STOCKPURCHASE AGREEMENT dated asof August 7,2009 among BARNES& NOBLE, INC., LEONARDRIGGIO and LOUISERIGGIO relatingto the purchase and sale of 100%of the Capital Stock of BARNES& NOBLE COLLEGE BOOKSELLERS, INC. TABLEOF CONTENTS

Sellers jointly and severally represent and warrant to Buyer as of the date hereof and as of the Closing Date that:

Section 3.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Sellers have heretofore delivered to Buyer true and complete copies of the certificate of incorporation and bylaws of the Company as currently in effect.

Section 3.02. Capacity and Authorization. (a) Each Seller has full capacity and right to execute and deliver this Agreement and each Ancillary Agreement to which he or she is or is to be a party and to perform his or her obligations hereunder and thereunder. This Agreement and each Ancillary Agreement to which a Seller is or is to be a party constitutes a valid and binding agreement of such Seller.

(b) The execution, delivery and performance of each Ancillary Agreement to which a Seller Entity (other than Sellers) is or is to be a party, and the consummation of the transactions contemplated thereby, are within such Seller Entity’s corporate or limited liability company powers (as applicable) and have been duly authorized by all necessary corporate or limited liability company action (as applicable) on the part of such Seller Entity. Each Ancillary Agreement

to which a Seller Entity is or is to be a party constitutes a valid and binding obligation of such Seller Entity.

Section 3.03. Governmental Authorization. The execution, delivery and performance by Sellers of this Agreement and the execution, delivery and performance by each Seller Entity of the Ancillary Agreements to which such Seller Entity is or is to be party, and the consummation of the transactions contemplated hereby and thereby, require no action by or in respect of, or filing with, any Governmental Authority, other than (i) compliance with any applicable requirements of the HSR Act and (ii) filings with the Federal Aviation Administration following the transfer of the limited liability company interest in B&N College Marketing Services, LLC in connection with the Restructuring Transactions.

Section 3.04. Noncontravention. The execution, delivery and performance by Sellers of this Agreement and the execution, delivery and performance by each Seller Entity of the Ancillary Agreements to which such Seller Entity is or is to be party, and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate the certificate of incorporation or bylaws (or similar organizational documents) of such Seller Entity, (ii) assuming compliance with the matters referred to in Section 3.03, violate any Applicable Law, (iii) except as set forth in Section 3.04(iii) of the Disclosure Schedule, require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of a Seller or the Company or any of its Subsidiaries or to a loss of any benefit to which a Seller or the Company or any of its Subsidiaries is entitled under any provision of any Contract binding upon a Seller or the Company or any of its Subsidiaries, except for any defaults, terminations, cancellations, accelerations of any rights or obligations, or loss of benefits that would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries taken as a whole, or (iv) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries (other than Permitted Liens on assets of the Company or any of its Subsidiaries other than the Company Marks).

Section 3.05. Capitalization. (a) The authorized capital stock of the Company consists of (i) 200 Class A Common Shares, no par value, (ii) 200 Class B Common Shares, no par value, (iii) 1,000 Class A Preferred Shares, par value $100, (iv) 1,100 Class B Preferred Shares, par value $1,000 and (v) 475,000 Class C Preference Shares, par value $1.00. As of the date hereof, there are outstanding 107.33 Class A Common Shares, and no other shares of capital stock of the Company. On and following the date the Company made the election described in Section 3.27(i) to be treated as an “S Corporation” and through the date hereof, (A) the only outstanding shares of capital stock of the Company have

been the Class A Common Shares and Class B Common Shares, which together are treated as one class of stock under section 1361 of the Code, and (B) the Company has not issued or entered into any instrument, obligation or arrangement (including the Synthetic Rights) treated as an additional class of stock pursuant to Treasury regulations section 1.1361-1(l)(4).

(b) All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable, except to the extent provided under Section 630 of the New York Business Corporation Law. Except as set forth in this Section 3.05, there are no outstanding (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (iii) options or other rights to acquire from the Company, or other obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (the items in Sections 3.05(b)(i), 3.05(b)(ii) and 3.05(b)(iii) being referred to collectively as the “Company Securities”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.

Section 3.06. Ownership of Shares. Each Seller is the record and beneficial owner of the Shares set forth opposite his or her name in Section 3.06 of the Disclosure Schedule (which Shares collectively constitute 100% of the issued and outstanding capital stock of the Company), free and clear of any Lien and any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of the Shares), and shall transfer and deliver to Buyer at the Closing valid title to the Shares free and clear of any Lien and any such limitation or restriction.

Section 3.07. Subsidiaries. (a) Each Subsidiary of the Company is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has all organizational powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All Subsidiaries of the Company and their respective jurisdictions of organization are identified in Section 3.07 of the Disclosure Schedule. Sellers have heretofore delivered to Buyer true and complete copies of the organizational documents of each Subsidiary of the Company as currently in effect. B&N College Marketing Services, LLC holds no assets other than those described in Section 1.01(b) of the Disclosure Schedule.

 

(b) All of the outstanding capital stock or other voting securities of each of the Company’s Subsidiaries is owned by the Company, directly or indirectly, free and clear of any Lien and any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities). There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of any Subsidiary of the Company or (ii) options or other rights to acquire from the Company or any of its Subsidiaries, or other obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of any Subsidiary of the Company (the items in Sections 3.07(b)(i) and 3.07(b)(ii) being referred to collectively as the “Subsidiary Securities”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.

Section 3.08. Financial Statements. (a) The audited consolidated balance sheets as of April 28, 2007, May 3, 2008 and May 2, 2009, and the related audited consolidated statements of income and cash flows for each of the fiscal years then ended, of the Company and its Subsidiaries fairly present, in conformity with GAAP applied on a consistent basis (except (x) as may be indicated in the notes thereto and (y) for the specific impact of purchase accounting), the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended.

(c) None of Sellers, the Company, any of the Company’s Subsidiaries or, to the knowledge of Sellers, any of their respective directors, officers,

employees, auditors or accountants has received or otherwise had or obtained knowledge of any material written complaint, allegation or claim regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices.

Section 3.09. Absence of Certain Changes. Except as set forth in Section 3.09 of the Disclosure Schedule, since the Balance Sheet Date, (a) the business of the Company and its Subsidiaries has been conducted in the ordinary course of business consistent with past practice, (b) there has not been any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (c) neither the Company nor any of its Subsidiaries has taken any action that, if taken after the date hereof and prior to the Closing Date without Buyer’s consent, would constitute a breach of Section 5.01 (including, for the avoidance of doubt, Section 5.01(b)).

Section 3.10. No Undisclosed Liabilities. Except as set forth in Section 3.10 of the Disclosure Schedule, there are no liabilities of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than:

(a) liabilities provided for in the Pro Forma Balance Sheet or disclosed in the notes thereto;

(b) liabilities incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date;

(c) liabilities to be assumed by Sellers in connection with the Restructuring Transactions; and

(d) other liabilities which, individually or in the aggregate, are not material to the Company and its Subsidiaries, taken as a whole.

Section 3.11. Related Party Transactions. (a) Except as set forth in Section 3.11(a) of the Disclosure Schedule or with respect to any transactions with Buyer or its Subsidiaries, (x) no (1) Seller, (2) member of the “immediate family” (as such term is defined in Rule 16a-1 of the 1934 Act) of a Seller or (3) Affiliate of a Seller or of the Company or any of its Subsidiaries (each of the foregoing, a “Primary Interested Person”) and (y) to the knowledge of Sellers (and to the extent the following Persons are not Primary Interested Persons), no director, officer or “associate” (as such term is defined in Rule 16a-1 of the 1934 Act) of the Company or any of its Subsidiaries or of any Primary Interested

Person (each of the foregoing, a “Secondary Interested Person”; and, together with Primary Interested Persons, collectively, “Interested Persons”) has or has had in the past five years, directly or indirectly, (i) an economic interest in any Person that has furnished or sold, or furnishes or sells, services or products that the Company or any of its Subsidiaries furnishes or sells; (ii) an economic or beneficial interest in any Person that purchases from, or sells or furnishes to, the Company or any of its Subsidiaries any goods or services; (iii) an economic or beneficial interest in any Contract disclosed in the Disclosure Schedule, other than, in the case of Sellers, by reason of their ownership interest in the Company; or (iv) any contractual or other arrangement with the Company and any of its Subsidiaries. Section 3.11(a) of the Disclosure Schedule specifically sets forth, for each disclosure item included therein, (A) the identity of the Interested Person, (B) the relationship(s) of such Interested Person with Sellers, the Company or its Subsidiaries, as the case may be, (C) the nature and magnitude of the interest or arrangement so disclosed and (D) any and all Contracts reflecting the interest or arrangement so disclosed (true and complete copies which have been delivered to Buyer).

(b) Except as set forth in Section 3.11(b) of the Disclosure Schedule, in the past five years, neither the Company nor any of its Subsidiaries has made any payment to any third party (i) on behalf of any Primary Interested Person or, to the knowledge of Sellers, any Secondary Interested Person or (ii) in connection with any benefit received by any Primary Interested Person or, to the knowledge of Sellers, any Secondary Interested Person (except, in each case, for payments made in the ordinary course of business in connection with benefits received by Interested Persons in their capacity as officers, directors or employees of the Company or any of its Subsidiaries, so long as such benefits relate to and are in furtherance of the Company’s business and are of the type ordinarily received by officers, directors and employees in such capacity).

(c) Section 3.11(c) of the Disclosure Schedule contains a complete list of all intercompany balances as of the Balance Sheet Date between Sellers and their respective Affiliates and Interested Persons, on the one hand, and the Company and its Subsidiaries, on the other hand (other than intercompany balances between Buyer and its Subsidiaries, on the one hand, and the Company and its Subsidiaries, on the other hand). Since the Balance Sheet Date there has not been any accrual of liability by the Company or any of its Subsidiaries to a Seller or any other Interested Person or other transaction between the Company or any of its Subsidiaries, on the one hand, and a Seller or any other Interested Person, on the other hand, except in the ordinary course of business consistent with past practice.

Section 3.12. Material Contracts. (a) Except as set forth in Section 3.12(a) of the Disclosure Schedule or as otherwise permitted under

Section 5.01, neither the Company nor any of its Subsidiaries is a party to or bound by:

(ii) other than the Bookstore Services Agreements, any lease or sublease (whether of real or personal property) that requires (A) annual payments by or to the Company and its Subsidiaries of $1 million or more or (B) aggregate payments by or to the Company and its Subsidiaries of $5 million or more;

(iii) any Contract for the purchase of materials, supplies, goods, services, equipment or other assets providing for either (A) annual payments by the Company and its Subsidiaries of $1 million or more or (B) aggregate payments by the Company and its Subsidiaries of $5 million or more;

(iv) any sales, distribution or other similar Contract providing for the sale by the Company or any of its Subsidiaries of materials, supplies, goods, services, equipment or other assets that provides for either (A) annual payments to the Company and its Subsidiaries of $1 million or more or (B) aggregate payments to the Company and its Subsidiaries of $5 million or more;

(ix) any agency, dealer, sales representative, marketing or other similar Contract;

(x) any Contract that limits or purports to limit the freedom of the Company, any of its Subsidiaries or Affiliates, or Buyer or any of its Affiliates to compete in any line of business or with any Person or in any

area or which would so limit the freedom of the Company or any of its Subsidiaries or Affiliates, or Buyer or any of its Affiliates after the Closing Date;

(xii) any Contract with any director or officer of the Company or any of its Subsidiaries or with any “associate” or any member of the “immediate family” (as such terms are respectively defined in Rules 12b-2 and 16a-1 of the 1934 Act) of any such director or officer; or

(xiii) any other Contract not made in the ordinary course of business consistent with past practice that is material to the Company and its Subsidiaries, taken as a whole.

