Barnes & Noble Inc.
BARNES & NOBLE INC (Form: 8-K, Received: 12/04/2014 08:34:08)
 


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 4, 2014 (December 3, 2014)
 


BARNES & NOBLE, INC.
(Exact name of registrant as specified in its charter)

 
 
Delaware
1-12302
06-1196501
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 
122 Fifth Avenue, New York, New York
10011
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code: (212) 633-3300
 

 
Not Applicable
(Former name or former address, if changed since last report)
 

 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 


 
 
 

 
 
Item 1.01.    Entry into a Material Definitive Agreement.
 
Commercial Agreement Termination Agreement

As a condition to closing of the transactions described below, Barnes & Noble, Inc. (the “ Company ”) entered into a Commercial Agreement Amendment and Termination Agreement and Patent Agreement Amendment (the “ Commercial Agreement Termination Agreement ”), pursuant to which the Company’s existing Commercial Agreement (the “ Commercial Agreement ”) with Microsoft Corporation, a Washington corporation (“ Microsoft ”), was amended and terminated and the Company’s existing Confidential Settlement and Patent License Agreement with Microsoft (the “ Settlement and License Agreement ”) was amended to modify the termination provisions thereof.
 
Such termination will allow the Company to continue its rationalization of the NOOK Digital business and enhances the Company’s operational and strategic flexibility.  The termination also relieves Microsoft of any obligation to continue to fund support and other payments set forth in the Commercial Agreement between the partners.
 
The foregoing summary is a general description only, does not purport to be complete and is qualified in its entirety by reference to the Commercial Agreement Termination Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.
 
Purchase Agreement
 
On December 3, 2014, the Company entered into a Purchase Agreement (the “ Purchase Agreement ”) among the Company, NOOK Media Inc., a Delaware corporation (“ NMI ”), Morrison Investment Holdings, Inc., a Nevada corporation (the “ Investor ”), and Microsoft, pursuant to which NMI will purchase from the Investor, and the Investor will sell, all of its $300 million convertible Series A preferred limited liability company interest in NOOK Media LLC (“ NOOK Media ”) in exchange for an aggregate purchase price equal to (i) $62,425,006.63 in cash and (ii) 2,737,290 shares of common stock (“ Company Common Stock ”), par value $.001 per share, of the Company.  The closing of the transactions contemplated by the Purchase Agreement (“ Closing ”) is occurring on December 4, 2014.
 
Management believes that the transactions consummated pursuant to the Purchase Agreement strengthen the Company’s balance sheet through the elimination of Microsoft’s preference rights in exchange for the consideration described above.  In addition, the funds that the Company received as part of the Microsoft Commercial Agreement are currently in other long-term liabilities, which liabilities will also be extinguished at Closing.  The detailed accounting treatment for this transaction is currently being finalized.
 
The foregoing summary is a general description only, does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.
 
 
 
 

 
 
 
Microsoft Contingent Payment Agreement
 
As a condition to Closing, the parties entered into a Digital Business Contingent Payment Agreement (the “ Contingent Payment Agreement ”), pursuant to which the Investor became entitled to 22.7% of the proceeds from, among other events or transactions, any future dividends or other distributions to NMI from the Company’s digital business until the date that is three years from Closing, subject to a one year extension under certain circumstances, and the sale of the Company’s digital business until the date that is three years from Closing, subject to a one year extension under certain circumstances.
 
The foregoing summary is a general description only, does not purport to be complete and is qualified in its entirety by reference to the Contingent Payment Agreement, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.
 
Registration Rights Agreement
 
As a condition to Closing, the parties entered into a Registration Rights Agreement of Barnes & Noble, Inc. (the “ Registration Rights Agreement ”), pursuant to which the Investor became entitled to certain customary registration rights.
 
The foregoing summary is a general description only, does not purport to be complete and is qualified in its entirety by reference to the Registration Rights Agreement, which is filed as Exhibit 10.4 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.
 
Pearson Contingent Payment Agreement
 
On December 3, 2014, Pearson Education, Inc. (“ Pearson ”) in its capacity as a member of NOOK Media consented to the distribution of the Company’s digital business solely to NMI.  In connection therewith, the parties entered into a Digital Business Contingent Payment Agreement pursuant to which, subject to certain exceptions, Pearson became entitled to 5% of the proceeds from, among other events or transactions, any future dividends or other distributions to NMI from the Company’s digital business until the date that is three years from Closing, subject to a one year extension under certain circumstances, and the sale of the Company’s digital business, subject to certain exceptions, until the date that is three years from Closing, subject to a one year extension under certain circumstances.
 
The foregoing summary is a general description only, does not purport to be complete and is qualified in its entirety by reference to the Digital Business Contingent Payment Agreement entered into with Pearson, which is filed as Exhibit 10.5 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.
 
Item 1.02.     Termination of a Material Definitive Agreement.
 
As a condition to Closing, the parties entered into the Commercial Agreement Termination Agreement, pursuant to which the Company’s existing Commercial Agreement was terminated, effective as of December 3, 2014.
 
 
 
 
 

 
 
 
The description of the Commercial Agreement Termination Agreement in Item 1.01 of the Company’s Current Report on Form 8-K filed on April 30, 2012 and the description of the amendments to the Commercial Agreement in Item 1.01 of Company’s Current Report on Form 8-K filed on March 13, 2014, are incorporated into this Item 1.02 by reference.
 
Item 3.02.       Unregistered Sales of Equity Securities.
 
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.
 
The shares of Company Common Stock were sold in a private placement exempt from the registration requirements of the Securities Act of 1933, pursuant to Section 4(2) thereof.  The shares of Company Common Stock were sold without underwriting discounts and commissions.
 
Item 9.01.    Financial Statements and Exhibits

(d)   The following exhibits are filed as a part of this Report.
 
Exhibit No.
 
Description
10.1
 
 
Commercial Agreement Amendment and Termination Agreement and Patent Agreement Amendment dated as of December 3, 2014, among Microsoft Corporation, Barnes & Noble, Inc., NOOK Media LLC, barnesandnoble.com llc and Microsoft Licensing GP.*
 
10.2
 
 
Purchase Agreement dated as of December 3, 2014, among Barnes & Noble, Inc., NOOK Media Inc., Morrison Investment Holdings, Inc. and Microsoft Corporation.
 
10.3
 
 
Digital Business Contingent Payment Agreement dated as of December 3, 2014, by and between NOOK Media Inc., Barnes & Noble, Inc. and Morrison Investment Holdings, Inc.
 
10.4
 
 
Registration Rights Agreement of Barnes & Noble, Inc. dated as of December 3, 2014, among Barnes & Noble, Inc. and the Shareholders party thereto.
 
10.5
 
 
Digital Business Contingent Payment Agreement dated as of December 3, 2014, by and between NOOK Media Inc., Barnes & Noble, Inc. and Pearson Education, Inc.
 
 
 
 

 
* Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
 
 
 
 

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  BARNES & NOBLE, INC.,  
       
Date: December 4, 2014
By:
/s/ Bradley A. Feuer  
    Name: Bradley A. Feuer   
    Title:
Vice President, General Counsel and
Corporate Secretary
 
       

 
 

 
 
Exhibit Index
 
Exhibit No.
 
Description
10.1
 
 
Commercial Agreement Amendment and Termination Agreement and Patent Agreement Amendment dated as of December 3, 2014, among Microsoft Corporation, Barnes & Noble, Inc., NOOK Media LLC, barnesandnoble.com llc and Microsoft Licensing GP.*
 
10.2
 
 
Purchase Agreement dated as of December 3, 2014, among Barnes & Noble, Inc., NOOK Media Inc., Morrison Investment Holdings, Inc. and Microsoft Corporation.
 
10.3
 
 
Digital Business Contingent Payment Agreement dated as of December 3, 2014, by and between NOOK Media Inc., Barnes & Noble, Inc. and Morrison Investment Holdings, Inc.
 
10.4
 
 
Registration Rights Agreement of Barnes & Noble, Inc. dated as of December 3, 2014, among Barnes & Noble, Inc. and the Shareholders party thereto.
 
10.5
 
Digital Business Contingent Payment Agreement dated as of December 3, 2014, by and between NOOK Media Inc., Barnes & Noble, Inc. and Pearson Education, Inc.

 
 
 
 
 
 
 
 
 
* Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
 
Exhibit 10.1
 
CONFIDENTIAL TREATMENT REQUESTED.  INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH [***] .   AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
 
Commercial Agreement Amendment and Termination Agreement
and Patent Agreement Amendment

This Commercial Agreement Termination Agreement and Patent Agreement Amendment (this “Agreement” ) is made and entered into among Microsoft Corporation, a Washington corporation ( “Microsoft” ), Barnes and Noble, Inc., a Delaware corporation ( “B&N” ), NOOK Media LLC, a Delaware limited liability company ( “NewCo” ), barnesandnoble.com llc, a Delaware limited liability company, and Microsoft Licensing GP ( “MLGP” ), a Nevada general partnership, effective as of December 3, 2014 (the “Termination Effective Date” ).

Background and Purpose

A.            Microsoft, B&N and NewCo previously entered into a Commercial Agreement with an Effective Date of October 4, 2012, as amended by Amendment No. 1 and the Amended and Restated Exhibit E to the Commercial Agreement (the Commerce Platform Agreement) and Amendment No. 2 dated March 10, 2014 (collectively, the “ Commercial Agreement ”).  Capitalized terms that are used without definition herein shall have the meanings assigned to them in the Commercial Agreement.

B.            Microsoft, B&N and NewCo desire to amend and terminate the Commercial Agreement as set forth in this Agreement.

C.            B&N, barnesandnoble.com llc, Microsoft and MLGP previously entered into a Confidential Settlement and Patent License Agreement effective as of April 27, 2012, under which B&N’s obligations were assumed by NewCo (collectively, the “Patent Agreement” ).

D.            B&N, barnesandnoble.com llc, Microsoft and MLGP desire to amend the Patent Agreement as set forth in this Agreement.

Agreement
The parties therefore agree as follows:

Section 1.    Amendment of Commercial Agreement.

B&N, NewCo and Microsoft hereby amend the Commercial Agreement to replace Section 11.7 with the following new Section 11.7:

11.7   Survival.   Only Sections 1.1 (and all other definitions), 7.6, 8.1, 9, 10.1, 10.6, 10.7, 11.7, 12, 13 (except 13.4) and 14 (excluding Section 14.1 and the portion of Section 14.5 after the first three sentences); and Exhibit A of this Agreement will survive any expiration or termination of this Agreement; provided that the restrictions in Sections 8.1.1 and 8.1.2 will survive only until the date that is two years after the Termination Effective Date.”
 
 
 

 
 
Section 2.  Termination of Commercial Agreement.

2.1           Termination.

The Commercial Agreement is hereby terminated effective as of the Termination Effective Date.  For the avoidance of any doubt, only the provisions listed in Section 1 of this Agreement shall survive the termination of the Commercial Agreement pursuant to this Agreement.

Section 3.    Releases.

3.1           Microsoft Release.

Subject to Section 3.4, Microsoft, on behalf of itself and its current and future Affiliates, hereby irrevocably releases and forever discharges each of NewCo and B&N, their respective past and current Affiliates and their respective employees, officers, directors, stockholders, members and principals from any and all claims, actions, causes of action, suits, damages, injuries, duties, rights, obligations, liabilities, adjustments, responsibilities, judgments, trespasses, and demands, whatsoever, in law or in equity, whether known or unknown, suspected to exist or unsuspected to exist, arising out of or relating to the Commercial Agreement or any actual or potential breach thereof.

3.2           B&N/NewCo Releases.

Subject to Section 3.4, each of B&N and NewCo, on behalf of itself and its current and future Affiliates, hereby irrevocably releases and forever discharges Microsoft, its past and current Affiliates and their respective employees, officers, directors, stockholders and principals from any and all claims, actions, causes of action, suits, damages, injuries, duties, rights, obligations, liabilities, adjustments, responsibilities, judgments, trespasses, and demands, whatsoever, in law or in equity, whether known or unknown, suspected to exist or unsuspected to exist, arising out of or relating to the Commercial Agreement or any actual or potential breach thereof.

3.3           Express Waiver.

Subject to Section 3.4, each of Microsoft, B&N, and NewCo, on behalf of itself and its current and future Affiliates, hereby expressly waive all rights under any statutes (such as, for example, California Civil Code § 1542), legal decisions, or common law principles providing that releases of the type extended in Sections 3.1 and 3.2 of this Agreement do not or may not extend to claims which are unknown, unanticipated, or unsuspected at the time such releases are executed.

3.4           Exceptions.

Sections 3.1, 3.2 and 3.3 do not release, discharge, waive or otherwise apply to any claims, actions, causes of action, suits, damages, injuries, duties, rights, obligations, liabilities, adjustments, responsibilities, judgments, trespasses, and demands arising out of or relating to the parties’ respective obligations, or a party’s breach or default with respect to any of its obligations, under any provision of the Commercial Agreement that survives pursuant to Section 11.7 of the Commercial Agreement, as amended by Section 1 of this Agreement, or this Agreement.
 
 
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Section 4.  Patent Agreement Amendment.

NewCo, barnesandnoble.com llc, Microsoft and MLGP hereby amend the Patent Agreement by:

(1)            inserting a new Section 5.2.4 therein, which shall read as follows:

“5.2.4.  [***]

(2)            inserting the following sentence at the end of Section 7.6:

“Notwithstanding the foregoing, MLGP may assign this Agreement to Microsoft or a subsidiary of Microsoft by providing written notice to Barnes & Noble, provided such assignment is made subject to, and the transferee accepts, the rights and obligations set forth in this Agreement.”

Section 5.    General Provisions.

5.1           Additional Provisions.

Sections 14.4, 14.5, 14.6, 14.7, 14.8, 14.9, 14.10, 14.12 and 14.13 of the Commercial Agreement will apply to this Agreement as if set forth fully herein.

5.2             Effectiveness .

This Agreement will become effective as of the Termination Effective Date.


 
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Microsoft Corporation
 
Barnes and Noble, Inc.
 
Signature: /s/ Amy E. Hood
 
Signature: /s/ Michael P. Huseby
 
Printed Name: Amy E. Hood
 
Printed Name: Michael P. Huseby
 
Title: Chief Financial Officer
 
Title: Chief Executive Officer
 
Date Signed: December 3, 2014
 
Date Signed: December 3, 2014
 
barnesandnoble.com llc
 
Nook Media LLC
 
Signature: /s/ Michael P. Huseby
 
Signature: /s/ Michael P. Huseby
 
Printed Name: Michael P. Huseby
 
Printed Name: Michael P. Huseby
 
Title: Chief Executive Officer
 
Title: Chief Executive Officer
 
Date Signed: December 3, 2014
 
Date Signed: December 3, 2014
 
Microsoft Licensing GP
 
 
Signature: /s/ Stephen Harlan
 
 
Printed Name: Stephen Harlan
 
 
Title: Duly Authorized Signatory
 
 
Date Signed: December 2, 2014
 
 

 
[ Signature Page to the Commercial Agreement Termnation Agreement ]
 
Exhibit 10.2
 
 


 
 
 
 
 
 
 
PURCHASE AGREEMENT
 
dated as of December 3, 2014,
 
among
 
BARNES & NOBLE, INC.,
 
NOOK MEDIA INC.,
 
MORRISON INVESTMENT HOLDINGS, INC.
 
and
 
MICROSOFT CORPORATION
 
 
 

 
 
 



 
 

 

Table of Contents

Page

ARTICLE I
     
Purchase and Sale; Closing
SECTION 1.01.
Purchase and Sale of the Series A Preferred Interests
1
SECTION 1.02.
Closing
1
     
     
ARTICLE II
     
Representations and Warranties
SECTION 2.01.
Representations and Warranties of the Company
2
SECTION 2.02.
Representations and Warranties of the Investor
8
     
     
ARTICLE III
     
Covenants and Additional Agreements and Acknowledgements
SECTION 3.01.
Further Assurances
10
SECTION 3.02.
Expenses
10
SECTION 3.03.
Confidentiality
10
SECTION 3.04.
Investment Agreement Termination; Releases
11
SECTION 3.05.
Releases
11
SECTION 3.06.
Acknowledgements
11
SECTION 3.07.
NYSE Listing of Common Shares
12
     
     
ARTICLE IV
     
Miscellaneous
SECTION 4.01.
Survival
12
SECTION 4.02.
Amendments, Waivers, etc
12
SECTION 4.03.
Counterparts and Facsimile
12
SECTION 4.04.
Specific Enforcement; Governing Law; Submission to Jurisdiction; Waiver of Jury Trial
12
SECTION 4.05.
Notices
14
SECTION 4.06.
Entire Agreement, etc.
16
SECTION 4.07.
Definitions
16
SECTION 4.08.
Interpretation
17
SECTION 4.09.
Severability
17
SECTION 4.10.
No Third-Party Beneficiaries
17
 
 
 
i

 

 
SECTION 4.11.
Assignment
18
SECTION 4.12.
Public Announcements
18
SECTION 4.13.
Transfer Taxes
18
 
 
 
ii

 
 
PURCHASE AGREEMENT dated as of December 3, 2014 (this “ Agreement ”), among Barnes & Noble, Inc., a Delaware corporation (the “ Company ”), NOOK Media Inc., a Delaware corporation (“ NMI ”), Morrison Investment Holdings, Inc., a Nevada corporation (the “ Investor ”), and Microsoft Corporation, a Washington corporation (“ Microsoft ”). The Company, NMI, the Investor and Microsoft each may be referred to herein individually as a “ Party ” and collectively as the “ Parties .”
 
WHEREAS NMI desires to purchase, and the Investor desires to sell, all of the Investor’s right, title and interest in, to and under the 300,000 convertible Series A preferred limited liability company interests (the “ Series A Preferred Interests ”) of NOOK Media LLC (“ NOOK Media ”) owned by the Investor, pursuant to the terms and conditions set forth in this Agreement.
 
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and subject to the conditions set forth herein, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

Purchase and Sale; Closing

SECTION 1.01. Purchase and Sale of the Series A Preferred Interests .   On the terms and subject to the conditions set forth in this Agreement, at the Closing, NMI shall purchase from the Investor all of the Investor’s right, title and interest in, to and under the Series A Preferred Interests for an aggregate purchase price equal to (a) $62,425,006.63 in cash, payable as set forth in Section 1.02(b), and (b) 2,737,290 shares (the “ Common Shares ”) of common stock, par value $.001 per share (“ Company Common Stock ”), of the Company. The purchase and sale of the Series A Preferred Interests is referred to in this Agreement as the “ Preferred Interest Purchase ”.

SECTION 1.02. Closing .

(a) The closing of the Preferred Interest Purchase (the “ Closing ”) shall take place at the offices of Cravath, Swaine & Moore LLP, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, immediately following the execution and delivery of this Agreement by the Company, NMI, the Investor and Microsoft.  The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date ”.

(b) At the Closing, the Parties will make the following deliveries and take the following actions:

(i) the Investor shall deliver to NMI certificates, together with appropriate instruments of transfer, representing the Series A Preferred Interests;

(ii) as early as practicable on December 4, 2014, NMI shall pay to the Investor $62,425,006.63 by wire transfer of immediately available funds to a bank account designated in writing by the Investor;
 
 
 
 

 

 
(iii) as early as practicable on December 4, 2014, NMI shall cause the Common Shares to be issued in book-entry form, duly registered in the name of Microsoft, on behalf of the Investor, and shall provide evidence reasonably satisfactory to the Investor of such book-entry;

(iv) each Party that is a party to the Commercial Agreement Termination Agreement shall deliver to the other Parties an executed counterpart of the Commercial Agreement Termination Agreement;

(v) each Party that is a party to the Digital Business Contingent Payment Agreement shall deliver to the other Parties an executed counterpart of the Digital Business Contingent Payment Agreement; and

(vi) each Party that is a party to the Registration Rights Agreement shall deliver to the other Parties an executed counterpart of the Registration Rights Agreement.

ARTICLE II

Representations and Warranties

SECTION 2.01. Representations and Warranties of the Company .

Except as set forth in the Company Disclosure Letter, the Company represents and warrants as of the date hereof and as of the Closing Date to the Investor and Microsoft as follows:

(a) Organization, Standing and Corporate Power.   The Company and each of its Subsidiaries is duly organized and validly existing under the Laws of its jurisdiction of organization and has all requisite corporate or other entity power and authority to own or lease all of its properties and assets and to carry on its business as presently conducted.  Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing (where such concept is recognized under applicable Law) in each U.S. jurisdiction where the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than where the failure to be so qualified, licensed or in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of either the Company or NMI to consummate the transactions contemplated by this Agreement.
 
(b) Capitalization.

