Document:

SALARY CONTINUATION AGREEMENT

 GREER STATE BANK 
 Salary Continuation Agreement 
  
 Prepared 7-18-05 
  
 GREER STATE BANK 
 SALARY CONTINUATION AGREEMENT 
 WITH KENNETH M. HARPER 
  
 NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR CONSTRUED TO BE AN EMPLOYMENT AGREEMENT EITHER EXPRESS OR IMPLIED. 
  
 THIS SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted
this 12th day of August, 2005, by and between GREER STATE BANK, a state-chartered commercial bank located in Greer, South Carolina (the “Company”), and KENNETH M. HARPER (the “Executive”). 
  
 The purpose of this Agreement is to provide specified benefits to the
Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Company. This Agreement shall be unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time. The Company will pay the benefits from its general assets. 
  
 The Company and the Executive agree as provided herein. 
  
 Article 1 
 Definitions 
  
 Whenever used in this Agreement,
the following words and phrases shall have the meanings specified: 
  

	1.1	“Accrual Balance” means the liability that should be accrued by the Company, under Generally Accepted Accounting Principles (“GAAP”), for the
Company’s obligation to the Executive under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the
Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen by the Company at its sole discretion the method must be consistently applied. The Accrual Balance shall be reported by
the Company to the Executive on Schedule A. 

  

	1.2	“Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined
pursuant to Article 4. 

  

	1.3	“Beneficiary Designation Form” means the form provided time to time by the Plan Administrator that the Executive completes, signs and returns to the Plan
Administrator to designate one or more Beneficiaries. 

 GREER STATE BANK 
 Salary Continuation Agreement 
  

	1.4	“Board” or “Board of Directors” means the Board of Directors of the Company. 

  

	1.5	“Change in Control” means 

  

	 	(i)	the acquisition, directly or indirectly, (including beneficial ownership) by any “person” as this term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended within any twelve (12) consecutive month period of the Corporation’s or Company’s issued and outstanding common stock representing an aggregate of fifty percent (50%) or more of the Corporation’s or Company’s
common stock; or 

  

	 	(ii)	consummation of merger, sale, acquisition, or liquidation of all, or substantially all, of the Corporation’s or the Company’s assets or outstanding stock; or

  

	 	(iii)	the occurrence of any other event or circumstance which is not covered by 1.5(i) or 1.5(ii) above, which the Board determines affects the Corporation’s or Company’s
control and, to implement the purposes of this Agreement, adopts a resolution that the event or circumstance constitutes a Change in Control for the purposes of this Agreement. 

  

	 	(iv)	Notwithstanding any other provisions in this Agreement, “Change in Control” shall not be construed to mean the formation of a bank holding company or other entity approved
in advance by the Company’s Board of Directors or any changes in ownership of the Company’s assets or stock as the result of the formation of such an entity. 

  

	1.6	“Code” means the Internal Revenue Code of 1986, as amended. 

  

	1.7	“Corporation” means Greer Bancshares Incorporated. 

  

	1.8	“Disability” means sickness, accident, or injury which, in the judgment of a physician appointed and paid by the Company, prevents the Executive from performing all
of the Executive’s customary duties for the Company. As a condition to any benefits, the Company may require the Executive to submit to such physical or mental evaluations and tests as the Company’s Board of Directors deems appropriate.

  

	1.9	“Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six and one-quarter percent (6.25%).
However, the Plan Administrator, in its sole discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP. 

  

	1.10 	“Early Termination” means the Executive’s Termination of Employment before Normal Retirement Age for reasons other than death, Disability, Termination for
Cause, or following a Change of Control. 

  

	1.11 	“Early Termination Date” means the month, day and year in which Early Termination occurs. 

  

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	1.12 	“Effective Date” means May 1, 2005. 

  

	1.13 	“Normal Retirement Age” means the Executive’s sixty-fifth (65th) birthday. 

  

	1.14 	“Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Employment. 

  

	1.15 	“Plan Administrator” means the Company. 

  

	1.16 	“Plan Year” means a twelve-month period commencing on November 1 and ending on October 31 of each year. The initial Plan Year shall commence on the Effective Date
of this Agreement. 

  

	1.17 	“Termination for Cause” has that meaning set forth in Article 5. 

  

	1.18 	“Termination of Employment” means Executive ceasing to be employed by the Company for any reason whatsoever other than by reason of a leave of absence approved by
the Board. 

  

	1.19 	“Years of Service” means the twelve consecutive month period beginning on Executive’s date of hire and any twelve (12) month anniversary thereof, during the
entirety of which time the Executive is an employee of the Company. Service with a subsidiary or other entity controlled by the Company before the time such entity became a subsidiary or under such control shall not be considered “credited
service” unless the Plan Administrator specifically agrees to credit such service. In addition, the Plan Administrator in its discretion may also grant additional Years of Service in such circumstances where it deems such additional service
appropriate. 

  
 Article 2 
 Benefits During Lifetime 
  

	2.1	Normal Retirement Benefit. Upon Termination of Employment on or after the Normal Retirement Age for reasons other than death, the Company shall pay to the Executive the
benefit described in this Section 2.1 in lieu of any other benefit under this Agreement. 

  

	 	2.1.1 	Amount of Benefit. The annual benefit under this Section 2.1 is Fifty Thousand Dollars ($50,000).  

  

	 	2.1.2 	Payment of Benefit. The Company shall pay the annual benefit to the Executive in twelve (12) equal consecutive monthly installments commencing on the first day of the month
following the Executive’s Normal Retirement Date. The annual benefit shall be paid to the Executive for fifteen (15) years. 

  

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	2.2	Early Termination Benefit. Upon Early Termination, the Company shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this
Agreement. 

  

	 	2.2.1	Amount of Benefit. The benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year during which the Early Termination
Date occurs. This benefit is determined by vesting the Executive in ten percent (10%) of the Accrual Balance for the first Plan Year, and an additional ten percent (10%) of said amount for each succeeding Plan Year thereafter until the Executive
becomes one hundred percent (100%) vested in the Accrual Balance. 

  

	 	2.2.2	Payment of Benefit. The Company shall pay the benefit to the Executive over fifteen (15) years in one hundred eighty (180) equal consecutive monthly installments
commencing with the first day of the month following Normal Retirement Age. 

  

	2.3	Disability Benefit. Upon Termination of Employment due to Disability prior to Normal Retirement Age, the Company shall pay to the Executive the benefit
described in this Section 2.3 in lieu of any other benefit under this Agreement. 

  

	 	2.3.1	Amount of Benefit. The benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year during which the Termination of
Employment occurs. This benefit is determined by vesting the Executive in one hundred percent (100%) of the Accrual Balance. 

  

	 	2.3.2	Payment of Benefit. The Company shall pay the benefit to the Executive over fifteen (15) years in one hundred eighty (180) equal consecutive monthly installments
commencing with the first day of the month following the Executive’s Termination of Employment. 

  

	2.4	Change of Control Benefit. Upon a Change of Control followed by the Executive’s Termination of Employment, the Company shall pay to the Executive the benefit
described in this Section 2.4 in lieu of any other benefit under this Agreement. 

  

	 	2.4.1	Amount of Benefit. The benefit under this Section 2.4 is the Change of Control Benefit set forth on Schedule A for the Plan Year during which the Termination of
Employment occurs. This benefit is determined by vesting the Executive in one hundred percent (100%) of the Normal Retirement Benefit described in Section 2.1. 

  

	 	2.4.2	Payment of Benefit. The Company shall pay the benefit to the Executive in a lump sum present value payment based on the Discount Rate within sixty (60) days following
Termination of Employment. 

  

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 Article 3 
 Death Benefits 
  

	3.1	Death During Active Service. If the Executive dies while employed by the Company, the Company shall pay to the Executive’s Beneficiary the benefit described in this
Section 3.1. This benefit shall be paid in lieu of all other benefits under this Agreement. 

  

	 	3.1.1	Amount of Benefit. The benefit under this Section 3.1 is the Pre-Retirement Death Benefit set forth on Schedule A for the Plan Year during which death occurs.

  

	 	3.1.1.1 	For the first ten (10) Years of Service, this benefit is based upon one hundred percent (100%) of the Accrual Balance. 

  

	 	3.1.1.2 	After the Executive has completed ten (10) Years of Service, this benefit is based upon one hundred percent (100%) of the Normal Retirement Benefit described in Section 2.1.

  

	 	3.1.2	Payment of Benefit. The Company shall pay the benefit to the Beneficiary over fifteen (15) years in one hundred eighty (180) equal consecutive monthly installments commencing
within thirty (30) days following the date of the Executive’s death. 

  

	3.2	Death During Payment of a Lifetime Benefit. If the Executive dies after any benefit payments have commenced under this Agreement but before receiving all such payments, the
Company shall pay the remaining benefits to the Executive’s Beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived. 

  

	3.3	Death After Termination of Employment But Prior to Commencement of Benefit Payments. If the Executive dies after Termination of Employment, but prior to
commencement of benefit payments, the Company shall pay the same benefit payments to the Executive’s Beneficiary that the Executive was entitled to prior to death except that the benefit payments shall commence within thirty (30) days following
the date of the Executive’s death. 

  
 Article 4 
 Beneficiaries 
  

	4.1	Beneficiary Designation. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under this Agreement upon the death
of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Company in which the Executive participates. 

  

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	4.2	Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan
Administrator or its designated agent. The Executive’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently
dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to
time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form
filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death. 

  

	4.3	Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or
its designated agent. 

