ASSET PURCHASE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), is entered into this 30th day of June, 2011, by and among (a) BORDERS GROUP, INC., a corporation formed under the laws of the State of Michigan (“ Parent ”), and BORDERS, INC., a corporation formed under the laws of the State of Colorado (the “ Company ” and, together with Parent, the “ Sellers ,” and each, individually, a “ Seller ”), and (b) BB Brands, LLC, a limited liability company formed under the laws of the State of Delaware (the “ Buyer ”). The Sellers and the Buyer are referred to herein individually as a “ Party ” and collectively as the “ Parties .”

RECITALS

     WHEREAS , the Sellers and certain of their domestic subsidiaries (together with the Sellers, the “ Seller Group ”) filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the “ Bankruptcy Code ”) on February 16, 2011 in the United States Bankruptcy Court for the Southern District of New York (the “ Bankruptcy Court ”), and such bankruptcy cases are being jointly administered under Case No. 11-10614 (MG) and are hereinafter referred to collectively as the “ Cases ;” and

     WHEREAS, each of the Sellers wishes to sell, transfer, convey, assign and deliver to the Buyer, and the Buyer wishes to purchase, assume and acquire, in accordance with Sections 363 and 365 and the other applicable provisions of the Bankruptcy Code, the Assets (as hereinafter defined), together with the Assumed Liabilities (as hereinafter defined), upon the terms and subject to the conditions set forth in this Agreement; and

     WHEREAS, subject to the Bankruptcy Court’s entry of the Sale Order (as hereinafter defined), the Buyer shall purchase from the Sellers, and the Sellers shall sell, transfer, convey, assign and deliver to the Buyer, the Assets together with the Assumed Liabilities, upon the terms and subject to the conditions set forth in this Agreement; and

     WHEREAS, prior to the Closing Date (as hereinafter defined), (i) the Sellers, the Buyer and Hilco Merchant Resources, LLC (the “Agent”) shall enter into a Going Concern Agency Agreement (as amended and modified from time to time, the “ Going Concern Agency Agreement ”), or (ii) the Buyer shall execute a joinder to the Backstop Agency Agreement among the Sellers, the Agent and certain other agents (as amended and modified from time to time, the “ Backstop Agency Agreement ,” and together with the Going Concern Agency Agreement, the “ Agency Agreements ”), in each case pursuant to which the Agent (and such other agents, in the case of the Backstop Agency Agreement) shall be retained as exclusive agent in connection with the disposition of certain of the assets of the Seller Group in accordance with the terms and conditions set forth therein.

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties mutually agree as follows:

ARTICLE 1

PURCHASE AND SALE OF ASSETS

     1.1 Defined Terms . All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth for such terms in Article 13.

     1.2 Purchase and Sale . Subject to the terms and conditions set forth in this Agreement, the Sellers hereby agree that at the Closing, or such other date or dates provided in Section 1.4, they shall, and shall cause the other members of the Seller Group to, sell, transfer, convey and assign to the Buyer, free and clear of all Liens (except for Permitted Liens), and the Buyer shall purchase, assume and acquire from the Seller Group, all right, title and interest of the Seller Group in, to and under all of the business, properties, assets and goodwill of whatever kind and nature, real or personal, tangible or intangible, actual or contingent, which are owned or held by the Seller Group, other than the Excluded Assets (collectively, the “ Assets ”), including the following:

          (a) All of the interest of the Seller Group in and to the Real Property Leases set forth on Schedule 1.2(a) that are designated by the Buyer to be assumed by the Seller Group and assigned to the Buyer in accordance with Section 1.4 (the “ Assumed Real Property Leases ”);

          (b) All of the interest of the Seller Group in and to the Contracts set forth on Schedule 1.2(b) that are designated by the Buyer to be assumed by the Seller Group and assigned to the Buyer in accordance with Section 1.4 (the “ Assumed Contracts ”);

          (c) All of the interest of the Seller Group in and to all Equipment and leasehold improvements in the Transferred Stores and Distribution Centers (the “ Transferred Equipment and Improvements ”);

          (d) All Licenses (to the extent such Licenses are freely transferable), other than Licenses relating exclusively to any Excluded Leased Property (the “ Excluded Licenses ”);

          (e) All of the interest of the Seller Group in Intellectual Property;

          (f) All of the interest of the Seller Group in and to all Inventory other than Inventory located at the Store Closing Locations (the “ Transferred Inventory ”);

          (g) All security and other deposits and advances and all pre-paid expenses maintained by the Seller Group, other than the deposits, advances and pre-paid expenses relating exclusively to any Excluded Leased Property (the “ Excluded Deposits ”);

          (h) All Accounts Receivable arising from sales of Inventory prior to the Closing Date (the “ Transferred Accounts Receivable ”);

          (i) Subject to Section 2.9, all right, title and interest in and to the equity interest (the “ Kobo Interest ”) in Kobo, Inc. (“ Kobo ”) held by the Seller Group;

          (j) All goodwill of the Seller Group associated with the Business as a going concern;

          (k) All of the Sellers’ books, records, files, documents and other written or electronic materials, including customer lists, except those related to the Excluded Assets or the Excluded Liabilities or expressly included in the Excluded Assets pursuant to Section 1.3;

          (l) All Cash;

          (m) The Disposition Rights; and

          (n) All franchisor rights with respect to the foreign operations of the Seller Group, including all rights to receive franchise fees.

