Master Lease Agreement - Atlantic Financial Group Ltd. and Borders Inc.
<DESCRIPTION>MASTER LEASE AGREEMENT DATED AS OF JUNE 21, 2002
<TEXT>
<PAGE>
EXHIBIT 10.47
EXECUTION COPY
MASTER LEASE AGREEMENT
Dated as of June 21, 2002
between
ATLANTIC FINANCIAL GROUP, LTD., as Lessor,
and
BORDERS, INC. AND CERTAIN OTHER SUBSIDIARIES OF
BORDERS GROUP, INC., as Lessees
<PAGE>
TABLE OF CONTENTS
(Lease Agreement)
Page
ARTICLE I. DEFINITIONS ................................................ 1
ARTICLE II. LEASE OF LEASED PROPERTY ................................... 2
2.1 Acceptance and Lease of Property ........................... 2
2.2 Acceptance Procedure ....................................... 2
ARTICLE III. RENT ....................................................... 2
3.1 Basic Rent ................................................. 2
3.2 Supplemental Rent .......................................... 3
3.3 Method of Payment .......................................... 3
3.4 Late Payment ............................................... 3
3.5 Net Lease; No Setoff, Etc. ................................. 3
3.6 Certain Taxes .............................................. 5
3.7 Utility Charges ............................................ 5
ARTICLE IV. WAIVERS .................................................... 6
ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES ...................... 7
ARTICLE VI. MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS ................... 8
6.1 Maintenance and Repair; Compliance With Law ................ 8
6.2 Alterations ................................................ 8
6.3 Title to Alterations ....................................... 9
ARTICLE VII. USE ........................................................ 9
ARTICLE VIII. INSURANCE .................................................. 9
ARTICLE IX. ASSIGNMENT AND SUBLEASING .................................. 12
ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE .................. 12
10.1 Event of Loss .............................................. 12
10.2 Event of Taking ............................................ 13
10.3 Casualty ................................................... 14
10.4 Condemnation ............................................... 14
10.5 Verification of Restoration and Rebuilding ................. 14
10.6 Application of Payments .................................... 14
<PAGE>
10.7 Prosecution of Awards ...................................... 15
10.8 Application of Certain Payments Not Relating to an Event
of Taking................................................... 16
10.9 Other Dispositions ......................................... 16
10.10 No Rent Abatement .......................................... 16
ARTICLE XI. INTEREST CONVEYED TO LESSEES ............................... 16
ARTICLE XII. EVENTS OF DEFAULT .......................................... 17
ARTICLE XIII. ENFORCEMENT ................................................ 20
13.1 Remedies ................................................... 20
13.2 Remedies Cumulative; No Waiver; Consents ................... 23
13.3 Purchase Upon an Event of Default .......................... 23
ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL ....... 23
14.1 Lessee's Option to Purchase ................................ 23
14.2 Conveyance to Lessee ....................................... 24
14.3 Acceleration of Purchase Obligation ........................ 24
14.4 Determination of Purchase Price ............................ 25
14.5 Purchase Procedure ......................................... 25
14.6 Renewal .................................................... 26
ARTICLE XV. LESSEE'S EQUIPMENT ......................................... 26
ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE ................................ 27
ARTICLE XVII. MISCELLANEOUS .............................................. 27
17.1 Reports .................................................... 27
17.2 Binding Effect; Successors and Assigns; Survival ........... 27
17.3 Quiet Enjoyment ............................................ 28
17.4 Documentary Conventions .................................... 28
17.5 Liability of Lessor Limited ................................ 28
17.6 Estoppel Certificates ...................................... 28
17.7 No Joint Venture ........................................... 29
17.8 No Accord and Satisfaction ................................. 29
17.9 No Merger .................................................. 29
17.10 Survival ................................................... 29
17.11 Chattel Paper .............................................. 29
17.12 Time of Essence ............................................ 29
17.13 Recordation of Lease ....................................... 30
17.14 Investment of Security Funds ............................... 30
17.15 Ground Leases .............................................. 30
(ii)
<PAGE>
17.16 Land and Building .......................................... 30
17.17 Joint and Several .......................................... 30
17.18 IDB Documentation .......................................... 31
EXHIBIT A Lease Supplement
(iii)
<PAGE>
THIS MASTER LEASE AGREEMENT (as from time to time amended or
supplemented, this "Lease"), dated as of June 21, 2002, is among ATLANTIC
FINANCIAL GROUP, LTD., a Texas limited partnership (together with its
successors and assigns hereunder, the "Lessor"), as Lessor, and BORDERS,
INC., a Colorado corporation ("Borders"), and certain other Subsidiaries of
Borders Group, Inc., hereafter parties hereto (individually, with its
successors and permitted assigns hereunder, each a "Lessee" and collectively,
the "Lessees"), as Lessees.
PRELIMINARY STATEMENT
A. Lessor will purchase, or acquire a leasehold interest in, from
one or more third parties designated by the Construction Agent, on a Closing
Date, certain parcels of real property to be specified by the Construction
Agent, together with any improvements thereon.
B. Lessor desires to lease to each Lessee, and each Lessee desires
to lease from Lessor, certain of such properties as described on the Lease
Supplement(s) to which such Lessee is a party.
C. If applicable, the Construction Agent will, on behalf of Lessor,
cause to be constructed, certain improvements on such parcels of real
property which as constructed will be the property of Lessor and will become
part of such property subject to the terms of this Lease.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged,
Lessor and Lessees hereby agree as follows:
ARTICLE I.
DEFINITIONS
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in Appendix A to the Master Agreement, dated as of June 21,
2002 (as amended, supplemented or otherwise modified from time to time, the
"Master Agreement") among Borders Group, Inc. ("BGI"), and certain
Subsidiaries of BGI as Guarantors, the Lessees, Lessor, the financial
institutions party thereto as Lenders, Fleet National Bank, as Co-Arranger
and Syndication Agent, and SunTrust Bank, as Co-Arranger, Documentation Agent
and Agent, for all purposes hereof.
1
<PAGE>
ARTICLE II.
LEASE OF LEASED PROPERTY
Section 2.1 Acceptance and Lease of Property. On each Closing Date for
Land, Lessor, subject to the satisfaction or waiver of the conditions set
forth in Article III of the Master Agreement, hereby agrees to accept
delivery on such Closing Date of such Land pursuant to the terms of the
Master Agreement, together with any Building or Buildings and other
improvements thereon, and simultaneously to lease to the related Lessee
hereunder for the Lease Term, Lessor's interest in such Land and in such
Building or Buildings and other improvements, together with any Building
which thereafter may be constructed thereon pursuant to the Construction
Agency Agreement, and such related Lessee hereby agrees, expressly for the
direct benefit of Lessor, commencing on such Closing Date, to lease from
Lessor for the Lease Term Lessor's interest in such Land to be delivered on
such Closing Date, together with, in the case of Land, Lessor's interest in
the Building or Buildings and other improvements thereon and/or which
thereafter may be constructed thereon pursuant to the Construction Agency
Agreement.
Section 2.2 Acceptance Procedure. Lessor hereby authorizes one or more
employees of the related Lessee, to be designated by such Lessee, as the
authorized representative or representatives of Lessor to accept delivery on
behalf of Lessor of that Leased Property identified on the applicable Funding
Request. Each Lessee hereby agrees that such acceptance of delivery by such
authorized representative or representatives and the execution and delivery
by such Lessee on each Closing Date for property to be leased hereunder of a
lease supplement in substantially the form of Exhibit A hereto (each, a
"Lease Supplement") (appropriately completed) shall, without further act,
constitute the irrevocable acceptance by such Lessee of that Leased Property
which is the subject thereof for all purposes of this Lease and the other
Operative Documents on the terms set forth therein and herein, and that such
Leased Property, together with, in the case of Land, any and all Buildings
and other improvements thereon and/or to be constructed thereon pursuant to
the Construction Agency Agreement, shall be deemed to be included in the
leasehold estate of this Lease and shall be subject to the terms and
conditions of this Lease as of such Closing Date. The demise and lease of
each parcel of Land and each Building pursuant to this Section 2.2 shall
include any additional right, title or interest in each such parcel of Land
and each such Building which may at any time be acquired by Lessor, the
intent being that all right, title and interest of Lessor in and to each such
parcel of Land and each such Building shall at all times be demised and
leased to the related Lessee hereunder.
ARTICLE III.
RENT
Section 3.1 Basic Rent. Beginning with and including the first Payment
Date occurring after the Initial Closing Date, each Lessee shall pay to the
Agent the Basic Rent for the Leased Properties subject to a Lease Supplement
to which such Lessee is a party, in installments,
2
<PAGE>
payable in arrears on each Payment Date during the Lease Term, subject to
Section 2.3(c) of the Master Agreement.
Section 3.2 Supplemental Rent. Each Lessee shall pay to the Agent, or
to whomever shall be entitled thereto as expressly provided herein or in any
other Operative Document, any and all Supplemental Rent related to each
Leased Property subject to a Lease Supplement to which such Lessee is a party
or for which such Lessee is otherwise responsible pursuant to any Operative
Document on the date the same shall become due and payable, and in the event
of any failure on the part of such Lessee to pay any such Supplemental Rent,
the Agent shall have all rights, powers and remedies provided for herein or
by law or in equity or otherwise in the case of nonpayment of Basic Rent.
All Supplemental Rent to be paid pursuant to this Section 3.2 shall be
payable in the type of funds and in the manner set forth in Section 3.3.
Section 3.3 Method of Payment. Basic Rent shall be paid to the Agent, and
Supplemental Rent (including amounts due under Article XIV hereof) shall be paid
to the Agent (or to such Person as may be entitled thereto) or, in each case, to
such Person as the Agent (or such other Person) shall specify in writing to the
related Lessee, and at such place as the Agent (or such other Person) shall
specify in writing to the related Lessee. Each payment of Rent (including
payments under Article XIV hereof) shall be made by the Lessees prior to 12:00
p.m. (noon) Atlanta, Georgia time at the place of payment in funds consisting of
lawful currency of the United States of America which shall be immediately
available on the scheduled date when such payment shall be due, unless such
scheduled date shall not be a Business Day, in which case such payment shall be
made on the next succeeding Business Day.
Section 3.4 Late Payment. If any Basic Rent shall not be paid on the
date when due, the related Lessee shall pay to the Agent, as Supplemental
Rent, interest (to the maximum extent permitted by law) on such overdue
amount from and including the due date thereof to but excluding the Business
Day of payment thereof at the Overdue Rate.
