SALE AND PURCHASE AGREEMENT

Asset Purchase Agreement

AGREEMENTS / CONTRACTS

CLAUSES

BORDERS GROUP INC | Baker & McKenzie LLP | BGI (UK) LIMITED | BOOKSHOP ACQUISITIONS LIMITED | Borders (UK) Limited | Ireland Limited

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Title: SALE AND PURCHASE AGREEMENT
Date: 9/27/2007
Industry: Retail (Specialty) Law Firm: Baker McKenzie Sector: Services

SALE AND PURCHASE AGREEMENT, Parties: borders group inc , baker & mckenzie llp , bgi (uk) limited , bookshop acquisitions limited , borders (uk) limited , ireland limited

Exhibit 10.39

DATED 2007

BGI (UK) LIMITED

and

BOOKSHOP ACQUISITIONS LIMITED

AGREEMENT
for the sale and purchase of
the entire issued share capital
of Borders (UK) Limited and Borders Books
Ireland Limited

Baker & McKenzie LLP

London
Ref: GF/RAK/CGB

CONTENTS


Clause		Page

1.	Interpretation		1
2.	Sale and Purchase of Shares and Irish Shares		7
3.	Consideration		8
4.	Completion		9
5.	Post-Completion Obligations		9
6.	Restrictive Covenants		9
7.	Warranties		11
8.	Locked Box		12
9.	Employee Incentives		12
10.	Announcements, Confidentiality and Return of Information		13
11.	Insurance		15
12.	Counterparts		15
13.	Further Assurance		15
14.	Variation, Waiver and Consent		15
15.	Entire Agreement		15
16.	Default Interest		15
17.	Notices		16
18.	Costs		17
19.	Third Party Rights		17
20.	Time of the Essence		17
21.	Continuing Effect		17
22.	Assignment		17
23.	Currency Conversion		17
24.	Governing Law and Submission to Jurisdiction		18
25.	Governing language		18

Schedule


SCHEDULE 1
Part 1: Details of the Company			19
Part 2: Details of the Irish Company			21
SCHEDULE 2
Completion			23
Part 1: Seller’s Delivery Obligations at Completion			23
Part 2: Seller’s Other Obligations at Completion			25
Part 3: Purchaser’s Obligations at Completion			26
SCHEDULE 3
Post-Completion Obligations			27
SCHEDULE 4
Warranties			29
SCHEDULE 5
Limitations on Liability			39
SCHEDULE 6
Awareness of Seller			44
SCHEDULE 7
Insurance			45
SCHEDULE 8
Properties			46
Part 1: Borders Stores			46
Part 2: Books etc. Stores			64


Part 3: Airport Concessions			76
Part 4: Occupational Concessions			79
Part 5: Closed and Disposed Properties			81
SCHEDULE 9
Permitted Leakage			87
SCHEDULE 10
Deferred Consideration			88

DATE:

PARTIES:

(1)		BGI (UK) LIMITED a company incorporated under the laws of England and Wales with registered number 3434022 and having its registered office at 100 New Bridge Street, London EC4V 6JA (the “ Seller ”); and

(2)		BOOKSHOP ACQUISITIONS LIMITED a company incorporated under the laws of England and Wales with registered number 6301376 and having its registered office at 32 Bedford Row, London WC1R 4HE (the “ Purchaser ”).

RECITALS:

(A)

The Seller has agreed to sell (and to procure the sale of the Irish Shares) and the Purchaser has agreed to purchase the Shares and the Irish Shares on the terms set out in this Agreement.

IT IS AGREED as follows:

1.		INTERPRETATION

1.1		Defined terms

		In this Agreement, the following words and expressions shall have the following meanings:

		“ Accounting Date ” means 3 February 2007;

		“ Accounts ” means:

(a)

the audited balance sheet of the Company as at the Accounting Date; and

(b)

the audited profit and loss account and cash flow statement of the Company in respect of the Financial Year ending on the Accounting Date,

		together in each case with all notes, reports and statements required by CA85 to be included in or annexed to them;

		“ Aggregate Consideration ” has the meaning attributed in clause 3.1;

		“ Blanchardstown Property ” means Units 3B & 4, West End Retail Park, Blanchardstown, Dublin 15, Republic of Ireland;

		“ BoA Indebtedness ” means the aggregate Indebtedness due to the syndicate of banks led by Bank of America, N.A. (as administrative agent and collateral agent) from the Group as at Completion together with all accrued interest;

		“ Borders Group ” means Borders Group, Inc., a corporation incorporated in Delaware, USA and having its principal place of business at 100 Phoenix Drive, Ann Arbor, MI 48108 USA;

		“ Borders Irish Pension Scheme ” means the personal retirement savings account for the benefit of the employees of the Irish Company;

		“ Borders UK Pension Scheme ” means the occupational money purchase pension scheme for the benefit of the employees of the Company, details of which are included in the Data Room;

		“ Business ” means the business carried on by the Company and the Irish Company as at Completion;

		“ Business Day ” means a day (excluding Saturday) on which banks generally are open in the City of London for the transaction of normal banking business;

		“ CA85 ” means the Companies Act 1985;

		“ CHAPS ” means the clearing houses automated payment system or any other method of electronic transfer for same-day value;

		“ Charges ” means the mortgages and charges detailed in part 1 of schedule 1;

		“ Closed Property ” means the property at Birmingham Star City listed as a closed property and short particulars of which are set out in part 5 of schedule 8;

		“ Company ” means Borders (UK) Limited, a private company limited by shares and incorporated in England and Wales, short particulars of which are set out in part 1 of schedule 1;

		“ Completion ” means completion of the sale and purchase of the Shares and the Irish Shares in accordance with clause 4;

		“ Completion Date ” means the date upon which Completion is required to take place in accordance with clause 4.1;

		“ Confidential Information ” means know-how, trade secrets and other information of a confidential nature;

		“ Confidentiality Letter ” means the confidentiality letter from Borders Group to Risk Capital Partners Limited dated 22 May 2007;

		“ Data Room ” means the collection of documents, materials and information hosted by Intralinks and made available for review by the Purchaser and its advisers copies of which are contained in the CD ROMs that have been initialled by or on behalf of the Seller and the Purchaser;

		“ Deeds of Covenant ” means the deeds to be entered into by the Company and the Irish Company in favour of Borders Group and containing obligations in respect of the assignment of the Glasgow Property and the Blanchardstown Property in the agreed form;

		“ Deferred Consideration ” means the amount of the additional consideration payable (if any) for the Shares and the Irish Shares pursuant to clause 3.4;

		“ Directors ” means the persons listed as directors of the Company and the Irish Company in parts 1 and 2 of schedule 1;

		“ Disclosure Letter ” means the letter of the same date as this Agreement (including the contents of any schedule or appendix thereto or attachment thereto) from the Seller to the Purchaser;

		“ Disposed Properties ” means the properties short particulars of which are listed as disposed properties set out in part 5 of schedule 8;

		“ Domain Names ” means borders.co.uk, borders.eu, bordersukltd.com, bordersukltd.net, bordersuklimited.com, bordersuklimited.net, bordersuk.eu, bordersgroup.info, borders-group.eu;

		“ Encumbrance ” means any encumbrance or security interest of any kind whatsoever including without limitation a mortgage, charge, pledge, lien, hypothecation, restriction, right

		to acquire, right of pre-emption, option, conversion right, third party right or interest, right of set-off or counterclaim, equities, trust arrangement or any other type of preferential agreement (such as a retention of title arrangements) having similar effect or any other rights exercisable by or claims by third parties;

		“ Financial Year ” shall, save in relation to schedule 10, be construed in accordance with s223 CA85;

		“ Fortis Indebtedness ” means the aggregate Indebtedness due to Fortis Bank SA-NV from the Group as at Completion with all accrued interest;

