SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) November 12, 1998
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BARNES & NOBLE, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-12302 06-1196501
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
122 Fifth Avenue, New York, NY 10011
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 633-3300
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets.
On November 12, 1998, Barnes & Noble, Inc ( the "Company")
completed the establishment of its previously announced 50%/50% joint venture
with Bertelsmann AG, an Akteingesellschaft organized and existing under the
laws of Germany ("BAG"), to operate the Company's online retail business,
barnesandnoble.com ("barnesandnoble.com").
Under the terms of the Formation Agreement among the Company, BAG
and certain of their respective subsidiaries (the "Formation Agreement"),
effective as of October 31, 1998, the Company established barnesandnoble.com
llc, a Delaware limited liability company (the "LLC"), to own and operate
barnesandnoble.com. BOL US Online, Inc., a Delaware corporation ("USO") and
wholly owned subsidiary of BAG, became a 50% member of the LLC following a
$150 million cash contribution to the LLC and a $75 million cash payment to
the Company. USO has also agreed to contribute an additional $50 million in
capital to the LLC upon the request of the Chairman and Chief Executive
Officer of the LLC. Additionally, USO will pay B&N, at the time of any
initial public offering of the business of the LLC prior to December 31,
2001, an additional amount, not to exceed $25 million, equal to the amount,
if any, by which the value of USO's interest in the LLC at the time of such
offering exceeds the value of USO's total investment in the LLC through the
date of such offering. The Formation Agreement is attached hereto as Exhibit
10.1.
The Amended and Restated Limited Liability Company Agreement (the
"LLC Agreement") sets forth the agreement of the parties as to the operation
and governance of the LLC. Pursuant to the LLC Agreement, the LLC has two
50% members: B&N.com Holding Corp., a wholly owned subsidiary of the Company
("B&N Holding"), and USO. Pursuant to the LLC Agreement the parties have
agreed that, with certain exceptions, the LLC will be the exclusive means
through which they sell English language books on the Internet, and the LLC
Agreement also provides for links between BAG's non-English language sites
and the LLC for the sale of books. The LLC Agreement contains non-compete
provisions which are operative during the term of the joint venture and for a
period of time thereafter. The LLC will be managed by a board of managers
consisting of six managers, with three managers appointed by B&N Holding and
three managers appointed by USO. Leonard Riggio, the Chairman and Chief
Executive Officer of the Company, is the LLC's initial Chairman, and Jonathan
Bulkeley, who has served as head of America Online's United Kingdom
operations for the past three years, will be the LLC's initial Chief
Executive Officer and report to Mr. Riggio. Certain major decisions of the
LLC require the consent of a majority of each of the B&N Holding managers and
the USO managers, certain related party transactions between the LLC and
either B&N or BAG require the consent of a majority of the other party's
managers and other decisions require a majority of all managers. As required
by the Formation Agreement, USO has agreed in the LLC Agreement to make
additional capital contributions to the LLC of up to $50 million. The LLC
Agreement also contains provisions restricting sales and transfers of
membership interests in the LLC. Pursuant to the LLC Agreement the parties
have also agreed to share certain technology. The LLC Agreement is attached
hereto as Exhibit 10.2.
Item 5. Other Events.
On November 6, 1998, the Company announced an agreement to purchase
the Ingram Book Group, a group of privately held subsidiaries of Ingram
Industries Inc., for $600 million, consisting of approximately $200 million
in cash and approximately $400 million in common stock of the Company. The
Ingram Book Group includes: Ingram Book Company, the nation's largest
wholesaler of general trade books; Retailer Services Inc.; Ingram Periodicals
Inc.; Spring Arbor Distributors Inc.; Publisher Resources Inc.; Ingram
International Inc.; Tennessee Book Company; Lighting Print Inc.; and Ingram
Library Services Inc.
The closing of the transaction is subject to satisfaction of
certain conditions, including the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Upon the completion of the transaction, the Ingram Book Group is
expected to become a major component of the Company's distribution network
through Ingram Book Group's eleven strategically located distribution
centers.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Exhibit 10.1 - Formation Agreement dated November 12, 1998 among
Barnes & Noble, Inc., B&N.com Holding Corp.,
barnesandnoble.com inc., B&N.com Member Corp.,
Bertelsmann AG and BOL.US Online, Inc.
Exhibit 10.2 - Amended and Restated Limited Liability Company
Agreement of barnesandnoble.com llc among Barnes &
Noble, Inc., B&N.com Holding Corp., Bertelsmann AG
and BOL.US Online, Inc.
FORMATION AGREEMENT
AMONG
BERTELSMANN AG, BOL.US ONLINE, INC.,
BARNES & NOBLE, INC.,
barnesandnoble.com inc.,
B&N.com Holding Corp. and B&N.com Member Corp
Effective As of 11:59 PM, October 31, 1998
<PAGE>
FORMATION AGREEMENT
This FORMATION AGREEMENT is dated as of November 12, 1998 (the
"Closing Date"), but effective as of 11:59 PM on October 31, 1998 (the
"Effective Date"), by and among Bertelsmann AG, an Aktiengesellschaft
organized and existing under the laws of Germany, with offices located at
Carl-Bertelsmann-Strasse 270, 33311 Gutersloh, Germany ("BAG"), BOL.US
Online, Inc., a Delaware corporation, with offices located at 1540 Broadway,
New York, New York 10036 ("USO"), Barnes & Noble, Inc., a Delaware
corporation, with offices located at 122 Fifth Avenue, New York, New York
10011 ("BN"), barnesandnoble.com inc., a Delaware corporation, with offices
located at 76 Ninth Avenue, New York, New York 10011 ("Transferor"), B&N.com
Member Corp., a Delaware corporation, with offices located at 76 Ninth
Avenue, New York, New York 10011 ("B&N.com Member") and B&N.com Holding
Corp., a Delaware corporation, with offices located at 122 Fifth Avenue, New
York, New York 10011 ("B&N.com Holding").
W I T N E S S E T H:
WHEREAS, BN is the sole shareholder of each of the Transferor and
B&N.com Holding, and Transferor is the sole shareholder of B&N.com Member;
WHEREAS, the Transferor has, as of October 31, 1998: (i) formed
barnesandnoble.com llc, a Delaware limited liability company (the "Company");
(ii) contributed all of its assets (except its interests in NuvoMedia, Inc.
and B&N.com Member) and liabilities to the Company in exchange for a one
hundred percent (100%) Membership Interest (as hereinafter defined); and
(iii) transferred a one percent (1%) Membership Interest to B&N.com Member;
WHEREAS, USO intends, as of the Closing Date, to pay the Transferor
Seventy-Five Million Dollars ($75 million) for a 21.42857% Membership
Interest;
WHEREAS, USO intends, as of the Closing Date, to make a capital
contribution to the Company in exchange for an additional 28.57143%
Membership Interest, which, together with the 21.42857% Membership Interest
referred to above, would give USO an aggregate fifty percent (50%) Membership
Interest;
WHEREAS, immediately subsequent to the payments described above,
but immediately prior to the execution of the Limited Liability Company
Agreement (as hereinafter defined), each of Transferor and B&N.com Member
Corp. intend to assign all of their Membership Interests (which together will
aggregate a fifty percent (50%) Membership Interest) to B&N.com Holding;
WHEREAS, as of the Closing Date, immediately subsequent to the
assignment referred to above, BN, B&N.com Holding, BAG and USO intend to
enter into the Limited Liability Company Agreement, in order to set forth the
rights and obligations of the members of the Company; and
WHEREAS, the parties hereto desire to set forth, inter alia, the
terms and conditions of their agreements and understanding concerning their
respective undertakings to effectuate the payments and contributions to be
made by USO in exchange for its fifty percent (50%) Membership Interest and
the entering into of the Limited Liability Company Agreement.
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall, for the purposes of this Agreement, have
the following meanings (terms defined in the singular or the plural include
the plural or the singular, as the case may be):
1.1 "Affiliate" shall mean, as to any Person, any other Person
that, directly or indirectly, controls, is under common control with, or is
controlled by, that Person. For purposes of this definition, "control"
(including, with its correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. In the case of
BOL, the term "Affiliates" shall include all Persons in which BOL directly or
indirectly owns an equity interest to the extent such Person operates under
the name BOL (or a derivative thereof) provided that no Restricted Transferee
(as defined in the Limited Liability Company Agreement) owns an interest
therein.
1.2 "BN Contribution Schedule" shall mean the schedule of assets
and liabilities that Transferor will contribute or cause to be contributed to
the Company in the form annexed as Schedule 1.2 to the Disclosure Letter
which shall describe specifically the contracts, software, leases and
liabilities being contributed, as well as other assets and liabilities of
Transferor in general terms, as included in the Financial Statements (as
modified through the Closing Date).
1.3 "BOL" shall mean BOL.Global, Inc., a corporation organized
under the laws of Delaware.
1.4 "Closing" shall mean the closing of the transactions
contemplated by this Agreement.
1.5 "Closing Date" shall have the meaning assigned to such term in
the first paragraph of this Agreement.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.7 "Code Affiliate" shall mean any Person which could be treated
as a single employer along with the Transferor or the Company under Section
414(b) or (c) of the Code.
1.8 "Disclosure Letter" shall mean that Disclosure Letter dated
the date hereof prepared by Transferor to which the Schedules referred to
herein are attached.
1.9 "Employee Plan" shall have the meaning assigned to such term
in Section 4.1(q)(i) of this Agreement.
1.10 "Encumbrance" shall mean any mortgage, pledge, security
interest, lien, restriction on use or transfer, other than those imposed by
law, voting agreement, adverse claim or encumbrance or charge of any kind
(including any agreement to give any of the foregoing), any conditional sale
or other title retention agreement, any lease in the nature thereof, and the
filing of, or any agreement to give, any financing statement under the
Uniform Commercial Code or similar law of any jurisdiction.
1.11 "Environment" shall mean soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life,
and any other environmental medium or natural resource.
1.12 "Environmental, Health, and Safety Liabilities" shall mean any
cost, damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and Health Law
and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety
and health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law. The terms "removal," "remedial," and "response action," include
the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601 et seq., as amended ("CERCLA").
1.13 "Environmental Law" shall mean any legal requirement that
requires or relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous substances
or materials, violations of discharge limits, or other prohibitions and of
the commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to human
health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
1.14 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
1.15 "Facilities" shall mean any real property, leaseholds, or
other interests currently or formerly owned or operated by the Transferor or
the Company and any buildings, plants, structures, or equipment (including
motor vehicles, tank cars, and rolling stock) currently or formerly owned or
operated by the Transferor or the Company.
1.16 "Fulfillment Agreements" shall mean each of the Fulfillment
Agreements between the Company and BOL (or its Affiliates), regarding the
fulfillment by the Company and BOL (or its Affiliates) of certain customer
product orders, each of which shall be negotiated in good faith after the
Closing Date.
1.17 "GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time, consistently applied.
1.18 "Governmental Body" shall mean any domestic or foreign
national, state or municipal or other local government or multinational body
(including, but not limited to, the European Union), any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory authority thereunder and any corporation,
partnership or other entity directly or indirectly owned by or subject to the
control of any of the foregoing.
1.19 "Hazardous Materials" shall mean any waste or other substance
that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any
admixture or solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
1.20 "Limited Liability Company Agreement" shall mean the Amended
and Restated Limited Liability Company Agreement by and between B&N.com
Holding, USO, BAG and BN, to be entered into at the Closing as the same may
be amended or modified from time to time in accordance with the terms
thereof.
1.21 "Members" shall mean B&N.com Holding, USO and all other
Persons who become members of the Company in accordance with the terms of the
Limited Liability Company Agreement, and the term "Member" shall mean any of
them.
1.22 "Membership Interest" shall mean a Member's entire interest in
the Company, including, but not limited to, (i) the Percentage Interest now
or hereafter owned by it; (ii) its share in any Net Income, Net Loss and any
distributions of the Company; and (iii) its right to participate in the
management of the Company or any other decision of the Members pursuant to
the Limited Liability Company Agreement.
1.23 "Name License Agreements" shall mean each of the agreements
between the Company and BOL and between the Company and BN College (as
defined in the Limited Liability Company Agreement) relating to the right to
use the trade names, trademarks and domain names associated with BOL and
"Barnes and Noble," respectively.
1.24 "Net Profits" and "Net Losses" shall mean the income and loss
of the Company as determined in accordance with the accounting methods
followed by the Company for Federal income tax purposes including income
exempt from tax and described in Code Section 705(a)(1)(B), treating as
deductions items of expenditure described in, or under Treasury Regulations
deemed described in, Code Section 705(a)(2)(B) and treating as an item of
gain (or loss) the excess (deficit), if any, of the fair market value of
distributed property over (under) its book value. Depreciation, depletion,
amortization, income and gain (or loss) with respect to Company assets shall
be computed with reference to their book value rather than to their adjusted
basis in the Company.
1.25 "Occupational Safety and Health Law" shall mean any legal
requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
1.26 "Percentage Interest" shall mean a Member's aggregate economic
percentage interest in the Company as set forth on Schedule I to the Limited
Liability Company Agreement as each such percentage may be adjusted from time
to time in accordance with the Limited Liability Company Agreement.
1.27 "Permitted Encumbrances" shall mean:
(a) such matters as are set forth in Schedule 1.27 of the
Disclosure Letter; and
(b) (i) Encumbrances reflected in the financial statements of
the Company which have been delivered to USO pursuant to this Agreement
(including, but not limited to, purchase money liens which are not overdue as
of a particular date or which are being contested in good faith), (ii)
Encumbrances arising out of contracts entered into in the ordinary course of
the Business (as defined in the Limited Liability Company Agreement), (iii)
mechanics', materialmen's or similar inchoate liens relating to liabilities
not yet due and payable and (iv) liens for current taxes not yet delinquent,
to the extent the validity thereof is being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
foreclosure or enforcement of such liens and where adequate reserves are
established and maintained in accordance with GAAP.
1.28 "Person" shall mean an individual, sole proprietorship,
corporation, partnership, limited liability company, joint venture, trust,
unincorporated organization, mutual company, joint stock company, estate,
union, employee organization, bank, trust company, land trust, business trust
or other organization, whether or not a legal entity, or a Governmental Body.
1.29 "Related Person" shall mean with respect to a particular
individual:
(a) each other member of such individual's family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's family;
(c) any Person in which such individual or members of such
individual's family hold (individually or in the aggregate) an interest equal
to or in excess of twenty percent (20%); and
(d) any Person with respect to which such individual or one
or more members of such individual's family serves as a manager, director,
officer, partner, executor or trustee (or in a similar capacity).
1.30 "Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.
1.31 "Software Licenses" shall mean the Software License between
the Company and BOL relating to the exploitation of software owned by the
Company and the Software License between the Company and BOL relating to the
exploitation of software owned by BOL.
1.32 "Taxes" shall mean any federal, state, local or foreign
income, receipts, sales, franchise, ad valorem, profits, license, lease, use,
payroll, withholding, employment, property, excise, occupation, customs,
duties or other tax, fee or assessment of any kind whatever, including
penalties thereon.
1.33 "Tax Return" shall mean any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any
legal requirement relating to any Tax.
1.34 "Threat of Release" shall mean a substantial likelihood of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
1.35 "Transfer" shall mean any sale, assignment, conveyance,
transfer, donation or any other means to dispose of, or pledge, hypothecate
or otherwise encumber in any manner whatsoever, or permit or suffer any
Encumbrance of any interest in the Company (whether profits, management or
Percentage Interest).
ARTICLE II
FORMATION AND CONTRIBUTIONS
2.1 Transferor Contribution. As of the Effective Date, Transferor
has: (i) formed the Company; (ii) contributed to the Company all of
Transferor's assets (except for its interests in NuvoMedia, Inc. and B&N.com
Member) and liabilities in exchange for a one hundred percent (100%)
Membership Interest; and (iii) transferred a one percent (1%) Membership
Interest to B&N.com Member. The Company shall have assumed all of the
liabilities of Transferor, subject to and consistent with the terms and
conditions of this Agreement.
2.2 USO Payment. On the Closing Date, USO agrees to pay Transferor
(or its designee), in immediately available funds by wire transfer to an
account designated by Transferor, Seventy-Five Million Dollars ($75 million)
for a 21.42857% Membership Interest.
2.3 Additional USO Payment to Transferor. Within twenty (20)
days after receipt of notice from Transferor certifying the occurrence of the
sale of stock to the public, on a nationally recognized stock exchange,
pursuant to an initial public stock offering in a corporation which owns at
least twenty percent (20%) (or such lesser percentage to which the parties
hereto mutually agree) of the Membership Interest (or any other entity formed
for purposes of taking the Business of the Company public), USO shall pay to
BN the Additional Sum (as hereinafter defined) provided that such amount
shall be payable only if the value of the Membership Interest owned
beneficially by USO (as of and after giving effect to such offering) based on
the value ascribed to the Company in such offering (on a fully diluted basis
taking into consideration, inter alia, such stock offering)(the "Value") is
in excess of the total investment of USO (as of the date of the consummation
of the public offering) in the Company (i.e. $225 million plus all capital
contributions, if any, made by USO pursuant to Section 5.3 of the Limited
Liability Company Agreement) less all capital returned to USO as of or prior
to such time, including capital returned out of the proceeds of the initial
public offering (the "Investment"). The term "Additional Sum" shall mean the
lesser of: (i) Twenty-Five Million Dollars ($25 million); or (ii) the amount
of the Value less the Investment. The obligation of USO to make payment
under this Section 2.3 shall expire if an initial public stock offering is
not consummated prior to December 31, 2001 and USO shall not thereafter have
any obligation to make payment by reason of this Section unless notice is
given by Transferor (or its Affiliate), in accordance with the foregoing,
prior to such date.
2.4 USO Contribution. (a) As of the Closing Date, USO agrees to
contribute (or shall be deemed to have contributed) to the Company, in
exchange for an additional 28.57143% Membership Interest (which, together
with the 21.42857% Membership Interest described in Section 2.2, will give
USO an aggregate fifty percent (50%) Membership Interest), One Hundred Fifty
Million Dollars ($150 million) in cash, in immediately available funds, by
wire transfer to accounts designated by the Company as set forth in Section
5.1(b) of the Limited Liability Company Agreement.
(b) Subject to the terms and conditions set forth in
this Agreement, USO shall make contributions to the Company as set forth in
Section 5.3 of the Limited Liability Company Agreement in accordance with the
terms and conditions of the Limited Liability Company Agreement.
2.5 Transferor Assignment. Immediately subsequent to the USO
payments described in Sections 2.2 and 2.4, but immediately prior to the
execution of the Limited Liability Company Agreement, each of Transferor and
B&N.com Member shall assign all of their Membership Interests (which together
shall aggregate a fifty percent (50%) Membership Interest) to B&N.com
Holding.
2.6 Closing Obligations. At the Closing:
(a) Transferor shall deliver or cause to be delivered to USO:
(i) evidence of the formation and good standing of the
Company;
(ii) a certificate representing fifty percent (50%) of
the Membership Interest, free and clear of Encumbrances, duly issued in the
name of USO;
(iii) the Limited Liability Company Agreement, executed
by Transferor; and
(iv) each of the Name License Agreement, Software
Licenses, Amended and Restated Services Agreement with BN, Amended and
Restated Services Agreement with Marboro, Amended and Restated Database and
Software License Agreement, Contribution, Assignment and Assumption
Agreement, and Supply Agreement to which BN (or any Affiliate) is a party,
duly executed by BN (or its Affiliate which is a party thereto) and the
Company.
(b) USO shall deliver or cause to be delivered to Transferor:
(i) the payment described in Section 2.2;
(ii) the capital contribution described in Section
2.4(a);
(iii) the Limited Liability Company Agreement, executed
by USO; and
(iv) each of the Name License Agreement and Software
Licenses to which USO (or any Affiliate) is a party, duly executed by USO (or
its Affiliates) and the Company.
ARTICLE III
CLOSING
3.1 Closing. The Closing of the transactions contemplated by this
Agreement relating to the transfer of Membership Interests to USO shall take
place on November 12, 1998 ("Closing Date"), at 1290 Avenue of the Americas,
31st Floor, New York, New York, or at such other time, date and place as the
parties hereto may agree.
3.2 Deliveries. At the Closing, each of USO and Transferor shall
make (or cause to be made) the deliveries described in Section 2.6.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Transferor. Transferor
represents and warrants to USO that, as of the Effective Date and the Closing
Date, with the exception of actions taken to consummate the transactions
described in or contemplated by this Agreement, each of the following
statements are true and correct:
(a) Organization and Existence. BN and the Transferor are
each duly organized, validly existing and in good standing under the laws of
the State of Delaware. Each of BN and the Transferor has full corporate
power and authority to own and lease the properties and assets it now owns
and leases and to carry on its business as and where such properties and
assets are now owned or leased and such business is now conducted. Each of
BN and the Transferor is in good standing and duly qualified to conduct its
business as a foreign corporation in each of the jurisdictions in which the
ownership or leasing of its properties or assets or the conduct of its
business requires such qualification, except where any failure to be so
qualified would not have a material adverse effect.
(b) Authority and Approval. Transferor has the requisite
corporate power and authority to enter into this Agreement and each of BN and
Transferor are authorized to perform their respective obligations hereunder.