(i) The authorized capital stock of the Company consists of 300,000,000 shares of Company Common Stock and 5,000,000 shares of preferred stock, par value $.001 per share (“ Company Preferred Stock ”), of which 300,000 shares of Company Preferred Stock were designated by the board of directors of the Company (the “ Board ”) as Series I Preferred Stock and 214,000 shares of Company Preferred Stock were designated by the Board as Series J Preferred Stock.  At the close of business on December 1, 2014, (i) 59,531,503 shares of Company Common Stock (which includes 45,660 shares of Company Common Stock granted pursuant to a Company Stock Plan that is subject to
 
 
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vesting or other forfeiture conditions or repurchase by the Company (such shares, the “ Company Restricted Stock ”)) were issued and outstanding, (ii) 7,097,695 shares of Company Common Stock were reserved and available for issuance pursuant to the Amended and Restated 2009 Incentive Plan of the Company (the “ 2009 Plan ”), the 2004 Incentive Plan of the Company, as amended (the “ 2004 Plan ”), and the Amended and Restated 1996 Incentive Plan of the Company (the “ 1996 Plan ”, and collectively with the 2009 Plan and the 2004 Plan, the “ Company Stock Plans ”), of which 620,375 shares of Company Common Stock were subject to outstanding options to acquire shares of Company Common Stock (such options, the “ Company Stock Options ”), and 2,794,254 shares of Company Common Stock were subject to outstanding restricted stock units (such restricted stock units, the “ Company RSUs ”), (iii) 34,546,409 shares of Company Common Stock were owned by the Company as treasury stock, (iv) 214,000 shares of Series J Preferred Stock were outstanding (and such Series J Preferred Stock were convertible as of December 1, 2014 into no more than 12,000,000 shares of Company Common Stock), (v) 12,000,000 shares of Company Common Stock were reserved for issuance in connection with a conversion of the Series J Preferred Stock, and (vi) zero shares of Series I Preferred Stock were outstanding.  Except as set forth above, at the close of business on December 1, 2014, no shares of capital stock or other voting securities of or equity interests in the Company were issued, reserved for issuance or outstanding and no securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of or equity interests in the Company were issued or outstanding.  Since December 1, 2014, to the date of this Agreement, (x) there have been no issuances by the Company of shares of capital stock or other voting securities of or equity interests in the Company, other than issuances of shares upon the vesting of Company Restricted Stock pursuant to the Company Stock Plans or shares of Company Common Stock pursuant to Company Stock Options, Company RSUs, or the Company’s Amended and Restated Savings Plan (the “ Company 401(k) Plan ”) and (y) there have been no issuances by the Company of options, warrants, rights, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of, or other equity or voting interests in, the Company or other rights that give the holder thereof any economic interest of a nature accruing to the holders of Company Common Stock, other than issuances pursuant to the Company 401(k) plan in accordance with its terms.  All outstanding shares of Company Common Stock are, and all such shares that may be issued prior to the date hereof will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.  There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Common Stock may vote (“ Voting Company Debt ”).  Except for any obligations pursuant to this Agreement or as otherwise set forth above in this Section 2.01(b), as of the date of this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, stock-based performance units, Contracts or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which the Company is bound (1) obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of or equity interests in, or any security convertible or
 
 
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exchangeable for any shares of capital stock or other voting securities of or equity interest in, the Company or any Voting Company Debt, (2) obligating the Company or any of its Subsidiaries to issue, grant or enter into any such option, warrant, right, security, unit, Contract or undertaking or (3) that give any person the right to receive any economic interest of a nature accruing to the holders of Company Common Stock.  There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock or options, warrants, rights, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of the Company, other than pursuant to the Company Stock Plans and the Company 401(k) Plan. 
 
(ii) The Company Common Stock constitute the only outstanding class of securities of the Company or its Subsidiaries registered under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

(c) Authorization; Enforceability.

(i) Each of the Company and NMI has all requisite corporate power and authority to execute and deliver this Agreement and each other agreement contemplated hereby to which it is a party and to consummate the transactions contemplated hereunder and thereunder.  The execution and delivery of this Agreement and each such other agreement by each of the Company and NMI and the consummation of the transactions contemplated by, and compliance with the provisions of, this Agreement and each such other agreement by each of the Company and NMI have been duly authorized and approved by all necessary corporate action on the part of the Company and NMI, respectively.  On or prior to the date of this Agreement, the Board has duly adopted resolutions approving this Agreement and each such other agreement and the transactions contemplated hereby and thereby (and, as of the date of this Agreement, the resolutions giving effect to such corporate actions have not been rescinded, modified or withdrawn in any way). This Agreement has been duly executed and delivered by each of the Company and NMI and, assuming the due authorization, execution and delivery by each of the Investor and Microsoft, constitutes a legal, valid and binding obligation of each of the Company and NMI, enforceable against each of the Company and NMI in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles, whether considered in a proceeding at law or in equity.

(ii) No vote, consent or approval of the stockholders of the Company is required under applicable Law, under the certificate of incorporation of the Company or by-laws of the Company, or under any Contract between the Company and any stockholder of the Company, to authorize or approve this Agreement or the transactions contemplated hereby.
 
 
 
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(d) No Conflict.

(i) Neither the Company nor NMI is in violation or default of any provision of the certificate of incorporation or the by-laws of the Company or NMI, respectively.  The execution and delivery by each of the Company and NMI of this Agreement and each other agreement contemplated hereby to which it is a party do not, and the consummation of the transactions contemplated by, and compliance with the provisions of, this Agreement and each such other agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under any provision of (A) the certificate of incorporation of the Company or the by-laws of the Company, (B) the certificate of incorporation or the by-laws of NMI or the organizational documents of Nook Media, or (C) (1) any loan or credit agreement, license, contract, lease, sublease, indenture, note, debenture, bond, mortgage or deed of trust or other agreement, arrangement or understanding (a “ Contract ”) to which the Company or any of its Subsidiaries is a party or by which any of their respective properties or assets are bound and that is material to the business of NMI or the Company and its Subsidiaries, taken as a whole, (2) any supranational, federal, national, state, provincial or local statute, law (including common law), ordinance, rule or regulation of any Governmental Entity (“ Law ”) that is material to NMI or the Company and its Subsidiaries, taken as a whole, or (3) any judgment, order or decree of any Governmental Entity (“ Judgment ”), in each case, applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of such clause (C) above, any such conflicts, violations, breaches, defaults, rights, losses or pledges, liens, charges, mortgages, encumbrances or security interests of any kind or nature (collectively, “ Liens ”) that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of either the Company or NMI to consummate the transactions contemplated by this Agreement.

(ii) Other than in connection or in compliance with the provisions of the Securities Act of 1933, as amended (the “ Securities Act ”) and the securities or blue sky laws of the various states or, to the extent applicable, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) or any applicable antitrust, merger or competition law, no notice to, registration, declaration or filing with, review by, or authorization, consent, order, waiver, authorization or approval of, any governmental or regulatory (including any stock exchange) authorities, agencies, courts, commissions or other entities, whether federal, state, local or foreign, or applicable self-regulatory organizations (each, a “ Governmental Entity ”) or other third party is necessary for the consummation by the Company and NMI of the transactions contemplated by this Agreement.

(e) Authorization of Company Common Stock.   As of the Closing Date, and upon the completion of the actions to be taken at the Closing, the Common Shares (i) will be duly authorized by all necessary corporate action on the part of the Company, (ii) will be validly issued, fully paid and nonassessable, (iii) will not be subject to preemptive rights or restrictions on transfer (other than restrictions
 
 
5

 
 
on transfer under applicable state and federal securities laws) and (iv) will be free and clear of all Liens.
 
(f) Private Offering.   None of the Company, its Subsidiaries, their Affiliates and their Representatives have, directly or indirectly, made any offers or sales of the Common Shares or solicited any offers to buy the Common Shares, under circumstances that would require registration of the Common Shares under the Securities Act.  None of the Company, its Subsidiaries, their Affiliates and their Representatives have, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause this offering of the Common Shares to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated.  None of the Company, its Subsidiaries, their Affiliates and their Representatives will take any action or steps referred to in the two preceding sentences that would require registration of any of the Common Shares under the Securities Act.  Assuming the accuracy of the representations made by the Investor in Section 2.02, the sale and delivery of the Common Shares hereunder are exempt from the (i) registration and prospectus delivery requirements of the Securities Act and (ii) the registration and qualification requirements of all applicable securities laws of the states of the United States.

(g) Anti-Takeover Provisions Not Applicable .  The provisions of Section 203 of the General Corporation Law of the State of Delaware as they relate to the Company do not and will not apply to this Agreement or to any of the transactions contemplated hereby.

(h) SEC Documents; Undisclosed Liabilities; Disclosure Controls and Procedures; Other .

(i) The Company has filed all material reports, schedules, forms, statements and other documents with the Securities and Exchange Commission (the “ SEC ”) required to be filed by the Company pursuant to the Securities Act or the Exchange Act since April 28, 2012 (the “ SEC Documents ”).  As of their respective effective dates (in the case of SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective dates of filing (in the case of all other SEC Documents), the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable thereto, and except to the extent amended or superseded by a subsequent filing with the SEC prior to the date of this Agreement, as of such respective dates, none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  As of the date of this Agreement, there are no outstanding or unresolved comment letters received from the SEC or its staff.  The audited consolidated financial statements and the unaudited quarterly financial statements (including, in each case, the notes thereto) of the Company included or incorporated by reference in the SEC Documents when filed complied in all material respects with the published rules and regulations of the SEC with respect thereto, have been prepared in all material respects in accordance with generally accepted accounting principles (“ GAAP ”) (except, in the case
 
 
 
6

 
 
of unaudited quarterly statements, as permitted by Form 10-Q of the SEC or other rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end adjustments).
 
(ii) Except for matters reflected or reserved against in the most recent consolidated balance sheet of the Company (or the notes thereto) included in the SEC Documents, neither the Company nor any of its Subsidiaries has any liabilities (whether absolute, accrued, contingent, fixed or otherwise) of any nature that would be required under GAAP, as in effect on the date of this Agreement, to be reflected on a consolidated balance sheet of the Company (including the notes thereto), except liabilities that (A) were incurred since the date of such balance sheet in the ordinary course of business or (B) are incurred in connection with the transactions contemplated by this Agreement.  There are no unconsolidated Subsidiaries of the Company or any off-balance sheet arrangements of any type (including any off-balance sheet arrangement required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K promulgated under the Securities Act) that have not been so described in the SEC Documents nor any obligations to enter into any such arrangements.

(iii) The Company has established and maintains disclosure controls and procedures and a system of internal controls over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act.  Since April 28, 2012, neither the Company nor the Company’s independent registered public accounting firm, has identified or been made aware of “significant deficiencies” or “material weaknesses” (as defined by the Public Company Accounting Oversight Board) in the design or operation of the Company’s internal controls and procedures which would reasonably be expected to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial data, in each case which has not been subsequently remediated.  To the knowledge of the Company, there is no fraud, whether or not material, that involves the Company’s management or other employees who have a significant role in the preparation of financial statements or the internal control over financial reporting utilized by the Company and its Subsidiaries.

(iv) Except for matters that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, there is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries or any of their respective assets before or by any Governmental Entity. Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries is in default with respect to any Judgment.
 
 
 
7

 

 
(v) Neither the Company nor any of its Subsidiaries is in violation of any applicable Law, except where such violation would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(i) Brokers and Finders .  Other than Guggenheim Partners LLC, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Company or its Affiliates that is entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

SECTION 2.02. Representations and Warranties of the Investor .  The Investor hereby represents and warrants as of the date hereof and as of the Closing Date to the Company and NMI that:

(a) Organization and Authority.   Each of the Investor and Microsoft is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization and has all requisite corporate power and authority to carry on its business as presently conducted, except where the failure to be in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of either the Investor or Microsoft to consummate the transactions contemplated by this Agreement.

(b) Authorization; Enforceability.   Each of the Investor and Microsoft has all requisite corporate power and authority to execute and deliver this Agreement and each other agreement contemplated hereby to which it is a party and to consummate the transactions contemplated hereunder and thereunder.  The execution and delivery of this Agreement and each such other agreement by each of the Investor and Microsoft and the consummation of the transactions contemplated by, and compliance with the provisions of, this Agreement and each such other agreement, by each of the Investor and Microsoft have been duly authorized by all necessary corporate action on the part of the Investor and Microsoft, respectively (and, as of the date of this Agreement, the resolutions giving effect to such corporate actions have not been rescinded, modified or withdrawn in any way).  This Agreement has been duly executed and delivered by each of the Investor and Microsoft and, assuming the due authorization, execution and delivery by the Company and NMI, constitutes a legal, valid and binding obligation of each of the Investor and Microsoft, enforceable against each of the Investor and Microsoft in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) No Conflict.   The execution and delivery by each of the Investor and Microsoft of this Agreement and each other agreement contemplated hereby to which it is a party do not, and the consummation of the transactions contemplated by, and compliance with the provisions of, this Agreement and each such other agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of the Investor under, the certificate of incorporation or bylaws, or similar organizational documents, of the Investor or Microsoft, any provision of any Contract to which the Investor or Microsoft or any of their respective Subsidiaries is a party or by which any of its properties or assets are bound and that is material to the business of Microsoft and its Subsidiaries, taken as a whole, or
 
 
 
8

 
 
any Law that is material to Microsoft and its Subsidiaries, taken as a whole, or Judgment, in each case, applicable to the Investor or Microsoft or any of their respective Subsidiaries or any of its properties or assets, other than any such conflicts, violations, breaches, defaults, rights, losses or Liens that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Investor or Microsoft to consummate the transactions contemplated by this Agreement.
 
(d) Consents.   Other than in connection or in compliance with the provisions of the Securities Act and the securities or blue sky laws of the various states or, to the extent applicable, the HSR Act or any applicable antitrust, merger or competition law, no notice to, registration, declaration or filing with, review by, or authorization, consent, order, waiver, authorization or approval of any Governmental Entity is necessary for the consummation by the Investor or Microsoft of the transactions contemplated by this Agreement.

(e) Purchase for Investment.   The Investor acknowledges that the Common Shares have not been registered under the Securities Act or under any state securities laws.  The Investor (i) is acquiring the Common Shares pursuant to an exemption from registration under the Securities Act solely for investment with no present intention or view to distribute any of the Common Shares to any person in violation of the Securities Act, (ii) will not sell or otherwise dispose of any of the Common Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws, (iii) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Common Shares and of making an informed investment decision and has conducted an independent review and analysis of the business and affairs of the Company that it considers sufficient and reasonable for purposes of its making its investment in the Common Shares and (iv) is an “accredited investor” (as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act).

(f) Ownership of Series A Preferred Interests .  The Investor (i) holds and has good and valid title to the Series A Preferred Interests and the certificates representing such securities, free and clear of any Liens, proxies, voting trusts or agreements, understandings or arrangements other than those contained in the Second Amended and Restated Limited Liability Company Agreement of NOOK Media (the “ LLC Agreement ”) and (ii) is the record owner thereof.  Assuming NMI has the requisite power and authority to be the lawful owner of the Series A Preferred Interests, upon delivery to NMI at the Closing of certificates representing the Series A Preferred Interests and other appropriate instruments of transfer, and upon consummation of the other transactions contemplated hereby, good and valid title to the Series A Preferred Interests will pass to NMI, free and clear of any Liens, and the Series A Preferred Interests will not be subject to any voting trust agreement or other Contract relating to the ownership, voting, distribution rights or disposition of the Series A Preferred Interests (other than those created or entered into by NMI).

(g) Ownership .  Neither the Investor nor any of its Affiliates beneficially owns (within the meaning of Section 13 of the Exchange Act and the rules and regulations promulgated thereunder) more than 1% of the aggregate outstanding shares of Company Common Stock, or is a party to any Contract (other than this Agreement) for the purpose of
 
 
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acquiring, holding, voting or disposing of, more than 1% of the aggregate outstanding shares of Company Common Stock.
 
(h) Brokers and Finders .  There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Investor or its Affiliates that is entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

ARTICLE III

Covenants and Additional Agreements and Acknowledgements

SECTION 3.01. Further Assurances .

(a) Each Party will cooperate and consult with the other Parties and use commercially reasonable efforts to prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary permits, consents, orders, approvals and authorizations of, or any exemption by, all Governmental Entities and other third parties, and expiration or termination of any applicable waiting periods, necessary or advisable to consummate the transactions contemplated by this Agreement, to take actions necessary to cause the conditions to Closing to be satisfied as promptly as reasonably practicable and to perform the covenants contemplated by this Agreement.  Each Party shall execute and deliver after the Closing such further certificates, agreements and other documents and take such other actions as the other Party may reasonably request to consummate or implement such transactions or to evidence such events or matters.  Each of the Investor and the Company will have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable Laws relating to the exchange of information, with respect to all the information relating to the other Party, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement.  In exercising the foregoing right, each of the Parties agrees to act reasonably and as promptly as practicable.  Each Party agrees to keep the other Parties apprised of the status of matters relating to completion of the transactions contemplated hereby.  Each Party shall promptly furnish each other Party, to the extent permitted by applicable Laws, with copies of written communications received by them or their Subsidiaries from, or delivered by any of the foregoing to, any Governmental Entity in respect of the transactions contemplated by this Agreement.

SECTION 3.02. Expenses .   Each Party shall bear and pay its own costs, fees and expenses incurred by it in connection with this Agreement and the transactions contemplated by this Agreement.

SECTION 3.03. Confidentiality .  Each Party hereby agrees to keep confidential and to cause its respective employees, officers, directors, Affiliates and Representatives to keep confidential any and all confidential information of the Investor and Microsoft, on the one hand, and NMI and the Company, on the other hand, including non-public information relating to their respective finances and results, trade secrets, know-how, customers, business plans, marketing
 
 
 
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activities, financial data and other business affairs that was disclosed by the Investor or Microsoft, on the one hand, and NMI or the Company, on the other hand, or their respective Affiliates or Representatives on or prior to the date of this Agreement in connection with the transactions contemplated by this Agreement.
 
SECTION 3.04. Investment Agreement Termination; Releases .  Effective as of the Closing (a) all rights and obligations under the Investment Agreement dated as of April 27, 2012 (the “ Investment Agreement ”), among the Company, the Investor and Microsoft shall terminate and (b) all rights and obligations of the Investor under the LLC Agreement shall terminate.

SECTION 3.05. Releases .  Effective as of the Closing, each of the Investor and Microsoft hereby releases, remises and forever discharges each of the Company, NMI and NOOK Media and any of their respective Affiliates, directors, officers, employees and representatives from any claims, losses, liabilities, obligations or responsibilities for any and all actions or failures to take action, whether known or unknown, relating to, resulting from or arising out of the LLC Agreement, the Investment Agreement and the transactions contemplated by any of the foregoing (excluding the Commercial Agreement, dated as of April 27, 2012, between the Company and Microsoft, as amended, and the Confidential Settlement and Patent License Agreement, dated as of April 27, 2012, among the Company, barnesandnoblellc.com, Microsoft and Microsoft Licensing GP).  Effective as of the Closing, each of the Company and NMI hereby releases, remises and forever discharges each of the Investor, Microsoft and any of their respective Affiliates, directors, officers, employees and representatives from any claims, losses, liabilities, obligations or responsibilities for any and all actions or failures to take action, whether known or unknown, relating to, resulting from or arising out of the LLC Agreement, the Investment Agreement and the transactions contemplated by any of the foregoing (excluding the Commercial Agreement, dated as of April 27, 2012, between the Company and Microsoft, as amended, and the Confidential Settlement and Patent License Agreement, dated as of April 27, 2012, among the Company, barnesandnoble.com llc, Microsoft and Microsoft Licensing GP).  Nothing herein shall impair or modify any releases contained in the Commercial Agreement Termination Agreement.

SECTION 3.06. Acknowledgements .  The Parties acknowledge and agree that the representations and warranties set forth in Section 2.01 constitute the sole and exclusive representations and warranties of the Company and its Subsidiaries to the Investor and Microsoft in connection with the transactions contemplated by this Agreement and the representations and warranties set forth in Section 2.02 constitute the sole and exclusive representations and warranties of the Investor and its Subsidiaries to the Company in connection with the transactions contemplated by this Agreement, and there are no other representations, warranties, covenants, understandings or agreements, oral or written, in relation thereto between the Parties other than those incorporated therein.  Except for the representations and warranties expressly set forth in Section 2.01, each of the Investor and Microsoft disclaims reliance on any representations or warranties, either express or implied, by or on behalf of the Company or any of its Subsidiaries or their Affiliates or Representatives. Except for the representations and warranties expressly set forth in Section 2.02, each of NMI and the Company disclaims reliance on any representations or warranties, either express or implied, by or on behalf of the Investor or any of its Subsidiaries or their Affiliates or Representatives.  The Investor and Microsoft each
 
 
 
11

 
 
 
represent and warrant that it is a sophisticated party.  The Investor and Microsoft each acknowledge and agree that any financial forecasts or projections relating to the Company and NOOK Media and their respective businesses that have been provided to the Investor and Microsoft have been provided with the understanding and agreement that neither the Company nor any of its Subsidiaries is making any representation or warranty with respect to such forecasts or projections (except as expressly set forth in Section 2.01) and that actual future results may vary from such forecasts or projections based upon numerous factors. For the avoidance of doubt, no investigation or receipt of information in connection with the transactions contemplated hereby shall affect or be deemed to modify any representation, warranty or covenant of the Company or NMI or any person’s right to any remedy hereunder with respect to any breaches thereof.
 
