Document:

exv10w42

 

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

1

 

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	 

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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:

	1.	 	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

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	 	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);

2

 

	 	 	 
	“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

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	 	 	 	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.

4

 

	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.

5

 

	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
Business9 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.

6

 

	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

7

 

	 	(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 governmental laws, regulations or
orders) which affect the performance of this Agreement and which in each case are beyond the
reasonable control of the party affected.
	 
	12.	 	TERM & TERMINATION
	 
	12.1	 	This Agreement shall commence on the Commencement Date and, subject to clauses 12.2, and 12.6
below, shall remain in full force and effect until twelve (12) months from Completion or, if
earlier, the date on which all Transitional Services have been terminated. The Recipient
shall be entitled to terminate each Transitional Service on the notice period, if any, set out
in the relevant Term Sheet, and upon such termination the fees relating to that Transitional
Service shall cease, and an appropriate adjustment to the amount payable shall be credited to
the Recipient.
	 
	12.2	 	Either party may terminate this Agreement forthwith by written notice to the other in the
event that the other party: becomes insolvent; has a liquidator, administrator, administrative
receiver or receiver appointed in respect of the whole or any part of its assets; has an order
or resolution made or passed for winding-up; enters into a composition generally with its
creditors; takes any equivalent action, or any equivalent action occurs in any other
jurisdiction; or shall cease to carry on business.
	 
	12.3	 	The Provider may terminate this Agreement immediately at any time by written notice to the
Recipient if:

	 	(a)	 	either of the parties constituting the Recipient commits a material breach of
this Agreement (including any breach of its payment obligations under this Agreement)
which is not remediable, or if remediable, it has failed to remedy within thirty (30)
days of receiving written notice requiring it to do so;
	 
	 	(b)	 	the Purchaser fails to pay any of the Deferred Consideration properly due under
the the Share Purchase Agreement within thirty (30) days of the due date for payment;
or

8

 

	 	(c)	 	any of the Intra Group Guarantees are enforced against any member of the
Seller’s Group.

	12.4	 	The right to terminate this Agreement contained in this clause 12 and the exercise of it
shall not prejudice any other right or remedy of either party in respect of any breaches of
this Agreement.

	12.5	 	Termination or expiry of this Agreement (for whatever reason) shall be without prejudice to
the respective rights and liabilities of each of the parties accrued prior to such termination
or expiry.

	12.6	 	All rights and obligations of the parties shall cease to have effect immediately upon
termination or expiry of this Agreement save that:

	 	(a)	 	clauses which are expressed to survive its termination or expiry, or which,
from their nature or context, it is contemplated that they are to survive termination
or expiry; and
	 
	 	(b)	 	any provision of this Agreement necessary for its interpretation or
enforcement, shall continue in force following termination or expiry of this Agreement (for whatever
reason).

	12.7	 	Where this Agreement is terminated in accordance with clause 12.1 the Provider will arrange
for all Customer Data to be transferred to the Recipient on the date of termination. The
Recipient agrees that it will take such steps as are necessary to ensure that the transfer to
and processing by the Recipient of the Customer Data, will comply with applicable data
protection law.

	13.	 	NOTICES

	13.1	 	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
13.2, or delivering it by hand to the address set out in clause 13.2 and in each case marked
for the attention of the relevant party set out in clause 13.2 (or as otherwise notified from
time to time in accordance with the provisions of this clause 13). 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.
	 
	13.2	 	The addresses and fax numbers of the parties for the purpose of clause 13.1 are as follows:

	 	(a)	 	Provider

	 	 	 	 	 
	 

	 	Address:
	 	100 Phoenix Drive

Ann Arbor

MI 48108, USA

9

 

	 	 	 	 	 
	 

	 	Fax:
	 	+1 734 477 1370
	 
	 	 	 	 
	 

	 	For the attention of:
	 	General Counsel

	 	(b)	 	Recipient

	 	 	 	 	 
	 

	 	Address:
	 	120 Charing Cross Road

London

WC2H 0JR
	 
	 	 	 	 
	 

	 	Fax:
	 	020 7831 5099
	 
	 	 	 	 
	 

	 	For the attention of:
	 	Mark Farrer-Brown/Bobby Hashemi

	13.3	 	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 13, 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.

	13.4	 	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.

	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.	 	RIGHTS AND REMEDIES CUMULATIVE

	15.1	 	No failure or delay by either party in exercising any right or remedy provided by law or
under or pursuant to this Agreement shall impair such right or remedy or operate or be
construed as a waiver or variation of it or preclude its exercise at any subsequent time. No
single or partial exercise of any right or remedy by either party shall preclude any other or
further exercise of such right or remedy or the exercise of any other right or remedy.

	15.2	 	The rights, powers and remedies provided by this Agreement are cumulative and are in addition
to any rights, powers and remedies provided by law.

10

 

	16.	 	ENTIRE AGREEMENT
	 
	16.1	 	This Agreement constitutes the entire agreement between the parties relating to the
subject-matter covered and supersedes any previous agreements, arrangements, undertakings or
proposals, written or oral, between the parties in relation to such matters.
	 
	16.2	 	No statement, representation, warranty, undertaking or promise will be taken to have been
given or implied from anything said or written in negotiations or otherwise between the
parties prior to the date of this Agreement except as expressly stated in this Agreement.
	 
	16.3	 	Save for fraudulent misrepresentations, the parties confirm that in entering into this
Agreement, they do not rely on and will have no remedy in relation to, any statement,
representation, warranty, undertaking or promise (whether negligently or innocently made) of
any person other than as expressly set out in this Agreement.
	 
	17.	 	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.
	 
	18.	 	SEVERABILITY
	 
	 	 	If any provision of this Agreement is held by a court of competent jurisdiction to be
illegal, invalid or unenforceable in any respect under the law of any jurisdiction, then
such provision shall (so far as it is invalid or unenforceable) be given no effect and shall
be deemed not to be included in this Agreement but without invalidating any of the remaining
provisions of this Agreement. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not held invalid
or unenforceable. The parties shall then use all reasonable endeavours to replace the
invalid or unenforceable provision(s) by a valid and enforceable substitute provision the
effect of which is as close as possible to the intended effect of the invalid or
unenforceable provision.
	 
	19.	 	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 balance sheet 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. Income statement amounts will be
converted by using the daily average New York closing rates for exchanges between those
currencies quoted in the Wall Street Journal for the period in which the relevant expense
or income applies.
	 
	20.	 	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.
	 
	21.	 	NO PARTNERSHIP
	 
	 	 	The parties are each independent contractors and nothing contained in this Agreement shall
create or be construed as creating any partnership, joint venture or similar relationship
between them and/or any other person nor authorising any such party to make any statements

11

 

	 	 	or enter into any agreement on behalf of any other party, except as expressly set out in
this Agreement.
	 
	22.	 	LIABILITY
	 
	 	 	The obligations of each of the parties constituting the Recipient the under this agreement
are joint and several. If any liability of one but not both of the parties constituting the
Recipient is, or becomes, illegal, invalid or unenforceable in any respect, that shall not
affect or impair the liabilities of the other party constituting the Recipient under this
agreement.
	 
	23.	 	GOVERNING LAW AND JURISDICTION
	 
	23.1	 	The construction, validity and performance of this Agreement shall be governed by the laws of
England and Wales.
	 
	23.2	 	Subject to clause 4 (Dispute Resolution) above, 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. Governing language

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

12

 

SCHEDULE 1

TERM SHEETS

A — Financial Reporting

	 	 	 
	A.1. Description

	 	Procuring financial reporting for Borders stores — see
below for more detailed description
	 
	 	 
	A.2. Location

	 	Borders US
	 
	 	 
	A.3. Service Manager

	 	Anthony Grant
	 
	 	 
	A.4. Fees/Charges

	 	$140,000/year
	 
	 	 
	A.5. Exceptions

	 	N/A
	 
	 	 
	A.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice

Department: International Finance

Department description: Financial Reporting

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Daily Flash Sales

	 	Reporting
	 	D
	 	Net sales daily reporting by store
	 
	 	 	 	 	 	 
	Maintain FX Rates in 

Lawson/EAP

	 	Task
	 	D
	 	Enter FX rates into Lawson
	 
	 	 	 	 	 	 
	Email Collection

	 	Reporting
	 	D	 	 
	 
	 	 	 	 	 	 
	Paperchase Sales

	 	Reporting
	 	W	 	 
	 
	 	 	 	 	 	 
	Fun Learning Sales

	 	Task
	 	W
	 	Download fun learning sales by category
	 
	 	 	 	 	 	 
	Weekly Transactions

	 	Task
	 	W
	 	Download weekly transactions by store

for UK & IRE
	 
	 	 	 	 	 	 
	Category Sales

	 	Reporting
	 	W
	 	Net sales by category
	 
	 	 	 	 	 	 
	Transaction/Units Summary

	 	Reporting
	 	W
	 	Includes transaction and units counts;
Gross Margin, Discounts, Net Margin
per Trans and Unit
	 
	 	 	 	 	 	 
	Clearance (Red Dot) Results

	 	Reporting
	 	W
	 	During the Clearance (Red Dot) Sales

Timing
	 
	 	 	 	 	 	 
	Series Code (Promotional)
Discounts

	 	Reporting
	 	W
	 	Sales and units sold by series code
	 
	 	 	 	 	 	 
	Coupon Discounts

	 	Reporting
	 	W	 	 

13

 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Gift Card Sales

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Corporate Sales

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	AP165 Reprint

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	ACME Returns

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Periodical Sales/Margin

	 	Reporting
	 	M
	 	by UPC
	 
	 	 	 	 	 	 
	Missed Returns
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Month End Journal Entries