(b) Each Contract required to be disclosed pursuant to this Section 3.12 (each, a “Material Contract”) is a valid and binding agreement of the Company or one of its Subsidiaries, as the case may be, and is in full force and effect, and none of the Company, any of its Subsidiaries or, to the knowledge of Sellers, any other party thereto is in default or breach in any material respect under the terms of any such Material Contract, and, to the knowledge of Sellers, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute any event of default thereunder. True and complete copies of each such Material Contract (other than the Bookstore Services Agreements) have been delivered to Buyer and true and complete copies of the Bookstore Services Agreements have been made available to Buyer.

(c) The Company and its Subsidiaries (as applicable) have, in all material respects, correctly calculated and duly and timely (subject to any applicable grace periods) made each payment required to be made by the Company or its Subsidiaries to the other parties to the Bookstore Services Agreements, including each payment that is calculated as a percentage of gross sales (or any similar metric).

Section 3.13. Litigation. (a) Except as set forth in Section 3.13(a) of the Disclosure Schedule, there is no action, suit, inquiry, investigation or proceeding

 

pending against, or, to the knowledge of Sellers, threatened against either Seller, the Company or any of its Subsidiaries or any of their respective properties before any arbitrator or any Governmental Authority, or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement or the Restructuring Transactions.

(b) Except as set forth in Section 3.13(b) of the Disclosure Schedule, to the knowledge of Sellers, there is no action, suit, inquiry, investigation or proceeding pending or threatened against any college or university that is party to a Bookstore Services Agreement (or any Person affiliated with or otherwise controlled by, controlling or under common control with any such college or university) before any arbitrator or Governmental Authority that would reasonably be expected (if determined adversely to such college, university or other Person) to have a material impact (whether directly or indirectly) on the business or operations of the Company or any of its Subsidiaries.

Section 3.14. Compliance with Laws and Court Orders. Neither the Company nor any of its Subsidiaries is in material violation of, and has not since January 1, 2005 violated in any material respect, and, to the knowledge of Sellers, is not under investigation with respect to and has not been threatened to be charged with or given notice of any material violation of, any Applicable Law.

Section 3.15. Beneficial Ownership Reporting Obligations. (a) The Company has filed with the Securities and Exchange Commission each beneficial ownership report and other document required to be filed by the Company (collectively, the “Beneficial Ownership Reports”).

(b) As of its filing date (and as of the date of any amendment), each Beneficial Ownership Report complied, and each Beneficial Ownership Report filed subsequent to the date hereof will comply, with the applicable requirements of the 1934 Act.

(c) As of its filing date (or, if amended or superseded by a filing prior to the date hereof, on the date of such filing), each Beneficial Ownership Report filed pursuant to the 1934 Act did not, and each Beneficial Ownership Report filed subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

Section 3.16. Absence of Certain Business Practices. None of the Company, any of its Subsidiaries or, to the knowledge of Sellers, any directors, officers, employees or agents of the Company or any of its Subsidiaries has (i) used any funds or assets for unlawful or improper contributions, gifts,

entertainment or other unlawful expenses in connection with the business of the Company or any of its Subsidiaries; (ii) made any unlawful or improper payment or contribution, or given any unlawful or improper gift, similar benefit or anything of value, to officials or employees of any school or Governmental Authority, or to any other Person who was (at the time such payment was made or such gift or benefit was given) in a position to help or hinder the business of the Company and its Subsidiaries; (iii) been, at any time during the past ten years, the subject of any bribery, improper contribution or anti-kickback investigation by any Governmental Authority; or (iv) violated in any respect the Foreign Corrupt Practices Act of 1977 or any Applicable Law relating to public procurement.

Section 3.17. Properties. (a) Section 3.17(a) of the Disclosure Schedule correctly sets forth the address of (i) all real property that is the subject of any Bookstore Services Agreement as of the date hereof (the “Managed Real Property”) and (ii) all other real property that is the subject of a lease or sublease to which the Company or any of its Subsidiaries is a party as of the date hereof (the “Leased Real Property”; and, together with the Managed Real Property, the “Real Property”). Neither the Company nor any of its Subsidiaries has owned any real property since January 1, 1999.

(b) The Company and its Subsidiaries have good and marketable title to, or in the case of leased property and assets have valid leasehold interests in, all property and assets (whether real, personal, tangible or intangible) reflected on the Balance Sheet or acquired after the Balance Sheet Date, except for properties and assets sold since the Balance Sheet Date in the ordinary course of business consistent with past practice. None of such property or assets is subject to any Lien, except for Permitted Liens.

(c) There are no developments affecting any such property or assets pending or, to the knowledge of Sellers, threatened, which might materially detract from the value, materially interfere with any present or intended use or materially adversely affect the marketability of any such property or assets.

(d) No notice of a violation of any Applicable Law, or of any covenant, condition, easement or restriction which is material to the Real Property or its use or occupancy, has been given to the Company, its Subsidiaries or Sellers.

(e) After giving effect to the Restructuring Transactions, as of the Closing, the property and assets owned or leased by the Company and its Subsidiaries, or which they otherwise have the right to use, will constitute all of the property and assets used or held for use in connection with the businesses of the Company or any of its Subsidiaries and are adequate and sufficient to conduct such businesses as currently conducted.

Section 3.18. Intellectual Property. (a) Section 3.18(a)(i) of the Disclosure Schedule contains a true and complete list of each of the registrations and applications for registration of Intellectual Property Rights owned or otherwise controlled by the Company or its Subsidiaries as of the date hereof (“Registered Intellectual Property Rights”). Section 3.18(a)(ii) of the Disclosure Schedule contains a true and complete list of all Contracts (whether written or otherwise, including license agreements, research agreements, development agreements, distribution agreements, settlement agreements, consent to use agreements and covenants not to sue, but excluding licenses for off-the- shelf software that is generally available on nondiscriminatory pricing terms and that has an aggregate acquisition cost of less than $10,000) to which the Company or any of its Subsidiaries is a party or otherwise bound as of the date hereof, granting or restricting the Company, its Subsidiaries or any Person, any right to use, exploit or practice any (x) Owned Intellectual Property Rights or (y) Licensed Intellectual Property Rights.

(b) Except to the extent expressly permitted under any Contract set forth in Section 3.18(a)(ii)(x) of the Disclosure Schedule, no Person other than the Company or its Subsidiaries has any current or contingent right to (i) use any Material Owned Intellectual Property Rights, (ii) grant rights under any Material Owned Intellectual Property Rights to any Person or (iii) restrict, limit or otherwise adversely affect the rights of the Company and its Subsidiaries in and to any Material Owned Intellectual Property Rights.

(c) The Licensed Intellectual Property Rights and the Owned Intellectual Property Rights together constitute all the Intellectual Property Rights necessary to, or used or held for use in, the conduct of the business of the Company and its Subsidiaries as currently conducted, in all material respects. There exist no material restrictions on the disclosure, use, license or transfer of the Owned Intellectual Property Rights. The consummation of the transactions contemplated by this Agreement will not materially alter, encumber, impair or extinguish any Owned Intellectual Property Rights or Licensed Intellectual Property Rights.

(d) None of the Company and its Subsidiaries has infringed, misappropriated or otherwise violated any Intellectual Property Right of any third party. There is no claim, action, suit, investigation or proceeding pending or, to the knowledge of Sellers, threatened against the Company, any of its Subsidiaries, or any present or former officer, director or employee of the Company or any of its Subsidiaries, (x) based upon, or challenging or seeking to deny or restrict, the rights of the Company or any of its Subsidiaries in any of the Owned Intellectual Property Rights or the Licensed Intellectual Property Rights, (y) alleging that the use of the Owned Intellectual Property Rights or the Licensed Intellectual Property Rights or any services provided, processes used or products

manufactured, used, imported or sold by the Company or any of its Subsidiaries do or may conflict with, misappropriate, infringe or otherwise violate any Intellectual Property Right of any third party or (z) otherwise alleging that the Company or any of its Subsidiaries have infringed, misappropriated or otherwise violated any Intellectual Property Right of any third party.

(e) None of the Owned Intellectual Property Rights and Licensed Intellectual Property Rights material to the operation of the business of the Company and its Subsidiaries has been adjudged invalid or unenforceable in whole or in part, and all (i) Material Owned Intellectual Property Rights and (ii) to the knowledge of Sellers, Owned Intellectual Property Rights (to the extent not included in the Material Owned Intellectual Property Rights) and Licensed Intellectual Property Rights, are valid and enforceable.

(f) Except as set forth in Section 3.18(f) of the Disclosure Schedule, the Company and its Subsidiaries (i) solely and exclusively own all right, title and interest in and to all Owned Intellectual Property Rights (including the Registered Intellectual Property Rights) and (ii) hold all of the Company’s and its Subsidiaries’ licenses under the Licensed Intellectual Property Rights, in each case, free and clear of any Lien. In each case where any Registered Intellectual Property Right is held by assignment, the assignment has been duly recorded with the Governmental Authority from which such Registered Intellectual Property Right issued or before which an application for registration is pending. The Company and its Subsidiaries have taken all actions necessary to maintain and protect the Registered Intellectual Property Rights (including payment of applicable maintenance fees and filing of applicable statements of use).

(g) To the knowledge of Sellers, no Person has infringed, misappropriated or otherwise violated any Material Owned Intellectual Property Right or Material Licensed Intellectual Property Right. The Company and its Subsidiaries have taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of all confidential Intellectual Property Rights. None of the Material Owned Intellectual Property Rights or the Material Licensed Intellectual Property Rights whose value to the Company or any of its Subsidiaries is contingent upon maintaining the confidentiality thereof has been disclosed other than to employees, representatives and agents of the Company or any of its Subsidiaries all of whom are bound by written confidentiality agreements substantially in the form previously disclosed to Buyer.

(h) No Public Software forms part of, has been used in connection with the development of, is incorporated into or has been distributed with, in whole or in part, any Company Software in a manner that would require the licensing, disclosure or distribution of a material portion of any source code for such Company Software owned or developed by or for the Company or its Subsidiaries

(other than source code that is a part of such Public Software) to licensees or any other Person.

(i) The IT Assets operate and perform in all material respects in a manner that permits the Company and its Subsidiaries to conduct their respective businesses as currently conducted and, to the knowledge of Sellers, are free from all material defects. To the knowledge of Sellers, no person has gained unauthorized access to the IT Assets.

Section 3.19. Privacy. The Company and its Subsidiaries are in compliance in all material respects with (a) all Applicable Law relating to privacy, data protection and the collection and use of personal information and user information gathered or accessed in the course of the operations of the Company or any of its Subsidiaries, (b) except as set forth in Section 3.19(b) of the Disclosure Schedule, Payment Card Industry Data Security Standards (“PCI DSS”) as applicable and as in effect from time to time and (c) all rules, policies and procedures established by the Company or any of its Subsidiaries from time to time with respect to the foregoing. No claims have been asserted or threatened against the Company or any of its Subsidiaries (and to the knowledge of Sellers, no such claims are likely to be asserted or threatened against the Company or any of its Subsidiaries) alleging a violation of any Person’s privacy, personal or confidentiality rights under any such Applicable Law, the PCI DSS or the Company’s or its Subsidiaries’ rules, policies or procedures, and the consummation of the transactions contemplated by this Agreement will not breach or otherwise cause any violation of the foregoing. With respect to any personal and user information gathered or accessed in the course of the operation of the Company or any of its Subsidiaries, the Company and its Subsidiaries have at all times taken all steps reasonably necessary (including implementing and monitoring compliance with adequate measures with respect to technical and physical security) to ensure that such information is protected against loss and against unauthorized access, use, modification, disclosure or other misuse. To the knowledge of Sellers, there has been no unauthorized access to or other misuse of that information.