SECTION 3.07. NYSE Listing of Common Shares . The Company shall cause the Common Shares to be approved for listing on the New York Stock Exchange promptly following the Closing.

ARTICLE IV

Miscellaneous

SECTION 4.01. Survival .   The representations and warranties of the Parties set forth in Article II of this Agreement shall survive until the second (2 nd ) anniversary of the Closing, except that Sections 2.01(a), (b), (c) and (e) and Sections 2.02(a), (b) and (f) shall survive indefinitely.  All of the covenants or other agreements of the Parties contained in this Agreement shall survive until fully performed or fulfilled.

SECTION 4.02. Amendments, Waivers, etc .  This Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed by the Party against whom such amendment or waiver shall be enforced.  The failure of any Party to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other Party with its obligations hereunder, shall not constitute a waiver by such Party of its right to exercise any such other right, power or remedy or to demand such compliance.

SECTION 4.03. Counterparts and Facsimile .  This Agreement may be executed in two or more identical counterparts (including by facsimile), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered (by telecopy or otherwise) to the other Parties.

SECTION 4.04. Specific Enforcement; Governing Law; Submission to Jurisdiction; Waiver of Jury Trial .

(a) This Agreement shall be governed by and construed in accordance with the Laws of the State of New York.
 
(b) THE PARTIES ACKNOWLEDGE AND AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS
 
 
 
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AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.  IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OR THREATENED BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF COMPETENT JURISDICTION, IN EACH CASE WITHOUT PROOF OF DAMAGES OR OTHERWISE (AND EACH PARTY HEREBY WAIVES ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND IN CONNECTION WITH SUCH REMEDY), THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.  THE PARTIES AGREE NOT TO ASSERT THAT A REMEDY OF SPECIFIC ENFORCEMENT IS UNENFORCEABLE, INVALID, CONTRARY TO LAW OR INEQUITABLE FOR ANY REASON, NOR TO ASSERT THAT A REMEDY OF MONETARY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY.  IN ADDITION, EACH PARTY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, BROUGHT BY ANY OTHER PARTY OR ITS SUCCESSORS OR ASSIGNS SHALL BE BROUGHT AND DETERMINED EXCLUSIVELY IN ANY STATE OR FEDERAL COURT IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, SO LONG AS ONE OF SUCH COURTS SHALL HAVE SUBJECT MATTER JURISDICTION OVER SUCH LEGAL 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.  EACH PARTY HEREBY IRREVOCABLY SUBMITS WITH REGARD TO ANY SUCH ACTION OR PROCEEDING FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE PERSONAL JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, (1) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR ANY REASON, (2) ANY CLAIM THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH COURTS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE) AND (3) TO THE FULLEST EXTENT PERMITTED BY THE APPLICABLE LAW, ANY CLAIM THAT (A) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT IN AN INCONVENIENT FORUM, (B) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR (C) THIS AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH COURTS.  EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY ACTION, SUIT OR OTHER
 
 
 
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PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON BEHALF OF ITSELF OR ITS PROPERTY, BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH BELOW, AND NOTHING IN THIS SECTION 4.04(b) SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
 
(c) EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY (1) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 4.04(c).

SECTION 4.05. Notices .  Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission ( provided that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (addressee’s local time) shall be deemed to have been received at 9:00 a.m. (addressee’s local time) on the next Business Day), by reliable overnight delivery service (with proof of service), or hand delivery, addressed as follows:
 
 
(a)
If to the Company:
     
   
Barnes & Noble, Inc.
   
122 Fifth Avenue
   
New York, NY 10011
   
Attention:  Vice President, General Counsel & Secretary
   
Facsimile:  212-463-5683
     
   
with a copy to (which copy alone shall not constitute notice):
     
   
Cravath, Swaine & Moore LLP
   
Worldwide Plaza
   
825 Eighth Avenue
   
New York, NY 10019
   
Attention:
Scott A. Barshay, Esq.
     
Andrew R. Thompson, Esq.
   
Facsimile:
(212) 474-3700
     
 
(b)
If to the Investor:
     
 
 
 
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Morrison Investment Holdings, Inc.
   
c/o Microsoft Corporation
   
One Microsoft Way
   
Redmond, Washington 98052-6399
   
Attention:
Keith R. Dolliver
     
President
   
Facsimile:
(425) 706-7329
     
   
with a copy to (which copy alone shall not constitute notice):
     
   
Simpson Thacher & Bartlett LLP
   
425 Lexington Avenue
   
New York, NY 10017
   
Attention:
Alan M. Klein, Esq.
     
Anthony F. Vernace, Esq.
   
Facsimile:
(212) 455-2502
     
 
(c)
If to Microsoft:
     
   
Microsoft Corporation
   
One Microsoft Way
   
Redmond, Washington 98052-6399
   
Attention:
Chief Financial Officer
   
Facsimile:
(425) 706-7329
     
   
with a copy to (which copy alone shall not constitute notice):
     
   
Simpson Thacher & Bartlett LLP
   
425 Lexington Avenue
   
New York, NY 10017
   
Attention:
Alan M. Klein, Esq.
     
Anthony F. Vernace, Esq.
   
Facsimile:
(212) 455-2502
 
or to such other address as any person shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or scheduled to be received if sent by overnight delivery service.  Any Party may notify the other Parties of any changes to the address or any of the other details specified in this paragraph; provided , however , that such notification shall only be effective on the date specified in such notice or five Business Days after the notice is given, whichever is later.  Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.
 
 
 
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SECTION 4.06. Entire Agreement, etc .  This Agreement (including all the Annexes, Exhibits, and Schedules hereto), constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, between the Parties, with respect to the subject matter hereof and thereof.

SECTION 4.07. Definitions .

(a) “ Affiliate ” means, with respect to any specified person or entity, any other person or entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified person or entity; provided , that NOOK Media and its Subsidiaries shall not be deemed to be Affiliates of the Investor or Microsoft.  For the purposes of this definition, “ control ”, when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.

(b) “ beneficial owner ” and “ beneficial ownership ” and words of similar import have the meaning assigned to such terms in Rule 13d-3 and Rule 13d-5 promulgated under the Exchange Act and a person’s beneficial ownership of securities shall be determined in accordance with the provisions of such Rules.

(c)  “ Business Day ” means any weekday that is not a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to be closed.

(d) “ Claim ” means any demand, action, claim, suit, litigation, arbitration, prosecution, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding, at law or in equity), hearing, examination or investigation.

(e) “ Commercial Agreement Termination Agreement ” means the Commercial Agreement Termination Agreement and Patent Agreement Amendment in the form attached hereto as Annex A.

(f) “ Company Disclosure Letter ” means the letter dated as of the date of this Agreement delivered by the Company to the Investor.

(g) “ Company Material Adverse Effect ” means any state of facts, change, effect, condition, development, event or occurrence that has a material and adverse effect on the business, assets or properties of the Company and its Subsidiaries, taken as a whole.

(h) “ Digital Business Contingent Payment Agreement ” means the Digital Business Contingent Payment Agreement in the form attached hereto as Annex B.
 
(i) “ Registration Rights Agreement ” means the Registration Rights Agreement of the Company in the form attached hereto as Annex C.
 
 
 
16

 
 

(j) “ Representative ” means, with respect to any person, the directors, officers, employees, investment bankers, financial advisors, attorneys, accountants or other advisors, agents or representatives of such person.
 
(k) A “ Subsidiary ” of any person means another person, an amount of the voting securities, other voting rights or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, more than 50% of the equity interests of which) is owned directly or indirectly by such first person.  For purposes of this Agreement, “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Entity or other entity.  For the avoidance of doubt, NMI and Nook Media shall be deemed to be a Subsidiary of the Company, and the Investor shall be deemed to be a Subsidiary of Microsoft.

SECTION 4.08. Interpretation .  When a reference is made in this Agreement to an Article, Section or Schedule, such reference shall be to an Article or Section of, or a Schedule to, this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The word “or” shall not be exclusive.  All references to “$” mean the lawful currency of the United States of America.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Except as specifically stated herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  Except as otherwise specified herein, references to a person are also to its permitted successors and assigns.  Each of the Parties has participated in the drafting and negotiation of this Agreement.  If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement.

SECTION 4.09. Severability .  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

SECTION 4.10. No Third-Party Beneficiaries .  Nothing expressed or referred to in this Agreement will be construed to give any person, other than the Parties, any legal or
 
 
 
17

 
 
 
equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.

SECTION 4.11. Assignment .  Except as otherwise provided herein, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of law or otherwise) without the prior written consent of the other Parties; provided , however , NMI’s rights, interests and obligations under this Agreement shall be permitted to be assigned without the consent of any Party solely as a result of NMI being converted into another form of entity such as a limited liability company or merging with a direct or indirect subsidiary of the Company; provided further , that the Investor shall be permitted to assign its rights, interests or obligations hereunder to any Affiliate without the consent of any Party.
 
SECTION 4.12. Public Announcements . Subject to each Party’s disclosure obligations imposed by Law or the rules of any stock exchange upon which its securities are listed compliance with which shall not require consultation with, or the consent of, the other Parties, the Parties will not make any public news release or other public disclosure with respect to this Agreement or the transactions contemplated hereby without first consulting with the other Parties, and, in each case, also receiving the other Parties’ consent (which shall not be unreasonably withheld, conditioned or delayed).

SECTION 4.13. Transfer Taxes . NMI shall pay any and all transfer, documentary, stamp, sales, use, registration or similar issue or transfer taxes incurred in connection with the Preferred Interest Purchase, including in connection with the issuance of the Common Shares.

[Signature Page Follows]
 
 
 
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Parties as of the date first written above.
 
 
BARNES & NOBLE, INC.
 
       
 
By:
/s/ Michael P. Huesby  
    Name:  Michael P. Huesby   
    Title:    Chief Executive Officer   
       
 
 
NOOK MEDIA INC.
 
       
 
By:
/s/ Michael P. Huesby  
    Name:  Michael P. Huesby   
    Title:    Chief Executive Officer   
       
 
 
 
[Signature Page Purchase Agreement]

 
 
 
 
MORRISON INVESTMENT HOLDINGS, INC.
 
       
 
By:
/s/ Keith Dolliver  
    Name:  Keith Dolliver  
    Title:    President  
       
 
 
MICROSOFT CORPORATION
 
       
 
By:
/s/ Amy E. Hood  
    Name:  Amy E. Hood  
    Title:    Chief Financial Officer  
       
 
 
 
[Signature Page Purchase Agreement]

 
 
Annex A
 
Commercial Agreement Termination Agreement
 
 
[Filed as Exhibit 10.1 of this Current Report on Form 8-K]
 
 
 
 

 
 
Annex B
 
Digital Business Contingent Payment Agreement
 
 
[Filed as Exhibit 10.3 of this Current Report on Form 8-K]
 
 
 
 

 
 
Annex C
 
Registration Rights Agreement
 
 
[Filed as Exhibit 10.4 of this Current Report on Form 8-K]
 
 

Exhibit 10.3
 


DIGITAL BUSINESS CONTINGENT PAYMENT AGREEMENT
 
dated as of December 3, 2014
 
by and between
 
NOOK MEDIA INC.,
 
BARNES & NOBLE, INC.
 
and
 
MORRISON INVESTMENT HOLDINGS, INC.
 
 
 
 
 
 
 
 



 
 

 



Table of Contents
 
Page
 
SECTION 1.
Definitions
1
SECTION 2.
No Certificates
7
SECTION 3.
Rights of the Investor
7
SECTION 4.
Non-transferability
7
SECTION 5.
CPR Payment Amount and Procedures
7
SECTION 6.
Adjustment Procedures
10
SECTION 7.
The Digital Business
11
SECTION 8.
Guarantee of Obligations
12
SECTION 9.
Assumption of Obligations
12
SECTION 10.
Termination; Effect of Termination
12
SECTION 11.
Intent
12
SECTION 12.
Notices
12
SECTION 13.
Amendments, Waivers, etc.
14
SECTION 14.
Severability
14
SECTION 15.
No Third-Party Beneficiaries
14
SECTION 16.
Assignment
14
SECTION 17.
Successors
14
SECTION 18.
Counterparts
14
SECTION 19.
No Fiduciary Obligations
15
SECTION 20.
Headings
15
SECTION 21.
Specific Enforcement; Governing Law; Submission to Jurisdiction; Waiver of Jury Trial
15

 

 
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This DIGITAL BUSINESS CONTINGENT PAYMENT AGREEMENT (this “ Agreement ”), dated as of December 3, 2014, is entered into by and between NOOK Media Inc., a Delaware corporation (“ NMI ”), Barnes & Noble, Inc., a Delaware corporation (the “ Company ”), and Morrison Investment Holdings, Inc., a Nevada corporation (the “ Investor ”). NMI, the Company and the Investor each may be referred to herein individually as a “Party” and collectively as the “Parties.”
 
WHEREAS, the Company, NMI, the Investor and Microsoft Corporation, a Washington corporation, have entered into a Purchase Agreement (as the same may be amended, modified or supplemented from time to time, the “ Purchase Agreement ”), dated as of December 3, 2014, pursuant to which NMI will purchase, and the Investor will sell, all of the Investor’s right, title and interest in, to and under all of the convertible Series A preferred limited liability company interests of NOOK Media LLC (“ NOOK Media ”) owned by the Investor; and
 
WHEREAS, in connection with the transactions contemplated by the Purchase Agreement, NMI desires to confer on the Investor a contingent payment right (the “ Contingent Payment Right ”) in the event NMI engages in a CPR Sale Transaction or CPR Dividend Event, subject to the terms and conditions set forth herein.
 
NOW, THEREFORE, for good and valuable consideration, NMI, the Company and Investor hereby agree as follows:
 
SECTION 1.   Definitions .  The following terms shall have the meaning as set forth below:
 
(a)  “ Affiliate ” means, with respect to any specified person or entity, any other person or entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified person or entity; provided , that NOOK Media and its subsidiaries shall not be deemed to be Affiliates of the Investor, but, for the avoidance of doubt, Nook Media and its subsidiaries shall be deemed to be Affiliates of NMI and the Company.  For the purposes of this definition, “ control ”, when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.
 
(b)  “ Agreement ” has the meaning set forth in the Preamble.
 
(c)  “ Business Day ” means any weekday that is not a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to be closed.
 
(d)  “ Company ” has the meaning set forth in the Preamble.
 

 
 

 


(e)  “ Company Common Stock ” shall mean the common stock, par value $.001 per share, of the Company.
 
(f)  “ Contingent Payment Right ” has the meaning set forth in the Recitals.
 
(g)  “ CPR Deadline ” means 5:00 p.m., New York City time, on the third anniversary of the Closing Date (as defined in the Purchase Agreement); provided , however , that if any Person (or group of Persons) has submitted to the Company or any of its Affiliates or representatives a bona fide proposal, inquiry or offer relating to a CPR Sale Transaction (which proposal, inquiry or offer has not been withdrawn or lapsed) or the Company or any of its Affiliates or representatives have engaged in any negotiations or discussions with any Person (or group of Persons), other than the Investor and its Affiliates, relating to a CPR Sale Transaction (which negotiations or discussions have not terminated) after the date hereof and prior to the third anniversary of the Closing Date, then the CPR Deadline shall be the fourth anniversary of the Closing Date.
 
(h)  “ CPR Dividend Declaration Date ” means the date and time on which there is a declaration of a dividend or other distribution, the payment of which would result in a CPR Dividend Event.
 
(i)   “ CPR Dividend Event ” means any dividend or other distribution (other than a dividend or distribution in connection with a CPR Sale Transaction to the extent such dividend or distribution is included in CPR Sale Distributable Proceeds), the CPR Dividend Declaration Date (or, if earlier, the CPR Dividend Payment Date) for which is on or prior to the CPR Deadline, distributed, directly or indirectly, to NMI or any of its Affiliates (other than barnesandnoble.com llc or any of its subsidiaries) from or in respect of the Digital Business.
 
(j)   “ CPR Dividend Payment Date ” means the date and time on which there is a payment of any dividend or other distribution resulting in a CPR Dividend Event.
 
(k)  “ CPR Dividend Proceeds ” means an amount equal to the aggregate proceeds received, directly or indirectly, by NMI or any of its Affiliates in a CPR Dividend Event.  For the avoidance of doubt, if any proceeds received by NMI or any of its Affiliates in a CPR Dividend Event are in the form of non-cash consideration, the aggregate proceeds received by NMI and its Affiliates with respect to such non-cash consideration shall be the fair market value of such non-cash consideration (which fair market value shall be equal to (x) in the case of consideration in the form of securities that are listed on either the New York Stock Exchange or the Nasdaq Stock Market, as applicable, the weighted average closing price for the thirty (30) trading days immediately preceding the CPR Dividend Declaration Date and (y) in the case of all other non-cash consideration, the fair market value of such non-cash consideration).
 
(l)   “ CPR Notice ” has the meaning set forth in Section 5(c) .
 
(m)  “ CPR Payment Amount ” means an amount equal to 22.7% multiplied by the CPR Sale Distributable Proceeds or the CPR Dividend Proceeds, as applicable.
 

 
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(n)  “ CPR Payment Date ” has the meaning set forth in Section 5(c) .
 
(o)  “ CPR Sale Distributable Proceeds ” means an amount equal to the aggregate proceeds received (taking into account Section 5(g) ), directly or indirectly by NMI or any of its Affiliates in a CPR Sale Transaction minus   the sum of (i) any federal, state, local or foreign income, transfer or similar taxes payable by NMI or any of its subsidiaries as a result of such CPR Sale Transaction, provided , that (x) any such taxes shall be reduced to the extent of any tax benefit which NMI or any of its Affiliates is entitled to by reason of any payment made hereunder, and (y) taxes payable by NMI or any of its subsidiaries shall not include any amounts required to be withheld on account of payments made to other Persons, as estimated (after consultation from the Company’s outside tax advisors) in good faith by the Board of Directors of the Company, and (ii) net third party indebtedness (i.e., third party indebtedness for borrowed money, guarantees of such indebtedness and drawn letters of credit (excluding, for the avoidance of doubt, any liquidation preference or similar obligation) less   cash and cash equivalents (other than cash and cash equivalents received in connection with the CPR Sale Transaction)) relating exclusively to the Digital Business that is retained by NMI and its subsidiaries following such CPR Sale Transaction. For the avoidance of doubt, if any proceeds received by NMI or any of its Affiliates in a CPR Sale Transaction are in the form of non-cash consideration, the aggregate proceeds received by NMI and its Affiliates with respect to such non-cash consideration shall be the fair market value of such non-cash consideration (which fair market value shall be equal to (x) in the case of consideration in the form of securities that are listed on either the New York Stock Exchange or the Nasdaq Stock Market, as applicable, the weighted average closing price for the thirty (30) trading days immediately preceding the CPR Sale Transaction Signing Date and (y) in the case of all other non-cash consideration, the fair market value of such non-cash consideration).
 
(p)  “ CPR Sale Transaction ” means in one or more transactions (whether related or not), other than an Excluded Transaction, the CPR Sale Transaction Signing Date (or, if earlier, the CPR Sale Transaction Closing Date) for which is on or prior to the CPR Deadline, pursuant to which (i) barnesandnoble.com llc or any Affiliate thereof (which Affiliate holds, directly or indirectly, all or substantially all of the Digital Business) completes, directly or indirectly, a consolidation, recapitalization, conversion, reorganization, merger or similar transaction with or into another Person (other than the Company or any of its wholly-owned subsidiaries) or any spin-off, split-off, public offering or similar transaction involving barnesandnoble.com llc or any such Affiliate, (ii) the Company and its wholly-owned subsidiaries no longer own more than 50% of the outstanding equity interests of barnesandnoble.com llc or any Affiliate thereof (which Affiliate holds, directly or indirectly, all or substantially all of the Digital Business) or (iii) barnesandnoble.com llc or any Affiliate thereof (which Affiliate holds, directly or indirectly, all or substantially all of the Digital Business) sells, assigns, transfers, conveys or otherwise disposes of all or a substantial portion of the properties, rights or assets of the Digital Business.
 
(q)  “ CPR Sale Transaction Closing Date ” means the date and time on which the closing of a CPR Sale Transaction occurs.
 
 
 
3

 
 
 
(r)  “ CPR Sale Transaction Signing Date ” means the date and time on which the signing of definitive documentation (which, if the transactions contemplated by such definitive documentation were consummated, would result in a CPR Sale Transaction) occurs.
 