		“ Glasgow Property ” means 98 Buchanan Street, Royal Exchange Square, Glasgow G1 3HA;

		“ Group ” means the Company and the Irish Company and “ member of the Group ” shall be construed accordingly;

		“ Guaranteed Properties ” means the Blanchardstown Property and the Glasgow Property and “ Guaranteed Property ” means either of them;

		“ Indebtedness ” means, in respect of any company, any borrowing or indebtedness in the nature of borrowing;

		“ Initial Consideration ” means the cash, shares and loan notes referred to in clause 3.2;

		“ Intellectual Property ” means rights in Confidential Information, patents, registered designs, copyrights (including rights in computer software), rights in databases, rights in other protectable lists of information, design rights, rights in know how, utility models, topography rights, trade marks, domain names, business names, trade names, registrations of and applications to register any of the aforesaid items and the goodwill attaching to any of them and rights in the nature of any of the aforesaid items in any country;

		“ Intra-Group Guarantees ” means all guarantees, indemnities and counter-indemnities of any nature whatsoever (i) given to any third party by any member of the Group in respect of a liability of any member of the Seller’s Group and/or as the context may require; (ii) given to any third party by any member of the Seller’s Group in respect of a liability of any member of the Group; and (iii) given by any member of the Seller’s Group after the date of this agreement in connection with the completion of the agreement for lease dated 24 March 2006 between (1) Cosgrave Property Developments Limited, (2) Joseph Cosgrave, Peter Cosgrave and Michael Cosgrave and (3) Borders Books Ireland Limited relating to the property at Unit 3B & 4, West End Retail Park, Blanchardstown, Dublin 15, Republic of Ireland;

		“ Intra-Group Indebtedness ” means all Indebtedness outstanding between any member of the Group and any member of the Seller’s Group (other than Intra-Group Trading Indebtedness);

		“ Intra-Group Trading Indebtedness ” means all sums owing between any member of the Group and the any member of the Seller’s Group in respect of intra-group trading activities;

		“ Irish Company ” means Borders Books Ireland Limited, a private company limited by shares and incorporated in the Republic of Ireland, short particulars of which are set out in part 2 of schedule 1;

		“ Irish Share Consideration ” has the meaning given in clause 3.3(b);

		“ Irish Shares ” means the issued share capital of the Irish Company as shown in part 2 of schedule 1;

		“ Irish Trial Balance” means the draft unaudited trial balance of the Irish Company for the year ended 3 February 2007 in the agreed form;

		“ Leakage ” means:

	(a)		any dividend or other distribution (whether actual or deemed) to, in the case of the Company, the Seller or, in the case of the Irish Company, Borders Group;

	(b)		any payments made, or agreed to be made by any member of the Group, to (or assets transferred to or liabilities assumed, indemnified, or incurred for the benefit of) any member of the Seller’s Group (other than in the ordinary and usual course of business) and any repayment by any member of the Group of any Intra-Group Indebtedness (provided that the same has not been refunded to the relevant member of the Group together with accrued interest prior to the date of Completion);

	(c)		any payments made by any member of the Group to any member of the Seller’s Group in respect of any share capital or other securities of any member of the Group being issued, redeemed, purchased or repaid, or any other return of capital; and

	(d)		the waiver or agreement to waive by any member of the Group of any amount owed to it by any member of the Seller’s Group;

		“ Lease Guarantee ” means any guarantee given by Borders Group in respect of the Company’s obligations or the Irish Company’s obligations (as applicable) under the lease of a Guaranteed Property;

		“ Licence ” means the agreement relating to the license of the “Borders” brand in the agreed form;

		“ Licence Consideration ” has the meaning given in clause 3.3(c);

		“ Life Assurance Scheme ” means the Borders (UK) Limited life assurance scheme (previously known as the Books Etc Limited life assurance scheme);

		“ Losses ” includes, in respect of any matter, event or circumstance, all demands, claims, actions, proceedings, damages, payments, fines, penalties, losses, costs (including legal costs), expenses (including taxation), disbursements or other liabilities in any case of any nature whatsoever;

		“ Management Accounts ” means the unaudited management accounts of the Group for the five month period to the Management Accounts Date;

		“ Management Accounts Date ” means 30 June 2007;

		“ Occupational Concessions ” means the concessions and licences, short particulars of which are set out in part 4 of schedule 8;

		“ Other Domain Names ” means bordersmobile.co.uk; bordersdirect.co.uk; myborders.co.uk; bordersmail.co.uk; bordersonline.co.uk;

		“ Paperchase Arrangements ” means the arrangements described in the memorandum from David Roche dated 31 August 2007 as have been initialled for identification purposes only by or on behalf of the Seller and the Purchaser;

		“ Paperchase Business ” means the business of selling blank books, day book diaries, calendars, stationery, pens, stationers sundries, greeting cards, posters, picture frames, artists’ materials, leather goods, luggage, home storage products, furniture, toys, games, paper

		products, Christmas decorations, partyware, general giftware and any items ancillary thereto, carried on by Paperchase Products Limited (company number 3185938 and whose registered office is at 12 Alfred Place London WC1E 7EB) as at Completion;

		“ Permitted Leakage ” means all of the expenses or payments detailed in schedule 9;

		“ Proceedings ” means any proceedings, suit or action arising out of or in connection with this Agreement;

		“ Properties ” means the properties short particulars of which are set out in parts 1, 2 and 3 of schedule 8;

		“ Purchaser’s Group ” means the group of companies comprising the Purchaser, any holding company from time to time of the Purchaser and any subsidiary of the Purchaser (including, following Completion, any member of the Group) or of any such holding company and “ member of the Purchaser’s Group ” shall be construed accordingly;

		“ Purchaser’s Solicitors ” means Pinsent Masons of City Point, One Ropemaker Street, London EC2Y 9AH;

		“ Reference Balance Sheet ” means the unaudited balance sheet of the Group contained in the Management Accounts;

		“ Seller’s Group ” means the group of companies comprising the Seller, any holding company from time to time of the Seller and any subsidiary of the Seller or any such holding company (including, without limitation, Borders Group and its subsidiaries) but excluding each member of the Group and “ member of the Seller’s Group ” shall be construed accordingly;

		“ Seller’s Solicitors ” means Baker & McKenzie LLP of 100 New Bridge Street, London EC4V 6JA;

		“ Senior Executive ” means each of David Roche, Mark Raban, Philip Downer and David Kohn;

		“ Service Document ” means a document relating to or in connection with any Proceedings;

		“ Share Consideration ” has the meaning given in clause 3.3(a);

		“ Shares ” means the issued share capital of the Company as shown in part 1 of schedule 1;

		“ Tax ” has the meaning given to that term in the Tax Deed and “ Taxes ” shall be construed accordingly;

		“ Tax Deed ” means the deed relating to Tax in the agreed form;

		“ Taxation Authority ” has the meaning given to that term in the Tax Deed;

		“ Taxes Act ” means the Income and Corporation Taxes Act 1988;

		“ Transaction Documents ” means this Agreement, the Tax Deed, the Licence and the Transitional Services Agreement;

		“ Transitional Services Agreement ” means the agreement relating to transitional services in the agreed form; and

		“ Warranties ” means the warranties given in clause 7.1 and schedule 4.

1.2		Statutory provisions

		All references to statutes, statutory provisions, enactments, EU Directives or EU Regulations shall include references to any consolidation, re-enactment, modification or replacement of the same, any statute, statutory provision, enactment, EU Directive or EU Regulation of which it is a consolidation, re-enactment, modification or replacement and any subordinate legislation in force under any of the same from time to time except to the extent that any consolidation, re-enactment, modification or replacement enacted after the date of this Agreement would extend or increase the liability of either party to the other under this Agreement.

