SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND
AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
(Amendment No. 3)*
barnesandnoble.com inc.
-----------------------
(Name of Issuer)
CLASS A COMMON STOCK
--------------------
(Title of Class of Securities)
067846 10 5
-----------
(CUSIP Number)
Mr. Leonard Riggio
Barnes & Noble, Inc.
122 Fifth Avenue
New York, NY 10011
with copies to:
Jay M. Dorman, Esq.
Bryan Cave LLP
1290 Avenue of the Americas
New York, NY 10104
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 29, 2003
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d 1(e), 13d 1(f) or 13d 1(g), check the
following box: [ ]
Note. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 7 Pages)
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section of the Exchange Act but shall be subject to all other provisions of the
Exchange Act (however, see the Notes).
CUSIP No. 067846 10 5 13D Page 2 of 7 Pages
_____________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (Entities Only)
Barnes & Noble, Inc.
_____________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
_____________________________________________________________________________
3 SEC USE ONLY
_____________________________________________________________________________
4 SOURCE OF FUNDS*
BK, OO, WC
_____________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
_____________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_____________________________________________________________________________
NUMBER OF 7 SOLE VOTING POWER
SHARES 60,512,501
______________________________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY None
______________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 60,512,501
______________________________________________________________
PERSON 10 SHARED DISPOSITIVE POWER
WITH None
_____________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
60,512,501
_____________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
_____________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
59.7% (38.1% assuming the conversion into Class A Common Stock on a 1-for-1
basis of 57,500,000 membership units in barnesandnoble.com llc and one
share of Class C Common Stock of the Issuer beneficially owned by
Bertelsmann AG)
_____________________________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
_____________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 067846 10 5 13D Page 3 of 7 Pages
_____________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (Entities Only)
B&N.com Holding Corp.
_____________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
_____________________________________________________________________________
3 SEC USE ONLY
_____________________________________________________________________________
4 SOURCE OF FUNDS*
BK, OO, WC
_____________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
_____________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_____________________________________________________________________________
NUMBER OF 7 SOLE VOTING POWER
SHARES 60,512,501
______________________________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY None
______________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 60,512,501
______________________________________________________________
PERSON 10 SHARED DISPOSITIVE POWER
WITH None
_____________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
60,512,501
_____________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
_____________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
59.7% (38.1% assuming the conversion into Class A Common Stock on a 1-for-1
basis of 57,500,000 membership units in barnesandnoble.com llc and one
share of Class C Common Stock of the Issuer beneficially owned by
Bertelsmann AG)
_____________________________________________________________________________ 14
TYPE OF REPORTING PERSON*
CO
_____________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
This Amendment No. 3 to Schedule 13D is being filed by Barnes & Noble, Inc.
("B&N") and its wholly owned subsidiary B&N.com Holding Corp. ("B&N.com
Holding"), each Delaware corporations (collectively, the "Reporting Persons"),
to amend the Schedule 13D filed by the Reporting Persons on November 1, 2002
(the "Schedule 13D"), as amended on November 15, 2002 by Amendment No. 1, and as
amended on April 7, 2003 by Amendment No. 2 ("Amendment No. 2") with respect to
beneficial ownership of Class A Common Stock, $0.001 par value per share (the
"Shares"), of barnesandnoble.com inc., a Delaware corporation (the "Issuer").
In accordance with Exchange Act Rule 13d-2, this amendment amends and
supplements only information that has materially changed since the April 7, 2003
filing of Amendment No. 2. Unless otherwise indicated herein, terms used and
defined in the Schedule 13D shall have the same respective meanings herein as
are ascribed to such terms in the Schedule 13D.
Item 2. Identity and Background.
Schedule A to the Schedule 13D, relating to the executive officers and directors
of B&N and B&N.com Holding, is hereby amended to add Dennis J. Williams as Vice
President and Director of Stores of B&N.
Item 3. Source and Amount of Funds or other Consideration.
