Document:

exv4w1

Exhibit 4.1

 

FIRST NIAGARA FINANCIAL GROUP, INC.,

Company,

AND

THE BANK OF NEW YORK MELLON,

Trustee

 

SECOND

SUPPLEMENTAL

INDENTURE

Dated as of March 19,

2010

TO

SENIOR NOTES

INDENTURE

Dated as of

September 4, 2009

 

6.750% SENIOR NOTES DUE 2020

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	ARTICLE ONE

DEFINITIONS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 101.

	 	Definition of Terms
	 	 	2	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE TWO

GENERAL TERMS AND CONDITIONS OF THE NOTES	 	 	 	 
	 
	 	 	 	 	 	 
	Section 201.

	 	Designation and Principal Amount
	 	 	3	 
	Section 202.

	 	Form and Denomination of Notes
	 	 	3	 
	Section 203.

	 	Initial Limit on Amount of Series
	 	 	3	 
	Section 204.

	 	Rank
	 	 	3	 
	Section 205.

	 	Further Issues Without Holders’ Consent
	 	 	3	 
	Section 206.

	 	Form and Payment
	 	 	3	 
	Section 207.

	 	Redemption
	 	 	4	 
	Section 208.

	 	Global Securities
	 	 	4	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE THREE

ORIGINAL ISSUE OF NOTES	 	 	 	 
	 
	 	 	 	 	 	 
	Section 301.

	 	Original Issue of Notes
	 	 	4	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE FOUR

COVENANTS	 	 	 	 

	 	 	 	 	 	 	 
	Section 401.

	 	Limitation on Sale or Issuance of Voting Shares of Principal Subsidiary Banks
	 	 	4	 
	Section 402.

	 	Liens
	 	 	6	 
	Section 403.

	 	Waiver of Covenants
	 	 	7	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE FIVE

AMENDMENTS TO INDENTURE	 	 	 	 

	 	 	 	 	 	 	 
	Section 501.

	 	Amendment to Section 1.01 of Indenture
	 	 	7	 
	Section 502.

	 	Conforming Amendments to Indenture
	 	 	8	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE SIX

MISCELLANEOUS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 601.

	 	Ratification of Indenture
	 	 	8	 
	Section 602.

	 	Trustee Not Responsible for Recitals
	 	 	8	 
	Section 603.

	 	Governing Law
	 	 	8	 
	Section 604.

	 	Separability
	 	 	8	 
	Section 605.

	 	Counterparts
	 	 	8	 

-i-

 

     SECOND SUPPLEMENTAL INDENTURE, dated as of March 19, 2010 (this “Supplemental Indenture”),
between First Niagara Financial Group, Inc., a Delaware corporation having an address at 726
Exchange Street, Suite 618, Buffalo, New York 14210 (hereinafter called the “Company,” which term
shall include any successors and assigns pursuant to the terms of this Supplemental Indenture), and
The Bank of New York Mellon, a New York banking corporation having an address at 101 Barclay
Street, Floor 8W, New York, NY 10286, Attn: FNFG Trustee (hereinafter called the “Trustee”).

     WHEREAS, the Company executed and delivered the Senior Notes Indenture (the “Indenture”),
dated as of September 4, 2009, to the Trustee, to provide for the issuance of the Company’s notes
or other evidences of indebtedness (the “Securities”), to be issued in one or more series;

     WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the
establishment of an additional series of its notes under the Indenture to be known as its “6.750%
Senior Notes due 2020” (the “Notes”), the form and substance of and the terms, provisions and
conditions thereof to be set forth as provided in the Indenture and this Supplemental Indenture;

     WHEREAS, the Board of Directors of the Company, pursuant to resolutions duly adopted on
January 26, 2010, and the Pricing Committee (as defined in such resolutions) of the Board of
Directors at its meeting held on March 15, 2010, have duly authorized the issuance of the Notes and
the other amendments to the Indenture provided for in this Supplemental Indenture, and have
authorized the proper officers of the Company to execute any and all appropriate documents
necessary or appropriate to effect each such issuance;

     WHEREAS, this Supplemental Indenture is being entered into pursuant to the provisions of
Section 3.01 and subclause (7) of Section 9.01 of the Indenture;

     WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental
Indenture; and

     WHEREAS, all things necessary to make this Supplemental Indenture a valid agreement of the
Company, in accordance with its terms, and to make each of the Notes, when executed by the Company
and authenticated and delivered by the Trustee or an authentication agent, the valid obligations of
the Company, have been performed, and the execution and delivery of this Supplemental Indenture has
been duly authorized in all respects;

     NOW THEREFORE, in consideration of the premises and the purchase and acceptance of the Notes
by the Holder thereof, and for the purpose of setting forth, as provided in the Indenture, the
forms and terms of the Notes, the Company covenants and agrees, with the Trustee, as follows:

 

 

ARTICLE ONE

DEFINITIONS

Section 101. Definition of Terms.

     Unless the context otherwise requires:

     (a) each term defined in the Indenture has the same meaning when used in this Supplemental
Indenture;

     (b) the singular includes the plural and vice versa; and

     (c) headings are for convenience of reference only and do not affect interpretation.

     “Consolidated Banking Assets” means the aggregate of the assets of all Subsidiary Banks
(including Subsidiaries of such Subsidiary Banks).

     “Notes” has the meaning specified in the second whereas clause of the preamble.

     “Principal Subsidiary Bank” means each of (i) First Niagara Bank, (ii) any other Subsidiary
Bank the consolidated assets of which constitute 20% or more of the consolidated assets of the
Company and its Subsidiaries, (iii) any other Subsidiary Bank designated as a Principal Subsidiary
Bank pursuant to a Board Resolution and set forth in an Officers’ Certificate delivered to the
Trustee, and (iv) any Subsidiary that owns, directly or indirectly, any Voting Shares, or
securities convertible into, or options, warrants or rights to subscribe for or purchase Voting
Shares of any Principal Subsidiary Bank under clause (i), (ii) or (iii), and in the case of clause
(i), (ii), (iii) or (iv) their respective successors (whether by consolidation, merger, conversion,
transfer of substantially all their assets and business or otherwise) so long as any such successor
is a Subsidiary Bank (in the case of clause (i), (ii) or (iii)) or a Subsidiary (in the case of
clause (iv)).

     “Subsidiary Bank” means any Subsidiary that is organized under the laws of the United States,
any State of the United States, the District of Columbia, any territory of the United States,
Puerto Rico, Guam, American Samoa or the Virgin Islands and either (i) accepts deposits that the
depositor has a legal right to withdraw on demand and engages in the business of making commercial
loans or (ii) is a trust company.

     “Voting Shares” means, as to shares of a particular corporation, outstanding shares of Capital
Stock of any class or classes having voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of such corporation (irrespective of
whether at the time stock of any other class or classes shall have or might have voting power by
reason of the failure to pay a dividend or other amount or by reason of the occurrence of any other
contingency).

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ARTICLE TWO

GENERAL TERMS AND CONDITIONS OF THE NOTES

Section 201. Designation and Principal Amount.

     There is hereby authorized and established a series of Securities under the Indenture,
designated as the “6.750% Senior Notes due 2020”.

Section 202. Form and Denomination of Notes.

     The definitive form of the Notes and the Trustee’s Certificate of Authentication to be
endorsed thereon shall be substantially in the form set forth in Exhibit A attached hereto, which
is incorporated herein and made part hereof. The Notes shall bear interest and have such other
terms as are stated in the form of definitive Notes or in the Indenture. The Stated Maturity of
the Notes shall be March 19, 2020. The Notes shall be issued in denominations of $2,000 and
integral multiples of $1,000 in excess thereof.

Section 203. Initial Limit on Amount of Series.

     The Notes shall initially be limited to U.S.$300,000,000 in aggregate principal amount, and
may, upon the execution and delivery of this Supplemental Indenture or from time to time
thereafter, be executed by the Company and delivered to the Trustee for authentication, and the
Trustee shall thereupon authenticate and deliver said Notes to or upon the delivery of a Company
Order. Following the initial issuance of the Notes, the aggregate principal amount of Notes may be
increased as provided in Section 205.