  

	4.4	No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the
Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive’s estate or its assignee. 

  

	4.5	Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person
incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable
person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Executive and the
Executive’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such payment amount. 

  

Article 5 
 General Limitations

  

	5.1	Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement, and the Executive shall
irrevocably forfeit all benefits under this Agreement, if the Company terminates the Executive’s employment for: 

  

	 	(a)	Gross negligence or gross neglect of duties prior to a Change in Control; 

  

	 	(b)	Conviction of a felony; or 

  

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	 	(c)	Fraud, disloyalty, or willful violation of any law or material Company policy in connection with the Executive’s employment. 

  

	5.2	Forfeiture Provision. While Executive is employed by the Company and during the period of time the Executive is receiving any benefit payments pursuant to this Agreement, the
Executive will not, for himself or on behalf of, or in conjunction with any other person or persons, company, partnership, limited liability company, proprietorship, trust company, bank, financial services institution, or other entity, directly or
indirectly, own, manage, operate, control, be employed by, consult with, participate in, or be connected in any manner with the ownership, employment, management, operation, consulting or control of any financial services institution that competes
with the Company within Greenville County, South Carolina, Spartanburg County, South Carolina, or any other market served by the Company at the time payment of benefits commence. In the event of any actual breach by the Executive of the provisions
of this Section 5.2, all payments under this Agreement payable to the Executive shall irrevocably forfeit and terminate and no further amount shall be due or payable to the Executive pursuant to this Agreement. The Executive specifically
acknowledges that the restrictions set forth above are reasonable and bear a valid connection with the business operations of the Company, and specifically admits that Executive is capable of obtaining suitable employment not in competition with the
Company. If any one of the restrictions contained herein shall for any reason be held to be excessively broad as to duration or geographical area, it shall be deemed amended by limiting and reducing it so as to be valid and enforceable to the extent
compatible with applicable state law as it shall then appear. Executive acknowledges that the Company would not have entered into this Agreement without the provision Section 5.2 contained herein. This Section 5.2 shall not prohibit the Executive
from owning stock in any publicly traded company provided the Executive’s stock ownership is five percent (5%) or less of the issued and outstanding stock of such publicly traded company and the Executive has no corporate responsibility other
than the Executive’s rights as a stockholder. 

  

	5.3	Excess Parachute Payment. Notwithstanding anything in this Agreement to the contrary, in the event that the benefit payable to Executive pursuant to this Agreement
should cause a “parachute payment”, as defined in Code Section 280G(b)(2) of the Code, then such benefit shall be reduced One Dollar ($1.00) at a time until the payment will not constitute a parachute payment. In the event the benefit
Executive receives under this Agreement should be incorrectly calculated so that such amount constitutes a parachute payment, then Executive will promptly refund to Company the excess amount. Excess amount shall mean the amount in excess of
Executive’s base amount, as defined in Code Section 280G(b)(3), multiplied by 2.999. 

  

	5.4	Suicide or Misstatement. The Company shall not pay any benefit under this Agreement if the Executive commits suicide within two years after the Effective Date. In addition,
the Company shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on any application for life insurance owned by the Company on the Executive’s life. 

  

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 Article 6 
 Claims and Review Procedures 
  

	6.1	For all claims other than Disability benefits: 

  

	 	6.1.1	Claims Procedure. Any individual (“Claimant”) who has not received benefits under this Agreement that he or she believes should be paid shall make a claim for such
benefits as follows: 

  

	 	6.1.1.1 	Initiation – Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits. 

  

	 	6.1.1.2 	Timing of Company Response. The Company shall respond to such Claimant within 90 days after receiving the claim. If the Company determines that special circumstances require
additional time for processing the claim, the Company can extend the response period by an additional 90 days by notifying the Claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of
extension must set forth the special circumstances and the date by which the Company expects to render its decision. 

  

	 	6.1.1.3 	Notice of Decision. If the Company denies part or all of the claim, the Company shall notify the Claimant in writing of such denial. The Company shall write the notification
in a manner calculated to be understood by the Claimant. The notification shall set forth: 

  

	 	(a)	The specific reasons for the denial, 

  

	 	(b)	A reference to the specific provisions of this Agreement on which the denial is based, 

  

	 	(c)	A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed, 

  

	 	(d)	An explanation of this Agreement’s review procedures and the time limits applicable to such procedures, and 

  

	 	(e)	A statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. 

  

	 	6.1.2 	Review Procedure. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

  

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	 	6.1.2.1 	Initiation – Written Request. To initiate the review, the Claimant, within 60 days after receiving the Company’s notice of denial, must file with the Company a
written request for review. 

  

	 	6.1.2.2 	Additional Submissions – Information Access. The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating
to the claim. The Company shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the
Claimant’s claim for benefits. 

  

	 	6.1.2.3 	Considerations on Review. In considering the review, the Company shall take into account all materials and information the Claimant submits relating to the claim, without
regard to whether such information was submitted or considered in the initial benefit determination. 

  

	 	6.1.2.4 	Timing of Company Response. The Company shall respond in writing to such Claimant within 60 days after receiving the request for review. If the Company determines that
special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 60 days by notifying the Claimant in writing, prior to the end of the initial 60-day period, that an additional
period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision. 

  

	 	6.1.2.5 	Notice of Decision. The Company shall notify the Claimant in writing of its decision on review. The Company shall write the notification in a manner calculated to be
understood by the Claimant. The notification shall set forth: 

  

	 	(a)	The specific reasons for the denial, 

  

	 	(b)	A reference to the specific provisions of this Agreement on which the denial is based, 

  

	 	(c)	A statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as
defined in applicable ERISA regulations) to the Claimant’s claim for benefits, and 

  

	 	(d)	A statement of the Claimant’s right to bring a civil action under ERISA Section 502(a). 

  

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	6.2	For Disability claims: 

  

	 	6.2.1	Claims Procedures. Any individual (“Claimant”) who has not received benefits under this Agreement that he or she believes should be paid shall make a claim
for such benefits as follows: 

  

	 	6.2.1.1 	Initiation – Written Claim. The Claimant initiates a claim by submitting to the Company a written claim for the benefits.  

  

	 	6.2.1.2 	Timing of Company Response. The Company shall notify the Claimant in writing or electronically of any adverse determination as set out in this Section.

  

	 	6.2.1.3 	Notice of Decision. If the Company denies part or all of the claim, the Company shall notify the Claimant in writing of such denial. The Company shall write the notification
in a manner calculated to be understood by the Claimant. The notification shall set forth: 

  

	 	(a)	The specific reasons for the denial, 

  

	 	(b)	A reference to the specific provisions of this Agreement on which the denial is based, 

  

	 	(c)	A description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed, 

  

	 	(d)	An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, 

  

	 	(e)	A statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, 

  

	 	(f)	[See §2560.503-1(g)(v)] Any internal rule, guideline, protocol, or other similar criterion relied upon in making the adverse determination, or a statement that such a rule,
guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that the Claimant can request and receive free of charge a copy of such rule, guideline, protocol or other criterion from the Company, and

  

	 	(g)	If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical
judgment for the determination, applying the terms of this Agreement to the Claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request. 

  

	 	6.2.1.4 	 Timing of Notice of Denial/Extensions. The Company shall notify the Claimant of denial of benefits in writing or electronically not later than 

  

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45 days after receipt of the claim by the Company. The Company may elect to extend notification by two 30-day periods subject to the following requirements:

  

	 	(a)	For the first 30-day extension, the Company shall notify the Claimant (1) of the necessity of the extension and the factors beyond the Company’s control requiring an extension;
(2) prior to the end of the initial 45-day period; and (3) of the date by which the Company expects to render a decision. 

  

	 	(b)	If the Company determines that a second 30-day extension is necessary based on factors beyond the Company’s control, the Company shall follow the same procedure in (a) above,
with the exception that the notification must be provided to the Claimant before the end of the first 30-day extension period. 

  

	 	(c)	For any extension provided under this section, the Notice of Extension shall specifically explain the standards upon which entitlement to a benefit is based, the unresolved issues
that prevent a decision on the claim, and the additional information needed to resolve those issues. The Claimant shall be afforded 45 days within which to provide the specified information. 

  

	 	6.2.2 	Review Procedures – Denial of Benefits. If the Company denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the
Company of the denial, as follows: 

  

	 	6.2.2.1 	Initiation of Appeal. Within 180 days following notice of denial of benefits, the Claimant shall initiate an appeal by submitting a written notice of appeal to
Company. 

  

	 	6.2.2.2 	Submissions on Appeal – Information Access. The Claimant shall be allowed to provide written comments, documents, records, and other information relating to the
claim for benefits. The Company shall provide to the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant (as defined in applicable ERISA regulations) to the
Claimant’s claim for benefits. 

  

	 	6.2.2.3 	Additional Company Responsibilities on Appeal. On appeal, the Company shall: 

  

	 	(a)	[See §2560.503-1(h)(3)(i)-(v)] Take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination; 

  

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	 	(b)	Provide for a review that does not afford deference to the initial adverse benefit determination and that is conducted by an appropriate named fiduciary of the Company who is
neither the individual who made the adverse benefit determination that is the subject of the appeal, nor the subordinate of such individual; 

  

	 	(c)	In deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, including determinations with regard to whether a particular
treatment, drug, or other item is experimental, investigational, or not medically necessary or appropriate, consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical
judgment; 

  

	 	(d)	Identify medical or vocational experts whose advice was obtained on behalf of the Company in connection with a Claimant’s adverse benefit determination, without regard to
whether the advice was relied upon in making the benefit determination; and 

  

	 	(e)	Ensure that the health care professional engaged for purposes of a consultation under subsection (c) above shall be an individual who was neither an individual who was consulted in
connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual. 