Transferor has, or on the Closing Date will have, the requisite corporate
power and authority to enter into the Limited Liability Company Agreement and
to perform its obligations thereunder. This Agreement is a valid and binding
obligation of Transferor, enforceable against Transferor in accordance with
its terms, subject to (a) applicable bankruptcy, insolvency or other similar
laws relating to creditors' rights generally and (b) general principles of
equity. When executed, the Limited Liability Company Agreement will be a
valid and binding obligation of B&N.com Holding enforceable against
Transferor in accordance with its terms, subject to (a) applicable
bankruptcy, insolvency or other similar laws relating to creditors' rights
generally and (b) general principles of equity. No other act, approval or
proceedings on the part of BN is, or will be, required to authorize the
execution and delivery of this Agreement and the Limited Liability Company
Agreement by B&N.com Holding or the consummation of the transactions
contemplated by each such agreement.
(c) No Conflict. This Agreement and the Limited Liability
Company Agreement and the execution and delivery of each such agreement by
Transferor and B&N.com Holding, respectively do not, and the fulfillment and
compliance with the terms and conditions of each such agreement and the
consummation of the transactions contemplated by each such agreement will
not:
(i) conflict with, result in a breach of, constitute a
default under, or require the consent of any Person under, any of the terms,
conditions or provisions of the articles of incorporation or by-laws of BN or
Transferor or B&N.com Holding or the constituent documents of the Company;
(ii) violate any provision of, or require any consent,
authorization or approval under, any law or administrative regulation or any
judicial, administrative or arbitration order, award, judgment, writ,
injunction or decree applicable to BN, B&N.com Holding, the Company or
Transferor;
(iii) conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both),
or accelerate or permit the acceleration of the performance required by, or
require any consent, authorization or approval under, the termination of, or
the right to terminate, any material indenture, mortgage, lease, license,
franchise, permit, approval, agreement or instrument to which BN, B&N.com
Holding, the Company or Transferor is a party or by which it is bound or to
which its assets or properties are subject; or
(iv) result in the creation or imposition of any
Encumbrance upon the assets or property of BN, B&N.com Holding, the Company
or Transferor under any such material indenture, mortgage, lease, license,
franchise, permit, approval, agreement or instrument.
Neither BN, the Company nor Transferor is subject to any order, judgment,
decree or award of any court or other judicial, administrative or regulatory
body or arbitrator having prospective effect on the assets or the business of
BN, the Company or Transferor.
(d) Financial Statement.
(i) BN has delivered to USO true, complete and correct
copies of the: (i) audited balance sheets as of January 31, 1998 of the
Transferor; (ii) audited statements of operations and statements of cash
flows of Transferor for the year ended January 31, 1998; (iii) unaudited
balance sheet of Transferor as of August 1, 1998, and (iv) unaudited
statements of operations for the six (6) month period ended August 1, 1998
(collectively, the "Financial Statements").
(ii) The Financial Statements have been prepared in
accordance with GAAP, and present fairly the financial condition of
Transferor as of such dates and the results of its operations and changes in
cash flow for such periods.
(e) No Undisclosed Liabilities. Except for: (i) liabilities
which are reflected or reserved against in the Financial Statements, (ii)
normal and usual current commercial liabilities incurred in the ordinary
course of business, or (iii) as set forth in Schedule 4.1(e) of the
Disclosure Letter, the properties, assets or liabilities listed in the BN
Contribution Schedule which will be transferred to the Company are not
subject to any material liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise and whether due or to become due.
(f) Litigation. Schedule 4.1(f) of the Disclosure Letter
contains a complete and accurate list and description of all material claims,
demands, suits, actions, proceedings, settlements, awards and judgments upon
or against the Company, B&N.com Holding or the Transferor relating to any of
the properties, assets or liabilities listed in the BN Contribution Schedule.
Except as set forth in Schedule 4.1(f) of the Disclosure Letter and to the
extent relating to the assets set forth in the BN Contribution Schedule:
(i) neither the Company, B&N.com Holding nor the
Transferor is charged with a violation of, or to its knowledge threatened
with a charge of a violation of, any provision of any foreign or United
States federal, state or local law or regulation; and
(ii) neither the Company, B&N.com Holding nor the
Transferor is operating its business under or subject to, or in default with
respect to, any order, writ, injunction, judgment or decree to which the
Company, Transferor or its predecessors is a party or by which it or its
assets or property is bound, issued by any foreign or United States court or
federal, state, municipal or governmental department, commission, board,
agency or instrumentality.
(g) Capitalization. BN owns all of the issued and
outstanding shares of stock of Transferor. Transferor and B&N.com Member own
(or will own as of the Effective Date) an interest equal to one hundred
percent (100%) of all Membership Interests, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance
appears upon any certificate representing a Membership Interest, except as
required by the Limited Liability Company Agreement. All of the Membership
Interests have been duly authorized and validly issued and are fully paid and
nonassessable. Other than the Limited Liability Company Agreement, there are
no contracts relating to the issuance, sale, or transfer of any interest in
the Company. None of the Membership Interests was issued in violation of
any Legal requirement. The Company does not own, or have any contract to
acquire, any equity securities or other securities of any Person or any
direct or indirect equity or ownership interest in any other Person. Upon
consummation of the transactions contemplated in this Agreement, USO will own
a Membership Interest (free and clear of all Encumbrances) equal to fifty
percent (50%) of the aggregate Membership Interests.
(h) Title to Properties; Encumbrances.
(i) As of the Closing Date the Company will have good
and valid title to all material assets reflected on the Financial Statement
or thereafter acquired, except those sold or otherwise disposed of since the
date of the Financial Statement in the ordinary course of business consistent
with past practice and not in violation of this Agreement, in each case free
and clear of all Encumbrances, except Permitted Encumbrances.
(ii) Schedule 4.1(h)of the Disclosure Letter sets forth a
complete list of all real property and interests in real property leased by
the Company (the "Leased Property"). The Company has good and valid title to
the leasehold estates in all the Leased Property free and clear of all
Encumbrances except;
A.. leases, subleases and similar agreements set
forth in Schedule 4.1(h) of the Disclosure
Letter;
B. Permitted Encumbrances;
C. easements, covenants, rights-of-way and other
similar restrictions of record;
D. any conditions that may be shown by a current,
accurate survey or physical inspection of any
Leased Property made prior to Closing; and
E. zoning, building and other similar
restrictions;
F. Encumbrances, easements, covenants, rights-of-
way and other similar restrictions that have
been placed by any developer, landlord or other
third party on property over which the
Transferor or the Company has easement rights
or on any Leased Property and subordination or
similar agreements relating thereto; and
G. unrecorded easements, covenants, rights-of-way
and other similar restrictions, none of which
items set forth in this clause (iv),
individually or in the aggregate, materially
impair the continued use and operation of the
property to which they relate in the business
of the Transferor or the Company as presently
conducted.
Neither the Transferor nor the Company owns any real estate.
(i) Condition and Sufficiency of Assets. Except as set forth
in Schedule 4.1(i)of the Disclosure Letter, to the Company's knowledge, the
buildings, plants, structures, and equipment intended to be contributed to
the Company are structurally sound, are in good operating condition and
repair, and are in compliance, in all material respects, with applicable
legal requirements, are adequate for the uses to which they are being put,
and none of such buildings, plants, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost.
(j) Accounts Receivable. Except as set forth in Schedule
4.1(j) of the Disclosure Letter, all the accounts receivable that are
reflected on the Financial Statement or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually
made or services actually performed in the ordinary course of business.
There is no contest, claim or right of set-off, other than returns in the
ordinary course of business, under any contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable.
(k) Inventory. All the inventory contributed or to be
contributed to the Company, whether or not reflected in the Financial
Statement, consists of a quality and quantity usable and salable in the
ordinary course of business, except for obsolete items and items of below-
standard quality, all of which shall have been written off or written down
to net realizable value in the Financial Statement or on the Company's
accounting records as of the Closing Date, as the case may be.
(l) Taxes. Except as otherwise disclosed in Schedule 4.1(l)
of the Disclosure Letter:
(i) each of the Transferor and the Company have filed
when due all material Tax Returns required by applicable law to be filed with
respect to the Transferor and the Company and all Taxes shown to be due on
such Tax Returns have been paid;
(ii) all Taxes relating to periods ending on or before
the Closing Date owed by the Transferor or the Company, if required to have
been paid, have been paid (except for Taxes which are being contested in good
faith);
(iii) any liability of the Transferor or the Company for
Taxes not yet due and payable, or which are being contested in good faith,
has been provided for on the Financial Statement in accordance with generally
accepted accounting principles; and
(iv) there are no Tax Encumbrances with respect to
Transferor that may affect the Company.
(m) No Material Adverse Change. Since the date of the
Financial Statement, there has not been any material adverse change in the
business, operations, properties, assets, or condition of the Transferor or
the Company.
(n) Absence of Certain Changes and Events. Except as set
forth in Schedule 4.1(n) of the Disclosure Letter or as a result of the
transactions contemplated herein, since August 1, 1998 each of the Transferor
and the Company have conducted business only in the ordinary course of
business and there has not been any:
(i) change in the Company's Membership Interests; grant
of any option or right to purchase Membership Interests; issuance of any
security convertible into such Membership Interests; purchase, redemption,
retirement, or other acquisition by the Company of any Membership Interests;
or declaration or payment of any dividend or other distribution or payment in
respect of Membership Interests;
(ii) amendment to the organizational documents of the
Company, except as contemplated in the Limited Liability Company Agreement;
(iii) (A) increase, decrease or modification of, nor any
commitment to increase, decrease or modify, the rate or terms of compensation
(including base salary or bonus) payable or to become payable to any officer
or director of the Transferor or the Company, or (B) adoption, entry into,
modification or amendment of, nor any commitment to adopt, enter into, modify
or amend the terms of any Employee Plan, except in connection with the
transactions contemplated by this Agreement;
(iv) damage to or destruction or loss of any asset or
property of the Transferor or the Company, whether or not covered by
insurance, materially and adversely affecting the properties, assets,
business, or financial condition of the Transferor or the Company, taken as a
whole;
(v) entry into, termination of, receipt of notice of
termination of, or cancellation or waiver of any claims or rights with
respect to, any material contract to which Transferor or the Company are or
were parties;
(vi) sale (other than sales of inventory in the ordinary
course of business), lease, or other disposition of any material asset or
property of the Transferor or the Company, distribution of any dividend
(whether in kind or in cash), or mortgage, pledge, or imposition of any lien
or other encumbrance on any material asset or property of the Transferor or
the Company;
(vii) material change in the accounting methods used by
the Transferor or Company; or
(viii) agreement in writing by the Transferor or the
Company to do any of the foregoing.
(o) Insurance. The Transferor maintains, in full force and
effect, and the Company will acquire, by assignment from Transferor,
insurance with responsible and reputable insurance companies or associations
in amounts, on such terms and covering such risks, including fire and other
risks insured against by extended coverage, as is reasonably deemed necessary
by BN and Transferor. Transferor has maintained, in full force and effect,
and the Company will acquire from Transferor by assignment, public liability
insurance, insurance against claims for personal injury or death or property
damage occurring in connection with the activities of the Transferor and the
Company and any properties owned, occupied, or controlled by Transferor or
the Company, except for failure to obtain or maintain as would not have a
material adverse effect on the Transferor or the Company.
(p) Environmental Matters. Except as set forth in Schedule
4.1(p) of the Disclosure Letter:
(i) The Company, to its knowledge, is not in violation
of any material Environmental Law where such violation will have a material
adverse effect on the Company and neither BN, Transferor nor the Company has
received any written communication regarding an alleged violation of any
Environmental Law from any Person or Governmental Body or written notice of
any actual or threatened obligation to undertake or bear the cost of any
Environmental, Health and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal or
mixed) in which Transferor or the Company has or had an interest. Neither
BN, the Transferor or the Company has received any written notice of
potential responsibility or letter of inquiry from any private party or
governmental agency for any Facility of Transferor or the Company or for any
off-site facility under CERCLA or any state or local counterpart thereof.
(ii) There are no pending or, to the knowledge of BN,
Transferor or the Company, threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any material Environmental,
Health, and Safety Liabilities or arising under or pursuant to any material
Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets (whether real, personal, or mixed) in which
Transferor or the Company has or had an interest.
(iii) No Hazardous Materials have been used, stored,
manufactured or processed at the Facility except as necessary to the conduct
of its business and in compliance with all material Environmental Laws
applicable to the use, storage, manufacture or processing thereof, or except
as will not have a material adverse effect on the Company. Transferor has
obtained (and will assign to the Company or obtain in the name of the
Company) and is in compliance with all material environmental permits and
other material authorizations required for its operations at the Facilities
by any applicable material Environmental Laws.
(iv) BN, Transferor and the Company do not, to their
knowledge, have any material Environmental, Health, and Safety Liabilities
with respect to the Facilities or with respect to any other properties and
assets (whether real, personal, or mixed) in which Transferor or the Company
(or any predecessor), has or had an interest, or any such other property or
assets.
(v) Except such as were made in full compliance with all
applicable Environmental Laws or except as would not cause a material adverse
effect to the Company, there has been no disposal, Release or, Threat of
Release, of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured,
refined, transferred, produced, imported, used, or processed from or by the
Facilities, or from or by any other properties and assets (whether real,
personal, or mixed) in which BN, Transferor or the Company has or had an
interest.
(vi) Transferor has delivered to USO true and complete
copies and results of any material reports, studies, analyses, tests or
monitoring possessed or initiated by Transferor or the Company pertaining to
the Facilities and/or concerning compliance by the Transferor and the
Company, with any material Environmental Laws.
(q) Employee Benefits.
(i) Schedule 4.1(q)(i) of the Disclosure Letter sets
forth a list of each formal or informal, oral or written plan, fund, program,
agreement, payroll practice or other arrangement which the Transferor or
Company sponsors, contributes to, participates in, or has or may have any
liability or obligation (including any terminated plan) with respect to
current or former employees or independent contractors of the Transferor or
Company or their respective dependents, and (A) which is an "employee benefit
plan" as defined in Section 3(3) of ERISA, (B) whether or not an "employee
benefit plan" as so defined, which provides any pension, profit sharing,
severance, termination, equity, savings, bonus, change in control, incentive,
holiday, vacation, perquisite, fringe or similar benefit to current or former
employees or independent contractors of the Transferor or Company or their
respective dependents, or (C) which is an employment, retainer, or consulting
agreement to which the Transferor or Company is a party (each of the
foregoing in (A), (B) or (C) an "Employee Plan," and collectively, the
"Employee Plans"). Transferor has delivered or made available to USO true
and complete copies of the plan documents, written instruments and/or
agreements governing such Employee Plans.
(ii) A favorable determination letter from the Internal
Revenue Service has been issued with respect to each Employee Plan intended
to qualify under Section 401(a) of the Code, and nothing has occurred since
the date of such determination letter which could result in disqualification
of such Employee Plan. As of the Closing Date, neither the Transferor nor
the Company has any liability or obligations with respect to any plan
maintained by a Code Affiliate which is subject to Title IV of ERISA, other
than with respect to the BN Pension Plan (as defined in Section 5.9
(b)(ii)(A)). The Transferor has furnished to USO the most recent actuarial
valuation with respect to the BN Pension Plan.
(iii) Each Employee Plan has been maintained in material
compliance with its terms and all provisions of applicable law, and no
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975(c) of the Code has occurred with respect to any Employee Plan as a
result of any act or omission of Transferor or a Code Affiliate. BN has paid
all contributions required to be paid with respect to the Transferor's
employees under all Employee Plans as and when due.
(iv) Neither the Transferor nor any Code Affiliate has
incurred any withdrawal liability under Title IV of ERISA with respect to any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA, nor shall the
Transferor or any Code Affiliate incur such withdrawal liability as a result
of the transactions contemplated hereby.
(v) Except as required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, or any similar state statutes,
no Employee Plan provides medical, life insurance or other welfare benefits
to or with respect to former employees or independent contractors of the
Transferor. Except as set forth on Schedule 4.1(q)(v) of the Disclosure
Letter, the transactions contemplated hereby shall not trigger, increase or
accelerate any payment or benefit under any Employee Plan, whether or not
such payment or benefit would constitute an "excess parachute payment" as
defined in Section 280G of the Code. No severance or termination benefits
shall be payable to any employee or independent contractor of the Transferor
or Company as a result of or in connection with the transactions contemplated
hereby.
(vi) Schedule 4.1(q)(vi) of the Disclosure Letter sets
forth a list of each employee of the Transferor or the Company who
participates in the BN Deferred Comp Plan (as defined in Section
5.9(b)(iii)(A)) as of the Closing Date and the value of the Deferral Account
(as defined thereunder) of each such participant as of the date set forth on
Schedule 4.1(q)(vi) of the Disclosure Letter. None of the Employee Plans
includes a "flexible spending account" within the meaning of Proposed
Treasury Regulation Section 1.125-2, Q&A-7(c). With regard to any voluntary
employees' beneficiary association (as defined in Section 501(c)(9) of the
Code) ("VEBA") which is maintained under or with respect to any Employee
Plan, as of the Closing Date there are no assets accumulated or held under
such VEBA with respect to such employees.
(r) Labor and Employment. There is no collective bargaining
agreement, memorandum agreement or other labor contract covering employees of
the Transferor or the Company, and, to the knowledge of the Transferor or the
Company, no union or other labor organization is seeking to organize such
employees, or to be recognized as a collective bargaining representative of
such employees. There is no pending or, to the knowledge of the Transferor,
threatened strike, work stoppage, material unfair labor practice claim or
other material labor dispute against or affecting the Transferor, the Company
or their respective employees. A list of each current employee of the
Transferor and the Company and his position, status (active, disabled or on
other leave) annual compensation (including latest bonus), date of hire and
date of birth will be provided to USO prior to the Closing Date.
(s) Contracts.
(i) Schedule 4.1(s)(i) of the Disclosure Letter hereto
is a true and complete list of all contracts which are material to the
business, operations, assets and liabilities of the Transferor and which will
be assigned to the Company (the "Contracts").
(ii) Except as otherwise disclosed on Schedule 4.1(s)(ii)
of the Disclosure Letter, the Contracts are valid, binding, and enforceable
in accordance with their terms (assuming the other parties thereto are bound,
as to which none of BN, Transferor and the Company has any reasonable basis
to believe otherwise) and in full force and effect, except where any such
invalidity or failure to be binding, enforceable or in full force and effect
would not have a material adverse effect.
(iii) Except as otherwise disclosed on Schedule
4.1(s)(iii) of the Disclosure Letter, neither the Transferor nor the Company
is, and to the knowledge of BN, Transferor and the Company, no other party to
such Contract is, in default thereunder, and no event has occurred which,
with or without the passage of time or the giving of notice or both, would
constitute a default thereunder, except in each case for default as would not
have, individually or in the aggregate, a material adverse effect on the
conduct of business by, or the assets and liabilities of, the Transferor or
the Company.
(iv) Except as set forth on Schedule 4.1(s)(iv) of the
Disclosure Letter, all of the Contracts are assignable without obtaining
third party consent to the Company, and none of such Contracts has change in
control provisions that would allow another party the right to terminate the
Contract or take action that is adverse to the Transferor or the Company,
except with respect to Contracts as would not have, individually or in the
aggregate, a material adverse effect on the conduct of business or the assets
and liabilities of the Transferor or the Company.
(t) Patents, Trademarks, Software.
(i) Except as disclosed on Schedule 4.1(t) of the
Disclosure Letter hereto, the Transferor owns, and the Company will own as of
the Closing, free and clear of all Encumbrances, the right to use, sell,
license or dispose of such patents, copyrights, trademarks, service marks,
and applications and registrations therefor, and trade names, trade secrets,
customer lists, proprietary technology processes and formulae, source code,
object code, know-how, inventions, other confidential and proprietary
information and other intellectual property rights as are necessary to permit
the Transferor and the Company to carry on the business as currently
conducted by the Transferor, except for failures to own free and clear,
license to use or otherwise have sufficient rights to use as would not have a
material adverse effect (the "Rights"). Schedule 4.1(t) of the Disclosure
Letter sets forth all registered patents, copyrights, trademarks and service
marks included in the Rights, all of which are in full force and effect and
are not subject to any Taxes or maintenance fees, except as set forth on
Schedule 4.1(t) of the Disclosure Letter, or except where the failure to be
in full force or effect or to be so subject would not have a material adverse
effect. Except as set forth on Schedule 4.1(t) of the Disclosure Letter, or
pursuant to the Transferor's "Affiliates Program", neither BN, Transferor nor
the Company has licensed or granted to anyone the right to use the name
"Barnes and Noble" in connection with business conducted on the Internet or
any other name associated with or used by the Transferor in connection with
the business conducted by the Transferor or the Company. Except as set forth
on Schedule 4.1(t) of the Disclosure Letter, none of BN, Transferor nor the
Company (i) has licensed or granted to anyone rights of any nature to use any
Rights that would limit the exercise of such Rights by the Transferor or the
Company, or that would limit or prevent the Transferor or the Company from
using, selling, licensing or disposing of Rights in any market or geographic
region, including in direct competition with any licensee of such Rights in
such geographic region; (ii) except for the $50,000 annual royalty payable by
the Company to BN College, is obligated to pay royalties, fees or other
payments to anyone for use of any single Right; and (iii) has received notice
from any third party or otherwise has knowledge that any Rights or any
services or products marketed or sold by the Transferor or the Company
violates any intellectual property right of a third party, except for such
violations as would not have a material adverse affect. To Transferor's
knowledge, there exists no infringement by any third party of any Rights that
would have a material adverse effect and there is no pending or, to the
knowledge of either Transferor or the Company, threatened claim or litigation
against the Transferor or the Company contesting its use of any Rights,
asserting the misuse of any Rights, or asserting the infringement or other
violation of any rights of a third party, nor, to the knowledge of either
Transferor or the Company, is there any reasonable basis for any such claim,
where, in any such case, individually or in the aggregate, such infringement,
claim or litigation would have a material adverse effect.