Section 204. Rank.

     The Notes are unsecured and shall rank equally among themselves and with all of the Company’s
other unsecured and unsubordinated indebtedness.

Section 205. Further Issues Without Holders’ Consent.

     The Company may, without notice to or the consent of the Holders of the Notes, but in
compliance with the terms of the Indenture, issue additional Notes having the same ranking,
interest rate, maturity date and other terms as the Notes. Any such additional Notes, together
with the Notes herein provided for, will constitute a single series of Securities under the
Indenture; provided, however, that no additional Notes may be issued unless they will be fungible
with the Notes offered hereby for United States federal income tax and securities law purposes; and
provided, further, that the additional Notes have the same CUSIP number as the Notes offered
hereby. No additional Notes may be issued if any Event of Default has occurred and is continuing
with respect to the Notes.

Section 206. Form and Payment.

     Principal of, premium, if any, and interest on the Notes shall be payable in U.S. dollars.

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Section 207. Redemption.

     The Notes are subject to redemption at the option of the Company as set forth in the Indenture
and the form of the Note attached hereto as Exhibit A.

Section 208. Global Securities.

     The Notes shall be issued as Fully Registered Securities in the form of one or more Global
Securities, without coupons, registered in the name of the Depositary (which initially shall be The
Depository Trust Company) or its nominee. Except as otherwise provided in Section 2.05 of the
Indenture, the Global Securities described above may be transferred by the Depositary, in whole but
not in part, only to a nominee of the Depositary, or by a nominee of the Depositary to the
Depositary, or to a successor Depositary or to a nominee of such sucessor Depositary.

     Owners of beneficial interests in such Global Securities will not be considered the Holders
thereof for any purpose under the Indenture. The rights of owners of beneficial interests in such
Global Securities shall be exercised only through the Depositary.

ARTICLE THREE

ORIGINAL ISSUE OF NOTES

Section 301. Original Issue of Notes.

     The Notes may, upon execution of this Supplemental Indenture, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall, upon Company Order,
authenticate and deliver such Notes as in such Company Order provided.

ARTICLE FOUR

COVENANTS

     The Company shall comply with the following Covenants in addition to those Covenants set forth
in the Indenture:

Section 401. Limitation on Sale or Issuance of Voting Shares of Principal Subsidiary Banks.

     The Company will not (a) permit the issue, sale or other disposition of any Voting Shares, or
securities convertible into, or options, warrants or rights to subscribe for or purchase Voting
Shares, of any Principal Subsidiary Bank, (b) permit the merger or consolidation of any Principal
Subsidiary Bank with or into any other corporation, or (c) permit the sale or other disposition of
all or substantially all of the assets of any Principal Subsidiary Bank, if, after giving effect to
any such transaction (specified in clauses (a), (b) or (c) above) and the issuance of the maximum
number of Voting Shares issuable upon the conversion or exercise of all such convertible
securities, options, warrants or rights, the Company would own, directly or indirectly, less than
80% of the Voting Shares of such Principal Subsidiary Bank (and of any other Principal Subsidiary
Bank any Voting Shares of which are owned, directly or indirectly, by

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such Principal Subsidiary Bank); provided, however, that the foregoing shall not prohibit any
such issuance, sale or disposition of shares or securities, any such merger or consolidation or any
such sale or disposition of assets if:

     (i) required by any law or any regulation or order of any governmental authority;

     (ii) required as a condition imposed by any law or any regulation or order of any
governmental authority to the acquisition by the Company, directly or indirectly, of any
other corporation or entity, if thereafter, (x) the Company would own, directly or
indirectly, at least 80% of the Voting Shares of such other corporation or entity, and (y)
the Consolidated Banking Assets of the Company would be at least equal to the Consolidated
Banking Assets of the Company prior thereto, and (z) by a Board Resolution, such other
corporation or entity shall have been designated a Principal Subsidiary Bank for all
purposes of this Indenture;

     (iii) upon consummation of such transaction, the Company owns, directly or indirectly,
not less than the percentage of Voting Shares of such Principal Subsidiary Bank (and of any
other Principal Subsidiary Bank any Voting Shares of which are owned, directly or
indirectly, by such Principal Subsidiary Bank) it owned prior to such transaction; or

     (iv) the proceeds of any such issuance, sale or other disposition are invested within
180 days after such issuance, sale or other disposition in any one or more Subsidiary Banks
(including any previously existing Subsidiary Bank or any other corporation which upon such
investment becomes a Subsidiary Bank), or if within 180 days after such issuance, sale or
other disposition the Company has entered into an agreement to invest such proceeds in any
one or more Subsidiary Banks (including any previously existing Subsidiary Bank or any other
corporation which upon such investment would become a Subsidiary Bank), but such investment
has not been made because all regulatory or other approvals have not been obtained but are
in the process of being obtained, and if, in each case, the consolidated assets of the
Subsidiary Bank(s) acquired or to be acquired or invested in (including any one or more
corporations which upon such investment would become Subsidiary Banks) would be at least
equal to 80% of the consolidated assets of the Principal Subsidiary Bank being disposed of;
provided, however, that if the Company makes a subsequent acquisition as described in this
paragraph using its common stock and preferred stock, with a fair market value at least
equal to the proceeds of any sale, assignment, transfer or disposition of a Principal
Subsidiary Bank, it will not also be required to invest the proceeds of any sale assignment,
transfer or disposition as otherwise required by this paragraph; provided, further, that the
Company will, for the purpose of satisfying this covenant, only issue preferred shares in a
subsequent acquisition in an amount needed to replace any preferred stock of the acquired
company;

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provided, however, that nothing herein shall be deemed to restrict or prohibit the merger of a
Principal Subsidiary Bank with and into a Principal Subsidiary Bank or the Company, the
consolidation of Principal Subsidiary Banks into a Principal Subsidiary Bank or the Company, or the
sale or other disposition or all or substantially all of the assets of any Principal Subsidiary
Bank to another Principal Subsidiary Bank or the Company, if, in any such case in which the
surviving, resulting or acquiring entity is not the Company, the Company would own, directly or
indirectly, at least 80% of the Voting Shares of the Principal Subsidiary Bank (and of any other
Principal Subsidiary Bank any Voting Shares of which are owned, directly or indirectly, by such
Principal Subsidiary Bank) surviving such merger, resulting from such consolidation or acquiring
such assets.

Section 402. Liens.

     The Company will not, and it will not permit any Subsidiary to, pledge, mortgage or
hypothecate or permit to exist any pledge, mortgage or hypothecation or other lien upon Voting
Shares of any Principal Subsidiary Bank owned by the Company or any Subsidiary to secure any
indebtedness for borrowed money without making effective provisions whereby any Securities then
outstanding shall be equally and ratably secured with any and all such indebtedness; provided,
however, that this restriction shall not apply to or prevent:

          (a) the mortgage, pledge, or hypothecation of, or the establishment of a lien on, any such
Voting Shares to secure indebtedness of the Company or a Subsidiary as part of the purchase price
of such Voting Shares, or incurred prior to, at the time of or within 120 days after acquisition
thereof for the purpose of financing all or any part of the purchase price thereof;

          (b) the acquisition by the Company or any Subsidiary of any Voting Shares subject to
mortgages, pledges, hypothecations or other liens existing thereon at the time of acquisition
(whether or not the obligations secured thereby are assumed by the Company or such subsidiary);

          (c) the assumption by the Company or a Subsidiary of obligations secured by mortgages on,
pledge or hypothecations of, or other liens on, any such Voting Shares, existing at the time of the
acquisition by the Company or such Subsidiary of such Voting Shares;

          (d) the extension, renewal or refunding (or successive extensions, renewals or refundings), in
whole or in part, of any mortgage, pledge, hypothecation or other lien referred to in the foregoing
clauses (a), (b) and (c); provided, however, that the principal amount of any and all other
obligations and indebtedness secured thereby shall not exceed the
principal amount so  secured at
the time of each extension, renewal or refunding, and that such extension, renewal or refunding
shall be limited to all or a part of the Voting Shares that were subject to the mortgage, pledge,
hypothecation or other lien so extended, renewed or refunded; or

          (e) liens to secure loans or other extensions of credit by a Subsidiary Bank subject to
Section 23A of the Federal Reserve Act or any successor or similar federal law or regulations
promulgated thereunder;

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and provided, further, that, notwithstanding the foregoing, the Company may incur or permit to be
incurred or to exist upon such Voting Shares (x) liens for taxes, assessments or other governmental
charges or levies which are not yet due or are payable without penalty or of which the amount,
applicability or validity is being contested by the Company or a Subsidiary in good faith by
appropriate proceedings and the Company or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto (segregated to the extent required by generally accepted
accounting principles), or (y) the lien of any judgment, if such judgment shall not have remained
undischarged, or unstayed on appeal or otherwise, for more than 60 days.