     1.3 Excluded Assets . Notwithstanding anything to the contrary contained herein, expressly excluded from the Assets are all of the right, title and interest of the Seller Group in and to the following (collectively, the “ Excluded Assets ”):

          (a) All corporate and Tax records of the Seller Group and any foreign subsidiaries of the Seller Group, including corporate charters, corporate minute and stock books and records, and other documents and instruments relating solely to the organization, maintenance and existence of the Seller Group or such foreign subsidiaries or the Taxes of the Seller Group or such foreign subsidiaries;

          (b) All claims (including any litigation or arbitration claims and any refunds and deposits), rights, rights of offset or causes of action that the Seller Group or their Affiliates may have against or from any Person relating to any of the Excluded Assets or the Excluded Liabilities;

          (c) All refunds, pre-payments, net operating losses and claims relating to federal, state or municipal income Taxes of the Seller Group or their Affiliates for any period, or portion of any period, ending on or prior to the Closing Date;

          (d) The capital stock of the Seller Group and each of their subsidiaries and all equity securities owned or held by any Seller Group or any of their subsidiaries, other than the Seller Group’s right, title and interest in and to the Kobo Interest, subject to Section 2.9;

          (e) All causes of action and claims that may be asserted against the Buyer and all rights of the Sellers under this Agreement or any Ancillary Agreement or any other agreements or instruments otherwise delivered in connection with this Agreement or any Ancillary Agreement;

          (f) All of the interest of the Seller Group in and to all Real Property Leases other than the Assumed Real Property Leases (the “ Excluded Real Property Leases ”);

          (g) All of the interest of the Seller Group in and to all Contracts other than the Assumed Contracts (the “ Excluded Contracts ”);

          (h) All Equipment and leasehold improvements in the Store Closing Locations;

          (i) All Excluded Licenses;

          (j) All Inventory located at the Store Closing Locations;

          (k) All Excluded Deposits;

          (l) All confidential personnel and medical records of employees who do not become Transferred Employees;

          (m) All assets, properties or rights relating to any Employee Plan of the Seller Group;

          (n) All Avoidance Actions;

          (o) All assets and other rights relating to the Business sold or otherwise transferred or disposed of during the period from the date of this Agreement through and including the Closing Date, in any event in accordance with the provisions of this Agreement; and

          (p) All of the other assets, rights and properties set forth on Schedule 1.3(p) .

     1.4 Assumed and Rejected Leases and Contracts; Inventory Liquidation .

          (a) The Buyer shall have the right, exercisable without limitation at any time and from time to time prior to the applicable Designation Deadline, to notify the Sellers in writing of the Buyer’s election to treat each Real Property Lease set forth on Schedule 1.2(a) as either an Assumed Real Property Lease or an Excluded Real Property Lease.

          (b) The Buyer shall have the right, exercisable without limitation at any time and from time to time prior to the applicable Designation Deadline, to notify the Sellers in writing of the Buyer’s election to treat each Contract set forth on Schedule 1.2(b) as either an Assumed Contract or an Excluded Contract.

          (c) Promptly following delivery of each notice by the Buyer pursuant to Section 1.4(a) or 1.4(b) or, in the case of any notice delivered prior to the Closing Date, as of or promptly following the Closing Date, the Sellers shall or shall cause (i) each Real Property Lease or Contract that the Buyer has elected to treat as Assumed Real Property Lease or Assumed Contract to be assumed and assigned to the Buyer in accordance with Section 365 of the Bankruptcy Code and the Sale Order and (ii) each Real Property Lease or Contract that the Buyer has elected to treat as an Excluded Real Property Lease or Excluded Contract to be rejected in accordance with Section 365 of the Bankruptcy Code and the Sale Order. The Sellers shall timely file appropriate motions and take such other actions as may be necessary to assume and assign to the Buyer the Assumed Real Property Leases and Assumed Contracts, and the Sale Order shall authorize such assumption and assignment. On the date of the assignment thereof to the Buyer, the Seller Group shall be released from any further liability under the Assumed Real Property Leases and Assumed Contracts. On the date of the assignment of any Assumed Real Property Lease to the Buyer, all right, title and interest of the Seller Group in and to any Assets located at any Store subject to such Assumed Real Property Lease shall be deemed sold, transferred, conveyed and assigned to the Buyer.

          (d) To the extent that any Assumed Real Property Lease or Assumed Contract is subject to a cure (pursuant to Section 365 of the Bankruptcy Code and described in any Order of the Bankruptcy Court relating to such cure liability), the Buyer shall be obligated to pay such Cure Costs as a condition to such assumption and assignment to the Buyer. A good faith estimate of such Cure Costs, determined as of the date of this Agreement, is attached as Schedule 1.4(d) .

          (e) If the Buyer fails for any reason to notify the Sellers in writing prior to the applicable Designation Deadline with respect to any Real Property Lease or Contract of the Buyer’s election pursuant to Section 1.4(a) or 1.4(b), then such Real Property Lease or Contract shall be deemed to be an Excluded Real Property Lease or Excluded Contract and the provisions of Section 1.4(c)(ii) shall apply.

          (f) Subject to entry by the Bankruptcy Court of the Sale Order, the Agent shall act as the exclusive agent of the Sellers and the Buyer for the purpose of liquidating the Inventory and Equipment and leasehold improvements at the Leased Real Property subject to all Real Property Leases that are designated as Excluded Real Property Leases in accordance with this Section 1.4 (such locations, the “ Store Closing Locations ”) through the conduct of GOB Sales. Notwithstanding designation of a

Real Property Lease as an Excluded Real Property Lease, the Buyer may deliver notice to the Agent to defer commencement of a GOB Sale at such Store Closing Location; provided that the Buyer may not defer the commencement of any Pre-Closing GOB Sale. The terms, conditions and procedures applicable to the conduct of the GOB Sales in the Store Closing Locations are set forth in the applicable Agency Agreement. After the Closing Date, the Buyer or its parent may have representatives present at Store Closing Locations during GOB Sales to sell Direct Brands club memberships, provided such activities do not adversely impact the conduct of the GOB Sales.