(ii) All copyrightable works, inventions and know-how
conceived by employees or, to the knowledge of BN, the Transferor or the
Company, independent contractors of the Transferor or the Company within the
scope of their employment or retention, as the case may be, and related to
the business conducted by the Transferor were and are "works for hire," or if
they were or are not, then all right, title and interest therein were
transferred and assigned to, or vested in, the Transferor or the Company
except where the failure to be "works for hire" or to have been so
transferred, assigned or vested would not have a material adverse effect.
(iii) Except as set forth on Schedule 4.1(t) of the
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not alter, impair or extinguish any of the Rights, the
alteration, impairment or extinguishing of which would have a material
adverse effect. Following the consummation of the transactions contemplated
hereby, the Company will own, free and clear of all Encumbrances, or have the
exclusive right to use, sell, license or dispose of or otherwise will have
sufficient rights to use, the Rights, except for failures to own free and
clear, license to use or otherwise have sufficient rights to use as would not
have a material adverse effect.
(iv) To the best of BN's and Transferor's knowledge, the
software used by Transferor with respect to the Business, including embedded
software, either: (i) is not affected (with respect to performance and
functionality) by dates prior to, during and after the year 2000; or (ii)
insofar as such software is so affected, Transferor has taken reasonable
steps to assure that any problems which may arise with respect to dates prior
to, during and after the year 2000 will be corrected sufficiently in advance
of the year 2000.
(u) Relationships with Related Persons. Except as set forth
on Schedule 4.1(u) of the Disclosure Letter, neither BN nor any Related
Person of BN or its officers or directors has any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), which
will be used in or pertaining to the Company's business. Neither BN nor any
Related Person of BN owns (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i)
had business dealings or a material financial interest in any transaction
with the Transferor or the Company other than business dealings or
transactions conducted in the ordinary course of business with the Company at
substantially prevailing market prices and on substantially prevailing market
terms, or (ii) engaged in competition with the Transferor or the Company with
respect to any line of the products or services of such Person in any market
presently served by such company. Except as set forth in Schedule 4.1(u) of
the Disclosure Letter, neither BN nor any Related Person of BN or of the
Company is a party to any contract with, or has any claim or right against
the Company.
(v) Disclosure. No representation or warranty by Transferor
contained in this Agreement, nor any statement contained in the Limited
Liability Company Agreement or in any Schedule, certificate, list or other
instrument furnished or to be furnished by Transferor or BN to USO pursuant
to this Agreement or the Limited Liability Company Agreement or in connection
with the transactions contemplated by either, contains any untrue statement
of a material fact or omits to state a material fact which is necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading. There is no fact
known to Transferor which materially adversely affects the condition
(financial or otherwise), properties, assets, business, operations or
prospects of Transferor as they relate to the assets listed on the BN
Contribution Schedule which has not been set forth herein or in the Schedules
hereto. All documents delivered or to be delivered by Transferor or BN to
USO pursuant to this Agreement are or will be true and complete copies of
what they purport to be.
4.2 Representations and Warranties of USO. USO represents and
warrants to Transferor that:
(a) Organization and Existence. USO is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
USO has full legal power and authority to own and lease the properties and
assets it now owns and leases and to carry on its business as and where such
properties and assets are now owned or leased and such business is now
conducted.
(b) Authority and Approval. Each of BAG and USO has the legal
power and authority to enter into this Agreement and to perform its
obligations hereunder. Each of BAG and USO has, or on the Closing Date will
have, the legal power and authority to enter into the Limited Liability
Company Agreement and to perform its obligations thereunder. This Agreement
is a legal, valid and binding obligation of each of BAG and USO, enforceable
against each of BAG and USO in accordance with its terms, subject to:
(i) applicable bankruptcy, insolvency or other similar
laws relating to creditors' rights generally; and
(ii) general principles of equity. When executed, the
Limited Liability Company Agreement will be a valid and binding obligation of
USO enforceable against USO in accordance with its terms, subject to (a)
applicable bankruptcy, insolvency or other similar laws relating to
creditors' rights generally and (b) general principles of equity. No other
act, approval or proceeding on the part of USO is or will be required to
authorize the execution and delivery of this Agreement and the Limited
Liability Company Agreement by USO or the consummation of the transactions
contemplated by each such agreement.
(c) No Conflict. This Agreement and the Limited Liability
Company Agreement and the execution and delivery of each such agreement by
each of BAG and USO do not, and the fulfillment and compliance with the terms
and conditions of each such agreement and the consummation of the
transactions contemplated by each will not:
(i) conflict with any of, or require the consent of any
Person under, the terms, conditions or provisions of the certificate of
incorporation, by-laws or other corporate documents of each of BAG and USO;
(ii) conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both),
or accelerate or permit the acceleration of the performance required by, or
require any consent, authorization or approval under, any indenture,
mortgage, lease, agreement or instrument to which USO is a party or by which
it is bound or to which any of its assets or property is subject; or
(iii) result in the creation of any Encumbrance upon
the assets or property of USO under any such indenture, mortgage, lease,
agreement or instrument.
USO is not subject to any order, judgment, decree or award of any court or
other judicial, administrative or regulatory body or arbitrator having
prospective effect.
(d) Disclosure. No representation or warranty by either BAG
or USO contained in this Agreement, nor any statement contained in the
Limited Liability Company Agreement or in any Schedule, certificate, list or
other instrument furnished or to be furnished by either BAG or USO to
Transferor pursuant to this Agreement or the Limited Liability Company
Agreement or in connection with the transactions contemplated by either,
contains any untrue statement of a material fact or omits to state a material
fact which is necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading. All documents delivered or to be delivered by either BAG or USO
to Transferor pursuant to this Agreement are or will be true and complete
copies of what they purport to be.
ARTICLE V
COVENANTS
5.1 Filings. Each of the parties hereto agree to cooperate fully
with the other in the preparation and filing, whether before or after the
Closing Date, of all documents and instruments required to be filed by BN,
BAG, USO, the Transferor, B&N.com Holding or the Company, in connection with
the transactions contemplated by this Agreement and the Limited Liability
Company Agreement, including, without limitation, any business certificate,
or any trade, assumed or fictitious name certificates, or any applications
for authority to do business, or any registrations or assignments of
registrations of any patents, trademarks, trade names, service marks,
copyrights or similar rights.
5.2 Access and Investigation. Between the Effective Date and the
Closing Date, the Transferor and the Company and its representatives shall,
subject to the provisions of Section 9.1: (a) afford USO and its
representatives and prospective lenders and their representatives
(collectively, "USO's Advisors") full and free access to Transferor's and
Company's personnel, properties, contracts, books and records, and other
documents and data relating to the Transferor and/or the Company, (b) furnish
USO and USO's Advisors with copies of all such contracts, books and records,
and other existing documents and data relating to the Transferor and the
Company and/or the Transferor as USO may reasonably request, and (c) furnish
USO and USO's Advisors with such additional financial, operating, and other
data and information as USO may reasonably request relating to the Transferor
and/or the Company.
5.3 Operation of the Business of the Transferor and Company.
Between the Effective Date and the Closing Date, the Transferor and the
Company shall, other than with respect to actions contemplated in or by this
Agreement or set forth on Schedule 4(n) of the Disclosure Letter:
(a) conduct the business of the Transferor and the
Company only in the ordinary course of business;
(b) use its best efforts to preserve intact the current
business organization of the Transferor and the Company, keep available the
services of the current managers, officers, employees, and agents of the
Transferor and the Company, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with the Transferor and the Company;
(c) confer with USO concerning operational matters of a
material nature with respect to the Transferor and the Company; and
(d) otherwise report periodically to USO concerning the
status of the business, operations, and finances of the Transferor and the
Company.
5.4 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the Effective Date and the Closing Date, the
Transferor and the Company shall not, without the prior consent of USO, take
any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in Section
4.1(n) (other than as set forth in Schedule 4(n) of the Disclosure Letter) is
likely to occur.
5.5 Required Approvals. Transferor and USO acknowledge that there
are no filings required by legal requirements to be made by either party in
order to consummate the contemplated transactions including, but not limited
to, filings under the HSR Act.
5.6 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 7.1, the Transferor and its Affiliates shall
not, directly or indirectly, solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from,
any Person (other than USO) relating to any transaction involving the
potential sale of the business or assets (other than in the ordinary course
of business) of the Transferor or the Company, or any of the Membership
Interests in the Company, or (except into or with an Affiliate) any merger,
consolidation, business combination, or similar transaction involving the
Transferor or the Company.
5.7 Delayed Receipts. In the event that the Transferor receives
any property, assets, payment or otherwise which constitutes a part of the
business contributed to the Company, such item shall be promptly contributed
to the Company.
5.8 Stock Options. As of the Effective Date, the Company shall
adopt the barnesandnoble.com inc. 1998 Incentive Plan (the "Incentive Plan")
with such changes therein as are necessary to reflect the issuer as a limited
liability company and not a corporation, and any other mutually agreeable
changes that do not adversely affect the awards set forth in Schedule 5.8 of
the Disclosure Letter. The awards to date under the Incentive Plan are set
forth in Section 5.8 of the Disclosure Letter. All such awards (other than
600,000 of Stephen Riggio's 800,000, which shall be forfeited) shall be
converted into the same number of units in the Company, at the same exercise
price per unit and vesting schedule, as set forth on Schedule 5.8 of the
Disclosure Letter and the existing Membership Interests shall be converted
into 33,333,334 taking into account the units to be issued to USO pursuant
hereto as well as the Membership Interests currently outstanding, and any
units to be issued in connection with the aforementioned awards shall be in
addition to and not in reduction of the aforementioned 33,333,334 units.
5.9 Employees and Employee Benefits
(a) The employment of all current employees of the Transferor
shall terminate as of the Effective Date, and the Transferor and USO shall
cause the Company to offer employment to such employees, effective as of
November 1, 1998 (the "Start Date"), at rates of compensation and with
employee benefits which, subject to Section 5.8, are substantially equivalent
to the respective rates of compensation and benefits paid or provided to such
employees by the Transferor as of the Effective Date. The employees of the
Transferor who accept such offer of employment shall be referred to as
"Company Employees." BN, the Transferor, USO and the Company shall take such
action as is necessary to cause the Company to adopt or enter into, effective
as of the Start Date (except as set forth in Section 5.9(b)(i)A.), benefit
plans, funds, programs, agreements, payroll practices or other arrangements
which effectuate the provisions of this Section 5.9.
(b) As soon as practicable after the Closing Date, but
effective (except as set forth in Section 5.9(b)(i)A.) as of the Start Date,
the following shall occur:
(i) Defined Contribution Plan
A. As of the Closing Date, the Company shall become a
Participating Employer in and adopt the Barnes & Noble, Inc. 401(k) Savings
Plan as in effect as of the Closing Date (the "BN 401(k) Plan") and employees
of the Company shall participate thereunder under the same terms and
conditions as BN employees, and shall earn service credit thereunder for
service with the Company on the same basis as employees of BN receive credit
for service with BN.
B. BN shall take all actions necessary to cause the BN
401(k) Plan to provide for investment of the Employer Contribution Accounts
of the Company's Employees participating in the BN 401(k) Plan in BN stock
for as long as BN is an "affiliate" of the Company within the meaning of
Section 407(d)(7) of ERISA.
C. BN shall indemnify, defend and hold harmless the
Company and USO against all Damages (as defined in Section 8.2) which arise
as a result of or in connection with the form or operation of the BN 401(k)
Plan under ERISA, the Code or otherwise, provided that BN shall have no such
duty with respect to Damages which arise out of an act or omission of the
Company. The Company shall have the right to terminate its participation in
the BN 401(k) Plan at any time, in which event the Company shall establish a
separate 401(k) Plan (the "Company 401(k) Plan") maintained solely with
respect to employees of the Company, and BN and the Company shall take all
actions necessary to cause the assets and liabilities of Company Employees
under the BN 401(k) Plan to be transferred to the Company 401(k) Plan.
(ii) Defined Benefit Plan
A. The Company shall adopt a defined benefit pension
plan designed to qualify under Section 401(a) of the Code (the "Company
Pension Plan") which is substantially equivalent to the Barnes and Noble,
Inc. Employees' Retirement Plan (the "BN Pension Plan") as in effect as of
the Effective Date and provides service credits as set forth in the
provisions of this Section 5.9(b)(ii). BN shall cause the trustees of the
BN Pension Plan to transfer to the trust maintained pursuant to the Company
Pension Plan, as soon as practicable after the Closing Date, an amount of
assets in cash equal in value to the BN Pension Plan's projected benefit
obligation determined as of the Effective Date with respect to Company
Employees who are participants in the BN Pension Plan as of the Effective
Date and the BN Pension Plan shall transfer to the Company Pension Plan the
liabilities under the BN Pension Plan determined as of the Effective Date
with respect to such Company Employees. The amount of such assets and
liabilities shall be calculated as soon as practicable after the Closing Date
by the BN Pension Plan's actuary based upon the assumptions set forth on
Schedule 5.9(b)(ii)(A) of the Disclosure Letter, provided that the value of
the assets to be transferred shall (x) be no less than the amount necessary
to satisfy the requirements of Section 414(1) of the Code, (y) be increased
by interest at the rate set forth on Schedule 5.9(b)(ii)(A) of the Disclosure
Letter, for the period from the Effective Date to the date of transfer, and
(z) be decreased to reflect benefit payments by the BN Pension Plan with
respect to Company Employees during the period from the Effective Date to the
date of transfer. The calculation made pursuant to the preceding sentence
shall be available for review prior to such transfer by USO's actuary at
USO's expense. The Company shall cause the Trustee of the Company Pension
Plan to accept such transfer of assets and liabilities. Neither the Company
nor the Company Pension Plan shall assume liability for the valuation of
assets and liabilities under the BN Pension Plan necessary to file a Form
5500 for the BN Pension Plan. Neither BN, a Code Affiliate of BN nor the BN
Pension Plan shall assume liability for the valuation of assets and
liabilities of the Company Pension Plan necessary to file a Form 5500 for the
Company Pension Plan.
B. The BN Pension Plan shall provide that service with
the Company shall be taken into account for purposes of eligibility, vesting
and early retirement subsidies for any person who becomes employed by BN or a
Code Affiliate of BN by virtue of a direct transfer of employment from the
Company. The Company Pension Plan shall provide that service with
Transferor, BN or any Code affiliate of BN shall be taken into account for
purposes of eligibility, vesting and early retirement subsidies for any
person who becomes employed by the Company by virtue of a direct transfer of
employment from BN or a Code Affiliate of BN, provided that such service
rendered prior to the Start Date by a Company Employee also shall be
recognized for benefit accrual purposes under the Company Pension Plan (but
in no event will a Company Employee receive duplicate service credit for
benefit accrual purposes under the Company Pension Plan for the same period
of service).
C. The Company Pension Plan shall provide that in the
event that any person becomes employed by BN or a Code Affiliate of BN by
virtue of a direct transfer of employment from the Company, the accrued
benefit of such person under the Company Pension Plan through the date of
such transfer shall be calculated by taking into account increases in such
person's age and compensation paid from BN or such Code Affiliate of BN after
the date of such direct transfer of employment. The BN Pension Plan shall
provide that in the event that any person becomes employed by the Company by
virtue of a direct transfer of employment from BN or a Code Affiliate of BN,
the accrued benefit of such person under the BN Pension Plan through the date
of such transfer shall be calculated by taking into account increases in such
person's age and compensation paid from the Company after the date of such
direct transfer of employment. This Section 5.9(b)(ii)C. shall cease to
apply if and when either of the Company Pension Plan or the BN Pension Plan
is terminated or is amended to cease future accruals for all participants
under the respective plan.
D. The Company Pension Plan shall not be amended or
terminated for a period of one year after the Closing Date except that (x)
the Company Pension Plan shall be amended to match an amendment to the BN
Pension Plan adopted within that one year period which does not result in an
increase in benefits under the Company Pension Plan, (y) the Company Pension
Plan may be amended as required by applicable law, and (z) the Company
Pension Plan may be terminated within such one year period to match a
termination of the BN Pension Plan effected within that one year period.
E. Each of the BN Pension Plan and the Company Pension
Plan shall provide that, to the extent that under a provision thereof a
termination of employment renders a participant entitled to immediate payment
of a benefit, a participant who terminates employment with an employer
sponsoring one plan for the purpose of becoming employed by a sponsoring
employer of the other plan shall not be considered to have terminated
employment for the purpose of such provision.
(iii) Deferred Compensation Plan
A. The Company shall establish a deferred compensation
plan (the "Company Deferred Comp Plan") which is substantially equivalent to
the Barnes & Noble, Inc. Deferred Compensation Plan listed as Item 9 on
Schedule 4.1(q)(i) of the Disclosure Letter (the "BN Deferred Comp Plan") as
in effect on the Closing Date. The Company Deferred Comp Plan shall give
credit for all service under the BN Deferred Comp Plan.
B. The Administrative Committee of the BN Deferred Comp
Plan shall cause the trustee of any grantor trust established thereunder to
transfer, as soon as practicable after the Closing Date, an amount in cash
equal to the Deferral Account (as defined in the BN Deferred Comp Plan) of a
Company Employee to the Company Deferred Comp Plan.
C. The Company Deferred Comp Plan and the BN Deferred
Comp Plan shall each provide, or shall be amended as soon as practicable
after the Closing Date to provide, that a participant in such plan who
transfers employment to an employer who sponsors the other plan shall not be
deemed to have terminated employment for purposes of eligibility to receive a
benefit on the basis of termination of employment. In the event of such a
transfer, the plan maintained by the employer from which the participant
transfers shall, as soon as practicable after the date of the employment
transfer, transfer to the other plan from the assets of any grantor trust
established thereunder attributable to such participant an amount equal to
the Deferral Account (as defined in the respective plan).
(c) With respect to each Company Employee:
(i) BN or the Transferor shall be responsible for, and
shall indemnify and hold harmless the Company and USO against, any actions,
claims or proceedings brought by or on behalf of any Company Employee at any
time, including, but not limited to, wrongful termination, breach of
fiduciary duty, discrimination, sexual harassment, workers compensation or
other employment-related matters, to the extent such claims are based solely
upon actions, events or circumstances which occurred before the Start Date,
except: (x) to the extent that such matter is fully disclosed to USO pursuant
to this Agreement; or (y) to the extent adequate reserves have been
established in the financial statements of Transferor (as delivered to USO
pursuant to this Agreement).
(ii) Subject to Section 5.9(b), BN or the Employee Plans
shall have liability for or shall be responsible for all benefits provided
pursuant to any Employee Plan, including, but not limited to, (A) deferred
compensation, non-qualified and incentive plans or policies with respect to
services rendered on or before the Effective Date and (B) medical, dental and
other welfare benefits under any Employee Plan based on claims incurred prior
to the Start Date under the terms of such Employee Plans, provided, however,
that effective as of the Start Date a health plan adopted by the Company
shall assume the obligation, if any, of the Barnes and Noble, Inc.
Comprehensive Medical and Dental Plan (the "BN Health Plan") to provide
health continuation benefits pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, to any person (y) who is a "qualified
beneficiary" (within the meaning of Section 4980B(g)(1)(A) of the Code) under
the BN Health Plan by virtue of such person's current or former employment
with the Transferor or by virtue of being the spouse or dependent child of a
current or former employee of the Transferor, and (z) with respect to whom a
"qualifying event" (within the meaning of Section 4980B(f)(3) of the Code)
has occurred. Notwithstanding the foregoing, the Company shall be
responsible for satisfying obligations with respect to accrued vacation and
sick time and personal holidays of Company Employees. Subject to Section
5.9(b), BN shall cause the Employee Plans to provide effective as of the
Start Date that any employee of the Company who becomes employed by BN or a
Code Affiliate of BN upon a direct transfer of employment from the Company
shall be credited with such employee's service with the Company for purposes
of determining benefits under such Employee Plans made available or provided
to employees of BN or the Code Affiliate of BN. Such credit shall include
credit for any co-payments and deductibles paid prior to the transfer of
employment.
(iii) Subject to Section 5.9(b), BN and USO shall
cause the Company to take such action as is necessary such that each Company
Employee and each person who becomes an employee of the Company subsequent to
the Start Date upon a direct transfer of employment from BN or a Code
Affiliate of BN shall be credited with such Company Employee's or such
person's service with the Transferor, BN or the Code Affiliate of BN, as the
case may be, for purposes of determining benefits under any employee benefit
plans, funds, programs, agreements, payroll practices or other arrangements
(including, but not limited to, vacation) made available or provided to
employees of the Company. Such credit shall include credit for co-payments
and deductibles paid prior to the Start Date (in the case of Company
Employees) and prior to transfer of employment (in all other cases). For
Company Employees, the amount of service to be credited shall be based on the
years of service for such Company Employee.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of USO. The obligations of USO
to proceed with the Closing are subject to the satisfaction on or prior to
the Closing Date of all of the following conditions, any one or more of which
may be waived in whole or in part by USO:
(a) Representations and Warranties True. The representations
and warranties contained in Section 4.l and in all schedules and certificates
delivered by Transferor to USO pursuant to this Agreement shall be true and
accurate on and as of the Closing Date with the same effect as though made on
and as of such date, except for such changes, if any, as may be expressly
permitted by this Agreement or agreed to in writing by the parties hereto.
(b) Performance of Covenants. Transferor shall have
performed and complied in all material respects with each and every covenant,
agreement and condition required to be performed or complied with by it
hereunder on or prior to the Closing Date.