	 	Task
	 	M
	 	Datacomm, legal expenses,

Interest, taxes, error suspense,

shrink, markdowns, etc
	 
	 	 	 	 	 	 
	VAT Reporting

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Forecasting

	 	Task
	 	M/Q
	 	Each markets send P&L submissions
to be loaded into EAP system
	 
	 	 	 	 	 	 
	Over/Short Report

	 	Task
	 	M
	 	Send over/short amounts to LP team
in UK
	 
	 	 	 	 	 	 
	Provide Final P&L Statements

	 	Reporting
	 	M
	 	Send over final P&L statements
after all journal entries are
booked
	 
	 	 	 	 	 	 
	Store Contribution Reporting

	 	Reporting
	 	M
	 	Store level P&L’s for Month and YTD
	 
	 	 	 	 	 	 
	Account Reconciliations

	 	Task
	 	M
	 	Various accounts, are completed in
the US
	 
	 	 	 	 	 	 
	Magazine Subscriptions

	 	Reporting
	 	W	 	 
	 
	 	 	 	 	 	 
	Corporate Customer Sales 

Reporting

	 	Reporting
	 	W	 	 
	 
	 	 	 	 	 	 
	Weekly Discount 

Reconciliation Reporting

	 	Reporting
	 	W	 	 
	 
	 	 	 	 	 	 
	DVD and Music Promotional
Campaign reporting

	 	Reporting
	 	W	 	 
	 
	 	 	 	 	 	 
	Accounts Payable Lag 

Reporting

	 	Reporting
	 	M	 	 

14

 

B — Statutory Accounts Reporting

	 	 	 
	B.1. Description

	 	Procuring statutory reporting for Borders and Books etc
- see below for more detailed description
	 
	 	 
	B.2. Location

	 	Borders US
	 
	 	 
	B.3. Service Manager

	 	Anthony Grant
	 
	 	 
	B.4. Fees/Charges

	 	$17,500/year
	 
	 	 
	B.5. Exceptions

	 	N/A
	 
	 	 
	B.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice

Department: International Finance

Department description: Statutory Accounts Reporting

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Provide Lawson TB’s for all UK
companies and Ireland

	 	Task
	 	Annual	 	 
	 
	 	 	 	 	 	 
	Provide letter of support,
letter of representation and
intercompany confirmations

	 	Task
	 	Annual	 	 
	 
	 	 	 	 	 	 
	Coordinate EY requests from work 

performed by IFD

	 	Task	 	 	 	 
	 
	 	 	 	 	 	 
	Provide supporting documents for 

accounts managed by IFD

	 	Task	 	 	 	 

15

 

C — Property Accounting

	 	 	 
	C.1. Description

	 	Responsible for Asset Management for Borders stores- see

below for more detailed description
	 
	 	 
	C.2. Location

	 	Borders US
	 
	 	 
	C.3. Service Manager

	 	Anthony Grant
	 
	 	 
	C.4. Fees/Charges

	 	$35,000/year
	 
	 	 
	C.5. Exceptions

	 	N/A
	 
	 	 
	C.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice

Department: Property Accounting

Department description: Responsible for Asset Management system, including Capital spending, depreciation and asset write-offs

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Yearly budgeting of
cap-ex and
depreciation expense

	 	Task
	 	Y
	 	Cap-ex submissions from local
office, all planning at H.O.
	 
	 	 	 	 	 	 
	Monthly forecast 

updates

	 	Task
	 	M
	 	Monthly reforecast
depreciation expense and
cap-ex, submit into EAP
	 
	 	 	 	 	 	 
	Capital Spending 

administration

	 	Task
	 	Ongoing
	 	Responsible for creation and
approval, as well as
subsequent tracking of CERs
	 
	 	 	 	 	 	 
	Tracking of Capital
Projects

	 	Task
	 	Ongoing	 	 
	 
	 	 	 	 	 	 
	Fixed asset accounting

	 	Task
	 	M
	 	Record all depreciation and
asset-related activity
	 
	 	 	 	 	 	 
	Monthly Fixed Asset 

Reporting

	 	Reporting
	 	M
	 	Monthly variance to forecast
explanations, Asset Registers
	 
	 	 	 	 	 	 
	Cap-ex reporting

	 	Reporting
	 	M
	 	1) Approved vs. Invoiced
	 
	 	 	 	 	 	 
	Cap-ex reporting

	 	Reporting
	 	M
	 	2) Project activity reporting
	 
	 	 	 	 	 	 
	Cap-ex reporting

	 	Reporting
	 	M
	 	3) New Store Cap-Ex
	 
	 	 	 	 	 	 
	GL Account Recs

	 	Task
	 	M
	 	All fixed asset accounts

16

 

D — Accounts Payable (A/P)

	 	 	 
	D.1. Description

	 	Accounts Payable and Accounts Receivable for Borders
stores— see below for more detailed description
	 
	 	 
	D.2. Location

	 	Borders US
	 
	 	 
	D.3. Service Manager

	 	Anthony Grant
	 
	 	 
	D.4. Fees/Charges

	 	$245,000/year
	 
	 	 
	D.5. Exceptions

	 	N/A
	 
	 	 
	Department:

	 	Accounts Payable
	 
	 	 
	Department 

description:

	 	Accounts Payable and Accounts Receivable

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	EDI and Paper drop
ship merchandise
invoice processing

	 	Task
	 	Ongoing	 	 
	 
	 	 	 	 	 	 
	Expense invoice 

processing

	 	Task
	 	Ongoing
	 	10% done by IFD
	 
	 	 	 	 	 	 
	Warehouse receipt 

merchandise invoice 

matching

	 	Task
	 	Ongoing	 	 
	 
	 	 	 	 	 	 
	Vendor service 

representatives

	 	Task
	 	Ongoing
	 	Primary contact is IFD
	 
	 	 	 	 	 	 
	Vendor account 

reconciliations

	 	Task
	 	Ongoing	 	 
	 
	 	 	 	 	 	 
	Vendor set-up

	 	Task
	 	Ongoing
	 	Includes completion of
vendor credit applications
	 
	 	 	 	 	 	 
	Debit balance recovery

	 	Task
	 	Ongoing
	 	Substantial leveraging of
UK resources
	 
	 	 	 	 	 	 
	AP Audit functions

	 	Task
	 	Ongoing
	 	Includes but not limited to
duplicate payment recovery
and 3rd party audit
recoveries
	 
	 	 	 	 	 	 
	Trade check runs

	 	Task
	 	M/W
	 	Check runs are run and
signed off by IFD
	 
	 	 	 	 	 	 
	Expense check runs

	 	Task
	 	M/W
	 	UK controlled
	 
	 	 	 	 	 	 
	Wire transfers

	 	Task
	 	Ongoing	 	 
	 
	 	 	 	 	 	 
	Year-end audit

	 	Task
	 	Y
	 	Support for auditor requests

17

 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	General Ledger 

Balance Sheet Account 

Reconciliations

	 	Task
	 	M
	 	All payables accounting
	 
	 	 	 	 	 	 
	Reserves Analysis

	 	Reporting
	 	M
	 	All payables accounting
	 
	 	 	 	 	 	 
	Aged Accrual Analysis

	 	Reporting
	 	M
	 	All payables accounting
	 
	 	 	 	 	 	 
	Average Days to Pay

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Non Top Vendor 

Activity

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Status of
Reconciliations for
Top Vendors

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Accounts Payable 

Ratio Reporting

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Vendor Debit Balance 

Reporting

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	Claims on Invoices 

Trend Reporting

	 	Reporting
	 	M	 	 
	 
	 	 	 	 	 	 
	AP165 — drop ship
merchandise invoices
reporting to stores

	 	Reporting
	 	M	 	 

18

 

E — Bank Reconciliation

	 	 	 
	E.1. Description

	 	Bank Reconciliations for Borders stores— see below for

more detailed description
	 
	 	 
	E.2. Location

	 	Borders US
	 
	 	 
	E.3. Service Manager

	 	Anthony Grant
	 
	 	 
	E.4. Fees/Charges

	 	$21,000/year
	 
	 	 
	E.5. Exceptions

	 	N/A
	 
	 	 
	E.6 Termination Notice
	 	Not less than 3 and not more than 6 months written notice
	 
	 	 
	Department:

	 	Bank Reconciliation
	 
	 	 
	Department 

description:

	 	Responsible for Reconciliation of all bank/disbursement accounts

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	General Ledger 

Balance Sheet 

Account 

Reconciliations

	 	Task
	 	M
	 	All Cash and Disbursement Accounts

19

 

F — Treasury

	 	 	 
	F.1. Description

	 	Treasury — see below for more detailed description— see
below for more detailed description
	 
	 	 
	F.2. Location

	 	Borders US
	 
	 	 
	F.3. Service Manager

	 	Anthony Grant
	 
	 	 
	F.4. Fees/Charges

	 	$35,000/year
	 
	 	 
	F.5. Exceptions

	 	N/A
	 
	 	 
	F.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice
	 
	Department:
Treasury

	 	 
	 
	Department 

description:
	 	 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Cash Management

	 	Task
	 	Ongoing
	 	Includes
forecasting,
funding,
 borrowing,
overdraft facility

maintenance
	 
	 	 	 	 	 	 
	Month-end close for 

bank/cash accounts

	 	Accounting
	 	Monthly
	 	ID all cash
activity (cash,
wires, checks etc)
and tie to specific
General Ledger
code. Monthly
upload to Lawson
General Ledger of
all activity.
	 
	 	 	 	 	 	 
	Foreign currency 

transactions for year 

end hedging

	 	Task
	 	Yearly	 	 
	 
	 	 	 	 	 	 
	Credit card management

	 	Accounting, Task,

Reporting
	 	Ongoing
	 	Setting up and
managing
relationship with
credit card
companies, monthly
entry of credit
card fees, planning
for credit card
fees, reporting on
credit card fees.
	 