ARTICLE 2

PURCHASE PRICE AND PAYMENT

     2.1 Initial Purchase Price . The aggregate consideration to be paid by the Buyer or by the Agent pursuant to the applicable Agency Agreement for the sale of the Assets and for the right of the Agent to conduct the GOB Sales pursuant to the terms of the Agency Agreement shall consist of (a) $215,100,000 (the “ Initial Purchase Price ”), subject to adjustment in accordance with Sections 2.2 and 2.3, and (b) the assumption by the Buyer of the Assumed Liabilities. At the Closing, $17,000,000 of the Initial Purchase Price (the “ Escrow Amount ”) shall be delivered by the Buyer to the Escrow Agent by wire transfer of immediately available funds in accordance with instructions given by the Escrow Agent. The balance of the Initial Purchase Price, as adjusted in accordance with Section 2.2, shall be paid to the Sellers at the Closing by wire transfer of immediately available funds in accordance with instructions given by the Sellers to the Buyer.

     2.2 Adjustments to the Initial Purchase Price .

          (a) No later than three (3) Business Days prior to the Closing Date, the Sellers shall prepare and deliver to the Buyer a statement setting forth in reasonable detail the Sellers’ calculation of the Net Working Capital as of the close of business on the Closing Date (the “ Estimated Closing Net Working Capital ”). The Sellers’ calculation of the Estimated Closing Net Working Capital shall be made on an estimated basis using the same accounting methodologies and procedures used to calculate the Reference Closing Net Working Capital as set forth on Schedule 2.2(a) . An appropriate dollar-for-dollar adjustment shall be made in the Estimated Closing Net Working Capital to take into account any Pre-Closing GOB Sales.

          (b) If the Estimated Closing Net Working Capital is less than the Reference Closing Net Working Capital, the Initial Purchase Price shall be decreased dollar-for-dollar by the absolute value of the deficiency. If the Estimated Closing Net Working Capital is greater than the Reference Closing Net Working Capital, the Initial Purchase Price shall be increased dollar-for-dollar by the absolute value of the excess.

          (c) Within fifteen (15) days after the first full monthly accounting period (or four or five weeks, as the case may be) following the Closing Date, the Buyer shall prepare and deliver to the Sellers written notice (the “ Adjustment Notice ”) containing (i) the Buyer’s calculation in reasonable detail of the Net Working Capital as of the close of business on the Closing Date (the “ Final Closing Net Working Capital ”) and (ii) the Buyer’s calculation of the amount of any payments required pursuant to Section 2.2(h) (the “ Adjustment Calculation ”). The Buyer’s calculation of the Final Closing Net Working Capital shall be made based on the financial books and records of the Business as of the close of business on the Closing Date using the same accounting methodologies and procedures used to calculate the Reference Closing Net Working Capital as set forth in Schedule 2.2(a) . An appropriate dollar-for-dollar adjustment shall be made in the Final Closing Net Working Capital to take into account any Pre-Closing GOB Sales. With respect to any Store Closing Locations at which a physical inventory has been

conducted in accordance with the applicable Agency Agreement prior to the delivery of the Adjustment Notice, the Final Closing Net Working Capital shall take into account the results of such physical inventory applying the valuation methodologies, as applicable, set forth in the applicable Agency Agreement. The Buyer shall include with the Adjustment Notice delivered to the Sellers copies of all inventory and valuation reports prepared in connection with such physical inventories.

          (d) Within thirty (30) days after delivery of the Adjustment Notice, the Sellers shall deliver to the Buyer a written response in which the Sellers shall either (i) agree in writing with the Adjustment Calculation, in which case such calculation shall be final and binding on the parties for purposes of Section 2.2(h), or (ii) dispute the Adjustment Calculation by delivering to the Buyer a written notice (a “ Dispute Notice ”) setting forth in reasonable detail the basis for each such disputed item.

          (e) If the Sellers fail to take either of the foregoing actions within 30 days after delivery of the Adjustment Notice, then the Sellers shall be deemed to have irrevocably accepted the Adjustment Calculation, in which case, the Adjustment Calculation shall be final and binding on the Parties for purposes of Section 2.2(h).

          (f) If the Sellers timely deliver a Dispute Notice to the Buyer, then the Buyer and the Sellers shall attempt in good faith, for a period of thirty (30) days, to agree on the Adjustment Calculation for purposes of Section 2.2(h). Any resolution by the Buyer and the Sellers during such thirty (30) day period as to any disputed items shall be final and binding on the Parties for purposes of Section 2.2(h). If the Buyer and the Sellers do not resolve all disputed items within thirty (30) days after the date of delivery of the Dispute Notice, then the Buyer and the Sellers shall submit the remaining items in dispute to PriceWaterhouseCoopers LLP (the “ Independent Accounting Firm ”) for resolution. The Buyer and the Sellers shall instruct the Independent Accounting Firm to render its determination with respect to the items in dispute in a written report that specifies the conclusions of the Independent Accounting Firm as to each item in dispute and the resulting Adjustment Calculation. The Buyer and the Sellers shall each use their reasonable best efforts to cause the Independent Accounting Firm to render its determination within thirty (30) days after referral of the items to such firm or as soon thereafter as reasonably practicable. The Independent Accounting Firm’s determination of the Adjustment Calculation as set forth in its report shall be final and binding on the Parties for purposes of Section 2.2(h). The Buyer shall revise the calculation of the Final Closing Net Working Capital as appropriate to reflect the resolution of the issues in dispute pursuant to this Section 2.2(f). The fees and expenses of the Independent Accounting Firm shall be shared by the Buyer and the Sellers in inverse proportion to the relative amounts of the disputed amount determined to be for the account of the Buyer and the Sellers, respectively.