(s)  “ Digital Business ” means the assets, rights and properties, including all goodwill relating thereto, whether tangible or intangible, real, personal or mixed, and liabilities of barnesandnoble.com llc and its Affiliates primarily related to, or used primarily in connection with, the digital device, digital content and nook.com businesses (excluding, for the avoidance of doubt, assets and liabilities primarily related to the retail business (including the Barnes & Noble trademark) and the retail eCommerce business conducted through barnesandnoble.com) conducted by barnesandnoble.com llc and its Affiliates as of the date hereof, including:

(i)    Digital device manufacturing, development, sale and distribution work and rights and each Nook line of devices;
 
(ii)   Application software development, sale and distribution work and rights;
 
(iii)  Intellectual property to the extent associated with such digital device, digital content, eCommerce and nook.com businesses (including patents primarily related to such digital device, digital content, eCommerce and nook.com businesses, the Nook trademark and copyrights and licenses for digital content, but only including certain URLs, such as nook.com);
 
(iv)   Customer data, including all data associated with a customer’s consumption of digital content (including bookmarks, last page read, highlighting and annotations), originating in such digital device, digital content, eCommerce and nook.com businesses and rights to maintain digital lockers for digital customers (subject to applicable restrictions under privacy policies and applicable law);
 
(v)    Rights to sell digital content, including electronic books, magazines, newspapers, periodicals, comic books, children’s books and other reading and reading-related content, together with associated data thereto including any annotations by such end user, and contracts related to such digital device, digital content, eCommerce and nook.com businesses;
 
(vi)   Claims primarily related to such digital device, digital content, eCommerce and nook.com businesses, including all claims against third parties, whether choate or inchoate, known or unknown, contingent or non-contingent, or otherwise, and the right to obtain all proceeds therefrom;
 
(vii)  Obligations with respect to third-party channel partner returns, price protection agreements with third-party channel partners, rebates and offsets of rebates from suppliers and liabilities with respect to gift cards, in
 

 
4

 


each case primarily related to such digital device, digital content, eCommerce and nook.com businesses;
 
(viii)  Obligations under digital device warranties (including pre-separation digital device warranties);
 
(ix)     Obligations under the Settlement and Patent License Agreement, dated as of April 27, 2012, among the Company, barnesandnoble.com llc, Microsoft and Microsoft Licensing GP;
 
(x)      Substantially all the employees of barnesandnoble.com llc or its subsidiaries who are engaged primarily in such digital device, digital content, eCommerce and nook.com businesses (and the liabilities associated therewith);
 
(xi)    Such other assets, rights, properties, obligations and liabilities described or referenced in the sections of the Company’s Annual Report on Form 10-K for the year ended May 3, 2014, and subsequently filed Quarterly Reports on Form 10-Q as are primarily related to the “NOOK” segment;
 
(xii)   Rights and obligations under the Retail Agreement to the extent relating to the other items included in this definition of “Digital Business”; and
 
(xiii)  All credits and deposits (including customer deposits, security deposits for rent, electricity, telephone or otherwise), and prepaid charges and expenses, and all permits or franchises, in each case, primarily related to such digital device, digital content, eCommerce and nook.com businesses.
 
(t)  “ Excluded Transaction ” means any transaction involving a merger, consolidation, issuance or acquisition of equity interests or sale of all or substantially all the assets of, in each case, the Company or any of its subsidiaries (other than barnesandnoble.com llc and its subsidiaries), unless barnesandnoble.com llc and its subsidiaries (or the Digital Business) constitute all or substantially all the assets thereof; provided , however , a transaction involving a merger, consolidation, issuance or acquisition of equity interests or sale of all or substantially all the assets of, in each case, NOOK Media (which transaction includes barnesandnoble.com llc and its subsidiaries (and/or the Digital Business)) which results in NMI or its Affiliates receiving, directly or indirectly, aggregate proceeds in excess of $550,000,000, shall be deemed not to be an Excluded Transaction to the extent of the proceeds in excess of $550,000,000; provided , further , a transaction, occurring on or prior to the date that is ninety (90) days following the Closing Date (or, if any Person (or group of Persons) has submitted to the Company or any of its Affiliates or representatives a bona fide proposal, inquiry or offer relating to such a transaction (which proposal, inquiry or offer has not been withdrawn or lapsed) or the Company or any of its Affiliates or representatives have engaged in any negotiations or discussions with any Person (or group of Persons), other than the Investor and its Affiliates, relating to such a transaction (which negotiations or discussions have not
 

 
5

 

 
 
terminated) after the date hereof and prior to the date that is ninety (90) days following the Closing Date, then the date that is one (1) year and ninety (90) days following the Closing Date), involving a merger, consolidation or sale of all or substantially all the assets of, or sale of a majority of the equity of, or any similar transaction involving, in each case, NOOK Media or such other entity which includes all or substantially all the assets of Barnes & Noble Booksellers, LLC (or that otherwise includes all or substantially all of the Company’s “B&N College” business segment) (which transaction does not include the Digital Business) which results in aggregate proceeds in excess of $550,000,000, shall be deemed not to be an Excluded Transaction to the extent of the proceeds in excess of $550,000,000.
 
  (u)  “ Final CPR Payment Amount ” has the meaning set forth in Section 6(a) .
 
  (v)  “ Independent Accounting Firm ” means a nationally recognized, independent accounting firm as mutually agreed upon by the Parties, or if such firm cannot or refuses to accept the engagement contemplated by this Agreement, another nationally recognized, independent accounting firm as mutually agreed upon by the Parties.
 
  (w)  “ Initial Public Offering ” has the meaning set forth in the LLC Agreement.
 
  (x)   “ Investor ” has the meaning set forth in the Preamble.
 
  (y)  “ LLC Agreement ” shall mean the Second Limited Liability Company Agreement of NOOK Media LLC dated as of January 22, 2013.
 
  (z)  “ NMI ” has the meaning set forth in the Recitals.
(aa)  “ NOOK Media ” has the meaning set forth in the Recitals.
 
(bb)  “ Notice of Objection ”  has the meaning set forth in Section 6 .
 
(cc)  “ Pearson ” shall mean Pearson Education, Inc., a Delaware corporation.
 
(dd)  “ Person ” means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.
 
(ee)  “ Preferred Membership Interest ” has the meaning set forth in the LLC Agreement.
 
(ff)  “ Purchase Agreement ” has the meaning set forth in the Recitals.
 
(gg)  “ Qualified Distribution ” has the meaning set forth in the LLC Agreement.
 

 
6

 


(hh)  “ Retail Agreement ” has the meaning set forth in Section 6 .
 
(ii)  “ Series B Preferred Interests ” has the meaning set forth in the LLC Agreement.
 
(jj)  “ subsidiary ” of any Person means another Person, an amount of the voting securities, other voting rights or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, more than 50% of the equity interests of which) is owned directly or indirectly by such first Person.  For the avoidance of doubt, NMI and Nook Media shall be deemed to be a subsidiary of the Company.
 
(kk)  “ Warrants ” has the meaning set forth in the LLC Agreement.
 
SECTION 2.   No Certificates.   The Contingent Payment Right shall not be evidenced by a certificate or any other instrument.
 
SECTION 3.   Rights of the Investor .  Nothing contained in this Agreement shall be construed as conferring upon the Investor, by virtue of the Contingent Payment Right, the right to vote or to consent or to receive notice as a stockholder or member of the Company, NMI or any of their respective subsidiaries, as applicable, or any rights or obligations of any kind or nature whatsoever as a stockholder or member of the Company, NMI or any of their respective subsidiaries, as applicable, either at law or in equity.  The rights of the Investor and the obligations of the Company, NMI, their Affiliates and their respective officers, directors and controlling Persons are contract rights limited to those expressly set forth in this Agreement.
 
SECTION 4.   Non-transferability .  The Contingent Payment Right and any interest therein shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, without the prior written consent of NMI; provided , that the Investor may sell, assign, transfer or pledge the Contingent Payment Right and any interest therein to any of its Affiliates.
 
SECTION 5.   CPR Payment Amount and Procedures.
 
(a)  If a CPR Sale Transaction occurs, then upon the CPR Sale Transaction Closing Date, the Investor (or its designee) shall be entitled to receive the CPR Payment Amount, as may be adjusted pursuant to Section 6 , with respect to such CPR Sale Transaction.
 
(b)  If a CPR Dividend Event occurs, then upon the CPR Dividend Payment Date, the Investor (or its designee) shall be entitled to receive the CPR Payment Amount, as may be adjusted pursuant to Section 6 , with respect to such CPR Dividend Event.
 
(c)  As promptly as practicable (and in no event later than five (5) Business Days) following the CPR Sale Transaction Closing Date or the CPR Dividend Payment Date, if any, NMI shall deliver to the Investor a written notice (the “ CPR
 

 
7

 
 
 
Notice ”) notifying the Investor that a CPR Sale Transaction Closing Date or a CPR Dividend Payment Date, as applicable, has occurred.  The CPR Notice shall set forth in reasonable detail the calculation of the CPR Payment Amount (and its components) and include all necessary supporting documentation for such calculation.  The Investor and its Affiliates and their respective representatives shall be entitled to reasonable access to all books, records, financial information and personnel and representatives (including accountants) of NMI and its Affiliates related to the calculation of the CPR Payment Amount. The CPR Notice shall also establish a payment date (the “ CPR Payment Date ”) of the CPR Payment Amount that is no later than fifteen (15) Business Days following the CPR Sale Transaction Closing Date or CPR Dividend Payment Date, as applicable. In addition, to the extent the CPR Payment Amount includes any non-cash consideration, the CPR Notice shall set forth in reasonable detail the composition of the CPR Payment Amount.
 
(d)  If NMI or any of its Affiliates receives non-cash consideration in a CPR Sale Transaction or a CPR Dividend Event, NMI shall have the option, in its sole discretion, to pay or deliver the CPR Payment Amount in any combination of cash or non-cash consideration; provided , that such non-cash consideration is valued at its fair market value as described in the definition of “CPR Sale Distributable Proceeds” or “CPR Dividend Proceeds”, as applicable, and is of the type of non-cash consideration received by NMI or its Affiliates in the applicable CPR Sale Transaction or CPR Dividend Event; provided , further , that such proportion of non-cash consideration to cash shall not exceed the proportion of non-cash consideration to cash received by NMI or its Affiliates in the applicable CPR Sale Transaction or CPR Dividend Event.
 
(e)  On the CPR Payment Date set forth in any CPR Notice, NMI shall (i) deliver the non-cash consideration portion of the CPR Payment Amount, if any, to the Investor at the address specified by the Investor and (ii) pay the cash portion of the CPR Payment Amount to the Investor by wire transfer of immediately available funds to the account specified by the Investor, in each case, in written instructions delivered by the Investor to NMI not less than two (2) Business Days prior to the CPR Payment Date.  Upon such payment and/or delivery, no further payment or delivery by NMI pursuant to this Agreement shall be required, except as set forth in Section 6 .
 
(f)  NMI shall pay and/or deliver, as applicable, the CPR Payment Amount to the Investor prior to distributing, by dividend or otherwise, any CPR Sale Distributable Proceeds or CPR Dividend Proceeds, as applicable, to any other Person.
 
(g)  In the event any of the consideration to be received by NMI or its Affiliates in a CPR Sale Transaction or a CPR Dividend Event, as applicable, is not paid at the CPR Sale Transaction Closing Date or CPR Dividend Payment Date, as applicable, but payment of such consideration is conditioned or contingent upon the occurrence of other events or circumstances thereafter or is otherwise scheduled to be paid on a delayed basis, then NMI shall, if and when such additional conditional or contingent consideration is actually received by NMI or its Affiliates, recalculate the CPR Payment Amount as described herein, taking into account both the closing consideration and such conditional or contingent consideration, and shall pay to Investor, within fifteen (15)
 

 
8

 


 
Business Days of receipt of such conditional or contingent proceeds from such CPR Sale Transaction or CPR Dividend Event, as applicable, the additional payment amount that the Investor would have been entitled to in the event such conditional or contingent payments had been received by NMI or its Affiliates at the CPR Sale Transaction Closing Date or CPR Dividend Payment Date, as applicable.
 
(h)  In the event the Company or any of its subsidiaries, on or prior to the date that is nine (9) months from the date of this Agreement (or, if any Person (or group of Persons) has submitted to the Company or any of its Affiliates or representatives a bona fide proposal, inquiry or offer relating to a transaction described in this clause (h) (which proposal, inquiry or offer has not been withdrawn or lapsed) or the Company or any of its Affiliates or representatives have engaged in any negotiations or discussions with any Person (or group of Persons), other than the Investor and its Affiliates, relating to a transaction described in this clause (h) (which negotiations or discussions have not terminated) after the date hereof and prior to the date that is nine (9) months following the date of this Agreement, then the date that is fifteen (15) months following the date of this Agreement), directly or indirectly, purchases (or otherwise acquires) Pearson’s right, title and interest in, to and under the Series B Preferred Interests and/or Warrants owned by Pearson in one or more transactions (whether related or not) for aggregate consideration with a value in excess of (i) 602,927 shares of Company Common Stock and (ii) $13,750,008.59 in cash consideration, then the consideration payable to the Investor pursuant to the Purchase Agreement shall be increased to match, on a per Preferred Membership Interest basis (treating all consideration as paid for Series B Preferred Interests), the consideration paid to Pearson, and NMI shall promptly pay or deliver such additional consideration to the Investor; provided , however , the Investor shall have no right to any payment hereunder solely as a result of any merger, consolidation, exchange or similar transaction occurring in connection with an Initial Public Offering or Qualified Distribution; provided , further , that the Investor shall have no right to any payment hereunder solely as a result of Pearson entering into an agreement providing for a contingent payment right (the “ Pearson Contingent Payment Right ”) with respect to the Digital Business so long as the Pearson Contingent Payment Right provides for a payment to Pearson that is proportionate to its as-converted ownership of Nook Media equity interests (excluding Warrants) immediately prior to the Closing Date and so long as the other terms of the Pearson Contingent Payment Right are no more favorable to Pearson than the terms of the Contingent Payment Right are to the Investor.  The Company hereby represents and warrants that it has not agreed on a Pearson Contingent Payment Right that is more favorable to Pearson than the terms of the Contingent Payment Right are to the Investor.
 
(i)  Promptly following the Closing, the Company shall transfer barnesandnoble.com llc and its subsidiaries (or shall otherwise transfer the Digital Business) to one of its subsidiaries (“ New Digital Holdco ”) which is not a subsidiary of Nook Media.  Pearson shall have no rights or interests in New Digital Holdco or its assets, rights or properties other than pursuant to the Pearson Contingent Payment Right. Concurrently with the execution of this Agreement, the Company has furnished to Investor the true and complete irrevocable written consent to such transfer delivered by
 
 
 
9

 
 
 
Pearson to NMI, which consent constitutes the Pearson Consent pursuant to the Amended and Restated Limited Liability Company Agreement of Nook Media.
 
SECTION 6.   Adjustment Procedures .
 
(a)  The Investor will have twenty (20) Business Days following delivery of the CPR Notice during which to notify NMI in writing of any objections with respect to the calculation of the CPR Payment Amount, including the value of any non-cash consideration, net third party indebtedness (“ Notice of Objection ”). If the Investor fails to deliver a Notice of Objection in accordance with this Section 6(a) , the CPR Payment Amount shall be conclusive and binding on the Parties.  If the Investor submits a Notice of Objection, then (i) for fifteen (15) Business Days after the date upon which NMI receives the Notice of Objection, the Parties will each use their commercially reasonable efforts to agree on the calculation of the disputed amounts and (ii) failing such agreement within such fifteen (15) Business Day period, then the Investor and NMI, acting jointly, shall refer the matter for resolution to the Independent Accounting Firm. Promptly (but in any event within five (5) Business Days) after engagement of the Independent Accounting Firm, the Investor, on the one hand, and NMI, on the other hand, shall each deliver to the Independent Accounting Firm, a notice setting forth in reasonable detail their calculation, to the extent in dispute under the Notice of Objection, of the CPR Payment Amount as of the CPR Sale Transaction Closing Date or the CPR Dividend Payment Date, as applicable. Within fifteen (15) Business Days after receipt thereof, the Independent Accounting Firm shall deliver its determination of the disputed amounts and of the CPR Payment Amount as of the CPR Sale Transaction Closing Date or the CPR Dividend Payment Date, as applicable, which determination shall be final and binding on each of the Parties.  For the avoidance of doubt, the only matter the Independent Accounting Firm shall have the authority to determine shall be the CPR Payment Amount, including the value of any non-cash consideration, net third party indebtedness.  The fees and expenses of the Independent Accounting Firm shall be paid in equal proportions (i.e., 50% each) by the Investor, on the one hand, and NMI, on the other hand. The CPR Payment Amount that is final and binding on the Parties, as determined either through agreement of the Parties or through the action of the Independent Accounting Firm pursuant to this Section 6(a) , is referred to as the “ Final CPR Payment Amount ”.  The Independent Accounting Firm shall act as an expert under the New York CPLR.
 
(b)  If the Final CPR Payment Amount that is greater than the CPR Payment Amount, NMI shall pay to the Investor, within two (2) Business Days after the CPR Payment Amount becomes final and binding pursuant to Section 6(a) , an amount in cash equal to such difference by wire transfer in immediately available funds to an account designated by the Investor. If the CPR Payment Amount is greater than the Final CPR Payment Amount, the Investor shall pay to NMI, within two (2) Business Days after the CPR Payment Amount becomes final and binding pursuant to Section 6(a) , an amount in cash equal to such difference by wire transfer in immediately available funds to an account designated by NMI. Any payment required pursuant to this Section 6(b) shall be made in cash regardless of whether the CPR Payment Amount includes or is comprised of non-cash consideration.
 

 
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SECTION 7.   The Digital Business .  (a)  Prior to the earlier to occur of the expiration of the Contingent Payment Right and a CPR Sale Transaction Closing Date, (i) the Company shall not be permitted to modify the existing Retail Agreement between the Company and NOOK Media (the “ Retail Agreement ”) other than any modifications of the Retail Agreement (A) to allow the Company to purchase devices directly from device manufacturers, (B) to make non-economic changes to the Retail Agreement, which changes will not impact the commissions payable or cost allocations between the Digital Business and the retail business and would not otherwise reasonably be expected to have a detrimental impact in any material respect on the value of the Digital Business, (C) to allow for an assignment and assumption of the rights and obligations of NOOK Media under the Retail Agreement relating to the Digital Business by any entity (including any subsidiary of the Company) to which all or substantially all of the Digital Business is assigned and (D) to provide for the Retail Agreement to expire immediately prior to the CPR Sale Transaction Closing Date and (ii) the Company and its subsidiaries shall be permitted to replace the Retail Agreement upon its expiration or termination in accordance with its terms with a successor retail agreement that is no less favorable to the entity holding the Digital Business than the Retail Agreement in effect immediately prior to such termination or expiration.
 
(b)  Subject to the provisions of Section 9 , prior to the earlier to occur of the expiration of the Contingent Payment Right and a CPR Sale Transaction Closing Date, (i) the Digital Business shall be conducted through barnesandnoble.com llc and its subsidiaries and (ii) neither NMI nor its Affiliates shall (A) transfer the Digital Business out of barnesandnoble.com llc and its subsidiaries to any Person (other than barnesandnoble.com llc or any of its subsidiaries) or (B) cause barnesandnoble.com llc or any of its subsidiaries to create or assume any obligations or liabilities other than obligations or liabilities to the extent arising out of or relating to the Digital Business (which shall include, for the avoidance of doubt, credit support under the Company’s credit facility) or (C) enter into any transaction between the Digital Business, on the one hand, and the Company and any of its subsidiaries (other than barnesandnoble.com llc and its subsidiaries), on the other hand, that meets all of the following conditions (1) is on terms that are less favorable than would be available to unrelated third parties bargaining at arm’s length, (2) is outside the ordinary course of the Digital Business and the Company’s retail business (which ordinary course transactions include, without limitation, purchases and sales of digital devices, purchase and sales of digital content, existing cost allocations under the Transition Services Agreement between the Company and NOOK Media, transactions under the existing Retail Agreement (taking into account the modifications permitted by Section 7(a) ) and transactions under the existing Separation Agreement between the Company and NOOK Media) and (3) would reasonably be expected to have a detrimental impact in any material respect on the value of the Digital Business.
 
(c)  Nothing in this Agreement shall require the Company, NMI, NOOK Media or any of their respective Affiliates to engage in, or to attempt to engage in, a CPR Sale Transaction or a CPR Dividend Event or to fund any obligations of NOOK Media or the Digital Business.
 
