Environmental Indemnity Agreement

ENVIRONMENTAL INDEMNITY AGREEMENT
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This ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement") dated as of the 28th day of July, 2000 is made by and between Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership ("Seller"), and Borden Chemical, Inc., a Delaware corporation ("Purchaser").


WITNESSETH:
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WHEREAS, pursuant to a Conveyance and Transfer Agreement dated as of June 27, 2000 (the "Conveyance Agreement"), by and between Seller and Purchaser, Seller has agreed to sell to Purchaser and Purchaser has agreed to purchase from Seller the Purchased Assets and Seller has granted Purchaser an Option to purchase the Optioned Assets (capitalized terms used herein and not otherwise defined herein are being used as defined in the Conveyance Agreement);


WHEREAS, the Purchased Assets include the Real Property;


WHEREAS, Seller and Purchaser desire to set forth the terms and conditions upon which certain environmental liabilities of the Real Property will be handled on and after the date hereof;


NOW, THEREFORE, in consideration of the premises and of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


1. Seller Indemnity. Subject to Section 3 below, Seller shall
---------------- indemnify and save and hold harmless Purchaser and its Affiliates, successors and assigns against all claims, costs, damages, expenses and liabilities incurred by such indemnified persons to the extent relating to or arising out of the following (less a deductible to be borne by Purchaser of $125,000 in any given calendar year, provided that the cumulative amount borne by Purchaser pursuant to this Section 1 shall not exceed $500,000):


(a) any treatment, recycling, storage or disposal of any Materials of
Environmental Concern after November 30, 1987, and prior to the date of
this Agreement (the "Operating Period"), at the Real Property or any
Purchased Asset or Optioned Asset (collectively, the "Assets");


(b) any Release during the Operating Period at the Real Property or
from an Asset during the Operating Period of any substance which
constituted Materials of Environmental Concern (the term "Release" as used
herein means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment, including without limitation the workplace);


(c) any claim by a third-party based upon any exposure or alleged
exposure of any person or property to any Materials of Environmental
Concern Released at the Real


Property or from an Asset during the Operating Period (excluding claims
arising after the date hereof under Workman's Compensation and Occupational
Disease statutes); and


(d) any violation or alleged violation during the Operating Period of
applicable Environmental Laws relating to the use, operation or ownership
of an Asset.


It is acknowledged by the parties that this Environmental Indemnity Agreement is intended to be Purchaser's sole remedy with respect to the subject matters covered in this Section 1 but is not intended to address matters not specifically addressed in this Section. Without limiting the foregoing, this Environmental Indemnity Agreement is not intended to address claims, costs, damages, expenses and liabilities incurred as a result of treatment, recycling, storage or disposal or Releases of Materials of Environmental Concern that are not present at and do not emanate from, or violations of Seller not involving, the Real Property or the Assets, all of which matters are Excluded Liabilities indemnifiable pursuant to Section 9 of the Conveyance Agreement.


2. Purchaser Indemnity. Subject to Section 3 below, Purchaser shall
------------------- indemnify and save and hold harmless Seller and its Affiliates, successors and assigns against all claims, costs, damages, expenses and liabilities incurred by such indemnified persons to the extent relating to or arising out of:


(a) any treatment, recycling, storage or disposal by or at the Real
Property or any other facility owned or operated by Purchaser, including
any facility leased by Purchaser on or after the date hereof, of any
Materials of Environmental Concern shipped by Purchaser, or its employees,
agents or contractors (other than the Seller Entities or any of their
respective employees) ("Representatives"), from the Real Property or from
an Asset on or after the date hereof;


(b) any Release by Purchaser or its Representatives at the Real
Property or from an Asset on or after the date hereof of any substance
which is a Material of Environmental Concern;


(c) any exposure or alleged exposure of any person or property to any
Materials of Environmental Concern Released by Purchaser or its
Representatives at the Real Property or from an Asset on or after the date
hereof; and


(d) any violation or alleged violation by Purchaser or its
Representatives on or after the date hereof of ap ...