AGREEMENT

Transition Agreement

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BORDERS GROUP INC | Baker & McKenzie LLP | Borders (UK) Limited | Borders Books Ireland Limited | BORDERS INTERNATIONAL SERVICES, INC

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

AGREEMENT, Parties: borders group inc , baker & mckenzie llp , borders (uk) limited , borders books ireland limited , borders international services inc

Exhibit 10.42

DATED 2007

BORDERS INTERNATIONAL SERVICES, INC.

and

BORDERS (UK) LIMIITED

and

BORDERS BOOKS IRELAND LIMITED

AGREEMENT
for the provision of transitional services
in connection with the sale of the entire
issued share capital of Borders (UK) Limited
and Borders Books Ireland Limited

Baker & McKenzie LLP

London
Ref: GF/RAK/FHT

CONTENTS


Clause	Page

1. Interpretation		1
2. Provision and duration of Transitional Services		4
3. Co-operation and Management		5
4. Dispute Resolution		5
5. Fees and Other Costs		5
6. Invoicing and Late Payments		6
7. Other Obligations		6
8. Limitation of Liability		6
9. Confidentiality		7
10. Assignment and Sub-contracting		8
11. Force Majeure		8
12. Term & Termination		8
13. Notices		9
14. Variation, Waiver and Consent		10
15. Rights and remedies cumulative		10
16. Entire Agreement		11
17. Third Party Rights		11
18. Severability		11
19. Currency Conversion		11
20. Counterparts		11
21. No Partnership		11
22. Liability		12
23. Governing Law and Jurisdiction		12

SCHEDULE 1
TERM SHEETS		13
A — Financial Reporting		13
B — Statutory Accounts Reporting		15
C — Property Accounting		16
D — Accounts Payable (A/P)		17
E — Bank Reconciliation		19
F — Treasury		20
G — Lease Accounting		21
H — Merchandise Reporting		22
I — Margin Accounting and Reporting		24
J — Inventory Accounting and Control		25
K — Tax		26
L — IT		27
M — Merchandising		30
N — Merchandise Operations		31
O — Transportation		33
P— Communications		34
Q — Store Operations		35
R — Management		36

DATE:

PARTIES:

(1)

BORDERS INTERNATIONAL SERVICES, INC. , a corporation incorporated in the State of Michigan, USA and having its principal place of business at 100 Phoenix Drive, Ann Arbor, MI 48108 USA (the “ Provider ”); and

(2)

BORDERS (UK) LIMITED , a company incorporated under the laws of England and Wales with registered number 01580771, and having its registered office at 120 Charing Cross Road, London, WC2H 0JR;

(3)

BORDERS BOOKS IRELAND LIMITED , a company incorporated in the Republic of Ireland with registered number 404624, and having its registered office at 70 Sir John Rogerson’s Quay, Dublin 2, together parties (2) and (3) each being (the “ Recipient ”).

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 the Sale and Purchase Agreement.

(B)

In connection with the Sale and Purchase of the Shares and the Irish Shares, the Recipient desires the provision of certain Transitional Services and the Provider is prepared to provide certain Transitional Services to the Recipient for a limited period on the terms set out in this Agreement.

IT IS AGREED as follows:

INTERPRETATION

1.1

Defined terms

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


“ Agreement ”		this agreement and the recitals and schedules to it;

“ Brand Licence Agreement ”		the agreement entered into by Borders Properties, Inc., and the Recipient effecting the grant of a licence to the Recipient to use certain intellectual property rights of Borders Properties, Inc.;

“ Breach of Duty ”		the breach of any (i) obligation arising from the express or implied terms of a contract to take reasonable care or exercise reasonable skill in the performance of the contract; or (ii) common law duty to take reasonable care or exercise reasonable skill (but not any stricter duty);

“ Business ”		has the same meaning as in the Sale and Purchase Agreement;

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

“ Commencement Date ”		has the same meaning as Completion Date in the Sale and


		Purchase Agreement;

“ Completion ”		has the same meaning as in the Sale and Purchase Agreement;

“ Customer Data ”		means the information contained on the customer database containing details of the customers of the Recipient currently hosted by Cheetahmail;

“ Deferred Consideration ”		means the amount of additional consideration payable (if any) for the Shares and the Irish Shares pursuant to schedule 10 of the Share Purchase Agreement;

“ Intra Group Guarantees ”		means:

		(a) the guarantee provided by Borders Group, Inc in relation to the lease between (1) Dempsey Assets Limited and (2) Borders (UK) Limited relating to the property at 98 Buchanan Street, Royal Exchange Square, Glasgow, Scotland, G1 3HA;

		(b) the guarantee provided by Borders Group, Inc in relation to the lease between (1) Standard Life Investment Fund Limited and (2) Borders (UK) Limited relating to the property at 94-96 Briggate, Leeds, West Yorkshire, LS1 6NP;

		(c) the guarantee provided by Borders Group, Inc in relation to the lease between (1) Superdrug PLC and (2) Borders (UK) Limited relating to the property at 203-207 Oxford Street, London, W1D 2LE;