 
 
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SECTION 8.   Guarantee of Obligations .  The Company hereby irrevocably and unconditionally guarantees NMI’s obligations contained in this Agreement, including Sections 5 and 6 , on the terms and subject to the conditions set forth in this Agreement. This guarantee (i) is a present and continuing guarantee of payment and not of collectability, and (ii) is in no way conditioned or contingent upon any attempts to collect or upon any other condition or contingency.  Notwithstanding anything in this Agreement to the contrary, in the event that the Company irrevocably assumes all of the obligations of NMI under this Agreement pursuant to Section 9 , the Company’s guarantee of NMI’s obligations pursuant to this Section 8 shall terminate.
 
SECTION 9.   Assumption of Obligations .  Notwithstanding anything in this Agreement to the contrary, NMI shall not be prevented from transferring barnesandnoble.com llc to the Company or any of its subsidiaries; provided , however , in the event barnesandnoble.com llc is transferred to the Company or any of its subsidiaries (other than to NMI or any of its subsidiaries), the Company shall assume all rights, interests and obligations of NMI under this Agreement.
 
SECTION 10.   Termination; Effect of Termination.   (a)  In the event that neither a CPR Sale Transaction Signing Date nor CPR Dividend Declaration Date shall have occurred on or prior to the CPR Deadline, then this Agreement shall terminate at 5:00 p.m., New York City time, on the date of the CPR Deadline, and the Contingent Payment Right will automatically terminate in its entirety and all rights thereunder and all rights in respect thereof under this Agreement shall cease and be of no further force or effect.
 
(b)  In the event that a CPR Sale Transaction Signing Date or CPR Dividend Declaration Date, as applicable, shall have occurred on or prior to the CPR Deadline, then on the earlier of (i) the date on which NMI pays in full the CPR Payment Amount (and if there is non-cash consideration, delivery of such non-cash consideration) to the Investor, including any adjustments thereto pursuant to Section 6 , and (ii) the date on which (x) the definitive documentation relating to the CPR Sale Transaction and/or the CPR Sale Transaction contemplated in such documents, are irrevocably terminated or (y) the declaration of any dividend or other distribution, the payment of which would have resulted in a CPR Dividend Event, is irrevocably rescinded, this Agreement will immediately and automatically terminate in its entirety, and the Contingent Payment Right will automatically terminate in its entirety and all rights thereunder and all rights in respect thereof under this Agreement shall cease and be of no further force or effect.
 
SECTION 11.   Intent.   The Parties agree that the provisions of this Agreement shall be interpreted in order to give effect to their intent and NMI covenants, on behalf of itself and its Affiliates, not to structure any transaction with the intent or purpose of avoiding the provisions of this Agreement.
 
SECTION 12.   Notices .  Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission ( provided , that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (addressee’s local time) shall be deemed to have been
 
 
 
12

 
 
 
received at 9:00 a.m. (addressee’s local time) on the next Business Day), by reliable overnight delivery service (with proof of service), or hand delivery, addressed as follows:
 
(i)           If to NMI or the Company:

Barnes & Noble, Inc.
122 Fifth Avenue
New York, NY 10011

Attention:  Vice President, General Counsel & Secretary
Facsimile:  (212) 463-5683

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

Cravath, Swaine & Moore LLP
 
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019

Attention:  Scott A. Barshay, Esq.
                  Andrew R. Thompson, Esq.
Facsimile:  (212) 474-3700

(ii)           If to the Investor:

Morrison Investment Holdings, Inc.
c/o Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052-6399
Attention:  Keith R. Dolliver
                  President
 
Facsimile: (425) 706-7329

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

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attention:  Alan M. Klein, Esq.
                  Anthony F. Vernace, Esq.
 
Facsimile:  (212) 455-2502

or to such other address as any person shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or scheduled to be received if sent by overnight delivery service. 
 
 
 
13

 
 
 
Any Party to this Agreement may notify any other Party of any changes to the address or any of the other details specified in this paragraph; provided , however , that such notification shall only be effective on the date specified in such notice or five Business Days after the notice is given, whichever is later.  Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.
 
SECTION 13.   Amendments, Waivers, etc.   This Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed by the Party against whom such amendment or waiver shall be enforced.  The failure of any Party to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other Party with its obligations hereunder, shall not constitute a waiver by such Party of its right to exercise any such other right, power or remedy or to demand such compliance.
 
SECTION 14.   Severability .  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.
 
SECTION 15.   No Third-Party Beneficiaries.   Nothing expressed or referred to in this Agreement will be construed to give any person, other than the Parties, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.
 
SECTION 16.   Assignment .  Except as otherwise provided herein, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of law or otherwise) without the prior written consent of the other Parties; provided , however , NMI’s rights, interests and obligations under this Agreement shall be permitted to be assigned without the consent of any Party solely as a result of NMI being converted into another form of entity such as a limited liability company or merging with a direct or indirect subsidiary of the Company; provided further , that the Investor shall be permitted to assign its rights, interests or obligations hereunder to any Affiliate without the consent of any Party.
 
SECTION 17.   Successors.   All the covenants and provisions of this Agreement by or for the benefit of NMI, the Company and the Investor shall bind and inure to the benefit of their respective successors, assigns, heirs and personal representatives.
 
SECTION 18.   Counterparts.   This Agreement may be executed in two or more identical counterparts (including by facsimile), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same
 
 
 
14

 
 
 
instrument, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered (by telecopy or otherwise) to the other Parties.
 
SECTION 19.   No Fiduciary Obligations.   Each Party acknowledges and agrees that the other Parties, their Affiliates and their respective officers, directors and controlling Persons do not owe any fiduciary duties to the first Party or any of its respective Affiliates, officers, directors or controlling Persons.  The only obligations of the Parties, their Affiliates and their respective officers, directors and controlling Persons arising out of this Agreement are the contractual obligations expressly set forth in this Agreement.
 
SECTION 20.   Headings.   The headings and table of contents contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
 
SECTION 21.   Specific Enforcement; Governing Law; Submission to Jurisdiction; Waiver of Jury Trial .   (a)  This Agreement shall be governed by and construed in accordance with the Laws of the State of New York.
 
(b)  THE PARTIES ACKNOWLEDGE AND AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.  IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OR THREATENED BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF COMPETENT JURISDICTION, IN EACH CASE WITHOUT PROOF OF DAMAGES OR OTHERWISE (AND EACH PARTY HEREBY WAIVES ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND IN CONNECTION WITH SUCH REMEDY), THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.  THE PARTIES AGREE NOT TO ASSERT THAT A REMEDY OF SPECIFIC ENFORCEMENT IS UNENFORCEABLE, INVALID, CONTRARY TO LAW OR INEQUITABLE FOR ANY REASON, NOR TO ASSERT THAT A REMEDY OF MONETARY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY.  IN ADDITION, EACH PARTY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, BROUGHT BY ANY OTHER PARTY OR ITS SUCCESSORS OR ASSIGNS SHALL BE BROUGHT AND DETERMINED EXCLUSIVELY IN ANY STATE OR FEDERAL COURT IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, SO LONG AS ONE OF SUCH COURTS SHALL HAVE SUBJECT MATTER JURISDICTION OVER SUCH LEGAL ACTION OR PROCEEDING, AND THAT ANY CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT SHALL BE DEEMED TO HAVE ARISEN
 

 
15

 
 

 
FROM A TRANSACTION OF BUSINESS IN THE STATE OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS WITH REGARD TO ANY SUCH ACTION OR PROCEEDING FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE PERSONAL JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, (1) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR ANY REASON, (2) ANY CLAIM THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH COURTS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE) AND (3) TO THE FULLEST EXTENT PERMITTED BY THE APPLICABLE LAW, ANY CLAIM THAT (A) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT IN AN INCONVENIENT FORUM, (B) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR (C) THIS AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH COURTS.  EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON BEHALF OF ITSELF OR ITS PROPERTY, BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH BELOW, AND NOTHING IN THIS SECTION 22(B) SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
 
(c)  EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY (1) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 22(C).
 
[Remainder of page intentionally left blank]
 

 
16

 


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

NOOK MEDIA INC.
 
by:
 
/s/ Michael P. Huseby
 
 
Name: Michael P. Huseby
 
Title:  Chief Executive Officer

 
BARNES & NOBLE, INC.
 
by:
   /s/ Michael P. Huseby
 
 
Name: Michael P. Huseby
 
Title:  Chief Executive Officer

















[Signature Page – Digital Business Contingent Payment Agreement]

 
 

 


MORRISON INVESTMENT HOLDINGS, INC.
 
by
  /s/ Keith Dolliver  
 
Name:  Keith Dolliver
 
Title:    President















[Signature Page – Digital Business Contingent Payment Agreement]
 

Exhibit 10.4
 


 
 
 
 
 
 
REGISTRATION RIGHTS AGREEMENT
 
OF
 
BARNES & NOBLE, INC.
 

 

 

 


 



 
 

 


TABLE OF CONTENTS
 
Page
 
ARTICLE I
 
Defined Terms
SECTION 1.01.
Definitions
1
SECTION 1.02.
Terms and Usage Generally
4
 
ARTICLE II
 
Registration Rights
SECTION 2.01
Filing
4
SECTION 2.02
Shelf Take-Down
6
SECTION 2.03
Expenses of Registration
7
SECTION 2.04
Procedures for Registration
7
SECTION 2.05
Suspension of Sales
10
SECTION 2.06
Free Writing Prospectuses
11
 
ARTICLE III
 
Indemnification
SECTION 3.01
Indemnification
11
SECTION 3.02
Contribution
14
 
ARTICLE IV
 
Rule 144
SECTION 4.01
Rule 144 Reporting
15
 
ARTICLE V
 
Transfer and Termination of Registration Rights
SECTION 5.01
Transfer of Registration Rights
15
SECTION 5.02
Termination of Registration Rights
15
 
ARTICLE VI
 
Miscellaneous
SECTION 6.01
Binding Effect; Assignability; Shareholder Joinder; Benefit
16
SECTION 6.02
Notices
16
 
 
 

 
 
 
SECTION 6.03
Counterparts and Facsimile
17
SECTION 6.04
Waiver; Amendment
17
SECTION 6.05
Governing Law; Specific Enforcement; Submission to Jurisdiction; Waiver of Jury Trial
17
SECTION 6.06
Headings
19
SECTION 6.07
Entire Agreement
19
SECTION 6.08
Severability
19
SECTION 6.09
Future Registration Rights
19

EXHIBITS
 
Exhibit A
Form of Shareholder Joinder to Registration Rights Agreement
Exhibit B
Shareholders Party to the Registration Rights Agreement
 

 
ii 

 
 

 
REGISTRATION RIGHTS AGREEMENT dated as of December 3, 2014 (this “ Agreement ”) among Barnes & Noble, Inc., a Delaware corporation (the “ Company ”) and the Shareholders party hereto as listed on the signature pages, including any Permitted Transferees (collectively, the “ Shareholders ” and individually, a “ Shareholder ”).  Capitalized terms used herein have their respective meanings as set forth in Section 1.01.
 
NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
ARTICLE I
 
Defined Terms
 
SECTION 1.01   Definitions .  Unless the context otherwise requires, the terms defined in this Article I shall, for the purposes of this Agreement, have the meanings herein specified.
 
Affiliate ” shall mean, with respect to any Person, any other Person that directly or through one or more intermediaries, controls, is controlled by or is under common control with, the specified Person.  As used in this definition, the term “control” (including with correlative meanings, “controls”, “controlled by” and “under common control with”) shall mean, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company or other ownership interests, by contract or otherwise.
 
Board ” means the board of directors of the Company.
 
Business Day ” shall have the meaning set forth in the Purchase Agreement.
 
Claim ” means any demand, action, claim, suit, litigation, arbitration, prosecution, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding, at law or in equity), hearing, examination or investigation.
 
Company Common Stock ” shall mean the common stock, par value $.001 per share, of the Company.
 
Effectiveness Period ” shall have the meaning set forth in Section 2.04.
 
Governmental Entity ” shall mean the government of the United States, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
 
Indemnified Party ” shall have the meaning set forth in Section 3.01(d).
 
 
 
 

 
 
 
Indemnifying Party ” shall have the meaning set forth in Section 3.01(d).
 
Inspectors ” shall have the meaning set forth in Section 2.04(k).
 
Joinder Agreement ” has the meaning set forth in Section 6.01(b).
 
Liberty Investment Agreement ” shall mean the Investment Agreement dated August 18, 2011, between the Company and Liberty GIC, Inc.
 
Morrison ” shall mean Morrison Investment Holdings, Inc., a Nevada corporation.
 
Microsoft Corporation ” shall mean Microsoft Corporation, a Washington corporation.
 
NMI ” shall mean Nook Media Inc., a Delaware corporation.
 
Permitted Transferee ” shall mean (A) Morrison, (B) Microsoft Corporation or (C) any Person that is (directly or indirectly) wholly owned by Microsoft Corporation; provided , however , that, in the case of a transfer to a Person that is (directly or indirectly) wholly owned by Microsoft Corporation, if at any time subsequent to such transfer, such transferee ceases to be wholly owned (directly or indirectly) by Microsoft Corporation, then such Person shall automatically cease to be a Permitted Transferee and Shareholder for purposes of this Agreement and any Company Common Stock held by such Person shall be deemed to be automatically transferred back to Microsoft Corporation or such other Person that is (directly or indirectly) wholly owned by Microsoft Corporation as designated by Microsoft Corporation.
 
Person ” shall mean any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company or other legal entity or organization.
 
Purchase Agreement ” shall mean the Purchase Agreement, dated as of December 3, 2014, among the Company, NMI, Morrison and Microsoft Corporation.
 
Records ” shall have the meaning set forth in Section 2.04(k).
 
Register ,” “ registered ” and “ registration ” shall mean a registration effected by preparing and filing a registration statement with the SEC in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such registration statement by the SEC.
 
Registrable Securities ” shall mean the shares of Company Common Stock issued to a Shareholder pursuant to the Purchase Agreement  and any other securities issued or issuable with respect to any such securities by way of share split, share dividend, recapitalization, merger, exchange or similar event or otherwise.  As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement registering such securities under the Securities Act has been declared effective and such securities have been sold or otherwise transferred by the holder thereof pursuant to such effective registration statement, (ii) such securities shall have been distributed pursuant to Rule 144 under the Securities Act, (iii) such
 
 
 
2

 
 
 
securities shall have been otherwise transferred in a transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities, (iv) such securities are no longer outstanding or (v) such securities may be sold without restriction under the Securities Act, or if later, one year since the date of this Agreement has passed.
 
Registration Expenses ” shall mean, with respect to any registration, (i) all expenses incurred by the Company in effecting any registration pursuant to this Agreement, including all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, road show expenses and (ii) fees and expenses of the Company’s independent certified public accountants and counsel (including with respect to “comfort” letters and opinions) and any other special experts retained by the Company; provided that Registration Expenses shall not include any Selling Expenses.
 
Registration Statement ” means any registration statement that is required to register the resale of the Registrable Securities under this Agreement, and including the related prospectus and any pre- and post-effective amendments and supplements to each such registration statement or prospectus.
 
Requesting Shareholder ” shall have the meaning set forth in Section 2.01(a).
 
Representative ” shall mean, with respect to any person, the directors, officers, employees, investment bankers, financial advisors, attorneys, accountants or other advisors, agents or representatives of such person.
 
Scheduled Black-Out Period ” shall mean the period from and including the 10th Business Day preceding the last day of a fiscal quarter of the Company to and including the 3rd Business Day after the day on which the Company publicly releases its earnings for such fiscal quarter.
 
SEC ” shall mean the United States Securities and Exchange Commission.
 
Securities Act ” shall mean the United States Securities Act of 1933.
 
Selling Expenses ” shall mean all underwriting discounts, selling commissions and stock transfer taxes, if any, applicable to the sale of Registrable Securities and all fees and expenses, in each case, of any Requesting Shareholder (other than such fees and expenses included in Registration Expenses).
 
Series J Holders ” shall mean the holders of the Company’s Senior Convertible Redeemable Series J Preferred Stock, par value $.001 per share, and the holders of any Company Common Stock issued upon the conversion of the Company’s Senior Convertible Redeemable Series J Preferred Stock, par value $.001 per share.
 
Series J Piggyback Rights ” shall mean the rights of a Series J Holder, pursuant to Section 5.02 of the Liberty Investment Agreement, to include for registration any Registrable Securities (as defined in the Liberty Investment Agreement) owned by such Series J Holder in any registration statement proposed to be filed by the Company, subject to the terms of the Liberty Investment Agreement.
 
 
 
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Shareholder ” has the meaning set forth in the Preamble hereto.
 
Shareholder Indemnified Person ” shall have the meaning set forth in Section 3.01(a).
 
Shelf Registration Statement ” means a Registration Statement of the Company filed with the SEC on Form S-3 for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the SEC) covering the Registrable Securities, as applicable.
 
Shelf Take-Down ” shall have the meaning set forth in Section 2.02(a).
 
Subsidiary ” shall have the meaning set forth in the Purchase Agreement.
 
Suspension Period ” shall have the meaning set forth in Section 2.01(d).
 
SECTION 1.02   Terms and Usage Generally .   All references herein to an “Article”, “Section” or “Schedule” shall refer to an Article or a Section of, or a Schedule to, this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereto”, “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein shall mean such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent in writing and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its successors and assigns, in each case as permitted under this Agreement. All references to “$” mean the lawful currency of the United States of America.  Each of the parties has participated in the drafting and negotiating of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.
 
ARTICLE II
 
Registration Rights
 
SECTION 2.01   Filing .  (a)  As promptly as practicable following the date hereof (and in any event within 12 Business Days of the date hereof) the Company shall file a Shelf Registration Statement to register for sale under the Securities Act all of the Registrable Securities held by Morrison (such Shareholder shall be referred to herein as the “ Requesting Shareholder ”), and all of the shares of securities requested to be included by any Series J Holder pursuant to such Series J Holder’s Series J Piggyback Rights.  The Company shall use commercially reasonable
 
 
 
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efforts to cause the registration statement to become effective. Within two Business Days of the date of this Agreement, the Company shall provide the Series J Holders written notice as required pursuant to Section 5.02 of the Liberty Investment Agreement that it proposes to register the Requesting Shareholders’ Registrable Securities pursuant to this Section 2.01.
 
(b)           If the method of disposition to be utilized by the Requesting Shareholder shall be an underwritten public offering, the Requesting Shareholder may designate the managing underwriter or co-managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed. The Company’s obligation to effect the Shelf Take-Down pursuant to Section 2.02 shall be deemed satisfied only when a Registration Statement covering all Registrable Securities specified in the Requesting Shareholder’s request, for sale in accordance with the method of disposition specified by the Requesting Shareholder, shall have become effective and, (i)(x) if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto and (y) in any other case, such registration statement shall have remained effective throughout the Effectiveness Period and (ii) the offering of the Registrable Securities pursuant to such Registration Statement is not subject to a stop order, injunction, or similar order or requirement of the SEC during such period.
 
(c)           From and after the date hereof, the Company shall use its commercially reasonable efforts to continue to qualify at all times, for registration on Form S-3 or any successor thereto. The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement filed pursuant to Section 2.01(a) hereof continuously effective under the Securities Act in order to permit the prospectus (or any free writing prospectus) forming a part thereof to be usable by the Requesting Shareholder until the date as of which all Registrable Securities registered by such Shelf Registration Statement have been sold or have otherwise ceased to be Registrable Securities.  In the event the Shelf Registration Statement filed pursuant to Section 2.01(a) hereof fails to become effective or ceases to be effective at any time, the Company shall use reasonable best efforts to file another Registration Statement to register as promptly as reasonably practicable under the Securities Act for public sale in accordance with the method or methods of disposition specified by the Requesting Shareholder the number of shares of Registrable Securities specified by such Requesting Shareholder.
 
(d)           Notwithstanding anything to the contrary contained in this Agreement, the Company shall be entitled, by providing written notice to the Requesting Shareholder, to require the Requesting Shareholder to suspend the use of the prospectus for sales of Registrable Securities under the registration statement for a reasonable period of time not to exceed 60 consecutive days or 90 days in the aggregate in any 12-month period (a “ Suspension Period ”) if the Board determines in good faith and if the Company gives written notice that such use would (i) require the public disclosure of material non-public information concerning any transaction or negotiations involving the Company that would materially interfere with such transaction or negotiations or (ii) otherwise materially interfere with financing plans, acquisition activities or business activities of the Company,   provided that, if at the time of receipt of such notice the Requesting Shareholder shall have sold Registrable Securities (or have signed a firm commitment underwriting agreement with respect to the purchase of such shares) and the reason for the Suspension Period is not of a nature that would require a post-effective amendment to the Registration Statement, then the Company shall use its commercially reasonable efforts to take
 
 
 
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such action as to eliminate any restriction imposed by federal securities laws on the timely delivery of such shares. Such notice shall contain a statement of the reasons for such postponement and an approximation of the anticipated delay. Immediately upon receipt of such notice, the Requesting Shareholder shall discontinue the disposition of Registrable Securities under such registration statement and prospectus relating thereto until such Suspension Period is terminated. The Company agrees that it will terminate any such Suspension Period as promptly as reasonably practicable and will promptly notify the Requesting Shareholder of such termination. After the expiration of any Suspension Period and without any further request from the Requesting Shareholder, the Company shall as promptly as reasonably practicable prepare a post-effective amendment or supplement to the registration statement or the prospectus, or any document incorporated therein by reference, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, the prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If a Suspension Period occurs during the Effectiveness Period for a registration statement, such Effectiveness Period shall be extended for a number of days equal to the total number of days during which the distribution of Registrable Securities is suspended under this Section 2.01(d). If the Company notifies the Requesting Shareholder of a Suspension Period with respect to a registration statement requested pursuant to Section 2.01, (i) the Requesting Shareholder may by notice to the Company withdraw such request without such request counting as the Requesting Shareholder’s take-down request under Section 2.02 and (ii) the Requesting Shareholder will not be responsible to reimburse the Company for any of its out-of-pocket expenses, including Registration Expenses.
 