	 	 	 	 	 	 
	Bank relationships

	 	Task
	 	Ongoing
	 	Set-up and
management of bank
relationships,
monthly entry of
bank fees, planning
for bank fees.
	 
	 	 	 	 	 	 
	Interest

	 	Accounting
	 	Ongoing
	 	Monthly entry of
interest, monthly
reconciliations,
forecasting and
planning
	 
	 	 	 	 	 	 
	Wire Transfer Activity

	 	Task
	 	Ongoing
	 	Activation of
approved wire
transfers.

20

 

G — Lease Accounting

	 	 	 
	G.1. Description

	 	Lease Accounting for Borders and Books etc — see below
for more detailed description
	 
	 	 
	G.2. Location

	 	Borders US
	 
	 	 
	G.3. Service Manager

	 	Anthony Grant
	 
	 	 
	G.4. Fees/Charges

	 	$8,750/year
	 
	 	 
	G.5. Exceptions

	 	N/A
	 
	 	 
	G.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice
	 
	 	 
	Department:

	 	Lease Accounting
	 
	 	 
	Department 

description:
	 	 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Straight Line Rent 

Accounting

	 	Accounting
	 	On-going
	 	Includes: initial
calculation,
maintenance,
journal entries,
monthly
forecasting, yearly
planning, and
General Ledger
reconciliations of
Straight Line
Balance Sheet
accounts

21

 

H — Merchandise Reporting

	 	 	 
	H.1. Description

	 	Merchandise Reporting for Borders stores —  see
below for more detailed description
	 
	 	 
	H.2. Location

	 	Borders US
	 
	 	 
	H.3. Service Manager

	 	Anthony Grant
	 
	 	 
	H.4. Fees/Charges

	 	$70,000/year
	 
	 	 
	H.5. Exceptions

	 	N/A
	 
	 	 
	Department:

	 	International Finance
	 
	 	 
	Department 

description:

	 	Reporting on Merchandise
 Category
Performance

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Weekly Subject Range 

Report

	 	Reporting
	 	W
	 	Weekly sales, store inventory,
purchase, pending order, on
order, store returns, and
vendor return by subject
breaks
	 
	 	 	 	 	 	 
	Open to Buy

	 	Reporting
	 	W
	 	Units on Order (DC and Drop
ship) by PO types — Actual vs.
Target by buyers
	 
	 	 	 	 	 	 
	Not Yet Published

	 	Reporting
	 	W
	 	Order of Not Yet Publish
Titles by Product line by
month
	 
	 	 	 	 	 	 
	In Stock

	 	Reporting
	 	W
	 	Weekly Top Title sales by
subject break 100 and In Stock
percentage
	 
	 	 	 	 	 	 
	Top Titles

	 	Reporting
	 	W
	 	Weekly Top 10 sales by product
lines comparison TY vs. LY
	 
	 	 	 	 	 	 
	Bargain Scorecard

	 	Reporting
	 	W
	 	Bargain Sales, Shipments,
Inventory by Store
	 
	 	 	 	 	 	 
	Calendar Scorecard

	 	Reporting
	 	W
	 	While Calendars are in Stock
(Oct-Jan)
	 
	 	 	 	 	 	 
	Weekly Kids Sales

	 	Reporting
	 	W
	 	Kids Subject Code Sales by
Store
	 
	 	 	 	 	 	 
	US Binc Sales for UK

	 	Reporting
	 	M
	 	Unit sales by store for US Binc
	 
	 	 	 	 	 	 
	Vendor Scorecard

	 	Reporting
	 	M
	 	Sales, Purchase, Return,
Refused Return, and inventory
by vendor level
	 
	 	 	 	 	 	 
	Inventory Aging by 

Category

	 	Reporting
	 	M
	 	Aging Inventory bucket by
category by store

22

 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Bargain Report

	 	Reporting
	 	W
	 	Bargain Sales, Rolling 5 weeks
Sales, Inventory by store
	 
	 	 	 	 	 	 
	Stock Aging

	 	Reporting
	 	M
	 	Aging of Returnable and Non
Returnable Stock by
Category/Product line
	 
	 	 	 	 	 	 
	Stock Reserves

	 	Accounting
	 	M
	 	Reserve Calculations and
Accounting Entries for Aged
Non Returnable Stock
	 
	 	 	 	 	 	 
	Deadwood Returns

	 	Reporting
	 	M — as needed
	 	Manual Process
	 
	 	 	 	 	 	 
	RPLs

	 	Reporting
	 	M — as needed
	 	System Process
	 
	 	 	 	 	 	 
	Buyer Action Plan

	 	Reporting
	 	M
	 	Sales, Margin, Inventory, Week
of Supply, Stockturn, Purchase
and Vendor Claims by Buyers
	 
	 	 	 	 	 	 
	Location Range Report

	 	Reporting
	 	M
	 	Sales, Inventory, and On Order
by Location by Store
	 
	 	 	 	 	 	 
	Out of Stock

	 	Reporting
	 	M
	 	Out of Stock reporting by
store by country

23

 

I — Margin Accounting and Reporting

	 	 	 
	I.1. Description

	 	Margin Accounting and Reporting for Borders stores -
see below for more detailed description
	 
	 	 
	I.2. Location

	 	Borders US
	 
	 	 
	I.3. Service Manager

	 	Anthony Grant
	 
	 	 
	I.4. Fees/Charges

	 	$70,000/year
	 
	 	 
	I.5. Exceptions

	 	N/A
	 
	 	 
	Department:

	 	International Finance
	 
	 	 
	Department 

description:

	 	Margin Accounting and Reporting

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Preliminary Period 

Margin Statements

	 	Reporting
	 	W
	 	Actual Sales vs.
Forecast vs. Plan
Analysis
	 
	 	 	 	 	 	 
	Final Period Margin 

Statements

	 	Reporting
	 	M
	 	Final reporting of
sales, cost, and
margin and
comparison to
forecast
	 
	 	 	 	 	 	 
	Period Cost of Sales

	 	Accounting
	 	M
	 	Calculate cost of
sales for
accounting posting
	 
	 	 	 	 	 	 
	Period Sales 

Adjustments

	 	Accounting
	 	M
	 	Sales Audit posting
	 
	 	 	 	 	 	 
	Vendor Code Sales Mix

	 	Reporting
	 	M
	 	Sales mix by
vendors for the
last 6 months with
their average
margin rate
	 
	 	 	 	 	 	 
	Period Margin by 

Vendor Code

	 	Reporting
	 	M
	 	Avg 6 months period
margin sales mix by
vendors
	 
	 	 	 	 	 	 
	Country Mix -
Purchases and Sales

	 	Reporting
	 	M
	 	Sales and Shipment
Mix by country by
product line
	 
	 	 	 	 	 	 
	New Store Discount 

Summary

	 	Reporting
	 	NYO only	 	 
	 
	 	 	 	 	 	 
	Periodicals

	 	Reporting
	 	M
	 	Mill & Boon, US
Periodical, Local
Periodical, and
Subscription Sales
reporting by stores

24

 

J — Inventory Accounting and Control

	 	 	 
	J.1. Description

	 	Inventory Accounting and Control for Borders stores -
see below for more detailed description
	 
	 	 
	J.2. Location

	 	Borders US
	 
	 	 
	J.3. Service Manager

	 	Anthony Grant
	 
	 	 
	J.4. Fees/Charges

	 	$70,000/year
	 
	 	 
	J.5. Exceptions

	 	N/A
	 
	 	 
	Department:

	 	Inventory Control
	 
	 	 
	Department 

description:

	 	Inventory reconciliation of on hand systems to financial systems and inventory
reporting

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Inventory at Retail

	 	Reporting
	 	W
	 	Classified by Total Stores, FTC, RC
	 
	 	 	 	 	 	 
	Warehouse Inventory 

Summary

	 	Reporting
	 	W
	 	Warehouse system weekly processing
flow with perpetual inventory
balances.
	 
	 	 	 	 	 	 
	Warehouse Overstock
Aging and Fill
Rates

	 	Reporting
	 	W
	 	Warehouse system inventory aging
with weekly shipping fill rates.
	 
	 	 	 	 	 	 
	Return Center
Summary and Claim
Aging

	 	Reporting
	 	W
	 	Return Center system weekly
inventory flow, on hand balances,
with aged vendor returns claims.
	 
	 	 	 	 	 	 
	Warehouse Receipts
and Shipments

	 	Reporting
	 	W
	 	Warehouse system weekly summary
processing. Details are provided
upon request.
	 
	 	 	 	 	 	 
	Warehouse 

Reconciliations

	 	Accounting
	 	Q
	 	Reconcile to General Ledger
	 
	 	 	 	 	 	 
	Physical Inventory

	 	Accounting
	 	Per StockTake

Schedule
	 	Includes pre-work, stock takes,
post work, reconciliations, and
results reporting by store and
category
	 
	 	 	 	 	 	 
	Shrink Liabilities

	 	Accounting
	 	M
	 	Monthly Accruals, Record Results
	 
	 	 	 	 	 	 
	Inventory Entries

	 	Accounting
	 	M	 	 

25

 

K — Tax

	 	 	 
	K.1. Description

	 	Tax Reporting and Filing for Borders and Books etc — -
see below for more detailed description
	 
	 	 
	K.2. Location

	 	Borders US
	 
	 	 
	K.3. Service Manager

	 	Anthony Grant
	 
	 	 
	K.4. Fees/Charges

	 	$52,500/year
	 
	 	 
	K.5. Exceptions

	 	N/A
	 
	 	 
	K.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice

 

			
	*	 	Tax is fully dependent on transaction data support from the UK team.

