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Lease Guaranty, Indemnification and Reimbursement Agreement [Amendment No. 1] - Kmart Corp. and Borders Group Inc.

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              FIRST AMENDMENT TO LEASE GUARANTY, INDEMNIFICATION AND
                              REIMBURSEMENT AGREEMENT
 
                   THIS FIRST AMENDMENT TO LEASE GUARANTY, INDEMNIFICATION AND REIMBURSEMENT
AGREEMENT ("Amendment") is made as of the 11th day of June, 2001, by and among KMART
CORPORATION, a Michigan corporation ("Kmart"), having an address at 3100 West Big
Beaver Road, Troy, Michigan 48084, BORDERS GROUP, INC., a Michigan corporation ("BGI"),
and BORDERS, INC., a Colorado corporation ("Borders"), each of BGI and Borders having
an address at 100 Phoenix Drive, Ann Arbor, Michigan 48108.
 
                   A. Prior to the date hereof, Kmart, Borders and BGI entered into
that certain Lease Guaranty, Indemnification and Reimbursement Agreement, dated
May 24, 1995 (the "LGIRA"), whereby Borders and BGI agreed, among other things,
to indemnify Kmart in connection with the obligations of Borders under the Leases
(as defined in the LGIRA) and to accept certain financial and other covenants in
favor of Kmart.
 
                   B. Prior to the date hereof, Kmart, Borders and BGI entered into
that certain Agreement, dated January 25, 2001 (the "Agreement"), whereby Kmart
agreed to amend the LGIRA upon the satisfaction of certain conditions set forth
in Section 2 of the Agreement.
 
                   C. The conditions set forth in Section 2 of the Agreement have
been satisfied, and thus Kmart, Borders and BGI desire to amend the LGIRA in accordance
with the Agreement.
 
                   NOW, THEREFORE, in consideration of the foregoing recitals and
for other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, Kmart, BGI and Borders agree as follows:

 
          1. Representation of Satisfaction of Conditions. Each of Borders and BGI
represent and warrant to Kmart that the conditions set forth in Section 2 of the
Agreement have been fully satisfied. Without limiting the foregoing sentence, BGI
and Borders are unconditionally and irrevocably committed to continue to take the
actions required under Section 1.2 of the Agreement to seek to cause Kmart to be
fully, absolutely and unconditionally released from any and all obligations and
liabilities relating to the Group B Leases (as defined in the Agreement) and related
Guaranties (as defined in the Agreement).
 
          2. Amendment of LGIRA. The LGIRA is amended as follows:

 
                            (a)      Sections 5(a) and 5(b) of the LGIRA (other
                                     than the definition of the term
                                     "Indebtedness") are hereby deleted in their
                                     entirety;
 
                            (b)      Clause (ii) of Section 5(c) is hereby
                                     deleted in its entirety; and

     2
 
                            (c)      Clause (i) of Section 5(e) is hereby deleted
                                     in its entirety.

 
 
          3. Prior Agreements/Conflicts. This Amendment contains all of the agreements
of the parties hereto with respect to the matters contained herein, and no prior
agreement (other than the Agreement and the LGIRA as modified by this Amendment),
arrangement or understanding pertaining to any of such matters shall be effective
for any purpose.
 
          4. LGIRA Ratification. With the sole exception of the matters expressly
set forth in this Amendment, each and every one of the terms, conditions, agreements
and provisions of the LGIRA shall remain unchanged and in full force and effect,
and all of rights and obligations of the parties under the LGIRA are hereby reaffirmed,
ratified, and confirmed in their entirety.
 
          5. Counterparts. This Amendment may be executed in several counterparts
and all such counterparts shall constitute one agreement binding on the parties
hereto.
 
          6. Headings. The section headings contained in this Amendment are for
reference purposes only and shall not affect in any manner the meaning or interpretation
of this Amendment.
 
                   IN WITNESS WHEREOF, the undersigned have executed and delivered
this Amendment as of the date first written above.
 
                                   KMART CORPORATION

 
                                   By:   /s/ M.E. Welch
                                     -------------------------------------------
                                        Name: M. E. Welch
                                        Title:  Exceutive Vice President & Chief
                                        Financial Officer

 
                                   BORDERS GROUP, INC.

 
                                   By:   /s/ Bruce A. Quinnell
                                     -------------------------------------------
                                        Name:  Bruce A.Quinnell
                                        Title: Vice Chairman

 
                                   BORDERS, INC.

 
                                   By:   /s/ Edward W. Wilhelm
                                     -------------------------------------------
                                        Name: Edward W. Wilhelm
                                        Title:  Senior Vice President & Chief
                                        Financial Officer