 

Section 3.20. Insurance Coverage. Sellers have furnished to Buyer a list of, and true and complete copies of, all insurance policies and fidelity bonds maintained by the Company or any of its Subsidiaries relating to the assets, business, operations, employees, officers or directors of the Company and its Subsidiaries. There is no claim by the Company or any of its Subsidiaries pending under any such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights. All premiums payable under all such policies and bonds have been timely paid, and the Company and its Subsidiaries have otherwise complied fully with the terms and

conditions of all such policies and bonds. Such policies and bonds are of the type and in amounts customarily carried by Persons conducting businesses similar to those of the Company and its Subsidiaries.

Section 3.21. Licenses and Permits. Section 3.21 of the Disclosure Schedule correctly describes each material license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company and its Subsidiaries (in each case, issued by a Governmental Authority) required by the Company and its Subsidiaries to conduct their business as presently conducted (the “Permits”), together with the name of the Governmental Authority issuing such Permit. The Permits are valid and in full force and effect, and neither the Company nor any of its Subsidiaries is in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, the Permits. None of the Permits will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated by this Agreement or the Restructuring Transactions.

Section 3.22. Inventories. The inventories set forth in the Balance Sheet were properly stated therein on a LIFO basis at the lesser of cost or fair market value determined in accordance with GAAP applied on a consistent basis. Since the Balance Sheet Date, the inventories of the Company and its Subsidiaries have been maintained in the ordinary course of business consistent with past practice. All such inventories are owned free and clear of all Liens. All of the inventories recorded on the Balance Sheet consist of, and all inventories of the Company and its Subsidiaries on the Closing Date (after giving effect to the Restructuring Transactions) will consist of, items of a quality usable or saleable in the normal course of business consistent with past practice and are and will be in quantities sufficient for the normal operation of the Company and its Subsidiaries consistent with past practice.

Section 3.23. Receivables. All accounts, notes receivable and other receivables (other than receivables collected since the Balance Sheet Date) reflected on the Pro Forma Balance Sheet are, and all accounts and notes receivable arising from or otherwise relating to the business of the Company and its Subsidiaries as of the Closing Date are, valid and bona fide receivables arising in the ordinary course of business. All accounts, notes receivable and other receivables arising out of or relating to such business of the Company and its Subsidiaries as of the Balance Sheet Date have been included in the Pro Forma Balance Sheet in accordance with GAAP applied on a consistent basis.

Section 3.24. Finders’ Fees. Except for Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated, whose fees and expenses will be paid by Sellers, there is no investment banker, broker, finder or other intermediary which

has been retained by or is authorized to act on behalf of Sellers or the Company or any of its Subsidiaries who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement or the Restructuring Transactions.

Section 3.25. Environmental Matters. Except as set forth in Section 3.25 of the Disclosure Schedule:

(a) None of the Sellers, the Company or its Subsidiaries have received notice of any material demand, claim, request for information, citation, summons, order or assessed penalty, no complaint has been filed and no action, suit, inquiry, investigation or proceeding is pending, or, to the knowledge of Sellers, threatened by any Governmental Authority or other Person with respect to any matters relating to the Company or any of its Subsidiaries and relating to or arising out of any Environmental Law, Environmental Permit or Hazardous Substance.

(b) There are no material liabilities of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law, Environmental Permit or Hazardous Substance and there are no facts or conditions which could reasonably be expected to result in or be the basis for any such liability.

(c) Except as could not reasonably be expected to result in or be the basis for any material liability of the Company or any of its Subsidiaries, no Hazardous Substance has been discharged, disposed of, dumped, injected, pumped, deposited, spilled, leaked, emitted or released at, on or under any Real Property or any other property now or previously owned, leased, managed or operated by the Company or any of its Subsidiaries.

(d) No Real Property or any other property now or previously owned, leased, managed or operated by the Company or any of its Subsidiaries or any property to which the Company or any of its Subsidiaries has, directly or indirectly, transported or arranged for the transportation of any Hazardous Substances is listed or, to the knowledge of Sellers, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any analogous federal, state or foreign list of sites requiring investigation or clean-up.

 

(e) The Company and its Subsidiaries are in compliance in all material respects with all applicable Environmental Laws and have obtained and are in compliance with all Environmental Permits.

(f) The consummation of the transactions contemplated by this Agreement and the Restructuring Transactions will not trigger any requirement for any action, consent, approval, registration, remedial action or filing under any Environmental Law, including (i) Sections 22a-134 through 22a-134e of the Connecticut General Statutes (CGS), or the law commonly known as the Connecticut Property Transfer Law, and (ii) the New Jersey Industrial Site Recovery Act.

(g) There has been no material environmental investigation, study, audit, test, review or other analysis conducted that is in the possession of the Company, any of its Subsidiaries or either Seller in relation to the current or prior business of the Company or any of its Subsidiaries, any Real Property or any other property now or previously owned, leased, managed or operated by the Company or any of its Subsidiaries that has not been delivered to Buyer at least five (5) days prior to the date hereof.

(h) For purposes of this Section 3.25, the terms “Company” and “Subsidiary” shall include any entity which is, in whole or in part, a predecessor of the Company or any of its Subsidiaries.

Section 3.26. Employee Matters. (a) Employees. Section 3.26(a) of the Disclosure Schedule sets forth a true and complete list of the names, titles, annual salaries and other compensation of all officers of the Company and its Subsidiaries and all other employees of the Company and its Subsidiaries whose annual base salary exceeds $300,000. To the knowledge of Sellers, none of such employees intends to resign or retire as a result of the transactions contemplated by this Agreement or otherwise within two years after the Closing Date.

(b) Labor Matters. (i) The Company and its Subsidiaries are in material compliance with all currently Applicable Laws respecting employment and employment practices, terms and conditions of employment, wages and hours and employee classification, and are not engaged in any unfair labor practice, failure to comply with which or engagement in which, as the case may be, would reasonably be expected to be material.

(ii) Except as set forth in Section 3.26(b)(ii) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has been a party to or otherwise subject to or obligated with respect to any collective bargaining agreement or other labor agreement with any union or labor organization and

 

there has not been any activity or proceeding of any labor organization or employee group to organize any such employees. Furthermore: (A) there are no unfair labor practice charges or complaints against the Company or any of its Subsidiaries pending before the National Labor Relations Board or any foreign equivalent; (B) there are no labor strikes, slowdowns or stoppages actually pending or threatened against or affecting the Company or any of its Subsidiaries; (C) there are no representation claims or petitions pending before the National Labor Relations Board and there are no questions concerning representation with respect to the employees of the Company or its Subsidiaries; and (D) there are no material grievances or pending arbitration proceedings against the Company or any of its Subsidiaries that arose out of or under any collective bargaining agreement.

(c) Employee Benefit Plans. (i) Section 3.26(c)(i) of the Disclosure Schedule contains a correct and complete list identifying each material “employee benefit plan”, as defined in Section 3(3) of ERISA, each employment, severance or similar contract, plan, arrangement or policy and each other plan or arrangement (written or oral) providing for compensation, bonuses, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) which is maintained, administered or contributed to by the Company or any ERISA Affiliate and covers any employee or former employee of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has any liability. Copies of such plans (and, if applicable, related trust or funding agreements or insurance policies) and all amendments thereto and written interpretations thereof (including, if any such plans are oral, true, correct and complete written summaries) have been furnished to Buyer together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and tax return (Form 990) prepared in connection with any such plan or trust. Such plans are referred to collectively herein as the “Employee Plans”.

(ii) Except as set forth in Section 3.26(c)(ii) of the Disclosure Schedule, none of the Company, any ERISA Affiliate and any predecessor thereof sponsors, maintains or contributes to, or has in the past sponsored, maintained or contributed to, any Employee Plan subject to Title IV of ERISA.

(iii) None of the Company, any ERISA Affiliate of the Company and any predecessor thereof contributes to, or has in the past contributed to, any

 

multiemployer plan, as defined in Section 3(37) of ERISA (a “Multiemployer Plan”).

(iv) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter, or has pending or has time remaining in which to file, an application for such determination from the Internal Revenue Service, and the Company is not aware of any reason why any such determination letter should be revoked or not be reissued. The Company has made available to Buyer copies of the most recent Internal Revenue Service determination letters with respect to each such Employee Plan. Each Employee Plan has been maintained in material compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including ERISA and the Code, which are applicable to such Employee Plan. No material events have occurred with respect to any Employee Plan that could result in payment or assessment by or against the Company of any material excise taxes under the Code.

(v) Except as set forth in Section 3.26(c)(v) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has any current or projected liability in respect of post-employment or post-retirement health or medical or life insurance benefits for retired, former or current employees of the Company or any of its Subsidiaries, or any current or projected liability in respect of medical or life insurance benefits for any other person, except as required to avoid excise tax under Section 4980B of the Code. No condition exists that would prevent the Company or any of its Subsidiaries from amending or terminating any Employee Plan providing health or medical benefits in respect of any active employee of the Company or any of its Subsidiaries other than limitations imposed under the terms of a collective bargaining agreement.

(vi) All contributions and payments accrued under each Employee Plan will be paid on or prior to the Closing Date in accordance with prior funding and accrual practices. There has been no amendment to, written interpretation of or announcement (whether or not written) by Sellers or any of their respective Affiliates or the Company or any of its Subsidiaries relating to, or change in employee participation or coverage under, any Employee Plan that would increase materially the expense of maintaining such Employee Plan above the level of the expense incurred in respect thereof for the most recent fiscal year ended prior to the date hereof.

(vii) There is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of the Company or any of its Subsidiaries that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Sections 280G or 162(m) of the Code.

 

(viii) Except for the amounts set forth in Section 3.26(c)(viii) of the Disclosure Schedule (the “Bonus Payments”), no employee or former employee of the Company or any of its Subsidiaries will become entitled to any bonus, retirement, severance, job security or similar benefit, or the enhancement of any such benefit (including acceleration of vesting or exercise of an incentive award), as a result of the transactions contemplated by this Agreement or the Restructuring Transactions. All of the Bonus Payments will be discharged in full prior to Closing pursuant to Section 5.07(a)

(ix) There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the 1934 Act) or director of the Company. The Company has not, since the enactment of the Sarbanes-Oxley Act, taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.

(x) There is no action, suit, investigation, audit or proceeding pending against or involving or, to the knowledge of Sellers, threatened against or involving any Employee Plan before any arbitrator or any Governmental Authority.

(xi) Except as set forth in Section 3.26(c)(xi) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has or shall have any liability or responsibility for or with respect to any payments to any Person relating to, arising out of or in connection with any notional, deemed or actual (A) equity or equity-based interests or (B) profits interests, bonuses, incentive compensation or other similar payments, in each case that are (x) in or related to the Company or any of its Subsidiaries, (y) directly or indirectly based upon the performance of the Company or any of its Subsidiaries (including any business, unit, segment or division of the Company or any of its Subsidiaries) or (z) related to the Shares or any securities of any of the Company’s Subsidiaries (collectively, “Synthetic Rights”). All of the Synthetic Rights described Section 3.26(c)(xi) of the Disclosure Schedule are included in the amount of the Bonus Payments described in Section 3.26(c)(viii) of the Disclosure Schedule and will be discharged in full prior to Closing pursuant to Section 5.07(a).