  

	 	6.2.2.4 	Timing of Notification of Benefit Denial – Appeal Denial. The Company shall notify the Claimant not later than 45 days after receipt of the Claimant’s
request for review by the Company, unless the Company determines that special circumstances require an extension of time for processing the claim. If the Company determines that an extension is required, written notice of such shall be furnished to
the Claimant prior to the termination of the initial 45-day period, and such extension shall not exceed 45 days. The Company shall indicate the special circumstances requiring an extension of time and the date by which the Company expects to render
the determination on review. 

  

	 	6.2.2.5 	Content of Notification of Benefit Denial. The Company shall provide the Claimant with a notice calculated to be understood by the Claimant, which shall contain:

  

	 	(a)	The specific reason or reasons for the adverse determination; 

  

	 	(b)	Reference to the specific plan provisions on which the benefit determination is based;  

  

	 	(c)	A statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records, and other relevant information (as
defined in applicable ERISA regulations); 

  

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	 	(d)	A statement of the Claimant’s right to bring an action under ERISA Section 502(a);  

  

	 	(e)	[See §2560.503-1(j)(5)] Any internal rule, guideline, protocol, or other similar criterion relied upon in making the adverse determination, or a statement that such a rule,
guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that the Claimant can request and receive free of charge a copy of such rule, guideline, protocol or other criterion from the Company;

  

	 	(f)	If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical
judgment for the determination, applying the terms of this Agreement to the Claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request; and 

  

	 	(g)	The following statement: “You and your Company may have other voluntary alternative dispute resolution options such as mediation. One way to find out what may be available is
to contact your local U.S. Department of Labor Office and your state insurance regulatory agency.” 

  
 Article 7 
 Amendments and Termination

  
 This Agreement may be amended or terminated by a written
agreement signed by the Company and the Executive. Additionally, the Company may also unilaterally amend this Agreement to conform with written directives to the Company from its banking regulators or to otherwise comply with federal and state laws
and regulations. If the Company unilaterally amends the agreement, the Company shall provide a copy of the amendment to the Executive. If the Board determines in good faith that the Executive is no longer a member of a select group of management or
highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement the Company may terminate this Agreement and pay benefits to the Executive as follows: 
  

	 	7.1.1 	Termination of Agreement Prior to a Change in Control. Upon termination of this Agreement prior to a Change in Control, the Company shall distribute to the Executive the
Early Termination benefits described in Section 2.2 as if Early Termination occurred on the date of such termination, regardless of whether Early Termination actually occurs. Such amount shall be distributed to the Executive or his or her
Beneficiary in a lump sum within sixty (60) days following Termination of Employment. 

  

	 	7.1.2 	 Termination of Agreement Following a Change in Control. Upon termination of this Agreement following a Change in Control, the Company shall distribute to the
Executive the Change in Control benefits described in Section 2.4. Such 

  

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amount shall be distributed to the Executive or his or her Beneficiary in a lump sum within sixty (60) days following Termination of Employment.

  
 Article 8 
 Administration of Agreement 
  

	8.1	Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator. The Plan Administrator shall also have the discretion and authority to (i) make,
amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.

  

	8.2	Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting
through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Company. 

  

	8.3	Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration,
interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Executive or Beneficiary shall be deemed to have
any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the Discount Rate. 

  

	8.4	Indemnity of Plan Administrator. The Company shall indemnify and hold harmless the members of the Plan Administrator and the Board against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members or the Board. 

  

	8.5	Company Information. To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters
relating to the date and circumstances of the retirement, Disability, death, or Termination of Employment of the Executive, and such other pertinent information as the Plan Administrator may reasonably require. 

  

	8.6	Annual Statement. The Plan Administrator shall provide to the Executive, within 120 days after the end of each Plan Year, a statement setting forth the benefits payable under
this Agreement. 

  

 13 

 GREER STATE BANK 
 Salary Continuation Agreement 
  

 Article 9 
 Miscellaneous 
  

	9.1	Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, successors, personal representatives, and transferees.

  

	9.2	No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Company, nor does it
interfere with the Company’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time. 

  

	9.3	Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner. 

  

	9.4	Tax Withholding. The Company shall withhold any taxes that, in its reasonable judgment, are required to be withheld from the benefits provided under this Agreement. The
Executive acknowledges that the Company’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). 

  

	9.5	Governing Law. The Agreement and all rights hereunder shall be governed by the laws of the State of South Carolina, except to the extent preempted by the laws of the United
States of America. 

  

	9.6	Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent
the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the
Executive’s life is a general asset of the Company to which the Executive and Beneficiary have no preferred or secured claim; provided, however, that the Company is under no obligation to purchase any life insurance on the Executive by
executing this Agreement. 

  

	9.7	Reorganization. The Company or Corporation shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the occurrence of such event, the term “Company” as
used in this Agreement shall be deemed to refer to the successor or survivor company. 

  

	9.8	Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the
Executive by virtue of this Agreement other than those specifically set forth herein. 

  

	9.9	Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the
feminine and use of the singular includes the plural. 

  

 14 

 GREER STATE BANK 
 Salary Continuation Agreement 
  

	9.10	Alternative Action. In the event it shall become impossible for the Company or the Plan Administrator to perform any act required by this Agreement, the Company or Plan
Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Company. 

  

	9.11	Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

  

	9.12	Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but
this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein. 

  

	9.13	Notice. Any notice or filing required or permitted to be given to the Company or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered,
or sent by registered or certified mail, to the address below: 

  
 1111 West Poinsett Street 
 Greer, SC 29652 
  
 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address
of the Executive. 
  

	9.14	Named Fiduciary. The Company shall be the named fiduciary and Plan Administrator under this Agreement. It may delegate to others certain aspects of the management and
operational responsibilities including the employment of advisors and the delegation of ministerial duties to qualified individuals. 

  
 IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Company have signed this Agreement. 
  

									
	EXECUTIVE:	 	 	 	COMPANY:
			
	 	 	 	 	GREER STATE BANK
				
	/s/ Kenneth M. Harper	 	 	 	By	 	 /s/ R. Dennis Hennett

	KENNETH M. HARPER	 	 	 	 	 	 
	 	 	 	 	Title	 	 Chief Executive Officer

  

 15 

 GREER STATE BANK 
 Salary Continuation Agreement 
 BENEFICIARY DESIGNATION FORM 
  

	{    }	 New Designation 

  

	{    }	 Change in Designation 

  
 I, KENNETH M. HARPER, designate the following as beneficiary of benefits under the Agreement payable following my death: 
  

				
	 Primary:
 ___________________________________________________________
	  	_____	%
	  
 ___________________________________________________________
	  	_____	%
		
	 Contingent:
 ___________________________________________________________
	  	_____	%
	  
 ___________________________________________________________
	  	_____	%

  
 Notes: 
  

	 	•	 	Please PRINT CLEARLY or TYPE the names of the beneficiaries. 

  

	 	•	 	To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement. 

  

	 	•	 	To name your estate as beneficiary, please write “Estate of _[your name]_”. 

  

	 	•	 	Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you. 

  
 I understand that I may change these beneficiary designations by delivering a new written
designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that the designations will be automatically revoked if the beneficiary predeceases
me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved. 
  

									
					
	Name:	 	 	 	 	 	 	 	 
					
	Signature:	 	 	 	 	 	 	 	 Date: ____________

	 	 	 	 	 	 	 	 	 

  
 Received by the Plan Administrator
this              day of
                                        
    , 20     
  

									
					
	By:	 	 	 	 	 	 	 	 
					
	Title:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

  

					
	CLARKCONSULTINGTM	  	Salary Continuation Plan	  	Plan Year Reporting
	
	Hypothetical Termination Benefits Schedule

  

																									
	 Kenneth M. Harper
     Birth Date: 6/1/1964
    Plan Anniversary Date: 11/1/2005
    Normal Retirement: 6/1/2029, Age 65
    Normal Retirement Payment: Monthly for
15 years
	  	 Early Termination Benefit
 Annual Benefit Payable in
Monthly Installments at
Normal Retirement Date for 15
Years

	  	 Disability Benefit
 Annual Benefit Payable in
Monthly Installments at
Normal Retirement Date for 15
Years

	  	 Change of Control Benefit
 Lump Sum Payable at
Termination

	  	 Pre-Retirement
Death
 Annual Benefit
Payable in Monthly
Installments

	 Period
Ending

	  	 Discount
Rate
 (1)

	 	 	 Benefit
Level
 (2)

	  	 Accrual
Balance
 (3)

	  	Vesting
(4)

	 	 	Based On
Accrual
(5)

	  	Vesting
(6)

	 	 	Based On
Accrual
(7)

	  	Vesting
(8)

	 	 	Based On
Benefit
(9)

	  	Based On
Custom 2
(10)