(e)           The Company shall not, without the prior consent of the Requesting Shareholder, be entitled to include in any registration statement referred to in this Section 2.01 securities held by any persons other than the Requesting Shareholder and the Series J Holders; provided , however , that the sale of any Registrable Securities by any Requesting Shareholder shall be independent from any sales of any Series J Holders, including in connection with any underwritten public offering.
 
SECTION 2.02   Shelf Take-Down .
 
(a)           An unlimited number of offerings or sales of Registrable Securities pursuant to a Shelf Registration Statement (each, a “ Shelf Take-Down ”) may be initiated by the Requesting Shareholder; provided , however , (i) the Requesting Shareholder shall only be entitled to two Shelf Take-Downs in the form of underwritten offerings, (ii) except as otherwise provided in clause (iii) below, in any Shelf Take-Down not in the form of underwritten offering, all Requesting Shareholders, taken together, shall only be entitled to offer and sell on any day, a number of Registrable Securities not in excess of the number of shares of Company Common Stock constituting 20% of the reported trading volume of Company Common Stock on such trading day, and (iii) in any Shelf Take-Down not in the form of underwritten offering, the Requesting Shareholder shall be entitled to sell Registrable Securities in a privately negotiated block trade entered into outside of market trading hours to a single purchaser or a single group of affiliated purchasers, in each case under this clause (iii), that to the knowledge of such Requesting Shareholder are not purchasing with a present intention or view to promptly distribute such Registrable Securities.
 

 
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(b)           Without limiting the provisions of Section 2.04, in connection with any Shelf Take-Down the Company shall use its reasonable best efforts to: (i) take all actions reasonably necessary to effect such Shelf Take-Down as expeditiously as reasonably practicable and (ii) if reasonably necessary or if reasonably requested by the Requesting Shareholder that initiated the applicable Shelf Take-Down and to the extent consistent with applicable law, amend or supplement the Shelf Registration Statement, including any prospectus supplements thereto, for such purpose as soon as reasonably practicable.
 
SECTION 2.03   Expenses of Registration .  Except as specifically provided for in this Agreement, all Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the Company.  In addition, the Company shall pay its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit, the fees and expenses incurred in connection with the listing of the Company Common Stock to be registered on any securities exchange on which similar securities issued by the Company are then listed and rating agency fees and the fees and expenses of any person, including special experts, retained by the Company. All Selling Expenses with respect to Registrable Securities of a Requesting Shareholder incurred in connection with any registration hereunder shall be borne by such Requesting Shareholder.  All Selling Expenses relating to Registrable Securities registered on behalf of the holders of Registrable Securities shall be borne by such holders included in such registration pro rata among each other on the basis of the number of Registrable Securities so registered.
 
SECTION 2.04   Procedures for Registration .  If and whenever the Company is required by the provisions of Sections 2.01 or 2.02 to effect the registration of any shares of Registrable Securities under the Securities Act, the Company will use its reasonable best efforts to effect such registration to permit the sale of such Registrable Securities, as expeditiously as reasonably practicable:
 
(a)           prepare and promptly file with the SEC a registration statement with respect to such securities and use commercially reasonable efforts to cause such registration statement to become and remain effective for the Effectiveness Period;
 
(b)           prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement in accordance with a Requesting Shareholder or its Affiliates’ intended method of disposition set forth in such registration statement for such period;
 
(c)           furnish to the Requesting Shareholder and the underwriters such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such registration statement; and the Company hereby consents to the use of such Registration Statement and each amendment or supplement thereto by the Requesting Shareholder and the underwriters in connection with the offering and sale, subject to this Agreement, of the Registrable Securities covered by such Registration Statement and any such amendment or supplement thereto;
 
 
 
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(d)           use commercially reasonable efforts to register or qualify (or exempt from such registration or qualification) the Registrable Securities covered by such registration statement under the securities or “blue sky” laws of such jurisdictions as any Requesting Shareholder or, in the case of an underwritten public offering, the managing underwriter, reasonably shall request; provided , however , that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;
 
(e)           use commercially reasonable efforts to list the Registrable Securities covered by such registration statement with any securities exchange on which the Company Common Stock is then listed;
 
(f)           provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;
 
(g)           immediately notify the Requesting Shareholder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of the Requesting Shareholder prepare and furnish to the Requesting Shareholder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
 
(h)           if the offering is underwritten and at the request of the Requesting Shareholder, use commercially reasonable efforts to furnish on the date that Registrable Securities are delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to the Requesting Shareholder, stating that such registration statement has become effective under the Securities Act and that (A) to the knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act and (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements or financial or statistical data contained therein) and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters and to the Requesting Shareholder, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five Business Days prior to the date of such letter) with respect to such registration as such underwriters or the Requesting Shareholder may reasonably request;
 
 
 
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(i)           use commercially reasonable efforts to cooperate with the Requesting Shareholder in the disposition of the Registrable Securities covered by such registration statement, including in anticipation of any Shelf Take-Down;
 
(j)           in connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act, and before filing any such registration statement or any other document in connection therewith give reasonable consideration to the inclusion in such documents of any comments reasonably and timely made by the Requesting Shareholder or any of its legal counsel; participate in and make documents available for the reasonable and customary due diligence review of underwriters during normal business hours, on reasonable advance notice and without undue burden or hardship on the Company; provided that (i) any party receiving confidential materials shall execute a confidentiality agreement on customary terms if reasonably requested by the Company and (ii) the Company may in its sole discretion restrict access to competitively sensitive or legally privileged documents or information; and
 
(k)           upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall, in connection with the preparation and filing of each registration statement registering Registrable Securities, make available for inspection by any Requesting Shareholder and any underwriter participating in any disposition pursuant to a registration statement being filed by the Company pursuant to this Section 2.04 and any attorney, accountant or other professional retained by any such Requesting Shareholder or underwriter (collectively, the “ Inspectors ”), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its Subsidiaries (collectively, the “ Records ”) as shall be reasonably necessary to enable any of the Inspectors to exercise its due diligence responsibility.  Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction.  Each Shareholder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or its Affiliates as the basis for any market transactions in the Registrable Securities unless and until such information is made generally available to the public.  Each Shareholder further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to the Company and allow the Company, at is expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; and
 
(l)           otherwise use commercially reasonable efforts to comply with the Securities Act, the Exchange Act and any other applicable rules and regulations of the SEC and reasonably cooperate with the Requesting Shareholder in the disposition of its Registrable Securities in accordance with the terms of this Agreement.  Such cooperation shall include the endorsement and transfer of any certificates representing Registrable Securities (or a book-entry transfer to similar effect) transferred in accordance with this Agreement and facilitating such Registrable Securities to be in such denominations and registered in such names as the Requesting Shareholder or underwriters request.
 

 
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The period of distribution of Registrable Securities in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Registrable Securities in any other registration shall be deemed to extend until the earlier of the sale of all Registrable Securities covered thereby and 120 days   after the effective date thereof (the “ Effectiveness Period ”).  The Company shall be required to maintain the effectiveness of the registration statement with respect to the registration of any shares of Registrable Securities for the Effectiveness Period, provided , however , that the Effectiveness Period shall be extended for a period of time equal to the period the holder of Registrable Securities refrains from selling any securities included in such Registration Statement at the request of the Company or an underwriter of the Company pursuant to the provisions of this Agreement or, in the case of any registration statement requested pursuant to Section 2.01, equal to the number of days included in any Scheduled Black-out Period. In connection with each registration hereunder, the Requesting Shareholder will timely furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably necessary in order to assure compliance with Federal and applicable state securities laws.  In connection with each registration or sale pursuant to Sections 2.01 or 2.02 covering an underwritten public offering, the Company and the Requesting Shareholder agree to enter into customary agreements (including an underwriting or similar agreement) with the managing underwriter or co-managing underwriters selected in the manner herein provided, as the case may be, in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company’s size and investment stature and take all such other actions reasonably necessary to facilitate the disposition of such Registrable Securities.  The Company will use commercially reasonable efforts to make available to its security holders, as promptly as reasonably practicable, an earnings statement (which need not to be audited) covering the period of 12 months commencing upon the first disposition of Registrable Securities pursuant to a registration statement, which earnings statement shall satisfy the provision of Section 11(a) of the Securities Act and Rule 158 of the SEC promulgated thereunder.
 
SECTION 2.05   Suspension of Sales .  (a)  Upon receipt of notice from the Company pursuant to Section 2.04(g), each Requesting Shareholder shall immediately discontinue disposition of Registrable Securities pursuant to the applicable registration statement and prospectus relating thereto until such Requesting Shareholders (i) have received copies of a supplemented or amended prospectus or prospectus supplement pursuant to Section 2.04(g) or (ii) are advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the Company, the Requesting Shareholder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in the Requesting Shareholder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.  If the Company shall give such notice with regards to any registration statement requested pursuant to Section 2.01, the Effectiveness Period in respect of such registration statement shall be extended by the number of days during the period from and including the date such notice is given by the Company to the date when the Company shall have (i) made available to the Requesting Shareholder a supplemented or amended prospectus or prospectus supplement pursuant to Section 2.04(g) or (ii) advised the Requesting Shareholder in writing that the use of the prospectus and, if applicable, prospectus supplement may be resumed.
 
 
 
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(b)           Notwithstanding anything to the contrary in this Agreement, during any Scheduled Black-out Period each Requesting Shareholder shall immediately suspend or discontinue disposition of Registrable Securities until the termination of such Scheduled Black-out Period; provided that a Scheduled Black-out Period shall not prevent a Requesting Shareholder from making a request for a Shelf Take-Down under Section 2.02 or relieve the Company from its obligation to file (but not its obligation to cause to be declared effective) a registration statement pursuant to this Agreement. The Effectiveness Period in respect of any registration statement requested pursuant to Section 2.01 shall be extended by the number of days included in any Scheduled Black-out Period.
 
SECTION 2.06   Free Writing Prospectuses .  No Shareholder shall use any “free writing prospectus” (as defined in Rule 405 under the Securities Act) in connection with the sale of Registrable Securities without the prior written consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed); provided that a Requesting Shareholder may use any free writing prospectus prepared and distributed by the Company, including any press release relating to any Shelf Take-Down.
 
ARTICLE III
 
Indemnification
 
SECTION 3.01   Indemnification .  (a)  Notwithstanding any termination of this Agreement, the Company shall indemnify and hold harmless (including the advancement of expenses (subject to customary reimbursement agreements), including expenses related to the investigation of any Claim and reasonable fees, expenses and disbursements of attorneys and other professionals, incurred prior to any assumption of the defense of such Claim by the Company) each Shareholder and its respective Affiliates, and each of their respective officers, directors, employees, agents, partners, members, stockholders, Representatives and Affiliates, and each person or entity, if any, that controls a Shareholder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the officers, directors, employees, agents, partners, members, stockholders, Representatives and Affiliates and employees of each such controlling person (each, a “ Shareholder Indemnified Person ”) against any and all losses, claims, damages, actions, liabilities, costs and expenses (including expenses related to the investigation, defense and settlement of any Claim and reasonable fees, expenses and disbursements of attorneys and other professionals), judgments, fines, penalties, charges and amounts paid in settlement (collectively, “ Losses ”), arising out of, directly or indirectly resulting from, or relating to any Claim instituted, commenced or brought by any Governmental Entity, stockholder of the Company or any other person (other than (i) a Claim by any Shareholder or any Affiliate of any Shareholder (except in the case of any action to enforce its rights under this Section 3.01) or (ii) a direct Claim by the Company and its Subsidiaries (for the avoidance of doubt, a derivative Claim brought by or on behalf of the Company or its Subsidiaries is not such a direct Claim)) based on, resulting from, or relating to this Agreement or the transactions contemplated by this Agreement and enforcement of this Section 3.01, except that the Company will not be required to indemnify any Shareholder Indemnified Person for Losses resulting from its gross negligence, willful misconduct or willful and material breach of this Agreement.
 
 
 
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(b)           Notwithstanding any termination of this Agreement, the Company shall indemnify and hold harmless each Shareholder Indemnified Person against any and all Losses arising out of, resulting from, or based upon any untrue or alleged untrue statement of material fact contained or incorporated by reference in any registration statement, including any preliminary prospectus or final prospectus contained therein (or any documents incorporated therein by reference) or any amendments or supplements thereto or contained in any “issuer free writing prospectus” (as such term is defined in Rule 433 under the Securities Act) prepared by the Company or authorized by it in writing for use by such Shareholder or any amendment or supplement thereto; or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company shall not be liable to such Shareholder or such Shareholder’s Shareholder Indemnified Person in any such case to the extent that any such Loss arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any issuer free writing prospectus prepared by the Company or authorized by it in writing for use by such Shareholder or any amendment or supplement thereto, in reliance upon and in conformity with information regarding such Shareholder or its plan of distribution or ownership interests which such Shareholder furnished in writing to the Company for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any issuer free writing prospectus, but only to the extent that such untrue statements or omissions are based solely upon information furnished in writing to the Company by such Shareholder expressly for use therein, (ii) offers or sales effected by or on behalf of such Shareholder “by means of” (as defined in Securities Act Rule 159A) a “free writing prospectus” (as defined in Securities Act Rule 405) that was not prepared by the Company or authorized in writing by the Company, or (iii) the failure by such Shareholder to deliver or make available to a purchaser of Registrable Securities a copy of any preliminary prospectus, pricing information or final prospectus contained in the applicable registration statement or any amendments or supplements thereto (to the extent the same is required by applicable Law to be delivered or made available to such purchaser at the time of sale or contract); provided that the Company shall have delivered to such Shareholder such preliminary prospectus or final prospectus contained in the applicable registration statement and any amendments or supplements thereto pursuant to Section 2.04(c) no later than the time of contract of sale in accordance with Rule 159 under the Securities Act.  Reimbursements payable pursuant to the indemnification contemplated by this Section 3.01(b) will be made by periodic payments during the course of any investigation or defense, as and when bills are received or expenses incurred.
 
(c)           Notwithstanding any termination of this Agreement, each Shareholder named as a selling stockholder in a registration statement pursuant to this Article III shall indemnify and hold harmless the Company and its officers, directors, employees, agents, Representatives and Affiliates and each person or entity, if any, that controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the officers, directors, employees, agents and employees of each such controlling person against any and all Losses arising out of or based upon any untrue or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto (or any documents incorporated
 
 
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therein by reference) or contained in any “issuer free writing prospectus” (as such term is defined in Rule 433 under the Securities Act), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, but only to the extent, that such untrue statements or omissions are based solely upon information furnished in writing to the Company by such Shareholder expressly for use therein.  Reimbursements payable pursuant to the indemnification contemplated by this Section 3.01 will be made by periodic payments during the course of any investigation or defense, as and when bills are received or expenses incurred.
 
(d)           If any Claim shall be brought or asserted against any person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the person from whom indemnity is sought (the “ Indemnifying Party ”) in writing; provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Section 3.01, except to the extent that such failure shall have materially prejudiced the Indemnifying Party.  In case any such Claim is brought against an Indemnified Party and such Indemnified Party seeks or intends to seek indemnity from an Indemnifying Party, the Indemnifying Party will be entitled to participate in, and to the extent that it shall elect, promptly after receiving the aforesaid notice from such Indemnified Party, assume the defense in such proceeding, including (x) in the case of an indemnification claim pursuant to Sections 3.01(b) or (c), the employment of counsel reasonably satisfactory to the Indemnified Party, (y) in the case of an indemnification claim pursuant to Section 3.01(a), the employment of counsel chosen by the Indemnified Party reasonably satisfactory to the Indemnifying Party, and the payment of all fees and expenses incurred in connection with such defense.  An Indemnified Party shall have the right to employ separate counsel in any such proceeding and to participate in the defense of such proceeding, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; (ii) the Indemnifying Party shall have failed promptly to assume the defense of such proceeding and to employ counsel (in accordance with this Section 3.01(d) reasonably satisfactory to such Indemnified Party in any such proceeding; or (iii) the named parties to any such proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that representation of both such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate because of an actual conflict of interest between the Indemnifying Party and such Indemnified Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party); provided that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys (in addition to one local counsel in each jurisdiction) at any time for all Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any such proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless the Indemnified Party from and against any Loss (to the extent stated above) by reason of such settlement or judgment.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed so long as the Indemnifying Party has complied, and continues to comply, with all of its covenants and obligations under this Agreement), effect any settlement or consent to entry of any judgment
 
 
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 of any pending proceeding in respect of which any Indemnified Party is a party, unless such settlement (x) includes an unconditional release, in form and substance reasonably satisfactory to the Indemnified Party, of such Indemnified Party from all liability on claims that are the subject matter of such proceeding and (y) does not result in any limitation or restriction upon any Shareholder’s exercise of all rights, privileges and preferences applicable to it as a holder of Company Common Stock and its rights under this Agreement. Notwithstanding the foregoing, the parties acknowledge and agree that to the extent a Claim is made against any Shareholder Indemnified Person which may be indemnifiable pursuant to Section 3.01(a), the Shareholder Indemnified Person will be entitled to retain its regular outside counsel to review and produce documents, electronic files and other materials in response to document requests in connection with any Claim for which a Shareholder Indemnified Person may be entitled to indemnification pursuant to Section 3.01(a), and make determinations with respect to and prosecute issues related to confidential information of the Shareholder Indemnified Persons.  The Company will pay directly the reasonable fees and expenses of such counsel in connection with any such Claim.
 
SECTION 3.02   Contribution .  If the indemnification provided for in Sections 3.01(b) or 3.01(c) is unavailable to an Indemnified Party with respect to any Losses, or is insufficient to hold the Indemnified Party harmless as contemplated therein (other than pursuant to the exceptions to indemnification provided for in Sections 3.01(b) or 3.01(c)), then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnified Party, on the one hand, and the Indemnifying Party, on the other hand, in connection with the actions, statements or omissions which resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of the Indemnifying Party, on the one hand, and of the Indemnified Party, on the other hand, shall be determined by reference to, among other factors, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information concerning the matter with respect to which the claim was asserted and opportunity to correct or prevent such statement or omission.  The Company and each Shareholder agree that it would not necessarily be just and equitable if the amount of contribution pursuant to this Section 3.02 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 3.02.  No Indemnified Party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from an Indemnifying Party not guilty of such fraudulent misrepresentation. Notwithstanding the foregoing, no Shareholder Indemnified Person shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by the Shareholders under the relevant registration statement exceeds the amount of any damages that such a Shareholder Indemnified Person has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
 
 
 
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ARTICLE IV
 
Rule 144
 
SECTION 4.01   Rule 144 Reporting .  With a view to making available to the Shareholders the benefits of certain rules and regulations of the SEC which may permit the sale of Registrable Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of this Agreement; (ii) file with the SEC, in a timely manner, all reports and other documents required of the Company under the Securities Act and the Exchange Act; (iii) so long as any Shareholder owns Registrable Securities, furnish to such Shareholder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act, and of the Exchange Act; a copy of the most recent annual or quarterly report of the Company; (iv) such other reports and documents as such Shareholder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such Company Common Stock without registration; and (v) take any other action (including cooperating with the Shareholders to cause the transfer agent to remove any restrictive legend on certificates evidencing the Company Common Stock) as shall be reasonably requested by the Shareholder or which shall otherwise facilitate the sale of the Company Common Stock from time to time by the Shareholder pursuant to the Rule 144 under the Securities Act. Upon the request of any holder of Registrable Securities, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements.
 
ARTICLE V
 
Transfer and Termination of Registration Rights
 
SECTION 5.01   Transfer of Registration Rights .  (a)  No Shareholder shall have the right to transfer any right, remedy, obligation or liability arising under this Agreement, other than to a Permitted Transferee.
 