Section 3.5 Net Lease; No Setoff, Etc. This Lease is a net lease and
notwithstanding any other provision of this Lease, each Lessee shall pay all
Basic Rent and Supplemental Rent, and all costs, charges, assessments and
other expenses foreseen or unforeseen, for which such Lessee or any
Indemnitee is or shall become liable by reason of such Lessee's or such
Indemnitee's estate, right, title or interest in the Leased Properties, or
that are connected with or arise out of the acquisition (except the initial
costs of purchase by Lessor of its interest in any Leased Property, which
costs, subject to the terms of the Master Agreement, shall be funded by the
Funding Parties pursuant to the Master Agreement), construction (except
Construction Costs to be funded under the Master Agreement), installation,
possession, use, occupancy, maintenance, ownership, leasing, repairs and
rebuilding of, or addition to, the Leased Properties or any portion thereof,
and any other amounts payable hereunder and under the other Operative
Documents without counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and each Lessee's
obligation to pay all such
3
<PAGE>
amounts throughout the Lease Term, including the Construction Term, is absolute
and unconditional. The obligations and liabilities of each Lessee hereunder
shall in no way be released, discharged or otherwise affected for any reason,
including without limitation: (a) any defect in the condition, merchantability,
design, quality or fitness for use of any Leased Property or any part thereof,
or the failure of any Leased Property to comply with all Applicable Law,
including any inability to occupy or use any Leased Property by reason of such
non-compliance; (b) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any requisition
or taking of any Leased Property or any part thereof; (c) any restriction,
prevention or curtailment of or interference with any use of any Leased Property
or any part thereof including eviction; (d) any defect in title to or rights to
any Leased Property or any Lien on such title or rights or on any Leased
Property; (e) any change, waiver, extension, indulgence or other action or
omission or breach in respect of any obligation or liability of or by Lessor,
the Agent or any Lender; (f) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceedings
relating to any Lessee, Lessor, any Lender, the Agent or any other Person, or
any action taken with respect to this Lease by any trustee or receiver of any
Lessee, Lessor, any Lender, the Agent, any Ground Lessor or any other Person, or
by any court, in any such proceeding; (g) any claim that any Lessee has or might
have against any Person, including without limitation, Lessor, any vendor,
manufacturer, contractor of or for any Leased Property or any part thereof, the
Agent, any Ground Lessor, any Governmental Authority, or any Lender; (h) any
failure on the part of Lessor to perform or comply with any of the terms of this
Lease, any other Operative Document, any applicable IDB Documentation, any
Ground Lease or of any other agreement; (i) any invalidity or unenforceability
or illegality or disaffirmance of this Lease against or by any Lessee or any
provision hereof or any of the other Operative Documents or any provision of any
thereof whether or not related to the Transaction; (j) the impossibility or
illegality of performance by any Lessee, Lessor or both; (k) any action by any
court, administrative agency or other Governmental Authority; (l) any
restriction, prevention or curtailment of or interference with the Construction
or any use of any Leased Property or any part thereof; or (m) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing, whether
or not any Lessee shall have notice or knowledge of any of the foregoing. Except
as specifically set forth in Articles XIV or X of this Lease, this Lease shall
be noncancellable by each Lessee in any circumstance whatsoever and each Lessee,
to the extent permitted by Applicable Law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this Lease, or
to any diminution, abatement or reduction of Rent payable by such Lessee
hereunder. Each payment of Rent made by a Lessee hereunder shall be final and
such Lessee shall not seek or have any right to recover all or any part of such
payment from Lessor, the Agent, any Lender or any party to any agreements
related thereto for any reason whatsoever. Each Lessee assumes the sole
responsibility for the condition, use, operation, maintenance, and management of
the Leased Properties leased by it and Lessor shall have no responsibility in
respect thereof and shall have no liability for damage to the property of either
any Lessee or any subtenant of any Lessee on any account or for any reason
whatsoever, other than solely by reason of Lessor's willful misconduct
4
<PAGE>
or gross negligence (except for willful misconduct and gross negligence imputed
to Lessor solely as a result of its interest in any Leased Property).
Section 3.6 Certain Taxes. Without limiting the generality of Section
3.5, each Lessee agrees to pay when due all real estate taxes, personal
property taxes, gross sales taxes, including any sales or lease tax imposed
upon the rental payments hereunder or under a sublease, occupational license
taxes, water charges, sewer charges, assessments of any nature and all other
governmental impositions and charges of every kind and nature whatsoever (the
"tax(es)") imposed with respect to any Leased Property that is subject to a
Lease Supplement to which such Lessee is a party, when the same shall be due
and payable without penalty or interest; provided, however, that this Section
shall not apply to any of the taxes covered by the exclusion described in
Section 7.4(b) of the Master Agreement, which taxes shall not be the
responsibility of any Lessee. It is the intention of the parties hereto
that, insofar as the same may lawfully be done, Lessor shall be, except as
specifically provided for herein, free from all expenses in any way related
to the Leased Properties and the use and occupancy thereof. Any tax relating
to a fiscal period of any taxing authority falling partially within and
partially outside the Lease Term, shall be apportioned and adjusted between
Lessor and the related Lessee. Each Lessee covenants to furnish Lessor and
the Agent, upon the Agent's written request, within forty-five (45) days
after the last date when any tax must be paid by such Lessee as provided in
this Section 3.6, official receipts of the appropriate taxing, authority or
other proof satisfactory to Lessor, evidencing the payment thereof.
So long as no Event of Default has occurred and is continuing, the
related Lessee may defer payment of a tax so long as the validity or the
amount thereof is contested by such Lessee with diligence and in good faith;
provided, however, that such Lessee shall pay the tax in sufficient time to
prevent delivery of a tax deed. Such contest shall be at the related
Lessee's sole cost and expense. Each Lessee covenants to indemnify and save
harmless Lessor, the Agent and each Lender from any actual and reasonable
costs or expenses incurred by Lessor, the Agent or any Lender as a result of
such contest, which indemnification shall survive the termination of this
Lease; provided that neither the Agent nor any Lender shall be entitled to
claim any indemnity against any Lessee pursuant to this sentence with respect
to any Construction Land Interest during the Construction Term therefor.
Section 3.7 Utility Charges. Each Lessee agrees to pay or cause to be
paid as and when the same are due and payable all charges for gas, water,
sewer, electricity, lights, heat, power, telephone or other communication
service and all other utility services used, rendered or supplied to, upon or
in connection with the Leased Properties leased by it.
5
<PAGE>
ARTICLE IV.
WAIVERS
During the Lease Term, Lessor's interest in the Leased Properties,
including the Building(s) (whether or not completed) and the Land, is demised
and let by Lessor "AS IS" subject to (a) the rights of any parties in
possession thereof, (b) the state of the title thereto existing at the time
Lessor acquired its interest in the Leased Properties, (c) any state of facts
which an accurate survey or physical inspection might show (including the
survey delivered on the related Closing Date), (d) all Applicable Law, and
(e) any violations of Applicable Law which may exist upon or subsequent to
the commencement of the Lease Term. EACH LESSEE ACKNOWLEDGES THAT, ALTHOUGH
LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR IS NOT A
MANUFACTURER OF, OR DEALER IN ANY LEASED PROPERTY, AND IS NOT RESPONSIBLE FOR
THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE BUILDING(S) OR ANY
ALTERATIONS. NEITHER LESSOR, THE AGENT NOR ANY LENDER HAS MADE OR SHALL BE
DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR
SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE,
MERCHANTABILITY, TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR
FITNESS FOR USE OF THE LEASED PROPERTIES (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE LEASED PROPERTIES (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY
DISCLAIMED, AND NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR
ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED
PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that
Lessor hereby represents and warrants that each Leased Property is and shall
be free of Lessor Liens. As between Lessor and the Lessees, each related
Lessee has been afforded full opportunity to inspect each Leased Property, is
satisfied with the results of its inspections of such Leased Property and is
entering into this Lease solely on the basis of the results of its own
inspections and all risks incident to the matters discussed in the two
preceding sentences, as between Lessor, the Agent or the Lenders on the one
hand, and the Lessees, on the other, are to be borne by the Lessees, except
for the foregoing representation and warranty of Lessor relative to the
absence of Lessor Liens. The provisions of this Article IV have been
negotiated, and, except to the extent otherwise expressly stated, the
foregoing provisions are intended to be a complete exclusion and negation of
any representations or warranties by Lessor, the Agent or the Lenders,
express or implied, with respect to the Leased Properties, that may arise
pursuant to any law now or hereafter in effect, or otherwise.
6
<PAGE>
ARTICLE V.
LIENS; EASEMENTS; PARTIAL CONVEYANCES
No Lessee shall directly or indirectly create, incur or assume, and
each Lessee shall promptly discharge, any Lien on or with respect to any
Leased Property leased by it, the title thereto, or any interest therein,
including any Liens which arise out of the possession, use, occupancy,
construction, repair or rebuilding of any Leased Property or by reason of
labor or materials furnished or claimed to have been furnished to a Lessee,
or any of its contractors or agents or Alterations constructed by a Lessee,
except, in all cases, Permitted Liens.
Notwithstanding the foregoing paragraph, at the request of the related
Lessee, Lessor shall, from time to time during the Lease Term and upon
reasonable advance written notice from such Lessee, and receipt of the
materials specified in the next succeeding sentence, consent to and join in
any (i) grant of easements, licenses, rights of way and other rights in the
nature of easements, including, without limitation, utility easements to
facilitate such Lessee's use, development and construction of the Leased
Properties leased by such Lessee, (ii) release or termination of easements,
licenses, rights of way or other rights in the nature of easements which are
for the benefit of the related Land or the Building(s) or any portion
thereof, (iii) dedication or transfer of portions of the related Land, not
improved with a Building, for road, highway or other public purposes, (iv)
execution of agreements for ingress and egress and amendments to any
covenants and restrictions affecting the related Land or the Building(s) or
any portion thereof and (v) request to any Governmental Authority for
platting or subdivision or replatting or resubdivision approval with respect
to the related Land or any portion thereof or any parcel of land of which the
related Land or any portion thereof forms a part or a request for rezoning or
any variance from zoning or other governmental requirements. Lessor's
obligations pursuant to the preceding sentence shall be subject to the
requirements that:
(a) any such action shall be at the sole cost and expense of the
requesting Lessee and such Lessee shall pay all actual and reasonable
out-of-pocket costs of Lessor and the Agent in connection therewith (including,
without limitation, the reasonable fees of attorneys, architects, engineers,
planners, appraisers and other professionals reasonably retained by Lessor, the
Agent or any Lender in connection with any such action),
(b) the requesting Lessee shall have delivered to Lessor and Agent a
certificate of a Responsible Officer of such Lessee stating that
(i) such action will not cause such Leased Property, the Land
or any Building or any portion thereof to fail to comply in any material
respect with the provisions of this Lease or any other Operative Documents
or any applicable IDB Documentation or any applicable Ground Lease, or in
any material respect with Applicable Law; and
7
<PAGE>
(ii) such action will not materially reduce the Fair Market
Sales Value, utility or useful life of any Leased Property, the Land or
any Building nor Lessor's interest therein; and
(c) in the case of any release or conveyance, if Lessor, the Agent
or any Lender so reasonably requests, the requesting Lessee will cause to be
issued and delivered to Lessor and the Agent by the Title Insurance Company an
endorsement to the Title Policy pursuant to which the Title Insurance Company
agrees that its liability for the payment of any loss or damage under the terms
and provisions of the Title Policy will not be affected by reason of the fact
that a portion of the real property referred to in Schedule A of the Title
Policy has been released or conveyed by Lessor.