     In case the Company or any Subsidiary shall propose to pledge, mortgage or hypothecate any
Voting Shares at any time owned by it to secure any indebtedness, other than as permitted by
subdivisions (a) to (e), inclusive, of this Section, the Company will prior thereto give written
notice thereof to the Trustee, and will prior to or simultaneously with such pledge, mortgage or
hypothecation, by supplemental indenture delivered to the Trustee, in form satisfactory to it,
effectively secure all the Securities equally and ratably with such indebtedness, by pledge,
mortgage or hypothecation of such Voting Shares. Such supplemental indenture shall contain the
provisions, concerning the possession, control, release and substitution of mortgaged and pledged
property and securities and other appropriate matters which are required or permitted by the Trust
Indenture Act (as in effect at the date of execution of such supplemental indenture) to be included
in a secured indenture qualified under said Act, and may also contain such additional and mandatory
provisions permitted by said Act as the Company and the Trustee shall deem advisable or appropriate
or as the Trustee shall deem necessary in connection with such pledge, mortgage or hypothecation.

Section 403. Waiver of Covenants.

     The Company may omit to comply with any covenant or condition set forth in this Article Four,
if before or after the time for such compliance the Holders of at least a majority in principal
amount of the Securities of such series at the time Outstanding shall, by Act of such Holders of
Securities, either waive such compliance in each instance or generally waive compliance with such
covenant or condition, with a copy of such waiver delivered to the Trustee, but no such waiver
shall extend to or affect each covenant or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such covenant or condition shall remain in full force and effect.

ARTICLE FIVE

AMENDMENTS TO INDENTURE

Section 501. Amendment to Section 1.01 of Indenture.

     Section 1.01 of the Indenture is hereby amended to add the following defined term:

     “‘Default’ means any event which is, or after notice or lapse of time or both would become, an
Event of Default.”

-7-

 

Section 502. Conforming Amendments to Indenture.

     Any reference in Sections 5.03, 5.04, 7.02, 7.13 and 8.02 of the Indenture to “default” is
hereby amended to refer to “Default”.

Section 503. Amendment to Section 7.15 of Indenture.

     Section 7.15 of the Indenture is hereby amended to replace the text “any stay or extension
law” with the text “any stay, usury or extension law”.

ARTICLE SIX

MISCELLANEOUS

Section 601. Ratification of Indenture.

     The Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and
confirmed, and this Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided; provided, however, that the provisions of this
Supplemental Indenture apply solely with respect to the Notes, other than Articles Four and Five,
which shall apply with respect to all Securities under the Indenture issued on or after the date of
this Supplemental Indenture.

Section 602. Trustee Not Responsible for Recitals.

     The recitals herein contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no representation as to
the validity or sufficiency of this Supplemental Indenture.

Section 603. Governing Law.

     This Supplemental Indenture and the Notes shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of conflicts of law.

Section 604. Separability.

     In case any one or more of the provisions contained in this Supplemental Indenture, the Notes
shall for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions of this
Supplemental Indenture or of the Notes, but this Supplemental Indenture and the Notes shall be
construed as if such invalid or illegal or unenforceable provision had never been contained herein
or therein.

Section 605. Counterparts.

     This Supplemental Indenture may be executed in any number of counterparts each of which shall
be an original; but such counterparts shall together constitute but one and the same

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instrument. This Supplemental Indenture shall be effective when one or more counterparts has
been signed by the parties hereto and delivered (including by electronic transmission) to the other
parties.

[signature page follows]

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     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed, as of the day and year first above written.

	 	 	 	 	 
	 	FIRST NIAGARA FINANCIAL GROUP, INC.

 	 
	 	By:  	/s/ John R. Koelmel	 
	 	 	Name:  	John R. Koelmel	 
	 	 	Title:  	President & CEO	 
	 

	 	 	 	 	 
	 	THE BANK OF NEW YORK MELLON,

as Trustee

 	 
	 	By:  	/s/ Francine Kincaid	 
	 	 	Name:  	Francine Kincaid	 
	 	 	Title:  	Vice President 	 

 

 

	 	 	 	 	 

EXHIBIT A

FORM OF NOTE

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. EXCEPT AS OTHERWISE PROVIDED
IN SECTION 2.05 OF THE INDENTURE, THIS SECURITY MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY
TO A NOMINEE OF THE DEPOSITARY, OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY, OR TO A
SUCCESSOR DEPOSITARY OR TO A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE
OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER, CEDE & CO., HAS AN INTEREST HEREIN.

THIS SECURITY IS NOT A DEPOSIT OR OTHER OBLIGATION OF A DEPOSITORY INSTITUTION AND IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.

A-1

 

FIRST NIAGARA FINANCIAL GROUP, INC.

6.750% Senior Note due 2020

No.: 1

CUSIP: 33582VAB4

ISIN: US33582VAB45

          FIRST NIAGARA FINANCIAL GROUP, INC., a Delaware corporation (hereinafter called the
“Company”, which term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal
sum of Three Hundred Million Dollars ($300,000,000), or such other principal amount as may be set
forth in the records of the Depositary or the Securities Registrar hereinafter referred to in
accordance with the Indenture, on March 19, 2020 (the “Stated Maturity Date”). The Company further
promises to pay interest on said principal sum from March 19, 2010 or from the most recent interest
payment date (each such date, an “Interest Payment Date”) on which interest has been paid or duly
provided for, semi-annually in arrears on March 19 and September 19 of each year, commencing
September 19, 2010, at the rate of 6.750% per annum until the principal hereof is paid or duly
provided for or made available for payment. In the event that any date, other than the Stated
Maturity Date, on which interest is payable on this Security is not a Business Day, then a payment
of the interest payable on such date will be made on the next succeeding Business Day (and without
any interest or other payment in respect of any such delay). In the event that the Stated Maturity
Date is not a Business Day, the payment of interest and principal will be made on the next
succeeding Business Day, and no interest on this Security or such payment will accrue for the
period from and after the Stated Maturity Date in respect of such delay. A “Business Day” shall
mean any day other than a Saturday, Sunday, or any other day on which banking institutions and
trust companies in New York, New York are permitted or required by law, regulation or executive
order to close. The interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest installment, which shall be the fifteenth calendar day
preceding the relevant Interest Payment Date whether or not such day is a Business Day. Any such
interest installment not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities of this series may be
listed, and upon such notice as may be required by such exchange, all as more fully provided in
said Indenture.

          Payment of the principal of and interest on this Security will be made at the Corporate Trust
Office of the Trustee, or such other office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be

A-2

 

made by check mailed to Holders of Registered Securities entitled thereto as such Holders
shall appear in the Securities Register.

          Reference is hereby made to the further provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.

          Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

[Signature on next page]

A-3

 

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

	 	 	 	 	 	 	 
	 	 	FIRST NIAGARA FINANCIAL GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 
	Attest:
	 	 	 	 
	 

	 	 

	 	 

A-4

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series designated therein referred to in the
within-mentioned Indenture.