1.3		Holding company and subsidiary

		A company or other entity shall be a “ holding company ” for the purposes of this Agreement if it falls within either the meaning attributed to that term in ss736 and 736A CA85 or the meaning attributed to the term “ parent undertaking ” in s258 CA85, and a company or other entity shall be a “ subsidiary ” for the purposes of this Agreement if it falls within either the meaning attributed to that term in ss736 and 736A CA85 or the meaning attributed to the term “ subsidiary undertaking ” in s258 CA85, and the terms “ subsidiaries ” and “ holding companies ” are to be construed accordingly.

1.4		Agreed form

		Any reference to a document in the “ agreed form ” is to the form of the relevant document in the terms agreed between the Seller and the Purchaser prior to the execution of this Agreement and signed or initialled for identification purposes only by or on behalf of the Seller and the Purchaser (in each case with such amendments as may be agreed by or on behalf of the Seller and the Purchaser).

1.5		Recitals, schedules, etc.

		References to this Agreement include the recitals and schedules which form part of this Agreement for all purposes. References in this Agreement to the parties, the recitals, schedules and clauses are references respectively to the parties and their legal personal representatives, successors and permitted assigns, the recitals and schedules to and clauses of this Agreement.

1.6		Meaning of references

		Save where specifically required or indicated otherwise:

	(a)		words importing one gender shall be treated as importing any gender, words importing individuals shall be treated as importing corporations and vice versa, words importing the singular shall be treated as importing the plural and vice versa, and words importing the whole shall be treated as including a reference to any part thereof;

	(b)		references to a person shall include any individual, firm, body corporate, unincorporated association, government, state or agency of state, association, joint venture or partnership, in each case whether or not having a separate legal personality. References to a company shall be construed so as to include any company, corporation or other body corporate wherever and however incorporated or established;

	(c)		references to the word “ include ” or “ including ” (or any similar term) are not to be construed as implying any limitation and general words introduced by the word

			“ other ” (or any similar term) shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things;

	(d)		references to any English statutory provision or legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any other legal concept, state of affairs or thing shall in respect of any jurisdiction other than England be deemed to include that which most nearly approximates in that jurisdiction to the English statutory provision or legal term or other legal concept, state of affairs or thing;

	(e)		any reference to “ writing ” or “ written ” includes any method of reproducing words or text in a legible and non-transitory form but, for the avoidance of doubt, shall not include e-mail;

	(f)		references to “ sterling ” or “ £ ” or “ pounds ” are to the lawful currency of the United Kingdom as at the date of this Agreement. References to “ Euro ” or “ € ” are to the single currency of the European Union constituted by the Treaty on European Union; and

	(g)		references to times of the day are to that time in London and references to a day are to a period of 24 hours running from midnight to midnight.

1.7		Headings

		Clause and paragraph headings and the table of contents are inserted for ease of reference only and shall not affect construction.

1.8		Connected persons

		Section 839 Taxes Act is to apply to determine whether one person is connected with another for the purposes of this Agreement.

2.		SALE AND PURCHASE OF SHARES AND IRISH SHARES

2.1		Sale and purchase of Shares and Irish Shares

	(a)		The Seller agrees to sell and transfer (and in relation to the Irish Shares to procure to be sold and transferred) and the Purchaser agrees to purchase the whole of the legal and beneficial interest in the Shares and the Irish Shares free from any Encumbrance, as at and with effect from the Completion Date.

	(b)		The Seller covenants with the Purchaser that it has and will at Completion have, the right to sell and transfer or procure the sale and transfer of the whole of the legal and beneficial interest in and title to the Share and the Irish Shares.

	(c)		The Seller covenants with the Purchaser that the Shares and the Irish Shares will on Completion be free from all Encumbrances.

	(d)		The Seller covenants with the Purchaser that the Purchaser will on Completion be entitled to exercise all rights attached to or accruing to the Shares including, without limitation, the right to receive all dividends or other distributions or any return of capital declared, made or paid by the Company on or after Completion.

	(e)		Part I of the Law of Property (Miscellaneous Provisions) Act 1994 shall not apply for the purposes of this Agreement.

2.2		Rights attaching to the Shares and the Irish Shares

		The Shares and the Irish Shares shall be sold together with all accrued and future rights now or hereafter attaching to them, including, without limitation, all rights to any dividend or other distribution declared, made or paid after the date of this Agreement.

2.3		Waiver of restrictions on transfer

		The Seller hereby irrevocably waives and agrees to procure the waiver of any restrictions on transfer (including rights of pre-emption) which may exist in relation to the Shares or the Irish Shares, whether under the articles of association of the Company or the Irish Company or otherwise.

2.4		Sale of all the Shares and the Irish Shares

		Neither party shall be obliged to complete the sale and purchase of any of the Shares or the Irish Shares unless the sale and purchase of all the Shares and all the Irish Shares is completed simultaneously in accordance with this Agreement.

3.		CONSIDERATION

3.1		Aggregate Consideration

		The total price payable for the Shares, the Irish Shares and the grant of the Licence is aggregate of the Initial Consideration and the Deferred Consideration (if any).

3.2		Payments

		On Completion the Purchaser shall:

	(a)		procure the repayment by the Company of £10,000,000 to Bank of America, N.A. (as administrative agent and collateral agent) in accordance with paragraph 1 of part 3 of schedule 2;

	(b)		issue to the Seller 1999 B Ordinary Shares of £0.01 each in the Purchaser credited as fully paid up; and

	(c)		issue to the Seller Fixed Rate Unsecured Loan Notes 2017 in the principal amount of £1,700,000 (one million and seven hundred thousand pounds).

3.3		Apportionment of Initial Consideration

		The Initial Consideration shall be apportioned between the Shares, the Irish Shares and the Licence as follows:

	(a)		the Shares — £5,999,999, the 1999 B Ordinary Shares in the Purchaser and Fixed Rate Unsecured Loan Notes 2017 of the Purchaser in the principal amount of £1,700,000 (the “ Share Consideration ”);

	(b)		the Irish Shares — £4,000,000 (the “ Irish Share Consideration ”); and

	(c)		the Licence — £1 (the “ Licence Consideration ”).

3.4

Deferred Consideration

		The provisions of schedule 10 shall have effect in respect of the Deferred Consideration. The Deferred Consideration shall be apportioned in the same proportions as the Initial Consideration.

4.		COMPLETION

4.1		Timing Completion shall take place immediately after the signing of this Agreement.

4.2		Location

		Completion shall take place at the offices of the Seller’s Solicitors when all (but not some only) of the events detailed in this clause 4 shall occur.

4.3		Seller’s obligations at Completion

		At Completion, the Seller shall:

	(a)		deliver (or cause to be delivered) to the Purchaser the items listed in part 1 of schedule 2 (the Purchaser receiving those items, where appropriate, as agent of the Company or the Irish Company); and

	(b)		procure that all necessary steps are taken properly to effect the matters listed in part 2 of schedule 2 at board meetings of each member of the Group and deliver to the Purchaser duly signed minutes of all such board meetings.

4.4		Purchaser’s obligations at Completion

		At Completion, the Purchaser shall do or deliver (or cause to be delivered) to the Seller the matters or items listed in part 3 of schedule 2.

4.5		No termination

		The Purchaser shall not be entitled in any circumstances to rescind or terminate this Agreement after Completion.

5.		POST-COMPLETION OBLIGATIONS

		The Purchaser undertakes to the Seller to procure the performance and observance of those matters listed in schedule 3.

