PURCHASE AGREEMENT dated as of December22, 2014, among BARNES & NOBLE, INC., NOOK MEDIA INC., NOOK MEDIA MEMBER TWO LLC, PEARSON EDUCATION, INC. and PEARSON INC. Table of Contents

 

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PURCHASE AGREEMENT

 

dated as of December 22, 2014,

 

among

 

BARNES & NOBLE, INC.,

 

NOOK MEDIA INC.,

 

NOOK MEDIA MEMBER TWO LLC,

 

PEARSON EDUCATION, INC.

 

and

 

PEARSON INC.

 

 

 

 

 

 

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Table of Contents

 

 

 

 

 

 

PURCHASE AGREEMENT dated as of December 22, 2014 (this “Agreement”), among Barnes & Noble, Inc., a Delaware corporation (the “Company”), NOOK Media Inc., a Delaware corporation (“NMI”), NOOK Media Member Two LLC, a Delaware limited liability company (“NOOK Member Two”), Pearson Education, Inc., a Delaware corporation (the “Investor”), and Pearson Inc., a Delaware corporation (“Guarantor”). The Company, NMI, NOOK Member Two, the Investor and the Guarantor each may be referred to herein individually as a “Party” and collectively as the “Parties.”

WHEREAS NMI and NOOK Member Two together desire to purchase, and the Investor desires to sell, all of the Investor’s right, title and interest in, to and under the 89,473.68421 convertible Series B preferred limited liability company interests (the “Series B Preferred Interests”) of NOOK Media LLC (“NOOK Media”) and the 94,182.82548 warrants (the “Warrants”) to purchase Series B Preferred Interests 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

SECTION 1.01. Purchase and Sale of the Series B Preferred Interests and Warrants.  On the terms and subject to the conditions set forth in this Agreement, at the Closing, (a) NMI shall purchase from the Investor all of the Investor’s right, title and interest in, to and under 85,894.73684 Series B Preferred Interests and 90,415.51246 Warrants for an aggregate purchase price equal to (i) $13,200,008.25 in cash, payable as set forth in Section 1.02(b), and (ii) 578,810 shares of common stock, par value $.001 per share (“Company Common Stock”), of the Company and (b) NOOK Member Two shall purchase from the Investor all of the Investor’s right, title and interest in, to and under 3,578.94737 Series B Preferred Interests and 3,767.31302 Warrants for an aggregate purchase price equal to (i) $550,000.34 in cash, payable as set forth in Section 1.02(b), and (ii) 24,117 shares of Company Common Stock. The purchase and sale of the Series B Preferred Interests and Warrants 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 the Guarantor.  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:

ARTICLE II

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 the Guarantor 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

 

 

(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 204,000 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 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 the 2,737,290 shares of Company Common Stock issued to Microsoft Corporation on December 4, 2014, pursuant to the Purchase Agreement dated

 

 

 

(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

 

 

 

(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.

 

 

 

 

(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 on transfer under applicable state and federal securities laws) and (iv) will be free and clear of all Liens.

 

 

 

       (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.

 

 

 

 

(c) No Conflict.  The execution and delivery by each of the Investor and the Guarantor 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 the Guarantor, any provision of any Contract to which the Investor or the Guarantor 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 the Guarantor and its Subsidiaries, taken as a whole, or any Law that is material to the Guarantor and its Subsidiaries, taken as a whole, or Judgment, in each case, applicable to the Investor or the Guarantor 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 the Guarantor to consummate the transactions contemplated by this Agreement.

 

 

(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 acquiring, holding, voting or disposing of, more than 1% of the aggregate outstanding shares of Company Common Stock.

 

 

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 the Guarantor, 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 activities, financial data and other business affairs that was disclosed by the Investor or the Guarantor, 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 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 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

 

 

(a) If to the Company:

(b) If to the Investor:

 

 

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.

 

 

 

 

(d) “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.

(e)  “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.

(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) “Registration Rights Agreement” means the Registration Rights Agreement of the Company in the form attached hereto as Annex B.

(i)  “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.

 

 

 

 

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 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.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Parties as of the date first written above.

 

 

 

 

 

 

 

 

 

 

[Filed as Exhibit 10.2 of this Current Report on Form 8-K]

 

 

 

 

 

 

 

 

[Filed as Exhibit 10.3 of this Current Report on Form 8-K]