Item 3 of the Schedule 13D is hereby amended to add the following paragraphs at
the end thereof:
"Pursuant to a Purchase Agreement dated as of July 29, 2003 (the "Agreement"),
by and between Bertelsmann AG ("Bertelsmann"), BOL.US Online, Inc. ("BOL.US"), a
wholly owned subsidiary of Bertelsmann, and B&N, B&N has agreed to purchase all
of the Shares, together with all of the membership units in barnesandnoble.com
llc ("bn.com") and all of the shares of Class C Common Stock of the Issuer,
beneficially owned by Bertelsmann for an aggregate amount equal to
$164,152,802.80 (the "Purchase Price"), equivalent to $2.80 per share and per
membership unit, subject to possible adjustment as set forth in the Agreement.
The consideration will be comprised of $82,152,802.80 in cash and $82,000,000 in
the form of a promissory note attached to the Agreement as Exhibit A, to be
issued by B&N in favor of BOL.US (the "Note"). B&N expects to fund the cash
payment from its $500 million revolving credit facility (the "Revolving Credit
Facility"), with Fleet National Bank as administrative agent thereunder, and
payments under the Note from the Revolving Credit Facility and/or cash on hand.
References to and descriptions of the Agreement (including the Note) and the
Revolving Credit Facility are qualified in their entirety by reference to the
copies of the Agreement (including the Note) and the Revolving Credit Facility
included as Exhibits 8 and 9, respectively, to this Amendment No. 3 and
incorporated into this Item 3 in their entirety where such references and
descriptions appear."
Item 4. Purpose of Transaction.
The last two paragraphs of Item 4 of the Schedule 13D are hereby deleted and the
following paragraphs are added in their place:
"Pursuant to the terms of the Agreement, B&N has agreed to purchase for the
Purchase Price the following ownership interests beneficially owned by
Bertelsmann: (i) 1,126,000 Shares; (ii) 57,500,000 membership units in bn.com;
and (iii) one share of Class C Common Stock in the Issuer. The membership units
and the share of Class C Common Stock are convertible into Shares on a 1-for-1
basis. Consequently, the Reporting Persons will have the sole power to vote and
to dispose of 58,626,001 additional Shares upon the consummation of the
transactions pursuant to the terms of the Agreement. The transaction is subject
to certain closing conditions, including the expiration or early termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and is expected to close within 45 days. Immediately following
the consummation of the transactions pursuant to the Agreement, B&N intends to
transfer all shares and membership units purchased pursuant to the Agreement to
B&N.com Holding.
Page 4 of 7 Pages
Effective as of the Closing Date (as defined in the Agreement), pursuant to the
terms of the Agreement, BOL.US shall cause the resignation of all three of the
Class C directors of the Issuer, and B&N intends to select three new Class C
directors to fill those vacancies.
The Reporting Persons, on October 22, 2002, by virtue of forming a "group" with
Bertelsmann and certain of its affiliates to coordinate the purchase of Shares
in the open market or through privately negotiated purchases, were deemed to
have acquired beneficial ownership of the 57,500,001 Shares owned on such date
by Bertelsmann, as well as 1,126,000 Shares acquired by Bertelsmann subsequent
to that date. In anticipation of the transactions contemplated by the Agreement,
the Reporting Persons have no further intention of coordinating with Bertelsmann
any acquisition of Shares and thus disclaim membership in a "group" with
Bertelsmann and beneficial ownership of any Shares owned by Bertelsmann.
References to and descriptions of the Agreement are qualified in their entirety
by reference to the copy of the Agreement and the exhibit thereto included as
Exhibit 8 to this Amendment No. 3 and incorporated into this Item 4 in its
entirety, where such references and descriptions appear.
The Reporting Persons intend to review their holdings in the Issuer and bn.com
on a continuing basis and, depending upon the price and availability of the
Shares, subsequent developments affecting the Issuer and bn.com, the business
prospects of the Issuer and bn.com, general stock market and economic
conditions, tax considerations and other factors deemed relevant, may consider
increasing or decreasing their investment in the Issuer and bn.com. As part of
this ongoing review, the Reporting Persons have engaged and/or may in the future
engage legal and financial advisors to assist them in such review and in
evaluating strategic alternatives that are or may become available with respect
to their holdings in the Issuer and bn.com.
Except as set forth in this Schedule 13D, none of the Reporting Persons has any
plan or proposals that relate to or would result in any of the transactions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D."