(c) Licenses, Consents, etc. Transferor shall have obtained
all licenses, approvals, and permits of governmental authorities required to
be obtained by it for or in connection with the transactions contemplated
hereby, and all consents and approvals, if any, of other parties, including,
but not limited to, the consent of creditors or contracting parties of
Transferor, in each case in which the failure to obtain such consent or
approval of other parties would have a material adverse effect on the assets,
properties and liabilities identified on the BN Contribution Schedule or
would materially interfere with the right or ability of the Company to use
the assets and properties listed on the BN Contribution Schedule or interfere
with the rights or ability of Transferor to transfer good and unencumbered
title to or lawful use of the assets and properties identified in the BN
Contribution Schedule, and no such governmental license, approval or permit
or consent or approval of any third party shall have been withdrawn or
suspended.
(d) No Injunction. On the Closing Date, there shall be no
injunction, writ, restraining order or any other order of any nature issued
by a court or governmental agency of competent jurisdiction directing that
any of the transactions provided for in this Agreement or the Limited
Liability Company Agreement not be consummated as herein or therein provided.
(e) No Actions. On the Closing Date, there shall be no
action or proceeding pending or threatened by or before any court or other
judicial, administrative or regulatory body to restrain or prohibit the
transactions contemplated by this Agreement or the Limited Liability Company
Agreement.
(f) Corporate Authorization. Transferor shall have delivered
to USO a certificate of the Secretary of Transferor, in form reasonably
satisfactory to USO and its counsel, dated the Closing Date, certifying that
(i) a true and correct copy of the articles of incorporation and by-laws of
the Transferor, as amended as of the Closing Date, is attached thereto, and
(ii) the authorization and approval of this Agreement and the Limited
Liability Company Agreement and the transactions contemplated hereby and
thereby by the Board of Directors of Transferor in accordance with the
provisions of its by-laws.
(g) Other Agreements. Transferor shall execute and deliver or
cause to be executed and delivered, on its own behalf or on behalf of the
Company, whichever applicable, the agreements identified in Section 2.6.
(h) Officer's Certificate. Transferor shall have delivered to
USO a certificate signed by a duly authorized officer of Transferor, dated
the Closing Date, in form and substance reasonably satisfactory to USO and
its counsel, certifying as to the satisfaction on the Closing Date of the
conditions specified in Sections 6.1(a) through (g) hereof and Section 2.6.
6.2 Conditions to the Obligations of Transferor. The obligations
of Transferor to proceed with the Closing are subject to the satisfaction on
or prior to the Closing Date of all of the following conditions, any one or
more of which may be waived in whole or in part by Transferor:
(a) Representations and Warranties True. The representations
and warranties contained in Section 4.2 and in all certificates delivered by
USO to Transferor pursuant to this Agreement shall be true and accurate on
and as of the Closing Date with the same effect as though made on and as of
such date, except for such changes, if any, as may be expressly permitted by
this Agreement or agreed to in writing by the parties hereto.
(b) Performance of Covenants. USO shall have performed and
complied in all material respects with each and every covenant, agreement and
condition required to be performed or complied with by it hereunder on or
prior to the Closing Date.
(c) Licenses, Consents, etc. USO shall have obtained all
licenses, approvals, and permits of governmental authorities required to be
obtained by it for or in connection with the transactions contemplated
hereby.
(d) No Injunction. On the Closing Date, there shall be no
injunction, writ, restraining order or any other order of any nature issued
by a court or governmental agency of competent jurisdiction directing that
any of the transactions provided for in this Agreement or the Limited
Liability Company Agreement not be consummated as herein or therein provided.
(e) No Actions. On the Closing Date, there shall be no
action or proceeding pending or threatened by or before any court or other
judicial, administrative or regulatory body to restrain or prohibit the
transactions contemplated by this Agreement or the Limited Liability Company
Agreement.
(f) Corporate Authorization. USO shall have delivered to
Transferor a certificate of a duly authorized officer of USO, in form
reasonably satisfactory to Transferor and its counsel, dated the Closing
Date, certifying that (i) a true and correct copy of the certificate of
incorporation and by-laws of USO, as amended as of the Closing Date is
attached thereto, and (ii) the authorization and approval of this Agreement
and the Limited Liability Company Agreement and the transactions contemplated
hereby and thereby by the Board of Directors of USO in accordance with the
provisions of its by-laws.
(g) Other Agreements. USO shall execute and deliver or cause
to be executed and delivered, on its own behalf, or by its Affiliates, as the
case may be, or on behalf of the Company, whichever applicable, the
agreements identified in Section 2.6.
(h) Officer's Certificate USO shall have delivered to
Transferor a certificate signed by a duly authorized officer of USO, dated
the Closing Date, in form and substance reasonably satisfactory to Transferor
and its counsel, certifying as to the satisfaction on the Closing Date of the
conditions specified in Sections 6.2(a) through (g) hereof and Section 2.6.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated before the
Closing Date only as follows:
(a) By written agreement of Transferor and USO at any time.
(b) By USO, by written notice to Transferor at any time, if,
through no fault of USO, one or more of the conditions specified in Section
6.1 is not satisfied at the time at which the Closing would otherwise occur
(provided that Transferor shall have fifteen (15) days after written notice
to cure such conditions) or satisfaction of such a condition is or becomes
impossible.
(c) By Transferor, by written notice to USO at any time, if,
through no fault of Transferor, one or more of the conditions specified in
Section 6.2 is not satisfied at the time at which the Closing would otherwise
occur (provided that USO shall have fifteen (15) days after written notice to
cure such conditions) or satisfaction of such a condition is or becomes
impossible.
(d) By Transferor or USO, by written notice to the other, if,
through no fault of the terminating party, the Closing has not taken place
for any reason on or before April 30, 1999.
ARTICLE VIII
NATURE AND SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1 Nature and Survival of Representations and Warranties. All
representations and warranties made by Transferor or USO in this Agreement
and in any schedules, certificates or other documents delivered in connection
with the transactions contemplated hereby shall survive the Closing for a
period of twelve (12) months after the end of the Company's first fiscal
year.
8.2 Indemnification.
(a) Transferor shall promptly indemnify, defend and hold
harmless USO and the Company against all damage, loss, liability, recovery,
deficiency cost or expense, including, without limitation, reasonable
attorneys' fees and costs related thereto ("Damages"), suffered or incurred
by USO or the Company, to the extent such Damages result in a diminution in
the value of USO's Company Interest, arising from or in connection with any
misrepresentation or breach of any representation or warranty or
nonfulfillment of a covenant or agreement made by Transferor set forth in
this Agreement or in any Exhibit, Schedule or certificate delivered pursuant
hereto. No investigation by USO at or prior to the Closing shall relieve
Transferor of any liability hereunder, except with respect to any written
disclosures, Schedules, Exhibits, certificates or documents furnished in
connection with this Agreement.
(b) USO shall promptly indemnify, defend and hold harmless
Transferor and the Company against all Damages suffered or incurred by
Transferor or the Company, to the extent such Damages result in a diminution
in the value of Transferor's Company Interest, arising from or in connection
with any misrepresentation or breach of representation or warranty or
nonfulfillment of a covenant or agreement made by USO set forth in this
Agreement or in any Exhibit, Schedule or certificate delivered pursuant
hereto. No investigation by Transferor at or prior to the Closing shall
relieve USO of any liability hereunder, except with respect to any written
disclosures, Schedules, Exhibits, certificates or documents furnished in
connection with this Agreement.
8.3 Brokers. Transferor shall indemnify, defend and hold harmless
USO, and USO shall indemnify, defend and hold harmless Transferor, from and
against all loss, liability, damage or expense (including reasonable
attorneys' fees) in connection with any claim by any Person for brokers' or
finders' fees or commissions or similar payments and related expenses based
upon any agreement or understanding alleged to have been made with respect to
the transactions contemplated hereby by such Person with USO (in the case of
USO as the indemnifying party) or with Transferor (in the case of Transferor
as the indemnifying party).
8.4 Indemnification Procedure. Transferor or USO, as the case may
be, shall notify the party against whom indemnification is sought promptly of
any claim it may have or any claim by any third party coming to its attention
which may result in any liability hereunder on the other's part. Neither
Transferor nor USO shall have any liability under this Article VIII unless
notice of a claim for indemnity has been given to the other party, with
sufficient detail of the events giving rise to such claim, on or prior to the
date twelve (12) months after the end of the Company's first fiscal year,
with the exception of any claim under Section 8.3, which claim may be
asserted until the expiration of the relevant statute of limitations. The
indemnifying party shall be entitled at its own expense to conduct the
defense of any third party claim with counsel of its own choosing, subject to
approval by the party seeking indemnification (whose approval shall not be
unreasonably withheld), but the party seeking indemnification shall be
entitled to participate in such defense with counsel of its own choosing and
at its own expense, provided that control of the defense will remain with
counsel for the indemnifying party if the indemnifying party has acknowledged
unequivocally in writing its obligation to indemnify the other in regard to
the claims to be defended against. Failure to give notice as provided herein
shall not relieve the indemnifying party of its obligations hereunder, except
to the extent that the defense of any claim is prejudiced by such failure to
give notice. The indemnifying party shall have the right to compromise or
settle for money damages only any claim giving rise to an obligation for
indemnification hereunder; any claim compromised or settled by the
indemnified party shall not be subject to indemnification hereunder.
ARTICLE IX
MISCELLANEOUS
9.1 Confidentiality. Transferor and USO will, in their respective
capacities, receive and at all times, both before and after the Closing or
termination of this Agreement, treat in confidence, any information of the
disclosing party (or their respective Affiliates) which is disclosed to the
receiving party, pertaining to the finances, technology, production methods
and processes', general business operations, prices charged and pricing
policies, marketing practices or policies, litigation, identity of customers,
or any other confidential aspect (collectively, the "Confidential Matters")
of the disclosing partner or of the Company, except for any such information
which:
(i) at the time of disclosure is publicly available or
becomes publicly available through no act or omission of the receiving party;
(ii) was in the receiving party's possession, otherwise
than as a result of a confidential or fiduciary relationship, prior to the
disclosure thereof by the disclosing party; or
(iii) is thereafter disclosed to the receiving party
by a third party which did not acquire the information under an obligation of
confidentiality.
9.2 Governing Law; Jurisdiction. This Agreement shall be
governed by and be construed in accordance with the law of the State of New
York, without regard however to the conflicts of laws principles thereof.
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, or otherwise relating to, this Agreement shall be
brought against Transferor or USO in the courts of the State of New York or,
if it has or can acquire jurisdiction, in the United States District Court
for the Southern District of New York, and each of the parties, for itself
and its shareholders, hereby submits to the exclusive jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
9.3 Notices. All notices and other communications hereunder shall
be in writing and shall be given and delivered by messenger, transmitted by
telecopy or telegram (in either case followed by reputable overnight courier
sent the same day), by reputable overnight courier or mailed by certified
mail, postage prepaid, return receipt requested, to the parties at the
following addresses (or such other address as shall be specified by such
party by like notice), and shall be deemed given on the date on which so
delivered by messenger or reputable overnight courier, on the next business
day following the date on which so transmitted by telecopy, telegram or on
the next business day following the date on which so transmitted by telecopy,
telegram or on the third business day following the date on which mailed by
certified mail:
If to BAG:
Bertelsmann AG
Carl-Bertelsmann-Strasse 270
33311 Gutersloh, Germany
Attention: Dr. Klaus Eierhoff
Fax: (011) 49 5241 809 555
If to USO:
BOL.US Online, Inc.
1540 Broadway
New York, New York 10036
Attention: Robert J. Sorrentino
Telefax: 212-782-1010/1103
with a copy for each of BAG and USO to:
Walter, Conston, Alexander & Green, P.C.
90 Park Avenue
New York, New York 10016
Attention: Aydin S. Caginalp, Esq.
Telefax: 212-210-9444
If to Transferor:
barnesandnoble.com inc.
76 Ninth Avenue, 11th Floor
New York, New York 10011
Attention: Leonard Riggio
Telefax: (212) 675-0413
If to BN:
Barnes & Noble, Inc.
122 Fifth Avenue
New York, New York 10011
Attention: Mr. Leonard Riggio
Telefax: (212) 675-0413
with a copy for each of Transferor and BN to:
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Michael N. Rosen, Esq.
Telefax: 212-541-1400
9.4 Additional Acts. Each of the parties hereto shall deliver
such further documents and agreements, and do such further acts and things as
may be necessary or expedient to carry out the provisions of this Agreement.
9.5 Entire Agreement; Waiver, Modifications. This Agreement and
the other contemporaneous agreements referred to herein constitute a complete
statement of all of the arrangements among the parties as of the date hereof
with respect to the transactions contemplated hereby and thereby, and all
other prior agreements of the parties with respect hereto or thereto are
hereby merged into this Agreement and such other contemporaneous agreements.
No modification, discharge or waiver, in whole or in part, of any of the
provisions hereof shall be valid unless in writing and signed by the party
against whom the same is sought to be enforced. A failure or omission of
either party hereto to insist, in any instance, upon strict performance by
the other party of any term or provision of this Agreement or to exercise any
of its rights hereunder shall not be deemed a modification of any term or
provision hereof, or a waiver or relinquishment of the future performance of
any such term or provision by such party, nor shall such failure or omission
constitute a waiver of the right of such party to insist upon future
performance by the other party of any such term or provision or any other
term or provision of this Agreement.
9.6 Headings; Interpretations. The headings in this Agreement are
intended solely for convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement. Unless the context
otherwise requires, the singular includes the plural, and the plural includes
the singular.
9.7 No Assignment. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and any Person that acquires an
interest in the Company as permitted by the terms hereof or the Limited
Liability Company Agreement. Otherwise, this Agreement is not assignable.
9.8 Invalidity. In the event that any provision of this Agreement
is declared by a court of competent jurisdiction to be void or unenforceable,
the remainder of this Agreement shall not be affected thereby and shall
remain in full force and effect to the extent feasible in the absence of the
void and unenforceable provision. The parties furthermore agree to execute
and deliver such amendatory contractual provisions to accomplish lawfully as
nearly as possible the goals and purposes of the provision so held to be void
or unenforceable.
9.9 Third Party Beneficiary. The Company shall be a third party
beneficiary of this Agreement.
9.10 Press Release. Transferor and USO shall cooperate with each
other to issue a press release at such time, and in such form and substance,
which is mutually agreeable to both parties.
9.11 Nonassignable Contracts.
(a) In the event that the transactions contemplated by this
Agreement involve the assignment of rights under any contract, agreement,
license, claim, or of other rights, assets, or property, which are
nonassignable without the consent, authorization or approval of the other
party or parties thereto or any other third party (a "Nonassignable
Contract"), and such consent, authorization or approval shall not have been
obtained by Transferor prior to the Effective Date, then, notwithstanding
anything in this Agreement to the contrary (and without relieving Transferor
of any liability or obligation it may have under this Agreement), any such
Nonassignable Contract shall not be assigned (except any rights to receive
payments thereunder) until all such necessary consents, authorizations and
approvals with respect to such Nonassignable Contract shall have been
obtained, whereupon Transferor shall, without further consideration, promptly
assign or cause the assignment of same to the Company. Notwithstanding any
other provision in this Agreement, in the event that the Transferor complies
with Sections 9.11(a) and 9.11(b), Transferor shall not be held liable or
accountable for failing to deliver, assign or make available to the Company
any of the licenses or other agreements assigned under this Agreement.
(b) Until such time, if any, as all the necessary consents,
authorizations and approvals shall have been obtained for the assignment of a
Nonassignable Contract, Transferor, at its own expense, shall retain,
preserve and hold in trust for the sole benefit of the Company all rights,
interests and claims with respect to such Nonassignable Contract from and
after the Effective Date; and Transferor shall, at the request of the
Company, take all such action, enter into such arrangements and do or cause
to be done such things as shall be reasonably requested by the Company to
provide, make available and secure to the Company all of the funds, income
and payments that would have inured to the Company upon an outright
assignment of such Nonassignable Contract to the extent permitted by law and
by contract. Except as provided by law or the Nonassignable Contract in
question, the performance obligations of Transferor under such Nonassignable
Contract as shall arise both (x) exclusively in respect of periods from and
after the date on which the aforesaid funds are so made available thereunder
and (y) exclusively in connection with the exploitation of such funds by the
Company, shall be deemed to be sublicensed or subcontracted to the Company
but only until such time (if any) as the rights under such Nonassignable
Contract have been effectively assigned to the Company. Transferor shall pay
over to the Company any amounts received by Transferor after the Effective
Date in respect of any Nonassignable Contract, and the Company shall pay over
to Transferor any amounts paid, or expenses incurred, by Transferor in
performing any Nonassignable Contract after the Effective Date.
9.12 Obligations of BN and BAG. By their signatures below, BN
agrees to be liable for any failure by Transferor to perform any of its
obligations under this Agreement, the Limited Liability Company Agreement and
any other agreements executed in connection herewith to which it is a party,
and BAG agrees to be liable for any failure by USO to perform any of its
obligations under this Agreement, the Limited Liability Company Agreement and
any other agreements executed in connection herewith to which it is a party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending legally to be
bound, have caused this Agreement to be duly executed as of the day and year
first herein above written.
BERTELSMANN AG
By:/s/Thomas Middelhoff
________________________________
BOL.US Online, Inc.
By:/s/Robert Sorrentino
______________________________
BARNES & NOBLE, INC.
By:/s/Leonard Riggio
______________________________
barnesandnoble.com inc.
By:/s/Leonard Riggio
______________________________
B&N.com Member Corp.
By: /s/Leonard Riggio
______________________________
B&N.com Holding Corp.
By: /s/Leonard Riggio
______________________________
___________________________________
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
barnesandnoble.com llc
Effective as of October 31, 1998
____________________________________
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
barnesandnoble.com llc
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") of barnesandnoble.com llc, a Delaware limited liability company
(the "Company"), is made and entered into, effective as of 11:59 p.m. on the
31st day of October, 1998, by and among Barnes & Noble, Inc., a corporation
organized and existing under the laws of Delaware, with its principal place
of business at 122 Fifth Avenue, New York, New York 10011 ("BN"), B&N.com
Holding Corp., a corporation organized and existing under the laws of
Delaware, with its principal place of business at 122 Fifth Avenue, New York,
New York 10011 ("BN Holding"), Bertelsmann AG, an Aktiengesellschaft
organized and existing under the laws of Germany, with its principal place of
business at Carl-Bertelsmann-Strasse 270, 33311 Gutersloh, Germany ("BAG")
and BOL.US Online, Inc., a corporation organized and existing under the laws
of Delaware, with its principal place of business at 1540 Broadway, New York,
New York 10036 ("USO").
WHEREAS, the Company was formed as a limited liability company pursuant
to the Delaware Limited Liability Company Law (6 Del. C. Section 18-101, et
seq., as it may be amended from time to time, or any successor statute (the
"LLCL")) by the filing of a Certificate of Formation with the Office of the
Secretary of State of the State of Delaware on October 27, 1998;
WHEREAS, barnesandnoble.com inc., a wholly-owned subsidiary of BN, has,
as of October 31, 1998: (i) contributed to the Company all of its assets
(except its interests in NuvoMedia, Inc. and B&N.com Member Corp., a wholly-
owned subsidiary of barnesandnoble.com inc. ("B&N.com Member")) and
liabilities in exchange for a one hundred percent (100%) Membership Interest
(as hereinafter defined), and (ii) transferred a one percent (1%) Membership
Interest to B&N.com Member ;
WHEREAS, USO has, as of the Closing Date (as defined in the Formation
Agreement), pursuant to the Formation Agreement (as hereinafter defined),
paid barnesandnoble.com inc. (or its designee) Seventy-Five Million Dollars
($75 million) for a 21.42857% Membership Interest;
WHEREAS, USO has, as of the Closing Date, pursuant to the Formation
Agreement, made a capital contribution to the Company in exchange for an
additional 28.57143% Membership Interest, which, together with the 21.42857%
Membership Interest referred to above, has given USO an aggregate fifty
percent (50%) Membership Interest;
WHEREAS, immediately subsequent to the payments described above, but
immediately prior to the execution of this Agreement, each of
barnesandnoble.com inc. and B&N.com Member has assigned all of its Membership
Interests (which together will aggregate a fifty percent (50%) Membership
Interest) to BN Holding; and
WHEREAS, the parties hereto desire to amend and restate the Limited
Liability Company Agreement (the "Original Agreement") of the Company, dated
as of October 27, 1998, to provide for the admission of USO as a Member and
to establish herein the respective rights and obligations of BN Holding and
USO with respect to the Company.
NOW, THEREFORE, in consideration of the conditions and provisions con-
tained herein, BN Holding and USO hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 DEFINITIONS. The following terms shall, for the purposes of this
Agreement and the Schedules and Exhibits hereto, have the following meanings
(terms defined in the singular or the plural include the plural or the
singular, as the case may be):
"Affiliate" of any Person shall mean any other Person that, directly or
indirectly, controls, is under common control with or is controlled by that
Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities or by contract or otherwise. In the case of BOL, the term
"Affiliates" shall include all Persons in which BOL directly or indirectly
owns an equity interest to the extent such Person operates under the name BOL
(or a derivative thereof) provided that no Restricted Transferee owns any
equity interest therein.
