JUNIOR SUBORDINATED SELLER
NOTE
|
$150,000,000
|
September 30 , 2009
|
1. FOR
VALUE RECEIVED, the undersigned, BARNES &
NOBLE, INC. , a Delaware
corporation (the “ Company ”), hereby
promises to pay to the order of Leonard Riggio and Louise Riggio
(each a “ Payee ”) the principal amount of One
Hundred and Fifty Million Dollars ($150,000,000) or, if less, the
aggregate unpaid principal amount of this Note, on the Maturity
Date (or, if such day is not a Business Day, on the immediately
preceding Business Day), subject to the provisions herein. The
Issuer further promises to pay interest on the unpaid principal
amount of this Note from time to time at a rate per annum equal to
10.0%. Interest on this Note shall be due and payable in
arrears in cash on each December 29 and June 30 of each calendar
year, provided that if any such day is not a Business Day,
payment shall be made on the immediately preceding Business Day.
Payments of principal hereof and interest hereon shall be made in
Dollars in immediately available funds to such account of the
Noteholder located in New York, New York, as the Noteholder may
designate in writing to the Issuer.
2.
Prepayments.
(a)
Optional Prepayment . Subject
to the provisions herein (including, without limitation, the
restrictions on payment contained in Section 3 and the
subordination provisions contained in Section 4), the Issuer may,
at any time prior to the Maturity Date and so long as such
prepayment is not prohibited under the Senior Debt Documents,
prepay the principal amount of this Note, in whole or in part,
without penalty or premium, on any Business Day; provided
that the Issuer may not prepay the Note, in whole or in part, so
long as any principal of or interest on the Senior Subordinated
Seller Note or any other amount payable thereunder remains
unpaid. Prepayments of this Note must be accompanied by
payment of accrued and unpaid interest on the principal amount
prepaid to and including the date of payment.
(b)
Change of Control Payment .
Subject to the provisions herein (including, without limitation,
the restrictions on payment contained in Section 3 and the
subordination provisions contained in Section 4):
|
|
|
upon a Change of Control, the
Noteholder shall have the right to require the Issuer to repurchase
this Note at a repurchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest if any,
to the date of repurchase, in accordance with the terms
contemplated in clause (ii) below;
|
|
|
|
within 10 Business Days following
any Change of Control, the Issuer shall notify the Noteholder that
a Change of Control has occurred. Such notice shall provide that
the Noteholder has the right to require the Issuer to repurchase
this Note at a repurchase
|
|
|
|
price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any,
to the date of repurchase and set forth the proposed date of
repurchase (which shall be a Business Day and shall in no event be
earlier than 10 Business Days from the date of such notice (such
date, the “ Repurchase Date ”));
|
|
|
|
the Noteholder shall notify the
Issuer of its election to tender the Note for purchase by the
Issuer on the terms set forth in the notice by no later than 10
Business Days after receipt of such notice, which election shall be
irrevocable and shall be in respect of not less than the entire
Note. If the Noteholder shall not have informed the Issuer of its
election at the expiration of such 10 Business Day period, the
Noteholder shall be deemed conclusively not to have elected to
tender the Note for purchase by the Issuer; and
|
|
|
|
on the Repurchase Date, the
Noteholder shall tender the Note to the Issuer against the deposit
by the Issuer in the Noteholder’s account (which account
shall be the same account as set forth in Section 1 above) of funds
sufficient to pay the purchase price of the Note so
tendered. Upon repurchase of the Note by the Issuer
pursuant to this Section 2(b), the Note shall be cancelled and all
obligations of the Issuer thereunder shall be
terminated.
|
3.
Other Payment Provisions.