          (g) For purposes of complying with this Section 2.2, the Buyer and the Sellers shall furnish to each other and to the Independent Accounting Firm such work papers and other documents and information relating to the disputed items as the Independent Accounting Firm may request and are available to that party (or its independent public accountants) and shall be afforded the opportunity to present to the Independent Accounting Firm any material related to the disputed items and to discuss the items with the Independent Accounting Firm. If the Buyer elects to conduct a physical inventory in connection with its calculation of the Final Closing Net Working Capital, the Buyer shall notify the Sellers in advance of such inventory, shall permit representatives of the Sellers to be present during such inventory and shall provide to the Sellers copies of all reports and other records and information produced in connection with such inventory.

          (h) If the Final Closing Net Working Capital, as finally determined pursuant to this Section 2.2, is greater than the Estimated Closing Net Working Capital, then the Sellers shall be entitled to receive a distribution of the Escrow Amount and the Buyer shall pay to the Sellers an amount equal to

such excess. If the Final Closing Net Working Capital, as finally determined pursuant to this Section 2.2, is less than the Estimated Closing Net Working Capital, then the Buyer shall be entitled to receive a distribution of a portion of the Escrow Amount equal to the amount of such shortfall, and the Sellers shall be entitled to receive a distribution of the balance, if any, of the Escrow Amount. If the Escrow Amount is not sufficient to cover the amount the Sellers are required to pay to the Buyer pursuant to the preceding sentence, the Sellers shall pay the shortfall to the Buyer.

          (i) All distributions and payments pursuant to Section 2.2(h) shall be made within five Business Days following the final determination of the Final Closing Net Working Capital in accordance with this Section 2.2; provided that if the Sellers deliver a Dispute Notice to the Buyer in accordance with Section 2.2(f) and the aggregate value of all disputed items is less than the Escrow Amount, the Sellers and the Buyer shall promptly instruct the Escrow Agent in writing to distribute to the Sellers the portion of the Escrow Amount that is not in dispute and to retain the balance of the Escrow Amount pending final resolution of such disputes in accordance with Section 2.2(f).

          (j) The Initial Purchase Price as adjusted in accordance with this Section 2.2 is referred to in this Agreement as the “ Purchase Price .”

     2.3 Assumed Liabilities and Excluded Liabilities

          (a) Subject to the terms and conditions set forth in this Agreement, the Buyer hereby agrees that at the Closing, or such other date or dates provided in Section 1.4, it shall assume and become responsible for the following liabilities and obligations of the Seller Group existing as of such time and arising from the operation of the Business prior to the Closing or the other date or dates provided in Section 1.4, as applicable (collectively, the “ Assumed Liabilities ”):

     (i) All liabilities and obligations under the Assumed Real Property Leases and Assumed Contracts that are assumed and assigned to the Buyer in accordance with Section 1.4, whether at the Closing or thereafter, including all related Cure Costs;

     (ii) All liabilities and obligations with respect to any gift cards outstanding on the Closing Date, and in the event that the Going Concern Agency Agreement is executed, all liabilities with respect to other loyalty programs outstanding on the Closing Date;

     (iii) All liabilities and obligations with respect to Inventory returned to the Stores after the Closing Date;

     (iv) All liabilities and obligations with respect to the Transferred Employees, to the extent set forth in Section 7.6;

     (v) All liabilities and obligations of the Seller Group relating to real property, personal property, sales and use and other accrued and unpaid Taxes taken into account in the calculation of the Final Closing Net Working Capital;

     (vi) All post-petition trade and other accounts payable and other accrued liabilities taken into account in the calculation of the Final Closing Net Working Capital;

     (vii) All obligations under the letters of credit set forth on Schedule 2.3(a)(vii) (the “ Assumed Letters of Credit ”); and

     (viii) All Wind Down Obligations in accordance with Section 2.4.

          (b) Except for the Assumed Liabilities, the Buyer shall not be subject to and shall not assume nor be liable for any liabilities of any kind or nature, whether absolute, contingent, accrued, known or unknown, of the Seller Group or related to the Assets or the Business, including the following (collectively, the “ Excluded Liabilities ”):

     (i) Any obligation or liability in respect of Outstanding Indebtedness, other than the Assumed Letters of Credit;

     (ii) Subject to Section 2.3(a)(v) and Section 2.6, any obligation or liability of the Seller Group for Taxes;

     (iii) Any pre-petition obligation or liability of the Seller Group and any obligation or liability of the Seller Group that constitutes a claim or interest against the Seller Group under Sections 502 or 503 of the Bankruptcy Code to the extent not specifically included in the Assumed Liabilities;

     (iv) Any obligation or liability under the Excluded Real Property Leases or the Excluded Contracts;

     (v) Any obligation or liability in respect of professional fees and expenses incurred by the Sellers prior to the Closing Date;

     (vi) Any obligation or liability in respect of any contingent or success-based fees payable by the Sellers in connection with the Closing pursuant to any Contract entered into by the Sellers prior to the Closing Date;

     (vii) Any obligation or liability in respect of the Sellers’ Key Employee Retention Plan, Key Employee Incentive Plan or any grant or award under either such Plan;

     (viii) Any obligation or liability of the Seller Group to their respective shareholders or equity holders or Affiliates of the Seller Group;

     (ix) Any obligation or liability relating to any current or former employee of the Seller Group, or their dependents and beneficiaries, other than the obligations and liabilities set forth in Section 7.6.