(xii) Neither the Company nor any of its Subsidiaries has any liability for or responsibility with respect to any payments made by any third party or either Seller to any employee or executive of the Company (collectively, “Third Party Payments”), and such Third Party payments have not for any reason been deemed or treated as compensation to any such individual from, in respect of or payable by the Company.

Section 3.27. Tax Matters. (a) Filing and Payment. Except as set forth in Section 3.27(a) of the Disclosure Schedule, (i) all Tax returns, statements, reports,

elections, declarations, disclosures, schedules and forms (including estimated tax or information returns and reports) filed or required to be filed with any Taxing Authority by or on behalf of the Company or any of its Subsidiaries (collectively, the “Returns”), have, to the extent required to be filed on or before the date hereof, been filed when due in accordance with all Applicable Laws; (ii) as of the time of filing, the Returns were true and complete in all material respects; and (iii) all Taxes shown as due and payable on the Returns that have been filed have been timely paid, or withheld and remitted to the appropriate Taxing Authority.

(b) Financial Records. Except as set forth in Section 3.27(b) of the Disclosure Schedule, (i) the charges, accruals and reserves for Taxes with respect to the Company and its Subsidiaries reflected on the Pro Forma Balance Sheet (excluding any provision for deferred income taxes reflecting either differences between the treatment of items for accounting and income tax purposes or carry forwards) are adequate to cover Tax liabilities accruing through May 2, 2009; (ii) since May 2, 2009, neither the Company nor any of its Subsidiaries has engaged in any transaction, or taken any other action, other than in the ordinary course of business consistent with past practice; and (iii) all information set forth in the Balance Sheet (including the notes thereto) relating to Tax matters is true and complete in all material respects.

(c) Procedure and Compliance. Except as set forth in Section 3.27(c) of the Disclosure Schedule, (i) all Returns filed with respect to Tax years of the Company and its Subsidiaries through the Tax year ended December 31, 2004 have been examined and closed or are Returns with respect to which the applicable period for assessment under Applicable Law, after giving effect to extensions or waivers, has expired; (ii) neither the Company nor any of its Subsidiaries is delinquent in the payment of any Tax or has requested any extension of time within which to file any Return and has not yet filed such Return; (iii) neither the Company nor any of its Subsidiaries (or any member of any affiliated, consolidated, combined or unitary group of which the Company or any of its Subsidiaries is or has been a member) has granted any extension or waiver of the statute of limitations period applicable to any Return, which period (after giving effect to such extension or waiver) has not yet expired; (iv) there is no claim, audit, action, suit, proceeding, or investigation now pending or threatened against or with respect to the Company or any of its Subsidiaries in respect of any Tax or Tax Asset; (v) there are no requests for rulings or determinations in respect of any Tax or Tax Asset pending between the Company or any of its Subsidiaries and any Taxing Authority; and (vi) during the five-year period ending on the date hereof, none of either Seller, the Company, any of the Company’s Subsidiaries or any Affiliate of a Seller has made or changed any Tax election, changed any annual Tax accounting period, or adopted or changed any method of Tax accounting (to the extent that any such action may materially affect the Company or any of its Subsidiaries), or, to the extent it may affect or

 

relate to the Company or any of its Subsidiaries, filed any amended Return, entered into any closing agreement, settled any Tax claim or assessment, or surrendered any right to claim a Tax refund, offset or other reduction in Tax liability.

(d) Taxing Jurisdictions. No jurisdiction in which none of the Company or any of its Subsidiaries files Tax returns has asserted that the Company or any of its Subsidiaries is or may be liable for Tax in that jurisdiction.

(e) Tax Sharing, Consolidation and Similar Arrangements. Except as set forth in Section 3.27(e) of the Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries has been a member of an affiliated, consolidated, combined or unitary group other than one of which a Seller was the common parent; (ii) neither the Company nor any of its Subsidiaries is party to any Tax Sharing Agreement or to any other agreement or arrangement referred to in clause (ii) or (iii) of the definition of “Tax”; (iii) no amount of the type described in clause (ii) or (iii) of the definition of “Tax” is currently payable by either the Company or any of its Subsidiaries, regardless of whether such Tax is imposed or asserted by a Taxing Authority on the Company or any of its Subsidiaries; and (iv) neither the Company nor any of its Subsidiaries has entered into any agreement or arrangement with any Taxing Authority with regard to the Tax liability of the Company or any of its Subsidiaries affecting any Tax period for which the applicable statute of limitations, after giving effect to extensions or waivers, has not expired.

(f) Certain Agreements and Arrangements. (i) None of the Company or any of its Subsidiaries has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b); (ii) during the five-year period ending on the date hereof, none of the Company or any of its Subsidiaries was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code; and (iii) neither the Company nor any of its Subsidiaries has participated in or cooperated with an international boycott within the meaning of Section 999 of the Code or has been requested to do so in connection with any transaction or proposed transaction.

(g) Post-Closing Attributes. Except as set forth in Section 3.27(g) of the Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries will be required to include any adjustment in taxable income for any Post-Closing Tax Period under Section 481(c) of the Code (or any similar provision of the Tax laws of any jurisdiction) as a result of a change in method of accounting for a Pre-Closing Tax Period and (ii) neither the Company nor any of its Subsidiaries will be required to include for a Post-Closing Tax Period taxable income attributable to income economically realized in a Pre-Closing Tax Period, including any income that would be includible in a Post-Closing Tax Period as a

 

result of the installment method or the look-back method (as defined in Section 460(b) of the Code).

(h) Property and Leases. Except as set forth in Section 3.27(h) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries owns an interest in real property in any jurisdiction in which a Tax is imposed, or the value of the interest is reassessed, on the transfer of an interest in real property and which treats the transfer of an interest in an entity that owns an interest in real property as a transfer of the interest in real property.

(i) Certain Elections. On May 3, 1998, the Company made a valid election under Section 1362 of the Code to be treated as an “S Corporation,” which election continues to be valid and effective.

(j) Withholding Obligations. Each of the Company and its Subsidiaries has complied with all Applicable Law relating to the withholding of Taxes and has duly and timely withheld and paid over to the appropriate Taxing Authority all amounts required to be so withheld and paid under all Applicable Law.

(l) Section 3.27(l) of the Disclosure Schedule sets forth the amount and date of tax distributions that have been made to Sellers, including amounts that have been paid to any Taxing Authority on behalf of Sellers, with respect to Sellers’ income tax liability attributable to the Company’s taxable income during the Applicable Period.

 

Buyer represents and warrants to Sellers as of the date hereof and as of the Closing Date that:

Section 4.01. Corporate Existence and Power. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Buyer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not individually or in the aggregate reasonably be expected to have a material adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement, the Seller Notes and each other Ancillary Agreement to which Buyer is or is to be a party, or to perform its obligations hereunder and thereunder.

Section 4.02. Corporate Authorization. The execution, delivery and performance by Buyer of this Agreement, the Seller Notes and each other Ancillary Agreement to which Buyer is or is to be a party, and the consummation of the transactions contemplated hereby and thereby, are within the corporate powers of Buyer and have been duly authorized by all necessary corporate action on the part of Buyer. Each of this Agreement, the Seller Notes and each other Ancillary Agreement to which Buyer is or is to be a party constitutes a valid and binding agreement or instrument of Buyer.

Section 4.03. Governmental Authorization. The execution, delivery and performance by Buyer of this Agreement, the Seller Notes and each other Ancillary Agreement to which Buyer is or is to be a party, and the consummation of the transactions contemplated hereby and thereby, require no material action by or in respect of, or material filing with, any Governmental Authority other than (i) compliance with any applicable requirements of the HSR Act and (ii) compliance with any applicable requirements of the 1934 Act.

Section 4.04. Noncontravention. The execution, delivery and performance by Buyer of this Agreement, the Seller Notes and each other Ancillary Agreement to which Buyer is or is to be a party, and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate the certificate of incorporation or bylaws of Buyer, (ii) assuming compliance with the matters referred to in Section 4.03, violate any material Applicable Law, (iii) require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or any of its Subsidiaries or to a loss of any benefit to

 

which the Buyer or any of its Subsidiaries is entitled under any provision of any Contract binding upon the Buyer or any of its Subsidiaries, except for any defaults, terminations, cancellations, accelerations of any rights or obligations, or loss of benefits that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement, the Seller Notes and each other Ancillary Agreement to which Buyer is or is to be a party, or to perform its obligations hereunder and thereunder.

Section 4.05. Financing. Buyer has received and furnished a copy to Sellers of one or more commitment letters (collectively, the “Commitment Letter”) executed by Bank of America, N.A., JPMorgan Chase Bank N.A., Wells Fargo Retail Finance, LLC and certain other lenders, pursuant to which the parties to the Commitment Letter (other than Buyer) have committed, upon the terms and subject to the conditions set forth in the Commitment Letter, to lend the amounts set forth therein for the purpose of (inter alia) funding the transactions contemplated by this Agreement. The Commitment Letter has not been amended, restated or otherwise modified prior to the date of this Agreement, and the respective commitments contained therein have not been withdrawn, modified or rescinded in any respect prior to the date of this Agreement. As of the date of this Agreement, the Commitment Letter is in full force and effect and constitutes the legal, valid and binding obligation of Buyer and, to the knowledge of Buyer, the other parties thereto. As of the date hereof, Buyer knows of no facts or circumstances that are reasonably likely to result in any of the conditions set forth in the Commitment Letter not being satisfied.

Section 4.06. Purchase for Investment. Buyer is purchasing the Shares for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof. Buyer (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Shares and is capable of bearing the economic risks of such investment. Buyer acknowledges that the Shares have not been registered under the Securities Act of 1933 or under any state or foreign securities laws.

Section 4.07. Litigation. There is no action, suit, investigation or proceeding pending against or, to the knowledge of Buyer, threatened against or affecting, Buyer before any arbitrator or any Governmental Authority which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.

Section 4.08. Finders’ Fees. Except for Greenhill & Co., LLC and the other Persons previously disclosed to Sellers, whose fees and expenses will be paid by Buyer, there is no investment banker, broker, finder or other intermediary

 

which has been retained by or is authorized to act on behalf of Buyer or the Transaction Committee who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

Sellers jointly and severally agree that:

Section 5.01. Conduct of the Company. From the date hereof until the Closing Date, Sellers shall cause each of the Company and its Subsidiaries to conduct its business in the ordinary course of business consistent with past practice and to use its reasonable best efforts to (i) preserve intact its present business organization, (ii) keep available the services of its directors, officers and key employees, (iii) maintain its relationships with its customers, lenders, suppliers and others having material business relationships with it in the ordinary course of business consistent with past practice, (iv) manage its working capital (including the timing of collection of accounts receivable and of the payment of accounts payable and the management of inventory) in the ordinary course of business consistent with past practice and (v) continue to make such capital expenditures as a prudent operator in the industry of the Company and its Subsidiaries would reasonably be expected to make (including such capital expenditures as are required by the Bookstore Services Agreements). Without limiting the generality of the foregoing, except as expressly contemplated by this Agreement, the Restructuring Documents or as set forth in Section 5.01 of the Disclosure Schedule, without the consent of Buyer, Sellers shall not permit the Company or any of its Subsidiaries to:

(a) amend its certificate of incorporation, bylaws or other similar organizational documents (whether by merger, consolidation or otherwise);

(b) split, combine or reclassify any shares of capital stock of the Company or any of its Subsidiaries or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of the capital stock of the Company or any of its Subsidiaries, or redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any Company Securities or any Subsidiary Securities, except for dividends by any wholly-owned Subsidiary; provided that the Company shall be permitted to distribute to Sellers an amount in cash of $6.5 million on September 15, 2009 (the “Permitted Tax Distribution”);