ARTICLE VI.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 6.1 Maintenance and Repair; Compliance With Law. Each Lessee, at
its own expense, shall at all times (a) maintain each Leased Property leased by
it in good repair and condition (subject to ordinary wear and tear), in
accordance with prudent industry standards and, in any event, in no less a
manner as other similar property owned or leased by such Lessee or its
Affiliates, (b) make all Alterations in accordance with, and maintain (whether
or not such maintenance requires structural modifications or Alterations) and
operate and otherwise keep such Leased Property in compliance in all material
respects with, all Applicable Laws and insurance requirements, and (c) make all
material repairs, replacements and renewals of such Leased Property or any part
thereof which may be required to keep such Leased Property in the condition
required by the preceding clauses (a) and (b). Each Lessee shall perform the
foregoing maintenance obligations regardless of whether such Leased Property is
occupied or unoccupied. Each Lessee waives any right that it may now have or
hereafter acquire to (i) require Lessor, the Agent or any Lender to maintain,
repair, replace, alter, remove or rebuild all or any part of any Leased Property
or (ii) make repairs at the expense of Lessor, the Agent or any Lender pursuant
to any Applicable Law or other agreements or otherwise. NEITHER LESSOR, THE
AGENT NOR ANY LENDER SHALL BE PERSONALLY LIABLE TO ANY LESSEE OR TO ANY
CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN, SUPPLIERS OR VENDORS FOR
SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN CONNECTION WITH ANY LEASED
PROPERTY OR ANY PART THEREOF. Neither Lessor, the Agent nor any Lender shall be
required to maintain, alter, repair, rebuild or replace any Leased Property in
any way.
Section 6.2 Alterations. Each Lessee may, at such Lessee's own cost
and expense, make Alterations which do not diminish the value, utility or
useful life of any Leased Property leased by such Lessee.
8
<PAGE>
Section 6.3 Title to Alterations. Title to all Alterations shall
without further act vest in Lessor (subject to each Lessee's right to remove
trade fixtures, personal property and equipment which do not constitute
Alterations and which were not acquired with funds advanced by Lessor or any
Lender) and shall be deemed to constitute a part of the Leased Properties and
be subject to this Lease.
ARTICLE VII.
USE
Each Lessee may use each Leased Property leased by it or any part
thereof for any lawful purpose, and in a manner consistent with the standards
applicable to properties of a similar nature in the geographic area in which
such Leased Property is located, provided that such use does not materially
adversely affect the Fair Market Sales Value, utility, remaining useful life
or residual value of such Leased Property, and does not materially violate or
conflict with, or constitute or result in a material default under, any
Applicable Law or any insurance policy required hereunder. In the event that
any use of any of the Leased Property changes the character or original
intended use of such Leased Property, as such character and intended use
existed on the Closing Date therefor or Completion Date therefor (as
applicable), and the Lessees do not purchase the Leased Properties at the end
of the Lease Term, the related Lessee, upon request of Lessor, shall restore
such Leased Property to its general character and intended use on the Closing
Date or Completion Date therefor (as applicable), ordinary wear and tear
excepted. No Lessee shall commit or permit any waste of any Leased Property
or any material part thereof.
ARTICLE VIII.
INSURANCE
(a) At any time during which any part of any Building or any
Alteration is under construction and as to any part of any Building or any
Alteration under construction, the related Lessee shall maintain, or cause to
be maintained, at its sole cost and expense, as a part of its blanket
policies or otherwise, "all risks" non-reporting completed value form of
builder's risk insurance.
(b) During the Lease Term and with respect to each Leased
Property leased by it, each related Lessee shall maintain, at its sole cost
and expense, as a part of its blanket policies or otherwise, insurance
against loss or damage to any Building by fire and other risks, including
comprehensive boiler and machinery coverage, on terms and in amounts no less
favorable than insurance covering other similar properties owned or leased by
such Lessee or its Affiliates and which is of the type usually carried by
corporations engaged in the same or similar business, similarly situated with
the related Lessee, and owning or operating similar property, and which cover
risks of all kind customarily insured against by such corporations, but in no
event less than
9
<PAGE>
the replacement cost of such Building from time to time [(except, if the
Property is located in (i) a flood zone area rated either Zone A or V, as such
Zones are defined by the Federal Emergency Management Agency, and/or (ii)
California, Alaska, or Hawaii, then such flood and/or earthquake coverage (as
the case may be) may be at less than full replacement value)]. If at any time
during the Lease Term with respect to a Leased Property subject hereto the area
in which such Leased Property is located is designated a "flood-prone" area
pursuant to the Flood Disaster Protection Act of 1973, or any amendments or
supplements thereto, then the related Lessee shall comply with the National
Flood Insurance Program as set forth in the Flood Disaster Protection Act of
1973. In addition, the related Lessee will fully comply with the requirements of
the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act
of 1973, as each may be amended from time to time, and with any other Applicable
Law, concerning flood insurance to the extent that it may apply to any such
Leased Property.
(c) During the Lease Term and with respect to each Leased
Property leased by it, each related Lessee shall maintain, at its sole cost
and expense, commercial general liability insurance which is of the type
usually carried by corporations engaged in the same or similar business,
similarly situated with the related Lessee, and owning or operating similar
property, and which cover risks of all kind customarily insured against by
such corporations. Such insurance shall be on terms and in amounts that are
no less favorable than insurance maintained by such Lessee or its Affiliates
with respect to similar properties that it owns or leases, but in no event
less than $1,000,000 per occurrence. Nothing in this Article VIII shall
prohibit any Additional Insured from carrying at its own expense other
insurance on or with respect to the Leased Properties, provided that any
insurance carried by such Additional Insured shall not prevent any Lessee
from carrying the insurance required hereby.
(d) Each policy of insurance required to be maintained by a
Lessee pursuant to paragraphs (a) and (b) of this Article VIII shall provide
that all insurance proceeds in respect of any loss or occurrence shall be
adjusted by such Lessee, except (i) that with respect to any loss, the
estimated cost of restoration of which is in excess of the greater of
$2,000,000 and 50% of the Funded Amounts with respect to the related Leased
Property, the adjustment thereof shall be subject to the prior written
approval of Lessor, which approval shall not be unreasonably withheld,
delayed or conditioned, and the insurance proceeds therefor shall be paid to
the Agent for application in accordance with this Lease, and (ii) if, and for
so long as, an Event of Default exists, all losses shall be adjusted solely
by, and all insurance proceeds shall be paid solely to, the Agent for
application pursuant to this Lease (provided that, with respect to any
insurance coverage not required to be maintained hereunder, such as business
interruption or inventory loss coverage, it is explicitly understood that the
related Lessee shall be entitled to make adjustments without any approval of
the Lessor).
(e) On the Initial Closing Date and on each anniversary of the
Initial Closing Date, each Lessee shall furnish Lessor with certificates,
which may be blanket certificates covering all of the Leased Properties
leased by it, showing the insurance required under this
10
<PAGE>
Article VIII to be in effect and naming the Additional Insureds, as additional
insureds (with respect to the insurance described in paragraph (c)) or, in the
case of the Agent with respect to the circumstances described in paragraph (d),
loss payee, as applicable.
(f) Each policy of insurance maintained by a Lessee pursuant to
this Article VIII shall (i) provide that such insurance shall be primary,
without right of contribution from any other insurance that is carried by any
Additional Insured, (ii) provide that all of the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering each Additional Insured, (iii) provide that the
related insurer waives any right of set-off or counterclaim against each
Additional Insured, (iv) provide that no Additional Insured shall have any
obligation or liability for premiums, commissions, assessments or calls in
connection with such insurance, (v) contain the waiver of any right of
subrogation of the insurer against each Additional Insured, (vi) provide that
in respect of the interests of each Additional Insured, such policies shall
not be invalidated by any fraud, action, inaction or misrepresentation of any
Lessee or any other Person and shall insure each Additional Insured
regardless of any breach of any terms, conditions or warranty contained in
such policy by any Lessee or any other Person and (vii) provide that the
related insurer shall give ten (10) days prior written notice to the
Additional Insureds of non-payment of premium and thirty (30) days prior
written notice to the Additional Insureds of the cancellation of such
insurance for any reason (other than non-payment of premium).
(g) All insurance policies carried in accordance with this
Article VIII shall be maintained with insurers of recognized responsibility
rated at least A by A.M. Best & Company, and in all cases the insurer shall
be qualified to insure risks in the State where each Leased Property is
located.
(h) During such time as (i) no Event of Default is outstanding
under this Lease and (ii) the tangible net worth of Lessee (or of a
Guarantor) shall be not less than Two Hundred Fifty Million Dollars
($250,000,000), as determined in accordance with generally accepted
accounting principles consistently applied, and (iii) Lessee (or a Guarantor)
(x) has a Standard & Poor's rating of BBB or better, or (y) is rated the
equivalent of an NAIC 1 Designation, or (z) is rated the equivalent of an
NAIC 2 Designation, Lessee may self-insure all or any portion of the coverage
referred to in this Article VIII, provided that the self insurance program of
this Article VIII does not violate any Requirement of Law of any state that
regulates Agent or the Lenders (or any replacement or new mortgagee)
domiciled in such state, and provided further that Lessee shall make proceeds
available after the expiration or termination of this Lease for any casualty
occurring prior to such expiration or termination to the extent that actual
insurance proceeds would have been available to Lessor or Lessee hereunder
had Lessee not elected to self-insure.
11
<PAGE>
ARTICLE IX.
ASSIGNMENT AND SUBLEASING
No Lessee may assign any of its right, title or interest in, to or
under this Lease, except as set forth in the following sentence. Each Lessee
may sublease all or any portion of any Leased Property, provided that (a) all
obligations of such Lessee shall continue in full effect as obligations of a
principal and not of a guarantor or surety, as though no sublease had been
made; (b) such sublease shall be expressly subject and subordinate to this
Lease, the Loan Agreement and the other Operative Documents; (c) each such
sublease shall terminate on or before the Lease Termination Date, and (d) the
Guarantors continue to guaranty the obligations of such Lessee under the
Lease. Each Lessee shall give the Agent and Lessor prompt written notice of
any such sublease.