6.		RESTRICTIVE COVENANTS

6.1		Restriction of Seller

		Subject to clause 6.2, the Seller undertakes with the Purchaser that, except with the consent in writing of the Purchaser (such consent not to be unreasonably withheld or delayed):

(a)

for the period of two years after Completion, it will not (and will procure that no member of the Seller’s Group will) in the United Kingdom or the Republic of Ireland, either on its own account or in conjunction with or on behalf of any other person, carry on or be engaged, concerned or interested, in any business which directly competes with the Business (a “ Competing Business ”) (other than as a holder of not more than five per cent of the issued shares or debentures of any company carrying on such a business traded on a recognised investment exchange (as defined in the Financial Services and Markets Act 2000)); and

(b)

for the period of two years after Completion, it will not (and will procure that no member of the Seller’s Group will) either on its own account or in conjunction with or on behalf of any other person solicit, entice away or attempt to solicit or entice away from the Company or the Irish Company any person employed in a senior or managerial capacity by the Company or the Irish Company at Completion.

6.2		Exceptions from restrictions

		Nothing in clause 6.1 shall prevent or restrict the Seller or any member of the Seller’s Group from:

	(a)		carrying on or being engaged in any business or providing any goods or services via the Internet or other electronic media, whether in the United Kingdom, the Republic of Ireland or elsewhere;

	(b)		carrying on or being engaged concerned or interested in, anywhere in the world, any business (not being a Competing Business) which it carries on at Completion or in which it is at Completion engaged, concerned or interested (or any reasonable extension or development of any such business);

	(c)		carrying on the Paperchase Business, whether in the United Kingdom, the Republic of Ireland or elsewhere;

	(d)		carrying on or being engaged concerned or interested in any Competing Business after such time as the Purchaser’s Group ceases to carry on or be engaged, concerned or interested in such business to any material extent;

	(e)		acquiring, directly or indirectly, shares in or the whole or any part of the undertaking or assets of any company which carries on a Competing Business if the Seller shall cease to carry on or be concerned or interested in the Competing Business or the company carrying on the same within one year from completion of the relevant acquisition (but nothing in this clause 6.2(e) shall require the Seller or the relevant members of the Seller’s Group to cease to carry on the Competing Business or to dispose of the same within one year as therein provided if such business or interest therein is acquired as part of a larger acquisition or series of related acquisitions and the value properly attributable to such part did not at the date of acquisition amount to more than 10% of the value of such larger acquisition or series of related acquisitions taken as a whole;

	(f)		general solicitation to the public of employment with the Seller or any member of the Seller’s Group and to which any person described in clause 6.1(b) responds without any other solicitation or prompting;

	(g)		carrying on the business of selling books, periodicals, CDs and DVDs from the Oxford St and/or Glasgow Properties in the event that the Seller or any member of the Seller’s Group takes possession of either or both of such properties in connection with any call on the guarantees given by Borders Group to the landlords of such properties; or

	(h)		carrying on or being engaged in any business or providing any goods or services, whether in the United Kingdom, the Republic of Ireland or elsewhere which is not a Competing Business and which incorporates a Starbucks or similar type of concession arrangement or which provides internet connectivity services whether using T-Mobile or otherwise.

6.3		The Seller acknowledges that they consider the undertakings contained in clause 6.1 reasonable and necessary for the proper protection of the business of the Company or the Irish Company and the legitimate interests of the Purchaser and further acknowledges that damages would not be an adequate remedy for breach of such undertakings.

6.4		Each of the undertakings in clause 6.1 is separate and severable and shall be construed on that basis. In the event that any such undertakings are found to be void but would be valid if some part of it were deleted or if the period or extent were reduced such undertaking shall apply with such modification as may be necessary to make it valid and effective.

6.5		The restrictions contained in clause 6.1 shall cease to apply in the event that there is a material breach of the terms of this agreement by the Purchaser including a failure to pay the Deferred Consideration and failure to comply with paragraph 1.2(a) of schedule 3.

7.		WARRANTIES

7.1		Warranties of the Seller

		The Seller warrants to the Purchaser in the terms set out in schedule 4 subject to:

	(a)		any matter disclosed in the Disclosure Letter (or treated by the Disclosure Letter as being disclosed);

	(b)		any information obtained by the Purchaser or any of its advisors during the course of any investigation (whether authorised by the Seller or not) by or on behalf of the Purchaser into the affairs of the Company or the Irish Company (including, without limitation to the generality of the foregoing, the information contained in the Data Room) and any other information of which the Purchaser or any other member of the Purchaser’s Group may have knowledge, whether actual, implied or constructive. All such information shall be deemed to be disclosed to the Purchaser; and

	(c)		the limitations and qualifications set out in schedule 5.

7.2		Accuracy of Disclosure Letter

		The Seller makes no representation or warranty to the Purchaser as to the completeness, truth or accuracy of the matters disclosed in the Disclosure Letter.

7.3		Warranties of the Purchaser

		The Purchaser warrants to the Seller that:

	(a)		the Purchaser has obtained all corporate authorisations required to empower it to enter into this Agreement and the Tax Deed and to perform its obligations thereunder;

	(b)		neither the entry into this Agreement and the Tax Deed nor the implementation of the transactions contemplated by this Agreement and the Tax Deed will:

	(i)		violate or conflict with the provisions of the Purchaser’s constitutional documents;

	(ii)		amount to a violation or breach of any applicable laws or regulations in any relevant jurisdiction;

	(iii)		amount to a violation or default with respect to any relevant order, decree or judgment of any court or any governmental or regulatory authority in any

			jurisdiction to which the Purchaser is a party or by which the Purchaser is bound; or

	(iv)		result in a breach of, or constitute a default under, any instrument to which the Purchaser is a party or by which the Purchaser is bound;

	(c)		the obligations expressed to be assumed by the Purchaser pursuant to this Agreement and the Tax Deed are legal, valid and binding and enforceable against it in accordance with the terms of this Agreement and the Tax Deed; and

	(d)		the Purchaser is not engaged in any material litigation or arbitration or similar proceedings related to the transactions contemplated by this Agreement and to the knowledge of the Purchaser, no such litigation, arbitration or proceeding is threatened against the Purchaser or any member of the Purchaser’s Group.

8.		LOCKED BOX

8.1		The Seller warrants to the Purchaser that since the Reference Balance Sheet Date no Leakage has occurred, save for Permitted Leakage.

8.2		The Seller undertakes to the Purchaser to pay to the Purchaser on demand, or as it may direct, the amount of any Leakage, other than Permitted Leakage, received by it or any other member of the Seller’s Group and to indemnify the Purchaser and keep it indemnified from and against all Losses incurred by the Purchaser arising out of a breach by the Seller of clause 8.1 and the Purchaser may set off any amounts due under this clause against any payments that it is due to make to Borders International Services, Inc under the Transitional Services Agreement by notice to the Seller provided that the such notice is accompanied by the written opinion of a commercial specialist Queen’s Counsel jointly agreed upon between the Purchaser and the Seller or (failing such agreement) appointed, at the request of either the Purchaser or the Seller at any time, by the President from time to time of The Bar Council of England and Wales, to the effect that the Purchaser is likely to succeed on the claim under the indemnity in respect of the amount to be set off to the extent of the amount to be set off or, if less, the amount stated in the opinion and will be entitled to set off the amount so estimated or stated.

9.		EMPLOYEE INCENTIVES

9.1		This clause 9 shall have effect if, and only to the extent that, the Purchaser or any member of the Group has any obligation to account for bonuses payable in connection with the transaction contemplated by this Agreement including, without limitation, any retention, termination or other bonuses (the “ Bonuses ”) and income tax and employee’s social security contributions after Completion under PAYE or any other withholding system arising in respect of any share incentive, share option or other incentive (including the Bonuses) granted before Completion (together the “ Incentives ”) by any member of the Seller’s Group to any employee or officer or former employee or officer of any member of the Group (a “ Relevant Individual ”).

9.2		The Seller shall inform the Purchaser of the occurrence of any event whereby income tax and employee social security contributions are required to be accounted for pursuant to Clause 9.1 (a “ Relevant Event ”) within 5 Business Days of the Relevant Event, specifying the name of the Relevant Individual and the amount of employment income arising to the Relevant Individual in respect of the Relevant Event.