 

(c) (i) issue, deliver or sell, or authorize the issuance, delivery or sale of, any shares of any Company Securities or Subsidiary Securities, other than the issuance of any Subsidiary Securities to the Company or any other Subsidiary, or (ii) amend any term of any Company Security or any Subsidiary Security (in each case, whether by merger, consolidation or otherwise);

(d) incur any capital expenditures or any obligations or liabilities in respect thereof, except for (i) capital expenditures that are expressly contemplated by the Bookstore Services Agreements, including any Bookstore Services Agreements entered into after the date hereof (provided that the capital expenditure obligations of the Company under such new Bookstore Services Agreements are consistent with past practice), and (ii) additional capital expenditures in the ordinary course of business consistent with past practice and not to exceed $1 million individually or $5 million in the aggregate;

(e) acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities, properties, interests or businesses, other than supplies and inventory in the ordinary course of business consistent with past practice;

(f) sell, license, lease or otherwise transfer, or create or incur any Lien (other than Permitted Liens on assets other than the Company Marks) on, any of the Company’s or any of its Subsidiaries’ assets, securities, properties, interests or businesses, other than sales of inventory in the ordinary course of business consistent with past practice;

 

(g) make any loans, advances or capital contributions to, or investments in, any other Person, other than (i) extensions of trade credit in the ordinary course of business consistent with past practice and (ii) loans, advances or investments that are expressly contemplated by the Bookstore Services Agreements, including any Bookstore Services Agreements entered into after the date hereof (provided that the loans, advances or investments contemplated by such new Bookstore Services Agreements are consistent with the past practice);

(h) create, incur, assume, suffer to exist or otherwise become liable with respect to any Indebtedness, other than drawings under the Credit Agreement in the ordinary course of business consistent with past practice, the proceeds of which are used solely to fund the working capital and capital expenditures requirements of the Company and its Subsidiaries or the Bonus Payments (to the extent otherwise permitted by this Section 5.01);

 

(i) (i) enter into any Contract that limits or otherwise restricts in any material respect the Company, any of its Subsidiaries or any of their respective Affiliates or any successor thereto or that could, after the Closing, limit or restrict in any material respect the Company, Buyer or any of their respective Affiliates from engaging or competing in any line of business, in any location or with any Person, (ii) enter into, amend or modify in any material respect or terminate (A) any Material Contract or (B) any Contract with an Interested Person, or otherwise waive, release or assign any material rights, claims or benefits of the Company or any of its Subsidiaries; provided, however, that the Company may, subject to each other provision of this Section 5.01 (including Section 5.01(i)(i)), (x) amend or modify any Bookstore Services Agreement which did not generate more than $5,000,000 in annual revenue in the Company’s most recently completed fiscal year, (y) renew any existing Bookstore Services Agreement that has expired or expires after the execution of this Agreement or (z) enter into any new Bookstore Services Agreement, in each case, in the ordinary course of business consistent with past practice;

(j) (i) grant or increase any severance or termination pay to, or amend any existing arrangement (whether written or oral) with, any director, officer or employee of the Company or any of its Subsidiaries, (ii) increase benefits payable under any existing severance or termination pay policies or employment Contracts, (iii) enter into any employment, deferred compensation or other similar Contract (or amend any such existing Contract) with any director, officer or employee of the Company or any of its Subsidiaries (provided, however, that the Company and its Subsidiaries may hire non-executive employees on an at-will basis and otherwise in the ordinary course of business consistent with past practice), (iv) establish, adopt or amend (except as required by Applicable Law) any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of the Company or any of its Subsidiaries or (v) increase any compensation, bonus or other benefits payable to any director, officer or, other than in the ordinary course of business consistent with past practice, to any other employee of the Company or any of its Subsidiaries;

(k) change the Company’s methods of accounting, except as required by concurrent changes in GAAP, as agreed to by its independent public accountants and consented to in writing by Buyer (which consent shall not be unreasonably withheld or delayed);

(l) settle, or offer or propose to settle, (i) any material litigation, investigation, arbitration, proceeding or other claim involving or

 

against the Company or any of its Subsidiaries or (ii) any litigation, arbitration, proceeding or dispute that relates to the transactions contemplated by this Agreement or the Restructuring Transactions (including, in each case, any matter disclosed in Section 3.13 of the Disclosure Schedule);

(m) (i) take or permit to be taken any action that, if taken on or prior to the date hereof, would have been required to be disclosed (or would have resulted in a state of facts that would have been required to be disclosed) in Section 3.11(a) or 3.11(b) of the Disclosure Schedule or (ii) otherwise make any payment to any Primary Interested Person except for (A) salary and benefits in the ordinary course of business consistent with past practice and (B) payments under the Contracts disclosed in Sections 3.11(a) and 3.11(b) of the Disclosure Schedule in the ordinary course of business consistent with past practice.

Section 5.02. Access to Information; Confidentiality. (a) From the date hereof until the Closing Date, Sellers will (i) give, and will cause the Company and each of its Subsidiaries to give, Buyer, its counsel, financial advisors, auditors and other authorized representatives full access during normal business hours to the offices, properties, books and records of the Company and its Subsidiaries and to the books and records of Sellers relating to the Company and its Subsidiaries, (ii) furnish, and cause the Company and each of its Subsidiaries to furnish, to Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to the Company or any of its Subsidiaries as such Persons may reasonably request and (iii) instruct the employees, counsel and financial advisors of Sellers, the Company and its Subsidiaries to cooperate with Buyer’s reasonable requests in its investigation of the Company or any of its Subsidiaries. Any investigation pursuant to this Section 5.02 shall be conducted only upon reasonable notice by Buyer to Sellers and the Company in such manner as not to interfere unreasonably with the conduct of the business of the Company. No investigation by Buyer or other information received by Buyer shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by a Seller hereunder.

(b) Without limitation of any other duty or obligation of Sellers relating to confidentiality, after the Closing, each Seller and its Affiliates will hold, and will use their reasonable best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Applicable Law, all confidential documents and information concerning the Company and its Subsidiaries, except to the extent

 

that such information can be shown to have been (i) previously known on a nonconfidential basis by Sellers, (ii) in the public domain through no fault of Sellers or their respective Affiliates or (iii) later lawfully acquired by Sellers from sources other than those related to their prior ownership of the Company and its Subsidiaries. The obligation of Sellers and their respective Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information.

(c) On and after the Closing Date, Sellers will afford promptly to Buyer and its agents reasonable access to their books of account, financial and other records (including accountants’ work papers), information, employees and auditors to the extent necessary for Buyer in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose relating to the Company or any of its Subsidiaries.

Section 5.03. Notices of Certain Events. From the date hereof through the Closing Date, each Seller shall, and shall cause the Company and its Subsidiaries to, promptly notify Buyer of:

(a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement or the Restructuring Transactions;

(b) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement or the Restructuring Transactions;

(c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting a Seller or the Company or any of its Subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.13 or that relate to the consummation of the transactions contemplated by this Agreement or the Restructuring Transactions;

(d) any inaccuracy of any representation or warranty contained in this Agreement at any time during the term hereof that could reasonably be expected to cause the condition set forth in Section 8.02(a) not to be satisfied; and

 

(e) any failure of a Seller to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder;

provided, however, that the delivery of any notice pursuant to this Section 5.03 shall not limit or otherwise affect the remedies available to Buyer hereunder.

Section 5.04. Non-solicitation. Each Seller agrees that for a period of two years after the Closing Date, except as consented to in writing by Buyer, neither such Seller nor any of his or her controlled Affiliates (excluding, for the avoidance of doubt, Buyer and its Subsidiaries) shall employ or solicit (other than pursuant to a general solicitation directed to and made available to the general public), or receive or accept the performance of services by, any current executive or management-level employee of the Company or any of its Subsidiaries.

Section 5.05. Restructuring Transactions. (a) No later than the Business Day immediately preceding the Closing Date, Sellers shall cause (i) each Restructuring Document to be executed and delivered by each party thereto in the form furnished to Buyer prior to the date of this Agreement and (ii) the Restructuring Transactions to be consummated in accordance with the terms of the Restructuring Documents.

(b) Prior to the Closing, without Buyer’s prior written consent (which consent shall not be unreasonably withheld or delayed), neither Seller shall, or shall permit any party to any Restructuring Document to, terminate, amend, supplement, waive or otherwise modify any term or provision of, or waive or exercise any of its rights, powers, privileges, remedies or claims under, any Restructuring Document (including any exhibit, schedule, or other attachment thereto and any agreement to be entered into in connection therewith).

Section 5.06. Financing. Without limiting the generality of Section 7.01, prior to the Closing, Sellers shall cause the Company and its Subsidiaries to, and shall use their reasonable best efforts to cause the respective officers, directors, employees, investment bankers, attorneys, accountants, consultants or other agents or advisors (“Representatives”) of the Company and each of its Subsidiaries to, provide to Buyer all cooperation reasonably requested by Buyer that is necessary or reasonably required in connection with the financing of the transactions contemplated by this Agreement (the “Financing”), including the following: (i) using reasonable best efforts to cause the Company’s senior officers and other Representatives to participate in meetings, presentations, road shows, due diligence sessions (including accounting due diligence sessions), drafting sessions and sessions with rating agencies; (ii) assisting with the preparation of appropriate and customary materials for rating agency presentations, offering

 

documents, bank information memoranda and similar documents reasonably required in connection with the Financing; (iii) using reasonable best efforts to assist with the preparation of any pledge and security documents, any loan agreement, currency or interest hedging agreement and other definitive financing documents on terms satisfactory to Buyer, or other certificates, or documents as may be reasonably requested by Buyer, provided that no obligation of the Company or any of its Subsidiaries under any such document or agreement shall be effective until the Closing; (iv) using reasonable best efforts to facilitate the pledging of collateral, provided that no pledge shall be effective until the Closing; (v) using reasonable best efforts to furnish on a confidential basis to Buyer and its financing sources, as promptly as practicable, financial and other pertinent information regarding the Company as may be reasonably requested by Buyer; (vi) providing monthly, quarterly and annual financial statements (excluding footnotes, in the case of monthly and quarterly financial statements) to the extent the Company customarily prepares such financial statements within the time such statements are customarily prepared; and (vii) using reasonable best efforts to cause the Company’s independent accountants to cooperate with and assist Buyer in preparing customary and appropriate information packages and offering materials as prospective lenders may reasonably request for use in connection with the offering and/or syndication of debt securities, loan facilities and other matters contemplated by the Financing; provided that, notwithstanding anything in this Agreement to the contrary, until the Closing occurs, neither the Company nor any of its Subsidiaries shall (A) be required to pay any commitment or other similar fee, (B) have any liability or obligation under any loan agreement or any related document or any other agreement or document related to the Financing or (C) be required to incur any other liability in connection with the Financing.

Section 5.07. Employee Matters. (a) The Sellers shall cause the Company to discharge and fully satisfy, no later than the Business Day immediately preceding the Closing Date, all liability and responsibility for and in respect of the Bonus Payments (including all liability and responsibility for and in respect of the Synthetic Rights). The Bonus Payments shall be satisfied (i) by distribution of Excluded Assets and/or (ii) by the payment of cash, in each case, by the Company to the recipients thereof. The aggregate amount of the Bonus Payments (including the fair market value of any Excluded Assets used to satisfy Bonus Payments) shall not exceed the amount set forth in Section 3.26(c)(viii) of the Disclosure Schedule.

(b) Neither the Company nor any of its Subsidiaries shall have any liability or responsibility for any Third Party Payments, whether arising prior to, on or after the Closing Date.