     2.4 Wind Down Obligations .

          (a) From and after the Closing Date, the Buyer shall, on behalf of the Seller Group, pay, perform or otherwise satisfy when and as due all of the obligations, liabilities and expenses as provided in the Transition Agreement (collectively, the “ Wind Down Obligations ”), including the following:

     (i) All compensation (including any severance compensation) and benefits (including group medical, dental and life insurance benefits) paid or provided by the Seller Group to current or former employees of the Seller Group (other than employees employed at Store Closing Locations the costs of which are the responsibility of the Agent under the applicable Agency Agreement), or their dependents and beneficiaries;

     (ii) All rents (including holiday closing payments), real and personal property and use taxes and assessments, maintenance and cleaning costs, insurance premiums, utility costs and

other costs and expenses arising from the operation of the Headquarters Building, the Distribution Centers and the Stores (other than such costs relating to Store Closing Locations which are the responsibility of the Agent under the applicable Agency Agreement) by the Seller Group;

     (iii) All property, casualty and other insurance premiums, fees and expenses payable in connection with the operations of the Seller Group;

     (iv) All professional fees and expenses, court costs and fees, appraisal and valuation expenses and other costs and expenses arising in connection with the Cases (or any successor liquidating trust or similar arrangement); and

     (v) All other obligations, liabilities and expenses that are reasonably incurred by the Seller Group in connection with the performance of this Agreement or the orderly winding down and termination of the Seller Group’s business.

          (b) Notwithstanding Section 2.4(a), the aggregate amount of Wind Down Obligations set forth in Sections 2.4(a)(iv) and 2.4(a)(v) for which the Buyer shall be responsible shall not exceed $15,000,000.

          (c) Prior to the Closing Date, the Parties shall agree upon and document mutually acceptable arrangements with respect to the incurrence and payment for Wind Down Obligations, including arrangements reasonably satisfactory to the Buyer with respect to minimizing to the extent practicable the Wind Down Obligations for which it is responsible.

          (d) In order to ensure the payment, performance and satisfaction in full of the Wind Down Obligations by the Buyer, the Buyer hereby covenants and agrees that until the final discharge of all of the Wind Down Obligations, without the prior written consent of the Sellers, the Buyer shall not (i) declare or pay any dividend or make any distribution of cash or other property, including any Assets, or repurchase or redeem for value any of its outstanding debt or equity securities, or (ii) directly or indirectly assign or otherwise transfer to any Affiliate of the Buyer any interest in assets of the Buyer, including the Assets.

     2.5 Non-Assignable Assets . If any Asset is by its terms or by Applicable Law non-assignable or non-transferable, to the extent such terms are not superseded by the terms of the Sale Order, the Sellers shall use their reasonable best efforts to obtain, or cause to be obtained, on or prior to the Closing, any approvals or consents necessary to convey to the Buyer the benefit thereof. The Buyer shall cooperate with the Sellers in such manner as may be reasonably requested in connection therewith. In the event any consent or approval to an assignment contemplated hereby is not obtained on or prior to the Closing Date, the Sellers shall continue to use reasonable best efforts to obtain any such approval or consent after the Closing Date and the Sellers agree to enter into any appropriate and commercially reasonable arrangement to provide that the Buyer shall receive the Seller Group’s interest in the benefits under any such Asset; provided that the Buyer shall undertake to pay or satisfy the corresponding liabilities for the enjoyment of such benefit to the extent the Buyer would have been responsible therefor if such consent or approval had been obtained.

     2.6 Transfer Taxes . To the extent the transactions contemplated hereby are not exempt under Section 1146 of the Bankruptcy Code, the Buyer shall be liable for and pay any sales and transfer Taxes, filing fees, documentary fees or other Taxes payable in connection with the purchase, sale or transfer of the Assets to, and the assumption of the Assumed Liabilities by, the Buyer pursuant to this Agreement. The Buyer and the Sellers shall use reasonable best efforts to minimize the amount of all the foregoing Taxes and shall cooperate in providing each other with any appropriate resale exemption certifications,

Tax clearance certificates and other similar documentation. The Party that is required by Applicable Law to make the filings, reports, or returns and to handle any audits or controversies with respect to any of the foregoing Taxes shall do so, and the other Party shall cooperate (and make reimbursement) with respect thereto as necessary.

     2.7 Allocation of Purchase Price . No later than ninety (90) days after the Closing Date, the Buyer and the Sellers shall mutually agree upon a Tax allocation of the Purchase Price, applicable Assumed Liabilities and other relevant items among the Assets in accordance with Section 1060 of the Tax Code and the regulations thereunder and any comparable provision of state or local law. Each of the Parties agrees that it or they shall file a statement (on IRS Form 8594 or other applicable form) setting forth such allocation with its or their federal and applicable state income Tax returns and shall also file such further information or take such further actions as may be necessary to comply with the Treasury Regulations that have been promulgated pursuant to Section 1060 of the Tax Code and similar applicable state laws and regulations.

     2.8 Deposit . The Buyer shall, within two (2) Business Days after the date of this Agreement, deposit with a mutually acceptable independent escrow agent (the “ Escrow Agent ”) an amount equal to $15,000,000 (the “ Deposit ”), pursuant to an escrow agreement in customary commercial form (the “ Escrow Agreement ”). If the Closing takes place as provided herein, then the Deposit shall be credited against the Initial Purchase Price pursuant to Section 2.1 and paid by the Escrow Agent to the Sellers at the Closing. If this Agreement is terminated in accordance with Article 10 for any reason other than pursuant to Section 10.1(g), then the Escrow Agent shall promptly return the Deposit to the Buyer. If this Agreement is terminated pursuant to Section 10.1(g), the Escrow Agent shall retain the Deposit pending a determination of actual damages pursuant to Section 12.14.

     2.9 Kobo Interest . The Buyer acknowledges that the assignment and transfer of the Kobo Interest by the Seller Group to the Buyer pursuant to this Agreement are subject to certain transfer restrictions, first refusal rights and participation rights under the organizational documents and shareholders agreement of Kobo. Prior to the Closing, the Sellers shall obtain a waiver of the foregoing restrictions and rights from Kobo and its shareholders or shall otherwise cause such restrictions and rights not to be applicable to the assignment and transfer of the Kobo Interest to the Buyer pursuant to this Agreement. The Buyer shall cooperate with the reasonable requests of the Sellers in connection with the assignment and transfer of the Kobo Interest, including executing at Closing a joinder agreement or similar instrument pursuant to which it agrees to become a party to and bound by the Kobo shareholders agreement and any other agreements to which the shareholders of Kobo, including the Sellers, are party as of the date of this Agreement.