	 Oct 20051
	  	6.25	%	 	50,000	  	4,405	  	10	%	 	197	  	100	%	 	1,971	  	100	%	 	111,718	  	451
	 Oct 2006
	  	6.25	%	 	50,000	  	13,638	  	20	%	 	1,147	  	100	%	 	5,735	  	100	%	 	118,904	  	1,396
	 Oct 2007
	  	6.25	%	 	50,000	  	23,464	  	30	%	 	2,781	  	100	%	 	9,271	  	100	%	 	126,552	  	2,402
	 Oct 2008
	  	6.25	%	 	50,000	  	33,923	  	40	%	 	5,037	  	100	%	 	12,593	  	100	%	 	134,692	  	3,472
	 Oct 2009
	  	6.25	%	 	50,000	  	45,054	  	50	%	 	7,857	  	100	%	 	15,714	  	100	%	 	143,356	  	4,612
	 Oct 2010
	  	6.25	%	 	50,000	  	56,901	  	60	%	 	11,188	  	100	%	 	18,647	  	100	%	 	152,577	  	5,824
	 Oct 2011
	  	6.25	%	 	50,000	  	69,510	  	70	%	 	14,982	  	100	%	 	21,402	  	100	%	 	162,391	  	7,115
	 Oct 2012
	  	6.25	%	 	50,000	  	82,931	  	80	%	 	19,193	  	100	%	 	23,991	  	100	%	 	172,836	  	8,489
	 Oct 2013
	  	6.25	%	 	50,000	  	97,214	  	90	%	 	23,781	  	100	%	 	26,424	  	100	%	 	183,953	  	9,951
	 Oct 2014
	  	6.25	%	 	50,000	  	112,417	  	100	%	 	28,709	  	100	%	 	28,709	  	100	%	 	195,785	  	11,507
	 Oct 2015
	  	6.25	%	 	50,000	  	128,597	  	100	%	 	30,857	  	100	%	 	30,857	  	100	%	 	208,378	  	50,000
	 Oct 2016
	  	6.25	%	 	50,000	  	145,818	  	100	%	 	32,874	  	100	%	 	32,874	  	100	%	 	221,782	  	50,000
	 Oct 2017
	  	6.25	%	 	50,000	  	164,146	  	100	%	 	34,770	  	100	%	 	34,770	  	100	%	 	236,047	  	50,000
	 Oct 2018
	  	6.25	%	 	50,000	  	183,654	  	100	%	 	36,551	  	100	%	 	36,551	  	100	%	 	251,230	  	50,000
	 Oct 2019
	  	6.25	%	 	50,000	  	204,416	  	100	%	 	38,224	  	100	%	 	38,224	  	100	%	 	267,390	  	50,000
	 Oct 2020
	  	6.25	%	 	50,000	  	226,514	  	100	%	 	39,797	  	100	%	 	39,797	  	100	%	 	284,589	  	50,000
	 Oct 2021
	  	6.25	%	 	50,000	  	250,033	  	100	%	 	41,274	  	100	%	 	41,274	  	100	%	 	302,894	  	50,000
	 Oct 2022
	  	6.25	%	 	50,000	  	275,065	  	100	%	 	42,662	  	100	%	 	42,662	  	100	%	 	322,376	  	50,000
	 Oct 2023
	  	6.25	%	 	50,000	  	301,707	  	100	%	 	43,966	  	100	%	 	43,966	  	100	%	 	343,112	  	50,000
	 Oct 2024
	  	6.25	%	 	50,000	  	330,062	  	100	%	 	45,191	  	100	%	 	45,191	  	100	%	 	365,182	  	50,000
	 Oct 2025
	  	6.25	%	 	50,000	  	360,242	  	100	%	 	46,343	  	100	%	 	46,343	  	100	%	 	388,671	  	50,000
	 Oct 2026
	  	6.25	%	 	50,000	  	392,363	  	100	%	 	47,424	  	100	%	 	47,424	  	100	%	 	413,671	  	50,000
	 Oct 2027
	  	6.25	%	 	50,000	  	426,549	  	100	%	 	48,441	  	100	%	 	48,441	  	100	%	 	440,279	  	50,000

  

			
	Salary Continuation Plan for Greer State Bank - Greer, SC	 	Securities offered through Clark Securities, Inc.,
	450636 27699 209747 v5.36.52 06/27/2005:11 SCP-E, F NB	 	Member NASD & SIPC, Los Angeles, CA 90071, (213) 486-6300.

					
	CLARKCONSULTINGTM	  	Salary Continuation Plan	  	Plan Year Reporting
	
	Hypothetical Termination Benefits Schedule

  

																									
	 Kenneth M. Harper
     Birth Date: 6/1/1964
    Plan Anniversary Date: 11/1/2005
    Normal Retirement: 6/1/2029, Age 65
    Normal Retirement Payment: Monthly for
15 years
	  	 Early Termination Benefit
 Annual Benefit Payable in
Monthly Installments at
Normal Retirement Date for 15
Years

	  	 Disability Benefit
 Annual Benefit Payable in
Monthly Installments at
Normal Retirement Date for 15
Years

	  	 Change of Control Benefit
 Lump Sum Payable at
Termination

	  	 Pre-Retirement
Death
 Annual Benefit
Payable in Monthly
Installments

	 Period
Ending

	  	 Discount
Rate
 (1)

	 	 	 Benefit
Level
 (2)

	  	 Accrual
Balance
 (3)

	  	Vesting
(4)

	 	 	Based On
Accrual
(5)

	  	Vesting
(6)

	 	 	Based On
Accrual
(7)

	  	Vesting
(8)

	 	 	Based On
Benefit
(9)

	  	Based On
Custom
(10)

	 Oct 2028
	  	6.25	%	 	50,000	  	462,935	  	100	%	 	49,396	  	100	%	 	49,396	  	100	%	 	468,599	  	50,000
	 Jun 2029
	  	6.25	%	 	50,000	  	488,483	  	100	%	 	50,000	  	100	%	 	50,000	  	100	%	 	488,483	  	50,000

  
 June 1, 2029
Retirement; July 1, 2029 First Payment Date 
  

	1	The first line reflects 6 months of data, May 2005 to October 2005. 

  

	2	The pre-retirement death benefit is equal to the accrual balance in plan years 1 through 10, this annual benefit is payable monthly for 180 months. In plan year 11
the pre-retirement death benefit changes to equal the projected annual benefit of $50,000, payable monthly for 15 years. 

  

	*	The purpose of this hypothetical illustration is to show the participant’s annual benefit based on various termination assumptions. Actual benefits are based on the terms and
provisions of the plan agreement executed between the company and participant and may differ from those shown. 

  

			
	Salary Continuation Plan for Greer State Bank - Greer, SC	 	Securities offered through Clark Securities, Inc.,
	450636 27699 209747 v5.36.52 06/27/2005:11 SCP-E, F NB	 	Member NASD & SIPC, Los Angeles, CA 90071, (213) 486-6300.EXHIBIT 10.2

 Exhibit 10.2 
  

					
	

	  	 	  	 2709 Water Ridge Parkway
 Charlotte, NC 28217

Tel: 704.357.3500
  
 www.btol.com

  
 February 17, 2004 
  
 Mr. Eric J. Kuhn 
 President and CEO 
 Varsity Group Inc. 
 1850 M Street, Suite 1150 
 Washington, DC 20036 
  
 Dear Eric: 
  
 The purpose of this letter is to confirm the agreement of the parties with respect to the matters set forth herein. 
  
 For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree that, effective as of July 1, 2004, this letter
agreement (the “2004/2005 Agreement”), together with the agreements listed in Schedule 1 attached hereto and made a part hereof by reference (“Schedule 1”), will collectively represent the entire agreement between Baker &
Taylor Fulfillment, Inc. (“B&T Fulfillment”) and Varsity Group, Inc., a/k/a VarsityBooks.com, f/k/a The Textbook Club, Inc. (collectively, “Varsity”) regarding the subject matter hereof. If not previously superseded or
terminated by agreement of the parties, all prior agreements between Varsity and Baker & Taylor, Inc. (“B&T”) and/or B&T Fulfillment regarding the subject matter hereof (other than those listed in Schedule 1) shall be deemed
superseded by this 2004/2005 Agreement as of July 1, 2004, including but not limited to that certain letter agreement dated June 1, 1999, that certain letter agreement dated August 13, 1999, that certain letter agreement dated October 12, 1999, that
certain letter agreement dated August 16, 2000, that certain letter agreement dated May 16, 2001, that certain letter agreement dated July 19,2002, and that certain letter agreement dated June 30,2003. The agreements listed in Schedule 1 shall be
deemed to be amended by this 2004/2005 Agreement and shall remain in full force and effect as provided herein. 
  
 The parties further acknowledge and agree that from and after the 1999 transfer to B&T Enterprises LLC of all of B&T’s rights and interests as a holder of equity and equity interests in Varsity, neither
B&T nor B&T Fulfillment has had any continuing obligation under the Investment Agreements defined in that certain Operating Agreement dated as of October 1, 1999, as amended. For purposes of this 2004/2005 Agreement, all references to the
Investment Agreements or any of them contained in any of the agreements listed in Schedule 1 are hereby deleted. 
  
 In the event of any conflict between a) the terms and conditions of any of the agreements referenced herein or listed in Schedule 1 and b) the terms and conditions of the

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 1 

 In the event of any conflict between a) the terms and conditions of any of the agreements referenced herein or listed in
Schedule 1 and b) the terms and conditions of the 2004/2005 Agreement, the terms and conditions of the 2004/2005 Agreement will control. 
  