9.3		The Purchaser will provide the Seller with all information reasonably necessary for the Seller to calculate the amounts that are required to be accounted for pursuant to clauses 9.1 and 9.5 within 2 Business Days of the notification made pursuant to clause 9.2 above.

9.4		The Seller agrees that it will, to the extent permitted by law, use its reasonable endeavours to withhold from amounts due to the Relevant Individual or otherwise recover from the Relevant Individual, an amount equal to the amount of income tax and employee social security contributions that are required to be accounted for pursuant to clause 9.1 and forward that amount to either the member of the Group that is the employer of the Relevant Individual or the Purchaser by the later of (i) the end of 5 Business Days after the relevant event; (ii) 5 Business Days after the notification made pursuant to clause 9.2 above; and (iii) the close of business on the day that is the latest date on which the income tax or employee social security contributions (as the case may be) may be paid to a Taxation Authority without a liability to interest and penalties arising. To the extent that the Seller is unable to withhold or recover the amounts of income tax and employee social security contributions due from the Relevant Individual, the Purchaser agrees that it will procure that the member of the Group that is the employer of the Relevant Individual will use all reasonable endeavours to recover the amount of income tax and employee social security contributions that are required to be accounted for pursuant to clause 9.1 by deduction from the salary or other remuneration of the Relevant Individual or otherwise directly from the Relevant Individual.

9.5		The Seller agrees that the Seller will bear any liability to employer social security contributions arising in respect of any Incentives granted by any member of the Seller’s Group or the Group to any Relevant Individual, and shall forward that amount to either the member of the Group that is the employer of the Relevant Individual or the Purchaser by the later of (i) the end of 5 Business Days after the relevant event; (ii) 5 Business Days after the notification made pursuant to clause 9.2 above; and (iii) the close of business on the day that is the latest date on which the income tax or employee social security contributions (as the case may be) may be paid to a Taxation Authority without a liability to interest and penalties arising.

9.6		The Purchaser shall procure that the relevant member of the Group that is the employer of the Relevant Individual shall account for the amount equal to the amount of income tax and employee social security contributions that are required to be accounted for pursuant to clause 9.1, and any employer social security contributions due, to the relevant Taxation Authority within any required timeframe and procure that, if and to the extent that there has been an over-recovery of any amount of income tax and employee social security contributions, the amounts are paid to the Relevant Individual as soon as practicable. The Purchaser shall provide to the Seller such evidence that the amounts of income tax and employee social security contributions have been duly accounted to the relevant Taxation Authority as the Seller may reasonably request.

9.7		The Purchaser shall procure that a member of the Group shall report to the relevant Taxation Authority any information required to be reported to any such Taxation Authority in relation to any Relevant Event in connection with any share incentive, share option or other incentive granted before Completion within the required timeframe. The Purchaser shall provide the Seller with a copy of any such report within five Business Days of a request being made for the same.

9.8		The Seller undertakes to pay or put the Purchaser in funds to pay, the Bonuses in time for payment on their due dates provided that the Purchaser shall have given the Seller not less than 5 Business Days prior notice that the liability is about to fall due.

10.		ANNOUNCEMENTS, CONFIDENTIALITY AND RETURN OF INFORMATION

10.1		Prior approval of announcements

		Subject to the provisions of clause 10.2 below, no disclosure or announcement relating to the existence or subject matter of this Agreement shall be made or issued by or on behalf of the Seller or the Purchaser or any member of the Purchaser’s Group or any member of the Group

		without the prior written approval of the other party (which approval may be subject to reasonable conditions but shall otherwise not be unreasonably withheld or delayed) provided that these restrictions shall not apply to any disclosure or announcement if required by any law, applicable securities exchange, supervisory, regulatory or governmental body.

10.2		Notices to customers etc.

		Nothing in this Agreement will prohibit the Purchaser from making or sending after Completion any announcement to a customer, client or supplier of the Company or the Irish Company informing it that the Purchaser has purchased the Shares and the Irish Shares.

10.3		Consultation

		The party making the communication shall use its reasonable endeavours to consult with the other party in advance as to the form, content and timing of the communication.

10.4		Confidentiality

		Each party shall treat as strictly confidential and will not disclose any information received or obtained by it or its officers, employees, agents or advisers as a result of entering into or performing this Agreement which relates to:

	(a)		the provisions of this Agreement, or any document or Agreement entered into pursuant to this Agreement;

	(b)		the negotiations leading up to or relating to this Agreement; or

	(c)		the other party,

and the Seller acknowledges that it shall and shall procure that the Seller’s Group shall treat as strictly confidential all information arising from its ownership of the Company and the ownership of the Irish Company by Borders Group provided that these restrictions shall not apply to any disclosure of information if and to the extent the disclosure is:

	(i)		required by the law of any jurisdiction;

	(ii)		required by any applicable securities exchange, supervisory or regulatory or governmental body to which the relevant party is subject or submits, wherever situated, whether or not the requirement for disclosure has the force of law;

	(iii)		made to the relevant party’s professional advisers, auditors or bankers or the professional advisers, auditors or bankers of any other member of the relevant party’s group of companies; or

	(iv)		of information that has already come into the public domain through no fault of the relevant party or any other member of that party’s group of companies.

10.5		Return of Information

		If for any reason whatsoever the transactions contemplated by this Agreement are not consummated, the Purchaser shall return to the Seller (i) all books and records relating or belonging to any member of the Group; and (ii) the Disclosure Letter, and the Purchaser undertakes to comply in all respects with the terms of the Confidentiality Letter.

11.		INSURANCE

		The provisions of schedule 7 shall have effect in respect of insurance claims and risk.

12.		COUNTERPARTS

		This Agreement may be executed in any number of counterparts and by the parties to it on separate counterparts and each such counterpart shall constitute an original of this Agreement but all of which together constitute one and the same instrument. This Agreement shall not be effective until each party has executed at least one counterpart.

13.		FURTHER ASSURANCE

		Each of the parties agrees to use all reasonable endeavours to perform (or use all reasonable endeavours to procure the performance of) all further acts and things, and execute and deliver (or use all reasonable endeavours to procure the execution and delivery of) such further documents, as the other may reasonably require, whether on or after Completion, to implement and/or give effect to the Agreement and the transactions contemplated by this Agreement.

14.		VARIATION, WAIVER AND CONSENT

14.1		No variation (or waiver of any provision or condition of this Agreement) shall be effective unless it is in writing and signed by or on behalf of each of the parties (or, in the case of a waiver, by or on behalf of the party waiving compliance).

14.2		Unless expressly agreed, no variation or waiver of any provision or condition of this Agreement shall constitute a general variation or waiver of any provision or condition of this Agreement, nor shall it affect any rights, obligations or liabilities under or pursuant to this Agreement which have already accrued up to the date of variation or waiver, and the rights and obligations of the parties under or pursuant to this Agreement shall remain in full force and effect, except and only to the extent that they are so varied or waived.

14.3		Any consent granted under this Agreement shall be effective only if given in writing and signed by the consenting party and then only in the instance and for the purpose for which it was given.

15.		ENTIRE AGREEMENT

		The Transaction Documents, the Confidentiality Letter and the Disclosure Letter together represent the whole and only agreement between the parties in relation to the sale and purchase of the Shares and the Irish Shares and supersede any previous agreement (whether written or oral) between all or any of the parties in relation to the subject matter of any such document save that nothing in this Agreement shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation.

16.		DEFAULT INTEREST

16.1		If any party which is required to pay any sum under this Agreement fails to pay any sum payable by it under this Agreement on the due date for payment (the “ Defaulting Party ”), it shall pay interest on such sum for the period from and including the due date up to the date of actual payment (after as well as before judgement) in accordance with this clause.