     2.10 Second Escrow .

          (a) On the Closing Date, the Buyer shall fund a second escrow with the Escrow Agent in the amount of $7,500,000 (the “ Second Escrow Amount ”), pursuant to an escrow agreement in customary commercial form (the “ Second Escrow Agreement ”). If the Sellers have insufficient assets after the Closing to pay all allowed administrative expenses pursuant to Section 503(b) and allowed priority tax claims pursuant to Section 507(a)(8) of the Bankruptcy Code that were incurred and unpaid as of the Closing Date, excluding any and all of such expenses that will be paid by the Buyer or the Agent hereunder or pursuant to the applicable Agency Agreement, then the Sellers may from time to time provide written notice of the deficiency to the Buyer (the “ Second Escrow Claim Notice ”). The Second Escrow Claim Notice shall be accompanied by reasonable supporting documentation setting forth the amount and nature of any allowed administrative expenses or allowed priority tax claims for which a deficiency exists and the amount of the deficiency. A copy of the Second Escrow Claim Notice shall also be provided by the Sellers to the Escrow Agent. The Second Escrow Claim Notice shall be final and

binding on the Buyer unless within ten (10) days following receipt thereof, the Buyer disputes any calculation thereon by delivering a written notice to the Seller and the Escrow Agent (the “ Second Escrow Dispute Notice ”).

          (b) If the Buyer does not timely provide a Second Escrow Dispute Notice, or if the Buyer affirmatively accepts the Second Escrow Claim Notice, the Buyer and the Sellers shall instruct the Escrow Agent to transfer to the Sellers the amount set forth in the Second Escrow Claim Notice. If the Buyer disputes only a portion of the Second Escrow Claim Notice in its Second Escrow Dispute Notice, the Buyer and the Sellers shall jointly instruct the Escrow Agent to release to the Sellers the undisputed amount.

          (c) Any dispute with respect to a Second Escrow Claim Notice shall be resolved by an action in the Bankruptcy Court. Upon resolution of such dispute, if additional amounts are payable to the Seller, the Buyer and the Sellers shall mutually instruct the Escrow Agent to pay such amounts.

          (d) The escrow contemplated by this Section 2.10 shall terminate on the earlier of January 31, 2012 or sixty (60) days after the effective date of a plan of reorganization, and the remaining balance paid by the Escrow Agent to the Buyer; provided that any amount subject to dispute not resolved by such time shall remain in the escrow until the dispute is resolved.

          (e) Any payments to the Sellers under this Section 2.10 shall be treated as an increase to the Purchase Price.

ARTICLE 3

CLOSING

     3.1 Closing . Consummation of the transactions contemplated hereby (the “ Closing ”) shall occur as soon as practicable on such date as is specified by the Buyer, but in any event not later than two (2) Business Days after the date the conditions to Closing set forth in this Agreement are satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), at the offices of Kasowitz, Benson, Torres & Friedman LLP, New York, New York, or at such time and place as the Buyer and the Sellers may otherwise agree. The date on which the Closing actually takes place is referred to in this Agreement as the “ Closing Date .” Notwithstanding anything herein to the contrary, the Buyer shall be entitled to direct the Agent to conduct GOB Sales on the terms set forth in the applicable Agency Agreement commencing on the first day following the entry of the Sale Order.

     3.2 Deliveries by the Sellers at Closing . At the Closing, the Sellers shall each execute, acknowledge and deliver to the Buyer the following (which events shall occur, each being deemed to have occurred simultaneously with the others):

          (a) A Bill of Sale in a form reasonably satisfactory to the Buyer and its counsel and the Sellers and their counsel;

          (b) An Assignment and Assumption Agreement in a form reasonably satisfactory to the Buyer and its counsel and the Sellers and their counsel, pursuant to which the Buyer shall be assigned and shall assume the Assumed Real Property Leases, Assumed Contracts and Assumed Liabilities from the Seller Group (the “ Assignment and Assumption Agreement ”);

          (c) A copy of the Sale Order;

          (d) Trademark, patent and domain name assignments in a form reasonably satisfactory to the Buyer and its counsel and the Sellers and their counsel, pursuant to which the Seller Group shall assigned the Transferred Intellectual Property to the Buyer (the “ IP Assignments ”);

          (e) The Escrow Agreement and the Second Escrow Agreement, each in a form reasonably satisfactory to the Buyer and its counsel and the Sellers and their counsel;

          (f) The applicable Agency Agreement in a form reasonably satisfactory to the Sellers, the Buyer and the Agent;

          (g) A copy of the resolutions adopted by the Sellers’ Boards of Directors authorizing the transactions contemplated hereby and the consummation thereof, certified by a secretary or assistant secretary of the Sellers to be a true and correct copy;

          (h) A certificate of incumbency as to those officers of the Sellers executing instruments in connection with this Agreement; and

          (i) All other documents, certificates, instruments or writings, including the Ancillary Agreements, reasonably requested by the Buyer in connection herewith.