Notwithstanding anything to the
contrary herein, no payment or prepayment of principal of or
interest on this Note (including, without limitation, under Section
2 or Section 8 hereof) may be made, directly or indirectly to the
Noteholder (and shall instead be paid over to the Senior Debt Agent
under Section 4(b) to the extent permitted by applicable law),
if:
|
|
(i)
|
the Issuer or its properties is
subject to any Insolvency Proceeding;
|
|
|
|
|
|
|
|
a payment default shall have
occurred and be continuing with respect to any Senior Obligations;
or
|
|
|
|
a Payment Blockage Period shall have
occurred and be continuing.
|
4.
Subordination Provisions.
(a)
Subordination. Payment of this
Note (including, without limitation, under Section 2 or Section 8
hereof) is and shall be expressly subordinate and junior in right
of payment to the prior payment in full in cash of the Senior
Obligations to the extent and in the manner set forth herein, and
this Note is hereby so subordinated as a claim against the Issuer
or any of the assets of the Issuer, whether such claim be made (i)
in the event of any Insolvency
Proceeding, or (ii) other than in
connection with an Insolvency Proceeding, prior to the Senior
Obligations being Paid in Full.
(b)
Payment Over. If the
Noteholder shall receive any payment (including, without
limitation, under Section 2 or Section 8 hereto) in
violation of the terms hereof, it shall hold such payment in trust
for the benefit of the Senior Creditors and forthwith pay it over
to the Senior Debt Agent, for application in accordance with the
Senior Debt Documents. In the event that any payment
hereunder shall be due and, at such time, the Issuer shall be
prohibited by the terms of this Note from making such payment to
the Noteholder, the Issuer shall instead, to the extent permitted
by applicable law, make such payment to the Senior Debt Agent to
the extent the Senior Debt Obligations have not been Paid In
Full.
(c)
Insolvency Proceedings; Acceleration of Senior Obligations
. (i) In the event
of any Insolvency Proceeding relative to the Issuer or any
Guarantor or its properties or any acceleration of any Senior
Obligations, then all of the Senior Obligations shall first be Paid
in Full before the Noteholder may receive and retain any payment
upon this Note, and in any such proceedings any payment or
distribution of any kind or character, whether in cash or property
or securities, which may be payable or deliverable in respect of
this Note shall be paid or delivered directly to the Senior Debt
Agent to the extent of any unpaid Senior Obligations, unless and
until all such Senior Obligations are Paid in Full, and the
Noteholder hereby irrevocably authorizes the Senior Debt Agent, as
attorney-in-fact for such Noteholder, to prove any claim in such
proceedings on this Note, and to demand, sue for, collect and
receive any such payment or distribution, and to apply such payment
or distribution to the payment of the then unpaid Senior
Obligations, and to take such other action (including acceptance or
rejection of any plan of reorganization in any Insolvency
Proceeding) in the name of such Noteholder or of the relevant
Senior Creditors as the Senior Debt Agent may deem necessary or
advisable for the enforcement of the provisions
hereof. The Noteholder shall execute and deliver such
other and further powers of attorney, assignments, proofs of claim
or other instruments as may be requested by the Senior Debt Agent
in order to accomplish the foregoing, but only with respect to such
Noteholder’s capacity as a Noteholder hereunder and not in
respect of any other relationship between such Noteholder and the
Issuer.
(ii) In
the event that, notwithstanding the foregoing, upon any such
Insolvency Proceeding, any payment or distribution of the assets of
the Issuer of any kind or character, whether in cash, property or
securities, shall be received by the Noteholder in respect of this
Note before all Senior Obligations are Paid in Full, such payment
or distribution shall be held in trust for the Senior Creditors and
shall forthwith be paid over to the Senior Debt Agent to the extent
any Senior Obligations have not been Paid in Full after giving
effect to any concurrent payment or distribution to the Senior Debt
Agent.