	 	 	 	 	 	 	 
	 	 	THE BANK OF NEW YORK MELLON

     Not in its individual capacity but solely

       as Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

      AUTHORIZED OFFICER
	 	 

A-5

 

[Reverse of Security]

          This Security is one of a duly authorized issue of securities of the Company (herein called
the “Securities”), issued and to be issued in one or more series under a Senior Notes Indenture,
dated as of September 4, 2009, as supplemented by that Second Supplemental Indenture, dated as of
March 19, 2010 (herein called the “Indenture”), between the Company and The Bank of New York
Mellon, as Trustee (herein called the “Trustee”, which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Securities, and to which Indenture reference is
hereby made for a statement of the terms upon which the Securities of this series are, and are to
be, authenticated and delivered. By the terms of the Indenture, the Securities are issuable in
series that may vary as to amount, date of maturity, rate of interest, rank and in any other
respect provided in the Indenture.

          The Securities of this series are redeemable at the option of the Company, in whole or in part
at any time, upon not less than 30 days nor more than 60 days prior notice to Holders, at a
redemption price calculated by the Company equal to the greater of:

          (i) 100.00% of the principal amount of the Securities to be redeemed; and

          (ii) the sum of the present values of the remaining scheduled payments of principal of and
interest on the Securities to be redeemed (not including any portion of such payments of interest
accrued as of the Redemption Date), discounted to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined
below) plus 45 basis points,

plus in each case accrued and unpaid interest thereon to the Redemption Date.

     Notwithstanding the foregoing, interest on Securities that are due and payable on an Interest
Payment Date falling after the relevant Regular Record Date and on or prior to such Redemption Date
will be payable on the Interest Payment Date to the registered Holders as of the close of business
on the relevant Regular Record Date according to the terms of the Securities of this series and the
Indenture.

     “Comparable Treasury Issue” means the United States Treasury security selected by the
Quotation Agent as having a maturity comparable to the remaining term of the Securities of this
series to be redeemed that would be utilized, at the time of selection in accordance with customary
financial practice, in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of the Securities of this series.

     “Comparable Treasury Price” means, with respect to any Redemption Date, (i) the average of the
Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (ii) if the Quotation Agent obtains fewer than
three such Reference Treasury Dealer Quotations, the average of all such quotations, or (iii) if
only one Reference Treasury Dealer Quotation is received, such quotation.

     “Quotation Agent” means J.P. Morgan Securities, Inc. or its successor.

     “Reference Treasury Dealer” means (i) J.P. Morgan Securities Inc. and Goldman, Sachs & Co. and
their respective successors; provided, however, that if one or more of the foregoing shall cease to
be a primary U.S. Government securities dealer in New York City (a “Primary

A-6

 

Treasury Dealer”), the Company will substitute thereof another Primary Treasury Dealer, and (ii)
any other Primary Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Company, of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case a percentage of its principal amount) quoted
in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City
time, on the third Business Day preceding such Redemption Date.

     “Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Redemption Date.

     The Company shall provide notice to the Trustee of the redemption at least two Business Days
prior to the date such notice is delivered to the Holders. Notice of redemption will be delivered
to the DTC.

     If fewer than all the Securities of this series are redeemed, the Trustee will select the
particular Securities of this series to be redeemed on a pro rata basis, by lot or by such other
method of random selection, if any, that the trustee deems fair and appropriate.

          All terms used in this Security that are defined in the Indenture and not otherwise defined
herein shall have the meanings assigned to such terms in the Indenture.

          The Indenture permits, with certain exceptions as therein provided, the Company, when
authorized by a Board Resolution, and the Trustee at any time to enter into a supplemental
indenture or indentures for the purpose of adding any provisions to or changing in any manner or
eliminating any provisions of the Indenture or modifying in any manner the rights and obligations
of the Holders of the Securities of each such series under the Indenture, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding Securities of all series
(voting as one class) to be affected by such supplemental indenture. The Indenture also contains
provisions permitting Holders of a specified percentage in principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

          As provided in and subject to the provisions of the Indenture, if an Event of Default with
respect to the Securities of this series at the time Outstanding occurs and is continuing, then and
in every such case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of this series may declare the principal amount of all the Securities of
this series to be due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders).

          No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and

A-7

 

unconditional, to pay the principal of, premium (if any) and interest on this Security at the
times, place and rate, and in the coin or currency, herein prescribed.

          As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Securities Register, upon presentment of this
Security for registration of transfer at the office or agency of the Company maintained under
Section 5.02 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer
substantially in the form attached hereto duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to the designated
transferee or transferees. No service charge shall be made for any such registration of transfer
or exchange, but, subject to certain exceptions set forth in the Indenture, the Company may require
payment of a sum sufficient to cover any tax or other governmental charge payable in connection
therewith.

          Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee shall treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

          The Securities of this series are issuable only in registered form without coupons in
denominations of $2,000 and any integral multiples of $1,000 in excess thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of such series of a different
authorized denomination, as requested by the Holder surrendering the same.

          THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

A-8

 

[FORM OF TRANSFER NOTICE]

To assign this Security, fill in the form below:

			
	(I) or (we) assign and transfer this Note to: 	

 

         (Insert assignee’s legal name)

      

(Insert assignee’s soc. Sec. or tax I.D. no.)

      

      

      

      

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                                                                 
to transfer this Security on the books of the Company. The agent may substitute another to act for
him.

Date:                                         

	 	 	 	 	 	 	 
	 

	 	Your signature:
	 	                                                            
	 	 
	 
	 

	 	 	 	(Sign exactly as your name appears on the face of this Security)	 	 

Signature Guarantee*:                                         

 

			
	*	 	Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor
acceptable to the Trustee).

A-9ex10-1.htm

    Exhibit
10.1

     

     

    

     

    
      March 17,
2010

      

      

      Mr.
William J. Lynch, Jr.

      122 Fifth
Avenue,

      New York,
NY 10011

      

      Dear Mr.
Lynch:

      

      This
letter agreement (the “Agreement”) is intended to set forth our mutual
understanding regarding your employment as Chief Executive Officer of Barnes
& Noble, Inc. (the “Company”).

      

      Accordingly,
we are pleased to agree as follows:

      

      1.           Duties.  You
agree to be Chief Executive Officer of the Company for the term of this
Agreement.  In this capacity, you shall perform such duties and have
such responsibilities as are typically associated with the office of Chief
Executive Officer, including such duties and responsibilities as are prescribed
by the Board of Directors of the Company (the “Board”) consistent with the
office of Chief Executive Officer.  While you are the Company’s
employee, you agree to devote your full business time and attention to the
performance of your duties and responsibilities hereunder.  You shall
report to the Board.

      

      2.           Term.  (a)  The
initial term of this Agreement shall be for a period beginning on March 17, 2010
(the “Effective Date”) and ending on the third anniversary of the Effective Date
or, if earlier, the termination of your employment in accordance with the
provisions set forth below (the “Initial Term”).  At the expiration
(but not earlier termination) of the Initial Term, and any subsequent “Renewal
Term” (as defined below), the term of this Agreement shall automatically renew
for additional periods of one year (each, a “Renewal Term”), unless your
employment has earlier terminated or either party hereto has given the other
party written notice of non-renewal at least 90 days prior to the expiration
date of the Initial Term or the Renewal Term, as applicable.  In the
event that either party has given written notice of non-renewal, and your
employment with the Company continues after the expiration of the Initial Term
or any Renewal Term, such post-expiration employment shall be “at-will” and
either party may terminate such employment with or without notice and for any
reason or no reason.

      

      (b)           Your
employment hereunder shall terminate upon your death and may be terminated by
the Company upon written notice to you following your Disability (as defined
below).  Your employment hereunder may also be terminated by the
Company immediately for Cause (as defined below) or following two weeks written
notice to you for any other reason.  Your employment hereunder may
also be terminated by you following written notice to the Company of your
intention to resign with or without Good Reason (as defined below); provided
that a resignation for Good Reason shall comply with Section
2(c)(iv).