Item 5. Interest in Securities of the Issuer.
The first three paragraphs of Item 5(a) of the Schedule 13D are hereby deleted
and replaced with the following paragraph:
"(a) As of August 1, 2003, the Reporting Persons beneficially owned, within the
meaning of Exchange Act Rule 13d-3, 60,512,501 Shares, representing
approximately 59.7% of the outstanding Shares of the Issuer (or 38.1%, assuming
the conversion into Shares on a 1-for-1 basis of 57,500,000 membership units in
bn.com and one share of Class C Common Stock of the Issuer beneficially owned by
Bertelsmann). These Shares beneficially owned by the Reporting Persons consisted
of the following: (i) 57,500,001 Shares which the Reporting Persons had the
right to acquire within 60 days upon conversion of (A) their one share of Class
B Common Stock in the Issuer and (B) their 57,500,000 membership units in
bn.com; and (ii) 3,012,500 Shares. Upon consummation of the transactions
contemplated by the Agreement, the Reporting Persons will beneficially own,
within the meaning of Exchange Act Rule 13d-3, 119,138,502 Shares, representing
approximately 75.0% of the outstanding Shares of the Issuer."
Item 5(b) of the Schedule 13D is hereby amended to read in its entirety as
follows:
"(b) The Reporting Persons have sole power to vote and to dispose of the
60,512,501 Shares they beneficially own as of August 1, 2003. Upon consummation
of the transactions pursuant to the terms of the Agreement, the Reporting
Persons will have sole power to vote and to dispose of 119,138,502 Shares, which
will consist of the 60,512,501 Shares they beneficially own as of August 1, 2003
and the additional 58,626,001 Shares to be acquired pursuant to the terms of the
Agreement."
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer
Page 5 of 7 Pages
Item 6 is hereby amended and restated in its entirety as follows:
"In connection with the Agreement, Citigroup Global Markets Inc. acted as a
financial advisor to B&N pursuant to the letter agreement attached hereto as
Exhibit 10 (the "Citigroup Agreement").
Under the Revolving Credit Facility and the Securities Collateral Pledge
Agreement related thereto (the "Pledge Agreement"), a copy of which is attached
hereto as Exhibit 11, the banks party to the Revolving Credit Facility will be
granted a security interest in the ownership interests purchased by B&N under
the Agreement.
Except for the Agreement, the Note, the Revolving Credit Facility, the Citigroup
Agreement, the Pledge Agreement and the materials filed as Exhibits to the
Schedule 13D, to the best knowledge of the Reporting Persons there are no
contracts, agreements, understandings or relationships (legal or otherwise),
including, but not limited to, transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies, between the persons enumerated in Item 2, and any other person, with
respect to any securities of the Issuer, including any securities pledged or
otherwise subject to a contingency the occurrence of which would give another
person voting power or investment power over such securities other than standard
default and similar provisions contained in loan agreements.
The matters set forth in Items 3, 4 and 5 above are incorporated in this Item 6
by reference as if fully set forth herein.
References to and descriptions of the Agreement (including the Note), the
Revolving Credit Facility, the Citigroup Agreement and the Pledge Agreement are
qualified in their entirety by reference to the copies of the Agreement
(including the Note), the Revolving Credit Facility, the Citigroup Agreement and
the Pledge Agreement included as Exhibits 8, 9, 10 and 11, respectively, to this
Amendment No. 3 and incorporated into this Item 6 in their entirety where such
references and descriptions appear."
Item 7. Material to be Filed as Exhibits.
Exhibit 8: Purchase Agreement dated as of July 29, 2003, by and between
Bertelsmann AG, BOL.US Online, Inc. and Barnes & Noble, Inc., including, as
Exhibit A thereto, the form of Promissory Note to be issued by Barnes & Noble,
Inc. in favor of BOL.US Online, Inc. (incorporated by reference to Exhibit 8 to
the Schedule 13D filed by Bertelsmann AG on July 31, 2003).
Exhibit 9: Revolving Credit Agreement dated as of May 22, 2002, among Barnes &
Noble, Inc., Fleet National Bank, as Administrative Agent and the Banks party
thereto (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the
quarterly period ended May 4, 2002 of Barnes & Noble, Inc.).