	 	 	 
	Department:

	 	Tax
	 
	 	 
	Department
	 	 
	description:

	 	Tax Returns

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Provide all
information
necessary for the
submission of tax
returns

	 	 	 	Annual	 	 
	 
	 	 	 	 	 	 
	Provide VAT reporting

	 	Report
	 	Periodic	 	 
	 
	 	 	 	 	 	 
	Support Statutory 

Account Tax 

Calculations

	 	Accounting
	 	Annual	 	 
	 
	 	 	 	 	 	 
	Provide tax 

depreciation 

reporting

	 	Report
	 	Annual	 	 

26

 

L — IT

	 	 	 
	L.1. Description

	 	Information Technology Support for Borders stores —
see below for more detailed description
	 
	 	 
	L.2. Location

	 	Borders US
	 
	 	 
	L.3. Service Manager

	 	Anthony Grant
	 
	 	 
	L.4. Fees/Charges

	 	$1,750,000 — Less Borders Shared Costs of Migration
= $1,088,000/year
	 
	 	 
	L.5. Exceptions

	 	N/A
	 
	 	 
	Department:

	 	IT
	 
	 	 
	Department description:

	 	Support for all Borders proprietary systems, as well as
other Borders integrated systems for merchandising,
distribution, stores, and financials.

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Transitional Support

	 	 	 	 	 	Tasks provided
during the term of
the TSA
	 
	 	 	 	 	 	 
	Provide BGIA (central
stock, supplier and
purchase order
management) system
functionality and
support

	 	Task
	 	On-going
	 	Provides data on
on-hand inventory
as well as
inventory transfer
data
	 
	 	 	 	 	 	 
	Provide BGIB
(distribution
management, inventory
control and subsidiary
financial) system
functionality and
support

	 	Task
	 	On-going
	 	Performs AP invoice
matching as well.
	 
	 	 	 	 	 	 
	Provide CMA (core
back-list titles as
well as EPOS daily data
poll) system
functionality and
support

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	Provide IMA (in-store
inventory management -
goods receipt and
returns) system
functionality and
support

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	Provide IT outage alerts

	 	Task
	 	As needed	 	 

27

 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Provide Lawson (general
ledger, asset
management, accounts
payable) system
functionality and
support

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	Provide Data Warehouse
(business intelligence,
the central location
for most business data)
functionality and
support

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	Provide DW Portal (web
application to access
sales, transactions,
and discounting from
POS) system
functionality and
support

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	Provide store detail
file transfers (daily
FTP of key financial
metrics) functionality
and support

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	Provide Outlooksoft/EAP
systems functionality
and support

	 	Task
	 	On-going
	 	Maintain the query tool
for Lawson G/L
	 
	 	 	 	 	 	 
	3rd level helpdesk 

support

	 	Task
	 	As needed
	 	For all IT issues that
cannot be resolved via
the UK IT group.
	 
	 	 	 	 	 	 
	Data back-ups and
storage

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 

	 	 	 
	TOTAL TRANSITIONAL
	 	 
	SUPPORT
	 	$385,000.00

	 	 	 	 	 	 	 
	Data Migration/IT
Transition to UK
Ownership

	 	 	 	 	 	Project management and
task work to migrate
data and hardware to UK
ownership
	 
	 	 	 	 	 	 
	Project 

coordination/management

	 	Task
	 	On-going
	 	IT point of contact for
coordination of
transition to new owner
to work with UK team
	 
	 	 	 	 	 	 
	Develop process for
transition of SCM
(product in the
pipeline) to UK
ownership

	 	Task
	 	On-going
	 	Co-manage the plan to
transition the SCM with
a system implementation
to ensure limited
disruption to the flow
of products
	 
	 	 	 	 	 	 

28

 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Provide final inventory
data to UK
ownership

	 	Task
	 	One time	 	 
	 
	 	 	 	 	 	 
	Provide final title
file assortment
data to new ownership

	 	Task
	 	One time	 	 
	 
	 	 	 	 	 	 
	Provide one-time historical 

sales/inventory data in 

the required
format

	 	Task
	 	One time	 	 
	 
	 	 	 	 	 	 
	Update Outlooksoft 

dimensions

	 	Task
	 	One time	 	 
	 
	 	 	 	 	 	 

	 	 	 
	TOTAL MIGRATION AND
TRANSITION COSTS
	 	$702,875.00
	 
	 	 
	TOTAL IT COSTS
	 	$1,087,875.00

29

 

M — Merchandising

	 	 	 
	M.1. Description

	 	Book and Non-Book Buying for Borders stores —  see
below for more detailed description
	 
	 	 
	M.2. Location

	 	Borders US
	 
	 	 
	M.3. Service Manager

	 	Anthony Grant
	 
	 	 
	M.4. Fees/Charges

	 	$105,000/year
	 
	 	 
	M.5. Exceptions

	 	N/A
	 
	 	 
	M.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice
	 
	Department:

	 	Merchandising
	 
	Department description:

	 	Book and Non-Book Buying

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Bargain buying, 

allocation &

replenishment

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	Weekly “big-buy”
conference calls
for information
sharing purposes
for Bargain,
Calendars,
Multi-media, Trade

	 	Task & Reporting
	 	W
	 	Other information
sharing activities
to be negotiated.
	 
	 	 	 	 	 	 
	Merch Ops — Vendor
Management — Weekly
reporting

	 	Reporting
	 	W
	 	By store listing of
total OH, OO, NYP
title and unit
counts, retail
value

30

 

N — Merchandise Operations

	 	 	 
	N.1. Description

	 	Product Data and Analysis Support for Borders stores
 — see below for more detailed description
	 
	 	 
	N.2. Location

	 	Borders US
	 
	 	 
	N.3. Service Manager

	 	Anthony Grant
	 
	 	 
	N.4. Fees/Charges

	 	$70,000/year
	 
	 	 
	N.5. Exceptions

	 	N/A
	 
	Department:

	 	 Merchandising Operations

	 	 	 
	Department 

description:

	 	Title file, vendor management, Point Of Sale promotions, 
store planning, merchandise planning

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	New store
planning/store space
and layout planning

	 	 	 	Ongoing	 	 
	 
	 	 	 	 	 	 
	Title File Department:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Complete listing of
all US titles on
BGIA

	 	Reporting
	 	Weekly	 	 
	 
	 	 	 	 	 	 
	Complete listing of
all non-US titles on
BGIA

	 	Reporting
	 	Weekly	 	 
	 
	 	 	 	 	 	 
	Sales and OH info
for all BINCs

	 	Reporting
	 	Weekly	 	 
	 
	 	 	 	 	 	 
	Bowker data — master
title file by
country

	 	Reporting
	 	Monthly	 	 
	 
	 	 	 	 	 	 
	Title File Updates

	 	Task
	 	Weekly
	 	Weekly set of
macros that cleanse
title file data to
conform to BGI
standards
	 
	 	 	 	 	 	 
	Title File Updates

	 	Task
	 	Ongoing
	 	Manual maintenance
based on vendor or
in-country requests
	 
	 	 	 	 	 	 
	Title File Updates

	 	Task
	 	Ongoing
	 	Semi-manual process
for mass updates,
required by
in-country
	 
	 	 	 	 	 	 
	Titles changing to OP

	 	Reporting
	 	Monthly
	 	Reporting on titles
changing to out of
print status
	 
	 	 	 	 	 	 
	Paperchase 

maintenance

	 	 	 	 	 	Performed by the
Paperchase(US)
department

31

 

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Marketing: POS 

Promotions
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Promotional set-up

— CMA

	 	Task
	 	Ongoing
	 	Set-up all non BGIA promotions in CMA to
be sent down to store POS system
	 
	 	 	 	 	 	 
	Promotional set-up

— BGIA

	 	Task
	 	Ongoing
	 	This department provides support for any
changes that need to be made to these
promotions
	 
	 	 	 	 	 	 
	Bar-code creation

	 	Task
	 	Ongoing
	 	Create all barcodes needed for promotions
	 
	 	 	 	 	 	 
	Training and
Consultation for
promotion creation

	 	Task
	 	Ongoing	 	 
	 
	 	 	 	 	 	 
	Merch Planning:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Reporting:

	 	 	 	Weekly
	 	Top 200 items(sales), all stores, by

country by product line
	 
	 	 	 	 	 	 
	 

	 	 	 	Weekly
	 	Top items(sales), by country, by product

line, by binc, by store
	 
	 	 	 	 	 	 
	 

	 	 	 	Weekly
	 	Same as above, excluding items with

series codes (on promotions) UK only
	 
	 	 	 	 	 	 
	 

	 	 	 	Weekly
	 	Same as above, but with one report for

high street stores, one for retail parks

UK only
	 
	 	 	 	 	 	 
	 

	 	 	 	Weekly
	 	Sales, On Hands, TY/LY, Turn, Discounts,
for Paperchase and Gifts/Stationary
category

32

 

O — Transportation

	 	 	 
	O.1. Description

	 	Logistics/Shipping for Borders stores —  see below
for more detailed description
	 
	 	 
	O.2. Location

	 	Borders US
	 
	 	 
	O.3. Service Manager

	 	Anthony Grant
	 
	 	 
	O.4. Fees/Charges

	 	$21,000/year
	 
	 	 
	O.5. Exceptions

	 	N/A
	 
	Department:

	 	Transportation
	 
	Department description:

	 	Shipping and logistics

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Ship and ensure any
Borders US bought
bargain category is
shipped to UK docks
at Purchasers
expense

	 	Task
	 	On-going
	 	Once shipments
clear customs,
Purchaser will be
responsible.
	 