 

(c) Sellers have heretofore delivered to Buyer term sheets, in the form agreed prior to the date hereof, executed by each employee of the Company listed in Section 5.07(c) of the Disclosure Schedule.

(d) Prior to the Closing Date, Sellers shall cause each of the employees of Textbooks.com listed in Section 5.07(d) of the Disclosure Schedule to be transferred to the Company.

Buyer agrees that:

Section 6.01. Confidentiality. Subject to Section 7.03, prior to the Closing Date and after any termination of this Agreement, Buyer and its Affiliates will hold, and will use their reasonable best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Applicable Law, all documents and information concerning the Company or any of its Subsidiaries, Sellers or any of their respective Affiliates furnished to Buyer or its Affiliates in connection with the transactions contemplated by this Agreement or the Restructuring Transactions, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer, (ii) in the public domain through no fault of Buyer or any of its Affiliates or (iii) later lawfully acquired by Buyer from sources other than Sellers or the Company or any of its Subsidiaries, which sources are not, to Buyer’s knowledge, subject to any legally binding obligation to the Company or its Subsidiaries to keep such information confidential; provided that Buyer may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement and to its lenders or other Persons in connection with obtaining the financing for the transactions contemplated by this Agreement so long as such Persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. The obligation of Buyer and its Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, (x) Buyer and its Affiliates will, and will use their reasonable best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents and their lenders and such other Persons to, destroy or deliver to Sellers, upon request, all documents and other materials, and all copies thereof, obtained by Buyer or its Affiliates or on their behalf from

 

Sellers or the Company or any of its Subsidiaries in connection with this Agreement that are subject to such confidence and (y) Buyer shall certify in writing to Sellers that all documents and other materials subject to the confidentiality restrictions of this Section 6.01 shall have been destroyed or returned to Sellers or the Company, as the case may be.

Section 6.02. Access. On and after the Closing Date, Buyer will cause the Company and each of its Subsidiaries to afford promptly to Sellers and their agents reasonable access to their properties, books, records, employees and auditors to the extent necessary to permit Sellers to determine any matter relating to their rights and obligations hereunder or to any period ending on or before the Closing Date; provided that any such access by Sellers shall not unreasonably interfere with the conduct of the business of Buyer and its Subsidiaries.

Buyer and Sellers agree that:

Section 7.01. Best Efforts; Further Assurances. (a) Subject to the terms and conditions of this Agreement, Buyer and Sellers will use their best efforts to take, or cause to be taken (including by causing any Affiliates to take actions), all actions and to do, or cause to be done, all things necessary or desirable under Applicable Laws to consummate the transactions contemplated by this Agreement, including (i) preparing and filing as promptly as practicable with any Governmental Authority or other third party all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents and (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other third party that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement; provided that the parties hereto understand and agree that the best efforts of Buyer shall not be deemed to include (x) entering into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the transactions contemplated hereby or (y) divesting or otherwise holding separate (including by establishing a trust or otherwise), or taking any other action (or otherwise agreeing to do any of the foregoing) with respect to any of its or the Company’s or any of its Subsidiaries’ businesses, assets or properties. Subject to the foregoing sentence, Sellers and Buyer agree, and Sellers, prior to the Closing, and Buyer, after the Closing, agree to cause the Company and each of its Subsidiaries, to execute and deliver such other documents, certificates, agreements and other writings and to

 

take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.

(b) In furtherance and not in limitation of the foregoing, each of Buyer and Sellers shall make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and in any event within ten (10) Business Days of the date hereof and supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable.

Section 7.02. Certain Filings. Sellers and Buyer shall cooperate with one another (a) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any Material Contracts, in connection with the consummation of the transactions contemplated by this Agreement or the Restructuring Transactions and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.

Section 7.03. Public Announcements. Buyer shall consult with Sellers with respect to the content of any proposed press release or public statement with respect to this Agreement, the transactions contemplated hereby or the Restructuring Transactions (including by means of the filing of a Current Report on Form 8-K with the Securities and Exchange Commission, which Current Report may include a copy of this Agreement as an exhibit); provided that the consent of Sellers shall not be required for the issuance by Buyer of any such press release or public statement. Except as required by Applicable Law or as consented to in writing by Buyer, Sellers will not, and will cause the Company and its Subsidiaries not to, issue any press release or make any public statement with respect to this Agreement, the transactions contemplated hereby or the Restructuring Transactions.

Section 7.04. Certain Accounts. All of the accounts set forth in Section 7.04 of the Disclosure Schedule shall be settled (irrespective of the terms of payment of such accounts) on or prior to the Closing Date in the manner provided in Section 7.04 of the Disclosure Schedule.

Section 7.05. Tax Matters. (a) All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with transactions contemplated by this Agreement (including any real property transfer tax and any similar Tax) shall be paid by Sellers when due, and each Seller will, at his or her own expense,

 

file all necessary Tax returns and other documentation with respect to all such Taxes and fees, and, if required by Applicable Law, Buyer will, and will cause its Affiliates to, join in the execution of any such Tax returns and other documentation.

(b) Without the prior written consent of Buyer, none of Sellers, the Company, any of its Subsidiaries and any Affiliate of a Seller shall to the extent it may affect or relate to the Company or any of its Subsidiaries, do any of the following things if doing so would have the effect of increasing the Tax liability or reducing any Tax Asset of the Company, any of its Subsidiaries, Buyer or any Affiliate of Buyer: make or change any Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, file any amended return, enter into any closing agreement, settle any Tax claim or assessment, surrender any right to claim a Tax refund, offset or other reduction in Tax liability, or consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment.

(c) Buyer shall prepare or cause to be prepared and file or cause to be filed all Tax returns for the Company and any of its Subsidiaries for all tax periods that are filed after the Closing Date. Buyer shall permit Sellers to review and comment on each such Tax return that includes any Pre-Closing Tax Period prior to filing and shall make such revisions to such Tax returns as are reasonably requested by Sellers. All Tax returns that include any Pre-Closing Tax Period shall be prepared in a manner consistent with all prior Tax returns of the Company and any of its Subsidiaries to the extent allowable by Applicable Law. No later than three (3) Business Days prior to the day of filing of any such Tax return, the Company shall submit to Sellers a statement of the amount, if any, shown as due on such Tax return that constitutes Excluded Liabilities, and Sellers shall promptly remit such amount to the Company (without duplication of amounts taken into account in determining payments under Section 2.04), and the Company shall timely pay all Taxes reported on such Tax return.

(d) Buyer and Sellers shall provide to the other such cooperation and information, as and to the extent reasonably requested, in connection with the filing of any Tax return, amended Tax return or claim for refund, determining liability for Taxes or a right to refund of Taxes, or in conducting any audit, litigation or other proceeding with respect to Taxes.

(e) Tax Audits. (i) Sellers shall have the sole right to represent the interests of the Company and any of its Subsidiaries in any Tax audit or suit, claim, litigation, proceeding (administrative, judicial, or in arbitration, mediation or alternative dispute resolution), Governmental Authority or grand jury investigation, or other action (any of the foregoing, an “Action”) relating to Shareholder Taxes and to employ counsel of its choice at its expense; provided,

 

however, that if the results of such Tax audit or proceeding could reasonably be expected to have an adverse effect on the Buyer or its liabilities or obligations under this Agreement, then there shall be no settlement or closing or other agreement with respect thereto without the written consent of the Buyer (which shall not be unreasonably withheld or delayed). The Buyer agrees that it will cooperate fully, and will cause the Company to cooperate fully, with Sellers and their counsel in the defense against or compromise of any claim in any such proceeding. Buyer shall have the right to participate in any such proceeding and to be represented by counsel of its own selection in connection with such action and to be kept informed by the Sellers as to the status of the action, all at Buyer’s expense. Sellers shall keep Buyer informed as to the status of any Action arising under this Section 7.05.

(ii) If any Governmental Authority asserts a claim, makes an assessment or otherwise disputes or affects any Tax relating to a Pre-Closing Tax Period or any period that begins before and ends after the Closing Date, Buyer shall promptly upon receipt by Buyer or the Company inform the Sellers thereof. The failure of Buyer or the Company to timely forward such notification in accordance with the immediately preceding sentence shall not relieve the Sellers of their obligations under this Agreement for Taxes except and to the extent that the failure timely to forward such notification actually increases the amount of such Taxes.

(iii) Buyer shall represent the interests of the Company in any Action relating to Ordinary Course Taxes and all Tax returns filed or required to be filed for the Company or any of its Subsidiaries for all Post-Closing Tax Periods, including any period that begins before and end after the Closing Date; provided, however, that if the results of such Action could reasonably be expected to have an adverse effect on the Sellers or their liabilities or obligations under this Agreement, then there shall be no settlement or closing or other agreement with respect thereto without the written consent of the Sellers (which shall not be unreasonably withheld or delayed). The Sellers and Buyer agree that they will cooperate fully with each other party and its respective counsel in the defense against or compromise of any claim in any such proceeding. The Sellers shall have the right, at Sellers’ expense, to participate in any such proceeding and to be represented by counsel of its own selection in connection with any such action in which Buyer represents the interests of the Company. Buyer shall keep Sellers informed as to the status of any Action arising under this Section 7.05.

(iv) Any dispute as to any matter covered in this Section 7.05 shall be resolved by the Accounting Referee. The fees and expenses of such accounting firm shall be borne equally by the Sellers and Buyer.

 

(v) Buyer and Sellers further agree, upon request, to use their reasonable best efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including with respect to the transactions contemplated hereby).

(f) Any and all existing Tax sharing agreements or Tax distribution agreements shall be terminated as of the date hereof (other than agreements among only the Company and its Subsidiaries). After the date hereof, neither the Company nor any of its Subsidiaries shall have any further rights or liabilities thereunder. This Agreement shall be the sole Tax sharing agreement or Tax distribution agreement relating to the Company or any of its Subsidiaries.

(g) Neither Buyer, the Company nor any of their Affiliates shall make any election under Section 338 of the Code (or any corresponding or similar provision of state, local, or foreign income Tax law) with respect to the transactions contemplated by this Agreement.

(h) Any Tax refunds that are received by Buyer or the Company and its Subsidiaries, and any amounts credited against Taxes to which Buyer or the Company and its Subsidiaries become entitled, that relate to Excluded Liabilities or Shareholder Taxes shall be for the account of Sellers, and Buyer shall pay over to Sellers any such refund or the amount of any such credit within 15 days after receipt or entitlement thereto.

(i) Buyer and Sellers shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation and filing of any Tax return, statement, report or form (including any report required pursuant to Section 6043A of the Code and all Treasury Regulations promulgated thereunder), any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

(j) Buyer and Sellers further agree, upon request, to use all reasonable efforts to obtain any certificate or other document from any Governmental Authority or customer of the Company or any of its Subsidiaries or any other person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including with respect to the transactions contemplated hereby).

(k) Any amount paid by Sellers or Buyer under Article 9 will be treated as an adjustment to the purchase price to the extent permitted by Applicable Law.

 

Section 8.01. Conditions to Obligations of Buyer and Sellers. The obligations of Buyer and Sellers to consummate the Closing are subject to the satisfaction of the following conditions:

(a) Any applicable waiting period under the HSR Act relating to the transactions contemplated hereby shall have expired or been terminated.

(b) No provision of any Applicable Law shall prohibit the consummation of the Closing.