Exhibit 10: Letter Agreement between Barnes & Noble, Inc. and Citigroup Global
Markets Inc. dated July 28, 2003.
Exhibit 11: Securities Collateral Pledge Agreement dated as of May 22, 2002,
between Barnes & Noble, Inc. and its Subsidiaries and Fleet National Bank, as
secured party and as administrative agent for itself and the Banks party thereto
(incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarterly
period ended May 4, 2002 of Barnes & Noble, Inc.).
Page 6 of 7 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: August 1, 2003
BARNES & NOBLE, INC.
By: /s/ John C. Weisenseel
-----------------------
Name: John C. Weisenseel
Title: Vice President, Treasurer
B&N.COM HOLDING CORP.
By: /s/ John C. Weisenseel
-----------------------
Name: John C. Weisenseel
Title: Vice President, Treasurer
Page 7 of 7 Pages
Exhibit 10
July 28, 2003
Barnes & Noble, Inc.
122 Fifth Avenue
New York, NY 10011
Attention: Leonard Riggio, Chairman of the Board
Ladies and Gentlemen:
We are pleased that Barnes & Noble, Inc. (the "Company") has chosen to
engage Citigroup Global Markets Inc. ("Citigroup") as its exclusive financial
adviser in connection with a possible Transaction to purchase all of the
ownership interests of Bertelsmann AG and its subsidiaries (the "Bertelsmann
Interests") in barnesandnoble.com inc. and barnesandnoble.com llc (collectively,
the "Target"). We look forward to working with you on this engagement, and have
set forth below the agreed upon terms of our engagement.
Scope of Engagement. As we have discussed, in the course of our engagement
as your exclusive financial adviser, we will perform such financial advisory and
investment banking services for the Company in connection with the proposed
Transaction as are customary and appropriate in transactions of this type and as
you reasonably request. For purposes of this agreement, "Transaction" means,
whether in one or a series of transactions, the acquisition, directly or
indirectly, by the Company of the Bertelsmann Interests.
Fees and Expenses. For our services hereunder, the Company will pay to
Citigroup a cash fee equal to $1,000,000, payable promptly upon
consummation of a Transaction.
Regardless of whether any Transaction is proposed or consummated, the Company
will promptly reimburse Citigroup, from time to time upon request, for all
reasonable travel and other expenses incurred in performing our services
hereunder.
Use of Information. The Company recognizes and confirms that Citigroup in
acting pursuant to this engagement will be using publicly available information
and information in reports and other materials provided by others, including,
without limitation, information provided by or on behalf of the Company, and
that Citigroup does not assume responsibility for and may rely, without
independent verification, on the accuracy and completeness of any such
information. The Company agrees to furnish or cause to be furnished to Citigroup
all necessary or appropriate information for use in its engagement and hereby
warrants that any information relating to the Company or the Transaction that is
furnished to Citigroup by or on behalf of the Company will be true and correct
in all material respects and not misleading. The Company agrees that any
information or advice rendered by Citigroup or any of our representatives in
connection with this engagement is for the confidential use of the Company and
its advisors only in their evaluation of a Transaction and, except as required
by law (with prior consultation with Citigroup to the extent practicable), the
Company will not, and will not permit any third party (other than its advisors)
to, use it for any other
Barnes & Noble, Inc.
July 28, 2003
Page 2
purpose or disclose or otherwise refer to such advice or information in any
manner without our prior written consent.
Certain Acknowledgments. The Company acknowledges that Citigroup has been
retained hereunder solely as an adviser to the Company, and not as an adviser to
or agent of any other person, and that the Company's engagement of Citigroup is
as an independent contractor and not in any other capacity including as a
fiduciary. Citigroup may, to the extent it deems appropriate, render the
services hereunder through one or more of its affiliates. Neither this
engagement, nor the delivery of any advice in connection with this engagement,
is intended to confer rights upon any persons not a party hereto (including
security holders, employees or creditors of the Company) as against Citigroup or
our affiliates or their respective directors, officers, agents and employees.