      

      (c)           For
purposes of this Agreement:

      

      (i)           “Cause”
means (A)  your engaging in intentional misconduct or gross negligence
that, in either case, is injurious to Company; (B) your indictment, entry of a
plea of nolo contendere or conviction by a court of competent jurisdiction with
respect to any crime or violation of law involving fraud or dishonesty (with the
exception of misconduct based in good faith on the advice of professional
consultants, such as attorneys and accountants) or any felony (or equivalent
crime in a non-U.S. jurisdiction); (C) any gross negligence, intentional acts or
intentional omissions by you (as determined by a majority vote of the Board in
its reasonable discretion and judgment) that constitute fraud, dishonesty,
embezzlement or misappropriation in connection with the performance of your
employment duties and responsibilities; (D) your engaging in any act of
intentional misconduct or moral turpitude (as determined by a majority vote of
the Board in its reasonable discretion and judgment) reasonably likely to
adversely affect the Company or its business; (E) your abuse of or dependency on
alcohol or drugs (illicit or otherwise) that adversely affects your job
performance; (F) your willful failure or refusal to properly perform (as
determined by a majority vote of the Board in its reasonable discretion and
judgment) the duties, responsibilities or obligations of your employment for
reasons other than Disability or authorized leave, or to properly perform or
follow (as determined by a majority vote of the Board in its reasonable
discretion and judgment) any lawful direction by the Company (with the exception
of a willful failure or refusal to properly perform based in good faith on the
advice of professional consultants, such as attorneys and accountants); or (G)
your material breach of this Agreement or of any other contractual duty to,
written policy of, or written agreement with the Company (with the exception of
a material breach based in good faith on the advice of professional consultants,
such as attorneys and accountants).

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
 

      (ii)           “Disability”
shall mean a written determination by a majority of three physicians (one of
which shall be your most recent primary care provider) mutually agreeable to the
Company and you (or, in the event of your total physical or mental disability,
your legal representative) that you are physically or mentally unable to perform
your duties as Chief Executive Officer under this Agreement and that such
disability can reasonably be expected to continue for a period of six
consecutive months or for shorter periods aggregating 180 days in any 12-month
period.

      

      (iii)           “Good
Reason” shall mean the occurrence of one or more of the following events without
your written consent:  (A) there shall have been a material diminution
of your authority, duties or responsibilities; (B) there shall have been a
greater than 10% reduction in your Annual Base Salary (as defined below) in
effect as of the Effective Date pursuant to Section 3.1; (C) the principal
executive offices of the Company shall be relocated to a location more than 50
miles from New York City; or (D) the Company fails to make material payments to
you (or provide to you restricted common stock or stock options) as required by
this Agreement.

      

      (iv)           You
shall only be deemed to terminate employment for Good Reason if (A) you provide
the Company with written notice of Good Reason within a period not to exceed 90
days after the initial existence of the condition alleged to give rise to Good
Reason, (B) the Company fails to remedy the condition within 30 days of such
notice and (C) your termination is within six months following the initial
existence of the condition alleged to give rise to Good Reason.

      

      3.           Compensation.

      

      3.1.           Annual Base
Salary.  During the Initial Term and any Renewal Term, the
Company shall pay you, for all services you perform hereunder, an annual base
salary of U.S. $900,000.00, or such higher amount as the Compensation Committee
of the Board (the “Compensation Committee”) may determine, payable in accordance
with the Company’s payroll schedule applicable to executive officers of the
Company (“Annual Base Salary”).

      

      3.2.           Bonus
Compensation.  During the Initial Term and any Renewal Term,
the Company shall pay you annual bonus compensation, as determined by the
Compensation Committee, with an annual target amount of not less than 150% of
your Annual Base Salary, which shall be paid in accordance with and subject to
the terms and conditions of the Company’s Executive Performance Plan (as may be
amended from time to time and attached hereto as Exhibit A and incorporated
herein by reference) or such other incentive or compensation plan or arrangement
specified by the Compensation Committee.

      

      3.3.           Employee
Benefits.  During the Initial Term and any Renewal Term, you
shall be eligible to participate in and receive any benefits to which you are
entitled under the employee benefit plans that the Company provides for its
employees generally, as well as any employee benefit plans that the Company
provides for its executive officers generally.

      

      3.4.           Expenses.  During
the Initial Term and any Renewal Term, the Company shall reimburse you for all
expenses incurred by you in the performance of your duties and responsibilities
under this Agreement, including entertainment and travel expenses, in accordance
with the policies and procedures established by the Compensation
Committee.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
 

      3.5.           Equity
Awards.  On April 1, 2010, you shall be granted (a) 500,000
shares of restricted common stock of the Company (the “Stock Grant”) and (b)
options to purchase 500,000 shares of the Company’s common stock (the “Option
Grant”), in each case, in accordance with the Company’s 2009 Incentive Plan (the
“Plan”).  The per-share exercise price of the Option Grant shall be
the Fair Market Value (as defined in the Plan) of the Company’s common stock on
the date of grant. The Stock Grant shall vest in two equal annual installments
on the second and third anniversaries of the Effective Date and the Option Grant
shall vest in three equal annual installments on the first, second and third
anniversaries of the Effective Date, except that, in each case, no installment
shall vest unless you are still employed by the Company at the time of such
vesting.  Notwithstanding the foregoing, the Stock Grant and the
Option Grant shall each vest immediately (i) upon the occurrence of a
Change of Control (as defined in and pursuant and subject to the terms of
Section 3.9 of this Agreement) or (ii) in the event that, during the
Initial Term or any Renewal Term, (x) your employment is terminated by the
Company without Cause or (y) you voluntarily terminate your employment for Good
Reason.  Except as provided above, the Stock Grant and the Option
Grant shall be subject to the terms and conditions set forth in the Company’s
customary award agreements.  During the Initial Term and any Renewal
Term, you shall be eligible to receive additional equity awards of the Company
under the terms of the Company’s 2009 Incentive Plan, as determined by the
Compensation Committee.

      

      3.6           Car
Allowance.  During the Initial Term and any Renewal Term, the
Company shall pay you in cash a monthly car allowance of U.S. $1,500.00, or such
higher amount as may be determined by the Compensation Committee.

      

      3.7           Life and Disability
Insurance.  During the Initial Term and any Renewal Term, the
Company shall obtain in your name (a) a life insurance policy providing for a
death benefit of U.S. $1,000,000.00 payable to any beneficiary or beneficiaries
named by you and (b) a disability insurance policy providing for monthly
payments to you of at least U.S. $12,800.00 during the period of any disability
until the earlier of your attaining age 65 or death; provided that the term
“disability” in any such disability insurance policy shall be defined in a
manner consistent with the definition in Section 2(c)(ii).  During the
Initial Term and the Renewal Term, the Company shall pay all premiums due on
such policies.