Section 8.02. Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction of the following further conditions:

(a) (i) Each Seller shall have performed in all material respects all of his or her obligations hereunder required to be performed by him or her on or prior to the Closing Date, (ii) the representations and warranties of Sellers contained in this Agreement and of the Seller Entities contained in the Ancillary Agreements to which the Seller Entities are or are to be party and in any certificate or other writing delivered by a Seller Entity pursuant hereto or thereto (A) that are qualified by materiality or Material Adverse Effect shall be true at and as of the Closing Date as if made at and as of such date, and (B) that are not qualified by materiality or Material Adverse Effect shall be true in all material respects at and as of the Closing Date as if made at and as of such date, and (iii) Buyer shall have received a certificate signed by each Seller to the foregoing effect.

(b) There shall not be threatened, instituted or pending any action or proceeding by any Person before any Governmental Authority (i) seeking to restrain, prohibit or otherwise interfere with the ownership or operation by Buyer or any of its Affiliates of all or any material portion of the business or assets of the Company or any of its Subsidiaries or of Buyer or any of their respective Affiliates or to compel Buyer or any of its Affiliates to dispose of all or any material portion of the business or assets of the Company or any of its Subsidiaries or of Buyer or any of their respective Affiliates, (ii) seeking to impose or confirm limitations on the ability of Buyer or any of its Affiliates effectively to exercise full rights of ownership of the Shares or (iii) seeking to require divestiture by Buyer or any of its Affiliates of any Shares.

 

(c) There shall not be any action taken, or any Applicable Law proposed, enacted, enforced, promulgated, issued or deemed applicable to the purchase of the Shares, by any Governmental Authority, other than the application of the waiting period provisions of the HSR Act to the purchase of the Shares, that, in the reasonable judgment of Buyer could, directly or indirectly, result in any of the consequences referred to in Sections 8.02(b)(i) through 8.02(b)(iii).

(d) Buyer shall have received payoff letters and other documentation, all of which shall be in form and substance reasonably satisfactory to Buyer, evidencing the repayment of the Credit Agreement and the release of all Liens related thereto.

(e) Buyer shall have obtained funds pursuant to the Commitment Letter or, if such funds are not available to Buyer, other funds on terms and conditions satisfactory to it in its sole and absolute discretion, sufficient to enable it to pay the cash portion of the Purchase Price and related fees and expenses.

(f) Each Restructuring Document shall have been executed and delivered by each party thereto in the form previously delivered to Buyer, and the Restructuring Transactions shall have been consummated in accordance with the terms of the Restructuring Documents.

(g) Textbooks.com shall have executed and delivered to Buyer the Termination and Release Agreement in the form attached as Exhibit B (the “Termination and Release”).

(h) MBS Textbook Exchange, Inc. shall have executed and delivered to the Company an amended and restated letter agreement in the form previously delivered to Buyer, which letter agreement shall not have been amended, modified or revised and shall be in full force and effect as of the Closing (the “MBS Agreement”).

(i) Textbooks.com shall have executed and delivered to the Company an Assignment, Assumption and Reimbursement Agreement in the form attached as Exhibit C (the “Assignment Agreement”).

(j) Buyer shall have received all documents it may reasonably request relating to the existence of the Company and its Subsidiaries, all in form and substance reasonably satisfactory to Buyer.

 

Section 8.03. Conditions to Obligation of Sellers. The obligation of Sellers to consummate the Closing is subject to the satisfaction of the following further conditions:

 

(a) (i) Buyer shall have performed in all material respects all of its obligations hereunder required to be performed by it on or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in this Agreement, the Seller Notes, and in the other Ancillary Agreements to which Buyer is or is to be party and in any certificate or other writing delivered by Buyer pursuant hereto or thereto (A) that are qualified by materiality or Material Adverse Effect shall be true at and as of the Closing Date as if made at and as of such date, and (B) that are not qualified by materiality or Material Adverse Effect shall be true in all material respects at and as of the Closing Date as if made at and as of such date, and (iii) Sellers shall have received a certificate signed by an executive officer of Buyer to the foregoing effect.

(b) Sellers shall have received all documents they may reasonably request relating to the existence of Buyer and the authority of Buyer for this Agreement, all in form and substance reasonably satisfactory to Sellers.

Section 9.01. Survival. The representations and warranties of the parties hereto contained in this Agreement and the Ancillary Agreements and in any certificate or other writing delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the Closing until the eighteen (18) month anniversary of the Closing Date; provided that (i) to the extent that it relates to periods after the Balance Sheet Date, the representation and warranty in Section 3.12(c) shall not survive the Closing, (ii) the representations and warranties in (x) Sections 3.01, 3.02, 3.03, 3.04(i) and (ii), 3.05 and 3.06 (the “Specified Representations”) and (y) Sections 4.01, 4.02, 4.03 and 4.04(i) and (ii) shall survive indefinitely or until the latest date permitted by law and (iii) the representations and warranties in Section 3.18 (but only insofar as they relate to the Company Marks) and Sections 3.24, 3.27(i) and 4.08 shall survive until the expiration of any applicable statute of limitations. The covenants and agreements of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing indefinitely or for the shorter period explicitly specified therein, except that for such covenants and agreements that survive for such shorter period, breaches thereof shall survive indefinitely or until the latest date permitted by law.

 

Notwithstanding the preceding sentences, any breach of representation, warranty, covenant or agreement in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentences, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

Section 9.02. Indemnification. (a) Effective at and after the Closing, Sellers hereby jointly and severally indemnify Buyer, its Affiliates and their respective successors and assignees and, effective at the Closing, without duplication, the Company, each of its Subsidiaries and their respective successors and assignees against and agree to hold each of them harmless from any and all damage, loss, liability and expense (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding (including any Tax audit) whether involving a third party claim (a “Third Party Claim”) or a claim solely among the parties hereto) (“Damages”), incurred or suffered by Buyer, any Affiliate of Buyer, the Company, any of its Subsidiaries or any of their respective successors and assignees, whether in connection with a Third Party Claim or otherwise, arising out of (without duplication):

(i) any misrepresentation or breach of warranty (determined, except in the case of Section 3.09, without regard to any qualification or exception contained therein relating to materiality or Material Adverse Effect or any similar qualification or standard) by a Seller in this Agreement or by a Seller Entity in any Ancillary Agreement to which such Seller Entity is or is to be a party or in any certificate or other writing delivered by a Seller Entity pursuant hereto or thereto or in connection herewith or therewith (each such misrepresentation and breach of warranty, a “Warranty Breach”);

(ii) any breach of covenant or agreement made or to be performed by a Seller pursuant to this Agreement or by a Seller Entity pursuant to any Ancillary Agreement to which such Seller Entity is or is to be a party (each such breach, a “Covenant Breach”);

(iii) any Transaction Expenses that are not included in the Transaction Expenses Amount set forth in the Closing Statement; or

provided that (A) with respect to indemnification by Sellers for Warranty Breaches pursuant to clause (i) above (other than breaches of any Specified Representation or Section 3.24 (any such breach, an “Excluded Warranty

 

Breach”)), (x) Sellers shall not be liable unless the aggregate amount of Damages with respect to such Warranty Breaches exceeds $5 million (the “Threshold Amount”) (in which case Sellers shall be liable for all such Damages without regard to the Threshold Amount) and (y) Sellers’ maximum liability for all such Warranty Breaches shall not exceed $310 million (the “Cap”) and (B) with respect to indemnification by Sellers for Ordinary Course Taxes and any Indemnified Escheat Payment, Sellers shall not be liable unless the aggregate amount of Damages with respect to such amounts exceeds $300,000 (in which case Sellers shall be liable for all such Damages without regard to such threshold amount). For the avoidance of doubt, the limitations on indemnification set forth in the foregoing proviso shall not apply to any indemnification by Sellers for (1) Excluded Warranty Breaches, (2) Covenant Breaches or (3) Excluded Liabilities (except, in the case of Ordinary Course Taxes and any Indemnified Escheat Payment subject to the threshold described in clause (B), to the extent of such threshold), and the amount of any Damages with respect to Excluded Warranty Breaches, Covenant Breaches and Excluded Liabilities shall not be included in the calculation of either the Threshold Amount or the Cap.

(b) Effective at and after the Closing, Buyer hereby indemnifies each Seller, his or her heirs and legal representatives, his or her Affiliates and their respective successors and assignees against and agrees to hold each of them harmless from any and all Damages incurred or suffered by such Seller, his or her heirs and legal representatives, any of his or her Affiliates or any of their respective successors and assignees, whether in connection with a Third Party Claim or otherwise, arising out of any (i) misrepresentation or breach of warranty of Buyer contained in this Agreement, the Seller Notes or any other Ancillary Agreement to which Buyer is or is to be a party or in any certificate or other writing delivered by Buyer pursuant hereto or thereto or in connection herewith or therewith (each such misrepresentation and breach of warranty, a “Buyer Warranty Breach”), or (ii) breach of covenant or agreement made or to be performed by Buyer pursuant to this Agreement, the Seller Notes, or any other Ancillary Agreement to which Buyer is or is to be a party (each such breach, a “Buyer Covenant Breach”); provided that with respect to indemnification by Buyer for Buyer Warranty Breaches pursuant to this Section 9.02 (other than breaches of the representations and warranties in Sections 4.01, 4.02, 4.03, 4.04(i) and (ii) and 4.08), (x) Buyer shall not be liable unless the aggregate amount of Damages with respect to such Warranty Breaches exceeds the Threshold Amount (in which case Buyer shall be liable for all such Damages without regard to the Threshold Amount) and (y) Buyer’s maximum liability for all such Buyer Warranty Breaches shall not exceed the Cap. For the avoidance of doubt, the limitations on indemnification set forth in the foregoing proviso shall not apply to any indemnification by Buyer for Buyer Covenant Breaches, and the amount of any Damages with respect to Buyer Covenant Breaches shall not be included in the calculation of either the Threshold Amount or the Cap.

 

 

Section 9.03. Third Party Claim Procedures. (a) The party seeking indemnification under Section 9.02 (the “Indemnified Party”) agrees to give prompt notice to the party against whom indemnity is to be sought (the “Indemnifying Party”) of the assertion of any claim or the commencement of any Third Party Claim in respect of which indemnity may be sought under such Section. The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have materially and adversely prejudiced the Indemnifying Party.

(b) The Indemnifying Party shall be entitled to participate in the defense of any Third Party Claim and, subject to the limitations set forth in this Section 9.03, shall be entitled to control and appoint lead counsel for such defense, in each case at its own expense; provided that prior to assuming control of such defense, the Indemnifying Party must acknowledge that it would have an indemnity obligation for the Damages resulting from such Third Party Claim as provided under this Article 9.

(c) The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Third Party Claim and shall pay the fees and expenses of counsel retained by the Indemnified Party if (i) the Indemnifying Party does not deliver the acknowledgment referred to in Section 9.03(b) within 30 days of receipt of notice of the Third Party Claim pursuant to Section 9.03(a), (ii) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, (iii) the Indemnified Party reasonably believes an adverse determination with respect to the Third Party Claim would be detrimental to the reputation or future business prospects of the Indemnified Party or any of its Affiliates, (iv) the Third Party Claim seeks an injunction or equitable relief against the Indemnified Party or any of its Affiliates or (v) the Indemnifying Party has failed or is failing to prosecute or defend vigorously the Third Party Claim.

(d) If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this Section 9.03, the Indemnifying Party shall not, without obtaining the prior written consent of the Indemnified Party, enter into any settlement of such Third Party Claim, unless such settlement (i) is limited solely to the payment of cash and (ii) provides for the full, complete and unconditional release of the Indemnified Party and its Affiliates.