(iii) In
the event of any Insolvency Proceeding against the Issuer or any
Guarantor or any of their assets, the Noteholder hereby agrees not
to contest and hereby waives any right to object to and expressly
consents to (A) any post-petition financing of or use of cash
collateral by Issuer or any Guarantor, to the extent approved or
provided by the Senior Debt Agent, and the granting by Issuer or
any Guarantor to Senior Debt
Agent of senior liens and priorities
in connection therewith and (B) any sale or other disposition of
any property securing all of any part of the Senior Obligations
free and clear of security interests, liens or other claims of
Noteholder under Section 363 of the Bankruptcy Code or any other
provision of the Bankruptcy Code if the Senior Debt Agent has
approved or consented to such sale or disposition.
(d)
Standstill; Certain Other Agreements.
(i) The Noteholder
agrees that, until the earlier to occur of the Maturity Date or the
date the Senior Obligations are Paid in Full (A) if a payment
default shall have occurred and be continuing with respect to any
Senior Obligations or a Payment Blockage Period shall have occurred
and be continuing or if an Insolvency Proceeding shall have
commenced, it will not take, demand or receive, or take any action
to accelerate or collect, any payment of all or any part of this
Note and (B) it will not file, join in or facilitate any petition
or proceeding seeking the involuntary bankruptcy of the Issuer or
any Guarantor.
(ii) The
Noteholder further agrees (A) that it shall not request, seek,
obtain or maintain any lien on or security interest in any
property, tangible or intangible, of the Issuer or any Guarantor as
security for payment of the obligation under this Note and that it
shall not attach or levy or take any action against any property,
tangible or intangible, of the Issuer or any Guarantor under any
circumstances and (B) that it shall not take, nor consent to or
acquiesce in the taking of, any action to set aside, challenge or
otherwise dispute the existence, validity or priority of the Senior
Obligations or the creation, attachment, validity, perfection,
priority or continuation of any lien or security interest of the
Senior Debt Agent or the Senior Creditors in any property, tangible
or intangible, of the Issuer, any Guarantor or any of their
Subsidiaries.
(iii) The
Senior Creditors, or any of them, may, at any time and from time to
time, without the consent of or notice to the Noteholder, without
incurring any responsibility to the Noteholder, and without
impairing or releasing any of the rights of any of the Senior
Creditors, or any of the obligations of the Noteholder:
|
|
|
change the amount (subject to
Section 6(b)) or terms of or renew or extend any Senior Obligations
or amend any Senior Debt Document, as the case may be, in any
manner or enter into or amend in any manner any other agreement
relating to any Senior Obligations;
|
|
|
|
sell, exchange, release or otherwise
deal with any property at any time pledged or mortgaged or subject
to any lien to secure any Senior Obligations;
|
|
|
|
release anyone liable in any manner
for the payment or collection of any Senior Obligations;
and
|
|
|
|
exercise or refrain from exercising
any rights against the Issuer, any Guarantor or any other Person
(including the Noteholder).
|
(e)
Certain Waivers.
(i) The Noteholder hereby waives notice of or proof of
reliance by any Senior Creditor upon the provisions hereof, and the
Senior Obligations shall conclusively be deemed to have been
created, contracted, incurred and maintained in reliance upon the
provisions hereof.
(ii) The
Issuer hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the
Noteholder of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any
subsequent instance.
(f)
Acknowledgement of Subordination and Payment
Restrictions. The subordination provisions
contained herein and the provisions contained in Section 3 hereof
are for the benefit of the Senior Debt Agent, Senior Creditors and
their respective successors and assigns and may not be rescinded or
cancelled or modified in any way without the prior written consent
of the Senior Debt Agent. The Noteholder
hereby expressly acknowledges and agrees to the subordination
provisions and payment restrictions contained
herein.
5.
Affirmative Covenants. So long as any
principal of and interest on this Note or any other amount payable
hereunder remains unpaid or unsatisfied:
|
|
|
Information.