     3.3 Deliveries by the Buyer at Closing . At the Closing, the Buyer shall execute, acknowledge and deliver to the Sellers the following (which events shall occur, each being deemed to have occurred simultaneously with the others):

          (a) A duly executed Assignment and Assumption Agreement;

          (b) The Bill of Sale and the IP Assignments, if any, that call for a signature by the Buyer;

          (c) The Escrow Agreement and the Second Escrow Agreement, each in a form reasonably satisfactory to the Buyer and its counsel and the Sellers and their counsel;

          (d) The Initial Purchase Price, as adjusted in accordance with Section 2.2(b), to the Sellers by wire transfer in immediately available funds;

          (e) A copy of the resolutions adopted by the Buyer’s Board of Directors authorizing the transactions contemplated hereby and the consummation thereof, certified by a secretary or assistant secretary of the Buyer to be a true and correct copy;

          (f) A certificate of incumbency as to those officers of the Buyer executing instruments in connection with this Agreement; and

          (g) All other documents, certificates, instruments or writings, including the Ancillary Agreements, reasonably requested by the Sellers in connection herewith.

     3.4 Deemed Consents and Cures . The Sellers shall be deemed to have obtained all required consents, as applicable, in respect of the assignment of any of the Assumed Real Property Leases and Assumed Contracts and all defaults thereunder shall be deemed to have been cured if, and to the extent that, pursuant to the Sale Order or another Order of the Bankruptcy Court, the Seller Group is authorized to assume and assign any such Assume Real Property Leases and Assumed Contracts to the Buyer pursuant to Section 365 of the Bankruptcy Code.

     3.5 Subsequent Documentation; Further Assurances . The Buyer and the Sellers shall, at any time and from time to time after the Closing Date, upon the reasonable request of the other, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, all such further (a) assignments, transfers and conveyances as may be required for assigning, transferring, granting, conveying and confirming the transactions contemplated hereby, including aiding and assisting the Buyer in collecting and reducing to possession any or all of the Assets and (b) documents and instruments as may be reasonably necessary for the further completion of any of the transactions contemplated hereby.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

     The Sellers, jointly and severally, represent that the following are true and correct as of the date hereof and shall be true and correct at the date of the Closing after giving effect to the Sale Order:

     4.1 Organization and Power . Each Seller (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of its organization, (b) has all requisite corporate power and authority to carry on its Business as currently conducted, and (c) has the requisite corporate power and authority to own, lease, operate or hold the applicable Assets.

     4.2 Authority; No Conflicts . Subject to Bankruptcy Court approval and entry of an Order of the Bankruptcy Court approving the terms of this Agreement, each Seller has the authority to enter into and consummate this Agreement and the Ancillary Agreements, and to consummate the transactions contemplated hereby and thereby. Subject to the approval of the Bankruptcy Court pursuant to the Sale Order and except for the requirements of the HSR Act, the execution, delivery and performance by each Seller of this Agreement and of the Ancillary Agreements to which it is a party (a) do not and shall not violate or conflict with any provision of the certificate or articles of incorporation or bylaws of such Seller, (b) do not and shall not violate any provision of any Applicable Law or any order, judgment or decree of any Governmental Entity or any Governmental Authority, (c) do not and shall not violate or result in a material breach of or constitute (with due notice or lapse of time or both) a material default under any Assumed Contract that is a Material Contract, (d) shall not result in the creation or imposition of any material Lien (other than Permitted Liens) upon any of the Assets, and (e) shall not result in the cancellation, modification, revocation or suspension of any material Permit.

     4.3 Execution and Delivery . Subject to the approval of the Bankruptcy Court pursuant to the Sale Order, the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Sellers have been duly authorized by all necessary corporate action, and the execution and performance of the Ancillary Agreements by the Sellers has been or shall be authorized by all necessary corporate action prior to the Closing Date. Subject to Bankruptcy Court approval and entry of an Order of the Bankruptcy Court approving the terms of this Agreement, this Agreement constitutes, and upon execution of each of the Ancillary Agreements such agreements shall constitute, valid and binding obligations of the Sellers, enforceable against the Sellers in accordance with their respective terms.

     4.4 Sale Free and Clear of Liens . On the Closing Date or such other applicable date as provided in Section 1.4, after giving effect to the Sale Order, (a) the Assets shall be transferred to the Buyer free and clear of all Liens other than Permitted Liens and (b) the Buyer shall obtain good title to the Assets free and clear of all Liens other than Permitted Liens.

     4.5 Ownership of Assets; Condition; Sufficiency; Subsidiaries .

          (a) Except as set forth on Schedule 4.5(a) , the Seller Group collectively has good title to, or valid leasehold interest in, the Assets.

          (b) The Equipment included in the Assets and the other tangible Assets are in good operating condition, reasonable wear and tear excepted, suitable and usable for the purposes for which they have been used by the Seller Group in the Business.

          (c) The entities listed on Schedule 4.5(c) represent all of the subsidiaries of the Sellers (collectively, the “ Borders Subsidiaries ”). Each Borders Subsidiary is an entity duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization. Each Borders Subsidiary is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a Material Adverse Effect. Except as set forth on Schedule 4.5(c) , neither Seller has any equity participation in any Person that is not another Seller or a Borders Subsidiary.

          (d) Except for those restrictions and rights provided in the organizational documents and shareholders’ agreement of Kobo, the Seller Group owns the Kobo Interest free and clear of all Liens, and have not granted to any Person other than the Buyer a preferential right to acquire such equity interest.

     4.6 Taxes . Except as set forth on Schedule 4.6 :

          (a) All material ad valorem and other property Taxes relating to the Assets have been fully paid for all Tax years ending on or before the Closing and there are no material delinquent property Tax Liens or assessments; and

          (b) The Sellers have filed all required Tax returns and have paid (or shall pay on or before the Closing) all Taxes of whatever kind pertaining to the Assets and the Business and required to be paid by the Sellers for all periods up to and including the Closing Date.