 This proposal has been structured with the good faith understanding that in order to meet competitive conditions, we will provide the services, pricing, terms and rebates
as set forth herein. The following terms will apply to the term beginning July 1, 2004 and ending June 30, 2006, as adjusted as provided herein (the “Term”): 
  

	1.	Prompt Payment Discount: With regard to invoices due and payable net 30 days from invoice date, a discount of 

  
 * 
  

	2.	Prepayment Discount: During the Fall 2004 Selling Season and the Fall 2005 Selling Season, an additional * prepayment discount will be available to Varsity for
use at Varsity’s sole discretion. The Fall 2004 Selling Season shall begin on July 1, 2004 and end on October 31, 2004 and the Fall 2005 Selling Season shall begin on July 1, 2005 and end on October 31, 2005. Should Varsity elect to utilize
this prepayment discount at any time during the Fall 2004 Selling Season and/or the Fall 2005 Selling Season, Varsity shall provide B&T Fulfillment with an estimate of purchases for the relevant prepayment period on a mutually agreeable
schedule, likely every other week, and remit to B&T Fulfillment a cash prepayment in the amount of the estimated purchases, less the applicable * *. Any unused prepayment balance from the prior week will, at Varsity’s discretion, be applied
toward prepayment of purchases in the next week or credited back to Varsity. 

  
 * 
  

	3.	Volume-Based Rebates: 

  
 a. B&T Fulfillment will offer Varsity credits based upon net sales volume for the 2004 calendar year, as follows: 
  
 (1)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2004 calendar year reach *, Varsity shall be entitled to a discount on net sales from *. The * discount will be applied monthly as a credit to Varsity’s account with B&T Fulfillment. 
  
 (2)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2004 calendar year reach *, Varsity shall be entitled to a * discount on net sales greater than * up to net sales of * * and an additional * discount on net sales from * 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 2 

 
The applicable discounts will be applied monthly as a credit to Varsity’s account with B&T Fulfillment. 
  
 (3)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2004 calendar year reach *, Varsity shall be entitled to a * discount on net sales greater than * up to net sales of * * and an additional * discount on net sales from * The applicable discounts will be applied monthly as a credit
to Varsity’s account with B&T Fulfillment. 
  
 (4)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2004 calendar year reach * Varsity shall be entitled to a * discount on net sales greater than * up to net sales of * * and an additional * discount on net sales from * The applicable discounts will be applied monthly as a credit
to Varsity’s account with B&T Fulfillment. 
  
 (5)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2004 calendar year reach * Varsity shall be entitled to a * discount on net sales greater than * The * discount will be applied monthly as a credit to Varsity’s account with B&T Fulfillment. 
  
 b. B&T Fulfillment will offer Varsity credits based upon net sales
volume for the 2005 calendar year, as follows: 
  
 (1)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2005 calendar year reach * Varsity shall be entitled to a * discount on net sales from * The * discount will be applied monthly as a credit to Varsity’s account with B&T Fulfillment. 
  
 (2)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2005 calendar year reach * Varsity shall be entitled to a * discount on net sales greater than * up to net sales of * * and an additional * discount on net sales from * The applicable discounts will be applied monthly as a credit
to Varsity’s account with B&T Fulfillment. 
  
 (3)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2005 calendar year reach * Varsity shall be entitled to a discount on net sales greater than * up to net sales of * and an additional * discount on net sales from * The applicable discount will be applied monthly as a credit to
Varsity’s account with B&T Fulfillment. 
  
 (4)
                *                 Once B&T Fulfillment’s net sales to
Varsity for the 2005 calendar year reach * Varsity shall be entitled to a * discount on net sales greater than * up to net sales of * and an additional * discount on net sales from * 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 3 

 
The applicable discounts will be applied monthly as a credit to Varsity’s account with B&T Fulfillment. 
  
 (5)
                *                 – Once B&T Fulfillment’s net sales
to Varsity for the 2005 calendar year reach * , Varsity shall be entitled to a * discount on net sales greater than * on and an additional * discount on net sales from * The applicable discounts will be applied monthly as a credit to Varsity’s
account with B&T Fulfillment. 
  
 The above-described volume
rebates relative to calendar years 2004 and 2005 will be calculated on net sales to Varsity. For purposes of this Agreement, the term “net sales” means Varsity’s book purchases from B&T Fulfillment plus Promotional and Customer
Service fees but not freight charges paid by Varsity less the NRT books invoice referenced in Section 17 hereof and any and all discounts, credits, returns and rebates, including but not limited to prepayment discounts, Y-Key rebates, prompt payment
discounts, monthly per book rebates, and return credits. 
  

	4.	Sell-Through Rate: Varsity and B&T Fulfillment agree to use commercially reasonable efforts to develop a mutually agreeable process designed to achieve a mutually
agreeable sell-through rate on titles ordered for Varsity in support of eduPartners by March 30, 2004 for the Fall 2004 Selling Season, by March 30, 2005 for the Fall 2005 Selling Season, and with respect to subsequent Fall Selling Seasons, if any,
under this Agreement by March 30 of those years. The sell-through rate will be calculated based upon total Varsity unit sales in the applicable Fall Selling Season divided by total units ordered for Varsity in support of eduPartners for that Fall
Selling Season. VRTY and VRTYU-coded titles and the NRT books invoice referenced in Section 17 hereof will not be considered for purposes of the sell-through rate calculation. 

  

	5.	Per Book Rebate: Based on a target average annual cost per book sold to Varsity of * or greater, Varsity will receive a rebate of * per book shipped (the “Per
Book Rebate”). Y-Key titles, VRTY and VRTYU-coded titles and NRT books will qualify for payment of this Per Book Rebate. This Per Book Rebate amount will be in effect for the period of July 1, 2004 through June 30, 2006. Each such Per Book
Rebate earned by Varsity will be issued to Varsity in the form of a credit to Varsity’s account on a monthly basis. If the average annual cost per book sold to Varsity should be less than * either party will have the right to renegotiate the
rebate amount with respect to periods after June 30, 2005, if any. 

  

	6.	Y-Key Titles: With respect to any book for which B&T receives no discount from the publisher or for which B&T must prepay, Varsity shall pay B&T
Fulfillment publisher’s list price plus * per book. During the Fall 2004 Selling Season and the Fall 2005 Selling Season, B&T will issue Varsity a rebate on any Amsco, Fireside, Lawrenceville Press and Center For Learning Y-Key units sold
for which B&T receives no discount from the publisher or for which B&T must prepay, as follows: 

  

	 	•	 	Amsco:                     * 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 4 

	 	•	 	Fireside:
                                   * 

  

	 	•	 	Lawrenceville Press:                * 

  

	 	•	 	Center for Learning:                 * 

  
 Such rebates will be issued to Varsity in the form of a credit to
Varsity’s account as specified in Section 10 hereof. B&T will use commercially reasonable efforts to provide Varsity with written notification of any change in publisher’s pricing terms for Amsco, Lawrenceville Press and Center For
Learning within three (3) business days of learning of such change. Any change in publisher’s terms or pricing will result in a change in terms or pricing to Varsity hereunder. 
  

	7.	McGraw Hill/Glencoe Titles: Glencoe (GLCMA), SRA and SRAAA titles are currently classified as N-Keys. B&T Fulfillment will issue Varsity a monthly rebate of * on
net sales of Glencoe (GLCMA), SRA and SRAAA titles on which B&T receives a discount of * or more off list. Such rebates will be issued to Varsity in the form of a credit to Varsity’s account as specified in Section 10 hereof. Varsity and
B&T Fulfillment will work together to monitor the sales of the Glencoe (GLCMA), SRA and SRAAA titles to avoid financial exposure of non-returnability. Varsity will make a good faith and diligent effort to work with B&T Fulfillment to enable
B&T Fulfillment to return Glencoe (GLCMA), SRA, SRAAA books in a timely manner. To facilitate control and tracking of product for return to the publisher, three (3) primary orders should be placed with the publisher for the season. Varsity will
monitor sales of the titles and initiate with B&T Fulfillment the returns process no later than thirty (30) days prior to the date by which the books need to be received by the publisher. The date for books to be received by the publisher is
ninety (90) days after invoice date for pub codes SRA and SRAAA and one hundred twenty (120) days for Glencoe (GLCMA). Varsity will not be billed for Glencoe (GLCMA), SRA, or SRAAA books that are not returned to the publisher in a timely manner if
the return delay is caused by B&T Fulfillment, provided that the above-mentioned thirty (30) day prior returns initiation is effected by Varsity and no violation of publisher terms by Varsity occurs that results in B&T Fulfillment not
receiving the scheduled publisher terms or discounts. Any change in publisher’s terms or pricing will result in a change in terms or pricing to Varsity hereunder. 

  

	8.	Used Books: B&T Fulfillment will continue to provide fulfillment services to Varsity consistent with the following: 

  
 a. Varsity will purchase and deliver to B&T Fulfillment, at
Varsity’s expense, used textbooks. Varsity and B&T Fulfillment agree to use commercially reasonable efforts to mutually agree on a maximum number of used textbook titles eligible for fulfillment services with respect to (i) the Fall 2004
Selling Season no later than February 27, 2004 and (ii) the Fall 2005 Selling Season no later than February 28, 2005. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 5 

 b. B&T Fulfillment will receive the used books into Varsity’s reserve inventory and assign each
title a separate ISBN to distinguish the used books from new versions of the same title. 
  
 c. Varsity will determine the list price of each used book title. 
  
 d. B&T Fulfillment will assign a cost in its system of the list price less * *. 
  
 e. B&T Fulfillment will use a * discount off the list price as the price it charges Varsity, plus a handling charge of *
per book. 
  
 f. The Promotional and Customer Services fee of *
per book shipped specified in the Promotional and Customer Services Agreement dated as of October 1, 1999, as amended, will be charged to Varsity. 
  
 g. The net sales volume, less applicable adjustments for credits, rebates, returns, and discounts, including but not limited to prepayment discounts,
prompt payment discounts, monthly Per Book Rebates, return credits, freight credits and handling charges, will contribute to the annual volume rebate incentive. 
  
 h. Books returned due to B&T Fulfillment error will be credited to Varsity at the price charged by Varsity to B&T
Fulfillment. 
  
 i. Where practical, Varsity will provide B&T
Fulfillment with thirty (30) days notice in advance of delivery of the used books. 
  
 j. During the Term, Varsity will be subject to a * per book per month storage fee applicable to unsold used books, except during the Fall 2004 Selling Season and the Fall 2005 Selling Season. 
  
 k. Varsity may initiate a one-time per year return of unsold used books
after the Fall 2004 Selling Season and the Fall 2005 Selling Season for a return processing fee of * per book plus the cost, of return freight at carrier’s published rates. 
  