Except pursuant to an Operative Document, this Lease shall not be
mortgaged or pledged by any Lessee, nor shall any Lessee mortgage or pledge
any interest in any Leased Property or any portion thereof. Any such
mortgage or pledge shall be void.
ARTICLE X.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section 10.1 Event of Loss. Any event (i) which would otherwise
constitute a Casualty and (ii) which, in the good-faith judgment of the
related Lessee, (A) renders repair and restoration of the affected Leased
Property impossible or impractical, or requires repairs to the related Leased
Property that, with the exercise of reasonable diligence, are impossible to
complete by the Lease Termination Date or (B) requires repairs to the
affected Leased Property that would cost in excess of the greater of
$2,000,000 and 50% of the cost of the Land, Building and any improvements
(other than Alterations done at Lessee's sole expense) related to such Leased
Property, and as to which such Lessee has determined not to rebuild, shall
constitute an "Event of Loss". Within sixty (60) days after the occurrence
of such event, the related Lessee shall deliver to Lessor an Officer's
Certificate notifying Lessor of such event and, in the case of an event
described in the foregoing clause (ii), of such Lessee's determination not to
rebuild. In the case of any other event which constitutes a Casualty, the
related Lessee shall restore such Leased Property pursuant to Section 10.3.
If an Event of Loss shall occur, the related Lessee shall be deemed to have
elected to purchase such Leased Property and shall pay to Lessor on the
earlier of (i) the Lease Termination Date and (ii) the next Payment Date
occurring not less than thirty (30) days after the delivery of the Officer's
Certificate pursuant to this Section 10.1 above an amount equal to the
related Leased Property Balance. Upon Lessor's receipt of such Leased
Property Balance on such date, Lessor shall cause Lessor's interest in such
Leased Property to be conveyed to the related Lessee in accordance with and
subject to the provisions of Section 14.5 hereof; upon completion of such
purchase, but not prior thereto, this Lease with respect to such Leased
Property and all obligations hereunder with respect to such Leased Property
shall
12
<PAGE>
terminate, except with respect to obligations and liabilities hereunder, actual
or contingent, that have arisen or relate to events occurring on or prior to
such date of purchase, or which are expressly stated herein to survive
termination of this Lease.
Upon the consummation of the purchase of any Leased Property pursuant
to this Section 10.1, any proceeds derived from insurance required to be
maintained by the related Lessee pursuant to this Lease for any Leased
Property remaining after payment of such purchase price shall be paid over
to, or retained by, such Lessee or as it may direct, and Lessor shall assign
to such Lessee, without warranty, all of Lessor's rights to and interest in
such insurance required to be maintained by such Lessee pursuant to this
Lease.
Section 10.2 Event of Taking. Any event (i) which constitutes a
Condemnation of all of, or substantially all of, a Leased Property, or (ii)
(A) which would otherwise constitute a Condemnation and (B) which, in the
good-faith judgment of the related Lessee, (1) renders restoration and
rebuilding of the affected Leased Property impossible or impractical, or
requires restoration to the related Leased Property that, with the exercise
of reasonable diligence, is impossible to complete by the Lease Termination
Date or (2) requires repairs to the affected Leased Property that would cost
in excess of the greater of $2,000,000 and 50% of the cost of the Land,
Building and any Improvements (other than Alterations done at Lessee's sole
expense) related to such Leased Property, and as to which such Lessee has
determined not to rebuild shall constitute an "Event of Taking". Within
sixty (60) days after the occurrence of such event, the related Lessee shall
deliver to Lessor an Officer's Certificate notifying Lessor of such event
and, in the case of an event described in the foregoing clause (ii), of such
Lessee's determination not to rebuild. In the case of any other event which
constitutes a Condemnation, the related Lessee shall restore and rebuild such
Leased Property pursuant to Section 10.4. If an Event of Taking shall occur,
the related Lessee shall be deemed to have elected to purchase such Leased
Property and shall pay to Lessor (1) on the earlier of (A) the Lease
Termination Date and (B) the next Payment Date occurring not less than thirty
(30) days after the occurrence of such Event of Taking, in the case of an
Event of Taking described in clause (i) above, or (2) on the earlier of (A)
the Lease Termination Date and (B) the next Payment Date occurring not less
than thirty (30) days after the delivery of the Officer's Certificate
pursuant to clause (ii) above, in the case of an Event of Taking described in
clause (ii) above, an amount equal to the related Leased Property Balance.
Upon Lessor's receipt of such Leased Property Balance on such date, Lessor
shall cause Lessor's interest in such Leased Property, and in all
condemnation proceeds related thereto, to be conveyed to the related Lessee
in accordance with and subject to the provisions of Section 14.5 hereof
(provided that such conveyance shall be subject to all rights of the
condemning authority); upon completion of such purchase, but not prior
thereto, this Lease with respect to such Leased Property and all obligations
hereunder with respect to such Leased Property shall terminate, except with
respect to obligations and liabilities hereunder, actual or contingent, that
have arisen or relate to events occurring on or prior to such date of
purchase, or which are expressly stated herein to survive termination of this
Lease.
13
<PAGE>
Upon the consummation of the purchase of such Leased Property pursuant
to this Section 10.2, all Awards received by Lessor, after deducting any
reasonable out-of-pocket costs incurred by Lessor in collecting such Awards,
received or payable on account of an Event of Taking with respect to such
Leased Property during the related Lease Term shall be promptly paid to the
related Lessee, and all rights of Lessor in Awards not then received shall be
assigned to Lessee by Lessor.
Section 10.3 Casualty. If a Casualty shall occur which is not an Event
of Loss, the related Lessee shall rebuild and restore the affected Leased
Property, will complete the same prior to the Lease Termination Date, and
will cause the condition set forth in Section 3.5 (c) of the Master Agreement
to be fulfilled with respect to such restoration and rebuilding prior to the
Lease Termination Date, regardless of whether insurance proceeds received as
a result of such Casualty are sufficient for such purpose.
Section 10.4 Condemnation. If a Condemnation shall occur which is not
an Event of Taking, the related Lessee shall rebuild and restore the affected
Leased Property, will complete the same prior to the Lease Termination Date,
and will cause the condition set forth in Section 3.5 (c) of the Master
Agreement to be fulfilled with respect to such restoration and rebuilding
prior to the Lease Termination Date.
Section 10.5 Verification of Restoration and Rebuilding. In the event
of Casualty or Condemnation that involves, or is reasonably expected to
involve, repair or rebuilding costs in excess of $1,000,000, to verify the
related Lessee's compliance with the foregoing Section 10.3 or 10.4, as
appropriate, Lessor, the Agent, the Lenders and their respective authorized
representatives may, upon five (5) Business Days' notice to such Lessee, make
a reasonable number of inspections of the affected Leased Property with
respect to (i) the extent of the Casualty or Condemnation and (ii) the
restoration and rebuilding of the related Building and the Land. All actual
and reasonable out-of-pocket costs of such inspections incurred by Lessor,
the Agent or any Lender will be paid by the related Lessee promptly after
written request. No such inspection shall unreasonably interfere with the
related Lessee's operations or the operations of any other occupant of such
Leased Property. None of the inspecting parties shall have any duty to make
any such inspection or inquiry and none of the inspecting parties shall incur
any liability or obligation by reason of making or not making any such
inspection or inquiry.
Section 10.6 Application of Payments. All proceeds (except for
payments under insurance policies maintained other than pursuant to Article
VIII of this Lease) received at any time by Lessor, any Lessee or the Agent
from any insurer, Governmental Authority or other Person with respect to any
Condemnation or Casualty to any Leased Property or any part thereof or with
respect to an Event of Loss or an Event of Taking, plus the amount of any
payment that would have been due from an insurer but for a Lessee's
self-insurance or deductibles ("Loss Proceeds"), shall (except to the extent
Section 10.9 applies) be applied as follows:
14
<PAGE>
(a) In the event the related Lessee purchases such Leased
Property pursuant to Section 10.1 or Section 10.2, such Loss Proceeds
shall be applied as set forth in Section 10.1 or Section 10.2, as the
case may be;
(b) In the event of a Casualty at such time when no Event of
Default has occurred and is continuing and the related Lessee is
obligated to repair and rebuild such Leased Property pursuant to
Section 10.3, such Lessee may, in good faith and subsequent to the date
of such Casualty, certify to Lessor and to the applicable insurer that
no Event of Default has occurred and is continuing, in which event the
applicable insurer shall pay the Loss Proceeds to such Lessee;
(c) In the event of a Condemnation at such time when no Event
of Default has occurred and is continuing and the related Lessee is
obligated to repair and rebuild such Leased Property pursuant to
Section 10.4, such Lessee may, in good faith and subsequent to the date
of such Condemnation, certify to Lessor and the Agent that no Event of
Default has occurred and is continuing, in which event the applicable
Award shall be paid over to such Lessee; and
(d) As provided in Section 10.8, if such section is applicable.
During any period of repair or rebuilding pursuant to this Article X,
this Lease will remain in full force and effect and Basic Rent shall continue
to accrue and be payable without abatement or reduction. Each Lessee shall
maintain records setting forth information relating to the receipt and
application of payments in accordance with this Section 10.6. Such records
shall be kept on file by each Lessee at its offices and shall be made
available to Lessor and the Agent upon request.
Section 10.7 Prosecution of Awards. (a) If any Condemnation shall
occur, the party receiving the notice of such Condemnation shall give to the
other party and the Agent promptly, but in any event within thirty (30) days
after the occurrence thereof, written notice of such occurrence and the date
thereof, generally describing the nature and extent of such Condemnation.
With respect to any Event of Taking or any Condemnation, the related Lessee
shall control the negotiations with the relevant Governmental Authority as to
any proceeding in respect of which Awards are required, under Section 10.6,
to be assigned or released to such Lessee, unless an Event of Default shall
have occurred and be continuing, in which case (i) the Agent (or Lessor if
the Loans have been fully paid) shall control such negotiations; and (ii)
such Lessee hereby irrevocably assigns, transfers and sets over to Lessor all
rights of such Lessee to any Award on account of any Event of Taking or any
Condemnation and, if there will not be separate Awards to Lessor and such
Lessee on account of such Event of Taking or Condemnation, irrevocably
authorizes and empowers the Agent (or Lessor if the Loans have been fully
paid) during the continuance of an Event of Default, with full power of
substitution, in the name of such Lessee or otherwise (but without limiting
the obligations of such Lessee under
15
<PAGE>
this Article X), to file and prosecute what would otherwise be such Lessee's
claim for any such Award and to collect, receipt for and retain the same. In any
event Lessor and the Agent may participate in such negotiations, and, if such
settlement is with respect to a material Condemnation or if the Lessor or the
Agent has provided notice to the Lessee that it shall not enter into any
settlement without prior consent, no settlement will be made without the prior
consent of the Agent (or Lessor if the Loans have been fully paid), not to be
unreasonably withheld.