"Bankruptcy" of a Member shall mean (a) the filing by a Member of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States
Code (or corresponding provisions of future laws) or any other federal,
foreign or state insolvency law, or a Member's filing of an answer consenting
to or acquiescing in any such petition; (b) the making by a Member of any
assignment for the benefit of its creditors or the admission by a Member in
writing of its inability to pay its debts as they mature; or (c) the
expiration of 60 days after the filing of an involuntary petition under Title
11 of the United States Code (or corresponding provisions of future laws),
seeking an application for the appointment of a receiver for the assets of a
Member, or an involuntary petition seeking liquidation, reorganization,
arrangement or readjustment of its debts under any other federal, foreign or
state insolvency law, provided that the same shall not have been vacated, set
aside or stayed within such 60-day period.
"BN College" shall mean Barnes & Noble College Bookstores, Inc., a New
York corporation, and any successor thereto.
"BN Managers" shall mean, collectively, the Managers designated by BN
Holding pursuant to Section 3.2 (a).
"Board" or "Board of Managers" shall mean the Board of Managers defined
in Section 3.1.
"BOL" shall mean BOL.Global, Inc., a corporation organized under the
laws of Delaware.
"Book Clubs" shall mean the business commonly known as "book clubs,"
"negative option mail-order" and "positive option mail-order" and similar
operations, which offer access to a customary and limited number of titles,
to which access is made available to the consumers by any means including
through Websites. For the avoidance of doubt, reference to such clubs or
mail order or similar operations shall include the business of acquiring
customers by direct-to-consumer methods and of selling and distributing such
products by direct marketing to customers who selected such products which
were offered at regular intervals or as special offers irrespective of the
manner by which customers are solicited or acquired.
"Business" shall mean sale, through one or more Websites, of books to
consumers (regardless of the form in which such books are delivered and
regardless of whether the form of delivery is now known or hereafter
devised), as well as videos, magazines, software or music. For the sake of
clarity, all other activities which do not directly involve consumers, as
well as the following, are excluded from the definition of "Business":
1. the retail sale of books through traditional retail stores;
2. sale of college textbooks through Websites;
3. Book Clubs regardless of the medium or means (whether now
known or hereafter devised, including through Websites) through which access
to such Book Clubs is made available to consumers;
4. mail-order operations; and
5. wholesale distribution of books.
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which federally chartered banks in the United States are open for business.
"Business Plan" shall mean a five-year business plan for the Company
setting forth a statement of projected expenses, revenue and capital
requirements of the Company over such period.
"Certificate of Formation" means the Certificate of Formation of the
Company filed on October 27, 1998 with the Secretary of State of the State of
Delaware pursuant to the LLCL, as such Certificate of Formation may be
amended or restated from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning given to that term in the first
paragraph of this Agreement.
"Distributable Cash" shall mean the excess of the Company's positive
cash flow on a consolidated basis over the Company's consolidated working
capital needs as determined in U.S. dollars in accordance with GAAP. The
Company's positive cash flow on a consolidated basis shall mean the excess of
consolidated cash receipts (excluding the proceeds of any borrowing by the
Company or any subsidiary thereof) over consolidated cash disbursements for
any given period. The Company's working capital needs shall be determined in
good faith by the Board and shall include, but not be limited to, reasonable
reserves for current and future operating expenses, debt service, business
expansion and acquisitions, contingencies and emergencies.
"Encumbrance" shall mean any mortgage, pledge, security interest, lien,
restriction on use or transfer, other than those imposed by law, voting
agreement, adverse claim or encumbrance or charge of any kind (including any
agreement to give any of the foregoing), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or
any agreement to give, any financing statement under the Uniform Commercial
Code or similar law of any jurisdiction.
"English Language Books" shall mean books published in the English
language.
"Fiscal Year" of the Company shall mean the twelve (12) month period
ending on December 31st.
"Foreign Language Books" shall mean books published in a language other
than English.
"Formation Agreement" shall mean the Formation Agreement by and among
BN, BN Holding, USO and BAG, dated as of the date hereof.
"Fulfillment Agreements" shall mean each of the Fulfillment Agreements
between the Company and BOL (or its Affiliates), regarding the fulfillment by
the Company and BOL (or its Affiliates) of certain customer product orders to
be negotiated in good faith after the Closing Date.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time, consistently applied, with respect to the jurisdiction to
which it refers.
"Governmental Body" shall mean any domestic or foreign national, state
or municipal or other local government or multi-national body (including, but
not limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder and any corporation, partnership or other
entity directly or indirectly owned by or subject to the control of any of
the foregoing.
"Majority in Interest of the Members" means, at any time, Members owning
a majority of all of the outstanding Membership Interests in the Company.
"Member" shall mean, at any time, each of BN Holding and USO if, at such
time, they have a Membership Interest in the Company and any Person who at
such time has a Membership Interest in the Company.
"Member-Funded Debt" shall mean any non-recourse debt of the Company
which is loaned or guaranteed by any Member and/or is treated as "partner
non-recourse debt" under Section 1.704-2(b)(4) of the Treasury Regulations.
"Membership Interest" shall mean a Member's entire interest in the
Company, including (i) the Percentage Interest now or hereafter owned by it;
(ii) its share in any Net Income, Net Loss and any distributions of the
Company; and (iii) its right to participate in the management of the Company
or any other decision of the Members pursuant to this Agreement.
"Minimum Gain" shall mean an amount equal to the excess of the principal
amount of debt, for which no Member is liable ("non-recourse debt"), secured
by any property of the Company over the adjusted basis of such Property which
represents the minimum taxable gain which would be recognized by the Company
if the non-recourse debt were foreclosed upon and the property were
transferred to the creditor in satisfaction thereof, and which is referred to
as "minimum gain" in Section 1.704-1(b)(4)(iv) of the Treasury Regulations.
A Member's share of Minimum Gain shall be determined pursuant to the above-
cited Treasury Regulations.
"Name License Agreements" shall mean each of the agreements between the
Company and BOL and between the Company and BN College relating to the right
to use the trade names, trademarks and domain names associated with BOL and
"Barnes and Noble," respectively.
"Net Profits" and "Net Losses" shall mean the income and loss of the
Company as determined in accordance with the accounting methods followed by
the Company for Federal income tax purposes including income exempt from tax
and described in Code Section 705(a)(1)(B), treating as deductions items of
expenditure described in, or under Treasury Regulations deemed described in,
Code Section 705(a)(2)(B) and treating as an item of gain (or loss) the
excess (deficit), if any, of the fair market value of distributed property
over (under) its book value. Depreciation, depletion, amortization, income
and gain (or loss) with respect to Company assets shall be computed with
reference to their book value rather than to their adjusted basis in the
Company.
"Percentage Interest" shall mean a Member's aggregate economic
percentage interest in the Company as set forth on Schedule I hereto as each
such percentage may be adjusted from time to time by the Members by mutual
consent or upon any Transfer by a Member in accordance with the terms of this
Agreement.
"Permitted Encumbrances" shall mean as of a particular date (i)
Encumbrances reflected in the financial statements of the Company (including
purchase money liens which are not overdue as of a particular date or which
are being contested in good faith), (ii) Encumbrances arising out of
contracts entered into in the ordinary course of the Business, (iii)
mechanics', materialmen's or similar inchoate liens relating to liabilities
not yet due and payable and (iv) liens for current taxes not yet delinquent,
to the extent the validity thereof is being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
foreclosure or enforcement of such liens and where adequate reserves are
established and maintained in accordance with GAAP.
"Person" shall mean an individual, sole proprietorship, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, mutual company, joint stock company, estate, union, employee
organization, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, or a Governmental Body.
"Prime Rate" for any period shall mean the interest rate for such period
as announced by Citibank N.A. (or its successors) at its principal office in
New York City as its base rate for loans.
"Restricted Transferee" shall mean amazon.com, inc., Borders Group,
Inc., America Online, Inc. ("AOL"), Microsoft, Inc. or Yahoo, Inc. or any of
their respective Affiliates.
"Software Licenses" shall mean the Software License between the Company
and BOL relating to the exploitation of software owned by the Company and the
Software License between the Company and BOL relating to the exploitation of
software owned by BOL.
"Transfer" shall mean, whether directly or indirectly by merger,
operation of law or otherwise, any sale, assignment, conveyance, transfer,
donation or any other means to dispose of, or pledge, hypothecate or
otherwise encumber in any manner whatsoever, or permit or suffer any
Encumbrance of any interest in the Company (whether profits, management or
Percentage Interest).
"Transition Services Agreement" shall mean the Transition Services
Agreement, dated as of the date hereof, by and between the Company and BN.
"Treasury Regulations" means the regulations promulgated by the U.S.
Department of the Treasury under the Code.
"USO Managers" shall mean, collectively, the Managers designated by USO
pursuant to Section 3.2(a).
"Website" shall mean any interactive site or area, including any
interactive site or area located on the World Wide Web portion of the
Internet or on any commercial service or network (including services such as
AOL), which is accessed via the use of any protocols, standards or platforms
(including Internet or Internet derivative protocols, standards and
platforms) for remote access by narrowband or broadband telecommunications,
including POTS, ISDN, cable, fiber optics and hybrid CD-ROM, regardless of
whether access to such site or area is secured through cable, telephone,
satellite or otherwise and regardless of whether the same is received or
operated in conjunction with a personal computer or television, together with
any successor into which any of the foregoing may evolve.
S USAGE GENERALLY; INTERPRETATION. Whenever the context may require,
any pronoun includes the corresponding masculine, feminine and neuter forms.
All references herein to Articles and Sections shall be deemed to be
references to Articles and Sections of this Agreement unless the context
otherwise requires. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". The words
"hereof", "herein" and "hereunder" and words of similar import when used in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise expressly provided 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 to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to sections of the Code or Treasury
Regulations or is expressly prohibited or ineffective under the LLCL, this
Agreement shall govern, even when inconsistent with, or different from, the
provisions of the LLCL or any other law or rule. To the extent any provision
of this Agreement is prohibited or ineffective under the LLCL, this Agreement
shall be deemed to be amended to the least extent necessary in order to make
this Agreement effective under the LLCL. In the event the LLCL is
subsequently amended or interpreted in such a way to make any provision of
this Agreement that was formerly invalid valid, such provision shall be
considered to be valid from the effective date of such interpretation or
amendment.
II. ORGANIZATIONAL AND OTHER MATTERS; MEMBERSHIP
2.1 FORMATION; ADMISSION. The Company was formed as a limited
liability company under the provisions of the LLCL by the filing on October
27, 1998 of the Certificate of Formation with the Secretary of State of the
State of Delaware. Each of the Persons listed on Schedule I hereto, by
virtue of the execution of this Agreement, are being admitted to the Company
as a Member. The rights and liabilities of the Members shall be as provided
in the LLCL, except as is otherwise expressly provided herein. This
Agreement hereby amends and restates the Original Agreement in its entirety.
2.2 NAME. The name of the Company shall be, and the business of the
Company shall be conducted under the name of, barnesandnoble.com llc.
2.3 BUSINESS PURPOSE/OPERATION.
(a) The purpose of the Company is to engage in the Business
and/or such other businesses as determined by the Board.
(b) The Company shall operate one or more Websites for the purpose
of selling English Language Books.
(c) As soon as reasonably practical, the Websites operated by BOL
and its Affiliates shall allow access to customers of the Company who wish to
order Foreign Language Books, and the Websites operated by the Company shall
promote (in a manner approved by the Board) the availability of Foreign
Language Books which shall be accessed through "hot links", pointers and key
word indexes which transport the customers to one or more Websites operated
by BOL or its Affiliates. BOL and its Affiliates shall be the exclusive
Website to which customers of the Company shall be allowed access with
respect to the Business through any form of links, pointers or key words for
purposes of ordering Foreign Language Books (to the extent that BOL is
capable of servicing such orders), except as may be limited by reason of
applicable laws or agreements relating to sale and distribution of books in
the country to which shipment will be made. If BOL or any of its Affiliates
is unable to provide a certain Foreign Language Book, the Company may provide
access to third-party Websites ("Alternative Site") which offers books in
such language provided that the Company shall discontinue access to such
Alternative Site, and resume BOL's exclusive Website promotion and access for
such Foreign Language Book, at such time as BOL offers books in such foreign
language. In the event that BOL expands to offer music, videos, magazines or
software in languages other than English in the future, the Company may offer
access to such Websites operated by BOL or its Affiliates in the same manner
as available with respect to books. Nothing herein shall obligate BMG Music,
a New York partnership, of which Bertelsmann Music Group, Inc. and Ariola
Eurodisc, Inc. are the partners or any other Person owned directly or
indirectly by BAG which is engaged in the music business (collectively,
"BMG") to conduct business with BOL, the Company or in any manner whatsoever
affect the conduct of business by BMG through a Website.
(d) As soon as reasonably practical, the Websites operated by the
Company shall allow access to customers of BOL and its Affiliates who wish to
order English Language Books, and the Websites operated by BOL and its
Affiliates shall promote (in a manner approved by the applicable Boards) the
availability of English Language Books which shall be accessed through "hot
links", pointers and key word indexes which transport the customers to one or
more Websites operated by the Company. The Company shall be the exclusive
Website to which customers of BOL and its Affiliates shall be allowed access
with respect to the Business through any form of links, pointers or key words
for purposes of ordering English Language Books, except as may be limited by
reason of applicable laws or agreements relating to sale and distribution of
books in the country to which shipment will be made. In the event that the
Company expands to offer music, videos, magazines or software in the English
language in the future, BOL may offer access to such Websites operated by the
Company in the same manner as available with respect to books. Nothing
herein shall obligate BMG to conduct business with BOL, the Company or in any
manner whatsoever affect the conduct of business by BMG through a Website.
(e) Notwithstanding the foregoing, the parties hereto will work
together, in good faith, so that as promptly as practicable following the
Closing, each BOL Website (other than BOL.UK) shall offer its customers
access to English Language Books through two equal sized buttons, one of
which shall access BOL.UK and one of which shall access the Company. In the
case of BOL.UK, there will be a button for barnesandnoble.com of equal size
as other BOL entities.
(f) Orders for English Language Books placed by customers of BOL
or its Affiliates who enter Websites operated by BOL or its Affiliates will
be filled by the Company through the applicable Fulfillment Agreements to be
negotiated in good faith after the Closing Date.
(g) Orders for Foreign Language Books placed by customers of the
Company who enter Websites operated by the Company will be filled by BOL or
its Affiliates through the applicable Fulfillment Agreements to be negotiated
in good faith after the Closing Date.
(h) BN or its Affiliates will provide services for the benefit of
the Company pursuant to that certain Amended and Restated Services Agreement
for BN, Amended and Restated Services Agreement for Marboro and Supply
Agreement entered into in connection herewith.
(i) In order to minimize confusion and maximize name recognition,
the Company shall agree with BOL on cobranding of trademarks and trade names
which will be used by the Company, BOL and its Affiliates, including
identifying an affiliation or a relationship between the Company and BOL on
the first screen and/or home page and for purposes of "bridging screens",
assuring seamless order processing and avoiding confusion to the public.
(j) Either party may engage in any activity relating to
development and exploitation of content, regardless of the medium which is
used (i.e. traditional media or Websites), except that actual sale of books
on Websites will be permitted only as set forth in this Section 2.3 and
Sections 7.7, 7.8 and 7.9.
(k) Nothing herein shall affect the right of either BN, BAG or
their respective Affiliates to engage in any other business, including sale
in any manner whatsoever (including through Websites) of music, videos,
software, magazines or any other product other than books through Websites,
except as provided in Section 2.3(a) relating to Book Clubs.
(l) Notwithstanding anything to the contrary contained herein or
in any of the agreements contemplated to be executed in connection with this
Agreement, BN shall not commingle any of its (or any of its Affiliates')
funds with the funds which it (or any of its Affiliates) collects on behalf
of the Company.
(m) With respect to all existing agreements to which BN (or any of
its Affiliates) is the contracting party for the sole benefit of the Company,
and which are renewed or extended during the term of this Agreement, the
Company shall use its good faith efforts to substitute itself in place of BN
(or its applicable Affiliate) as a party to, and the sole obligor under, such
agreements.
(n) BN Holding and USO are fully aware of, have been advised and
agree that each of them and their respective Affiliates are engaged in, and
may, in the future, conduct activities, which are directly or indirectly
competitive with the Company without any benefit to the Company or its
Members, except to the extent explicitly set forth in this Agreement. Each
party hereby consents to such activity and agrees that such conduct or
competition will not, in and of itself, constitute any breach of corporate or
partnership opportunity, breach of fiduciary responsibility, conflict of
interest, or otherwise, or impose any obligation on BN Holding or USO or
their Affiliates.
2.4 OFFICES. The Company's principal office shall be located at
76 Ninth Avenue, 11th Floor, New York, New York 10011. The Company may have
other offices at such other places within or without the State of New York as
the Board (as hereinafter defined) from time to time may select.
2.5 TERM. The Company commenced on the date of the filing of the
Certificate of Formation, and the term of the Company shall continue until
the close of business on January 31, 2049, subject to extension under Section
9.1(a), or until the earlier dissolution of the Company in accordance with
the provisions of ARTICLE IX hereof or as otherwise provided by law.
2.6 MEMBERS. The Members of the Company as of the date of this
Agreement are BN Holding and USO. Subject to the prior written consent of
all Members, a new Person may be admitted from time to time as a Member; pro-
vided, however, that each such new Member shall execute an appropriate
supplement to this Agreement pursuant to which the new Member agrees to be
bound by the terms and conditions of this Agreement, as it may be amended
from time to time. Admission of a new Member shall not be cause for the
dissolution of the Company.
2.7 PLACE OF MEMBERS' MEETINGS. Meetings of the Members (each, a
"Members' Meeting") shall be held at the principal office of the Company, or
at such other place as the Members shall mutually agree.
2.8 MEETINGS. A Members' Meeting may be called by any Member for
any matter which is appropriate for consideration thereat. Members' Meetings
shall be held from time to time, but no fewer than once in each calendar
year. Meetings shall be chaired by the Chairman of the Board, and the
Secretary of the Meeting shall be appointed by the Chairman.
2.9 TELEPHONIC MEETINGS. Members' Meetings may be held through
the use of conference telephone or similar communications equipment so long
as all Persons participating in such Members' Meetings can hear one another
at the time of such Members' Meeting. Participation in a Members' Meeting
via conference telephone or similar communications equipment in accordance
with the preceding sentence constitutes presence in person at the Members'
Meeting.
2.10 NOTICE OF MEETINGS. Written notice of each Members' Meeting
shall state the place, date and hour of such Members' Meeting, and the
general nature of the business to be transacted. Notice shall be given in
the manner prescribed in Section 11.2 hereof not fewer than ten (10) days nor
more than sixty (60) days before the date thereof.
2.11 WAIVERS. Notice of a Members' Meeting need not be given to
any Member who signs a waiver of notice, in person or by proxy, whether
before or after the Members' Meeting. The attendance of any Member at a
Members' Meeting, in person or by proxy, without protesting prior to the
conclusion of such Members' Meeting the lack of notice of such Members'
Meeting, shall constitute a waiver of notice by such Member, provided that
such Member has been given an adequate opportunity at the meeting to protest
such lack of notice.
2.12 QUORUM. A Majority in Interest of the Members shall
constitute a quorum at a Members' Meeting for the transaction of any
business; provided, however, that in order to constitute a quorum, each of
such Members must be represented in person or by proxy. A Majority in
Interest of the Members present may adjourn the Members' Meeting, whether or
not a quorum is present. An adjournment may include notice of the date, hour
and place that the Members shall reconvene. Notice of the adjournment (with
the new date, time and place) shall be given to all Members who were absent
at the time of the adjournment and, unless such date, hour and place are
announced at the Members' Meeting, to the other Members.
2.13 PROXIES. Every Member entitled to vote at a Members' Meeting
may authorize another Person or Persons to act for it by proxy. Every proxy
must be signed by the Member or his attorney-in-fact. No proxy shall be
valid after the expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable in writing
at the pleasure of the Member executing it.
2.14 VOTING POWER. Each Member shall be entitled to vote in
proportion to such Member's Percentage Interest.
2.15 WRITTEN CONSENT. Any action required or permitted to be
taken at any Members' Meeting may be taken without a meeting if all Members
consent thereto in writing. Any such written consents shall be filed with
the minutes of the proceedings.
ARTICLE III. BOARD OF MANAGERS; POWERS; VOTING; MEETINGS
3.1 BOARD OF MANAGERS/CHAIRMAN.
(a) The business, property and affairs of the Company shall be
managed under the direction of the Board of Managers (the "Board") consisting
of six (6) Managers (the "Managers").
(b) Without limiting the foregoing provisions of this Section 3.1,
the Managers shall have the general power to manage or cause the management
of the Company within the scope of the business purpose set forth in Section
2.3, including the following powers which may, subject to any limitations set
forth in this Agreement (including those set forth in Section 3.11(b) and
4.6), be delegated to the officers of the Company:
(i) To have developed and prepared a Business Plan each year
which will set forth the operating goals and plans for the Company;
(ii) To execute and deliver or to authorize the execution and
delivery of contracts, deeds, leases, licenses, instruments of transfer and
other documents in the ordinary course of business on behalf of the Company;
(iii) To employ, retain, consult with and dismiss such
personnel as may be required for accomplishment of the business purpose set
forth in Section 2.3, subject to the provisions of Section 3.11(b);
(iv) To establish and enforce limits of authority and internal
controls with respect to all personnel and functions;
(v) To engage attorneys, consultants and accountants for the
Company;
(vi) To develop or cause to be developed accounting procedures
for the maintenance of the Company's books of account;
(vii) To appoint auditors; and
(viii) To do all such other acts as shall be specifically
authorized in this Agreement or by the Members in writing from time to time.
