SURPLUS PROPERTY ROUNDTABLE MEETING REAL ESTATE AND ENVIRONMENTAL SUBCOMMITTEE NOVEMBER 2017 Chair/Moderator- Mike Goldstein- Ingersoll Rand Co-Chair/Co- Moderator: Mike Malley INSURANCE AND FINANCIAL ASSURANCE IN ENVIRONMENTAL LIABILITY TRANSFER TRANSACTIONS

Framing the Issue-November 2017 SPR Meeting February 2017 May 2017 August 2017 Insurance and Financial Assurance Environmental Due Diligence Seller’s Buyer Due Diligence Contract Terms Development Restrictions Emerging Issues Seller full disclosure Appropriate level of data Is more better? Seller Decision Process Type and level of Buyer testing allowed Certifications Buyer right to investigate Phase I Phase II, more? Reporting requirements of Seller and Buyer Financial strength Reputation Buyer entity type (i.e., SPE, LLC, etc.) Management team Similar projects Planned reuse Health and safety Insurance PLL RSL/Cap Cost Excess of Indemnity Financial Assurance Bonding Letter of Credit Corporate guarantee Trusts Escrows/Holdbacks Reps/Warranties/Indemnities/Covenants Definition of baseline environmental conditions at close Required regulatory endpoints Environmental liability transfer mechanisms Does it truly exist? Zoning restrictions Deed restrictions Easements Covenants (i.e., no groundwater use) Engineering controls Institutional controls Run with the land Vapor Intrusion Emerging contaminants Regulatory changes Cleanup standards Political climate Cleanup technologies Global economic market November 2017

Risk & Liability Management Each company has its own approach Each deal has its own facts Insurance products/financial assurance are tools Risk tolerance drives structure!

Managing Risk for Successful Brownfield Transactions Known Contamination Unknown Contamination Regulatory Reopeners Design/Construction Failure Non-owned Offsite Disposal Business Interruption Bodily Injury / Property Damage Natural Resource Damage Cost Certainty / Cost Containment

Insurance and Financial Assurance in ELT Transactions 1Amounts are for illustrative purposes only Insurance and Financial Insurance Layers

Real Estate and Environmental Committee – 2017 Highlights/Takeaways February 2017 Meeting – Due Diligence in ELT Transactions Sharply divided opinions: Should Sellers allow Buyers to conduct Phase II investigation? Should Seller conduct its own Phase II in preparing for sale Reporting obligations of the Seller when Buyer conducts a Phase II investigation May 2017 Meeting – Seller Due Diligence of Prospective Buyers Buyer Attributes (in order of importance): Financial strength Reputation/prior track record Indemnifications, financial guarantees and survivability Site reuse Commitment to post-closing obligations August 2017 Meeting – Contract T&Cs in an ELT Transaction Does Liability Transfer Truly Exist? Contractual assumption of liability possible, but statutorily, liability always stays with Seller Establish iron clad and well defined T&Cs (indemnities, reps, warranties, covenants) Seller’s PSA should be starting point Buyer financial assurance is a key factor in successful ELT transactions (e.g., escrow) “As is” sale price is a function of how much remediation still has to be performed Survey: What topics does the SPR membership want us to explore in 2018?