	 	 	 	 	 	 
	Freight and
Distribution Center
Reporting

	 	Reporting
	 	On-going
	 	Weekly, monthly
reporting including
Costs Per Unit,
Output (units) Per
Hour, Distribution
Financials, and
Freight Operating
Review Meetings
	 
	 	 	 	 	 	 
	Freight and DC
Planning

	 	Task
	 	Yearly
	 	Planning at the
detail Output Per
Hour/ Costs Per
Unit Distribution
and Freight
Financials

33

 

P — Communications

	 	 	 
	P.1. Description

	 	Store/field communications for Borders and Books etc —
see below for more detailed description
	 
	 	 
	P.2. Location

	 	Borders US
	 
	 	 
	P.3. Service Manager

	 	Anthony Grant
	 
	 	 
	P.4. Fees/Charges

	 	$11,375/year
	 
	 	 
	P.5. Exceptions

	 	N/A
	 
	 	 
	P.6 Termination Notice

	 	Not less than 3 and not more than 6 months written notice
	 
	Department: 

	 	Communications
	 
	Department description:

	 	Store and store manager communications

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Store
communications -
e-mail box,
news/marketing
bulletins
(promotions) and
e-info updates.

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	E-mail
communications for
Books Etc.

	 	Task
	 	Daily	 	 
	 
	 	 	 	 	 	 
	Store manager
specific 

communications

	 	Task
	 	Bi-weekly	 	 
	 
	 	 	 	 	 	 
	URL set-up on proxy 

server (link 

created on e-info)

	 	Task
	 	As needed	 	 

34

 

Q — Store Operations

	 	 	 
	Q.1. Description

	 	Store Operational Support for Borders stores — see
below for more detailed description
	 
	 	 
	Q.2. Location

	 	Borders US
	 
	 	 
	Q.3. Service Manager

	 	Anthony Grant
	 
	 	 
	Q.4. Fees/Charges

	 	$35,000/year
	 
	 	 
	Q.5. Exceptions

	 	N/A
	 
	Department: 

	 	Store Operations

Department

description:

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Provide store
operational support
from US.

	 	Task
	 	On-going	 	 
	 
	 	 	 	 	 	 
	New store set-up in 

legacy systems

	 	Task
	 	On-going	 	 

35

 

R — Management

	 	 	 
	R.1. Description

	 	Management of Support Services- see below for more
detailed description
	 
	 	 
	R.2. Location

	 	Borders US
	 
	 	 
	R.3. Service Manager

	 	Anthony Grant
	 
	 	 
	R.4. Fees/Charges

	 	$105,000/year
	 
	 	 
	R.5. Exceptions

	 	N/A
	 
	Departments: 

	 	Finance, Tax, Merchandising
	 
	Department description:

	 	Management Oversight of Support Services

	 	 	 	 	 	 	 
	Item	 	Classification	 	Re/(O)ccurrence	 	Item comments
	Direction and
leadership for
support services
employees

	 	Task
	 	Daily	 	 
	 
	 	 	 	 	 	 
	Review of support
services employee
work

	 	Task
	 	Daily	 	 

36

 

	 	 	 
	SIGNED by

duly authorised for and on behalf

of BORDERS INTERNATIONAL

SERVICES, INC.

	 	)

)

)    /s/ Edward W. Wilhelm                       

)
	 
	 	 
	SIGNED by

duly authorised for and on behalf

of BORDERS (UK) LIMITED

	 	)

)    /s/ Luke Johnson                       

)
	 
	 	 
	SIGNED by

duly authorised for and on behalf of

BORDERS BOOKS IRELAND LIMITED

	 	)

)    /s/ Luke Johnson                       

)

37exv10w43

 

Exhibit 10.43

DATED                 2007

(1) BOOKSHOP ACQUISITIONS LIMITED

(2) LUKE JOHNSON

(3) BGI (UK) LIMITED

 

SUBSCRIPTION AND

SHAREHOLDERS’ AGREEMENT

 

 

CONTENTS

	 	 	 	 	 	 	 
	Clause	 	 	 	Page	 
	 
	1
	 	INTERPRETATION	 	 	1	 
	2
	 	COMPLETION	 	 	4	 
	3
	 	PROVISION OF INFORMATION AND APPOINTMENT OF OBSERVER	 	 	5	 
	4
	 	MATTERS REQUIRING CONSENT	 	 	5	 
	5
	 	NEW SHAREHOLDERS	 	 	5	 
	6
	 	ANNOUNCEMENTS	 	 	6	 
	7
	 	COSTS, FEES AND EXPENSES	 	 	6	 
	8
	 	SUPREMACY OF THIS AGREEMENT	 	 	6	 
	9
	 	ENTIRE AGREEMENT AND NON-RELIANCE	 	 	7	 
	10
	 	GENERAL	 	 	7	 
	11
	 	NOTICES	 	 	8	 
	12
	 	GOVERNING LAW AND JURISDICTION	 	 	8	 
	SCHEDULE 1 - DETAILS OF THE COMPANY AT THE DATE OF THIS AGREEMENT	 	 	9	 
	SCHEDULE 2 - DEED OF ADHERENCE	 	 	10	 
	SCHEDULE 3 - INFORMATION RELATING TO THE GROUP	 	 	14	 
	SCHEDULE 4 - MATTERS REQUIRING CONSENT	 	 	15	 
	SCHEDULE 5 - DETAILS OF THE COMPANY IMMEDIATELY AFTER COMPLETION	 	 	16	 
	 
	Agreed Form Documents	 	 	 	 
	 
	Loan Note Instrument	 	 	 	 

i

 

THIS AGREEMENT is made on            2007

BETWEEN

	(1)	 	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 “Company”);
	 
	(2)	 	LUKE JOHNSON, of 32 Clarendon Gardens, London, W9 1AZ; and
	 
	(3)	 	BGI (UK) LIMITED, a company incorporated in England and Wales (registered number 3434022),
whose registered office is at 100 New Bridge Street, London EC4V 6JA (“Borders”).

INTRODUCTION

	(A)	 	The Company intends to acquire the entire issued share capital of the Target and Borders
Books Ireland Limited;
	 
	(B)	 	The Company is constituted immediately prior to the date of this Agreement as set out in
Schedule 1 and intended to be constituted immediately after Completion as set out in Schedule
5; and
	 
	(C)	 	This Agreement sets out the terms on which Luke Johnson and Borders are willing to invest in
the Company.

THE PARTIES AGREE as follows:-

	1.	 	INTERPRETATION

	1.1	 	In this Agreement:-

	 	 	 
	“Act ”

	 	means the Companies Act 1985
	 
	 	 
	“A Ordinary Shareholder”

	 	means a person entered in the register of members of the
Company as the holder from time to time of an A Ordinary Share
	 
	 	 
	“A Ordinary Shares”

	 	means the A ordinary shares of 1p each in the capital of the
Company, having the rights and being subject to the
restrictions set out in the Articles of Association
	 
	 	 
	“Articles of Association”

	 	means the new articles of association of the Company in the
agreed form to be adopted prior to Completion pursuant to the
Resolutions and, once adopted, those articles of association
as amended from time to time, and references in this Agreement
to an “Article” shall be construed accordingly
	 
	 	 
	“Board”

	 	means the board of directors of the Company from time to time;
	 
	 	 
	“B Ordinary Shareholder”

	 	means a person entered in the register of members of the
Company as the holder from time to time of a B Ordinary Share
	 
	 	 
	“B Ordinary Shares”

	 	means the B ordinary shares of 1p each in the capital of the
Company, having the rights and being subject to the
restrictions set out in the Articles of Association
	 
	 	 
	“Business Day”

	 	means a day other than a Saturday, Sunday or public holiday in
England and Wales
	 
	 	 
	“Completion”

	 	means the fulfilment by the parties to this Agreement of their
obligations under, and completion of this Agreement in
accordance

1

 

	 	 	 
	 

	 	with, Clause 2.1
	 
	 	 
	“Confidential Information”

	 	means all information:-
	 
	 	 
	 

	 	(a)     which is marked as, treated as or is by its nature
confidential and which is used in or otherwise relates to the
business, customers, suppliers, financial, technical or other
affairs of any member of the Group including, without
limitation, information relating to:-

	 
	 	 
	 

	 	(i)      the marketing of goods or services including, without
limitation, customer names and lists and other details of
customers, sales targets, sales statistics, market share
statistics, discount rates, prices, market research reports
and surveys and advertising or other promotional materials;
and

	 
	 	 
	 

	 	(ii)     future projects, business development or planning,
commercial relationships and negotiations; or

	 
	 	 
	 

	 	(b)      which has been supplied to any member of the Group in
confidence; or

	 
	 	 
	 

	 	(c)     in relation to which any member of the Group is bound by
an obligation of confidence to a third party;

	 
	 	 
	“connected person”

	 	has the meaning given to that expression in section 839 Income
and Corporation Taxes Act 1988 and “person connected” shall be
construed accordingly (except that the parties to this
Agreement shall not be deemed to be connected persons solely
because they are parties to the Agreement)
	 
	 	 
	“Dispose”

	 	means, in relation to any share or any legal or beneficial
interest in any share, to:-
	 
	 	 
	 

	 	(a)     sell, assign, transfer or otherwise dispose of it;

	 
	 	 
	 

	 	(b)     create or permit to subsist any Encumbrance over it;

	 
	 	 
	 

	 	(c)     assign any right to it or direct (by way of renunciation
or otherwise) that another person should receive it;

	 
	 	 
	 

	 	(d)     enter into any agreement in respect of the votes or any
other rights attached to the share; or

	 
	 	 
	 

	 	(e)     agree, whether or not subject to any condition precedent
or subsequent, to do any of the foregoing,

	 
	 
	 	 
	 

	 	
and “Disposed” and “Disposal” shall be construed accordingly.
	 
