Environmental Indemnity Related To Lease Agreement

ENVIRONMENTAL INDEMNITY


This ENVIRONMENTAL INDEMNITY (this "Environmental Indemnity") is made as of this 2nd day of February, 2001, by Borders, Inc., a Colorado corporation ("Borders"), and Borders Group, Inc., a Michigan corporation ("BGI," and collectively with Borders, the "Indemnitor") to Wilmington Trust Company, not in its individual capacity, but solely as owner trustee under a certain Collateral Trust Indenture dated as of January 22, 2001 ("Lender").


Preliminary Statement


I. BB Rapid City Associates, L.L.C., an Ohio limited liability company ("Borrower"), is the owner of the real property located in Rapid City, South Dakota, legally described in Exhibit A attached hereto (that real property, together with any additional real property hereafter encumbered by the lien of the Mortgage (as hereinafter defined) and all improvements now or hereafter located therein and all rights and interests of Borrower therein, being hereinafter collectively called the "Premises");


II. Pursuant to the terms of that certain Project Loan Agreement dated as of even date herewith between the Borrower and the Lender, concurrently herewith Lender shall make a loan to Borrower in the amount of $3,702,953.27 (the principal, interest, and all other sums due and owing under the loan being hereinafter collectively called the "Loan"), which Loan shall be evidenced by a Project Loan Note by Borrower to Lender (such Project Loan Note, together with all modifications, increases, and supplements thereof, being hereinafter collectively called the "Note") and secured by, among other things, a Mortgage or Deed of Trust made by Borrower to Lender (such Mortgage or Deed of Trust, together with all modifications, consolidations, increases, supplements, and spreaders thereof, being hereinafter collectively called the "Mortgage") which will encumber the Premises (which Note, Mortgage and all other documents evidencing and securing the Loan are hereinafter collectively called the "Loan Documents"); and


III. Concurrently herewith, Borders is entering into that certain Lease dated as of even date herewith between Borders, as lessee, and the Borrower, as lessor, pursuant to which Borders shall lease the Premises from Borrower.


IV. BGI is the sole shareholder of Borders.


V. To induce Lender to make the Loan to finance the Premises and in consideration thereof, Indemnitor has agreed to provide certain indemnities;


NOW, THEREFORE, in consideration of the matters described hereinabove and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor agrees as follows:


Indemnitor shall, at its sole cost and expense, indemnify, defend (with counsel approved by Lender), protect, and hold harmless Lender and Lender's officers, trustees, directors, shareholders, employees, and agents (which officers, trustees, directors, shareholders, employees


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and agents are hereinafter collectively called "Lender's Representatives") against and from any and all damages, losses, liabilities, obligations, penalties, claims, sums paid in settlement of claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements, fines, encumbrances, liens, and expenses of any kind or of any nature whatsoever (collectively, the "Indemnified Expenses") that may at any time (including, without limitation after the repayment of the Loan or after foreclosure of the Mortgage, exercise of power of sale under the Mortgage, or conveyance of the Premises in lieu of foreclosure) be imposed upon, incurred by, or asserted or awarded against, Lender or any Lender Representative and that arise directly or indirectly from or out of any Environmental Problem (defined below), regardless of whether that Environmental Problem arises before or after the date hereof or before or after any repayment of the loan or any conveyance of the Premises by foreclosure of the Mortgage, exercise of power of sale under the Mortgage, or conveyance in lieu of foreclosure, regardless (except as provided below) of whether or not that Environmental Problem is the fault of Borrower, Indemnitor, or any other person or entity, and regardless of whether or not the Environmental Problem was disclosed in any Environmental Report (defined below) performed for, or on behalf of, Lender in connection with the Loan or whether or not Lender has actual or constructive knowledge of the Environmental Problem from any other source.


A. Indemnified Expenses shall, include, without limitation, all of the following: (i) costs incurred in the removal of Hazardous Substances (defined below), costs incurred in investigation, monitoring, clean-up, and containment of Hazardous Substances, costs incurred to mitigate damages, foreclosure costs, costs incurred for remediation and restoration, and other response costs; (ii) costs incurred to cure any violations of Environmental Laws (defined below); (iii) damages for personal injury or death, property loss, or other loss; (iv) civil and criminal fines and penalties; (v) costs incurred to remove any liens imposed by law in favor of the federal or any state or local government or governmental agency or authority in connection with an Environmental Problem; (vi) reasonable attorneys', accountants', consultants', and experts' fees and disbursements, reasonable administrative costs, and other reasonable out-of-pocket expenses (including any such fees, disbursements, costs, and expenses incurred as a result of groundless, false, or fraudulent claims or proceedings brought against Lender or Lender's Representatives); (vii) diminution in the market value of the Premises realized upon the sale thereof, whether by foreclosure or otherwise; (viii) to the extent the appropriate governmental authorities have brought claims against Lender or Lender's Representatives damages for injury to, destruction of, or loss of, natural resources; (ix) sums paid to tenants and other third parties (or offset against rents or other sums payable by such tenants and other third parties) for indemnification pursuant to leases or other agreements wherein such tenants or other third parties are entitled to indemnification or payment on account of Environmental Problems or pursuant to statutory or common law; (x) consequential damages; (xi) sums paid and any other liability to the federal government, any state or local government, any federal, state, or local governmental authority, or any other person or entity for any costs described above; (xii) sums paid in satisfaction of judgments; (xiii) settlement costs; and (xiv) all other costs and expenses of any kind or nature.


