effect), present or future federal, state, county and local laws, by-laws, rules, regulations, codes and ordinances, or any judicial or administrative interpretations thereof, and the requirements of any governmental agency or authority having or claiming jurisdiction with respect thereto, including, without limitation, all orders, decrees, judgments, rulings, requirements, directives or notices of violation, imposed through any public or private enforcement proceedings, that create one or more duties, obligations, responsibilities or liabilities with respect to:


(i) the regulation or protection of the environment;


(ii) the health and safety of persons and property;


(iii)any environmental pollution, impairment or disruption;


(iv) any environmental permits (including, without limitation, the City of
Waltham's Board of Health Recombinant DNA Permit related to the
Property), licenses, emissions or affluent reduction plans and
reporting requirements; and


(v) in each instance further including, without limitation, laws governing
the existence, use, storage, treatment, discharge, release,
containment, transportation, generation, manufacture, refinement,
handling, production, disposal or management of any Hazardous
Materials, or otherwise regulating or providing for the protection of
the environment, and further including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act
(42 U.S.C.Section 9601 ET SEQ.), the Hazardous


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Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the
Public Health Service Act (42 U.S.C. Section 300(f) ET SEQ.), the
Pollution Prevention Act (42 U.S.C. Section 13101 ET SEQ.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
Section 136 ET SEQ.), the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 ET SEQ.), the Federal Clean Water Act (33
U.S.C. Section 1251 ET SEQ.), the Federal Clean Air Act (42 U.S.C.
Section 7401 ET SEQ.), and the Massachusetts Oil and Hazardous
Materials Release Prevention and Response Act, M.G.L. c. 21E and
the Massachusetts Hazardous Waste Management Act, M.G.L. c. 21C.


B. The term "Hazardous Materials" shall mean and include asbestos, flammable materials, explosives, radioactive or nuclear substances, polychlorinated biphenyls, other carcinogens, oil and other petroleum products, radon gas, urea formaldehyde, chemicals, gases, solvents, pollutants or contaminants that could be a detriment or pose a danger to the environment or to the health or safety of any person, and any other hazardous or toxic materials, wastes and substances which are defined, determined or identified as such in any past (which have current effect), present or future federal, state or local laws, by-laws, rules, regulations, codes or ordinances or any judicial or administrative interpretation thereof.


C. The term "Property" shall mean property known as 830 Winter Street, Waltham, Middlesex (Southern District) County, Massachusetts as further described on EXHIBIT A which is annexed hereto and made apart hereof, together with all appurtenant easement areas thereto and shall also include any other tangible property in which Lender now or hereafter receives a mortgage or security interest in connection with the Loan.


D. The term "Surrounding Property" shall mean any property located within one (1) mile of the perimeter of the Property.


E. The term "Guarantor" shall mean PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation.


F. The term "Indemnitors" shall mean, collectively, the Borrower and the Guarantor.


G. The term "Indemnified Party" shall mean: (i) Lender; (ii) all those claiming by, through or under Lender, including any other present or future holder of the Loan or any portion thereof and any present or future owner of a participation interest therein; (iii) any subsequent owner or tenant of all or any portion of the Property following the exercise by Lender of the rights of Lender under the Loan Agreement, the Security Deed, the Assignment of Leases and Rents or the other Loan Documents including, but not limited to, a foreclosure sale or deed in lieu thereof (provided, however, with respect to this clause (iii), the representations, warranties, covenants and indemnities contained in this Agreement shall only relate to environmental conditions arising out of activities and conditions on or about the Property which occurred or existed


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prior to the Lender Acquisition Date (hereinafter defined) and which were caused by Borrower on or after the date hereof); and (iv) as to each of the foregoing, their respective affiliate, parent and subsidiary corporations, and, as applicable, the respective officers, directors, stockholders, agents, employees, accountants and attorneys of any one or more of them, and any person firm or entity which controls, is controlled by, controlling, or under common control with, any one or more of them. Notwithstanding the foregoing, it is agreed that the term "Indemnified Party" shall not include (i) a party unaffiliated with Lender who purchases the Property from Lender (or Lender's nominee) following the expiration of thirteen (13) months from the date Lender (or Lender's nominee) first acquires the Property at foreclosure sale, deed in lieu thereof, or otherwise ("Lender Acquisition Date") or (ii) a party unaffiliated with Lender who purchases the Property from Lender at foreclosure sale, or any party unaffiliated with Lender to whom Lender sells, assigns, leases or otherwise transfers the Property prior to the expiration of the thirteen (13) month period following the Lender Acquisition Date, if Indemnitors shall have delivered to Lender, or Lender shall have otherwise obtained prior to sale or other disposition of the Property to any such party, a then current environmental site assessment report (the "Report") prepared by a licensed site professional and complying with the provisions of Section 4.1.1 hereof, which Report does not disclose to the reasonable satisfaction of Lender the existence of any Hazardous Materials condition in non-compliance, or the assertion by any environmental agency or third party of any such condition in non-compliance, with Environmental Legal Requirements applicable to the Property or the Surrounding Property, resulting from Hazardous Materials either (x) originating, on, under, or from the Property or (x) originating on, under, or from any Surrounding Property and affecting the Property, and which has not been cured to the reasonable satisfaction of Lender.