(e) In circumstances where the Indemnifying Party is controlling the defense of a Third Party Claim in accordance with paragraphs (b) and (c) above, the Indemnified Party shall be entitled to participate in the defense of such Third Party Claim and to employ separate counsel of its choice for such purpose, in which case the fees and expenses of such separate counsel shall be borne by the

 

Indemnified Party, provided that in such event the Indemnifying Party shall pay the fees and expenses of such separate counsel (i) incurred by the Indemnified Party prior to the date the Indemnifying Party assumes control of the defense of the Third Party Claim or (ii) if representation of both the Indemnifying Party and the Indemnified Party by the same counsel would create a conflict of interest.

(f) Each party shall cooperate, and cause its Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.

(g) If the Indemnifying Party elects not to assume such defense, the Indemnified Party may pay, compromise or contest the Third Party Claim at issue. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has not assumed the defense thereof; provided that such Third Party Claim is subject to indemnification under Section 9.02. Whether or not the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all of the parties hereto shall cooperate in the defense or prosecution thereof.

(h) The provisions of this Section 9.03 shall not be applicable to any Action under Section 7.05(e), which Action shall be subject to the procedures set forth in Section 7.05(e).

Section 9.04. Direct Claim Procedures. In the event the Indemnified Party should have a claim for indemnity under Section 9.02 against the Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall give prompt notice of such claim to the Indemnifying Party. The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have materially and adversely prejudiced the Indemnifying Party. If the Indemnifying Party does not notify the Indemnified Party within 30 days following the receipt of a notice with respect to any such claim that the Indemnifying Party disputes its indemnity obligation to the Indemnified Party for any Damages with respect to such claim, such Damages shall be conclusively deemed a liability of the Indemnifying Party and the Indemnifying Party shall promptly pay to the Indemnified Party the amount thereof. If the Indemnifying Party has timely disputed its indemnity obligation for any Damages with respect to such claim, the parties shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by litigation in an appropriate court of jurisdiction determined pursuant to Section 11.08.

Section 9.05. Calculation of Damages. The amount of any Damages payable under Section 9.02 by the Indemnifying Party shall (i) be net of any amounts actually recovered by the Indemnified Party under applicable insurance policies or from any other Person alleged to be responsible for such Damages, (ii) be reduced by any tax benefit actually realized or other reduction of the tax liability of the Indemnified Party as a result of the facts and circumstances giving rise to any Damages hereunder and (iii) not include any indirect, special, consequential or punitive Damages or Damages for lost profits, except in the case of Third Party Claims. If the Indemnified Party receives any amounts under applicable insurance policies or from any other Person alleged to be responsible for any Damages or obtains any tax benefit referred to in Section 9.05(ii), in each case, subsequent to an indemnification payment by the Indemnifying Party, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by such Indemnifying Party in connection with providing such indemnification payment up to the amount received by the Indemnified Party, net of any expenses incurred by such Indemnified Party in collecting such amount.

Section 9.06. Recourse Against Seller Notes. (a) Subject to the limitations on Sellers’ obligations set forth in this Article 9 and the procedures set forth in Section 9.06(b) and Section 9.06(c) below, any claim by Buyer or any of its Affiliates against Sellers for Damages payable under this Article 9 may, at Buyer’s option, be satisfied by setting off any amounts owed by Buyer under the Seller Notes (in which case the principal amount of the Seller Notes shall be reduced by the amount of such Damages, and from and after the date of the applicable Set-Off Notice no interest would be payable on such amount).

(b) Prior to any set-off pursuant to this Section 9.06, Buyer shall send a notice (a “Set-Off Notice”) to the Seller Representative setting forth the amount of Damages to be set off and applied against the Seller Notes (the “Set-Off Amount”), together with calculations supporting the computation of the Set-Off Amount. Seller Representative may, within 30 days after receipt of any Set-Off Notice, deliver to Buyer a written notice of objection to such set-off. Buyer shall be permitted to set off and apply the Set-Off Amount set forth in such Set-Off Notice against the Seller Notes upon the earliest to occur of (i) the mutual agreement of Buyer and Seller Representative with respect to the Set-Off Amount, (ii) the failure of Seller Representative to deliver to Buyer a notice of objection within 30 days after Seller Representative’s receipt of the Set-Off Notice and (iii) the entry of a final, nonappealable order by a court of competent jurisdiction that Sellers are liable for the payment of such Damages set forth in the Set-Off Notice pursuant to this Agreement (in which case the Set-Off Amount shall be the amount awarded to Buyer or its Affiliates by such court).

 

(c) If Buyer delivers a notice of objection with respect to any Set-Off Notice pursuant to Section 9.06(b), then during the period beginning on the date of the Set-Off Notice and ending on the date that Buyer becomes entitled to set off the applicable Set-Off Amount pursuant to Section 9.06(b)(i) or (iii) above, Buyer shall not be required to pay interest on such Set-Off Amount under the Seller Notes, and if any principal amount comes due under the Seller Notes during such period, Buyer may withhold an amount of principal equal to such Set-Off Amount and with respect to such withheld principal amount the Maturity Date (as defined in the Seller Notes) shall be extended until the Final Determination Date. Interest and principal withheld by Buyer pursuant to this Section 9.06(c) shall not be payable under the Seller Notes until the earlier to occur of (i) the mutual agreement of Buyer and Seller Representative regarding the treatment of such interest and principal and (ii) the entry of a final, nonappealable order by a court of competent jurisdiction that Sellers are not liable for the payment of Damages pursuant to this Agreement (or that Sellers are liable for the payment of Damages pursuant to this Agreement in an amount that is less than the amount of the interest and principal so withheld, in which case Buyer shall promptly remit to Sellers any such amounts that are not set off and applied against the Seller Notes pursuant to Section 9.06(b)(iii) above) (the “Final Determination Date”).

(d) Any Set-Off Amount set off by Buyer pursuant to this Section 9.06 shall be applied in the following priority:

(i) first, against the Seller Note in the original principal amount of $150,000,000 and with a tenor of five years after the Closing Date, until the outstanding principal amount under such Seller Note (after giving effect to all payments on such Seller Note and set-offs pursuant to this Section 9.06) has been reduced to zero; and

(ii) thereafter, against the Seller Note in the original principal amount of $100,000,000 and with a maturity date of December 15, 2010.

Section 9.07. Remedies Exclusive. From and after the Closing, absent fraud or intentional misconduct, Article 9 shall provide the sole and exclusive remedy (x) in the case of Buyer, for any Warranty Breaches or Covenant Breaches, and (y) in the case of Sellers, for any Buyer Warranty Breaches or Buyer Covenant Breaches.

Section 10.01. Grounds for Termination. This Agreement may be terminated at any time prior to the Closing:

 

(b) by Sellers, on the one hand, or Buyer, on the other hand, if the Closing shall not have been consummated on or before November 15, 2009; provided that such date shall be automatically extended (but in no event beyond December 15, 2009) if and to the extent that the expiration date of the commitments under the Commitment Letter is extended to a later date; and provided, further that the party electing to terminate this Agreement is not in material breach of this Agreement at the time of such termination; or

(c) by Sellers, on the one hand, or Buyer, on the other hand, if consummation of the transactions contemplated hereby or the Restructuring Transactions would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction.

The party desiring to terminate this Agreement pursuant to clauses 10.01(b) or 10.01(c) shall give notice of such termination to the other party.

Section 10.02. Effect of Termination. If this Agreement is terminated as permitted by Section 10.01, such termination shall be without liability of either party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other party to this Agreement; provided that if such termination shall result from the (i) willful failure of either party to fulfill a condition to the performance of the obligations of the other party, (ii) failure to perform a covenant of this Agreement or (iii) breach by either party hereto of any representation or warranty or agreement contained herein, such party shall be fully liable for any and all Damages incurred or suffered by the other party as a result of such failure or breach. The provisions of Sections 6.01, 11.07, 11.08 and 11.09 shall survive any termination hereof pursuant to Section 10.01.

Section 11.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,

if to Buyer, to:

Barnes & Noble, Inc.

122 Fifth Avenue

New York, NY 10011

Attention:  General Counsel

Facsimile No.: (212) 463-5683

with copies (which shall not constitute notice) to:

Irene R. Miller

c/o Barnes & Noble, Inc.

122 Fifth Avenue

New York, NY 10011

Attention:  General Counsel

Facsimile No.: (212) 463-5683

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York  10017

Attention:  Joseph Rinaldi, Esq.

Facsimile No.: (212) 450-3800

if to Sellers, to:

Leonard Riggio

c/o Barnes & Noble, Inc.

122 Fifth Avenue

New York, NY 10011

Attention:  Leonard Riggio

Facsimile No.: (212) 366-5186

with a copy (which shall not constitute notice) to:

Bryan Cave LLP

1290 Avenue of the Americas

New York, New York 10104

Attention: Michael N. Rosen, Esq.

Facsimile No.: (212) 541-1400

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or

communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

Section 11.02. Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by Buyer and the Seller Representative, or in the case of a waiver, by Buyer (if such waiver is to be effective against Buyer) or by the Seller Representative (if such waiver is to be effective against Sellers); provided, that any such amendment or waiver by Buyer shall require the approval of the Transaction Committee.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 11.03. Disclosure Schedule References. The parties hereto agree that any reference in a particular Section of the Disclosure Schedule shall only be deemed to be an exception to (or, as applicable, a disclosure for purposes of) (a) the representations and warranties (or covenants, as applicable) of Sellers that are contained in the corresponding Section of this Agreement and (b) any other representations and warranties of Sellers that are contained in this Agreement, but only if the relevance of that reference as an exception to (or a disclosure for purposes of) such representations and warranties would be readily apparent to a reasonable person who has read that reference and such representations and warranties, without any independent knowledge on the part of the reader regarding the matter(s) so disclosed.

Section 11.04. Seller Representative. Louise Riggio, by her execution and delivery of this Agreement, hereby irrevocably appoints Leonard Riggio as her agent and attorney-in-fact for all purposes under this Agreement (the “Seller Representative”), and consents to the taking by the Seller Representative of any and all actions and the making of any decisions required or permitted to be taken by Sellers or the Seller Representative hereunder or under any Ancillary Agreement. By the Seller Representative’s execution below, Leonard Riggio hereby accepts his appointment as Seller Representative hereunder. Buyer shall be entitled to deal exclusively with the Seller Representative on all matters relating to this Agreement and any Ancillary Agreement to which a Seller is a party, and shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of a Seller by the Seller Representative, and on any other action taken or purported to be taken on behalf of a Seller by the Seller Representative, as fully binding upon such Seller.

 

Section 11.05. Expenses. Except as otherwise provided herein, (x) all costs and expenses incurred by Buyer in connection with this Agreement shall be borne by Buyer and (y) all costs and expenses incurred by Sellers, the Company or any of its Subsidiaries in connection with this Agreement (including in connection with the Restructuring Transactions) shall be borne by Sellers.

Section 11.06. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that Buyer may transfer or assign its rights and obligations under this Agreement, in whole or from time to time in part, to (i) one or more of its Affiliates at any time and (ii) after the Closing Date, to any Person; provided that no such transfer or assignment shall relieve Buyer of its obligations hereunder or enlarge, alter or change any obligation (x) of any other party hereto or (y) due to Buyer.

Section 11.07. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York, without regard to the conflicts of law rules of such state.

Section 11.08. Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of New York, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 11.01 shall be deemed effective service of process on such party.

Section 11.09. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR

 

RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 11.10. Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

Section 11.11. Entire Agreement. This Agreement and the Restructuring Documents constitute the entire agreement among the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, among the parties with respect to the subject matter of this Agreement.

Section 11.12. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 11.13. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal court located in the state of New York or, to the extent that no such federal court has jurisdiction over such proceeding, in any New York state court, in addition to any other remedy to which they are entitled at law or in equity.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.