16.2		The Defaulting Party shall pay interest at the annual rate which is the aggregate of 2% per annum and the base rate from time to time of National Westminster Bank Plc.

16.3		Interest under this clause 16 shall accrue on the basis of the actual number of days elapsed and a 365-day year and shall be paid by the Defaulting Party on demand. Unpaid interest shall compound monthly.

17.		NOTICES

17.1		Save as otherwise provided in this Agreement, any notice, demand or other communication (“ Notice ”) to be given by any party under, or in connection with, this Agreement shall be in writing and signed by or on behalf of the party giving it. Any Notice shall be served by sending it by fax to the number set out in clause 17.2, or delivering it by hand to the address set out in clause 17.2 and in each case marked for the attention of the relevant party set out in clause 17.2 (or as otherwise notified from time to time in accordance with the provisions of this clause 17). Any Notice so served by fax or hand shall be deemed to have been duly given or made as follows:

	(a)		if sent by fax, at the time of transmission; or

	(b)		in the case of delivery by hand, when delivered;

		provided that in each case where delivery by fax or by hand occurs after 6pm on a Business Day or on a day which is not a Business Day, service shall be deemed to occur at 9am on the next following Business Day.

		References to time in this clause are to local time in the country of the addressee.

17.2		The addresses and fax numbers of the parties for the purpose of clause 17.1 are as follows:


(a)	Seller
	Address:	100 Phoenix Drive
		Ann Arbor MI 48108
		USA

	Fax:	+1 734 477 1370

	For the attention of:	General Counsel

	With a copy to:
	Address:	100 New Bridge Street
		London
		EC4V 6JA

	Fax:	+44 207 9191999

	For the attention of:	Gabriel Fisher/James Reed


(b)	Purchaser
	Address:	32 Bedford Row
		London
		WC1R 4HE

	Fax:	020 7831 5099

	For the attention of:	Luke Johnson

17.3

A party may notify the other party to this Agreement of a change to its name, relevant addressee, address or fax number for the purposes of this clause 17, provided that, such notice shall only be effective on:

	(a)		the date specified in the notification as the date on which the change is to take place; or

	(b)		if no date is specified or the date specified is less than five Business Days after the date on which notice is given, the date following five Business Days after notice of any change has been given.

17.4		In proving service is shall be sufficient to prove that the envelope containing such notice was properly addressed and delivered to the address shown thereon or that the facsimile transmission was made and a facsimile confirmation report was received, as the case may be.

18.		COSTS

		Each of the parties shall be responsible for its own legal, accountancy and other costs, charges and expenses incurred in connection with the negotiation, preparation and implementation of this Agreement and any other Agreement incidental to or referred to in this Agreement.

19.		THIRD PARTY RIGHTS

		The parties do not intend that any term of this Agreement shall be enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999 by any person who is not a party to this Agreement.

20.		TIME OF THE ESSENCE

		Time shall be of the essence of this Agreement, both as regards times, dates and periods specified in the Agreement and as to any times, dates or periods that may by Agreement between the parties be substituted for any of them.

21.		CONTINUING EFFECT

		Each provision of this Agreement shall continue in full force and effect after Completion, except to the extent that a provision has been fully performed on or before Completion.

22.		ASSIGNMENT

		Neither party may assign or transfer all or any of its rights or obligations under this Agreement or dispose of any right or interest in this Agreement without the prior written consent of the other party.

23.		CURRENCY CONVERSION

		For the purpose of converting amounts specified in one currency into another currency where required, the rate of exchange to be used in converting amounts specified in one currency into another currency shall be the New York closing rate for exchanges between those currencies quoted in the Wall Street Journal for the nearest Business Day for which that rate is so quoted prior to the date of the conversion.

24.		GOVERNING LAW AND SUBMISSION TO JURISDICTION

24.1		Governing law

		The construction, validity and performance of this Agreement shall be governed by the laws of England and Wales.

24.2		Submission to jurisdiction

		The parties to this Agreement irrevocably agree that the courts of England and Wales shall have exclusive jurisdiction over any claim or matter arising under or in connection with this Agreement and that accordingly any proceedings in respect of any such claim or matter may be brought in such court. Nothing in this clause shall limit the right of the Seller to take proceedings against any other party in any other court of competent jurisdiction, nor shall the taking of proceedings in any one or more jurisdiction preclude the taking of proceedings in any other jurisdictions, whether concurrently or not, to the extent permitted by the law of such other jurisdiction.

25.		GOVERNING LANGUAGE

		The official text of the Transaction Documents and any notices given thereunder shall be in English. In the event of any dispute concerning the construction or interpretation of any Transaction Document, reference shall be made only to the relevant Transaction Document as written in English and not to any translation into any other language.

The parties have shown their acceptance of the terms of this Agreement by executing it at the end of the schedules.

SCHEDULE 1

Part 1: Details of the Company



Name	:	Borders (UK) Limited

Date of Incorporation	:	17 August 1981

Place of Incorporation	:	England & Wales

Company number	:	01580771

Registered office	:	120 Charing Cross Road, London, WC2H 0JR

Directors	:	Edward James Jackson 6358 Cherry Tree Court, Rochester Hills, MI 48306, USA

		George Lewis Jones 100 Underdown Road, Ann Arbor, MI 48105, USA

		Edward W Wilhelm 46608 Southview Lane, Plymouth, MI 48170, USA

Secretary	:	Thomas D. Carney 2033 Norway, Ann Arbor, MI 48104, USA

Authorised share capital	:	£53,711 divided into 499,600 ordinary shares of £0.10 each, 10 “A” ordinary shares of £0.10 each and 37,500 7.5% cumulative convertible redeemable preference shares of £0.10 each

Issued share capital	:	£45,411.30 divided into 454,103 ordinary shares of £0.10 each, and 10 ordinary A shares of £0.10 each

Mortgages and charges	:	Fleet Retail Group, Inc. 30/07/04 (created) 09/08/2004 (registered)

		Guarantee and floating charge over the whole of the inventory and stock in trade, all books and other debts, and monetary claims, by way of security all agreements and policies of insurance, any letters of credit.

		Fleet Retail Group, Inc. 30/07/04 (created) 09/08/2004 (registered)

		An amended and restated multicurrency


		revolving credit agreement over all deposits, credits, collateral and property now or hereinafter in the possession, custody, safekeeping or control of such agent, such issuing bank, or such lender or any lender affiliate and their successors.

		Bank of America, N.A., JP Morgan Chase Bank, Wells Fargo Retail Finance 31/07/06 (created) 18/08/2006 (registered)

		An amended and restated multicurrency revolving credit agreement. A continuing lien, security interest and right of set off as security upon all deposits, credits, collateral and property. A security interest in all goods, documents, instruments, and accounts.

Registered shareholders	:	BGI (UK) Limited 100 New Bridge Street, London, EC4V 6JA 10 ordinary A shares 454,103 ordinary shares

Accounting reference date	:	25/01

Auditors	:	Ernst & Young LLP

Tax residence	:	UK

VAT registration number	:	GB 650 0723 71

Status	:	Trading

Direct subsidiaries	:	None

Part 2: Details of the Irish Company



Name	:	Borders Books Ireland Limited

Date of Incorporation	:	4 July 2005

Place of Incorporation	:	Dublin, Ireland

Company number	:	404624

Registered office	:	70 Sir John Rogerson’s Quay, Dublin 2

Directors	:	George L Jones 100 Underwood Road, Ann Arbor, MI, 48105

	:	Robert Heron 44 Avoca Avenue, Blackrock, Co Dublin, Ireland

	:	Edward W. Wilhelm 46608 Southview Lane, Plymouth MI 48170, USA

		Edward James Jackson 6358 Cherry Tree Court, Rochester Hills, MI 48306, USA

Secretary	:	Thomas D. Carney 2033 Norway, Ann Arbor, MI 48104, USA American

Authorised share capital	:	€ 10,000,000 divided into 10,000,000 ordinary shares of € 1 each

Issued share capital	:	€ 31,000 divided into 31,000 ordinary shares of € 1 each

Mortgages and charges	:	Bank of America, N.A. 26/01/2007 (created) 13/02/2007 (registered) Charge on book debts of the Irish Company.