B. Without limiting Indemnitor's obligations hereunder, in the event of any Environmental Problem, Lender may, in Lender's sole discretion: (i) by notice to Indemnitor, obligate Indemnitor to take such action as may be required by applicable Environmental Laws to correct or ameliorate the Environmental Problem, in which event Indemnitor shall take such action at Indemnitor's sole expense; (ii) itself take such action as may be required by applicable Environmental Laws to correct or ameliorate the Environmental Problem, to the extent permitted


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under the Loan Documents and under the law, in which event Indemnitor shall cooperate with Lender and shall indemnify Lender for the reasonable costs incurred in taking such action in accordance with this Environmental Indemnity; and/or (iii) exercise any other rights or remedies that Lender may have; but Lender shall have no obligation to do any of the foregoing. Lender shall have the options described above whether or not action to correct or ameliorate the Environmental Problem is ordered by any court, governmental authority, or other person or entity. For so long as (a) Borrower owns the Premises, (b) neither Lender nor any other party is operating the Premises under a mortgage-in-possession or receivership arrangement, and (c) there is no outstanding default under the documents evidencing and securing the Loan, Lender shall not be entitled to take the actions described in clause (ii) above unless Indemnitor fails to commence the actions required pursuant to (i) above within a reasonable period of time following receipt of Lender's notice or Indemnitor fails at any time thereafter to diligently pursue such actions.


C. If the Premises are conveyed by foreclosure of the Mortgage, exercise of power of the sale under the Mortgage, or conveyance in lieu of foreclosure (any such conveyance being hereinafter called a "Foreclosure Conveyance"), then the indemnity provided for under this instrument shall not apply to any Environmental Problem that arises solely after and not on or before the date of the conveyance unless the Environmental Problem results in whole or in part from acts or omissions by Indemnitor or Borrower or from acts or omissions prior to the date of the conveyance by any other person or entity. The indemnity provided for under this instrument shall, however, apply to Indemnified Expenses incurred after the date of the conveyance that arise from any Environmental Problem in existence on or before the date of the conveyance or any Environmental Problem otherwise not excluded from coverage under the immediately preceding sentence, even if that Environmental Problem is not discovered until after the date of the conveyance. For purposes of this clause C, a condition in existence on or before the date of the conveyance shall be deemed to be an Environmental Problem on or before that date even if the condition becomes an Environmental Problem as a result of a change in Environmental Laws that becomes effective after that date. Indemnitor shall have the burden of proving that any Environmental Problem arises after the date of the conveyance, and if Indemnitor is unable to satisfy such burden of proof, then Indemnitor's obligations hereunder with respect to that Environmental Problem shall be effective and shall not be reduced or diminished.


D. Notwithstanding anything in this instrument to the contrary, the indemnity provided under this instrument shall not apply to any Indemnified Expenses to the extent that they result from the gross negligence, willful misconduct or bad faith of Lender.


E. Lender shall terminate this Environmental Indemnity effective as of the first anniversary (the "Repayment Anniversary") of the repayment in full of the Loan, provided:


(i) The repayment shall have been made at a time and in a manner
permitted under the Loan Documents;


(ii) Indemnitor shall pay to Lender all sums due under this
Environmental Indemnity and Indemnitor shall not otherwise be
in default under this Environmental Indemnity;


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(iii) On the Repayment Anniversary, neither Lender nor the then
owner of the Premises shall be aware of any Environmental
Problem, and the then owner of the Premises shall provide a
certification to Lender, in form satisfactory to Lender, to
that effect; and


(iv) Neither Lender nor any affiliate or subsidiary of Lender shall
have at any time or in any manner participated in the
management or control of, or taken possession of or title to,
the Premises or any portion thereof whether as mortgagee in
possession or otherwise, nor shall Lender have taken any
action or exercised such dominion and control over the
Premises that, in Lender's sole discretion, could cause Lender
to be considered an "owner" or "operator" under CERCLA
(defined below) or to have similar status under any other
Environmental Laws, nor shall any receiver have at any time or
in any manner participated in the management or control of, or
taken possession of or title to, the Premises or any portion
thereof; provided, that this Subsection E(iv) shall only be
effective to restrict the termination of this Environmental
Indemnity as it applies to the property for which Lender's
"owner", "operator" or comparable status is incurred.


If all of the above conditions are satisfied, then Lender shall execute and deliver to Indemnitor an instrument effecting such termination. No such termination shall affect any rights or remedies, not derived from this Environmental Indemnity, that Lender may have against Indemnitor or Borrower with respect to Environmental Problems.


F. Lender shall terminate this Environmental Indemnity effective as of the first anniversary (the "Conveyance Anniversary") of any Foreclosure Conveyance (defined in paragraph D above), provided:


(i) Indemnitor shall pay to Lender all sums due under this
Environmental Indemnity and Indemnitor shall not otherwise be
in default under this Environmental Indemnity;


(ii) as of the date of the Conveyance Anniversary no Environmental
Problem is in existence; and


(iii) On the Conveyance Anniversary, neither Lender nor the then
owner of the Premises sh ...