(c) The Board will elect Mr. Leonard Riggio as its first
Chairman. Each subsequent Chairman will be nominated by the BN Managers and
shall be elected as the Chairman of the Company by the Managers unless the
USO Managers reject such nominee for good reason. In the event that Mr.
Leonard Riggio ceases to serve as the Chairman, USO agrees that it will not
reject the election of Mr. Stephen Riggio as Chairman.
3.2 ELECTION AND TERM OF MANAGERS; COMMITTEE MEMBERS.
(a) (i) Each of USO and BN Holding shall be entitled to
designate three (3) Managers. Each of USO and BN Holding hereby agrees to
vote its respective Membership Interests and take whatever action may be
necessary in respect of its Membership Interest to cause the election or
removal of all such designees as contemplated by this Article III.
(ii) If either Member Transfers a percentage of its
Membership Interest which is equal to more than ten percent (10%) of the
aggregate Membership Interests in the Company to any Person (other than an
Affiliate as permitted by Section 7.2(a)), then the transferring Member will
lose the right to elect one of its three (3) Managers and the number of
Managers on the Board of Managers will be reduced to five (5) by automatic
resignation of one of the Managers designated by the transferring Member
(such resigning Manager to be selected by the transferring Member within ten
(10) days prior to the transfer). In the absence of such notice, the
nontransferring Member shall designate the resigning Manager. Upon such
reduction, the nomination rights, restrictions on nomination and election of
the Chairman and CEO (whichever is applicable with respect to the
transferring Member) and, thereafter, all other governance provisions,
including the provisions of Section 3.11(b), shall be eliminated, and all
such decisions shall be made by majority vote of the Board of Managers.
(b) Each Member who is entitled to designate a Manager or
Committee Member pursuant to Section 3.15 hereof, shall have the authority to
designate a successor to that Manager or Committee Member should such Manager
or Committee Member resign, be removed or otherwise no longer be a Manager or
Committee Member of the Company. In addition, at the request of a Member who
desires to remove a Manager or Committee Member designated by such Member and
designate a successor Manager or Committee Member, the Members agree to take
all necessary action to remove such Manager or Committee Member and appoint
the successor Manager or Committee Member.
(c) The initial Board shall be constituted as set forth on
Schedule 3.2.
3.3 VACANCIES. Vacancies occurring on the Board or any Committee
thereof, for any reason, shall be filled by the Member which appointed the
Manager whose resignation, death or removal caused such vacancy.
3.4 REMOVAL OF MANAGERS AND COMMITTEE MEMBERS. A Manager or Committee
Member may be removed at any time for any or no reason by the Member which
appointed such Manager or Committee Member.
3.5 RESIGNATION. A Manager or Committee Member may resign at any time
by giving written notice to the Members and the Company. Unless otherwise
specified in such notice or consent, the resignation shall take effect upon
receipt of such notice by all of the Members.
3.6 PLACE OF MEETINGS. Unless otherwise agreed by each of the Members
or each Committee Member in the case of a Committee Meeting (as hereinafter
defined), Meetings of the Board (each, a "Board Meeting") and any committees
thereof (each a "Committee Meeting") shall be held at the principal office of
the Company.
3.7 MEETINGS. A Board Meeting may be called by any Manager or by the
Chief Executive Officer. Board Meetings shall be held from time to time,
but no fewer than once in any calendar quarter. Committee Meetings may be
called by a member thereof, or by the Board or by the Chief Executive
Officer. Meetings shall be chaired by the Chairman of the Board, and the
Secretary of the Meeting shall be appointed by the Chairman.
3.8 TELEPHONIC MEETINGS. Board Meetings and Committee Meetings may be
held through the use of conference telephone or similar communications
equipment so long as all Persons participating in such Board Meetings and
Committee Meetings can hear one another at the time of such Board Meeting or
Committee Meeting. Participation in such Board Meeting or Committee Meeting
via conference telephone or similar communications equipment in accordance
with the preceding sentence constitutes presence in person at the Board
Meeting or Committee Meeting.
3.9 NOTICE OF MEETINGS. Written notice of each Board Meeting and
Committee Meeting shall state the place, date and hour of such Board Meeting
or Committee Meeting, and the general nature of the business to be
transacted. Notice shall be given in the manner prescribed in Section 11.2
hereof to each of the Managers and the Members at the addresses set forth
therein and, in the case of the Managers, to their addresses appearing on the
records of the Company and not fewer than ten (10) days (provided that in
case of an economic emergency, the notice period may be reduced to twenty-
four (24) hours at the request of a Member) nor more than sixty (60) days
before the date thereof.
3.10 WAIVERS. Notice of a Board Meeting need not be given to any
Manager or Committee Member who signs a waiver of notice, in person or by
proxy, whether before or after the Board Meeting or Committee Meeting. The
attendance of any Manager or Committee Member at a Board Meeting or Committee
Meeting, in person or by proxy, without protesting prior to the conclusion of
such Board Meeting or Committee Meeting the lack of notice of such Board
Meeting or Committee Meeting, shall constitute a waiver of notice by such
Manager or Committee Member, provided that such Manager or Committee Member
has been given an adequate opportunity at the meeting to protest such lack of
notice.
3.11 QUORUM; BOARD ACTION.
(a) A majority of the Managers shall constitute a quorum at a
Board Meeting for the transaction of any business. A majority of the
Managers present may adjourn the Board Meeting, whether or not a quorum is
present. An adjournment may include notice of the date, hour and place that
the Managers shall reconvene. Notice of the adjournment (with the new date,
time and place) shall be given to all Managers who were absent at the time of
the adjournment and, unless such date, hour and place are announced at the
Board Meeting, to the other Managers. Except as otherwise expressly provided
in this Agreement, the vote of a majority of the Managers present at a
meeting at which a quorum is present shall be the act of the Board, provided
that such majority must contain at least one BN Manager and one USO Manager.
The Board shall keep a written record of its proceedings.
(b) Without the prior affirmative majority vote of each of the BN
Managers and the USO Managers then in office, the Company shall not, and
shall not permit any subsidiary to, and no officer, employee or agent of the
Company or any subsidiary thereof shall, take any of the actions specified in
Schedule 3.11(b).
(c) If the Board is unable to resolve any material matter subject
to approval under Section 3.11(b), the matter shall be referred to the
Chairman and Chief Executive Officer of BN Holding and USO, respectively, for
resolution, which resolution shall be final and binding on the Members.
3.12 PROXIES. Every Manager entitled to vote at a Board Meeting or a
Committee Meeting may authorize another Manager or Managers to act for him by
proxy. Every proxy must be signed by the Manager or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven (11) months from the
date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable in writing at the pleasure of the Manager executing it.
3.13 VOTING POWER. Each Manager of record shall be entitled to one
vote.
3.14 WRITTEN CONSENT. Any action required or permitted to be taken at
any Board Meeting or Committee Meeting may be taken without a meeting if all
Managers or Committee Members consent thereto in writing. Any such written
consents shall be filed with the minutes of the proceedings of the Board or
Committee.
3.15 COMMITTEES. The Board may, by resolution passed by a majority of
the whole Board, designate two or more of their Managers to constitute
committees of the Board to hold office at the pleasure of the Board;
provided, however, that each such Committee shall have at least one member (a
"Committee Member") designated by USO and one member designated by BN
Holding. Any Person ceasing to be a Manager shall ipso facto cease to be a
member of each Committee of which they were a member. A majority of the
members of a Committee shall constitute a quorum; provided at least one
Committee Member designated by USO and one Committee Member designated by BN
Holding are present. The act of a majority of the members of a Committee
present at any meeting at which a quorum is present shall be the act of such
Committee. The members of a Committee shall act only as a Committee, and the
individual members thereof shall not have any powers as such. A Committee
may act on such matters as authorized by the Board; provided, however, a
Committee may not act on any matter requiring Board approval under Section
3.11(b).
3.16 COMPENSATION. No Manager rendering services to the Company shall
be entitled to compensation for services rendered in his capacity as a
Manager or Committee Member. Each Member shall be responsible for the
compensation and expenses of its representatives on the Board or any
Committee thereof.
ARTICLE IV. OFFICERS AND EMPLOYEES
4.1 CHIEF EXECUTIVE OFFICER; ELECTION. USO will have the right to
nominate the Chief Executive Officer of the Company for approval by the Board
of Managers. The individual nominated by USO will be elected as the Chief
Executive Officer of the Company unless the BN Managers reject a nominee for
good reason. The terms of employment of the Chief Executive Officer will be
negotiated by the Chairman and shall be subject to Board approval.
4.2 OTHER OFFICERS AND EMPLOYEES. In addition to the Chief Executive
Officer, the Board may appoint such other officers as they may from time to
time determine to be appropriate.
4.3 REMOVAL OF OFFICERS AND EMPLOYEES; RESIGNATION.
(a) Any person serving as Chief Executive Officer shall be removed
by the Board of Managers upon the request of (i) the Chairman of the Board,
due to the failure of the Chief Executive Officer to perform his duties in a
manner satisfactory to the Chairman; or (ii) the majority of the Board of
Managers, due to the failure of the Chief Executive Officer to perform his
duties in a manner satisfactory to a majority of the Board of Managers.
(b) Any person serving as any other officer or employee appointed,
hired or otherwise approved by the Board shall cease to serve in such
position upon the written notification at any time by the Board. Any officer
or employee hired by the Company without requirement of approval by the Board
may be dismissed at any time by the Chief Executive Officer.
(c) The Chief Executive Officer may resign by giving written
notice to the Board. Unless otherwise specified in such notice, the
resignation shall take effect upon the receipt of such notice by the Board,
and the acceptance of the resignation shall not be necessary to make it
effective.
4.4 DUTIES; POWERS OF CHIEF EXECUTIVE OFFICER AND CHAIRMAN.
(a) The Chief Executive Officer shall implement all orders and
resolutions of the Board. As long as the name of the Company (or the
business operated thereunder) includes the name "Barnes and Noble" or any
substantially similar name or derivation thereof, subject to the terms and
conditions of this Agreement, including Sections 3.11(b) and 4.6, the Chief
Executive Officer shall report to the Chairman of the Board, who will be the
representative of the Board in reviewing the day-to-day affairs of the
business of the Company. As long as the name of the Company (or the business
operated thereunder) uses the name "Barnes and Noble, or any substantially
similar name or derivation thereof, the Chairman may direct the Chief
Executive Officer in accordance with the guidelines and Business Plan
established by the Board, subject to Sections 3.11(b) and 4.6.
(b) Any matters involving a contractual relationship between the
Company and any of the Members or any of their Affiliates shall either be on
the terms set forth herein, an agreement entered into pursuant to this
Agreement or on an arm's length basis and, if in excess of $50,000, such
matter shall be subject to the approval of the Board of Managers.
4.5 MANAGEMENT POLICIES
(a) The Chief Executive Officer and other officers and employees
of the Company shall develop and implement management policies consistent
with the general policies and programs established by the Board.
(b) To the extent specifically requested by the Board or the
Chairman, the Chief Executive Officer shall attend all meetings of the Board.
The Board or the Chairman may also request any other Person (including
officers and employees of the Company) to attend any meeting of the Board.
4.6 RESTRICTED ACTIVITIES. Any variance from the license agreement
relating to the name "Barnes & Noble", or any substantially similar name or
derivation thereof, shall require the approval of the BN Managers.
4.7 SPECIAL MANAGEMENT PROVISIONS. Notwithstanding anything to the
contrary contained in Article IV, the following actions shall at all times
be taken by the party indicated below, by or on behalf of the Company,
without the approval, consent or authorization by the other party (including
in such party's capacity as a Member) or its designees on the Board or any
Committee:
(a) Subject to Section 4.4(b), all action with respect to the
execution, delivery, or termination in accordance with the terms of any
agreement between BN Holding (or any of its Affiliates) and the Company shall
be taken solely pursuant to the direction of USO, and BN Holding shall cause
its Members to take such action by or on behalf of the Company as is directed
by USO.
(b) Subject to Section 4.4(b), all action with respect to the
execution, delivery, or termination in accordance with the terms of any
agreement between USO (or any of its Affiliates) and the Company shall be
taken solely pursuant to the direction of BN Holding, and USO shall cause its
Members to take such action by or on behalf of the Company as is directed by
BN Holding.
(c) The appointment and dismissal of the Chief Executive Officer
shall be governed by the provisions of Sections 4.1 and 4.3(a). The
appointment of the Chairman shall be governed by the provisions of Section
3.1(c).
(d) Subject to Section 4.4(b), all action with respect to matters
relating to the enforcement or waiver of any rights granted the Company under
an agreement with USO (or any of its Affiliates) shall be taken solely
pursuant to the direction of BN Holding, and USO shall cause its Members to
take such action as is directed by BN Holding.
(e) Subject to Section 4.4(b), all action with respect to matters
relating to the enforcement or waiver of any rights granted the Company under
an agreement with BN Holding (or any of its Affiliates) shall be taken solely
pursuant to the direction of USO, and BN Holding shall cause its Members to
take such action as is directed by USO.
ARTICLE V. FINANCE AND CAPITAL
5.1 CAPITAL CONTRIBUTIONS.
(a) The Members have made, on or prior to the date
hereof, capital contributions or acquired Membership Interests as specified
opposite their respective names on Schedule I hereto, including cash and
certain other assets all as set forth on Schedule I hereto.
(b) One Hundred Fifty Million shall be paid on the
Closing Date by USO to the Company as a capital contribution. Fifty Million
Dollars ($50 million) of USO's initial capital contribution shall be placed
in a segregated account of the Company (the "Reserve Account"). Withdrawals
from the Reserve Account may only be made in accordance with Section
5.3(a)(ii) and (iii). The funds in the Reserve Account shall be invested as
directed by the BN Managers in their sole discretion.
5.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as set forth in
Section 5.3, no Member shall be required or permitted to make additional
capital contributions to the Company without the consent of all of the
Members.
5.3 DRAWDOWN AND PAYMENT OF AGREED CAPITAL
CONTRIBUTIONS.
(a) (i) USO has agreed to make additional cash capital
contributions to the Company in amounts not to exceed, in the aggregate, the
sum of Fifty Million Dollars ($50 million). USO agrees that it will cause
such contribution to be made within two (2) Business Days after receipt of a
request signed by each of the Chairman and Chief Executive Officer of the
Company specifying the amount to be contributed by USO and the account to
which such amount shall be remitted. In no event shall the individual
obligation of USO under this Section 5.3 exceed, in the aggregate, the sum of
Fifty Million Dollars ($50 million).
(ii) Concurrently with any USO additional contribution
referred to in Section 5.3(a)(i), an equal amount shall be released to the
Company from the principal portion of the Reserve Account, together with
interest earned thereon as is reasonably allocable to such principal portion,
for use, in accordance with the Business Plan, as determined by the Chairman
and CEO of the Company. In the event that the principal portion of the
amount on deposit in the Reserve Account is less than the amount of such
additional USO contribution, then, in addition to releasing to the Company
the full amount of the Reserve Account, BN Holding agrees to contribute to
the Company as an additional capital contribution the amount of any such
deficiency, concurrently with such USO additional contribution.
(iii) Subject to Section 5.3(a)(ii), the remaining amount of
the principal on deposit in the Reserve Account (or any portion thereof) may
be paid to BN Holding at any time and from time to time after the six (6)
month anniversary of the date hereof if the BN Managers shall determine, in
their sole discretion, that such funds to be paid to BN Holding are no longer
needed by the Company. Any interest earned in the Reserve Account on the
principal paid to BN Holding shall be released to the Company at the time of
such payment. Unless otherwise agreed by the Managers, the amount (if any)
on deposit in the Reserve Account on January 1, 2001 shall be paid by the
Company to BN Holding on such day.
(b) In the event that a party defaults (a "Defaulting Party") for
a period of more than fifteen (15) days after notice from the Company or the
other party (the "Non-Defaulting Party") in satisfying a funding obligation
imposed on the Defaulting Party under the terms of this Agreement (regardless
of when and how such a default or failure occurs), the Non-Defaulting Party
shall be entitled, in connection with such funding obligation, to take all
necessary and available remedies to enforce the obligation of the Defaulting
Party for and on behalf of itself or the Company. Such failure to fund shall
constitute a material breach of this Agreement.
(c) The Non-Defaulting Party may, but shall not be required to,
satisfy the funding obligation of the Defaulting Party, in which case neither
party's percentage ownership interest in the Company shall change and the
Defaulting Party shall be obligated to reimburse the Non-Defaulting Party for
all amounts so funded together with interest thereon (at the rate provided
for herein) to the date of repayment.
(d) During the fifteen (15) day period described in Section 5.3(b)
and such longer period until the Defaulting Party cures said default or the
Non-Defaulting Party effectuates the remedies described in Section 5.3(b), as
applicable, the funding which is not made shall bear interest at five
percent (5%) over the Prime Rate and such interest shall be paid by the
Defaulting Party to the Company or the Non-Defaulting Party upon demand. In
the event that such interest rate is in excess of the legally permissible
rate of interest in New York, the rate of interest applicable under this
Section 5.3(d) shall be the highest rate allowed by New York State law.
(e) A Defaulting Party shall remain fully liable to the Company,
in proportion to its interest in the Company, for further funding obligations
to be made by the parties following such failure to fund pursuant to this
Agreement.
(f) This Section 5.3 provides a specific remedy only with respect
to funding obligations imposed pursuant to the terms and conditions of this
Agreement.
(g) Subject to Section 4.7, in the event that a party is a
Defaulting Party under Section 5.3, then, for a period which is equal to two
(2) times the period from the date on which such funding should originally
have been made to the date of cure, the right of the Defaulting Party to
grant or withhold consent to the matters requiring joint action set forth in
Sections 3.11(b) shall be suspended. Notwithstanding the foregoing, the
provisions of Sections 4.6 and 4.7 shall continue to apply in accordance with
their terms.
5.4 MEMBERS' CAPITAL ACCOUNTS. No Member shall have any right to
withdraw any portion of its Capital Account, except as otherwise provided
herein. For purposes hereof, "Capital Account" shall mean the separate
capital account maintained for each Member in accordance with Treasury
Regulations (as hereinafter defined) Section 1.704-1(b), as of any particular
date. Each Member's initial Capital Account (as determined immediately after
all of the events described in Section 5.1 hereof) is set forth on Schedule
I, which initial Capital Accounts apply the principles of Treasury Regulation
Section 1.704-1(b)(2)(iv)(d) (except as otherwise set forth therein) and
thereafter such Capital Accounts shall be adjusted as follows:
(a) The Capital Account of each Member shall be increased by:
(i) The amount of any Net Profits, allocated on or after
the date hereof to such Member;
(ii) The amount, if any, of any Company liabilities
assumed by such Member or taken subject to or in connection with the
distribution of property to such Member by the Company on or after the date
hereof;
(iii) The amount of any cash contributed by the Member to
the Company; and
(iv) The fair market value of property contributed to the
Company by such Member on or after the date hereof.
(b) The Capital Account of each Member shall be decreased by:
(i) The amount of cash distributed to such Member by the
Company on or after the date hereof;
(ii) The amount of any Net Losses allocated to such
Member on or after the date hereof;
(iii) The fair market value of any property distributed to
such Member by the Company on or after the date hereof; and
(iv) The amount of any liabilities of such Member assumed
by the Company or taken subject to or in connection with the contribution of
property by such Member to the Company on or after the date hereof.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations under Section 704(b) of the Code and, to the extent not
inconsistent with the provisions of this Agreement, shall be interpreted and
applied in a manner consistent with such Treasury Regulations.
5.5 PROFITS/LOSSES.
(a) Allocation of Income and Loss.
(i) Net Profits shall be allocated among the Members in
proportion to their Percentage Interests.
(ii) Net Losses shall be allocated among the Members in
proportion to their Percentage Interests.
(b) Tax credits, if any, shall be allocated among the Members
in proportion to their Percentage Interests.
(c) When the book value of a Company asset differs from its
basis for Federal or other income tax purposes, solely for purposes of the
relevant tax and not for purposes of computing Capital Account balances,
income, gain, loss, deduction and credit shall be allocated among the Members
under the traditional method with remedial allocations under Treasury
Regulation Section 1.704-3(d). The Members agree that, as of the date hereof,
all such differences relate to goodwill, and the corresponding remedial
allocations shall be made ratably over a fifteen (15) year period.
(d) Determinations by the Members. All matters concerning the
allocation of Net Income and Net Loss among the Members, tax elections
(except as may otherwise be required by the income tax laws) and accounting
procedures not expressly and specifically provided by the terms of this
Agreement, shall be determined in good faith by the Members, and on a basis
which is in conformity with the requirements imposed under Code Section 704
and the Treasury Regulations thereunder as equitably applied among the
Members.
(e) Interest. Except for interest payable pursuant to Member
loans permitted to be made hereunder, no interest shall be paid by the
Company on capital contributions, balances in Member's Capital Accounts or
any other funds contributed to the Company or distributed or distributable by
the Company under this Agreement.
(f) Minimum Gain Chargeback. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), if there is a net
decrease in Minimum Gain during a taxable year of the Company (including any
Minimum Gain attributable to Member-Funded Debt), each Member at the end of
such year shall be allocated, before any other allocations of Net Profits or
Net Losses for such year, items of income and gain for such year (and, if
necessary, subsequent years) in the amount and in the proportions described
in Section 1.704-2(f) of the Treasury Regulations.