(b) Notwithstanding the foregoing, each Lessee may prosecute, and
Lessor shall have no interest in, any claim with respect to such Lessee's
personal property and equipment not financed by or otherwise property of
Lessor, business interruption or similar award and such Lessee's relocation
expenses.
Section 10.8 Application of Certain Payments Not Relating to an Event
of Taking. In case of a requisition for temporary use of all or a portion of
any Leased Property which is not an Event of Taking, this Lease shall remain
in full force and effect with respect to such Leased Property, without any
abatement or reduction of Basic Rent, and the Awards for such Leased Property
shall, unless an Event of Default has occurred and is continuing, be paid to
the related Lessee.
Section 10.9 Other Dispositions. Notwithstanding the foregoing
provisions of this Article X, so long as an Event of Default shall have
occurred and be continuing, any amount that would otherwise be payable to or
for the account of, or that would otherwise be retained by, Lessee pursuant
to this Article X shall be paid to the Agent (or Lessor if the Loans have
been fully paid) as security for the obligations of the Lessees under this
Lease and, at such time thereafter as no Event of Default shall be
continuing, such amount shall be paid promptly to the related Lessee to the
extent not previously applied by Lessor or the Agent in accordance with the
terms of this Lease or the other Operative Documents.
Section 10.10 No Rent Abatement. Rent shall not abate hereunder by
reason of any Casualty, any Event of Loss, any Event of Taking or any
Condemnation of any Leased Property, and each Lessee shall continue to
perform and fulfill all of such Lessee's obligations, covenants and
agreements hereunder notwithstanding such Casualty, Event of Loss, Event of
Taking or Condemnation until the Lease Termination Date.
ARTICLE XI.
INTEREST CONVEYED TO LESSEES
For purposes of accounting, federal and state income taxes, and
commercial and bankruptcy law, each Lessee and Lessor intend that the
transaction represented by this Lease be treated as a financing transaction;
for such purposes, it is the intention of the parties hereto (i)
16
<PAGE>
that this Lease be treated as a mortgage or deed of trust (whichever is
applicable in the jurisdictions in which the Leased Properties are located) and
security agreement, encumbering the Leased Properties, and that each Lessee, as
grantor, hereby grants, mortgages and warrants to Lessor, as mortgagee or
beneficiary and secured party, or any successor thereto, a first and paramount
Lien on each Leased Property in which such Lessee has an interest, (ii) that
Lessor shall have, as a result of such determination, all of the rights, powers
and remedies of a mortgagee, deed of trust beneficiary or secured party
available under Applicable Law to take possession of and sell (whether by
foreclosure or otherwise) any Leased Property, (iii) that the effective date of
such mortgage, security deed or deed of trust shall be the effective date of
this Lease, or the related Lease Supplement, if later, (iv) that the recording
of this Lease or a Lease Supplement shall be deemed to be the recording of such
mortgage, security deed or deed of trust, (v) that the obligations secured by
such mortgage, security deed or deed of trust shall include the Funded Amounts
and all Basic Rent and Supplemental Rent hereunder and all other obligations of
and amounts due from each Lessee hereunder and under the Operative Documents and
(vi) that the related Lessee will be treated as the owner of the Leased
Properties leased by such Lessee for tax purposes.
ARTICLE XII.
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any
such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) any Lessee shall fail to make any payment of Basic Rent within
three (3) days after the date that such Basic Rent is due;
(b) any Lessee shall fail to make any payment of Rent (other than
Basic Rent and other than as set forth in clause (c)) or any other amount
payable hereunder or under any of the other Operative Documents (other than
Basic Rent and other than as set forth in clause (c)), and such failure shall
continue for a period of three (3) days, in the case of such Rent due to any
Funding Party, or five Business Days, in the case of such Rent due to any
other Person, in each case after written notice thereof from Lessor or the
Agent to Borders;
(c) any Lessee shall fail to pay the Funded Amount, Leased Property
Balance or Lease Balance when due pursuant to Section 10.1, 10.2, 14.1 or
14.2 hereof, or the Construction Agent shall fail to make any payment when
due under the Construction Agency Agreement or any other Construction Agency
Event of Default shall occur;
17
<PAGE>
(d) any Lessee shall fail to maintain insurance as required by Article
VIII hereof, and such failure shall continue until the earlier of (i) fifteen
(15) days after written notice thereof from Lessor to Borders and (ii) the date
on which any applicable insurance coverage would otherwise finally lapse or
terminate;
(e) any matured default shall have occurred under the Existing Lease
Transaction, any Financed Lease or the Revolving Credit Agreement, whether or
not any obligations thereunder have been accelerated;
(f) any Lessee fails to perform any covenant under any Ground Lease
that permits the related ground lessor to terminate such Ground Lease; or
(g) any of the Guarantors or the Lessees shall fail to comply with any
of its covenants contained in Sections 5.1, 5.4, 5.5(a), the first sentence of
5.6, 5.12, 5.14 through 5.33 of the Master Agreement (other than Sections 5.22
and 5.24 of the Master Agreement);
(h) any of the Guarantors or the Lessees or any of their Subsidiaries
shall fail to perform any term, covenant or agreement contained in the Master
Agreement or in any of the other Operative Documents (other than those specified
elsewhere in this Article XII) for thirty (30) days after written notice of such
failure has been given to Borders by the Agent (such grace period to be
applicable only in the event such Default can be remedied by corrective action
of the Guarantors or the Lessees as determined by the Agent in its sole
discretion);
(i) any representation or warranty of any Lessee, any Guarantor or any
of their Subsidiaries in the Master Agreement or any of the other Operative
Documents or in any other document or instrument delivered pursuant to or in
connection with the Operative Documents shall prove to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
(j) any Guarantor or any Lessee or any of their Subsidiaries shall fail
to pay at maturity, or within any applicable period of grace, any obligation for
Indebtedness with an aggregate outstanding principal amount in excess of
$25,000,000, or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing or
securing Indebtedness with an aggregate outstanding principal amount in excess
of $25,000,000 for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof, or any such
holder or holders shall rescind or shall have a right to rescind the purchase of
any such obligations;
(k) any Guarantor or any Lessee or any of their Subsidiaries shall make
an assignment for the benefit of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other
18
<PAGE>
custodian, liquidator or receiver of such Guarantor, such Lessee or any of their
Subsidiaries or of any substantial part of the assets of such Guarantor, such
Lessee or any of their Subsidiaries or shall commence any case or other
proceeding relating to such Guarantor, such Lessee or any of their Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or shall take any action to authorize or in furtherance of
any of the foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against such Guarantor,
such Lessee or any of their Subsidiaries and such Guarantor, such Lessee or any
of their Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within forty-five (45) days following the filing thereof;
(l) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any Guarantor, any Lessee or
any of their Subsidiaries bankrupt or insolvent, or approving a petition in any
such case or other proceeding, or a decree or order for relief is entered in
respect of any Guarantor, any Lessee or any of their Subsidiaries in an
involuntary case under federal bankruptcy laws as now or hereafter constituted;
(m) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty days, whether or not consecutive, any final
judgment against any Guarantor, any Lessee or any of their Subsidiaries that,
with other outstanding final judgments, undischarged, against any Guarantor, any
Lessee or any of their Subsidiaries exceeds in the aggregate $25,000,000;
(n) if any of the Operative Documents shall be cancelled, terminated,
revoked or rescinded, in each case otherwise than in accordance with the terms
thereof or with the express prior written agreement, consent or approval of the
Lenders, or any action at law, suit or in equity or other legal proceeding to
cancel, revoke or rescind any of the Operative Documents shall be commenced by
or on behalf of any Guarantor, any Lessee or any of their Subsidiaries party
thereto or any of their respective stockholders, or any court or any other
governmental or regulatory authority or agency of competent jurisdiction shall
make a determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Operative Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(o) any Guarantor, any Lessee or any ERISA Affiliate incurs any
liability to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA
in an aggregate amount exceeding $25,000,000, or any Guarantor, any Lessee or
any ERISA Affiliate is assessed withdrawal liability pursuant to Title IV of
ERISA by a Multiemployer Plan requiring aggregate annual payments exceeding
$25,000,000, or any of the following occurs with respect to a Guaranteed Pension
Plan: (i) an ERISA Reportable Event, or a failure to make a required installment
or other payment (within the meaning of Section 302(f)(1) of ERISA), provided
that the Agent determines in its reasonable discretion that such event (A) could
be expected to result in liability of any Guarantor, any Lessee or any of their
Subsidiaries to the PBGC or such
19
<PAGE>
Guaranteed Pension Plan in an aggregate amount exceeding $25,000,000 and (B)
could constitute grounds for the termination of such Guaranteed Pension Plan by
the PBGC, for the appointment by the appropriate United States District Court of
a trustee to administer such Guaranteed Pension Plan or for the imposition of a
lien in favor of such Guaranteed Pension Plan; or (ii) the appointment by a
United States District Court of a trustee to administer such Guaranteed Pension
Plan; or (iii) the institution by the PBGC of proceedings to terminate such
Guaranteed Pension Plan;
(p) any Guarantor, any Lessee or any of their Subsidiaries shall be
enjoined, restrained or in any way prevented by the order of any Governmental
Authority from conducting any material part of its business and such order shall
continue in effect for more than thirty (30) days and such restraint or
enjoinment or similar restriction by any Governmental Authority would have a
Material Adverse Effect;
(q) there shall occur the loss, suspension or revocation of, or failure
to renew, any license or permit now held or hereafter acquired by any Guarantor,
any Lessee or any of their Subsidiaries if such loss, suspension, revocation or
failure to renew would have a Material Adverse Effect;
(r) an "Event of Default" shall have occurred under the Kmart Indemnity
such that Kmart shall have the right thereunder to exercise the rights granted
to it pursuant to Sections 3(c)(ii) or Sections 3(c)(iii) thereof in respect of
more than two (2) Premises (as such term is defined therein);
(s) a Change of Control shall occur; or
(t) BGI and its Subsidiaries at any time shall not be in compliance
with the Obligor Group Requirement and such failure continues for thirty (30)
days.
ARTICLE XIII.