The Issuer shall deliver
to the Noteholder:
|
|
|
|
as soon as available, but in any
event within 90 days after the end of each fiscal year of the
Issuer, a consolidated balance sheet of the Issuer and its
Subsidiaries as at the end of such fiscal year, and related
consolidated statements of income, operations, shareholders’
equity and cash flows for such fiscal year, all in reasonable
detail and prepared in accordance with GAAP, setting forth in each
case in comparative form the figures for the previous fiscal year
and audited and accompanied by a report and opinion of a firm of
independent public accountants of recognized national standing
(without a “going concern” or like
qualification or exception and without any qualification or
exception as to the scope of audit) as presenting fairly in all
material respects, the financial position, results of operations
and cash flows of the Issuer and its Subsidiaries on a consolidated
basis in accordance with GAAP;
|
|
|
|
as soon as available, but in any
event within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Issuer, a consolidated
balance sheet of the Issuer and its Subsidiaries as at the end of
such fiscal quarter and the related statements of operations,
stockholders’ equity and cash flows for such fiscal quarter
and for the then elapsed portion of such fiscal year, setting forth
in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by a
Responsible Officer as presenting fairly in all material respects
the financial position, results of operations and cash
|
flows of the Issuer and its
Subsidiaries on a consolidated basis in accordance with GAAP,
subject to normal year-end adjustments and the absence of
footnotes;
|
|
|
within 5 Business Days after the
occurrence of any Default of which a Responsible Officer has
obtained knowledge, a notice setting forth such Default and stating
what action the Issuer has taken or proposes to take with respect
thereto; and
|
|
|
|
within 5 Business Days of the
occurrence of any matter that has resulted or could reasonably be
expected to result in a Material Adverse Effect, including the
commencement of any material litigation or proceeding affecting the
Issuer or any Material Subsidiary, a notice setting forth such
event and actions taken (if any) with respect thereto.
|
(b)
Preservation of Existence, Etc. The
Issuer shall (i) preserve, renew and maintain in full force and
effect its legal existence under the laws of the jurisdiction of
its organization except in a transaction permitted hereunder and
(ii) take all reasonable action to maintain all rights, privileges,
permits, licenses and franchises necessary or desirable in any
material respect in the normal conduct of its business, except to
the extent that failure to do so could not be reasonably be
expected to have a Material Adverse Effect.
(c)
Maintenance of Properties.
The Issuer shall, and shall cause each of its Subsidiaries,
to maintain, preserve and protect all of its material properties
and equipment necessary in the operation of its business in good
working order and condition, except where the failure to do so
could not reasonably be expected to have a Material Adverse
Effect.
(d)
Compliance with Law. The
Issuer shall, and shall cause each of its Subsidiaries to, comply
in all material respects with the requirements of all laws and all
orders, writs, injunctions and decrees applicable to it or to its
business or property, except in such instances in which (x) such
requirement of law or order, injunction or decree is being
contested in good faith by appropriate proceedings diligently
conducted or (y) the failure to comply therewith could not be
reasonable be expected to have a Material Adverse
Effect.
(e)
Maintenance of Books and Records.
The Issuer shall, and shall cause each of its Subsidiaries to,
maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied
shall be made of all financial transactions and matters involving
the assets and business of the Issuer or such Subsidiary, as the
case may be.
6.
Negative Covenants. So long as any
principal of and interest on this Note or any other amount payable
hereunder remains unpaid or unsatisfied:
(a)
Mergers and Consolidations. The
Issuer shall not merge or consolidate with or into any Person or
sell all or substantially all of its assets, except that so long as
both prior to and subsequent to such merger or consolidation, no
Event of Default has occurred and is
continuing, the Issuer may merge or
consolidate with any Person, provided that (x) the Issuer
shall be the continuing or surviving Person or (y) if the Issuer
shall not be the surviving Person, such surviving Person shall have
assumed the obligations of the Issuer hereunder pursuant to
documentation in form and substance reasonably satisfactory to the
Noteholder (each such merger or consolidation, a “
Permitted Merger ”).
(b)
Indebtedness.