		(d) the guarantee required to be provided by Borders Group, Inc in respect of 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;

“ Irish Company ”		Borders Books Ireland Limited, a private company limited by shares and incorporated in the Republic of Ireland;

“ Irish Shares ”		the issued share capital of the Irish Company;

“ Liability ”		liability in or for breach of contract, Breach of Duty, misrepresentation, restitution or any other cause of action whatsoever relating to or arising under or in connection with this Agreement, including without limitation liability expressly provided for under this Agreement or arising by reason of the invalidity or unenforceability of any term of this Agreement (and for the purposes of this definition, all references to “this Agreement” shall be deemed to include any collateral contract);


“ Purchaser ”		means Pimco 2672 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;

“ Sale and Purchase Agreement ”		the agreement entered into between the Seller and the Purchaser effecting the sale of the Shares and the Irish Shares;

“ Seller ”		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;

“ Service Managers ”		the respective parties’ representatives responsible for managing a particular Transitional Service and identified as such by the relevant party;

“ Shares ”		the issued share capital of the Recipient;

“ Tax Deed ”		means the deed relating to Tax in the agreed form between BGI (UK) Limited and the Purchaser of even date;

“ Term Sheet ”		a particular section of schedule 1 (Term Sheets), identified as such, which describes particular term(s) relating to a particular Transitional Service(s);

“ Termination Date ”		the date specified as the end date for a particular Transitional Service in the relevant Term Sheet in schedule 1 (Term Sheets) or, where no date is so specified, the date specified in clause 12.1 below;

“ Transitional Period ”		the period of time during which a Transitional Service is provided as set out in the relevant Term Sheet or, where no period of time is specified, the term of this Agreement; and

“ Transitional Service(s) ”		each of those services described in schedule 1 (Term Sheets).

1.2

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.

1.3		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.

1.4		Headings

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

2.		PROVISION AND DURATION OF TRANSITIONAL SERVICES

2.1		The Provider shall supply or procure the supply of, and the Recipient shall pay for, the Transitional Services.

2.2		Each Transitional Service shall be provided during the relevant Transitional Period.

2.3		If during the term of this Agreement, the Recipient requires additional services from the Provider (other than the Transitional Services described in schedule 1), the Recipient and the Provider shall meet and discuss the Recipient’s requirements for such services. If the Provider agrees to provide such additional services and the Recipient and Provider agree on the cost of such additional services, the Recipient and the Provider shall amend this Agreement to incorporate an additional Term Sheet in schedule 1 that sets out all relevant details of the additional services. The terms of this Agreement shall apply to the provision and receipt of such additional services.

2.4		In addition to the Transitional Services, the Provider, in its absolute discretion and on such terms at it may determine, may from time to time share knowledge relating to the Business (including retailing best practices, ways to exploit new channels to market (e.g. print on demand) and experience with loyalty schemes) with the Recipient.

2.5		Nothing in this Agreement shall prevent the Provider from providing services of a similar nature to the Transitional Services to any other person.

3.		CO-OPERATION AND MANAGEMENT

		The parties’ Service Managers shall be responsible for the parties’ respective roles and obligations, and the co-ordination of all matters, relating to the Transitional Services. All communications, documentation and materials relating to a particular Transitional Service and sent by the parties shall be sent to both parties’ Service Manager for that Transitional Service.

4.		DISPUTE RESOLUTION

4.1		In the event of any dispute, disagreement or difference of opinion arising out of this Agreement, its performance or its construction the Service Managers of the Provider and the Recipient shall use all reasonable efforts to negotiate an amicable resolution in good faith within twenty (20) Business Days of either party notifying the other of such a dispute, disagreement or difference of opinion.

4.2		If the Service Managers of the Provider and the Recipient have not met and reached a resolution or otherwise reached a resolution amicably in accordance with clause 4.1 above, then the Chief Executives of the Provider and the Recipient shall meet in order to endeavour to resolve the dispute. If, within twenty (20) Business Days of such meeting, the parties have failed to reach a settlement, the parties shall be free to seek resolution of the dispute by the courts of England and Wales in accordance with clause 23.2 of the Sale and Purchase Agreement.

5.		FEES AND OTHER COSTS

5.1		Subject to clause 5.4, in consideration for the provision of the Transitional Services, the Recipient shall pay to the Provider:

	(a)		the fees and other charges, if any, set out in schedule 1 (Term Sheets); and

	(b)		any additional third-party costs incurred by the Provider in connection with the provision of the Transitional Services by the Provider to the Recipient.

5.2

Unless otherwise stated, all sums referred to in this Agreement are exclusive of value added tax which shall be charged, if applicable, at the appropriate prevailing rate and shall be paid by the Recipient to the Provider.

5.3

In the event that a Transitional Service is terminated other than on the date in a month which, for the purposes of invoicing the Transitional Service, is deemed to be the start of the month (the “ Invoice Date ”), the fee for the last month of the Transitional Service shall be calculated and invoiced by the Provider on a pro-rata basis by reference to the number of days elapsed between the Invoice Date and the date on which the Transitional Service terminated.