(g) Qualified Income Offset. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), no allocation of an
item of loss or deduction shall be made to a Member to the extent such
allocation would cause or increase a deficit Capital Account balance in such
Member's Capital Account as of the end of the taxable year to which such
allocation relates, after taking into account any adjustment, allocation or
distribution described in Section l.704-1(b)(2)(ii)(d)(4), (5) or (6) of the
Treasury Regulations, and if any such adjustment, allocation or distribution
unexpectedly occurs, the Members shall be allocated items of income and gain
in an amount and manner to eliminate any Capital Account deficit attributable
to such adjustment, allocation or distribution as quickly as possible. For
purposes of this Section 5.5(g), there shall be excluded from a Member's
deficit Capital Account balance at the end of a taxable year of the Company
(x) such Member's share, determined in accordance with Section 704(b) of the
Code and Section 1.704-2(g) of the Treasury Regulations, of Minimum Gain
(provided that in the case of Minimum Gain attributable to Member-Funded
Debt, such Minimum Gain shall be allocated only to the Member or Members to
which such debt is attributable pursuant to Section 1.704-2(i) of the
Treasury Regulations); (y) the amount of any loans (other than Member-Funded
Debt) for which such Member is personally liable (whether as a result of a
guarantee or otherwise); and (z) the amount such Member is obligated to
restore to the Company under Section 1.704-l(b)(2)(ii) of the Treasury
Regulations.
(h) Member-Funded Debt. Notwithstanding the allocations
provided for in Section 5.5(a), (b), (c), (d) or (e), if there is a net
increase in Minimum Gain during a taxable year of the Company that is
attributable to Member-Funded Debt then, first depreciation, to the extent
the increase in such Minimum Gain is allocable to depreciable property, and
then a proportionate part of other deductions and expenditures described in
Section 705(a)(2)(B) of the Code, shall be allocated to the lending or
guaranteeing Member, provided that, the total amount of deductions so
allocated for any year shall not exceed the increase in Minimum Gain
attributable to such Member-Funded Debt in such year.
(i) Regulatory Allocations. The allocations set forth in
Sections 5.4(f), (g) and (h) (the "Regulatory Allocations") are intended to
comply with certain requirements of Section 1.704-1(b) of the Treasury
Regulations. The Regulatory Allocations shall be taken into account in
allocating other Net Profits and Net Losses so that, to the extent possible,
the net amount of such other allocations and the Regulatory Allocations to
each Member shall be equal to the net amount that would have been allocated
to such Member if the Regulatory Allocations had not been made.
(j) Special Allocations. If the remedial allocation
provisions of Section 5.5(c) or the provisions of Section 6.8(b) shall not
apply in the manner contemplated by the parties, then notwithstanding
Section 5.5(a), Net Profits and Net Losses or items of income, gain,
deduction or loss shall be allocated among the Members so that the tax
consequences are as nearly as possible identical to those tax consequences
contemplated by the parties.
5.6 BANKING; INVESTMENTS. All funds of the Company shall be deposited
in such bank account or accounts, or invested, and withdrawals from any such
bank account shall be made upon such signature or signatures, as shall be
established and designated by the Board, subject to Sections 5.1(c) and
5.3(a)(ii) and (iii).
5.7 DISTRIBUTIONS.
(a) Except as otherwise required by law or as provided in this
Agreement (including Section 5.3(a)(iii)), no Member shall have any right to
withdraw any portion of its Capital Account without the consent of all the
other Members.
(b) The Company shall, within ninety (90) days after the end
of each Fiscal Year (the "Distribution Period"), distribute Distributable
Cash as of the date of the proposed distribution, to each Member in
proportion to such Member's Percentage Interest.
5.8 RETURN OF CONTRIBUTION. Except as required by the LLCL, no Member
shall be personally liable for the return of any capital contribution, or any
portion thereof, or the return of any additions to the Capital Accounts of
the other Members, or any portion thereof, it being agreed that any return of
capital as may be made at any time, or from time to time, shall be made
solely from the assets of the Company, and only in accordance with the terms
hereof.
5.9 BUSINESS PLAN.
(a) Business Plan. The Business Plan is annexed to the
Disclosure Letter as Schedule 5.9(a) and is hereby adopted and approved by
the Members. No later than October 1st of each Fiscal Year beginning with
October 1, 2000, the Chief Executive Officer shall furnish to the Board a
Business Plan for the following Fiscal Year which shall be prepared in a
manner substantially similar to and contain the same level of detail as that
set forth in the Business Plan annexed to the Disclosure Letter. Such
Business Plan shall be subject to the review and approval of the Board. If
the Board approves any Business Plan item, the Company may make the capital
and other expenditures set forth in the Business Plan with respect to such
item, provided it has the necessary funds or can borrow such funds if
authorized by the Board in accordance with this Agreement, from third-party
lenders. A Member shall not be under any obligation to cause a vote in favor
of modifying a Business Plan once it has been adopted by the Board, it being
agreed that such decision is within the sole discretion of each Member.
(b) Other Reports. The Chief Executive Officer shall also
furnish to the Board such other reports and budgets as the Board may request
from time to time.
ARTICLE VI. ACCOUNTING; TAX MATTERS
6.1 BOOKS; FISCAL YEAR. The Company shall maintain complete and
accurate books of account of the Company's affairs at the Company's principal
place of business. Such books shall be kept in accordance with U.S. GAAP.
The Company's accounting period for tax purposes shall be the Fiscal Year.
The Company's accounting year for all other purposes shall be the Fiscal
Year, however, the Company shall also report its results for the twelve (12)
month period ended as of June 30 of each year in German GAAP.
6.2 REPORTS. The Company shall close the books of account after the
close of each month in each Fiscal Year. The Company shall prepare and
distribute to each Member a monthly statement of such Member's distributive
share of income and expense for income tax reporting purposes, as well as a
report on sales, income, expenses and other reports as are normally prepared
for USO and BN Holding and in sufficient detail to permit each of USO and BN
Holding to report its respective share of income, expense and such other GAAP
items as each of USO and BN Holding may reasonably request. Such information
shall be made available to each Member no later than fourteen (14) days after
the end of each month (provided that the Company shall have twenty-one (21)
days until June 30, 1999 and eighteen (18) days until December 31, 1999,
respectively, after each month end) and no later than August 15 of each
Fiscal Year in respect of such Fiscal Year. After the end of each Fiscal
Year, the Company shall send to each Member a report indicating such
information with respect to the Member as is necessary for purposes of
reporting such amounts for federal, state and local income tax purposes.
6.3 COMPANY INFORMATION. Upon reasonable request, the Company shall
supply to any Member information regarding the Company, its sales, receipts,
payments, all accounting information and records as well as all activities of
the Company. Each Member and its representatives shall have free access
during normal business hours to discuss the operations and business of the
Company with employees or agents of the Company, and to inspect, audit or
make copies of all books, records and other information relative to the
operations and business of the Company at their own expense; provided,
however, that each Member shall preserve the confidentiality of such
information. The Chairman of the Board of Managers or the Chief Executive
Officer shall provide all information requested by a Member.
6.4 RECORDS. The Company shall keep or cause to be kept appropriate
books and records in accordance with the LLCL with respect to the Company's
business, which books and records shall at all times be kept at the principal
office of the Company. Without limiting the foregoing, the Company shall
keep at its principal office the following:
(a) a current list of the full name and the last known street
address of each Manager and Member;
(b) a copy of the Certificate of Formation and this Agreement
and all amendments thereto;
(c) copies of the Company's federal, state and local income
tax returns and reports, if any, for the three most recent Fiscal Years;
(d) copies of any financial statements, if any, of the Company
for the six most recent Fiscal Years; and
(e) such other documents with respect to the Company's
business as may reasonably be required from time to time by Board resolution.
6.5 TAX CHARACTERIZATION. It is intended that the Company be
characterized and treated as a partnership for, and solely for, U.S. federal,
state and local income tax purposes. For such purpose, (i) the Company shall
be subject to all the provisions of Subchapter K of Chapter 1 of Subtitle A
of the Code, and (ii) all references to a "Partner," to "Partners" and to the
"Partnership" in the provisions of the Code and Treasury Regulations cited in
this Agreement shall be deemed to refer to a Member, Members and the Company,
respectively.
6.6 TAX RETURNS. The Members shall provide each other with copies of
all correspondence or summaries of other communication with any taxing
authority regarding any aspect of items of Company income, gain, loss or
deduction and no Member shall enter into settlement negotiations with respect
to the tax treatment of any Company item of income, gain, loss or deduction
without first giving reasonable advance notice of such intended action to the
other Members.
6.7 TAX MATTERS PARTNER. Pursuant to Code Section 6231(a)(7)(A), the
Board of Managers shall designate the "Tax Matters Partner" of the Company
for all purposes of the Code and any corresponding state or local statute.
Each Member consents to such designation and agrees to take such further
action as may be required, by regulation or otherwise, or as may be requested
by either Member, to effectuate such designation. The Tax Matters Partner
shall cooperate with the other Member and shall promptly provide the other
Member with copies of notices or other materials from, and inform the other
Member of discussions engaged in with, any taxing authority and shall provide
the other Member with notice of all scheduled administrative proceedings,
including meetings with agents, technical advice conferences and appellate
hearings, as soon as possible after receiving notice of the scheduling of
such proceedings. The Tax Matters Partner will schedule such proceedings
only after consulting the other Member with a view to accommodating the
reasonable convenience of both the Tax Matters Partner and the other Member.
The Tax Matters Partner shall not agree to extend the period of limitations
for assessments; file a petition or complaint in any court; file a request
for an administrative adjustment of partnership items after any return has
been filed; or enter into any settlement agreement with respect to Company
items of income, gain, loss or deduction except at the direction of the
Board. The Tax Matters Partner may request extensions to file any tax return
or statement without the written consent of, but shall so inform, the Board.
The provisions of this Agreement regarding the Company's tax returns shall
survive the termination of the Company and the transfer of either Member's
interest in the Company and shall remain in effect for the period of time
necessary to resolve any and all matters regarding the taxation of the
Company and items of Company income, gain, loss and deduction.
6.8 TAX ELECTIONS.
(a) The Board shall determine in accordance with Section
3.11(b) whether to make any available tax election.
(b) The Company shall, at the written request of BN Holding or
USO, file a written statement (the "Section 754 Election"), signed by a
Manager, setting forth (i) the name and address of the Company, (ii) a
declaration that the Company elects under Section 754 to apply the provisions
of Section 734(b) and Section 743(b) and (iii) such other information as may
be required under Treas. Reg. Section 1.754-1. The Company shall file the
Section 754 Election with its tax return for the taxable year during which
the election is to be effective. The Section 754 Election, once made, may
not be revoked without the consent of the Internal Revenue Service, and
applies to all subsequent distributions of Company property and permitted
ownership Transfers. The Company shall allocate such special basis
adjustments under Section 734(b) and Section 743(b) pursuant to Section 755.
The Members agree that a Section 754 Election shall be made with respect to
the Company's Fiscal Year which includes USO's purchase from
barnesandnoble.com inc. of a 21.42857% Membership Interest.
(c) The Company shall pay all costs incurred by the Company in
connection with such special basis adjustments arising from such permitted
ownership Transfers or distributions, including reasonable attorneys' and
accountants' fees. In addition, both the transferor and the transferees of a
permitted ownership interest Transfer (or the transferee of any Company
distribution) shall (within sixty (60) days of such permitted Transfer or
distribution), provide the Company with complete and accurate information
regarding such Transfer (or distribution) to enable the Company to make
special basis adjustments and other computations in connection therewith.
ARTICLE VII. TRANSFERS/EXCLUSIVITY/NONCOMPETITION
7.1 PROHIBITED TRANSFERS. Except as expressly permitted in this
Agreement, no Member or any of their respective Affiliates, including any
direct or indirect beneficial owner or ultimate parent of any Member
(including BN and BAG), shall, directly or indirectly, Transfer any of the
right, title or interest in (i) any Membership Interest or (ii) any of their
Affiliates which beneficially own, either directly or indirectly, a
Membership Interest.
7.2 PERMITTED TRANSFERS. Notwithstanding anything in this Agreement to
the contrary, each Member may Transfer all (but not less than all) of the
Membership Interests owned by it and its rights under this Agreement under
any of the following circumstances:
(a) Each of USO and BN Holding may Transfer all (but not less
than all) of the Membership Interests owned by it together with its rights
under this Agreement to any transferee which is an Affiliate of the
transferring Member provided that no Restricted Transferee owns an interest
in such transferee;
(b) Each of USO and BN Holding (or any permitted transferee
under clause (a) above) may Transfer all (but not less than all) of the
Membership Interests owned by it together with its rights under this
Agreement if such Transfer is part of the Transfer (i) by BAG and its
Affiliates of all (or substantially all) of the publishing business in the
United States, operated by BAG and its Affiliates; or (ii) by BN and its
Affiliates, of all (or substantially all) of its retail book store business.
(c) In the event of any such Transfer, a transferee (or
subsequent transferee) shall be entitled to the rights and privileges set
forth in this Agreement and shall be bound and obligated by the provisions of
this Agreement. As a condition to such Transfer permitted pursuant to this
Section 7.2, each transferee shall, prior to such transfer, agree in writing
to be bound by all of the provisions of this Agreement and no such transferee
shall be permitted to make any Transfer which the original transferor was not
permitted to make. In connection with any Transfer pursuant to this Section
7.2, the transferee shall execute and deliver to the non-transferring Member
and the Company such documents as may reasonably be requested by the non-
transferring Member or the Company to evidence the same.
7.3 RIGHTS OF FIRST REFUSAL.
(a) Except with respect to Transfers permitted pursuant to
Sections 7.2, if, on or after the first anniversary after the date hereof, a
Member desires to Transfer any part of its Membership Interest to any other
Person (other than a Restricted Transferee) in a bona fide transaction solely
for cash consideration, such Member (the "Offeror") shall be entitled to do
so provided that such Offeror first offers to sell such Membership Interest
to the other Member at the same price and the same terms and conditions as
the Offeror would receive from such other Person. If the Offeror shall
Transfer a percentage of its Membership Interest which is equal to more than
ten percent (10%) of the aggregate Membership Interests in the Company, the
terms of Section 3.2(a)(ii) shall apply. The Offeror shall submit to the
Company and the other Member a written notice (the "Offer Notice") stating in
reasonable detail such price and such terms and conditions and identifying
the Person and all Persons who beneficially own more than five percent (5%)
of such Person, proposing to purchase the Membership Interest. The other
Member shall have a period of thirty (30) days after the receipt of the Offer
Notice in which to accept or reject such offer. If the other Member elects
to accept such offer, which acceptance must be for all and not part of the
Membership Interest offered for sale, it shall so indicate within such thirty
(30) day period by notice to the Offeror. The notice required to be given by
the other Member (the "Purchaser") shall specify a date for the closing of
the purchase which, subject to the expiration or early termination of any
waiting period required by any Governmental Body and the receipt of any
required approvals of any Governmental Body, shall not be more than thirty
(30) days after the date of the giving of such notice.
(b) If the other Member does not exercise its right to
purchase all of the Membership Interest offered for sale pursuant to the
provisions of this Section 7.3, the Offeror of such Membership Interest shall
have the right to sell to the Person identified in the Offer Notice, subject
to the provisions of all of such Membership Interest on the same terms and
conditions including the Membership Interest price as specified in the Offer
Notice, free from the restrictions of Section 7.1 of this Agreement (for
purposes of such specific transaction, but not for purposes of any subsequent
transaction) in a bona fide transaction, for a period of ninety (90) days
from the date that the Offer expires hereunder, provided that any such
purchaser shall, prior to such transfer, agree in writing to be bound by all
of the provisions of this Agreement. At the end of such ninety (90) day
period, the Offeror shall notify the Company and the other Member in writing
whether its Membership Interest has been sold in a bona fide transaction
during such period. To the extent not sold during such ninety (90) day
period, all of such Membership Interest shall again become subject to all of
the restrictions and provisions hereof.
(c) The purchase price per unit for the Membership Interest
shall be the price per unit offered to be paid by the prospective transferee
described in the Offer Notice, which price shall be paid in cash.
(d) The closing of the purchase shall take place at the office
of the Company or such other location as shall be mutually agreeable and the
purchase price shall be paid at the closing by wire transfer of immediately
available funds. At the closing, the Offeror shall deliver to the Purchaser
the certificates evidencing the Membership Interest to be conveyed, duly
endorsed and in negotiable form as well as the items listed in Section 7.4.
7.4 CLOSING DELIVERIES. The Offeror at a closing under this Article
VII shall deliver to the Purchaser the following:
(a) A duly executed "Deed of Transfer of Membership Interest"
in the Company conveying to the Purchaser the Membership Interest being
purchased by the Purchaser, free and clear of any Encumbrances, except those
in this Agreement which are expressly assumed.
(b) A statement from the Offeror that: (i) except as set forth
therein, the Offeror has no claim as against the Company for unpaid
dividends, compensation, bonuses, profit-sharing or rights or other claims of
whatsoever kind, nature or description and that all amounts due and payable
by the Company to the Offeror have been paid; and (ii) it shall guarantee the
performance of the Purchaser's obligations under this Agreement.
7.5 CONTINUITY OF AGREEMENTS.
(a) In the event of a permitted Transfer under Section 7.2 or
7.3 (other than a permitted transfer to an Affiliate), the parties' rights
under the fulfillment agreements with BN shall terminate on the date which is
six (6) months after the date of Transfer unless otherwise provided therein.
(b) Notwithstanding the foregoing Section 7.5(a), in the event
that (x) USO is the transferring party in a transfer subject to Section 7.3,
and has complied with Section 7.3, and (y) the Transfer is to any entity
which is a competitor of the Company and derives more than fifty percent
(50%) of its revenues from the sale of books, BN College shall have the
right, by notice given no later than ninety (90) days after the consummation
of the Transfer by USO under Section 7.3(a), to terminate the Name License
Agreement insofar as relates to the right granted to the Company to use the
name "Barnes and Noble" or any substantially similar name or derivation.
7.6 BN'S PURCHASE RIGHT. If BOL (or the entity operating BOL's
business, but excluding any entity operating solely within one country)
engages in an initial public offering within five (5) years after the date
hereof, then BN shall have the right, exercisable within forty-five (45) days
after notice thereof, to purchase twenty percent (20%) of BOL outside of the
offering at a purchase price equal to eighty percent (80%) of the public
offering price.
7.7 EXCLUSIVITY. Each of BN and BAG agrees that the following
provisions shall be applicable during such time as BN and BAG (directly or
indirectly through its respective Affiliates) own an interest in the Company:
(a) The Company shall be the exclusive vehicle for each of BN
and BAG (and their respective Affiliates) to engage in the Business with
respect to English Language Books, except that BAG (and its Affiliates) may
engage in the sale of English Language Books through BOL.UK in accordance
with the provisions set forth in Section 2.3(e).
(b) BN (and its Affiliates) shall not engage in the: (i) sale
of Foreign Language Books through Websites except through links to Websites
operated by BAG and its Affiliates; or (ii) establishment or operation of
Book Clubs through Websites.
(c) Notwithstanding any provision of this Agreement to the
contrary:
(i) Either BN or BAG (or its respective Affiliates) may
engage in any activity described in clauses (1), (2), (4) (provided that
Websites may only be used for e-mail purposes in connection with operations
described in clause (4)) or (5) of the definition of Business;
(ii) BAG (or its Affiliates) may engage in any activity
described in clause (3) of the definition of Business;
(iii) BAG (or its Affiliates) may engage in the sale to
consumers through Websites of English Language Books, which are published by
BAG, or its Affiliates, at such times as unrelated third party publishers
(which are regarded as major publishers by industry sources) are engaged in
such sales activity;
(iv) BN (or its Affiliates) may engage in the sale to
consumers through Websites of English Language Books which are published by
BN (or its Affiliates), at such times as unrelated third party publishers
(which are regarded as major publishers by industry sources) are engaged in
such sales activity.
(v) Either BAG or BN (or its respective Affiliates) may
engage in the distribution of videos, music, software or magazines
independent of the Company;
(vi) BAG (or its Affiliates) or BN (or its Affiliates)
may engage in the following activities relating to sale, distribution or
delivery of electronic or digitized material:
1) the actual act of transforming copyrighted material
into electronic or digitized form;
2) the services involved in providing clearinghouse
functions; and
3) the offering of such electronic or digitized materials
to wholesalers, retailers, distributors or consumers, whether through
Websites or otherwise, including (but with respect to BAG and its Affiliates
only) through Book Clubs, but only to the extent that the offering party is
the publisher of such material.
7.8 EXCEPTIONS TO EXCLUSIVITY.
Notwithstanding anything in this Agreement to the contrary, the
following shall be exempt from the restrictions set forth in Section 7.7:
(a) Any Person in which either BAG, BN, or any of their
respective Affiliates owns:
(i) ten percent (10%) or less, in case the primary
activity of such Person is the Business. For purposes of the preceding
sentence, the primary activity of a Person shall be deemed to be the Business
only if it derives twenty-five percent (25%) or more of its net revenues from
the conduct of Business for the fiscal year of such Person preceding the
acquisition;
(ii) twenty percent (20%) or less, in the case of any
Person the primary activity of which involves or is focused on sectors
outside of the Business and where the contribution from the Business, in net
revenues, is less than twenty-five percent (25%) (on a consolidated basis)
but more than ten percent (10%) (on a consolidated basis) for the fiscal year
of such Person preceding the acquisition;
(iii) any percentage of another Person, without
limitation, if the net revenues of such Person from the conduct of Business
(on a consolidated basis) is less than ten percent (10%) of its total net
revenues for the fiscal year of such Person preceding the acquisition; or
(iv) any acquisition of another Person where such Person
is directly engaged in the Business (directly or through one or more units)
to an extent greater than that permitted by the above provisions of this
Agreement provided that, within a period of twelve (12) months after the date
of the acquisition, the acquiring party either: (a) makes an orderly
divestiture of such portions of the acquired business which are conducted by
the acquired Person or its Affiliates to a third party; or (b) the acquiring
party offers and sells such identifiable unit which is engaged in the
Business to the Company. In case an offer is made to the Company under the
preceding sentence, the purchase price shall be determined by the offering
party subject to acceptance, on behalf of the Company, by Managers who are
not appointed by the offering party.