ENFORCEMENT
Section 13.1 Remedies. Upon the occurrence and during the continuance
of any Event of Default, Lessor may, to the extent permitted by Applicable Law,
do one or more of the following as Lessor in its sole discretion shall
determine, without limiting any other right or remedy Lessor may have on account
of such Event of Default (including, without limitation, enforcing the
obligation of the Lessees to purchase the Leased Properties as set forth in
Section 14.3):
20
<PAGE>
(a) Lessor may, by notice to Borders, rescind or terminate this Lease
as of the date specified in such notice; however, (A) no reletting, reentry or
taking of possession of any Leased Property by Lessor will be construed as an
election on Lessor's part to terminate this Lease unless a written notice of
such intention is given to Borders, (B) notwithstanding any reletting, reentry
or taking of possession, Lessor may at any time thereafter elect to terminate
this Lease for a continuing Event of Default, and (C) no act or thing done by
Lessor or any of its agents, representatives or employees and no agreement
accepting a surrender of any Leased Property shall be valid unless the same be
made in writing and executed by Lessor;
(b) Lessor may (i) demand that the Lessees, and the Lessees shall upon
the written demand of Lessor, return the Leased Properties promptly to Lessor in
the manner and condition required by, and otherwise in accordance with all of
the provisions of, Articles VI and XIV hereof as if the Leased Properties were
being returned at the end of the Lease Term, and Lessor shall not be liable for
the reimbursement of any Lessee for any costs and expenses incurred by such
Lessee in connection therewith and (ii) without prejudice to any other remedy
which Lessor may have for possession of the Leased Properties, and to the extent
and in the manner permitted by Applicable Law, enter upon any Leased Property
and take immediate possession of (to the exclusion of the related Lessee) any
Leased Property or any part thereof and expel or remove the related Lessee and
any other person who may be occupying such Leased Property, by summary
proceedings or otherwise, all without liability to any Lessee for or by reason
of such entry or taking of possession, whether for the restoration of damage to
property caused by such taking or otherwise and, in addition to Lessor's other
damages, the Lessees shall be responsible for the actual and reasonable costs
and expenses of reletting, including brokers' fees and the reasonable
out-of-pocket costs of any alterations or repairs made by Lessor;
(c) Lessor may (i) sell all or any part of any Leased Property at
public or private sale, as Lessor may determine, free and clear of any rights of
any Lessee and without any duty to account to any Lessee with respect to such
action or inaction or any proceeds with respect thereto (except to the extent
required by Applicable Law or clause (ii) below if Lessor shall elect to
exercise its rights thereunder) in which event the related Lessee's obligation
to pay Basic Rent for such Leased Property hereunder for periods commencing
after the date of such sale shall be terminated or proportionately reduced, as
the case may be; and (ii) if Lessor shall so elect, demand that the Lessees pay
to Lessor, and the Lessees shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (the parties
agreeing that Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation of such
amount) (in lieu of Basic Rent due for periods commencing on or after the
Payment Date coinciding with such date of sale (or, if the sale date is not a
Payment Date, the Payment Date next preceding the date of such sale)), an amount
equal to (a) the excess, if any, of (1) the sum of (A) all Rent due and unpaid
to and including such Payment Date and (B) the Lease Balance, computed as of
such date, over (2) the net proceeds of such sale (that is, after deducting all
out-of-pocket costs and expenses incurred by Lessor, the Agent or any Lender
incident to such conveyance (including, without limitation, all costs,
21
<PAGE>
expenses, fees, premiums and taxes described in Section 14.5(b))); plus (b)
interest at the Overdue Rate on the foregoing amount from such Payment Date
until the date of payment;
(d) Lessor may, at its option, not terminate this Lease, and continue
to collect all Basic Rent, Supplemental Rent, and all other amounts (including,
without limitation, the Funded Amount) due Lessor (together with all costs of
collection) and enforce the Lessees' obligations under this Lease as and when
the same become due, or are to be performed, and at the option of Lessor, upon
any abandonment of any Leased Property by Lessee or re-entry of same by Lessor,
Lessor may, in its sole and absolute discretion, elect not to terminate this
Lease with respect thereto and may make such reasonable alterations and
necessary repairs in order to relet such Leased Property, and relet such Leased
Property or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or rentals and upon
such other terms and conditions as Lessor in its reasonable discretion may deem
advisable; and upon each such reletting all rentals actually received by Lessor
from such reletting shall be applied to the Lessees' obligations hereunder in
such order, proportion and priority as Lessor may elect in Lessor's sole and
absolute discretion. If such rentals received from such reletting during any
Rent Period are less than the Rent to be paid during that Rent Period by the
Lessees hereunder, the Lessees shall pay any deficiency, as reasonably
calculated by Lessor, to Lessor on the Payment Date for such Rent Period;
(e) Lessor may, whether or not Lessor shall have exercised or shall
thereafter at any time exercise any of its rights under paragraph (b), (c) or
(d) of this Article XIII, demand, by written notice to Borders specifying a date
(the "Final Rent Payment Date") not earlier than 30 days after the date of such
notice, that Lessees purchase, on the Final Rent Payment Date, all of the Leased
Properties then subject to this Lease in accordance with the provisions of
Sections 14.2, 14.4 and 14.5; provided, however, that (1) such purchase shall
occur on the date set forth in such notice, notwithstanding the provision in
Section 14.2 calling for such purchase to occur on the Lease Termination Date;
and (2) Lessor's obligations under Section 14.5(a) shall be limited to delivery
of a special warranty deed, assignment of Lessor's rights and obligations under
any Ground Lease (if applicable) and quit claim bill of sale of such Leased
Properties, without recourse or warranty, but free and clear of Lessor Liens;
(f) Lessor may exercise any other right or remedy that may be available
to it under Applicable Law, or proceed by appropriate court action (legal or
equitable) to enforce the terms hereof or to recover damages for the breach
hereof. Separate suits may be brought to collect any such damages for any Rent
Period(s), and such suits shall not in any manner prejudice Lessor's right to
collect any such damages for any subsequent Rent Period(s), or Lessor may defer
any such suit until after the expiration of the Lease Term, in which event such
suit shall be deemed not to have accrued until the expiration of the Lease Term;
or
22
<PAGE>
(g) Lessor may retain and apply against Lessor's damages all sums which
Lessor would, absent such Event of Default, be required to pay to, or turn over
to, a Lessee pursuant to the terms of this Lease.
Section 13.2 Remedies Cumulative; No Waiver; Consents. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any right, power or remedy. No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of any Lessee or to be an acquiescence therein. Lessor's
consent to any request made by any Lessee shall not be deemed to constitute or
preclude the necessity for obtaining Lessor's consent, in the future, to all
similar requests. No express or implied waiver by Lessor of any Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Potential Event of Default or Event of Default. To the extent permitted by
Applicable Law, each Lessee hereby waives any rights now or hereafter conferred
by statute or otherwise that may require Lessor to sell, lease or otherwise use
any Leased Property or part thereof in mitigation of Lessor's damages upon the
occurrence of an Event of Default or that may otherwise limit or modify any of
Lessor's rights or remedies under this Article XIII.
Section 13.3 Purchase Upon an Event of Default. Upon the occurrence of
an Event of Default, until such time as Lessor has commenced material
preparations for the sale or re-lease of the Leased Properties, the Lessees may
purchase all, but not less than all, of the Leased Properties for the Lease
Balance, including any amounts due pursuant to Section 7.5 of the Master
Agreement. Such purchase shall be made in accordance with Section 14.5, upon not
less than five (5) Business Days' written notice (which shall be irrevocable) to
Lessor, which notice shall set forth the date of purchase (which shall be a date
no later than 30 days from the date of such notice).
ARTICLE XIV.
SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL
Section 14.1 Lessee's Option to Purchase. (a) Subject to the terms,
conditions and provisions set forth in this Article XIV, each Lessee shall have
the option (the "Purchase Option"), to be exercised as set forth below, to
purchase (or cause to be purchased) from Lessor, Lessor's interest in all of the
Leased Properties; provided that, except as set forth in paragraph (b)
23
<PAGE>
below, such option must be exercised with respect to all, but not less than all,
of the Leased Properties under all of the Lease Supplements. Such option must be
exercised by written notice to Lessor not later than thirty (30) days prior to
the Lease Termination Date which notice shall be irrevocable; such notice shall
specify the date that such purchase shall take place, which date shall be a date
occurring not less than thirty (30) days after such notice or the Lease
Termination Date (whichever is earlier). If the Purchase Option is exercised
pursuant to the foregoing, then, subject to the provisions set forth in this
Article XIV, on the applicable purchase date or the Lease Termination Date, as
the case may be, Lessor shall convey to each Lessee, and each Lessee shall
purchase from Lessor, Lessor's interest in the Leased Properties leased by such
Lessee.
(b) Subject to the terms, conditions and provisions set forth in this
Article XIV, each Lessee shall have the option (the "Partial Purchase Option")
so long as no Event of Default has occurred and is continuing, to be exercised
as set forth below, to purchase from Lessor's interest in any Leased Property
leased by such Lessee; provided that, after giving effect to such purchase
either (i) no Leased Properties, or (ii) no less than three Leased Properties
remain subject to this Lease unless otherwise agreed to by the Agent and the
Required Lenders. Such option may be exercised by written notice to Lessor at
any time and from time to time prior to the last twelve months of the term of
this Lease, which notice shall be irrevocable; such notice shall specify the
Leased Property to be purchased and the date that such purchase shall take
place, which date shall be a date occurring not less than thirty (30) days after
such notice. If a Partial Purchase Option is exercised pursuant to the
foregoing, subject to the provisions set forth in this Article XIV, on the
applicable purchase date, Lessor shall convey to the related Lessee, and such
Lessee shall purchase from Lessor, Lessor's interest in the Leased Property that
is the subject of such Partial Purchase Option pursuant to Section 14.5. Nothing
in this Section 14.1(b) shall limit the rights of the Construction Agent to cure
a Construction Agency Event of Default by purchasing an affected Leased Property
pursuant to and in accordance with Section 5.3 of the Construction Agency
Agreement.
Section 14.2 Conveyance to Lessee. Unless the Lessees shall have
properly exercised the Purchase Option and purchased the Leased Properties
pursuant to Section 14.1(a) or 14.1(b) hereof, then, subject to the terms,
conditions and provisions set forth in this Article XIV, each Lessee shall
purchase from Lessor, and Lessor shall convey to each Lessee, on the Lease
Termination Date all of Lessor's interest in the Leased Properties leased to
such Lessee. Any Lessee may designate, in a notice given to Lessor not less than
ten (10) Business Days prior to the closing of such purchase, or any purchase
pursuant to Section 14.1(a) or (b), time being of the essence, the transferee to
whom the conveyance shall be made (if other than to such Lessee), in which case
such conveyance shall (subject to the terms and conditions set forth herein) be
made to such designee; provided, however, that such designation of a transferee
shall not cause any Lessee to be released, fully or partially, from any of its
obligations under this Lease.
Section 14.3 Acceleration of Purchase Obligation. The Lessees shall be
obligated to purchase Lessor's interest in the Leased Properties immediately,
automatically and without notice
24
<PAGE>
upon the occurrence of any Event of Default specified in clause (k) or (l) of
Article XII, for the purchase price set forth in Section 14.4. Upon the
occurrence and during the continuance of any other Event of Default, the Lessees
shall be obligated to purchase Lessor's interest in the Leased Properties for
the purchase price set forth in Section 14.4 upon notice of such obligation from
Lessor.