	 	 
	“Dispute”

	 	has the meaning set out in Clause 12.2
	 
	 	 
	“Encumbrance”

	 	means a mortgage, charge, pledge, lien, option, restriction,
right of first refusal, right of pre-emption, third party
right or interest, other encumbrance or security interest of
any kind, or another type of agreement or arrangement having
similar effect
	 
	 	 
	“FSMA”

	 	means the Financial Services and Markets Act 2000 as amended
or 

2

 

	 	 	 
	 

	 	
its successor legislation
	 
	 	 
	“Group”

	 	means the Company and its subsidiary undertakings from time to
time and “member of the Group” or “Group Company” shall be
construed accordingly
	 
	 	 
	“Investors”

	 	means Luke Johnson, together with any person who acquires A
Ordinary Shares after the date of this Agreement in accordance
with this Agreement and the Articles of Association and who
signs a deed of adherence as an Investor
	 
	 	 
	“Investor Affiliate”

	 	has the meaning set out in the Articles of Association
	 
	 	 
	“Investors’ Solicitors”

	 	means Pinsent Masons of CityPoint, One Ropemaker Street,
London, EC2Y 9AH
	 
	 	 
	“Loan Notes”

	 	means the £11,700,000 unsecured loan notes to be issued by the
Company and to be constituted by the Loan Note Instrument
	 
	 	 
	“Loan Note Instrument”

	 	means the instrument in the agreed form to be executed by the
Company constituting the Loan Notes
	 
	 	 
	“LSE”

	 	means the London Stock Exchange plc
	 
	 	 
	“Majority Investors”

	 	means the holders of at least 51 per cent. of the A Ordinary
Shares from time to time in issue
	 
	 	 
	“New Shareholder”

	 	has the meaning set out in Clause 5.1
	 
	 	 
	“Notice”

	 	has the meaning set out in Clause 11.1
	 
	 	 
	“Observer”

	 	means any person designated to attend meetings of the Board or
any committee of the Board pursuant to Clause 3.2
	 
	 	 
	“Recognised Investment
Exchange”

	 	has the meaning given to it in section 285 FSMA
	 
	 	 
	“Resolutions”

	 	means the written resolutions of the Company in the agreed form
	 
	 	 
	“Share Purchase Agreement”

	 	means the agreement of even date between Borders and the
Company for the sale and purchase of the entire issued share
capital of the Target and Borders Books Ireland Limited
	 
	 	 
	“Target”

	 	means Borders (UK) Limited, a company incorporated in England
and Wales (registered no. 1580771), whose registered office is
at 120 Charing Cross Road, London WC2H 0JR
	 
	 	 
	“Target Group”

	 	means the Target and its subsidiary undertakings at the date
of this Agreement and “member of the Target Group” shall be
construed accordingly

	1.2	 	In this Agreement, a reference to:-

	 	1.2.1	 	a “subsidiary undertaking” or a “group undertaking” is to be construed in
accordance with sections 258 and 259 respectively of the Act and a reference to a
“subsidiary” or “holding company” is to be construed in accordance with section 736 of
the Act;

3

 

	 	1.2.2	 	a document in the “agreed form” is a reference to a document in a form
approved and for the purposes of identification initialled by or on behalf of the
Company, the Investors and Borders;
	 
	 	1.2.3	 	a statutory provision includes a reference to:-

	 	(a)	 	the statutory provision as modified or re-enacted or both
from time to time before the date of this Agreement; and
	 
	 	(b)	 	any subordinate legislation made under the statutory
provision (as so modified or re-enacted) before the date of this Agreement;

	 	1.2.4	 	a “person” includes a reference to any individual, firm, company,
corporation or other body corporate, government, state or agency of a state or any
joint venture, association or partnership, works council or employee representative
body (whether or not having a separate legal personality);
	 
	 	1.2.5	 	a “party” is a reference to a party to this Agreement (either by virtue of
having executed this Agreement or having entered into a deed of adherence to it) and
includes a reference to that party’s legal personal representatives, successors and
permitted assigns, and “parties to this Agreement” shall be construed accordingly;
	 
	 	1.2.6	 	a Clause, paragraph or Schedule, unless the context otherwise requires, is a
reference to a Clause or a paragraph of, or a Schedule to, this Agreement; and
	 
	 	1.2.7	 	(unless the context otherwise requires) the singular shall include the
plural and vice versa.

	1.3	 	Words and expressions defined in the Articles of Association have the same meanings when used
in this Agreement, unless otherwise defined in this Agreement and a reference in this
Agreement to a numbered Article shall be to the corresponding Article in the Articles of
Association.
	 
	1.4	 	The headings in this Agreement do not affect its interpretation.

	2.	 	COMPLETION
	 
	2.1	 	Completion will take place at the offices of Borders’ Solicitors immediately after the
Agreement has been executed. At Completion all of the following shall take place (to the
extent that it has not taken place prior to Completion):-

	 	2.1.1	 	Luke Johnson shall procure that a meeting of the Board is held to approve,
and authorise (or ratify) the execution by the Company of this Agreement, the Share
Purchase Agreement, and the Loan Note Instrument and all matters or documents
contemplated or required by such agreements;
	 
	 	2.1.2	 	Luke Johnson shall procure that the Resolutions are passed;
	 
	 	2.1.3	 	Luke Johnson (having agreed to be a member and having consented to the entry
of his name in the register of members and/or register of noteholders, as appropriate)
shall subscribe in cash for 7,9001 A Ordinary Shares at an aggregate
subscription price of £8,000, and shall subscribe £9,992,000 for £9,992,000 principle
amount of Loan Notes;
	 
	 	2.1.4	 	the Company shall:-

	 	(a)	 	allot and issue to:

 

			
	1	 	The one subscriber share of £1 held by Luke
Johnson was subdivided into 100 Ordinary Shares of 1p each.

4

 

	 	(i)	 	Luke Johnson the A Ordinary Shares and
Loan Notes subscribed by him in accordance with Clause 2.1.3;
	 
	 	(ii)	 	Borders, the B Ordinary Shares and Loan
Notes to be issued to it pursuant to the Share Purchase Agreement;

	 	(b)	 	enter the name of Luke Johnson and Borders in the register
of members of the Company as the registered holder of such shares and in the
register of noteholders of the Company as the registered holder of such Loan
Notes; and
	 
	 	(c)	 	issue and deliver to Luke Johnson and Borders share
certificates and loan note certificates duly executed by the Company.

	2.2	 	Luke Johnson waives any rights of pre-emption and other restrictions on the issue of shares
conferred on him or it which may exist by virtue of the Articles of Association or otherwise
and which may affect or otherwise prevent any subscriptions and allotments made in accordance
with the Acquisition Agreement.
	 
	2.3	 	Luke Johnson and Borders are not obliged to complete this Agreement unless the Company
complies with all its obligations under this Clause 2.

	3.	 	PROVISION OF INFORMATION AND APPOINTMENT OF OBSERVER
	 
	3.1	 	The Company shall supply Borders with the information set out in Schedule 3 and shall use
reasonable endeavours to supply it within the timeframe specified in it.
	 
	3.2	 	Borders shall be entitled to appoint a person as an Observer, to attend and speak but not
vote, at meetings of the Board or any committee of the Board.
	 
	4.	 	MATTERS REQUIRING CONSENT
	 
	4.1	 	Each of the Investors severally undertakes to Borders that he will use his rights and powers
as a director, shareholder or otherwise to procure (so far as he is able) that none of the
acts specified in Schedule 4 shall be carried out without the written consent of Borders.
	 
	4.2	 	The Company undertakes to Borders (except to the extent that this would constitute an
unlawful fetter on its statutory powers, for which purpose each paragraph of Schedule 4 shall
be a separate and severable undertaking by the Company) that none of the acts specified in
Schedule 4 will be carried out by it and that it will use its rights as shareholder or
otherwise to procure (so far as it is able) that none of the acts specified in Schedule 4 are
carried out by any other member of the Group without the written consent of Borders.
	 
	4.3	 	If an Investor, or an Investor’s Affiliate, is proposing to lend any member of the Group any
sum that will have priority over the Loan Notes then prior to the loan of such sum the
Investors shall notify Borders of such intention (providing reasonable details of the amount
and terms) offering it the opportunity to loan a percentage of such sum equal to its
proportion of all Loan Notes in issue at the date of such notice. Such offer shall be open
for acceptance for five Business Days following the date of the notice. At the end of such
offer period, if Borders has not unconditionally accepted the offer, the Investors may proceed
with such loan.
	 
	5.	 	NEW SHAREHOLDERS
	 
	5.1	 	Without prejudice to the provisions in Articles 8, 9 and 10, no shares in the capital of the
Company shall be allotted, issued or Disposed of to a person (other than an Employee) who is
not already a party to this Agreement (a “New Shareholder”) (and the Board shall not enter the
New Shareholder in the register of members) unless:-

	 	5.1.1	 	in the case of the issue or transfer of A Ordinary Shares, the New
Shareholder has executed and delivered a deed of adherence in the form set out in Part
A of Schedule 2; and

5

 

	 	5.1.2	 	in the case of the issue or transfer of B Ordinary Shares, the New
Shareholder has executed and delivered a deed of adherence in the form set out in Part
B of Schedule 2.

	5.2	 	All executed deeds of adherence shall be delivered to and held by the Company (for both
itself and the other parties to the Agreement).
	 
	5.3	 	A person who has entered into a deed of adherence pursuant to this Agreement shall have the
benefit of and be subject to the burden of all the provisions and continuing obligations of
this Agreement as if he had been an original party in the capacity designated in the deed of
adherence, and this Agreement shall be interpreted accordingly. Nothing in this Clause 5.3
shall affect a party’s accrued rights and obligations under this Agreement or shall be
construed as requiring any party to perform again any obligation or discharge again any
liability already performed or discharged, or as entitling any party to receive again any
benefit already enjoyed.
	 
	5.4	 	The parties hereby agree that up to 1,764 of the authorised but unissued “C” Ordinary Shares
(the “Allocated Shares”) in existence as at the date of this Agreement may be offered and
issued to Employees appointed by the Majority Investors, whether by way of subscription for
shares or the granting of options.
	 