      

      3.8.           Severance.  In
the event that, during the Initial Term or any Renewal Term, (a) your employment
is terminated by the Company without Cause or (b) you voluntarily terminate your
employment for Good Reason, the Company shall pay you an amount equal to two
times the sum of (i) your then Annual Base Salary, (ii) the average of the
annual bonuses actually paid to you with respect to the three completed years
preceding the date of your termination of employment (or such lesser number of
completed years beginning on February 2, 2009 (such date, the “Date of Hire”)
and ending on the date of your termination of employment) and (iii) the
aggregate annual dollar amount of the payments made or to be made to you or on
your behalf for purposes of providing you with the benefits set forth in
Sections 3.3, 3.6 and 3.7 above, less all applicable withholding and other
applicable taxes and deductions (“Severance Amount”); provided that (x) you
execute and deliver to the Company, and do not revoke, a release of all claims
against the Company substantially in the form attached hereto as Exhibit B
(“Release”) and (y) you have not materially breached as of the date of such
termination any provisions of this Agreement and do not materially breach such
provisions at any time during the Relevant Period (as defined
below).  The Company’s obligation to make such payment shall be
cancelled upon the occurrence of any such material breach and, in the event such
payment has already been made, you shall repay to the Company such payment
within 30 days after demand therefore; provided, however, such repayment shall
not be required if the Company shall have materially breached this Agreement
prior to the time of your breach.  The Severance Amount shall be paid
in cash in a single lump sum on the later of (1) the first day of the month
following the month in which such termination occurs and (2) the
date the Revocation Period (as defined in the Release) has
expired.  Notwithstanding anything in this paragraph to the contrary,
if a Release is not executed and delivered to the Company within 60 days of such
termination of employment (or if such Release is revoked in accordance with its
terms), the Severance Amount shall not be paid.  Upon the expiration
of this Agreement due to non-renewal, or upon the termination of your employment
hereunder for Cause or by your death or Disability, or by your voluntary
termination of your employment hereunder without Good Reason, you shall be
entitled only to the payment of such installments of your Annual Base Salary
that have been earned through the date of such expiration and/or
termination.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
 

      3.9.           Change of Control
Payments.  (a)  If at any time during the Initial
Term and any Renewal Term (i) there
is a Change of Control (as defined below) and (ii) your employment is terminated
by the Company without Cause or you voluntarily terminate your employment for
Good Reason, in either case, within the greater of two years following the
Change of Control or the remainder of the Initial Term or any Renewal Term, as
applicable, then the Company shall pay you an amount equal to three times the
sum of (a) your then Annual Base Salary, (b) the average of the annual bonuses
actually paid to you with respect to the three completed years preceding the
date of your termination of employment (or such shorter period beginning on your
Date of Hire and ending on the date of your termination of employment) and
(c) the aggregate annual dollar amount of the payments made or to be made
by the Company for purposes of providing you with the benefits set forth in
Sections 3.3, 3.6 and 3.7 above, less all applicable withholding and other
applicable taxes and deductions (“Change of Control Amount”).  The
Change of Control Amount shall be paid to you in cash in a single lump sum
within 30 days after the date your employment terminates.  In the
event that it is determined that the aggregate amount of the payments and
benefits that could be considered “parachute payments” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(collectively, with the regulations and other guidance promulgated thereunder,
the “Code”; and such payments and benefits, the “Parachute Payments”) that, but
for this Section 3.9 would be payable to you under this Agreement or any other
plan, policy or arrangement of the Company, exceeds the greatest amount of
Parachute Payments that could be paid to you without giving rise to any
liability for any excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), then the aggregate amount of Parachute Payments payable to you
shall not exceed the amount that produces the greatest after-tax benefit to you
after taking into account any Excise Tax to be payable by you.  Any
reduction in Parachute Payments pursuant to the immediately preceding sentence
shall be made in the following order:  (1) cash payments that do not
constitute deferred compensation within the meaning of Section 409A of the Code,
(2) welfare or in-kind benefits, (3) equity compensation awards and (4) cash
payments that do constitute deferred compensation, in each case, such reductions
shall be made in the manner that maximizes the present value to you of all such
payments.  Subject to the Section 280G limitation referred to above,
to the extent that you are not fully vested in any retirement benefits from any
pension, profit-sharing or other retirement plan or program maintained by the
Company and your employment terminates in the circumstances contemplated by this
Section 3.9(a), the Company shall pay directly to you within 30 days after the
date on which your employment terminates the difference between the amounts that
would have been paid to you had you been fully vested on the date that your
employment terminates and the amounts actually paid or payable to you pursuant
to such plans or programs.  The amounts payable to you under this
Section 3.9(a) shall be in lieu of any amounts payable to you under Section 3.8
above.

      

      (b) As
used herein, “Change of Control” shall mean the occurrence of one or more of the
following
events:

       

      (i)  after
the Effective Date hereof, any person, entity or “group” as identified in
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “1934
Act”), other than you or any of your affiliates or Leonard Riggio or any of his
heirs or affiliates, becomes a beneficial owner (as such term is defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of securities of the Company
representing 40% or more of the total number of votes that may be cast for the
election of directors of the Company; or

      

      (ii)  within
two years after a merger, consolidation, liquidation or sale of assets involving
the Company, or a contested election of a Company director, or any combination
of the foregoing, the individuals who were directors of the Company immediately
prior thereto shall cease to constitute a majority of the Board; or

      

      (iii)  within
two years after a tender offer or exchange offer for voting securities of the
Company, the individuals who were directors of the Company immediately prior
thereto shall cease to constitute a majority of the Board.

      

      4.           Non-Competition and
Confidential Information.

      

      4.1.           Non-Competition.  You
agree that during the Initial Term and any Renewal Term and for a period of two
years (the “Relevant Period”) after the termination for any reason of your
employment, you shall not, directly or indirectly, (a) employ or retain, or
induce or cause any other person or entity to employ or retain, any person who
is, or who at any time in the twelve-month period prior to such time had been,
employed or retained by the Company or any of its subsidiaries or affiliates; or
(b) provide services, whether as principal or as agent, officer, director,
employee, consultant, shareholder, or otherwise, alone or in association with
any other person, corporation or other entity, to any Competing Business (as
defined below); provided, however, that you may provide services to a Competing
Business (other than Amazon.com, Inc. and its subsidiaries and affiliates and
their respective successors (collectively, “Amazon”)) that is engaged in one or
more businesses other than the Business Area (as defined below) but only to the
extent that you do not provide services, directly or indirectly, to the segment
of such Competing Business that is engaged in the Business Area.  For
purposes of this Agreement, the term “Competing Business” shall mean (i) Amazon
or (ii) any person, corporation or other entity engaged in the Business
Area.  For purposes of this Agreement, the term “Business Area” shall
mean the sale, distribution or attempted sale or distribution of books,
textbooks, periodicals, newspapers, digital or audio versions of any of the
foregoing or e-reading devices and related software.  Notwithstanding
the foregoing, the restrictions of this Section 4.1 shall not apply to the
placement of general advertisements or the use of general search firm services
with respect to a particular geographic area, but which are not targeted,
directly or indirectly, towards employees of the Company or any of its
subsidiaries.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
 

      4.2.           Ownership of Other
Securities.  Nothing in Section 4.1 shall be construed as
denying you the right to own securities of any corporation listed on a national
securities exchange or quoted in the NASDAQ System in an amount up to 5% of the
outstanding number of such securities.

      

      4.3.           Confidential
Information.  (a) You shall use best efforts and diligence both
during and after any employment with the Company, regardless of how, when or why
such employment ends, to protect the confidential, trade secret and/or
proprietary character of all Confidential Information and Trade Secret
Information (as defined below).  You shall not, directly or
indirectly, use (for your benefit or for the benefit of any other person) or
disclose any Confidential Information or Trade Secret Information, for so long
as it shall remain proprietary or protectable, except as may be necessary for
the performance of your duties for the Company.  For purposes of this
Agreement, “Confidential Information” shall mean all confidential information of
the Company, regardless of the form or medium in which it is or was created,
stored, reflected or preserved, information that is either developed by you
(alone or with others) or to which you shall have had access during any
employment with the Company.  Confidential Information includes, but
is not limited to, Trade Secret Information, and also includes information that
is learned or acquired by the Company from others with whom the Company has a
business relationship in which, and as a result of which, such information is
revealed to the Company.  For purposes of this Agreement, “Trade
Secret Information” shall mean all information, regardless of the form or medium
in which it is or was created, stored, reflected or preserved, that is not
commonly known by or generally available to the public and
that: (i)
derives or creates economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use; and (ii) is
the subject of efforts that are reasonable under the circumstances to maintain
its secrecy.  The Company’s Trade Secret Information may include, but
is not limited to, all confidential information relating to or reflecting the
Company’s research and development plans and activities; compilations of data;
product plans; sales, marketing and business plans and strategies; pricing,
price lists, pricing methodologies and profit margins; current and planned
incentive, recognition and rewards programs and services; personnel; inventions,
concepts, ideas, designs and formulae; current, past and prospective customer
lists; current, past and anticipated customer needs, preferences and
requirements; market studies; computer software and programs (including object
code and source code); and computer and database technologies, systems,
structures and architectures.  You understand that Confidential
Information and/or Trade Secret Information may or may not be labeled as such,
and you shall treat all information that appears to be Confidential Information
and/or Trade Secret Information as confidential unless otherwise informed or
authorized by the Company.  Nothing in this Agreement shall be
construed to mean that Company owns any intellectual property or ideas that were
conceived by you before you commenced employment with Company and which you have
previously disclosed to the Company.  Subject to Section 4.3(b),
nothing in this Section 4.3(a) shall prevent you from complying with a valid
legal requirement (whether by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information or Trade Secret
Information.