H. The term "Environmental Enforcement Action" shall mean all actions, orders, requirements or liens instituted, threatened in writing, required, completed, imposed or placed by any governmental authority and all claims made or threatened by any other person against or with respect to the Property or any Surrounding Property, or any present or past owner or occupant thereof, arising out of or in connection with any of the Environmental Legal Requirements, any environmental condition, or the assessment, monitoring, clean-up, containment, remediation or removal of, or damages caused or alleged to be caused by, any Hazardous Materials (i) located on or under the Property or any Surrounding Property, (ii) emanating from the Property or any Surrounding Property, or (iii) generated, stored, transported, utilized, disposed, managed, or released by any Indemnitor (whether or not on, under or from the Property or the Surrounding Property).


I. The terms "generated, "stored, "transported, "utilized," "disposed," "managed," "released" and "threat of release," and all conjugates thereof, shall have the meanings and definitions set forth in the Environmental Legal Requirements.


J. The term "Environmental Report" shall mean the report identified on EXHIBIT B which is annexed hereto and made a part hereof.


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K. All other capitalized terms used in this Agreement which are not otherwise specifically defined herein shall have the same meaning herein as in the Loan Agreement.


FOR VALUE RECEIVED, and to induce Lender to grant the Loan and extend credit to Borrower as provided for in the Loan Agreement and the other Loan Documents, Indemnitors hereby unconditionally agree as follows:


1. COMPLIANCE WITH ENVIRONMENTAL LEGAL REQUIREMENTS.


1.1 COMPLIANCE. Until such time as all Obligations with respect to
the Loan have been paid in full, Indemnitor guaranty and agree that
Borrower, or the other Indemnitor on behalf of Borrower, shall comply
with all Environmental Legal Requirements applicable to Borrower
and/or the Property and that Borrower, or the other Indemnitor on
behalf of Borrower, shall take all remedial action necessary to avoid
any liability of Borrower, any Lender, or any subsequent owner of the
Property, and to avoid the imposition of, or to discharge, any liens
on the Property, as a result of any failure by Borrower to comply with
Environmental Legal Requirements applicable to the Property.


1.2 PROHIBITIONS. Without limitation upon the generality of
foregoing, Indemnitors and each of them agree that they shall not:


(a) except in strict compliance with Environmental Legal
Requirements, release or permit any release or threat of release of
any Hazardous Materials on the Property;


(b) except in strict compliance with Environmental Legal
Requirements, generate or permit any Hazardous Materials to be
generated on the Property;


(c) except in strict compliance with all Environmental Legal
Requirements, store, or utilize, or permit any Hazardous Materials to
be stored or utilized on the Property;


(d) dispose of or permit any Hazardous Materials to be disposed of on
the Property; and


(e) fail to operate, maintain, repair and use the Property in
accordance with Environmental Legal Requirements; or


f) allow, permit or suffer any other person or entity to operate,
maintain, repair and use the Property except in accordance with
Environmental Legal Requirements.


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2. NOTICE OF CONDITIONS. Except as previously disclosed to Lender in the Environmental Report, Indemnitors shall provide Lender with prompt written notice, but in no event later than ten (10) Business Days after obtaining any actual knowledge or actual notice thereof, of any of the following conditions: (i) the presence, or any release or threat of release, of any Hazardous Materials on, under or from the Property, or any Surrounding Property, whether or not caused by any of Indemnitors; (ii) any Environmental Enforcement Action instituted or threatened in writing; or (iii) any condition or occurrence on the Property, or any Surrounding Property, that may constitute or threaten to cause to occur a violation of any of the Environmental Legal Requirements with respect to the Property.