	9.	 Returns: B&T Fulfillment will stamp product returns received from Varsity customers with the date they were originally received by the warehouse.
Within five (5) business days of B&T Fulfillment’s receipt of any returned products, such returns will be received into B&T Fulfillment’s inventory and logged as having been received into the information database. Within ten (10)
business days from B&T Fulfillment’s receipt of any returned products, B&T Fulfillment will issue Varsity any credit due for the price paid by Varsity to B&T Fulfillment for the products returned and B&T Fulfillment will deliver
to Varsity information in reasonably sufficient detail to allow Varsity to properly credit customers for such returns. Varsity and B&T 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 6 

	 	 
Fulfillment agree to use commercially reasonable efforts to develop a mutually agreeable solution for an electronic customer returns reporting system.

  
 With regard to publisher returns for unsold
inventory purchased for Varsity, Varsity shall pay B&T Fulfillment a return fee of * per book with respect to all such returns in excess of * of such purchases. 
  

	10.	Rebates: B&T Fulfillment agrees to process all applicable monthly rebates within fifteen (15) days from the close of each month. Monthly rebates in this category
would include the Per Book Rebate, volume rebate and freight credit. The Y-Key rebate described in Section 6 hereof and the McGraw Hill/Glencoe title rebate described in Section 7 hereof will be processed each year by October 31st for activity from January 1st through September 30th and by January 15th of each year for
activity from October 1st through December 31st of the most recently completed calendar year. 

  

	11.	Freight: Schedule 6.2 of the Amended and Restated Drop Ship Agreement between Varsity and B&T dated as of October 1, 1999, as amended, is hereby amended by
deleting all references to freight and substituting the following therefor: Starting July 1, 2004 and continuing through June 30, 2006, freight charges for ground shipments will be at B&T Fulfillment’s actual cost plus a mutually agreed
upon nominal markup, except for shipments sent by UPS Commercial/Residential Ground Service for which Varsity shall receive a discount equal to * off of total UPS Commercial/Residential Ground Service related charges billed to Varsity, shipments,
sent by UPS Next Day Air Service for which Varsity shall receive a discount equal to * off of total Next Day Air Service related charges billed to Varsity and shipments sent by UPS Second Day Air Service for which Varsity shall receive a discount
equal to * off of total Second Day Air Service related charges billed to Varsity. All such freight discounts earned by Varsity will be issued to Varsity in the form of a credit to Varsity’s account on a monthly basis. 

 
 B&T Fulfillment agrees to cause B&T to work with Varsity to make
commercially reasonable efforts to develop additional shipping options, such as USPS, International, and UPS Saturday Delivery in time for integration with Varsity’s Fall 2004 Selling Season, based on mutually agreeable freight requirements,
system development resource requirements and implementation costs. 
  

	12.	Reships & Shipping Credits: B&T Fulfillment will work with Varsity to develop a mutually agreed upon system for tracking and processing customer reship
requests due to warehouse error (missing book, damaged book, etc.) or UPS error (late delivery, UPS box damage, etc.). Varsity will utilize this system to deliver to B&T Fulfillment a monthly recap of all such requests. B&T Fulfillment will
review this file and process, the appropriate credits within thirty (30) days from receipt of this file. 

  

	13.	 Section 1.5 of Operating Agreement: The parties hereby confirm that for purposes of that certain Operating Agreement dated as of October 1, 1999, as
amended, the definition of “Competitor” contained in Section 1.5 thereof, all of Section 5.5 thereof 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 7 

	 	 
and Schedule 5.5 attached thereto are deleted in their entirety. For purposes of Section 1.5, the following definition of the term “Competitor”
shall continue to apply: “For purposes of this Agreement, the term ‘Competitor’ shall mean a person or entity that has as its principal business activity the goal of establishing exclusive relationships with educational institutions
for the purpose of selling textbooks via the Internet.” 

  

	14.	Service Levels: Varsity and B&T Fulfillment will work closely together to ensure a successful Fall 2004 Selling Season and a successful Fall 2005 Selling Season.

  
 Consistent with this objective, Varsity agrees
to utilize commercially reasonable efforts to contact publishers on newly desired titles to determine the status prior to ordering with B&T Fulfillment. 
  
 B&T Fulfillment agrees to utilize commercially reasonable efforts to: 
  
 a. Cause B&T to minimize internal processing times for titles submitted by Varsity for research, clearing a minimum of
three hundred (300) titles per week and a maximum of five hundred (500) titles per week during peak ordering periods. Title submission by Varsity shall continue throughout the year, however peak ordering periods shall start approximately on May 10
and end by June 20. Title processing times are for mutually agreed upon list of publishers with some minimal bibliographic information supplied by Varsity for each title. Newly added or foreign publishers may require additional time; 
  
 b. Minimize internal lead times required by B&T to place orders, placing
orders with publishers within five (5) to fourteen (14) days from receipt of Varsity’s order by B&T Fulfillment. Varsity recognizes that B&T’s internal lead times for placing orders with publishers will vary based on several
factors, including size of publisher, order size, location of publisher (domestic or international), credit terms with publisher, etc., but in no case will the lead time exceed fourteen (14) days. This would include processing and mailing all
prepayment publisher or draft orders with check within five (5) business days of Varsity submitting the order to B&T Fulfillment; 
  
 c. Provide written confirmation of quantity ordered and note problems such as book OS and publisher restrictions on a weekly basis; 
  
 d. During ramp up, B&T Fulfillment will incorporate into its planning
orders any additional quantity needed by Varsity. Once manual replenishment begins (defined on seasonal planning calendar), B&T Fulfillment will waive shipping consolidation if there will be no material loss in purchase discount and material
increases in freight charges will not be incurred. If expedited orders are needed due to error on the part of B&T Fulfillment, this will be done at B&T Fulfillment’s expense. In all cases, B&T Fulfillment is not responsible for
publisher failure to provide stock in a timely manner or for the prior sale of inventory. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 8 

 e. Process rush orders as required during the Fall 2004 Selling Season and during the Fall 2005 Selling
Season; 
  
 f. Allow Varsity to place initial orders representing
up to eighty-five percent (85%) of projected sales volume and place into reserve inventory up to eighty-five percent (85%) of projected sales volume (~100% of initial orders); 
  
 g. Maintain timely and accurate written status reports including: 
  
 (1) Prepayment publisher order status report (on a weekly basis) 

 
 (2) Reserve inventory status report (on a weekly basis) 
  
 (3) Purchase order follow-up file (on a weekly basis) 
  
 (4) Title replacement file, including all new replacement information for
all active Varsity AUX-coded titles (on a weekly basis) 
  
 (5)
Outstanding purchase order status response report (on a daily basis) 
  
 (6) New title research report (on a daily basis) 
  
 h.
Support publisher order follow-up as follows: 
  
 (1) B&T
Fulfillment recognizes the research and follow-up process is an important component to the successful execution of Varsity’s eduPartners Program and will continue to use commercially reasonable efforts to provide this information in a timely
manner. 
  
 (2) During the busy selling season (June through
August), B&T Fulfillment will provide Varsity a weekly vendor dispute file (e.g. a list of Varsity AUX- coded PUB Codes that are in dispute status) to help identify potential ordering delays or issues as early as possible. 
  

	15.	VRTY-Coded Titles: B&T Fulfillment will continue to allow Varsity to purchase books from publishers directly in instances where B&T cannot obtain books at all.
In addition, B&T Fulfillment will continue to work with Varsity to purchase any Y- Key, NRT, pre-pay publisher or school restricted title from publishers and if B&T Fulfillment cannot develop the source of this product, Varsity may elect to
purchase this product directly if Varsity provides written notice of such election prior to March 30 of each calendar year during the Term. If there are any Y-Key, NRT, pre-pay publisher or school restricted titles with respect to which Varsity is
able to obtain materially improved discounts over the discounts available to B&T, Varsity may, upon mutual agreement with B&T Fulfillment, which B&T Fulfillment shall not unreasonably deny, purchase such titles carrying such materially
improved discounts directly from the publishers thereof. All titles purchased by Varsity directly from such publishers are referred to herein as “VRTY titles” or “VRTY-coded titles”. Varsity will sell these titles to B&T
Fulfillment at a * discount off of list. 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 9 

 Varsity will purchase them back from B&T Fulfillment at * discount off of list, plus a handling
charge of * per book and the Promotional and Customer Services fee of * per book shipped specified in the Promotional and Customer Services Agreement dated as of October 1,1999, as amended. VRTY-coded titles will be eligible for the Per Book Rebate
referenced in Section 5 hereof. Payment terms applicable to Varsity purchases of these titles shall be Net * days. B&T Fulfillment and Varsity agree to use commercially reasonable efforts to develop a mutually agreeable process for receiving
into inventory all VRTY coded titles within two (2) business days of receipt (five (5) business days if books are received without bar coding). Varsity will provide B&T Fulfillment advance notice of these shipments to allow sufficient time to
plan for their arrival and handling. 
  