      

      (b)           
You agree that both during and after any employment with the Company, regardless
of how, when or why such employment ends, if you are legally required (whether
by oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to disclose any
Confidential Information or Trade Secret Information, you shall promptly notify
the Company of such request or requirement so that the Company may seek to avoid
or minimize the required disclosure and/or to obtain an appropriate protective
order or other appropriate relief to ensure that any information so disclosed is
maintained in confidence to the maximum extent possible by the agency or other
person receiving the disclosure, or, in the discretion of the Company to waive
compliance with the provisions of this Section 4.3.  Thereafter, you
shall use reasonable efforts, in cooperation with the Company or otherwise, to
avoid or minimize the required disclosure and/or to obtain such protective order
or other relief.  If, in the absence of a protective order or the
receipt of a waiver hereunder, you are compelled to disclose the Confidential
Information or Trade Secret Information or else stand liable for contempt or
suffer other sanction, censure or penalty, you shall disclose only so much of
the Confidential Information or Trade Secret Information to the party compelling
disclosure as you believe in good faith on the basis of advice of counsel is
required by law, and you shall give the Company prior notice of the Confidential
Information or Trade Secret Information you believe you are required to
disclose.  The Company shall reimburse any reasonable legal fees and
related expenses you incur in order to comply with this Section
4.3(b).

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

       

      4.4.           Inventions.  You
shall promptly disclose and provide to the Company, any original works of
authorship, designs, formulas, processes, improvements, compositions of matter,
computer software programs, data, information or databases, methods, procedures
or other inventions, developments or improvements of any kind that you conceive,
originate, develop, improve, modify and/or create, solely or jointly with
others, during the period of your employment, or as a result of such employment
(collectively, “Inventions”), and whether or not any such Inventions also may be
included within “Confidential Information” or “Trade Secret Information” (as
defined under this Agreement), or are patentable, copyrightable or protectable
as trade secrets.  You acknowledge and agree that the Company is and
shall be the exclusive owner of all rights, title and interest in and to the
Inventions and, specifically, that any copyrightable works prepared by you
within the scope of your employment are “works for hire” under the Copyright
Act, that such “works for hire” are Inventions and that the Company shall be
considered the author and owner of such copyrightable works.  In the
event that any Invention is deemed not to be a “work for hire”, or in the event
that you should, by operation of law, be deemed to be entitled to retain any
rights, title or interest in and to any Invention, you hereby irrevocably waive
all rights, title and interest and assign to the Company, without any further
consideration and regardless of any use by the Company of any such Inventions,
all rights, title and interest, if any, in and to such Invention.  You
agree that the Company, as the owner of all Inventions, has the full and
complete right to prepare and create derivative works based upon the Inventions
and to use, reproduce, publish, print, copy, market, advertise, distribute,
transfer, sell, publicly perform and publicly display and otherwise exploit by
all means now known or later developed, such Inventions and derivative works
anywhere throughout the world and at any time during or after your employment
hereunder or otherwise.

      

      4.5.           Return of
Information.  You shall promptly deliver to the Company, upon
the termination for any reason of your employment, or at any other time at the
Company’s request, without retaining any copies, all documents, information and
other material in your possession or control containing, reflecting and/or
relating, directly or indirectly, to any Confidential Information and/or Trade
Secret Information.

      

      4.6           Cooperation.   You
agree that both during and after any employment with the Company, regardless of
how, when or why such employment ends, you shall provide reasonable cooperation
to the Company and its affiliates in connection with any pending or future
lawsuit, arbitration, or proceeding between the Company and/or any affiliate and
any third party, any pending or future regulatory or governmental inquiry or
investigation concerning the Company and/or any affiliate and any other legal,
internal or business matters of or concerning the Company and/or any
affiliate.  Such cooperation shall include meeting with and providing
information the Company, any affiliate and/or their respective attorneys,
auditors or other representatives as reasonably requested by the
Company.  The Company shall reimburse any reasonable legal fees and
related expenses you incur in order to comply with this Section
4.6.

      

      4.7.           Non-Disparagement.  During
and after any employment with the Company, regardless of how, when or why such
employment ends, (a) you shall not make, either directly or by or through
another person, any oral or written negative, disparaging or adverse statements
or representations of or concerning the Company or its subsidiaries or
affiliates, any of their clients or businesses or any of their current or former
officers, directors, employees or shareholders and (b) Company Parties (as
defined below) shall not make any oral or written negative, disparaging or
adverse statements or representations of or concerning you; provided, however,
that nothing herein shall prohibit (i) critical communications between you and
the Company or Company Parties during the Initial Term and any Renewal Term and
in connection with your employment or (ii) you or any Company Party from
disclosing truthful information if legally required (whether by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process).  For purposes of this
Agreement, the term “Company Parties” shall mean the executive officers and
designated spokespersons of the Company.

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
 

      4.8.           Severability.  If
any of the restrictions in this Section 4 should for any reason whatsoever be
declared invalid, the validity or enforceability of the remainder of this
Agreement shall not be adversely affected thereby.

      

      4.9.           Equitable
Relief.  (a) You acknowledge that your services to the Company
are of a unique character that gives them a special value to the
Company.  You further recognize that any violation of the restrictions
in this Section 4 may give rise to losses or damages for which the Company
cannot be reasonably or adequately compensated in an action at law and that such
violation may result in irreparable and continuing harm to the
Company.  Accordingly, you agree that, in addition to any other remedy
that the Company may have at law or in equity, the Company shall be entitled to
injunctive relief to restrain any violation by you of the restrictions in this
Section 4.

      

      (b)           In
addition, the Company recognizes that any violation of the restrictions in
Section 4.7(b) may give rise to losses or damages for which you cannot be
reasonably or adequately compensated in an action at law and that such violation
may result in irreparable and continuing harm to you.  Accordingly,
the Company agrees that, in addition to any other remedy that you may have at
law or in equity, you shall be entitled to injunctive relief to restrain any
violation by the Company of the restrictions in Section 4.7(b).

      

      4.10.           Reasonableness.  You
acknowledge that the limitations and obligations contained in this
Section 4 are, individually and in the aggregate, reasonable and properly
required by the Company and that in the event that any such limitations are
found to be unreasonable and unenforceable, you shall submit to such limitations
and/or obligations in such form as the arbitrator shall
determine.  You agree that you shall not challenge or contest the
reasonableness, validity or enforceability of any such limitations and
obligations.

      

      5.           Indemnification.  You
shall be indemnified by the Company, as an officer of the Company and its
affiliates, against all actions, suits, claims, legal proceedings and the like
to the fullest extent permitted by law, including advancement of expenses,
partial indemnification, indemnification following the termination of this
Agreement, indemnification of your estate and similar matters.  For
purposes of this Agreement, such indemnification shall extend to, to the fullest
extent permitted by law, legal fees, costs, expenses, judgments, settlements,
claim resolution payments, arbitration fees, arbitrator fees, mediation fees,
negotiation fees and hold harmless obligations.