Citigroup may, at our own expense and with the prior written consent of the
Company, place announcements or advertisements in financial newspapers, journals
and marketing materials describing our services hereunder.
The Company acknowledges that it is not relying on the advice of Citigroup for
tax, legal or accounting matters, it is seeking and will rely on the advice of
its own professionals and advisors for such matters and it will make an
independent analysis and decision regarding any Transaction based upon such
advice. Notwithstanding anything herein to the contrary, the Company (and each
employee, representative or other agent of the Company) may disclose to any and
all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax
structure of any Transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to the Company relating to such U.S.
tax treatment and U.S. tax structure, other than any information for which
nondisclosure is reasonably necessary in order to comply with applicable
securities laws.
The Company should be aware that Citigroup and/or its affiliates may be
providing or may in the future provide financial or other services to other
parties with conflicting interests. However, consistent with our long-standing
policy to hold in confidence the affairs of our customers, we will not use
confidential information obtained from the Company except in connection with our
services to, and our relationship with, the Company, nor will we use on the
Company's behalf any confidential information obtained from any other customer.
Indemnity. The Company agrees to indemnify Citigroup as provided in Annex A
hereto, the terms of which are incorporated into this agreement in their
entirety.
Termination of Engagement. Citigroup's engagement will commence on the date
hereof and will continue until the earlier of the consummation of a Transaction
and 12 months after the date hereof, unless extended by mutual written consent
or earlier terminated as provided below. Either the Company or Citigroup may
terminate this agreement at any time, with or without cause, by giving written
notice to the other party; provided, however, that no such expiration or
termination will affect the matters set out in this section or under the
captions "Use of Information," "Certain Acknowledgments," "Indemnity" and
"Miscellaneous." It is expressly agreed that following the expiration or
termination of this agreement, Citigroup will continue to be entitled to receive
fees as described above that have accrued prior to such expiration or
termination but are unpaid, as well as reimbursement for expenses as
contemplated above. It is also expressly agreed that, if a Transaction is
consummated within 12 months after the date of expiration or termination of this
agreement or if a
Barnes & Noble, Inc.
July 28, 2003
Page 3
definitive agreement that results in a Transaction is entered into during the
term of this agreement or within such period, Citigroup shall be entitled to its
full fees as described above.
Miscellaneous. This agreement is governed by the laws of the State of New
York, without regard to conflicts of law principles, and will be binding upon
and inure to the benefit of the Company and Citigroup and their respective
successors and assigns. The Company and Citigroup agree to waive trial by jury
in any action, proceeding or counterclaim brought by or on behalf of either
party with respect to any matter whatsoever relating to or arising out of any
actual or proposed transaction or the engagement of or performance by Citigroup
hereunder. This agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
We are delighted to accept this engagement and look forward to working with
you on this matter. Please confirm that the foregoing is in accordance with your
understanding of our agreement by signing and returning to us a copy of this
letter.
Very truly yours,
CITIGROUP GLOBAL MARKETS INC.
By: /s/ Marco Habert
-------------------------
Marco Habert
Director
Accepted and agreed to as of
the date set forth above:
BARNES & NOBLE, INC.
By: /s/ Leonard Riggio
----------------------------
Leonard Riggio
Chairman of the Board
Barnes & Noble, Inc.
July 28, 2003
Page 4
Annex A
In connection with the engagement of Citigroup to assist the Company as
described in the attached engagement letter, including modifications or future
additions to such engagement and related activities prior to the date of the
engagement letter (the "engagement"), the Company agrees that it will indemnify
and hold harmless Citigroup and its affiliates and their respective directors,
officers, agents and employees and each other person controlling Citigroup or
any of its affiliates (each, an "indemnified party"), to the full extent lawful,
from and against any losses, expenses, claims or proceedings (collectively,
"losses") (i) related to or arising out of (A) the contents of oral or written
information provided by the Company, its employees or its other agents, which
information either the Company or Citigroup provides to any actual or potential
buyers, sellers, investors or offerees, or (B) any other action or failure to
act by the Company, its employees or its other agents or by Citigroup or any
indemnified party in accordance with and at the Company's request or with the
Company's consent, or (ii) otherwise related to or arising out of the engagement
or any transaction or conduct in connection therewith, except that this clause
(ii) shall not apply with respect to any losses that are finally judicially
determined to have resulted primarily from the gross negligence or willful
misconduct of such indemnified party. The Company further agrees that no
indemnified party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to the Company or any of its affiliates,
creditors or security holders for or in connection with the engagement or any
actual or proposed transactions or other conduct in connection therewith except
for losses incurred by the Company that are finally judicially determined to
have resulted primarily from the gross negligence or willful misconduct of such
indemnified party.