3. INDEMNITORS' AGREEMENT TO TAKE REMEDIAL ACTIONS.


3.1 REMEDIAL ACTIONS. Upon any of Indemnitors becoming aware of the
violation of any Environmental Legal Requirement related to the
Property, or the presence, or any release or any threat of release, of
any Hazardous Materials on, under, or from the Property or any
Surrounding Property, whether or not caused by any of Indemnitors,
Indemnitors shall, subject to the rights to contest set forth in
Section 6, immediately take all actions: (A) to cure or eliminate any
such violation of any such Environmental Legal Requirement relating to
the Property and, where applicable, to arrange for the assessment,
monitoring, clean-up, containment, removal, remediation, or
restoration of the Property and, (B) to the extent that the presence
of any Hazardous Materials on the Surrounding Property originated on,
under, or from the Property, or constitutes a danger to the Property,
take such steps as (i) are required pursuant to any Environmental
Legal Requirements or by any governmental authority to cure or
eliminate violation(s) of any such Environmental Legal Requirement;
and (ii) may otherwise be advisable and reasonably requested by Lender
consistent with Environmental Legal Requirements.


3.2 SECURITY FOR COSTS. If the potential costs associated with the
actions required in Section 3.1, the release of any lien against the
Property, and the release or other satisfaction of the liability, if
any, of any of Indemnitors with respect to the Property arising under
or related to any of the Environmental Legal Requirements or any
Environmental Enforcement Action are determined by Lender, in good
faith, to exceed $500,000, Lender shall have the right to require
Indemnitors to provide, and Indemnitors shall provide, within thirty
(30) days after written request therefor, a bond, letter of credit or
other similar financial assurance, in form and substance satisfactory
to Lender, in its good faith judgment, evidencing to Lender's
reasonable satisfaction that the necessary financial resources will be
unconditionally available to pay for all of the foregoing.


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3.3 ENVIRONMENTAL ASSESSMENTS. Lender shall have the right to require
Indemnitors, at their own cost and expense, to obtain a professional
environmental assessment of the Property in accordance with Lender's
then standard environmental assessment requirements and sufficient in
scope to comply with the requirements of Section 4 of this Agreement,
upon the occurrence of any one or more of the following events: (i) an
Event of Default; or (ii) upon receipt of any notice of any of the
conditions specified in Section 2 of this Agreement.


4. LENDER'S RIGHTS TO INSPECT THE PROPERTY AND TAKE REMEDIAL ACTIONS.


4.1 LENDER' S RIGHTS. Lender may exercise its rights and remedies
under this Section 4 only upon and following the existence of one or
more of the following events or conditions: (i) the Loan becomes due
and payable in full (but has not been paid) either at its stated
maturity or upon acceleration based upon an Event of Default; (ii) an
Indemnified Party has taken possession of all or some portion of the
Property based upon an Event of Default; (iii) an Indemnified Party
has acquired title to all or some portion of the Property by virtue of
foreclosure or deed in lieu of foreclosure; or (iv) a claim has been
asserted against an Indemnified Party for which indemnification is
provided in this Agreement, but none of Indemnitors has undertaken and
is continuing to pursue commercially reasonable efforts to remediate,
defend and otherwise indemnify any such Indemnified Party and to
provide such Indemnified Party with reasonable assurances of such
Indemnitor's ability, financially and otherwise, to satisfy
Indemnitor's obligations. In any such events Lender shall have the
right, but not the obligation, through such representatives or
independent contractors as it may designate, to enter upon the
Property and to expend funds to:


4.1.1 ASSESSMENTS. Cause one or more environmental assessments of the
Property to be undertaken, if Lender in its reasonable discretion
determines that such assessment is appropriate. Such environmental
assessments may include, without limitation, (i) detailed visual
inspections of the Property, including without limitation all storage
areas, storage tanks, drains, drywells and leaching areas; (ii) the
taking of soils and surface and sub-surface water samples; (iii) the
performance of soils and ground water analysis; and (iv) the
performance of such other investigations or analysis as are necessary
or appropriate and consistent with sound professional environmental
engineering practice in order for Lender to obtain a complete
assessment of the compliance of the Property and the use thereof with
all Environmental Legal Requirements and to make a determination as to
whether or not there is any risk of contamination (x) to the Property
resulting from Hazardous Materials originating on, under, or from any
Surrounding Property or (y) to any


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Surrounding Property resulting from Hazardous Materials originating
on, under, or from the Property;


4.1.2 CURE. Cure any breach of the representations, warranties,
cove ...