	5.5	 	Without prejudice to Clause 5.4, each of the parties to this Agreement hereby waives any and
all pre-emptive and other rights such party may have, gives any and all consents and approvals
as may be required, and undertakes to pass such resolutions as may be required whether under
this Agreement or the Articles of Association to the extent necessary to enable the issue of
shares pursuant to an offer made in accordance with Clause 5.4.
	 
	6.	 	ANNOUNCEMENTS
	 
	6.1	 	Subject to Clause 6.2, no announcement, communication or circular concerning the transactions
contemplated by this Agreement shall be made or issued by any party without the written
consent of the Majority Investors.
	 
	6.2	 	Clause 6.1 does not apply to an announcement, communication or circular required by law, by a
rule of a stock exchange or by a governmental authority or other authority with relevant
powers to which a party is subject or submits, whether or not the requirement has the force of
law provided that such announcement, communication or circular shall, so far as is
practicable, be made after consultation with the other parties to this Agreement and after
taking into account the reasonable requirements of the other parties to this Agreement as to
its timing, content and manner of making or despatch.
	 
	7.	 	COSTS, FEES AND EXPENSES
	 
	7.1	 	At Completion, the Company shall pay:-

	 	7.1.1	 	all of Luke Johnson’s costs and expenses (plus any VAT or overseas
equivalent) in connection with the negotiation, preparation, execution and performance
of this Agreement and all documents referred to in it; and
	 
	 	7.1.2	 	the costs and expenses (plus any VAT) of the Investor’s Solicitors and any
other relevant advisers to incurred in connection with the transactions contemplated
by the Share Purchase Agreement and all documents referred to in it.

	8.	 	SUPREMACY OF THIS AGREEMENT
	 
	 	 	If there is any conflict or inconsistency between the provisions of this Agreement and the
Articles of Association or the articles of association of any other member of the Group,
this Agreement shall prevail and, if requested to do so by the Majority Investors, each of
Borders and the Investors will use its rights and powers to procure (so far as it is able) that the terms of the Articles
of Association are amended so as to accord with the provisions of this Agreement and each
of the parties to this Agreement shall procure (so far as it is able) that the articles of
association of any other member of the Group are amended so as to accord with the
provisions of this Agreement.

6

 

	9.	 	ENTIRE AGREEMENT AND NON-RELIANCE
	 
	9.1	 	This Agreement and each document referred to in it constitute the entire agreement and
supersede any previous agreements between the parties to this Agreement relating to the
subject matter of this Agreement.
	 
	9.2	 	Each party acknowledges and represents that it has not relied on or been induced to enter
into this Agreement by a representation, warranty or undertaking (whether contractual or
otherwise) given by the other parties to this Agreement otherwise as expressly set out in this
Agreement or in each document referred to in it.
	 
	9.3	 	No party is liable to another party (in equity, contract or tort (including negligence),
under the Misrepresentation Act 1967 or in any other way) for a representation, warranty or
undertaking that is not set out expressly in this Agreement or in any document referred to in
it.
	 
	9.4	 	Nothing in this Clause 9 shall have the effect of restricting or limiting any liability
arising as a result of any fraud.
	 
	10.	 	GENERAL
	 
	10.1	 	This Agreement may be executed in any number of counterparts, each of which when executed and
delivered is an original and all of which together evidence the same agreement.
	 
	10.2	 	A variation of this Agreement is only valid if it is in writing and signed by or on behalf of
each party.
	 
	10.3	 	The failure to exercise or delay in exercising a right or remedy provided by this Agreement
or by law does not impair or constitute a waiver of the right or remedy or an impairment of or
a waiver of other rights or remedies. No single or partial exercise of a right or remedy
provided by this Agreement or by law prevents further exercise of the right or remedy or the
exercise of another right or remedy.
	 
	10.4	 	The Parties’ rights and remedies contained in this Agreement are cumulative and are not
exclusive of any rights or remedies provided by law.
	 
	10.5	 	Nothing contained in this Agreement (and no action taken by a party pursuant to its terms) is
to be construed as creating a partnership or agency relationship between any of the parties to
this Agreement.
	 
	10.6	 	The invalidity, illegality or unenforceability of any provision of this Agreement does not
affect the continuation in force of the remainder of this Agreement.
	 
	10.7	 	The provisions of this Agreement shall be binding upon the parties’ respective legal personal
representatives, successors and permitted assigns, but such persons shall not be entitled to
the benefit of its provisions unless they have entered into a deed of adherence in accordance
with Clause 5.
	 
	10.8	 	All obligations and undertakings in this Agreement are, unless otherwise provided for herein,
several and not joint or joint and several.
	 
	10.9	 	Except where expressly provided in this Agreement, a person who is not a party to this
Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any
term of this Agreement, but this does not affect any right or remedy of a third party which
exists or is available apart from that Act. Notwithstanding any benefits or rights conferred
by this Agreement on any third party by virtue of the Contracts (Rights of Third Parties) Act
1999, the parties to this Agreement may vary, terminate or rescind this Agreement without obtaining the consent of
any such third party.
	 
	10.10	 	The Company shall not be bound by any provision of this Agreement to the extent that it
would constitute an unlawful fetter on any of its statutory powers, but that provision shall
remain valid and binding as regards the other parties to this Agreement to which it is
expressed to apply.

7

 

	10.11	 	Each of the parties to this Agreement agrees to use its or his reasonable endeavours to take
all such action or procure that all such action is taken as is reasonable in order to
implement the terms of this Agreement or any transaction, matter or thing contemplated by this
Agreement.
	 
	10.12	 	A party’s rights and obligations under this Agreement shall terminate upon them ceasing to
be a Shareholder, provided that such termination shall not prejudice any rights and
obligations accrued prior to such termination, nor prejudice any rights and obligations of any
person to whom they have transferred their shares pursuant to such person’s deed of adherence.
	 
	11.	 	NOTICES
	 
	11.1	 	Any notice or other communication under or in connection with this Agreement (a “Notice”)
shall be:-

	 	11.1.1	 	in writing and in English;
	 
	 	11.1.2	 	delivered personally or sent by first class post, pre-paid recorded delivery (and
air mail if overseas) or by fax to the party due to receive the Notice at the address
referred to in Clause 11.2 or such other address as a party may specify by not less
than seven days’ notice in writing to the other parties received before the Notice was
despatched; and
	 
	 	11.1.3	 	copied to the Investors’ Solicitors (marked for the attention of Tom Leman and
Gareth Edwards).

	11.2	 	For the purposes of Clause 11.1.2, notices shall be given to the addresses set out in the
case of Luke Johnson, Borders or the Company at the front of this Agreement (for notices
served on Borders or the Company, marked “for the attention of the Company Secretary”).
	 
	11.3	 	Unless there is evidence that it was received earlier, a Notice is deemed given if:-

	 	11.3.1	 	delivered personally, when left at the address referred to in Clause 11.1;
	 
	 	11.3.2	 	sent by post other than air mail, two Business Days after posting it; and
	 
	 	11.3.3	 	sent by air mail, six Business Days after posting it.

	12.	 	GOVERNING LAW AND JURISDICTION
	 
	12.1	 	This Agreement is governed by English law.
	 
	12.2	 	The courts of England have exclusive jurisdiction to settle any dispute arising from or
connected with this Agreement (a “Dispute”), including a dispute regarding the existence,
validity or termination of this Agreement or the consequences of its nullity.
	 
	12.3	 	The parties to this Agreement agree that the courts of England are the most appropriate and
convenient courts to settle any Dispute and, accordingly, that they will not argue to the
contrary.

IN WITNESS WHEREOF this Agreement has been executed by the parties to this Agreement and is
intended to be and is delivered as a deed on the date written at the beginning of this Agreement.

8

 

SCHEDULE 1

DETAILS OF THE COMPANY AT THE DATE OF THIS AGREEMENT

AUTHORISED AND ISSUED SHARE CAPITAL

MEMBERS

	 	 	 
	 	 	Number of A Ordinary
	Name	 	Shares of 1p each
	 	 	 
	Luke Johnson
	 	100

DIRECTORS

	 	 	 
	Name	 	Address
	 
	 	 
	Luke Johnson
	 	32 Clarendon Gardens, London W9 1AZ
	 
	 	 
	Mark Farrer-Brown
	 	Flat 15, 22 Brook Mews North, London

9

 

SCHEDULE 2

DEED OF ADHERENCE

Part A

THIS DEED OF ADHERENCE is made on [   ] 200[   ]

BY [   ] of [   ] (the “Covenantor”) in favour of the persons whose names are set out in the
Schedule to this Deed [and for the benefit of any other person who becomes a party to the Agreement
(as subsequently defined) after the date of this Deed] and is SUPPLEMENTAL to a Subscription and
Shareholders’ Agreement dated [   ] 2007 made by (1) Bookshop Acquisitions Limited (the
“Company”), (2) Luke Johnson and (3) Borders (the “Agreement”).

INTRODUCTION:

	(A)	 	The Covenantor has agreed to acquire shares [and loan notes] in the capital of the Company.
	 
	(B)	 	This Deed is made in compliance with Clause 5.1.1 of the Agreement under which it is a
condition of the transaction referred to in (A) above that the Covenantor executes a deed of
adherence to the Agreement prior to such acquisition.
	 
	(C)	 	Words and expressions defined in the Agreement shall have the same meaning when used in this
Deed.

THIS DEED WITNESSES as follows:-

	1.	 	The Covenantor confirms that it has been given and has read a copy of the Agreement and,
pursuant to Clause 5.1.2 of the Agreement, covenants with and for the benefit of each person
named in the Schedule to this Deed and for the benefit of any other person who becomes a party
to the Agreement after the date of this Deed to perform, comply with and be bound by all the
terms of the Agreement in so far as they remain to be observed (except Clause 2 (Completion))
as if the Covenantor was an original party to the Agreement and was named in it as an Investor
with the intent that the Covenantor shall also be entitled to the benefit of the Agreement as
if it had been an original party to the Agreement and was named in it as an Investor.
	 