(b)           Following any transfer or assignment made pursuant to Section 5.01(a) in connection with the transfer by a Shareholder of a portion of its Registrable Securities to a Permitted Transferee, the Shareholder shall retain all rights, remedies, obligations and liabilities under this Agreement with respect to the remaining portion of its Registrable Securities; provided , however , notwithstanding anything to the contrary contained in this Agreement, in no event shall an assignment pursuant to this Section 5.01 require the Company keep more than one Shelf Registration Statement for all Requesting Shareholders effective under the Securities Act at any given time.
 
SECTION 5.02   Termination of Registration Rights .  This Agreement (other than Section 2.03 and Article III) will terminate on the date on which all shares of Company Common Stock subject to this Agreement cease to be Registrable Securities.
 
 
 
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ARTICLE VI
 
Miscellaneous
 
SECTION 6.01   Binding Effect; Assignability; Shareholder Joinder; Benefit .  (a)  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns. Any Shareholder that ceases to own beneficially any Registrable Securities shall cease to be subject to the terms hereof (other than (i) the provisions of Article III applicable to such Shareholder with respect to any offering of Registrable Securities completed before the date such Shareholder ceased to own any Registrable Securities and (ii) this Article VI).
 
(b)           Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any party hereto pursuant to any transfer of Registrable Securities or otherwise, except in accordance with Section 5.01.  Upon transfer of any right, remedy, obligation or liability pursuant to Section 5.01, any such Permitted Transferee shall (unless already bound hereby) execute and deliver to the Company an agreement to be bound by this Agreement in the form of Exhibit A hereto (a “ Joinder Agreement ”) and shall thenceforth be a “Shareholder”.
 
(c)           Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except that the provisions of Article III shall inure to the benefit of the persons referred to in that article.

SECTION 6.02   Notices .  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or otherwise delivered by hand or by messenger addressed:
 
(a)           if given to the Company, to the following address and fax number:
 
Barnes & Noble, Inc.
122 Fifth Avenue
New York, NY 10011

Attn:   Vice President, General Counsel & Secretary
 
Facsimile:    (212) 463-5683
 
With a Copy to (which copy alone shall not constitute notice):
 
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
 
 
 
16

 
 

 
 
Attn:
Scott A. Barshay, Esq.
Andrew R. Thompson, Esq.
     
 
Facsimile:
(212) 474-3700
 
(b)           if given to any Shareholder, at the address for such Shareholder set forth in Exhibit B hereto or otherwise provided to the Company as set forth below.
 
All such notices shall be deemed to have been delivered and given for all purposes (i) on the delivery date if delivered by confirmed facsimile, (ii) on the delivery date if delivered personally to the party to whom the same is directed, (iii) one (1) business day after deposit with a commercial overnight carrier, with written verification of receipt, or (iv) five (5) business days after the mailing date, whether or not actually received, if sent by U.S. mail, return receipt requested, postage and charges prepaid, or any other means of rapid mail delivery for which a receipt is available addressed to the receiving party as specified on the signature page of this Agreement.  Changes of the person to receive notices or the place of notification shall be effectuated pursuant to a notice given under this Section 6.02.
 
Any person that becomes a Shareholder after the date hereof shall provide its address, fax number and email address to the Company.
 
SECTION 6.03   Counterparts and Facsimile .  This Agreement may be executed in two or more identical counterparts (including by facsimile), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by telecopy or otherwise) to the other parties.
 
SECTION 6.04   Waiver; Amendment .  No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, shall not constitute a waiver by such party of its right to exercise any such other right, power or remedy or to demand such compliance. No provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by the Company and the holders of at least a majority of the Registrable Securities held by the parties hereto at the time of such proposed amendment or modification, provided that no such amendment or modification shall adversely affect the interests of any holder of Registrable Securities hereunder disproportionately to other holders of Registrable Securities without the written consent of such holder.
 
SECTION 6.05   Governing Law; Specific Enforcement; Submission to Jurisdiction; Waiver of Jury Trial .  (a)  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF SUCH STATE.
 
(b)            Specific Enforcement .  THE PARTIES ACKNOWLEDGE AND AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE
 
 
17

 
 
 
PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.  IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OR THREATENED BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF COMPETENT JURISDICTION, IN EACH CASE WITHOUT PROOF OF DAMAGES OR OTHERWISE (AND EACH PARTY HEREBY WAIVES ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND IN CONNECTION WITH SUCH REMEDY), THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.  THE PARTIES AGREE NOT TO ASSERT THAT A REMEDY OF SPECIFIC ENFORCEMENT IS UNENFORCEABLE, INVALID, CONTRARY TO LAW OR INEQUITABLE FOR ANY REASON, NOR TO ASSERT THAT A REMEDY OF MONETARY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY.
 
(c)            Submission to Jurisdiction .  EACH OF THE PARTIES HERETO IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, BROUGHT BY THE OTHER PARTY HERETO OR ITS SUCCESSORS OR ASSIGNS SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, 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.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS WITH REGARD TO ANY SUCH ACTION OR PROCEEDING FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE PERSONAL JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN THE AFORESAID COURTS.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, (1) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR ANY REASON, (2) ANY CLAIM THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH COURTS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE) AND (3) TO THE FULLEST EXTENT PERMITTED BY THE APPLICABLE LAW, ANY CLAIM THAT (A) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT IN AN INCONVENIENT FORUM, (B) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR (C) THIS AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH COURTS.  EACH PARTY HERETO HEREBY
 
 
18

 
 
 
 IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON BEHALF OF ITSELF OR ITS PROPERTY, BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH BELOW, AND NOTHING IN THIS SECTION 6.05(c) SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
 
(d)            Waiver of Jury Trial .  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY HERETO (1) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 6.05(d).
 
SECTION 6.06   Headings .  The headings and subheadings in this Agreement are included for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.
 
SECTION 6.07   Entire Agreement .  Except as specifically provided in this Agreement, this Agreement constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, between the parties, with respect to the subject matter hereof.
 
SECTION 6.08   Severability .  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.
 
SECTION 6.09   Future Registration Rights .  From and after the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder registration rights the terms of which are more favorable than or senior to the registration rights granted to the Shareholders hereunder unless it offers corresponding registration rights to the Shareholders hereunder; provided that this Section 6.09 shall not apply to any registration rights granted to the Company’s Subsidiaries (or their respective successors).
 
 
 
19

 
 
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first stated above.
 
BARNES & NOBLE, INC.
 
by
 
/s/ Michael P. Huseby
 
Name:         Michael P. Huseby
 
Title:           Chief Executive Officer













[Signature Page to the Registration Rights Agreement]

 
 

 


MORRISON INVESTMENT HOLDINGS, INC.
 
by
  /s/ Keith Dolliver 
 
Name:  Keith Dolliver
 
Title:    President






[Signature Page to the Registration Rights Agreement]

 
 

 


EXHIBIT A
 
[FORM OF SHAREHOLDER JOINDER TO REGISTRATION RIGHTS AGREEMENT]
 
This SHAREHOLDER JOINDER AGREEMENT (this “ Shareholder Joinder Agreement ”) is made as of the date written below by the undersigned in accordance with the Registration Rights Agreement dated as of December 3, 2014 (as the same may be amended from time to time, the “ Registration Rights Agreement ”), among Barnes & Noble, Inc., a Delaware corporation, and the Shareholders party thereto.  Capitalized terms used, but not defined, herein shall have the meaning ascribed to such terms in the Registration Rights Agreement.
 
SECTION 1.   Acknowledgment .  The undersigned acknowledges that it is becoming a party to the Registration Rights Agreement.
 
SECTION 2.   Agreement .  The undersigned (a) agrees that it shall be bound by and subject to the terms of the Registration Rights Agreement as a “Permitted Transferee” of a Shareholder thereto, (b) shall have all the rights and obligations of a Shareholder and a Permitted Transferee thereunder as if it had executed the Registration Rights Agreement as if it were originally a party thereto, and (c) hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Registration Rights Agreement (including, without limitation, Section 6.01 thereof).
 
Executed and dated this ___ day of _____ ___
 

[NAME OF JOINING SHAREHOLDER],
 
by
     
 
Name:
 
Title:
   
Address for Notices:
 
[Address]
[Fax number]


 
 

 


EXHIBIT B
 
SHAREHOLDERS PARTY TO THE REGISTRATION RIGHTS AGREEMENT
 
For each Shareholder:
 
Morrison Investment Holdings, Inc.
c/o Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052-6399
Attn:   Keith R. Dolliver
President
Fax:           (425) 706-7329
 
Exhibit 10.5
 


 
 
DIGITAL BUSINESS CONTINGENT PAYMENT AGREEMENT
 
 
dated as of December 3, 2014
 
 
by and between
 
 
NOOK MEDIA INC.,
 
 
BARNES & NOBLE, INC.
 
 
and
 
 
PEARSON EDUCATION, INC.
 

 
 
 
 
 
 
 
 
 
 
 

 



 
 
 

 
 
 

Table of Contents
 
 
    Page
     
SECTION 1.
Definitions
1
SECTION 2.
No Certificates
6
SECTION 3.
Rights of the Investor
6
SECTION 4.
Non-transferability
6
SECTION 5.
CPR Payment Amount and Procedures
6
SECTION 6.
Adjustment Procedures
8
SECTION 7.
The Digital Business
9
SECTION 8.
Guarantee of Obligations
10
SECTION 9.
Assumption of Obligations
10
SECTION 10.
Termination; Effect of Termination
10
SECTION 11.
Intent
10
SECTION 12.
Notices
11
SECTION 13.
Amendments, Waivers, etc.
12
SECTION 14.
Severability
12
SECTION 15.
No Third-Party Beneficiaries
12
SECTION 16.
Assignment
12
SECTION 17.
Successors
12
SECTION 18.
Counterparts
13
SECTION 19.
No Fiduciary Obligations
13
SECTION 20.
Headings
13
SECTION 21.
Specific Enforcement; Governing Law; Submission to Jurisdiction; Waiver of Jury Trial
13
 
 
 
 

 
 

 
This DIGITAL BUSINESS CONTINGENT PAYMENT AGREEMENT (this “ Agreement ”), dated as of December 3, 2014, is entered into by and between NOOK Media Inc., a Delaware corporation (“ NMI ”), Barnes & Noble, Inc., a Delaware corporation (the “ Company ”), and Pearson Education, Inc., a Delaware corporation (the “ Investor ”). NMI, the Company and the Investor each may be referred to herein individually as a “Party” and collectively as the “Parties.”
 
WHEREAS, the Investor is consenting on the date hereof to the Digital business being distributed by NOOK Media LLC (“ NOOK Media ”) to NMI; and
 
WHEREAS, in connection with such consent, NMI desires to confer on the Investor a contingent payment right (the “ Contingent Payment Right ”) in the event NMI engages in a CPR Sale Transaction or CPR Dividend Event, subject to the terms and conditions set forth herein.
 
NOW, THEREFORE, for good and valuable consideration, NMI, the Company and Investor hereby agree as follows:
 
SECTION 1.   Definitions .  The following terms shall have the meaning as set forth below:
 
(a)   Affiliate ” means, with respect to any specified person or entity, any other person or entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified person or entity; provided , that NOOK Media and its subsidiaries shall not be deemed to be Affiliates of the Investor.  For the purposes of this definition, “ control ”, when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.
 
(b)   Agreement ” has the meaning set forth in the Preamble.
 
(c)   Business Day ” means any weekday that is not a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to be closed.
 
(d)   Company ” has the meaning set forth in the Preamble.
 
(e)   Contingent Payment Right ” has the meaning set forth in the Recitals.
 
(f)   CPR Deadline ” means 5:00 p.m., New York City time, on the third anniversary of the date hereof; provided , however , that if any Person (or group of Persons) has submitted to the Company or any of its Affiliates or representatives a bona fide proposal, inquiry or offer relating to a CPR Sale Transaction or the Company or any of its Affiliates (which proposal, inquiry or offer has not been withdrawn or lapsed) or representatives have engaged in any negotiations or discussions with any Person (or
 
 
 
 
 

 
 
 
 
group of Persons), other than the Investor and its Affiliates, relating to a CPR Sale Transaction (which negotiations have not terminated) after the date hereof and prior to the third anniversary of the Closing Date, then the CPR Deadline shall be the fourth anniversary of the Closing Date.
 
(g)   CPR Dividend Declaration Date ” means the date and time on which there is a declaration of a dividend or other distribution, the payment of which would result in a CPR Dividend Event.
 
(h)   CPR Dividend Event ” means any dividend or other distribution (other than a dividend or distribution in connection with a CPR Sale Transaction to the extent such dividend or distribution is included in CPR Sale Distributable Proceeds), the CPR Dividend Declaration Date (or, if earlier, the CPR Dividend Payment Date) for which is on or prior to the CPR Deadline, distributed, directly or indirectly, to NMI or any of its Affiliates (other than barnesandnoble.com llc or any of its subsidiaries) from or in respect of the Digital Business.
 
(i)   CPR Dividend Payment Date ” means the date and time on which there is a payment of any dividend or other distribution resulting in a CPR Dividend Event.
 
(j)   CPR Dividend Proceeds ” means an amount equal to the aggregate proceeds received, directly or indirectly, by NMI or any of its Affiliates in a CPR Dividend Event.  For the avoidance of doubt, if any proceeds received by NMI or any of its Affiliates in a CPR Dividend Event are in the form of non-cash consideration, the aggregate proceeds received by NMI and its Affiliates with respect to such non-cash consideration shall be the fair market value of such non-cash consideration (which fair market value shall be equal to (x) in the case of consideration in the form of securities that are listed on either the New York Stock Exchange or the Nasdaq Stock Market, as applicable, the weighted average closing price for the thirty (30) trading days immediately preceding the CPR Dividend Declaration Date and (y) in the case of all other non-cash consideration, the fair market value of such non-cash consideration).
 
(k)   CPR Notice ” has the meaning set forth in Section 5(c) .
 
(l)   CPR Payment Amount ” means an amount equal to 5.0% multiplied by the CPR Sale Distributable Proceeds or the CPR Dividend Proceeds, as applicable.
 
(m)   CPR Payment Date ” has the meaning set forth in Section 5(c) .
 
(n)   CPR Sale Distributable Proceeds ” means an amount equal to the aggregate proceeds received (taking into account Section 5(g) ), directly or indirectly by NMI or any of its Affiliates in a CPR Sale Transaction minus   the sum of (i) any federal, state, local or foreign income, transfer or similar taxes payable by NMI or any of its subsidiaries as a result of such CPR Sale Transaction, provided , that (x) any such taxes shall be reduced to the extent of any tax benefit which NMI or any of its Affiliates is entitled to by reason of any payment made hereunder, and (y) taxes payable by NMI or any of its subsidiaries shall not include any amounts required to be withheld on account
 
 
 
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of payments made to other Persons, as estimated (after consultation from the Company’s outside tax advisors) in good faith by the Board of Directors of the Company, and (ii) net third party indebtedness (i.e., third party indebtedness for borrowed money, guarantees of such indebtedness and drawn letters of credit less   cash and cash equivalents (other than cash and cash equivalents received in connection with the CPR Sale Transaction)) relating exclusively to the Digital Business that is retained by NMI and its subsidiaries following such CPR Sale Transaction. For the avoidance of doubt, if any proceeds received by NMI or any of its Affiliates in a CPR Sale Transaction are in the form of non-cash consideration, the aggregate proceeds received by NMI and its Affiliates with respect to such non-cash consideration shall be the fair market value of such non-cash consideration (which fair market value shall be equal to (x) in the case of consideration in the form of securities that are listed on either the New York Stock Exchange or the Nasdaq Stock Market, as applicable, the weighted average closing price for the thirty (30) trading days immediately preceding the CPR Sale Transaction Signing Date and (y) in the case of all other non-cash consideration, the fair market value of such non-cash consideration).
 
(o)   CPR Sale Transaction ” means in one or more transactions (whether related or not), other than an Excluded Transaction, the CPR Sale Transaction Signing Date (or, if earlier, the CPR Sale Transaction Closing Date) for which is on or prior to the CPR Deadline, pursuant to which (i) barnesandnoble.com llc or any Affiliate thereof (which Affiliate holds, directly or indirectly, all or substantially all of the Digital Business) completes, directly or indirectly, a consolidation, recapitalization, conversion, reorganization, merger or similar transaction with or into another Person (other than the Company or any of its wholly-owned subsidiaries) or any spin-off, split-off, public offering or similar transaction involving barnesandnoble.com llc or any such Affiliate, (ii) the Company and its wholly-owned subsidiaries no longer own more than 50% of the outstanding equity interests of barnesandnoble.com llc or any Affiliate thereof (which Affiliate holds, directly or indirectly, all or substantially all of the Digital Business) or (iii) barnesandnoble.com llc or any Affiliate thereof (which Affiliate holds, directly or indirectly, all or substantially all of the Digital Business) sells, assigns, transfers, conveys or otherwise disposes of all or a substantial portion of the properties, rights or assets of the Digital Business.
 
(p)   CPR Sale Transaction Closing Date ” means the date and time on which the closing of a CPR Sale Transaction occurs.
 
(q)   CPR Sale Transaction Signing Date ” means the date and time on which the signing of definitive documentation (which, if the transactions contemplated by such definitive documentation were consummated, would result in a CPR Sale Transaction) occurs.
 
(r)   Digital Business ” means the assets, rights and properties, including all goodwill relating thereto, whether tangible or intangible, real, personal or mixed, and liabilities of barnesandnoble.com llc and its Affiliates primarily related to, or used primarily in connection with, the digital device, digital content and nook.com businesses (excluding, for the avoidance of doubt, assets and liabilities primarily related to the retail
 
 
 
 
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business (including the Barnes & Noble trademark) and the retail eCommerce business conducted through barnesandnoble.com) conducted by barnesandnoble.com llc and its Affiliates as of the date hereof, including:
 
(i)   Digital device manufacturing, development, sale and distribution work and rights and each Nook line of devices;
 
(ii)   Application software development, sale and distribution work and rights;
 
(iii)   Intellectual property to the extent associated with such digital device, digital content, eCommerce and nook.com businesses (including patents primarily related to such digital device, digital content, eCommerce and nook.com businesses, the Nook trademark and copyrights and licenses for digital content, but only including certain URLs, such as nook.com);
 
(iv)   Customer data, including all data associated with a customer’s consumption of digital content (including bookmarks, last page read, highlighting and annotations), originating in such digital device, digital content, eCommerce and nook.com businesses and rights to maintain digital lockers for digital customers (subject to applicable restrictions under privacy policies and applicable law);
 
(v)   Rights to sell digital content, including electronic books, magazines, newspapers, periodicals, comic books, children’s books and other reading and reading-related content, together with associated data thereto including any annotations by such end user, and contracts related to such digital device, digital content, eCommerce and nook.com businesses;
 
(vi)   Claims primarily related to such digital device, digital content, eCommerce and nook.com businesses, including all claims against third parties, whether choate or inchoate, known or unknown, contingent or non-contingent, or otherwise, and the right to obtain all proceeds therefrom;
 
(vii)   Obligations with respect to third-party channel partner returns, price protection agreements with third-party channel partners, rebates and offsets of rebates from suppliers and liabilities with respect to gift cards, in each case primarily related to such digital device, digital content, eCommerce and nook.com businesses;
 
(viii)   Obligations under digital device warranties (including pre-separation digital device warranties);
 
(ix)   Obligations under the Settlement and Patent License Agreement, dated as of April 27, 2012, among the Company, barnesandnoble.com llc, Microsoft and Microsoft Licensing GP;
 
 
 
 
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(x)   Substantially all the employees of barnesandnoble.com llc or its subsidiaries who are engaged primarily in such digital device, digital content, eCommerce and nook.com businesses (and the liabilities associated therewith);
 
(xi)   Such other assets, rights, properties, obligations and liabilities described or referenced in the sections of the Company’s Annual Report on Form 10-K for the year ended May 3, 2014, and subsequently filed Quarterly Reports on Form 10-Q as are primarily related to the “NOOK” segment;
 
(xii)   Rights and obligations under the Retail Agreement to the extent relating to the other items included in this definition of “Digital Business”; and
 
(xiii)   All credits and deposits (including customer deposits, security deposits for rent, electricity, telephone or otherwise), and prepaid charges and expenses, and all permits or franchises, in each case, primarily related to such digital device, digital content, eCommerce and nook.com businesses.
 
(s)   Excluded Transaction ” means (i) any transaction involving a merger, consolidation, issuance or acquisition of equity interests or sale of all or substantially all the assets of, in each case, the Company or any of its subsidiaries (other than barnesandnoble.com llc and its subsidiaries), unless barnesandnoble.com llc and its subsidiaries (or the Digital Business) constitute all or substantially all the assets thereof and (ii) any transaction involving a sale, merger, consolidation, issuance or acquisition of equity interests or sale of all or substantially all the assets of, in each case, barnesandnoble.com llc and its subsidiaries (or the Digital Business) if (A) barnesandnoble.com llc and its subsidiaries (or the Digital Business) is still owned by NOOK Media and (B) the Investor still owns membership interests in NOOK Media.
 