Registered shareholder	:	Borders International Services, Inc. 100 Phoenix Drive, Ann Arbor, MI 48108, USA 31,000 ordinary shares

Accounting reference date	:	28/01

Auditors	:	Ernst & Young

Tax residence	:	Republic of Ireland

SCHEDULE 2

Completion

Part 1: Seller’s Delivery Obligations at Completion

At Completion, the Seller shall deliver to the Purchaser:

1.		duly executed transfers of all of the (i) Shares; and (ii) Irish Shares, into the name of the Purchaser or its nominees together with the relevant share certificates (or indemnities in respect thereof in the agreed form);

2.		the leasehold deeds to the Properties referred to in parts 1 and 2 of schedule 8 (other than the leasehold deed relating to the Broadgate, Canary Wharf, Fleet Street and Finchley Road stores, copies of which will be provided) and the concessions referred to in part 3 of schedule 8 and the counterparts of the concessions referred to in part 4 of schedule 8, such delivery to be made by the title deeds being placed at the registered office/principal place of business of the Company or the Irish Company (as the case may be) or at the premises of the Company’s property solicitors (a schedule of the solicitors holding such documents having been provided to the Seller);

3.		all the statutory and other books (duly written up to, but not including, Completion) of the Company and the Irish Company and their respective certificates of incorporation and common seals in its possession, such delivery to be made by the statutory records and other books being placed at the registered office/principal place of business of the Company;

4.		duly executed releases under seal, in the agreed form, releasing the Company from the Charges together with forms 403a duly completed and sworn in respect of the same;

5.		duly executed releases under seal, in the agreed form, releasing the Irish Company from the charge dated 26 January 2007 granted to the Bank of America, N.A. together with Form C6 duly completed and sworn in respect of the same;

6.		a certificate of non-crystallization and release in the agreed form duly executed as a deed by Fleet Retail Group, Inc. in respect of the floating charge dated 30 July 2004 granted to the Bank by the Company and others;

7.		certified copies of any powers of attorney under which any of the documents referred to in this schedule is executed or evidence reasonably satisfactory to the Purchaser of the authority of any person signing on behalf of the Seller of or any member of the Borders Group;

8.		duly executed irrevocable power of attorney in the agreed form in respect of the Shares enabling the Purchaser (during the period prior to the registration of the transfer of the Shares) to exercise all voting and other rights attaching to the Shares;

9.		duly executed irrevocable power of attorney in the agreed form in respect of the Irish Shares enabling the Purchaser (during the period prior to the registration of the transfer of the Irish Shares) to exercise all voting and other rights attaching to the Irish Shares;

10.		letters of resignation in the agreed form from each of the Directors and the secretary of the Company and the Irish Company, such resignations to take effect from the close of the meetings referred to in part 2 of this schedule 2;

11.		a duly executed release under seal, in the agreed form, releasing the Company and the Irish Company from any liability whatsoever (whether actual or contingent, but excluding Intra-Group Trading Indebtedness) which may be owing to any member of the Seller’s Group by

		the Company or the Irish Company at Completion or written confirmation being furnished to the Purchaser that no Intra-Group Indebtedness exists;

12.		the Tax Deed duly executed by the Seller;

13.		the Licence duly executed by Borders Properties, Inc.;

14.		the Transitional Services Agreement duly executed by Borders International Services, Inc.;

15.		a copy of a resolution of the board of directors of the Seller (certified by a duly appointed officer as true and correct) authorising the execution of and the performance by the Seller of its obligations under this Agreement and each of the other documents to be executed by the Seller; and

16.		copies of all existing bank mandates and bank statements showing the current and deposit account balances of the Company and the Irish Company as at the close of business on the Business Day preceding Completion which show the repayment of all Leakage except Permitted Leakage.

Part 2: Seller’s Other Obligations at Completion

At Completion, the Seller shall:

1.		procure that:

4.1		the balance of the BoA Indebtedness (taking into account the payment to be made by the Purchaser on behalf of the Company pursuant to paragraph 1 of part 3 of schedule 2) is paid to Bank of America, N.A. (as administrative agent and collateral agent) by CHAPS to Bank of America, London (sort code: 16-50-50 account number: 65280027); and

4.2		the Fortis Indebtedness is paid by CHAPS to the Borders UK account at Fortis Bank (sort code: 40-52-62 account number: 1216402-84);

2.		cause the Directors to hold a meeting of the board of the Company and the Irish Company at which the relevant Directors shall pass resolutions in the agreed form to:

4.1		approve the registration of the Purchaser or its nominees as members of the Company or Irish Company (as appropriate) subject only to the production of duly stamped and completed transfers in respect of the Shares or the Irish Shares (as appropriate);

4.2		appoint such persons as the Purchaser may nominate as directors and secretary of the Company and the Irish Company (as appropriate);

4.3		revoke all authorities to the bankers of the Company and the Irish Company relating to bank accounts and to give authority to such persons as the Purchaser may nominate to operate the same;

4.4		do and perform any other business which may be necessary or desirable to give full and valid effect to the sale and purchase of the Shares and the Irish Shares,

		and the Seller shall furnish to the Purchaser on Completion duly signed minutes of the meetings.

Part 3: Purchaser’s Obligations at Completion

At Completion, the Purchaser shall:

1.		on behalf of the Company, pay the sum of £10,000,000 to Bank of America, N.A. (as administrative agent and collateral agent) by CHAPS to Bank of America, London (sort code: 16-50-50 account number: 65280027);

2.		issue to the Seller 1999 B Ordinary Shares of £0.01 each and deliver to the Seller a share certificate in respect thereof;

3.		issue to the Seller Fixed Rate Unsecured Loan Notes 2017 in the principal amount of £1,700,000 and deliver to the Seller a Loan Note in respect thereof;

4.		deliver to the Seller a counterpart of the Tax Deed duly executed by the Purchaser;

5.		deliver to the Seller a counterpart of the Licence duly executed by the Company and the Irish Company;

6.		deliver to the Seller a counterpart of the Transitional Services Agreement duly executed by the Company and the Irish Company;

7.		deliver to the Seller the Deeds of Covenant duly executed by the Company and the Irish Company;

8.		deliver to the Seller a copy of a resolution of the board of directors of the Purchaser (certified by a duly appointed officer as true and correct) authorising the execution of and the performance by the Purchaser of its obligations under this Agreement and each of the other documents to be executed by the Purchaser; and

9.		deliver to the Seller’s Solicitors certified copies of any powers of attorney under which any of the Transaction Documents are executed by the Purchaser or other evidence satisfactory to the Seller of the authority of the person signing on the Purchaser’s behalf.

SCHEDULE 3

Post-Completion Obligations

1.		Following Completion, the Purchaser undertakes to the Seller:

4.1		to procure the repayment in the ordinary and usual course of business by the relevant member(s) of the Group of all Intra-Group Trading Indebtedness owed to any member of the Seller’s Group as at Completion; and

4.2		to use all reasonable endeavours (including the provision of substitute guarantees) to obtain the release of the Seller and each member of the Seller’s Group from any Intra-Group Guarantees to which it is a party and, pending such release:

	(a)		to indemnify the Seller and the relevant member of the Seller’s Group against all amounts paid by it to any third party pursuant to any Intra-Group Guarantees in respect of any liability of any member of the Group (and all Losses incurred in connection with such liability) whether arising before or after Completion; and

	(b)		not to take any action or allow any event to occur that results in any increase in the liability of any member of the Seller’s Group under any Intra-Group Guarantee including, for the avoidance of doubt, extending the term of any of the leases to which such Intra-Group Guarantees relate.