Section 14.4 Determination of Purchase Price. Upon the purchase by the
Lessees of Lessor's interest in the Leased Properties upon the exercise of the
Purchase Option or pursuant to Section 14.2 or 14.3, the aggregate purchase
price for all of the Leased Properties shall be an amount equal to the Lease
Balance as of the closing date for such purchase, including any amount due
pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase.
Upon the purchase by a Lessee of Lessor's interest in a Leased Property upon the
exercise of a Partial Purchase Option, the purchase price for such Leased
Property shall be an amount equal to the Leased Property Balance for such Leased
Property as of the closing date for such purchase, including any amount due
pursuant to Section 7.5(f) of the Master Agreement as the result of such
purchase.
Section 14.5 Purchase Procedure. (a) If a Lessee shall purchase
Lessor's interest in a Leased Property pursuant to any provision of this Lease,
(i) such Lessee shall accept from Lessor and Lessor shall convey such Leased
Property by a duly executed and acknowledged special warranty deed and quit
claim bill of sale (without recourse or warranty (other than the absence of
Lessor Liens)) of such a Leased Property in recordable form, (ii) upon the date
fixed for any purchase of Lessor's interest in Leased Property hereunder, the
related Lessee(s) shall pay to the order of the Agent (or Lessor if the Loans
have been paid in full) the Lease Balance or Leased Property Balance, as
applicable, including any amount due pursuant to Section 7.5 of the Master
Agreement as a result of such purchase, by wire transfer of immediately
available funds, (iii) Lessor will execute and deliver to the related Lessee
such other documents, including releases, affidavits, termination agreements and
termination statements, as may be legally required or as may be reasonably
requested by such Lessee in order to effect such conveyance, free and clear of
Lessor Liens and the Liens of the Operative Documents and (iv) if such Leased
Property is subject to a Ground Lease, Lessor will execute and deliver to the
related Lessee an assignment or termination of such Ground Lease, as directed by
such Lessee, in such form as may be reasonably requested by such Lessee, and
such Lessee shall pay any amounts due with respect thereto under such Ground
Lease.
(b) Each Lessee shall, at such Lessee's sole cost and expense, obtain
all required governmental and regulatory approval and consents and in connection
therewith shall make such filings as required by Applicable Law; in the event
that Lessor is required by Applicable Law to take any action in connection with
such purchase and sale, the Lessees shall pay prior to transfer all reasonable
out-of-pocket costs incurred by Lessor in connection therewith. Without limiting
the foregoing, all costs incident to such conveyance, including, without
limitation, each Lessee's attorneys' fees, Lessor's attorneys' fees,
commissions, each Lessee's and Lessor's escrow fees,
25
<PAGE>
recording fees, title insurance premiums and all applicable documentary transfer
or other transfer taxes and other taxes required to be paid in order to record
the transfer documents that might be imposed by reason of such conveyance and
the delivery of such deed shall be borne entirely by and paid by the Lessees.
(c) Upon expiration or termination of this Lease resulting in
conveyance of Lessor's interest in the title to the Leased Properties to the
Lessees, there shall be no apportionment of rents (including, without
limitation, water rents and sewer rents), taxes, insurance, utility charges or
other charges payable with respect to the Leased Properties, all of such rents,
taxes, insurance, utility or other charges due and payable with respect to the
Leased Properties prior to termination being payable by the Lessees hereunder
and all due after such time being payable by the Lessees as the then owners of
the Leased Properties.
Section 14.6 Renewal. Subject to the conditions set forth herein,
Borders may, by written notice to Lessor and the Agent given not later than
three months and not earlier than six months, prior to the then scheduled Lease
Termination Date, request to renew this Lease for five years, commencing on the
date following such Lease Termination Date, provided that in no event shall the
Lease Term exceed fifteen (15) years. No later than the date that is 45 days
after the date the request to renew has been delivered to each of Lessor and the
Agent, the Agent will notify Borders whether or not Lessor and the Lenders
consent to such renewal request (which consent may be granted or denied in the
Lessor's and each Lender's sole discretion and may be conditioned on such
conditions precedent as may be specified by Lessor or such Lender). If the Agent
fails to respond in such time frame, such failure shall be deemed to be a
rejection of such request.
ARTICLE XV.
LESSEE'S EQUIPMENT
After any repossession of any Leased Property (whether or not this
Lease has been terminated), the related Lessee, at its expense and so long as
such removal of such trade fixture, personal property or equipment shall not
result in a violation of Applicable Law, shall, within a reasonable time after
such repossession or within ninety (90) days after such Lessee's receipt of
Lessor's written request (whichever shall first occur), remove all of such
Lessee's trade fixtures, personal property and equipment from such Leased
Property (to the extent that the same can be readily removed from such Leased
Property without causing material damage to such Leased Property); provided,
however, that such Lessee shall not remove any such trade fixtures, personal
property or equipment that has been financed by Lessor and/or the Lenders under
the Operative Documents or otherwise constituting Leased Property (or that
constitutes a replacement of such property). Any of a Lessee's trade fixtures,
personal property and equipment not so removed by such Lessee within such period
shall be considered abandoned by such Lessee, and title thereto shall without
further act vest in Lessor, and may be appropriated, sold, destroyed or
otherwise
26
<PAGE>
disposed of by Lessor without notice to any Lessee and without obligation to
account therefor and the related Lessee will pay Lessor, upon written demand,
all reasonable costs and expenses incurred by Lessor in removing, storing or
disposing of the same and all costs and expenses incurred by Lessor to repair
any damage to the Leased Property leased by it caused by such removal. Each
Lessee will immediately repair at its expense all damage to such Leased Property
caused by any such removal (unless such removal is effected by Lessor, in which
event such Lessee shall pay all reasonable costs and expenses incurred by Lessor
for such repairs). Lessor shall have no liability in exercising Lessor's rights
under this Article XV, nor shall Lessor be responsible for any loss of or damage
to any Lessee's personal property and equipment.
ARTICLE XVI.
RIGHT TO PERFORM FOR LESSEE
If any Lessee shall fail to perform or comply with any of its
agreements contained herein and either such failure shall continue for a period
of 10 or more days after notice to Borders by Lessor or the Agent or such
failure has resulted in immediate material danger to any Leased Property or
Lessor's or the Agent's interest therein, Lessor, upon reasonable notice to
Borders, may perform or comply with such agreement, and Lessor shall not thereby
be deemed to have waived any default caused by such failure, and the amount of
such payment and the amount of the expenses of Lessor (including actual and
reasonable attorneys' fees and expenses) incurred in connection with such
payment or the performance of or compliance with such agreement, as the case may
be, shall be deemed Supplemental Rent, payable by the related Lessee to Lessor
within ten (10) days after written demand therefor.
ARTICLE XVII.
MISCELLANEOUS
Section 17.1 Reports. To the extent required under Applicable Law and
to the extent it is reasonably practical for a Lessee to do so, such Lessee
shall prepare and file in timely fashion, or, where such filing is required to
be made by Lessor or it is otherwise not reasonably practical for a Lessee to
make such filing, Lessee shall prepare and deliver to Lessor (with a copy to the
Agent) within a reasonable time prior to the date for filing and Lessor shall
file, any material reports with respect to the condition or operation of such
Leased Property that shall be required to be filed with any Governmental
Authority.
Section 17.2 Binding Effect; Successors and Assigns; Survival. The
terms and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor and the Lessees, shall be binding upon their respective
successors, legal representatives and assigns (including, in the case of Lessor,
any Person to whom Lessor may transfer any Leased Property or any interest
therein in accordance with the provisions of the Operative Documents), and inure
27
<PAGE>
to the benefit of their respective permitted successors and assigns, and the
rights granted hereunder to the Agent and the Lenders shall inure (subject to
such conditions as are contained herein) to the benefit of their respective
permitted successors and assigns. Each Lessee hereby acknowledges that Lessor
has assigned all of its right, title and interest to, in and under this Lease to
the Agent and the Lenders pursuant to the Loan Agreement and related Operative
Documents, and that all of Lessor's rights hereunder may be exercised by the
Agent.
Section 17.3 Quiet Enjoyment. Lessor covenants that it will not
interfere in the related Lessee's or any of its permitted sublessees' quiet
enjoyment of the Leased Properties in accordance with this Lease during the
Lease Term, so long as no Event of Default has occurred and is continuing. Such
right of quiet enjoyment is independent of, and shall not affect, Lessor's
rights otherwise to initiate legal action to enforce the obligations of the
Lessees under this Lease.
Section 17.4 Documentary Conventions. The Documentary Conventions shall
apply to this Lease.
Section 17.5 Liability of Lessor Limited. Except as otherwise expressly
provided below in this Section 17.5, it is expressly understood and agreed by
and between each Lessee, Lessor and their respective successors and assigns that
nothing herein contained shall be construed as creating any personal liability
of Lessor or any of its Affiliates or any of their respective officers,
directors, employees or agents, individually or personally, for any failure to
perform any covenant, either express or implied, contained herein, all such
personal liability (other than that resulting from Lessor's gross negligence or
willful misconduct, except to the extent imputed to Lessor by virtue of any
Lessee's action or failure to act), if any, being expressly waived by each
Lessee and by each and every Person now or hereafter claiming by, through or
under any Lessee, and that, so far as Lessor or any of its Affiliates or any of
their respective officers, directors, employees or agents, individually or
personally, is concerned, each Lessee and any Person claiming by, through or
under any Lessee shall look solely to the right, title and interest of Lessor in
and to the Leased Properties and any proceeds from Lessor's sale or encumbrance
thereof (provided, however, that no Lessee shall be entitled to any double
recovery) for the performance of any obligation under this Lease and under the
Operative Documents and the satisfaction of any liability arising therefrom
(other than that resulting from Lessor's gross negligence or willful misconduct,
except to the extent imputed to Lessor by virtue of any Lessee's action or
failure to act).
Section 17.6 Estoppel Certificates. Each party hereto agrees that at
any time and from time to time during the Lease Term, it will promptly, but in
no event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser has signed a commitment or letter of
intent to purchase any Leased Property or any part thereof or any Note),
assignee or mortgagee or third party designated by such other party, a
certificate stating (a) that this Lease is unmodified and in force and effect
(or if there have been modifications, that this Lease is in force and effect
28
<PAGE>
as modified, and identifying the modification agreements); (b) the date to which
Basic Rent has been paid; (c) whether or not there is any existing default by
any Lessee in the payment of Basic Rent or any other sum of money hereunder, and
whether or not there is any other existing default by either party with respect
to which a notice of default has been served, and, if there is any such default,
specifying the nature and extent thereof; (d) whether or not, to the knowledge
of the signer, there are any setoffs, defenses or counterclaims against
enforcement of the obligations to be performed hereunder existing in favor of
the party executing such certificate and (e) other items that may be reasonably
requested; provided that no such certificate may be requested unless the
requesting party has a good faith reason for such request.