(t)   Final CPR Payment Amount ” has the meaning set forth in Section 6(a) .
 
(u)   Independent Accounting Firm ” means a nationally recognized, independent accounting firm as mutually agreed upon by the Parties, or if such firm cannot or refuses to accept the engagement contemplated by this Agreement, another nationally recognized, independent accounting firm as mutually agreed upon by the Parties.
 
(v)   Investor ” has the meaning set forth in the Preamble.
 
(w)   NMI ” has the meaning set forth in the Recitals.
 
(x)   NOOK Media ” has the meaning set forth in the Recitals.
 
(y)   Notice of Objection ”  has the meaning set forth in Section 6 .
 
 
 
 
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(z)   Person ” means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.
 
(aa)   Retail Agreement ” has the meaning set forth in Section 6 .
 
(bb)   subsidiary ” of any Person means another Person, an amount of the voting securities, other voting rights or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, more than 50% of the equity interests of which) is owned directly or indirectly by such first Person.  For the avoidance of doubt, NMI and Nook Media shall be deemed to be a subsidiary of the Company.
 
SECTION 2.   No Certificates .   The Contingent Payment Right shall not be evidenced by a certificate or any other instrument.
 
SECTION 3.   Rights of the Investor .  Nothing contained in this Agreement shall be construed as conferring upon the Investor, by virtue of the Contingent Payment Right, the right to vote or to consent or to receive notice as a stockholder or member of the Company, NMI or any of their respective subsidiaries, as applicable, or any rights or obligations of any kind or nature whatsoever as a stockholder or member of the Company, NMI or any of their respective subsidiaries, as applicable, either at law or in equity.  The rights of the Investor and the obligations of the Company, NMI, their Affiliates and their respective officers, directors and controlling Persons are contract rights limited to those expressly set forth in this Agreement.
 
SECTION 4.   Non-transferability .  The Contingent Payment Right and any interest therein shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, without the prior written consent of NMI; provided , that the Investor may sell, assign, transfer or pledge the Contingent Payment Right and any interest therein to any of its Affiliates.
 
SECTION 5.   CPR Payment Amount and Procedures .
 
(a)   If a CPR Sale Transaction occurs, then upon the CPR Sale Transaction Closing Date, the Investor (or its designee) shall be entitled to receive the CPR Payment Amount, as may be adjusted pursuant to Section 6 , with respect to such CPR Sale Transaction.
 
(b)   If a CPR Dividend Event occurs, then upon the CPR Dividend Payment Date, the Investor (or its designee) shall be entitled to receive the CPR Payment Amount, as may be adjusted pursuant to Section 6 , with respect to such CPR Dividend Event.
 
(c)   As promptly as practicable (and in no event later than five (5) Business Days) following the CPR Sale Transaction Closing Date or the CPR Dividend Payment Date, if any, NMI shall deliver to the Investor a written notice (the “ CPR Notice ”) notifying the Investor that a CPR Sale Transaction Closing Date or a CPR
 
 
 
 
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Dividend Payment Date, as applicable, has occurred.  The CPR Notice shall set forth in reasonable detail the calculation of the CPR Payment Amount (and its components) and include all necessary supporting documentation for such calculation.  The Investor and its Affiliates and their respective representatives shall be entitled to reasonable access to all books, records, financial information and personnel and representatives (including accountants) of NMI and its Affiliates related to the calculation of the CPR Payment Amount. The CPR Notice shall also establish a payment date (the “ CPR Payment Date ”) of the CPR Payment Amount that is no later than fifteen (15) Business Days following the CPR Sale Transaction Closing Date or CPR Dividend Payment Date, as applicable. In addition, to the extent the CPR Payment Amount includes any non-cash consideration, the CPR Notice shall set forth in reasonable detail the composition of the CPR Payment Amount.
 
(d)   If NMI or any of its Affiliates receives non-cash consideration in a CPR Sale Transaction or a CPR Dividend Event, NMI shall have the option, in its sole discretion, to pay or deliver the CPR Payment Amount in any combination of cash or non-cash consideration; provided , that such non-cash consideration is valued at its fair market value as described in the definition of “CPR Sale Distributable Proceeds” or “CPR Dividend Proceeds”, as applicable, and is of the type of non-cash consideration received by NMI or its Affiliates in the applicable CPR Sale Transaction or CPR Dividend Event; provided , further , that such proportion of non-cash consideration to cash shall not exceed the proportion of non-cash consideration to cash received by NMI or its Affiliates in the applicable CPR Sale Transaction or CPR Dividend Event.
 
(e)   On the CPR Payment Date set forth in any CPR Notice, NMI shall (i) deliver the non-cash consideration portion of the CPR Payment Amount, if any, to the Investor at the address specified by the Investor and (ii) pay the cash portion of the CPR Payment Amount to the Investor by wire transfer of immediately available funds to the account specified by the Investor, in each case, in written instructions delivered by the Investor to NMI not less than two (2) Business Days prior to the CPR Payment Date.  Upon such payment and/or delivery, no further payment or delivery by NMI pursuant to this Agreement shall be required, except as set forth in Section 6 .
 
(f)   NMI shall pay and/or deliver, as applicable, the CPR Payment Amount to the Investor prior to distributing, by dividend or otherwise, any CPR Sale Distributable Proceeds or CPR Dividend Proceeds, as applicable, to any other Person.
 
(g)   In the event any of the consideration to be received by NMI or its Affiliates in a CPR Sale Transaction or a CPR Dividend Event, as applicable, is not paid at the CPR Sale Transaction Closing Date or CPR Dividend Payment Date, as applicable, but payment of such consideration is conditioned or contingent upon the occurrence of other events or circumstances thereafter or is otherwise scheduled to be paid on a delayed basis, then NMI shall, if and when such additional conditional or contingent consideration is actually received by NMI or its Affiliates, recalculate the CPR Payment Amount as described herein, taking into account both the closing consideration and such conditional or contingent consideration, and shall pay to Investor, within fifteen (15) Business Days of receipt of such conditional or contingent proceeds from such CPR Sale
 
 
 
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Transaction or CPR Dividend Event, as applicable, the additional payment amount that the Investor would have been entitled to in the event such conditional or contingent payments had been received by NMI or its Affiliates at the CPR Sale Transaction Closing Date or CPR Dividend Payment Date, as applicable.
 
SECTION 6.   Adjustment Procedures .
 
(a)   The Investor will have twenty (20) Business Days following delivery of the CPR Notice during which to notify NMI in writing of any objections with respect to the calculation of the CPR Payment Amount, including the value of any non-cash consideration, net third party indebtedness (“ Notice of Objection ”). If the Investor fails to deliver a Notice of Objection in accordance with this Section 6(a) , the CPR Payment Amount shall be conclusive and binding on the Parties.  If the Investor submits a Notice of Objection, then (i) for fifteen (15) Business Days after the date upon which NMI receives the Notice of Objection, the Parties will each use their commercially reasonable efforts to agree on the calculation of the disputed amounts and (ii) failing such agreement within such fifteen (15) Business Day period, then the Investor and NMI, acting jointly, shall refer the matter for resolution to the Independent Accounting Firm. Promptly (but in any event within five (5) Business Days) after engagement of the Independent Accounting Firm, the Investor, on the one hand, and NMI, on the other hand, shall each deliver to the Independent Accounting Firm, a notice setting forth in reasonable detail their calculation, to the extent in dispute under the Notice of Objection, of the CPR Payment Amount as of the CPR Sale Transaction Closing Date or the CPR Dividend Payment Date, as applicable. Within fifteen (15) Business Days after receipt thereof, the Independent Accounting Firm shall deliver its determination of the disputed amounts and of the CPR Payment Amount as of the CPR Sale Transaction Closing Date or the CPR Dividend Payment Date, as applicable, which determination shall be final and binding on each of the Parties.  For the avoidance of doubt, the only matter the Independent Accounting Firm shall have the authority to determine shall be the CPR Payment Amount, including the value of any non-cash consideration, net third party indebtedness.  The fees and expenses of the Independent Accounting Firm shall be paid in equal proportions (i.e., 50% each) by the Investor, on the one hand, and NMI, on the other hand. The CPR Payment Amount that is final and binding on the Parties, as determined either through agreement of the Parties or through the action of the Independent Accounting Firm pursuant to this Section 6(a) , is referred to as the “ Final CPR Payment Amount ”.  The Independent Accounting Firm shall act as an expert under the New York CPLR.
 
(b)   If the Final CPR Payment Amount that is greater than the CPR Payment Amount, NMI shall pay to the Investor, within two (2) Business Days after the CPR Payment Amount becomes final and binding pursuant to Section 6(a) , an amount in cash equal to such difference by wire transfer in immediately available funds to an account designated by the Investor. If the CPR Payment Amount is greater than the Final CPR Payment Amount, the Investor shall pay to NMI, within two (2) Business Days after the CPR Payment Amount becomes final and binding pursuant to Section 6(a) , an amount in cash equal to such difference by wire transfer in immediately available funds to an account designated by NMI. Any payment required pursuant to this Section 6(b) shall be
 
 
 
 
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made in cash regardless of whether the CPR Payment Amount includes or is comprised of non-cash consideration.
 
SECTION 7.   The Digital Business .  (a)  Prior to the earlier to occur of the expiration of the Contingent Payment Right and a CPR Sale Transaction Closing Date, (i) the Company shall not be permitted to modify the existing Retail Agreement between the Company and NOOK Media (the “ Retail Agreement ”) other than any modifications of the Retail Agreement (A) to allow the Company to purchase devices directly from device manufacturers, (B) to make non-economic changes to the Retail Agreement, which changes will not impact the commissions payable or cost allocations between the Digital Business and the retail business and would not otherwise reasonably be expected to have a detrimental impact in any material respect on the value of the Digital Business, (C) to allow for an assignment and assumption of the rights and obligations of NOOK Media under the Retail Agreement relating to the Digital Business by any entity (including any subsidiary of the Company) to which all or substantially all of the Digital Business is assigned and (D) to provide for the Retail Agreement to expire immediately prior to the CPR Sale Transaction Closing Date and (ii) the Company and its subsidiaries shall be permitted to replace the Retail Agreement upon its expiration or termination in accordance with its terms with a successor retail agreement that is no less favorable to the entity holding the Digital Business than the Retail Agreement in effect immediately prior to such termination or expiration.
 
(b)   Subject to the provisions of Section 9 , prior to the earlier to occur of the expiration of the Contingent Payment Right and a CPR Sale Transaction Closing Date, (i) the Digital Business shall be conducted through barnesandnoble.com llc and its subsidiaries and (ii) neither NMI nor its Affiliates shall (A) transfer the Digital Business out of barnesandnoble.com llc and its subsidiaries to any Person (other than barnesandnoble.com llc or any of its subsidiaries) or (B) cause barnesandnoble.com llc or any of its subsidiaries to create or assume any obligations or liabilities other than obligations or liabilities to the extent arising out of or relating to the Digital Business (which shall include, for the avoidance of doubt, credit support under the Company’s credit facility) or (C) enter into any transaction between the Digital Business, on the one hand, and the Company and any of its subsidiaries (other than barnesandnoble.com llc and its subsidiaries), on the other hand, that meets all of the following conditions (1) is on terms that are less favorable than would be available to unrelated third parties bargaining at arm’s length, (2) is outside the ordinary course of the Digital Business and the Company’s retail business (which ordinary course transactions include, without limitation, purchases and sales of digital devices, purchase and sales of digital content, existing cost allocations under the Transition Services Agreement between the Company and NOOK Media, transactions under the existing Retail Agreement (taking into account the modifications permitted by Section 7(a) ) and transactions under the existing Separation Agreement between the Company and NOOK Media) and (3) would reasonably be expected to have a detrimental impact in any material respect on the value of the Digital Business.
 
(c)   Nothing in this Agreement shall require the Company, NMI, NOOK Media or any of their respective Affiliates to engage in, or to attempt to engage in, a CPR
 
 
 
 
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Sale Transaction or a CPR Dividend Event or to fund any obligations of NOOK Media or the Digital Business.
 
SECTION 8.   Guarantee of Obligations .   The Company hereby irrevocably and unconditionally guarantees NMI’s obligations contained in this Agreement, including Sections 5 and 6 , on the terms and subject to the conditions set forth in this Agreement. This guarantee (i) is a present and continuing guarantee of payment and not of collectability, and (ii) is in no way conditioned or contingent upon any attempts to collect or upon any other condition or contingency.  Notwithstanding anything in this Agreement to the contrary, in the event that the Company irrevocably assumes all of the obligations of NMI under this Agreement pursuant to Section 9 , the Company’s guarantee of NMI’s obligations pursuant to this Section 8 shall terminate.
 
SECTION 9.   Assumption of Obligations .  Notwithstanding anything in this Agreement to the contrary, NMI shall not be prevented from transferring barnesandnoble.com llc to the Company or any of its subsidiaries; provided , however , in the event barnesandnoble.com llc is transferred to the Company or any of its subsidiaries (other than to NMI or any of its subsidiaries), the Company shall assume all rights, interests and obligations of NMI under this Agreement.
 
SECTION 10.   Termination; Effect of Termination .   (a)  In the event that neither a CPR Sale Transaction Signing Date nor CPR Dividend Declaration Date shall have occurred on or prior to the CPR Deadline, then this Agreement shall terminate at 5:00 p.m., New York City time, on the date of the CPR Deadline, and the Contingent Payment Right will automatically terminate in its entirety and all rights thereunder and all rights in respect thereof under this Agreement shall cease and be of no further force or effect.
 
(b)   In the event that a CPR Sale Transaction Signing Date or CPR Dividend Declaration Date, as applicable, shall have occurred on or prior to the CPR Deadline, then on the earlier of (i) the date on which NMI pays in full the CPR Payment Amount (and if there is non-cash consideration, delivery of such non-cash consideration) to the Investor, including any adjustments thereto pursuant to Section 6 , and (ii) the date on which (x) the definitive documentation relating to the CPR Sale Transaction and/or the CPR Sale Transaction contemplated in such documents, are irrevocably terminated or (y) the declaration of any dividend or other distribution, the payment of which would have resulted in a CPR Dividend Event, is irrevocably rescinded, this Agreement will immediately and automatically terminate in its entirety, and the Contingent Payment Right will automatically terminate in its entirety and all rights thereunder and all rights in respect thereof under this Agreement shall cease and be of no further force or effect.
 
SECTION 11.   Intent .   The Parties agree that the provisions of this Agreement shall be interpreted in order to give effect to their intent and NMI covenants, on behalf of itself and its Affiliates, not to structure any transaction with the intent or purpose of avoiding the provisions of this Agreement.
 
 
 
 
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SECTION 12.   Notices .  Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission ( provided , that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (addressee’s local time) shall be deemed to have been received at 9:00 a.m. (addressee’s local time) on the next Business Day), by reliable overnight delivery service (with proof of service), or hand delivery, addressed as follows:
 
 (i)   If to NMI or the Company:
     
    Barnes & Noble, Inc.
    122 Fifth Avenue
    New York, NY 10011
     
    Attention: Vice President, General Counsel & Secretary
    Facsimile:     212-463-5683 
     
    with a copy to (which copy alone shall not constitute notice):
     
    Cravath, Swaine & Moore LLP
     
    Worldwide Plaza
    825 Eighth Avenue
    New York, NY 10019
     
    Attention:   Scott A. Barshay, Esq.
      Andrew R. Thompson, Esq. 
    Facsimile:  (212) 474-3700 
     
(ii)   If to the Investor:
     
    Pearson Education, Inc.
    c/o Pearson Inc.
    330 Hudson Street
    New York, NY 10013
     
    Attention: Chief Corporate Finance and Strategy Officer
     
    Facsimile: (917) 260-8859
     
    with a copy to (which copy alone shall not constitute notice):
     
    Morgan Lewis & Bockius LLP
    101 Park Avenue
    New York, NY 10178
    Attention: Robert W. Dickey, Esq
     
    Facsimile: (212) 309-6001
 
  
 
 
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or to such other address as any person shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or scheduled to be received if sent by overnight delivery service.  Any Party to this Agreement may notify any other Party of any changes to the address or any of the other details specified in this paragraph; provided , however , that such notification shall only be effective on the date specified in such notice or five Business Days after the notice is given, whichever is later.  Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.
 
SECTION 13.   Amendments, Waivers, etc.   This Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed by the Party against whom such amendment or waiver shall be enforced.  The failure of any Party to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other Party with its obligations hereunder, shall not constitute a waiver by such Party of its right to exercise any such other right, power or remedy or to demand such compliance.
 
SECTION 14.   Severability .  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.
 
SECTION 15.   No Third-Party Beneficiaries .   Nothing expressed or referred to in this Agreement will be construed to give any person, other than the Parties, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.
 
SECTION 16.   Assignment .  Except as otherwise provided herein, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether by operation of law or otherwise) without the prior written consent of the other Parties; provided , however , NMI’s rights, interests and obligations under this Agreement shall be permitted to be assigned without the consent of any Party solely as a result of NMI being converted into another form of entity such as a limited liability company or merging with a direct or indirect subsidiary of the Company; provided further , that the Investor shall be permitted to assign its rights, interests or obligations hereunder to any Affiliate without the consent of any Party.
 
SECTION 17.   Successors .   All the covenants and provisions of this Agreement by or for the benefit of NMI, the Company and the Investor shall bind and inure to the benefit of their respective successors, assigns, heirs and personal representatives.
 
 
 
 
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SECTION 18.   Counterparts .   This Agreement may be executed in two or more identical counterparts (including by facsimile), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered (by telecopy or otherwise) to the other Parties.
 
SECTION 19.   No Fiduciary Obligations .   Each Party acknowledges and agrees that the other Parties, their Affiliates and their respective officers, directors and controlling Persons do not owe any fiduciary duties to the first Party or any of its respective Affiliates, officers, directors or controlling Persons.  The only obligations of the Parties, their Affiliates and their respective officers, directors and controlling Persons arising out of this Agreement are the contractual obligations expressly set forth in this Agreement.
 
SECTION 20.   Headings .   The headings and table of contents contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
 
SECTION 21.   Specific Enforcement; Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) This Agreement shall be governed by and construed in accordance with the Laws of the State of New York.
 
(b)   THE PARTIES ACKNOWLEDGE AND AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.  IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OR THREATENED BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF COMPETENT JURISDICTION, IN EACH CASE WITHOUT PROOF OF DAMAGES OR OTHERWISE (AND EACH PARTY HEREBY WAIVES ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND IN CONNECTION WITH SUCH REMEDY), THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.  THE PARTIES AGREE NOT TO ASSERT THAT A REMEDY OF SPECIFIC ENFORCEMENT IS UNENFORCEABLE, INVALID, CONTRARY TO LAW OR INEQUITABLE FOR ANY REASON, NOR TO ASSERT THAT A REMEDY OF MONETARY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY.  IN ADDITION, EACH PARTY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, BROUGHT BY ANY OTHER PARTY OR ITS SUCCESSORS OR ASSIGNS SHALL BE BROUGHT AND DETERMINED EXCLUSIVELY IN ANY STATE OR FEDERAL COURT IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, SO LONG AS ONE OF
 
 
 
 
 
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SUCH COURTS SHALL HAVE SUBJECT MATTER JURISDICTION OVER SUCH LEGAL 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.  EACH PARTY HEREBY IRREVOCABLY SUBMITS WITH REGARD TO ANY SUCH ACTION OR PROCEEDING FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE PERSONAL JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, (1) ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR ANY REASON, (2) ANY CLAIM THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH COURTS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE) AND (3) TO THE FULLEST EXTENT PERMITTED BY THE APPLICABLE LAW, ANY CLAIM THAT (A) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT IN AN INCONVENIENT FORUM, (B) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR (C) THIS AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH COURTS.  EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON BEHALF OF ITSELF OR ITS PROPERTY, BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH BELOW, AND NOTHING IN THIS SECTION 22(B) SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
 
(c)   EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY (1) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 22(C).
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed, as of the day and year first above written.
 
 
  NOOK MEDIA INC.  
       
 
by:
 
/s/ Michael P. Huseby
 
    Name:    Michael P. Huseby  
    Title: Chief Executive Officer  
       
 
 
 
  BARNES & NOBLE, INC.  
       
 
by:
 
/s/ Michael P. Huseby
 
    Name:    Michael P. Huseby  
    Title: Chief Executive Officer  
       
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
[Signature Page – Digital Business Contingent Payment Agreement]
 
 
 
 

 
 
 
 
 
PEARSON EDUCATION, INC.
 
       
 
by:
 
/s/ Philip J. Hoffman
 
    Name:    Philip J. Hoffman  
    Title: Executive Vice President   
       
 
 
 
 
 
 


 
 
 
 
 
 
 
[Signature Page – Digital Business Contingent Payment Agreement]