     4.7 Litigation . Except as set forth on Schedule 4.7 , and except for the Cases, there is no claim, litigation, action, arbitration or legal proceeding pending before a Governmental Entity or, to the Sellers’ Knowledge, threatened against the Sellers, affecting (a) the Sellers’ ability to perform their obligations hereunder, (b) the rights granted under the Material Contracts, or (c) the ownership, use, maintenance or operation of the Assets and the Business, including the Stores, in each case that would not, individually or in the aggregate, materially and adversely affect the Buyer, the Assets or the Business. Except with respect to claims filed in connection with the Cases, and subject to all of the provisions of the Bankruptcy Code, neither the Business nor the Assets are subject to any order, writ, judgment, award, injunction or decree of any Governmental Entity that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

     4.8 Material Contracts . Each Assumed Contract that is a Material Contract is valid, binding and enforceable against the Sellers, as applicable, in accordance with its terms, and is in full force and effect on the date of this Agreement. The Seller Group has performed in all material respect the obligations required to be performed by the Seller Group to date under, and is not in default or delinquent in the performance in connection with, any Assumed Contract that is a Material Contract, or, upon entry and effectiveness of the Sale Order, which would not preclude the Seller Group from assigning such Assumed Contract to the Buyer, subject to payment of the applicable Cure Amount as provided in this Agreement. No other party to any Assumed Contract that is a Material Contract is in material default in respect thereof, and no event has occurred which, with due notice or lapse of time or both, would constitute such a material default by any such other party. Excepted from the representations in this

Section 4.8 related to the absence of default or delinquent performance under Assumed Contracts that are Material Contracts are those obligations that are deemed to be Cure Costs, which shall be paid under the terms of the Sale Order.

     4.9 Permits; Compliance with Laws .

          (a) The Sellers possess all permits, Licenses, approvals, authorizations, consents or filings with Governmental Authorities necessary for the conduct of the Business (the “ Permits ”) other than Permits that (a) are not customarily required to be obtained in connection with businesses having operations similar to those of the Business, (b) could, in the reasonable judgment of the Sellers, be obtained in the ordinary course of business after Closing through routine, administrative filings, and (c) if not obtained, would not, individually or in the aggregate, materially and adversely affect the Buyer, the Assets or the Business. All material Permits issued to the Sellers are in full force and effect, and no proceeding is pending or, to the Knowledge of the Sellers, threatened to revoke, withdraw or limit any such Permit. Except as set forth on Schedule 4.9 , to the Knowledge of the Sellers, no outstanding material violations are or have been recorded in respect of any material Permits.

          (b) The operation of the Business by the Sellers complies in all material respects with all Applicable Laws and the requirements and conditions of all Permits, including all applicable operating certificates and authorities, and all other rules, regulations, directives and policies of all Governmental Authorities having jurisdiction over the Business. There is no unresolved written notice from any Governmental Authority that the Assets or the operations of the Business are not being conducted in accordance with all Applicable Laws and orders and other requirements of Governmental Entities and Governmental Authorities having jurisdiction over either Seller and/or the Assets, except for matters that would not, individually or in the aggregate, materially and adversely affect the Buyer, the Assets or the Business.

     4.10 Broker or Finder . Except as set forth on Schedule 4.10 , no Person assisted in or brought about the negotiation of this Agreement, or the subject matter of the transactions contemplated hereby, in the capacity of broker, agent, or finder or in any similar capacity on behalf of the Sellers.

     4.11 Third Party Approvals . Except for (a) entry of the Sale Order, (b) compliance with the HSR Act, and (c) approvals or consents set forth on Schedule 4.11 , the execution, delivery and performance by the Sellers of this Agreement and the consummation of the transactions contemplated hereby do not require any material consent, waiver, authorization or approval of, or filings with, any Person (including any Governmental Authority) that has not been obtained or is not deemed to be superseded by applicable provisions of the Bankruptcy Code (the matters described in this Section 4.11, collectively referred to as the “ Consents ”).

     4.12 Real Estate .

          (a) Except as set forth on Schedule 4.12(a) , the Seller Group has, and at Closing shall transfer to the Buyer, a valid leasehold interest in the premises subject to the Assumed Real Property Leases, free and clear of any Liens other than Permitted Liens. Except as set forth on Schedule 4.12(a) , the Seller Group as of the date of this Agreement enjoys peaceful and undisturbed possession under all premises subject to the Assumed Real Property Leases.

          (b) Except as set forth on Schedule 4.12(b) , as of the date of this Agreement, the Seller Group has not received any notice of any pending, threatened or contemplated condemnation proceeding affecting any of the premises subject to the Assumed Real Property Leases or any material

part thereof or any proposed termination or impairment of any parking at any of such premises or of any sale or other disposition of any of such premises or any part thereof in lieu of condemnation.

          (c) The Seller Group has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the premises subject to the Assumed Real Property Leases, except for assignments, transfers, conveyances, mortgages, deeds of trust or other encumbrances that shall be released or terminated at Closing.

     4.13 Labor and Employment Matters .

          (a) The Seller Group (i) has withheld all amounts required by Applicable Law or by agreement to be withheld from the wages, salaries and other payments to its employees and (ii) is not liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing. Without limiting the generality of the foregoing, the Seller Group has timely paid or adequately accrued to be paid to any unemployment compensation fund or other fund to which the Seller Group is required to contribute under Applicable Laws through the Closing.

          (b) Except as set forth on Schedule 4.13(b) , the Seller Group is not a party to a collective bargaining agreement (including side letters or agreements, supplemental agreements or memorandum of understanding that would materially alter a collective bargaining agreement) covering any employees, nor, to the Knowledge of the Sellers, are there currently any union organizing efforts by or with respect to any such employees. The Seller Group with respect to the Business has not experienced any actual or, to the Sellers’ Knowledge, threatened employee strike or employee related work stoppage, slowdown or lockout, except for matters that would not, individually or in the aggregate, materially and adversely affect the Buyer, the Assets or the Business.

          (c) The Seller Group does not have any employment agreements with any of its employees that are not terminable at will wi