	2.	 	The Covenantor covenants to acquire from [   ] [   ] A Ordinary Shares at a price of [   ]
per share and the principal amount of [   ] unsecured Loan Notes at par value and agrees to
hold such shares with the benefit of the rights, and subject to the restrictions, set out in
the memorandum of association of the Company and the Articles of Association and consents to
its name being entered in the register of members of the Company as the holder of the shares
acquired, and agrees to hold such Loan Notes on the terms of the Loan Note Instrument and
consents to its name being entered in the register of noteholders of the Company in respect of
the Loan Notes acquired.
	 
	3.	 	If the Covenantor is beneficially entitled to shares in the Company which are held from time
to time by a nominee or trustee who is not a party to this Agreement, it undertakes to the
other parties to this Agreement to procure that the nominee or trustee observes the provisions
of this Agreement which would be binding on it if it were named in this Agreement as an
Investor.
	 
	4.	 	The address of the Covenantor for the purposes of Clause 11 (Notices) of the Agreement is as
follows:-
	 
	 	 	Fax No:      [                    ]

10

 

	 	 	(attention of:                               [          ])
	 
	5.	 	This Deed is governed by English law and the Covenantor agrees to submit to the exclusive
jurisdiction of the courts of England. The terms of Clause 12 (Governing Law and
Jurisdiction) of the Agreement shall apply to the Deed as if it was incorporated in it.

IN WITNESS WHEREOF this Deed has been executed by the Covenantor and is intended to be and is
delivered as a deed on the date written at the beginning of this Deed.

SCHEDULE

[Parties to Agreement]

11

 

Part B

THIS DEED OF ADHERENCE is made on [   ] 200[   ]

BY [   ] of [   ] (the “Covenantor”) in favour of the persons whose names are set out in the
Schedule to this Deed [and for the benefit of any other person who becomes a party to the Agreement
(as subsequently defined) after the date of this Deed] and is SUPPLEMENTAL to a Subscription and
Shareholders’ Agreement dated [   ] 2007 made by (1) Bookshop Acquisitions Limited (the
“Company”), (2) Luke Johnson and (3) Borders (the “Agreement”).

INTRODUCTION:

	(A)	 	The Covenantor has agreed to acquire shares [and loan notes] in the capital of the Company.
	 
	(B)	 	This Deed is made in compliance with Clause 5.1.2 of the Agreement under which it is a
condition of the transaction referred to in (A) above that the Covenantor executes a deed of
adherence to the Agreement prior to such acquisition.
	 
	(C)	 	Words and expressions defined in the Agreement shall have the same meaning when used in this
Deed.

THIS DEED WITNESSES as follows:-

	1.	 	The Covenantor confirms that it has been given and has read a copy of the Agreement and,
pursuant to Clause 5.1.2 of the Agreement, covenants with and for the benefit of each person
named in the Schedule to this Deed and for the benefit of any other person who becomes a party
to the Agreement after the date of this Deed to perform, comply with and be bound by all the
terms of the Agreement in so far as they remain to be observed (except Clause 2 (Completion))
as if the Covenantor was an original party to the Agreement and was named in it as Borders
with the intent that the Covenantor shall also be entitled to the benefit of the Agreement as
if it had been an original party to the Agreement and was named in it as Borders.
	 
	2.	 	The Covenantor covenants to acquire from [   ] [   ] B Ordinary Shares at a price of [   ]
per share and the principal amount of [   ] unsecured Loan Notes at par value and agrees to
hold such shares with the benefit of the rights, and subject to the restrictions, set out in
the memorandum of association of the Company and the Articles of Association and consents to
its name being entered in the register of members of the Company as the holder of the shares
acquired, and agrees to hold such Loan Notes on the terms of the Loan Note Instrument and
consents to its name being entered in the register of noteholders of the Company in respect of
the Loan Notes acquired.
	 
	3.	 	If the Covenantor is beneficially entitled to shares in the Company which are held from time
to time by a nominee or trustee who is not a party to this Agreement, it undertakes to the
other parties to this Agreement to procure that the nominee or trustee observes the provisions
of this Agreement which would be binding on it if it were named in this Agreement as Borders.
	 
	4.	 	The address of the Covenantor for the purposes of Clause 11 (Notices) of the Agreement is as
follows:-
	 
	 	 	Fax No:      [                    ]
	 
	 	 	(attention of:                                [          ])

12

 

	5.	 	This Deed is governed by English law and the Covenantor agrees to submit to the exclusive
jurisdiction of the courts of England. The terms of Clause 12 (Governing Law and
Jurisdiction) of the Agreement shall apply to the Deed as if it was incorporated in it.

IN WITNESS WHEREOF this Deed has been executed by the Covenantor and is intended to be and is
delivered as a deed on the date written at the beginning of this Deed.

SCHEDULE

[Parties to Agreement]

13

 

SCHEDULE 3

INFORMATION RELATING TO THE GROUP

	1.	 	The Group’s group accounts (as that term is used in section 227 of the Act) and cash flow
statement for each financial year, the auditors’ report on those accounts, the directors’
report for that year, the notes to those accounts and the auditors’ internal recommendations
report, as soon as practicable, and at the latest within 180 days after the end of that
financial year.
	 
	2.	 	Monthly management accounts in respect of each calendar month.
	 
	3.	 	The monthly management accounts will:-

	 	3.1	 	be supplied as soon as practicable, and at the latest within 21 days after
the end of each month;
	 
	 	3.2	 	be prepared on a consolidated basis for the Group.

	4.	 	Details of any transaction, contract or arrangement entered into between any member of the
Group and any Investor or Investor Affiliate, such details to be provided at or as soon as
reasonably practical after the same has been entered into.

14

 

SCHEDULE 4

MATTERS REQUIRING CONSENT

	1.	 	Any amendment to the Loan Notes (save in respect of any amendment which is required by law or
is made to correct a manifest error);
	 
	2.	 	Any change to the rights attaching to the B Ordinary Shares;
	 
	3.	 	The purchase or redemption by the Company of any share capital of the Company held by an
Investor;
	 
	4.	 	The creation or issue of any class of shares having rights on a sale of the Company, on a
winding up of the Company, in respect of rights to dividends or other distributions or in
respect of votes that are preferential to the shares held by Borders, or the variation of the
rights of any class of shares so as to give them any such preferential rights;
	 
	5.	 	Transfer all or any material parts of its business or assets or of any member of the Group to
any other person other than at fair market value, or the entry into or variation of any
contract or arrangement by any member of the Group with any Investor or Investor Affiliate
other than on arm’s length terms and at fair market value in the ordinary course of business;
	 
	6.	 	Any expansion, development or evolution of the Company’s business or that of the Group being
effected otherwise than through the Company or a subsidiary of the Company;
	 
	7.	 	Agreeing to do any of the matters or things referred to in paragraphs 1 to 9 above
(inclusive) on a conditional, suspensive or any other basis whatsoever.

15

 

SCHEDULE 5

DETAILS OF THE COMPANY IMMEDIATELY

AFTER COMPLETION

AUTHORISED AND ISSUED SHARE CAPITAL

	 	 	 	 	 	 	 	 	 
	 	 	Authorised	 	Issued
	 
	 	 	 	 	 	 	 	 
	A Ordinary Shares

	 	 	96,235	 	 	 	8,000	 
	B Ordinary Shares

	 	 	2,000	 	 	 	2,000	 
	C Ordinary Shares

	 	 	1,765	 	 	 	0	 

MEMBERS

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Number of A Ordinary	 	Number of B Ordinary	 	Principal Amount
	Name	 	Shares of 1p each	 	Shares of 1p each	 	of Loan Notes
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Luke Johnson

	 	 	8,000	 	 	 	—	 	 	£	9,992,000	 
	Borders

	 	 	—	 	 	 	1,999	 	 	£	1,698,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total

	 	 	8,000	 	 	 	1,999	 	 	£	11,690,000	 

DIRECTORS

	 	 	 
	Name	 	Address
	 
	 	 
	Luke Johnson

	 	32 Clarendon Gardens, London, W9 1AZ
	 
	 	 
	Mark Farrer-Brown

	 	Flat 15, 22 Brook Mews North, London

16

 

EXECUTED by the parties:-

	 	 	 	 	 
	EXECUTED as a Deed (but not delivered

	 	)	 
	until the date hereof) by

	 	)	 
	BOOKSHOP ACQUISITIONS LIMITED acting:

	 	)	 
	 
	 	 	 	 
	 

	 	Director /s/ Luke Johnson

	 
	 	 	 	 
	 

	 	Director/Secretary
/s/ Mark Farrer - Brown

	 
	 	 	 	 
	EXECUTED as a Deed (but not delivered

	 	)	 
	until the date hereof) by

	 	)	 
	LUKE JOHNSON

	 	)     /s/ Luke Johnson

	 

	 	)	 
	in the presence of:

	 	)	 
	 
	 	 	 	 
	Signature
of witness: /s/ Paul Amis

	 	 	 	 
	 
	 	 	 	 
	Name of witness: Paul Amis
	 	 	 	 
	 
	 	 	 	 
	Address:
One Ropemaker Street
London

	 	 	 	 
	 
	 	 	 	 
	Occupation: 
	 	 	 	 
	 
	 	 	 	 
	EXECUTED as a Deed (but not delivered

	 	)	 
	until the date hereof) by

	 	)     /s/
Edward W. Wilhelm

	BGI (UK) LIMITED acting:

	 	)	 
	 
	 	 	 	 
	 

	 	          Director

	 
	 	 	 	 
	 

	 	          Director/Secretary

17

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