	16.	Payment Terms for Used Books (VRTYU) and VRTY-Coded Titles Purchased by B&T Fulfillment: Varsity will bill B&T Fulfillment at the time of shipment for all VRTY
and USED (VRTYU) titles shipped to B&T’s facility. B&T Fulfillment will notify Varsity of any invoice discrepancies within fifteen (15) days of receipt of goods and shall pay all VRTY and USED (VRTYU) invoices within Net * * Varsity and
B&T Fulfillment agree to use commercially reasonable efforts to develop a mutually agreeable solution for electronic confirmation of receipt of VRTY and VRTYU titles shipped to B&T’s facility. 

  

	17.	Non-Returnable Titles: On or before April 1 of each calendar year, B&T Fulfillment will notify Varsity of any publishers that will be treated as NRTs. B&T will
‘tag’ each of the NRT titles on the B&T system in order that sales and inventory information on those titles can be retrieved. For all NRT books ordered for Varsity in inventory at the close of each of the Fall 2004 Selling Season and
the Fall 2005 Selling Season, B&T Fulfillment will invoice Varsity at B&T’s cost. Payment terms applicable to Varsity purchases of these titles shall be Net * No prepayment discounts, prompt pay discounts or other discounts, rebates or
credits apply. B&T Fulfillment will maintain the NRT books in inventory and issue a monthly credit to Varsity (at cost) for any books sold during the month, whether the sales were to Varsity or other B&T customers. 

 

	18.	 Classifications: All stated, discounts are stated as a percentage off of list price. The discounts vary based on the classification of books into
general categories, some of which are determined by general marketing criteria. B&T Fulfillment has utilized commercially reasonable efforts to categorize books for pricing purposes by considering such factors as binding, cost of acquisition,
general marketing categories, publisher’s discount, customer demand, returnability to publishers, and other factors. B&T Fulfillment reserves the sole right to be the final determinant of the pricing category. Please note that B&T
Fulfillment provides a detailed invoice that identifies the publisher’s current suggested list price, the discount offered, and the exact price charged for each title ordered. Please note that the publisher’s list price is subject to
change without notice. In addition, please note that for some college textbook publishers where no publisher list price is assigned by the publisher, Baker & Taylor will assign a list price for those titles. In such instances, the applicable
list price is 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 10 

	 	 
based upon a standardized formula that considers Baker & Taylor’s costs of doing business. 

  

	19.	Operating Agreement: 

  
 a. Section 1.2 of the Operating Agreement between Varsity and B&T dated as of October 1, 1999, as amended (the “Operating Agreement”), is
hereby deleted and replaced by the following: 
  

	 	•	 	Except as otherwise expressly stated in the 2005/2005 Agreement, Varsity agrees that any and all drop ship orders for text books, books and/or spoken word audio products that
Varsity issues at any time during the Term hereof shall be placed with B&T Fulfillment on an exclusive basis. 

  

	 	•	 	B&T Fulfillment reserves the right to not stock or supply titles (“Rejected Titles”) contained in the Textbook Request, which, in the opinion of B&T Fulfillment,
are not economically feasible to carry in inventory. The Company may use other sources of supply for such Rejected Titles that B&T does not stock or supply, but B&T Fulfillment shall at all times have a right of first refusal to supply any
Rejected Titles that any other supplier proposes to supply on substantially the same terms and conditions proposed by such other supplier. If Baker & Taylor declines to exercise its right of first refusal with respect to any such Rejected
Titles, Varsity may purchase such Rejected Titles from the other supplier only on the terms disclosed and made available to Baker & Taylor pursuant to the aforementioned right of first refusal. If Baker & Taylor declines at any time to
exercise a right of first refusal, such decision shall not operate to waive any other right of first refusal with respect to any other event giving rise to such right. All such Rejected Titles purchased from the other supplier shall become VRTY
titles and shall be subject to all provisions hereof relating to VRTY titles. 

  

	 	•	 	 Notwithstanding anything contained herein to the contrary, the parties agree that if B&T Fulfillment materially changes a classification category pursuant to
Section 18 hereof, or the specific titles classified therein, which results in a material reduction in the discount available to Varsity hereunder, Varsity shall have the right to seek other sources of supply only for the affected titles
(“Other Supplier”). In each such event, B&T Fulfillment shall have the right of first refusal to supply the affected titles proposed to be supplied by the Other Supplier on substantially the same terms and conditions proposed by the
Other Supplier. If Baker & Taylor declines to exercise its right of first refusal with respect to any such titles, Varsity may purchase such titles from the Other Supplier only on the terms disclosed and made available to Baker & Taylor
pursuant to the aforementioned right of first refusal. If Baker & Taylor declines at any time to exercise a right of first refusal, such decision shall not operate to waive any other right of first refusal with respect to any other event 

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 11 

	 	 
giving rise to such right. All such titles purchased from the Other Supplier shall become VRTY titles and shall be subject to all provisions hereof relating
to VRTY titles. 

  

	 	•	 	The Amended and Restated Drop Ship Agreement between B&T and Varsity dated as of October 1,1999, as amended, sets forth the terms and conditions under which B&T
Fulfillment’s services shall be performed. 

  
 b. Section 1.4 and Schedule 1.4 of the Operating Agreement are hereby deleted in their entirety. 
  
 c. Capitalized terms used in this Section 20, including but not limited to capitalized terms used in Schedule 1.4 attached hereto, but not defined herein
shall have the meanings assigned to them in the Operating Agreement. 
  

	20.	Drop Ship Agreement: 

  
 a. Section 5.2 (b) of the Drop Ship Agreement is hereby amended by deleting the word “stocking”. 
  
 b. Section 10.4 of the Drop Ship Agreement is hereby amended by deleting the
words “501 South Gladiolus Street, Momence Illinois 60954-1799, Attn: Credit Manager” and replacing them with the words “2709 Water Ridge Parkway, Suite 500, Charlotte, NC 29217 Attention: Chief Financial Officer”. 
  
 c. Schedule 5.2 of the Drop Ship Agreement is hereby deleted and replaced by
Schedule 5.2 attached to and made a part of the 2004/2005 Agreement. 
  
 d. Schedule 6.2 of the Drop Ship Agreement is hereby deleted and replaced by Schedule 6.2 attached to and made a part of the 2004/2005 Agreement. 
  
 e. Capitalized terms used in this Section 21, including but not limited to capitalized terms used in Schedule 5.2 and Schedule 6.2 attached hereto, but
not defined herein shall have the meanings assigned to them in the Drop Ship Agreement. 
  

	21.	Promotional and Customer Services Agreement: 

  
 a. Section II (ii) of the Promotional and Customer Services Agreement between Varsity and B&T dated as of October 1, 1999, as amended (the
“Promotional and Customer Services Agreement”), is hereby amended by deleting the words “procure shipping boxes customized with the Company’s name and logo” and replacing them with the words “ship books in generic CDF
packaging with packing list and supporting label complying with mutually agreeable specifications”. 
  
 b. Capitalized terms used in this Section 22 but not defined herein shall have the meanings assigned to them in the Promotional and Customer Services
Agreement. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 12 

	22.	Notices: All notices, demands, consents, approvals and requests given by either party under the 2004/2005 Agreement or under any of the agreements listed in Schedule 1
shall be in writing and shall be deemed effectively given and received upon delivery in person, or one (1) business day after delivery by a nationally recognized overnight courier service, or four (4) business days after deposit in the United States
mail via certified mail (return receipt requested), return postage pre-paid, in each case addressed as follows: 

  
 If to B&T Fulfillment: 
  
 Baker & Taylor Fulfillment, Inc. 
 2709
Water Ridge Parkway, Suite 500 
 Charlotte, NC 28217 
 Attention: Chief Financial Officer 
  
 With copy to: 
  
 Baker & Taylor Fulfillment, Inc.

 2709 Water Ridge Parkway, Suite 500 
 Charlotte, NC 28217 
 Attention: General Counsel 
  
 If to B&T: 
  
 Baker & Taylor, Inc. 
 2709 Water Ridge
Parkway, Suite 500 
 Charlotte, NC 28217 
 Attention: Chief Financial Officer 
  
 With copy to: 
  
 Baker & Taylor, Inc. 

2709 Water Ridge Parkway, Suite 500 
 Charlotte, NC 28217 
 Attention: General Counsel 
  
 If to Varsity: 
  
 Varsity Group Inc. 
 1850 M Street, Suite
1150 
 Washington, DC 20036 
 Attention: President and CEO 
  
 With copy to:

  
 Varsity Group Inc. 
 1850 M Street, Suite 1150 
 Washington, DC
20036 
 Attention: Chief Financial Officer 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 13 

 Either party may change its address for notice purposes from time to time by providing written notice of
such change to the other party in accordance with this Section 22. Section 5.7 of the Operating Agreement between Baker & Taylor, Inc. and VarsityBooks.com Inc., dated October 1, 1999, as amended, Section 10.7 of the Amended and Restated Drop
Ship Agreement between Baker & Taylor, Inc. and VarsityBooks.com Inc., dated October 1, 1999, as amended, Section IV.E. of the Promotional and Customer Services Agreement between Baker & Taylor, Inc. and VarsityBooks.com Inc., dated October
1, 1999, as amended, and Section 8.0 of the Amended and Restated Data License Agreement between Baker & Taylor, Inc. and VarsityBooks.com Inc., dated October 1, 1999, as amended, are hereby deleted in their entirety and replaced by the foregoing
notice provision of this Section 22. 
  