(i) The Issuer shall not, and shall not
permit any of its Subsidiaries to, Incur any Indebtedness;
provided , however , that the Issuer or any
Subsidiary may Incur Indebtedness, if the Interest Charge Coverage
Ratio for the Measurement Period immediately preceding the date on
which such additional Indebtedness is Incurred would have been at
least 2 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been Incurred at the beginning of
such Measurement Period.
|
|
|
Notwithstanding Section 6(b)(i)
above, the Issuer and the Subsidiaries may Incur the following
Indebtedness:
|
(A) Credit
Facility Indebtedness in an aggregate outstanding principal amount
not to exceed $2,000,000,000;
(B) Guarantees
by the Issuer and its Subsidiaries in respect of Indebtedness
otherwise permitted hereunder of the Issuer or any of its
Subsidiaries;
(C) Indebtedness
of the Issuer or any Subsidiary owing to the Issuer or any other
Subsidiary;
(D) Indebtedness
in respect of Capitalized Leases and Indebtedness Incurred in
financing the acquisition, construction, repair, replacement or
improvement of fixed or capital assets by the Issuer or any
Subsidiary;
(E) Indebtedness
of the Issuer or any Subsidiary (I) assumed in connection with or
(II) Incurred to finance, in each case, any acquisition of property
and assets or businesses of any Person or of assets constituting a
business unit, a line of business or division of such Person, or
Equity Interests in a Person;
(F) Indebtedness
representing deferred compensation to employees of the Issuer and
its Subsidiaries incurred in the ordinary course of
business;
(G) Indebtedness
to current or former officers, directors, managers, consultants and
employees, their respective estates, spouses or former spouses to
finance the purchase or redemption of Equity Interests of the
Issuer (or any direct or indirect parent thereof);
(H) Indebtedness
Incurred by the Issuer or any Subsidiary in an acquisition, or any
disposition of assets, in each case to the extent constituting
indemnification obligations or obligations in respect of purchase
price (including earn-outs) or other similar
adjustments;
(I) Indebtedness
consisting of obligations of the Issuer and any Subsidiary under
deferred compensation or other similar arrangements incurred by
such Person in connection with (I) the transactions contemplated by
the Stock Purchase Agreement, or (II) other acquisitions or
dispositions of assets;
(J) Cash
Management Obligations and other Indebtedness in respect of netting
services, automatic clearinghouse arrangements, overdraft
protections, employee credit card programs and other cash
management and similar arrangements in the ordinary course of
business and any guarantees thereof;
(K) Indebtedness
consisting of (I) the financing of insurance premiums or (II)
take-or-pay obligations contained in supply arrangements, in each
case, in the ordinary course of business;
(L) Indebtedness
incurred by the Issuer or any Subsidiary in respect of letters of
credit, bank guarantees, bankers’ acceptances, warehouse
receipts or similar instruments issued or created in the ordinary
course of business or consistent with past practice, including in
respect of workers compensation claims, health, disability or other
employee benefits or property, casualty or liability insurance or
self-insurance or other Indebtedness with respect to
reimbursement-type obligations regarding workers compensation
claims;
(M) obligations
in respect of performance, bid, appeal and surety bonds and
performance and completion guarantees and similar obligations
provided by the Issuer or any Subsidiary or obligations in respect
of letters of credit, bank guarantees or similar instruments
related thereto, in each case in the ordinary course of business or
consistent with past practice;
(N) all
premiums (if any), interest (including post-petition interest),
fees, expenses, charges and additional or contingent interest on
obligations described in clauses (A) through (M) above and (O)
through (R) below;
(O) Guarantees
Incurred in the ordinary course of business in respect of
obligations to suppliers, customers, franchisees, lessors and
licensees;
(P) Indebtedness
Incurred in the ordinary course of business in respect of
obligations of the Issuer or any Subsidiary to pay the deferred
purchase
price of goods or services or
progress payments in connection with such goods and
services;
(Q) Indebtedness
resulting from the refinancing, refunding, replacement, renewal or
extension of Indebtedness described in clauses (A) through (P)
above; and
(R) Indebtedness
resulting from the refinancing, refunding, replacement, renewal or
extension of Indebtedness described in Section 6(b)(i)
above.