In the event that the foregoing indemnity is unavailable to any indemnified
party for any reason (other than pursuant to the exception contained in the
first paragraph hereof), the Company agrees to contribute to any losses related
to or arising out of the engagement or any transaction or conduct in connection
therewith as follows. For losses referred to in clause (i) of the preceding
paragraph, Citigroup and the Company shall contribute in such proportion as is
appropriate to reflect the relative benefits received (or anticipated to be
received) by Citigroup, on the one hand, and by the Company and its security
holders, on the other hand, from the actual or proposed transaction arising in
connection with the engagement. For any other losses, and for losses referred to
in clause (i) of the preceding paragraph if the allocation provided by the
immediately preceding sentence is unavailable for any reason, Citigroup and the
Company shall contribute in such proportion as is appropriate to reflect not
only the relative benefits as set forth above, but also the relative fault of
Citigroup and the Company in connection with the statements, omissions or other
conduct that resulted in such losses, as well as any other relevant equitable
considerations. Benefits received (or anticipated to be received) by the Company
and its security holders shall be deemed to be equal to the aggregate cash
consideration and value of securities or any other property payable, issuable,
exchangeable or transferable in such transaction or proposed transaction, and
benefits received by Citigroup shall be deemed to be equal to the compensation
paid by the Company to Citigroup in connection with the engagement (exclusive of
amounts paid for reimbursement of expenses or paid under this Annex). Relative
fault shall be determined by reference to, among other things, whether any
alleged untrue statement or omission or any other alleged conduct relates to
information provided by the Company or other conduct by the Company (or its
employees or other agents), on the one hand, or by Citigroup, on the other hand.
Citigroup and the Company agree that it would not be just and
Barnes & Noble, Inc.
July 28, 2003
Page 5
equitable if contribution were determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable considerations
referred to above. Notwithstanding anything to the contrary above (other than
pursuant to the exception contained in the first paragraph hereof), in no event
shall Citigroup be responsible under this paragraph for any amounts in excess of
the amount of the compensation actually paid by the Company to Citigroup in
connection with the engagement (exclusive of amounts paid for reimbursement of
expenses or paid under this Annex).
The Company agrees that it will not, without prior written consent of Citigroup,
settle any pending or threatened claim or proceeding related to or arising out
of the engagement or any actual or proposed transactions or other conduct in
connection therewith (whether or not Citigroup or any indemnified party is a
party to such claim or proceeding) unless such settlement includes a provision
unconditionally releasing Citigroup and each other indemnified party from all
liability in respect of claims by any releasing party related to or arising out
of the engagement or any transactions or conduct in connection therewith. The
Company will not be liable under this Annex for any amount paid by Citigroup to
settle any claims or actions if the settlement is entered into without the
consent of the Company, not to be unreasonably withheld. The Company will also
promptly reimburse each indemnified party for all reasonable expenses (including
reasonable counsel fees and expenses) as they are incurred by such indemnified
party in connection with investigating, preparing for, defending, or providing
evidence in, any pending or threatened claim or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
Citigroup or any indemnified party is a party to such claim or proceeding) or in
enforcing this Annex.
The foregoing provisions are in addition to any rights the Company or Citigroup
may have at common law or otherwise and shall be binding on and inure to the
benefit of any successors, assigns, and personal representatives of the Company
and each indemnified party. Solely for purposes of enforcing the provisions of
this Annex, the Company hereby consents to personal jurisdiction, service of
process and venue in any court in which any claim or proceeding that is subject
to this Annex is brought against Citigroup. The provisions of this Annex shall
remain in full force and effect notwithstanding the completion or termination of
the engagement.