2.		The parties acknowledge and agree that:

4.1		the Domain Names have been incorrectly registered in the name of the Company and that the Domain Names should be transferred to their beneficial owner, Borders Properties, Inc. The parties agree that they will take all actions and execute all documents (and in the case of the Purchaser, that it will procure that the Company takes all actions and executes all documents) required to transfer the Domain Names from the Company to Borders Properties, Inc as soon as reasonably practicable following Completion; and

4.2		the Other Domain Names are currently registered in the name of various third parties. The Purchaser agrees that it will use (and procure the Company uses) its best endeavours to procure the transfer of the Other Domain Names to Borders Properties, Inc as soon as reasonably practicable following Completion.

3.		The Seller agrees that it will use its best endeavours to procure the transfer of the domain name booksetcltd.co.uk from Borders Properties, Inc. to the Company as soon as reasonably practicable following Completion

4.		If at any time the Landlord of any Guaranteed Property shall call upon Borders Group to make good in respect of a Lease Guarantee, and the Purchaser fails to indemnify the Seller and the relevant member of the Seller’s Group pursuant to paragraph 1.2 of this schedule, then upon written notice given by Borders Group to the Purchaser, the Purchaser shall:

4.1		procure that the Company or the Irish Company as appropriate shall assign the lease of the relevant Guaranteed Property as directed by Borders Group;

4.2		use its best endeavours to obtain all necessary consents for such assignment(s);

4.3		be responsible for all its own costs and those of Borders Group and the relevant Landlord in respect of the assignment and the granting of consent Provided That if the Purchaser does not promptly pay such costs or procure any necessary undertaking in respect thereof then Borders

Group may elect to pay such costs and/or provide such undertaking and such sums shall be owed as a debt by the Purchaser to Borders Group.

SCHEDULE 4

Warranties

1.		THE SHARES

4.1		The Seller is the legal and beneficial owner of the Shares and is entitled to sell the Shares and to procure the sale of the Irish Shares with full title guarantee on the terms of this Agreement without the consent of any third party.

1.1		The Shares comprise the whole of the issued and allotted share capital of the Company and all of the Shares are fully paid or credited as fully paid.

1.2		The Irish Shares comprise the whole of the issued and allotted share capital of the Irish Company and all of the Irish Shares are fully paid or credited as fully paid.

4.2		There is no Encumbrance on, over or affecting any of the Shares or Irish Shares or any unissued shares, debentures or other securities of the Company or the Irish Company and no person has the right (whether exercisable now or in the future and whether contingent or not) to call for the issue, allotment, conversion, redemption, sale or transfer of any shares, debentures or other securities of the Company or the Irish Company.

2.		CAPACITY OF SELLER

4.1		The Seller has obtained all corporate authorisations required to empower it to enter into this Agreement and the Tax Deed and to perform its obligations thereunder in accordance with their terms.

4.2		The relevant members of the Seller’s Group have obtained all corporate authorisation required to empower it to enter into the Transaction Documents to which they are a party and to perform their respective obligations thereunder in accordance with their terms.

4.3		Neither the entry into the Transaction Documents nor the implementation of the transactions contemplated by the Transaction Documents by the relevant members of the Seller’s Group will:

	(a)		violate or conflict with the provisions of their constitutional documents;

	(b)		to the knowledge of the Seller, amount to a violation or breach of any applicable laws or regulations in any relevant jurisdiction;

	(c)		to the knowledge of the Seller, amount to a violation or default with respect to any relevant order, decree or judgment of any court or any governmental or regulatory authority in any jurisdiction to which the relevant member of the Seller’s Group is a party or by which the relevant member of the Seller’s Group is bound; or

	(d)		to the knowledge of the Seller, result in a breach of, or constitute a default under, any instrument to which the relevant member of the Seller’s Group is a party or by which the relevant member of the Seller’s Group is bound.

4.4		The Transaction Documents constitute (or will on execution constitute) valid and legally binding obligations of the relevant members of the Seller’s Group.

4.5		The Seller is not engaged in any material litigation or arbitration or similar proceedings related to the transactions contemplated by the Transaction Documents and to the knowledge of the Seller, no such litigation, arbitration or proceeding is threatened against the Seller or any member of the Seller’s Group.

3.		THE COMPANY

4.1		The Company is duly incorporated and validly existing under the laws of England and Wales and has full corporate power and authority to carry on its business as it is now being conducted and to own the assets it now owns.

4.2		Except as required by this Agreement, there are no agreements or arrangements in force which provide for the present or future allotment, issue, transfer, redemption or repayment of, or grant to any person of the right (whether conditional or otherwise) to require the allotment, issue, transfer, redemption or repayment of, any shares in the Company (including any option or right of pre-emption or conversion).

4.		THE IRISH COMPANY

4.1		The Irish Company is duly incorporated and validly existing under the laws of Ireland and has full corporate power and authority to carry on its business as it is now being conducted and to own the assets it now owns.

4.2		Except as required by this Agreement, to the knowledge of the Seller, there are no agreements or arrangements in force which provide for the present or future allotment, issue, transfer, redemption or repayment of, or grant to any person of the right (whether conditional or otherwise) to require the allotment, issue, transfer, redemption or repayment of, any shares in the Irish Company (including any option or right of pre-emption or conversion).

5.		SCHEDULES

		The particulars relating to the Company and the Irish Company set out in schedule 1 are in all material respects true and accurate.

6.		THE ACCOUNTS

4.1		General

	(a)		The Accounts have been prepared in accordance with CA85 and audited by a certified auditor at the time they were audited.

	(b)		The Accounts give a true and fair view of the state of affairs of the relevant member of the Group and of the assets and liabilities as at, and the profit and losses of the relevant member of the Group for the period ended on the Accounting Date, and of the results of the relevant member of the Group for the Financial Year ended on the Accounting Date.

4.2		Management Accounts

		The Management Accounts have been prepared by the Company from the Company’s accounting records with due care and attention using the same accounting policies as were adopted for the management accounts for the Financial Year ended on 3 February 2007.

4.3		Irish Trial Balance

		The Irish Trial Balance has been prepared by the Company from the Irish Company’s accounting records with due care and attention using the same policies as were adopted for the management accounts of the Company for the Financial Year ended on 3 February 2007.

7.		BUSINESS SINCE THE ACCOUNTING DATE

		Since the Accounting Date:

	(a)		the businesses of the Company and the Irish Company have been carried on in the ordinary and usual course;

	(b)		no material adverse change in the financial position of the Company or the Irish Company has occurred other than any such material adverse change arising from changes in the economy generally or in the industry in which the Company and the Irish Company operate;

	(c)		the Company and the Irish Company have not declared, paid or made for the Financial Year ended on the Accounting Date, a dividend or other distribution except to the extent provided in the relevant Accounts; and

	(d)		the Company and the Irish Company have not undergone any capital reorganisation or change in their respective capital structures and the Company and the Irish Company have not repaid or redeemed share or loan capital, or made (whether or not subject to conditions) an Agreement or arrangement or undertaken an obligation to do any of those things.

4.2		The Data Room contains details of all current year disposals of fixed assets (other than disposals in the ordinary course of business) by the Company having in aggregate a value exceeding £1,000,000.

4.3		The Data Room contains details of all current year disposals of fixed assets (other than disposals in the ordinary course of business) by the Irish Company having in aggregate a value exceeding € 100,000.

8.		CONTRACTUAL MATTERS

4.1		Neither the Company nor the Irish Company is a party to any guarantee or agreement for indemnity or for suretyship in respect of a

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VAT registration number

IE 6424624H

Status

Direct subsidiaries

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