(c)
Liens. The Issuer shall not,
and shall not permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon any of its property, assets
or revenues, whether now owned or hereafter acquired to secure Pari
Passu/Junior Indebtedness, without making, or causing such
Subsidiary to make effective provision for securing this Note
equally and ratably with such Pari Passu/Junior Indebtedness or in
the event such Pari Passu/Junior Indebtedness is subordinate in
right of payment to this Note, prior to such Indebtedness, as to
such property or assets for so long as such Pari Passu/Junior
Indebtedness shall be secured. The foregoing restrictions shall not
apply to the following Liens:
|
|
|
Liens existing on the date
hereof;
|
|
|
|
Liens securing any Senior
Obligations;
|
|
|
|
Liens for taxes, assessments or
governmental charges that are not overdue for a period of more than
120 days or that are being contested in good faith and by
appropriate proceedings for which appropriate reserves have been
established in accordance with GAAP;
|
|
|
|
statutory or common law Liens of
landlords, carriers, warehousemen, mechanics, materialmen,
repairmen, construction contractors or other like Liens arising in
the ordinary course of business, so long as, in each case, such
Liens arise in the ordinary course of business;
|
|
|
|
(I) pledges or deposits in the
ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security
legislation and (II) pledges and deposits in the ordinary course of
business securing liability for reimbursement or indemnification
obligations of (including obligations in respect of letters of
credit or bank guarantees for the benefit of) insurance carriers
providing property, casualty or liability insurance to the Issuer
or any Subsidiary;
|
|
|
|
deposits to secure the performance
of bids, trade contracts, governmental contracts and leases (other
than Indebtedness for borrowed money), statutory obligations,
surety, stay, customs and appeal bonds, performance bonds and other
obligations of a like nature (including those to secure health,
safety and environmental obligations) incurred in the ordinary
course of business;
|
|
|
|
Liens securing Cash Management
Obligations, Hedging Agreements and other Indebtedness in respect
of netting services, automatic clearinghouse arrangements,
overdraft protections, employee credit card programs and other cash
management and similar arrangements in the ordinary course of
business and any guarantees thereof;
|
|
|
|
easements, rights-of-way,
restrictions (including zoning restrictions), encroachments,
protrusions and other similar encumbrances and minor title defects
affecting real property that, in the aggregate, do not in any case
materially interfere with the ordinary conduct of the business of
the Issuer and its Subsidiaries, taken as a whole, and any
exception on the title policies issued in connection with the
mortgaged property;
|
|
|
|
Liens arising from judgments or
orders for the payment of money;
|
|
|
|
Liens securing Indebtedness
permitted under Section 6(b)(ii)(D);
|
|
|
|
leases, licenses, subleases or
sublicenses granted to others in the ordinary course of
business;
|
|
|
|
Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods in the
ordinary course of business;
|
|
|
|
Liens (I) of a collection bank
arising under Section 4-210 of the Uniform Commercial Code on the
items in the course of collection, (II) attaching to commodity
trading accounts or other commodities brokerage accounts incurred
in the ordinary course of business and (III) in favor of a banking
or other financial institution arising as a matter of law
encumbering deposits or other funds maintained with a financial
institution (including the right of set off) and that are within
the general parameters customary in the banking
industry;
|
|
|
|
Liens (I) on cash advances in favor
of the seller of any property to be acquired in an investment to be
applied against the purchase
|
price for such investment or (II)
consisting of an agreement to dispose of any property;
|
|
|
Liens in favor of the Issuer or a
Subsidiary securing Indebtedness permitted under Section
6(b)(ii)(C);
|
|
|
|
Liens existing on property at the
time of its acquisition or existing on the property of any Person
at the time such Person becomes a Subsidiary and the Indebtedness
secured thereby is permitted under Section
|