	23.	Section Headings: The section headings used herein are for convenience of reference only and are not part of this 2004/2005 Agreement, and shall in no way be
deemed to define, limit, describe, or modify the meaning of any provision of hereof. 

  

	24.	Construction: This 2004/2005 Agreement has been fully reviewed and negotiated by the parties and, if desired, their respective legal counsel. Accordingly, in
interpreting this 2004/2005 Agreement, no weight shall be placed upon which party or its counsel drafted any provision being interpreted. 

  

	25.	Amendments: No provision of this 2004/2005 Agreement may be modified, waived or amended except by a written instrument duly executed by each of the parties. Any
such modifications, waivers or amendments shall not require additional consideration to be effective. 

  

	26.	Counterparts: This 2004/2005 Agreement may be signed in counterparts both of which taken together shall be deemed one original. Telecopied facsimiles of a
signed counterpart of this Agreement from one party to the other will be deemed to be delivery of a signed counterpart by the party sending the telecopied facsimile. 

  

	27.	Agreement Extension and Termination: All agreements listed in Schedule 1 are hereby extended through June 30, 2006. This 2004/2005 Agreement and all agreements
listed in Schedule 1 shall be automatically extended for an additional year unless either party provides to the other party one hundred twenty (120) days’ advance written notice of its intention for this and all agreements listed in Schedule 1
to expire on June 30, 2006. 

  
 Except as modified hereby,
all other terms and conditions agreed to between the parties remain unchanged. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 14 

			
	 Very truly yours,

	
	 BAKER & TAYLOR FULFILLMENT, INC.

		
	By:	 	 /s/ Illegible

	 Title:
	 	 Chairman, CEO

  
 Acknowledged and agreed in
all respects as of the date first above written. 
  

			
	VARSITY GROUP INC.
		
	By:	 	 /s/ Jack M. Benson

	 	 	 Jack M. Benson

	 Title: CFO

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 15 

  
 SCHEDULE 1 

 
 List of Agreements 
  

	1.	Operating Agreement between Baker & Taylor, Inc. and VarsityBooks. com Inc., dated October 1, 1999, as amended hereby; 

  

	2.	Amended and Restated Drop Ship Agreement between Baker & Taylor, Inc. and VarsityBooks.com Inc., dated October 1, 1999, as amended hereby; 

  

	3.	Promotional and Customer Services Agreement between Baker & Taylor, Inc. and VarsityBooks.com Inc., dated October 1, 1999, as amended hereby; and

  

	4.	Amended and Restated Data License Agreement between Baker & Taylor, Inc. and VarsityBooks.com Inc., dated October 1, 1999, as amended hereby. 

  

	5.	The parties hereby agree on the below procedures with regard to processing a return request from Varsity’s new partner schools: 

  
 a. The school will submit an excel file containing the ISBN and quantity
for each title to be returned. B&T’s Buying Dept. will review the titles and indicate to Varsity which books B&T can accept. Varsity will notify the school to return only the books for which a return authorization has been issued by
B&T. Varsity will notify the school that returned books must be in saleable condition. 
  
 b. Varsity will require the school to use a traceable delivery method and to advise B&T when the shipment will take place. B&T will supply
Varsity with an “attention of name to put in B&T’s address so that B&T can identify the shipment when it arrives. 
  
 c. Varsity will require the school to include a packing list in the shipment listing the books by title and ISBN. Varsity will also require the school
to mail a copy of the packing list to Varsity and B&T’s Buying Dept. 
  
 d. If B&T receives books that are not acceptable (out of print, shopworn, non-returnable), B&T will promptly send the books back to the school and charge Varsity * for each book handled plus freight.

  
 e. Within two weeks after receipt of the eligible
books, B&T will apply a credit to Varsity’s account at the then current cost of the books, less * for each book handled. The per book charge is to cover the higher costs of handling a mixed shipment of this type, returns to publishers, and
the capital cost of paying (crediting) Varsity up front. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 16 

 f. On or before March 30 preceding each Fall Selling Season, Varsity shall provide written notice to
B&T of the following: a) the number of schools that Varsity anticipates will participate in the returns program outlined above and the number of books that Varsity anticipates will be returned and b) whether the schools expect to re-purchase the
books and, if so, the expected amount of such re-purchases. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 17 

  
 SCHEDULE 5.2

  
 Drop Ship Agreement 
 Fee Reimbursement 
  
 B&T Fulfillment will reimburse Retailer the sum of * per each Free Return book, provided Retailer is then in compliance with its obligations under the
Promotional and Customer Services Agreement dated as of October 1, 1999, as amended. Notwithstanding anything in this Agreement to the contrary, the parties agree that neither party shall disclose the terms of this Schedule without the prior written
consent of the other party. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 18 

  
 SCHEDULE 6.2

  
 Drop Ship Agreement 
 Pricing Schedule 
  

					
	 Definition

	  	 Price Indicator

	  	 Terms*

	Trade Editions (Adult Hardcover) (Popular Fiction & Non-fiction)	  	0 (The number “zero”.)	  	*
			
	High demand materials designed for the general consumer, usually dealing with a subject matter having broad mass appeal.	  	 	  	 
			
	Trade Editions (Juvenile Hardcover) (Popular Fiction & Non-fiction)	  	J	  	*
			
	High demand, juvenile materials designed for the general consumer, usually dealing with a subject matter having broad mass appeal.	  	 	  	 
			
	 Spoken Word Audio (Popular Fiction & Non-fiction)
 (Includes some popular unabridged)
	  	H	  	*
			
	Primarily abridged materials designed for the general consumer, usually dealing with a subject matter having broad mass appeal.	  	 	  	 
			
	Juvenile Quality Paperback Editions	  	G	  	*
			
	High demand, juvenile paperback materials other than the standard rack size paperback, typically found in bookstores and other retail outlets.	  	 	  	 
			
	Adult Quality Paperback Editions	  	B	  	*
			
	High demand paperback materials other than the standard rack size paperback, typically found in bookstores and other retail outlets.	  	 	  	 
			
	Mass Market Editions	  	P	  	*
			
	A standard rack size paperback typically found in bookstores or other retail outlets.	  	 	  	 
			
	Single Edition reinforced	  	R	  	*
			
	A high quality binding designed to provide a long shelf life in a heavy use environment. Subject content can include both fictional and non-fiction works appealing to juveniles as well as
adults.	  	 	  	 
			
	Publisher’s Library Edition	  	Z	  	*
			
	Fiction as well as non-fiction materials appealing to both juveniles and adults, designed with the ragged durability required of the environment typically found in a library setting.	  	 	  	 
			
	Imported Foreign Language Titles	  	F	  	*
			
	University Press Trade Editions	  	A	  	*
			
	Computer Books	  	C	  	*

  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 19 

					
	Text, Technical, Reference & Small Press Category	  	L/M/N/S/T/V/X/	  	*
			
	Materials including, but not limited to text, technical, reference, small press and some university press titles (excluding University Press Trade Editions), as well as titles purchased from
publishers on a non-returnable basis and those publishers that extend little discount to Baker & Taylor and publishers whose titles have limited sales volume based upon a semiannual review. Materials in this category are both adult and juvenile
and may be of any binding.	  	 	  	 
			
	Enhanced Service Program	  	Y	  	*
	(Includes text, technical, reference & net titles)	  	Q	  
			
	Promotional & Service Fees	  	 	  	*
			
	Insert Fee	  	 	  	*
			
	Gift Wrap	  	 	  	*
			
	Freight	  	Ground Shipments	  	 Based upon B&T
 Fulfillment actual costs plus
 a mutually agreed upon
 nominal markup.

			
	 	  	 UPS Commercial/Residential
 Ground Service
	  	 * discount off total UPS
 Commercial/Residential
 Ground Service related
 charges billed to Varsity

			
	 	  	UPS Second Day Air Service	  	 * discount off total
 Second Day Air Service
 related charges billed to
 Varsity

			
	 	  	UPS Next Day Air Service	  	 * discount off total Next
 Day Air Service related
 charges billed to Varsity

  

	*	All stated discounts are stated as a percentage off of list price. 

  
 The discounts vary based on the classification of books into general categories, some of which are determined by general marketing criteria. Baker &
Taylor has utilized commercially reasonable efforts to categorize books for pricing purposes by considering such factors as binding, cost of acquisition, general marketing categories, publisher’s discount, customer demand, returnability to
publishers, and other factors. Baker & Taylor reserves the sole right to be the final determinant of the pricing category. Please note that Baker & Taylor provides, a detailed invoice that identifies the publisher’s current suggested
list price, the discount offered, and the exact price charged for each title ordered. 
  
 This agreement affords the provision of books based upon stated discounts from the publisher’s current list price. Please note that the publisher’s list price, is subject to change without notice. In
addition, please note that for some college textbook publishers where no publisher list price is assigned by the publisher, Baker & Taylor will assign a list price for these titles. In such instances, the applicable list price is based upon a
standardized formula that considers Baker & Taylor’s costs of doing business. 
  

	[*	INDICATES THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND THE REMOVED INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.] 

  
 20

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