(v) For purposes of this Section, the ownership
interest of each of BN and BAG, respectively, shall be aggregated with the
ownership interest of any Person in which it directly or indirectly through a
chain of other Persons owns an interest of fifty percent (50%) or more.
7.9 NONCOMPETITION AFTER SALE OF MEMBERSHIP INTEREST.
The restrictions set forth in Section 7.7 , and the provisions of
Sections 2.3(c), (d), and (e), shall apply to a Member at all times during
which:
(a) such Member owns a Membership Interest; and
(b) for two (2) years after the date on which such Member
ceases to own at least ten percent (10%) of the total Membership Interests.
ARTICLE VIII. LIMITED LIABILITY; INDEMNIFICATION
8.1 LIMITED LIABILITY. Except as otherwise provided under the LLCL,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company and neither any Member nor Manager shall be
obligated or liable for any such debt, obligation or liability of the
Company. Except as otherwise provided by the laws of the State of Delaware,
the debts, obligations and liabilities of any Member, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liability of such Member and neither any Member, Manager nor the Company
shall be obligated or liable for any such debt, obligation or liability of
such Member.
8.2 INDEMNIFICATION.
(a) The Company shall indemnify, defend and hold harmless any
Member, Manager or other Person, who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Company) by reason of the fact that
he, she or it is or was a Member, Manager, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, from and against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such Person in connection with such claim, action,
suit or proceeding if such Person acted in good faith and in a manner such
Person reasonably believed to be in, or not opposed to, the best interests of
the Company, and, with respect to any criminal sanction or proceeding, had no
reasonable cause to believe that his, her or its conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the Person did not act in good faith and
in a manner which he, she or it reasonably believed to be in, or not opposed
to, the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his, her or its
conduct was unlawful.
(b) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the Member, Manager, employee or agent to repay such
amount if it shall be ultimately determined by a court of competent
jurisdiction from which no further appeal may be taken or the time for appeal
has lapsed that such Person is not entitled to be indemnified by the Company
pursuant to the terms and conditions of this Section 8.2.
(c) The Company may maintain insurance on behalf of any Person
who is or was a Member, Manager, employee or agent, or is or was serving at
the request of the Company as a Manager, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against and incurred by such Person in any such
capacity, or arising out of such Person's status as such, whether or not the
Company would have the power to indemnify such Person against such liability
under this Section 8.2.
(d) The indemnification and advancement of expenses provided
by, or granted pursuant to this Section 8.2 shall continue as to a Person who
has ceased to be a Member, Manager, employee or agent and shall inure to the
benefit of the heirs, executors, administrators and other legal successors of
such Person.
(e) The indemnification provided by this Section 8.2 shall not
be deemed exclusive of any other rights to indemnification to which those
seeking indemnification may be entitled under any agreement, determination of
Members or otherwise.
(f) Any indemnification hereunder shall be satisfied only out
of the assets of the Company (including insurance and any agreements pursuant
to which the Company and indemnified Persons are entitled to
indemnification), and the Members shall not, in such capacity, be subject to
personal liability by reason of these indemnification provisions, except with
respect to the provisions set forth in Section 8.2(h).
(g) No Person shall be denied indemnification in whole or in
part under this Section 8.2 because such Person had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) The parties agree that the remedial allocations described
in Section 5.5(c) of this Agreement are intended to comply with the
provisions of Section 704 of the Code and, along with the 754 Election to be
made pursuant to Section 6.8(b), are intended to eliminate the disparity
between USO's (outside) basis in its interest in the Company and USO's share
of the Company's (inside) basis in the Company's assets as of the date
hereof. In the event that such disparity is not eliminated in full, and USO
does not secure the benefit of the deductions which it would have been
entitled to if an amount equal to USO's outside basis had been used to
calculate the deductions or credits allowable to USO, BN shall indemnify,
defend and hold harmless USO (and its Affiliates) and the Company from and
against all loss, expenses (including attorneys' fees and expenses),
judgments, interest, fines and amounts paid or incurred in connection with
any claim, action, suit or proceeding involving any adverse tax consequences
to any of such parties, including adverse tax consequences resulting by
reason of the remedial allocation provisions of Section 5.5(c), the 754
Election described in Section 6.8(b), or Section 5.5(j) not applying in the
manner contemplated by such parties. For purposes hereof, the disallowance
of any such benefits shall be deemed to give rise to economic loss to USO at
the time USO (or its Affiliates) could have used the benefit in any
jurisdiction to offset any other income or gain (after giving effect to all
other available offsets) upon presentation of a certificate to that effect to
BN. The obligation of BN hereunder shall survive until the year in which
such deduction could have been used.
ARTICLE IX. DISSOLUTION; LIQUIDATION
9.1 DISSOLUTION. The Company shall be dissolved and its affairs wound
up, upon the first to occur of any of the following events (each of which
shall constitute a "Dissolution Event"):
(a) The expiration of the term set forth in Section 2.5 hereof
unless the Company is continued with the consent of all Members;
(b) The written consent of all Members;
(c) The entry of a decree of judicial dissolution with respect
to the Company;
(d) Any event which makes it unlawful for the business of the
Company to be carried on by the Members;
(e) Any other event not inconsistent with any provision hereof
causing a dissolution of a limited liability company under the LLCL; or
(f) The Bankruptcy of any Member; provided, however, that upon
any such event, the Company shall be deemed dissolved, but such dissolution
shall not cause the termination of the Company, it being understood and
agreed that, upon any such dissolution, the remaining Member may elect to
continue to carry on the Company business pursuant to, and subject to, all of
the terms and provisions of this Agreement.
9.2 WITHDRAWAL OF MEMBERS. No Member shall have the right to
voluntarily withdraw as a Member of the Company other than following the sale
of such Member's entire Membership Interest under Article VII. Prior to the
tenth anniversary of the date hereof, no Member shall seek a decree of
judicial dissolution with respect to the Company.
9.3 DISTRIBUTION UPON DISSOLUTION.
(a) Upon dissolution, the Company shall not be terminated and
shall continue until the winding up of the affairs of the Company is
completed and a certificate of cancellation has been issued by the Secretary
of State of Delaware. Upon the winding up of the Company, the Board, or any
other Person designated by the Board (the "Liquidation Agent"), shall take
full account of the assets and liabilities of the Company and shall, unless
the Members agree otherwise, liquidate the assets of the Company as promptly
as is consistent with obtaining the fair value thereof. The proceeds of any
liquidation shall be applied and distributed in the following order:
(i) First, to the payment of debts and liabilities of
the Company (including payment of all indebtedness to Members and/or their
Affiliates) and the expenses of liquidation;
(ii) Second, to the establishment of any reserve which
the Liquidation Agent shall deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company ("Contingencies"). Such
reserve may be paid over by the Liquidation Agent to any attorney-at-law, or
acceptable party, as escrow agent, to be held for disbursement in payment of
any Contingencies and, at the expiration of such period as shall be deemed
advisable by the Liquidation Agent for distribution of the balance in the
manner hereinafter provided in this Section 9.3; and
(iii) Any balance, in accordance with the Percentage
Interest of each Member.
(b) It is the intent of the Members that the allocations
provided in Section 5.5 hereof result in the distributions required pursuant
to Section 9.3 being in accordance with positive capital accounts as provided
for in the Treasury Regulations under Section 704(b) of the Code. However,
if after giving hypothetical effect to the allocations required by Section
5.5, the capital accounts of the Members are in such ratios or balances that
distributions pursuant to Section 9.3 would not be in accordance with the
positive capital accounts of the Members as required by Treasury Regulations
under Section 704(b) of the Code, such failure shall not affect or alter the
distributions required by Section 9.3. Rather, the Members will have the
authority to make other allocations of Net Profits or Net Losses, or items of
income, gain, loss or deduction among the Members which, to the extent
possible, will result in the capital accounts of each Member having a balance
prior to the distribution equal to the amount of the distributions to be
received by each Member pursuant to Section 9.3.
9.4 TIME FOR LIQUIDATION. A reasonable amount of time shall be allowed
for the orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to enable the Liquidation Agent to minimize
the losses attendant upon such liquidation.
9.5 WINDING UP AND FILING ARTICLES OF CANCELLATION. Upon the
commencement of the winding up of the Company, articles of cancellation shall
be delivered by the Company to the Secretary of State of Delaware for filing.
The articles of cancellation shall set forth the information required by the
LLCL. The winding up of the Company shall be completed when all debts,
liabilities, and obligations of the Company have been paid and discharged or
reasonably adequate provision therefor has been made and all the remaining
assets of the Company have been distributed to the Members.
ARTCIEL X. MEMBERSHIP INTERESTS; CERTIFICATES
10.1 CERTIFICATES. A Membership Interest of the Company shall be
represented by a certificate or certificates, setting forth upon the face
thereof that the Company is a limited liability company formed under the laws
of the State of Delaware, the name of the Member to which it is issued and
the initial Percentage Interest which such certificate represents. Such
certificates shall be entered in the books of the Company as they are issued,
and shall be signed by the Chief Executive Officer and may be sealed with the
Company's seal or a facsimile thereof. Upon any Transfer permitted under
this Agreement, BN Holding and USO shall surrender to the Company and the
Company shall issue to BN Holding and USO certificates representing the
Membership Interests taking into account such Transfer. All certificates
representing Membership Interests (unless registered under the Securities Act
of 1933, as amended (the "Securities Act")), shall bear the following legend:
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY SECURITIES REGULATORY
AUTHORITY OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED,
PLEDGED, ENCUMBERED, TRANSFERRED, GRANTED AN OPTION WITH
RESPECT TO OR OTHERWISE DISPOSED OF, (I) UNLESS AND UNTIL THEY
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR SUCH SALE,
ASSIGNMENT, PLEDGE, ENCUMBRANCE, TRANSFER, OPTION GRANT OR
OTHER DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND (II) EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT OF THE COMPANY, A COPY OF WHICH IS AVAILABLE
FOR INSPECTION AT THE OFFICES OF THE COMPANY.
10.2 LOST OR DESTROYED CERTIFICATES. The Company may issue a new
certificate for Membership Interests in place of any certificate or
certificates theretofore issued by it, alleged to have been lost or
destroyed, upon the making of an affidavit of that fact, and providing an
indemnity in form and substance reasonably satisfactory to the Company, by
the Person claiming the certificate to be lost or destroyed.
10.3 TRANSFER OF MEMBERSHIP INTERESTS. Except for Transfers duly made
in accordance with Article VII, no Transfer of Membership Interests shall be
valid as against the Company except upon surrender to and cancellation of the
certificate therefor, accompanied by an assignment or transfer by the Member,
subject to any restrictions on Transfer contained in this Agreement.
10.4 REGULATIONS. The Board may make such additional rules and
regulations, not inconsistent with this Agreement, as it may deem expedient
with respect to the issue, transfer and recordation of certificates for the
Membership Interests.
10.5 REGISTERED MEMBERS. The Company shall be entitled to recognize the
exclusive right of a Person registered on its records as the owner of the
Membership Interests to receive distributions and to vote as owner of
Membership Interests and shall not be bound to recognize any equitable or
other claim to or interest in such Membership Interest(s) on the part of any
other Person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the LLCL.
ARTICLE XI. MISCELLANEOUS
11.1 SEVERABILITY. The terms, conditions, and provisions of this Agree-
ment are fully severable, and the decision or judgment of any court of
competent jurisdiction rendering void or unenforceable any one or more of
such terms, conditions or provisions shall not render void or unenforceable
any of the other terms, conditions or provisions hereof and such void or
unenforceable term shall be replaced with a valid and enforceable term which
would to the greatest degree possible reflect the original intentions of the
parties hereunder.
11.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be given and delivered by messenger, transmitted by
telecopy or telegram (in either case followed by reputable overnight courier
sent the same day), by reputable overnight courier or mailed by certified
mail, postage prepaid, return receipt requested, to the parties at the
following addresses (or such other address as shall be specified by such
party by like notice), and shall be deemed given on the date on which so
delivered by messenger or reputable overnight courier, on the next business
day following the date on which so transmitted by telecopy, telegram or on
the third business day following the date on which mailed by certified mail:
If to the Company, to:
barnesandnoble.com llc
76 Ninth Avenue
11th Floor
New York, New York 10011
Attention: Chief Executive Officer
Fax: (212) 414-6652
If to BN, BN Holding or BN Holding representatives on the Board, to:
Barnes & Noble, Inc.
122 Fifth Avenue
New York, New York 10011
Attention: Mr. Leonard Riggio
Fax: (212) 675-0413
with a copy to:
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Michael Rosen, Esq.
Fax: (212) 541-1400
If to USO, to:
BOL.US Online, Inc.
1540 Broadway
New York, New York 10036
Attention: Robert J. Sorrentino
Fax: (212) 782-1010/1103
If to BAG, to:
Bertelsmann AG
Carl-Bertelsmann-Strasse 270
33311 Gutersloh, Germany
Attention: Dr. Klaus Eierhoff
Fax: (011) 49 5241 809 555
with a copy for each of USO and BAG to:
Walter, Conston, Alexander & Green, P.C.
90 Park Avenue
New York, New York 10016
Attention: Aydin S. Caginalp, Esq.
Fax: (212) 210-9444
11.3 CAPTIONS. The captions at the heading of each article or section
of this Agreement are for convenience of reference only, and are not to be
deemed a part of the Agreement itself.
11.4 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the other agreements and documents referenced herein or
contemplated hereby, constitutes the entire agreement and understanding of
the parties hereto with respect to the matters herein set forth, and all
prior negotiations and understandings relating to the subject matter of this
Agreement are merged herein and are superseded and canceled by this
Agreement.
11.5 COUNTERPARTS. This Agreement may be executed and delivered in one
or more counterparts, each of which shall be deemed an original, and all of
which shall be deemed to constitute one and the same agreement.
11.6 AMENDMENTS; WAIVER. Amendments to this Agreement may be made from
time to time, provided, however, that no amendment, modification or waiver of
this Agreement or any provision hereof shall be valid or effective unless in
writing and signed by each and every Member. No consent to, or waiver, dis-
charge or release (each, a "Waiver") of, any provision of or breach under
this Agreement shall be valid or effective unless in writing and signed by
the party giving such Waiver, and no specific Waiver shall constitute a
Waiver with respect to any other provision or breach, whether or not of
similar nature. Failure on the part of any party hereto to insist in any
instance upon strict, complete and timely performance by another party hereto
of any provision of or obligation under this Agreement shall not constitute a
Waiver by such party of any of its rights under this Agreement or otherwise.
11.7 FURTHER ASSURANCES. Each party shall perform all other acts and
execute and deliver all other documents as may be necessary or appropriate to
carry out the purposes and intent of this Agreement.
11.18 INVESTMENT SERVICES. BN Holding shall be entitled to an
investment advisory fee with respect to investments and earnings on the
Reserve Account. Such fee shall be payable to BN Holding on January 1 of
each year in an amount equal to the aggregate earnings, if any, on the
amounts in the Reserve Account for the preceding calendar year.
11.9 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to its rules on conflicts of laws.
11.10 THIRD PARTY BENEFICIARY. Nothing set forth in the Agreement
shall be construed to confer any benefit to any third party who is not a
party to this Agreement.
11.11 ASSIGNMENT. This Agreement is personal to the parties hereto
and neither party may (except as set forth in Article VII) assign or Transfer
the rights accruing hereunder nor may performance of any duties by either
party hereunder be delegated or assumed by any other Person or legal entity
without the prior written consent of the other parties hereto.
11.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted assigns
of each party hereto; provided, that no party hereto may Transfer (or cause
or permit to be created or existing any lien on) or assign his Membership
Interest (or any portion thereof or any beneficial interest therein) or this
Agreement or his rights, interests or obligations hereunder, except in
accordance with the terms of this Agreement.
11.13 RELATIONSHIP. This Agreement does not constitute any Member,
Manager, or any employee or agent of the Company as the agent or legal
manager of any Member for any purpose whatsoever and no Member, Manager, or
any employee or agent of the Company is granted hereby any right or authority
to assume or to create any obligation or responsibility, express or implied,
on behalf of or in the name of any Member or to bind any Member in any manner
or thing whatsoever.
11.14 CONSENT TO JURISDICTION. The exclusive jurisdiction and venue
for any disputes arising out of or in connection with this Agreement will be
any state or federal court located in New York County, New York, and each
party hereby consents to personal jurisdiction in such court and consents to
service of process by means of certified or registered mail, return receipt
requested.
11.15 EQUITABLE REMEDIES. Each party acknowledges that no adequate
remedy of law would be available for a breach of Sections 3.11 and 4.6 and
Articles VII and VIII of this Agreement, and that a breach of any of such
Sections of this Agreement by one party would irreparably injure the other
and accordingly agrees that in the event of a breach of any of such Sections
of this Agreement, the respective rights and obligations of the parties
hereunder shall be enforceable by specific performance, injunction or other
equitable remedy (without bond or security being required), and each party
waives the defense in any action and/or proceeding brought to enforce this
Agreement that there exists an adequate remedy or that the other party is not
irreparably injured. Nothing in this Section 11.15 is intended to exclude
the possibility of equitable remedies with respect to breaches of other
sections of this Agreement.
11.16 FEES AND EXPENSES. Except as specifically set forth herein,
each party shall be responsible for any legal and other fees and expenses
incurred by such party in connection with the negotiation and preparation of
this Agreement and the transactions contemplated hereby.
11.17 OBLIGATIONS OF BN AND BAG. By their signatures below, BN
agrees to be liable for any failure by BN Holding to perform any of its
obligations under this Agreement, the Formation Agreement and any other
agreements executed in connection herewith to which it is a party, and BAG
agrees to be liable for any failure by USO to perform any of its obligations
under this Agreement, the Formation Agreement and any other agreements
executed in connection herewith to which it is a party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
Bertelsmann AG
By:/s/Thomas Middelhoff
_______________________
Name:
Title:
BOL.US Online, Inc.
By:/s/Robert Sorrentino
_______________________
Name:
Title:
Barnes & Noble, Inc.
By:/s/Leonard Riggio
________________________
Name:
Title:
B&N.com Holding Corp.
By:/s/Leonard Riggio
_______________________
Name:
Title:
B&N.com Member Corp.
By:/s/Leonard Riggio
_______________________
Name:
Title:
<PAGE>
SCHEDULE 3.11(b)
ACTIONS REQUIRING BOARD APPROVAL BY A MAJORITY OF EACH
OF THE BN MANAGERS AND THE USO MANAGERS
1. Any amendment, change or other modification, or restatement of this
Amended and Restated Limited Liability Company Agreement or the Certificate
of Formation of the Company.
2. The issuance, authorization, cancellation, alteration, modification,
redemption or any change in, of, or to, any Membership Interest, debt or
equity security of the Company or any option, put, call or warrant with
respect to the foregoing, or any initial public offering with respect to the
Membership Interest in the Company or any Person established for the purpose
of engaging in an initial public offering of the Company's business.
3. The Transfer or other disposition (other than inventory or obsolete
assets of the Company) of, or placing any Encumbrance (other than
Encumbrances arising by operation of law) on, any asset of the Company,
except Permitted Encumbrances.
4. The acquisition of any interest in another entity by the Company for an
amount in excess of $500,000; provided that the foregoing shall not apply
with respect to cash management objectives of the Company on a short term
basis with a recognized money market institution.
5. The merger, consolidation, dissolution or liquidation of the Company, or
any transaction having the same effect.
6. Other than pursuant to an agreement entered into with the consent of
the Board of Managers or involving an amount below $50,000, any transaction
between the Company on the one hand and either BAG, BN or their respective
Affiliates on the other hand; or any amendment or modification of, or waiver
with respect to, any such agreement or transaction.
7. Adoption and approval of the Business Plan.
8. Any capital expenditure (or a series of related expenditures) in excess
of $5 million.
9. Any debt, loan or borrowing (other than borrowings under a revolving
credit facility approved by the Board under Section 3.11(b)) exceeding $20
million outstanding in the aggregate at any time or any revolving credit
facility permitting aggregate borrowings at any one time outstanding to
exceed $20 million.
10. Adoption of any stock option or other employee benefit plan or any
material amendment to any existing plan (except as set forth in Section 5.8
of the Formation Agreement).
11. Hiring any personnel with an annual salary in excess of $250,000 or
increasing the compensation of any personnel above $250,000.
12. Appointment or dismissal of auditors.<PAGE>
SCHEDULE I
1. Members' Percentage Interest
B&N.com Holding Corp. 50%
BOL.US Online, Inc. 50%
2. Initial Capital Contributions and Acquisitions of Membership Interests
BN Holding USO
All of the business, assets and liabilities (i) Purchase of 21.42857 %
of barnesandnoble.com, other than its Membership Interest
investment in NuvoMedia, Inc. and B&N.com from BN and/or its
Member Corp., all such assets being Affiliates: $75 million
contributed by BN Holding having an
aggregate net agreed value of $275 million (ii) Capital contribution
(determined after taking into account the for 28.57143%
transfer of $75 million of capital to USO Membership
in connection with its acquisition of the Interest: $150 million
21.42857% Membership Interest). ------------
$225 million
3. Initial Capital Accounts
BN Holding USO
$275 million $225 million