5.4

The Recipient shall have a right of set-off in relation to the amounts to be paid by it under this agreement on the terms set out in clause 8.2 of the Sale and Purchase Agreement.

6.		INVOICING AND LATE PAYMENTS

6.1		The Provider will be entitled to invoice the Recipient on or after the Commencement Date for the fees payable under clause 5.1 (Fees and Other Costs). Invoices will be issued by the Provider on a monthly basis in advance for the Transitional Services that will be provided to the Recipient in the month following the date of the invoice. The Recipient will pay all invoices within twenty (20) Business Days of receipt.

6.2		All payments made under this Agreement shall be so made without set-off, deduction or withholding save as required by law.

6.3		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 clauses 6.4 and 6.5.

6.4		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.

6.5		Interest under this clause 6 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.

7.		OTHER OBLIGATIONS

7.1		Each party undertakes to the other that it will not alter, corrupt or damage in any way nor extract or add to in any unauthorised manner any data belonging to another and held on any computer or other system used for the purposes of supplying or receiving the Transitional Services.

7.2		The Provider will provide the Transitional Services with reasonable skill and care.

7.3		The Recipient shall only use the Transitional Services in relation to the Business ₉ including where a store or any other retail channel undergoes a change in name from “Borders” to “Books Etc”, or vice versa.

7.4		The Recipient shall be responsible for project managing the orderly transfer of responsibility for the Transitional Services at the end of the Transitional Period.

8.		LIMITATION OF LIABILITY

8.1		This clause 8 prevails over all other clauses and schedules in this Agreement and sets forth the entire liability of the parties, and their sole and exclusive remedies in respect of:

	(a)		the performance, non-performance, purported performance or delay in performance of this Agreement; or

	(b)		otherwise in relation to this Agreement or the entering into or performance of this Agreement.

8.2

Nothing in this Agreement shall exclude or limit either party’s Liability (i) for the tort of deceit; (ii) for death or personal injury caused by its Breach of Duty; (iii) for any breach of the obligations implied by s.12 Sale of Goods Act 1979 or s.2 Supply of Goods and Services Act 1982; or (iv) for any other Liability which cannot be excluded or limited by applicable law.

8.3		Save as provided in clause 8.2 above, neither party shall have Liability to the other for (i) loss of revenue; (ii) loss of actual or anticipated profits; (iii) loss of contracts; (iv) loss of the use of money; (v) loss of business; (vi) loss of opportunity; (vii) loss of goodwill; (viii) loss of reputation; or (ix) any indirect or consequential loss, and such Liability is excluded whether it is foreseeable, known, foreseen or otherwise.

8.4		Subject to clause 8.2 above, the total aggregate Liability of either party in connection with the provision of, failure to provide, or delay in providing, a Transitional Service including, for the avoidance of doubt, where the liability arises as a result of the provision, failure to provide, or delay in providing a Transitional Service by a sub-contractor of the Provider (as described in clause 8.5) shall not exceed the aggregate amounts payable in respect of the relevant Transitional Service. The limitation of Liability under this clause 8.4 has effect in relation both to any Liability expressly provided for under this Agreement and to any Liability arising by reason of the invalidity or unenforceability of any term of this Agreement. This clause 8.4 shall not apply to the Recipient’s liability to pay the charges pursuant to clause 5.1 (Fees and Other Costs).

8.5		The parties acknowledge that certain Transitional Services will be provided by sub-contractors of the Provider under existing contracts between the Provider and such sub-contractors.

8.6		Notwithstanding clause 14.1 below, in the event that the Recipient fails to notify the Provider of a breach of this Agreement within five (5) Business Days of becoming aware of the same, the Recipient shall be deemed to have waived such losses arising from the breach which arose prior to the date on which the Provider was notified.

9.		CONFIDENTIALITY

9.1		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

		(together “ Confidential Information ”),

		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.

9.2		Upon termination or expiry of this Agreement (for whatever reason), each party shall return all Confidential Information of the other party within its possession, custody or control.

10.		ASSIGNMENT AND SUB-CONTRACTING

10.1		Subject to clause 10.2 (below), the rights, benefits and obligations of the parties under this Agreement shall not be assigned, transferred or otherwise disposed of in whole or in part without the prior written consent of the other party, such consent not to be unreasonably withheld or delayed.

10.2		The Provider may sub-contract to a third party to supply the Transitional Services provided that, subject to clauses 8.3 and 8.4 above, the Provider remains responsible to the Recipient for its obligations under this Agreement.

11.		FORCE MAJEURE

		The party affected shall be excused performance of its obligations under or pursuant to this Agreement if, and to the extent that, performance of such obligations is delayed, hindered or prevented by acts, events, non-happenings, omissions or accidents (including, without limitation, acts of God, war, hostilities, riot, fire, explosion, accident, flood, sabotage, lack of adequate fuel, power, raw materials, containers, transportation or labour, strike, lock-out or injunction (provided that neither party shall be required to settle a labour dispute against its own best judgement), changes to gover

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