Section 17.7 No Joint Venture. Any intention to create a joint venture,
partnership or other fiduciary relationship between Lessor and any Lessee is
hereby expressly disclaimed.
Section 17.8 No Accord and Satisfaction. The acceptance by Lessor of
any sums from any Lessee (whether as Basic Rent or otherwise) in amounts which
are less than the amounts due and payable by the Lessees hereunder is not
intended, nor shall be construed, to constitute an accord and satisfaction of
any dispute between Lessor and any Lessee regarding sums due and payable by any
Lessee hereunder, unless Lessor specifically deems it as such in writing.
Section 17.9 No Merger. In no event shall the leasehold interests,
estates or rights of any Lessee hereunder, or of the holder of any Notes secured
by a security interest in this Lease, merge with any interests, estates or
rights of Lessor in or to the Leased Properties, it being understood that such
leasehold interests, estates and rights of each Lessee hereunder, and of the
holder of any Notes secured by a security interest in this Lease, shall be
deemed to be separate and distinct from Lessor's interests, estates and rights
in or to the Leased Properties, notwithstanding that any such interests, estates
or rights shall at any time or times be held by or vested in the same person,
corporation or other entity.
Section 17.10 Survival. The obligations of the parties to be performed
under this Lease prior to the Lease Termination Date and the obligations of the
parties pursuant to Articles III, X, XI, XIII, Sections 14.2, 14.3, 14.4, 14.5,
Articles XV, and XVI, and Section 17.5 hereof shall survive the expiration or
termination of this Lease. The extension of any applicable statute of
limitations by Lessor, any Lessee, the Agent or any Indemnitee shall not affect
such survival.
Section 17.11 Chattel Paper. To the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code in any
applicable jurisdiction), no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the sole
original counterpart, which shall be identified as the original counterpart by
the receipt of the Agent.
Section 17.12 Time of Essence. Time is of the essence of this Lease.
29
<PAGE>
Section 17.13 Recordation of Lease. Each Lessee will, at its expense,
cause each Lease Supplement or a memorandum of lease in form and substance
reasonably satisfactory to Lessor and such Lessee (if permitted by Applicable
Law) to be recorded in the proper office or offices in the States and the
municipalities in which the Land is located.
Section 17.14 Investment of Security Funds. The parties hereto agree
that any amounts not payable to a Lessee pursuant to any provision of Article
VIII, X or XIV hereof or this Section 17.14 shall be held by the Agent (or
Lessor if the Loans have been fully paid) as security for the obligations of the
Lessees under this Lease and the Master Agreement and of Lessor under the Loan
Agreement. At such time as such amounts are payable to the Lessee, such amounts,
net of any amounts previously applied to the Lessees' obligations hereunder or
under the Master Agreement (which application is hereby agreed to by Lessee),
shall be paid to the related Lessee. Any such amounts which are held by the
Agent (or Lessor if the Loans have been fully paid) pending payment to a Lessee
shall until paid to such Lessee, as provided hereunder or until applied against
the Lessees' obligations herein and under the Master Agreement and distributed
as provided in the Loan Agreement or herein (after the Loan Agreement is no
longer in effect) in connection with any exercise of remedies hereunder, be
invested by the Agent or Lessor, as the case may be, as directed from time to
time in writing by Lessee (provided, however, if an Event of Default has
occurred and is continuing it will be directed by the Agent or, if the Loans
have been fully paid, Lessor) and at the expense and risk of the Lessees, in
Permitted Investments. Any gain (including interest received) realized as the
result of any such investment (net of any fees, commissions and other expenses,
if any, incurred in connection with such investment) shall be applied in the
same manner as the principal invested. Lessee upon demand shall pay to the Agent
or Lessor, as appropriate, the amount of any loss incurred in connection with
all such investments and the liquidation thereof.
Section 17.15 Ground Leases. If any Land is subject to a Ground Lease,
this Lease, to the extent related to such Land, shall be deemed to be a
sublease. The related Lessee will, at its expense, timely perform all of the
obligations of Lessor, in its capacity as ground lessee, under such Ground Lease
and, if requested by Lessor shall provide satisfactory evidence to Lessor of
such performance.
Section 17.16 Land and Building. If any Building and the Land on which
such Building is located are subject to separate Lease Supplements, at any time
that the related Lessee exercises an option to purchase such Building or such
Land, or to renew this Lease with respect to such Building or such Land, or is
obligated to purchase such Building or such Land as a result of an Event of
Loss, an Event of Taking or an Event of Default, such purchase or renewal shall
be made simultaneously with respect to all of such Building and such Land.
Section 17.17 Joint and Several. Each obligation of each Lessee
hereunder shall be a joint and several obligation of all of the Lessees.
30
<PAGE>
Section 17.18 IDB Documentation. If any Leased Property is subject to
an IDB Lease, this Lease, to the extent related to such Leased Property, shall
be deemed to be a sublease. The related Lessee hereby agrees to perform all of
its obligations and all obligations of Lessor under all IDB Documentation
related to any Leased Property. In the event that a Lessee purchases any Leased
Property that is the subject of IDB Documentation, such Lessee shall prepay, or
cause to be prepaid, the Bonds related to such Leased Property or shall assume
all obligations of the Lessor related to such IDB Documentation and cause the
Lessor to be released therefrom pursuant to documentation reasonably
satisfactory to the Lessor.
[Signature page follows]
31
<PAGE>
IN WITNESS WHEREOF, the undersigned have each caused this Lease
Agreement to be duly executed and delivered and attested by their respective
officers thereunto duly authorized as of the day and year first above written.
Witnessed: BORDERS, INC., as a Lessee
By: By: /s/ Edward W. Wilhelm
------------------------ --------------------------------
Name: Name: Edward W. Wilhelm
---------------- Title: Senior Vice President and
Treasurer
By:
------------------------
Name:
----------------
S-1 LEASE
AGREEMENT
<PAGE>
ATLANTIC FINANCIAL GROUP, LTD.,
as Lessor
By: Atlantic Financial Managers,
Inc., its General Partner
Witnessed:
By: By: /s/ Stephen Brookshire
----------------------- ------------------------------------
Name: Name: Stephen Brookshire
------------------- Title: President
By:
-----------------------
Name:
------------------- LEASE
S-2 AGREEMENT
<PAGE>
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Agreement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ___ ____, this _____
day of __________, __________, by ___________, as _____________ , of BORDERS,
INC., a Colorado corporation, on behalf of the corporation.
[Notarial Seal] ______________________________
Notary Public
My commission expires: ______________
LEASE
N-1 AGREEMENT
<PAGE>
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Agreement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ____ ____, this
_____ day of __________, _______________, by _____________________, as
____________________ of Atlantic Financial Managers, Inc., the general partner
of Atlantic Financial Group, Ltd., on behalf of such partnership.
[Notarial Seal] ___________________________
Notary Public
My commission expires: _____________
LEASE
N-2 AGREEMENT
<PAGE>
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
SUNTRUST BANK,
as the Agent
By:_____________________________
Name:________________________
Title:_______________________
LEASE
N-3 AGREEMENT
<PAGE>
Recording requested by EXHIBIT A TO
and when recorded mail to: THE LEASE
_____________________________
_____________________________
_____________________________
_____________________________
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
[ ], between ATLANTIC FINANCIAL GROUP, LTD., as lessor (the "Lessor"),
and __________________, a _________ corporation, as lessee (the "Related
Lessee").
WHEREAS Lessor is the owner or ground-lessee of the Land described on
Schedule I hereto and wishes to lease the Land together with any Building and
other improvements thereon or which thereafter may be constructed thereon
pursuant to the Lease to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions; Interpretation. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Master Agreement, dated
as of June 21, 2002 (as amended and supplemented from time to time, the "Master
Agreement"), among Borders Group, Inc. ("BGI"), and Certain Subsidiaries of BGI,
as Guarantors, the Lessees named therein, Lessor, the financial institutions
party thereto, as Lenders, Fleet National Bank, as Co-Arranger and Syndication
Agent, and SunTrust Bank, as Co-Arranger, Documentation Agent and Agent; and the
rules of interpretation set forth in Appendix A to the Lease shall apply to this
Lease Supplement.
SECTION 2. The Properties. Attached hereto as Schedule I is the
description of certain Land (the "Subject Property"). Effective upon the
execution and delivery of this Lease Supplement by Lessor and Lessee, such Land,
together with any Building and other improvements thereon or which thereafter
may be constructed thereon shall be subject to the terms and provisions of the
Lease and Lessor hereby grants, conveys, transfers and assigns to the
A-1
<PAGE>
Related Lessee those interests, rights, titles, estates, powers and privileges
provided for in the Lease with respect to the Subject Property.
SECTION 3. Amendments to Lease with Respect to Subject Property.
Effective upon the execution and delivery of this Lease Supplement by Lessor and
the Related Lessee, the following terms and provisions shall apply to the Lease
with respect to the Subject Property:
[Insert Applicable Sections per Local Law
as contemplated by the Master Agreement]
SECTION 4. Ratification; Incorporation. Except as specifically modified
hereby, the terms and provisions of the Lease are hereby ratified and confirmed
and remain in full force and effect. The terms of the Lease (as amended by this
Lease Supplement) are by this reference incorporated herein and made a part
hereof.
SECTION 5. Original Lease Supplement. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. Documentary Conventions. The Documentary Conventions shall
apply to this Lease Supplement.
A-2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
Witnessed: ATLANTIC FINANCIAL GROUP, LTD.,
as the Lessor
By:__________________________________ By: Atlantic Financial Managers,
Name: Inc., its General Partner
By:__________________________________
By:__________________________________
Name: Name:
Title:
Witnessed: _____________________, as Related
Lessee
By:__________________________________
By:__________________________________ Name:
Title:
By: ____________________________
Name:
S-1
<PAGE>
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ____ ____, this
_____ day of __________, _______________, by _____________________, as
____________________ of Atlantic Financial Managers, Inc., the general partners
of Atlantic Financial Group, Ltd., on behalf of such partnership.
[Notarial Seal] ___________________________
Notary Public
My commission expires: _____________
N-1
<PAGE>
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ___ ____, this _____
day of __________, __________, by ___________, as _____________, of
___________________, a _________corporation, on behalf of the corporation.
[Notarial Seal] ______________________________
Notary Public
My commission expires: ______________
N-2
<PAGE>
Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as of the date hereof.
SUNTRUST BANK,
as the Agent
By: __________________________
Name:
Title:
S-3