      

      6.           Miscellaneous.

      

      6.1.           Entire
Agreement.  This Agreement constitutes the entire agreement
between you and the Company with respect to the terms and conditions of your
employment by the Company and supersedes all prior agreements, understandings
and arrangements, oral or written, between you and the Company with respect to
the subject matter hereof.  Upon the Effective Date, this Agreement
shall supersede and replace the letter agreement by and between you and the
Company, dated as of January 6, 2009, and you shall have no further rights and
the Company shall have no further obligations thereunder.

      

      6.2.           Binding Effect;
Benefits.  This Agreement shall inure to the benefit of and
shall be binding upon you and the Company and our respective heirs, legal
representatives, successors and assigns.

      

      6.3.           Amendments and
Waivers.  This Agreement may not be amended or modified except
by an instrument or instruments in writing signed by both parties to this
Agreement.  Electronic communications, even if receipt is
acknowledged, shall not constitute an amendment or modification of this
Agreement.

      

      6.4.           Assignment.  Neither
this Agreement nor any rights or obligations that either party may have by
reason of this Agreement shall be assignable by either party without the prior
written consent of the other party.

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      
 

      6.5.           Notices.  Any
notice that may or must be given under this Agreement shall be in writing and
shall be personally delivered or sent by certified or registered mail, postage
prepaid, or reputable overnight courier, addressed to you at the address set
forth on the first page hereof (with a copy by regular mail, facsimile and
electronic form to Clifford A. Wolff, Esq., The Wolff Law Firm, 1401 East
Broward Boulevard, Suite 204, Fort Lauderdale, FL 33301,
Facsimile:  (954) 827-8300,
Email:  CWolff@WolffLawFirm.com), or to the Company at 122 Fifth
Avenue, New York, NY 10011 to the attention of the Vice President for Human
Resources for the Company (with a copy to the General Counsel for the Company),
or to such other address as you or the Company, as the case may be, may
designate in writing in accordance with the provisions of this
section.

      

      6.6.           Section and Other Headings;
Other.  The section and other headings contained in this
Agreement are for reference purposes only and are not deemed to be a part of
this Agreement or to affect the meaning and interpretation of this
Agreement.  For purposes of this Agreement, the term “including” shall
mean “including, without limitation.”

      

      6.7.           Governing
Law.  This Agreement shall be construed (both as to validity
and performance) and enforced in accordance with and governed by the laws of the
State of New York applicable to agreements made and to be performed wholly
within the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.  Except as provided in Section 6.9,
exclusive jurisdiction for all disputes or claims arising under or in connection
with this Agreement, and any and all claims by or against you relating to your
employment with the Company, shall lie in any Federal  or state court
located within the County of New York.

      

      6.8.           Survival of Rights and
Obligations.  All rights and obligations arising hereunder
shall continue to have full force and effect after the termination of this
Agreement unless otherwise provided herein to the extent necessary to preserve
the intended benefits of such provisions.  If any section of this
Agreement  is determined to be void, voidable or unenforceable, it
shall have no effect on the remainder of this Agreement, which shall remain in
full force and effect, and the provisions so held invalid or unenforceable shall
be deemed modified as to give such provisions the maximum effect permitted by
applicable law.

      

      6.9.           Arbitration.  The
parties agree that all disputes arising under or in connection with this
Agreement, and any and all claims by you relating to your employment with the
Company, including any claims of discrimination or other employment-related
claims arising under Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, the Americans with Disabilities Act or any
other employment-related Federal, state or local law, shall be submitted to
arbitration before the American Arbitration Association (“AAA”) under its rules
then prevailing for the type of claim in issue before one arbitrator and to be
held at the AAA’s office located in the County of New York.  In any
arbitration hereunder, the arbitrator shall have the power to issue appropriate
injunctive or other non-monetary relief, and award appropriate compensatory
damages.  The parties agree that no damages other than compensatory
damages shall be sought or claimed by either party and each party waives any
claim, right or entitlement to punitive, exemplary or consequential damages, or
any other damages, and each relevant arbitrator is specifically divested of any
power to award any damages in the nature of punitive, exemplary or consequential
damages, or any other damages of any kind or nature in excess of compensatory
damages.  Nothing in this arbitration provision shall preclude, and
the parties expressly acknowledge that either party may seek, temporary
injunctive relief from any Federal or state court located within the County of
New York in connection with or as supplement to an arbitration hereunder,
including regarding any claim under Section 4 of this Agreement.  For
purposes of any such action or proceeding, the parties each hereby specifically
submit to the personal jurisdiction of any Federal or state court located within
the County of New York and further agree that service of process may be made
within or without the State of New York by giving notice in the manner provided
in Section 6.5 of this Agreement.

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      
 

      6.10.           Section 409A of the
Code.  It is intended that the provisions of this Agreement
comply with Section 409A of the Code, and all provisions of this Agreement shall
be construed and interpreted in a manner consistent with the requirements for
avoiding taxes or penalties under Section 409A of the Code.  If, at
the time of your separation from service (within the meaning of Section 409A of
the Code), (a) you shall be a specified employee (within the meaning of Section
409A of the Code and using the identification methodology selected by the
Company from time to time) and (b) the Company shall make a good faith
determination that an amount payable under this Agreement or any other plan,
policy, arrangement or agreement of or with the Company (this Agreement and such
other plans, policies, arrangements and agreements, the “Company Plans”)
constitutes deferred compensation (within the meaning of Section 409A of the
Code) the payment of which is required to be delayed pursuant to the six-month
delay rule set forth in Section 409A of the Code in order to avoid taxes or
penalties under Section 409A of the Code, then the Company shall not pay any
such amount on the otherwise scheduled payment date but shall instead accumulate
such amount and pay it, without interest, on the first day of the seventh month
following such separation from service.  Except as permitted under
Section 409A of the Code, any deferred compensation (within the meaning of
Section 409A of the Code) payable to or for your benefit under any Company Plan
may not be reduced by, or offset against, any amount owing by you to the
Company.  Except as specifically permitted by Section 409A of the
Code, the benefits and reimbursements provided to you under this Agreement and
any Company Plan during any calendar year shall not affect the benefits and
reimbursements to be provided to you under the relevant section of this
Agreement or Company Plan in any other calendar year, and the right to such
benefits and reimbursements cannot be liquidated or exchanged for any other
benefit and shall be provided in accordance with Treas. Reg. Section
1.409A-3(i)(1)(iv) or any successor thereto.  Further, in the case of
reimbursement payments, such payments shall be made to you on or before the last
day of the calendar year following the calendar year in which the underlying
fee, cost or expense is incurred.   Notwithstanding the
preceding, the Company makes no representations concerning the tax consequences
of your participation in this Agreement under Section 409A of the Code or any
other Federal, state or local tax law.  Your tax consequences shall
depend, in part, upon the application of relevant tax law, including Section
409A of the Code, to the relevant facts and circumstances.  You should
consult a competent and independent tax advisor regarding the tax consequences
of this Agreement.

      

      6.11.           Representations and
Warranties.  You hereby represent and warrant to the Company
that (a) your execution, delivery and performance of this Agreement do not and
shall not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which you are a party or by
which you are bound; (b) you are not a party to or bound by any employment
agreement, noncompete agreement or confidentiality agreement with any other
person or entity that has not been disclosed to the Company prior to the
execution of this Agreement; (c) in the performance of any duties and
responsibilities on behalf of the Company, you shall not divulge or use in any
way any trade secrets or confidential or proprietary information that are within
your possession or knowledge (if any), are owned by any other person or entity
and regardless of whether or not such trade secrets or confidential or
proprietary information are subject to any written agreement; and (d) upon the
execution and delivery of this Agreement, it shall be a valid and binding
obligation, enforceable in accordance with its terms.  You hereby
acknowledge and represent that you fully understand the terms and conditions
contained herein.

      

      6.12.           Counterparts. This
Agreement may be executed in one or more identical counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      
 

      If the foregoing accurately reflects
our agreement, kindly sign and return to us the enclosed duplicate copy of this
letter.

      

                 Very
truly yours,

      

      
        	
                BARNES
      & NOBLE, INC.

              
	 
      
	
                By:

              	/s/
      Michelle Smith  
	 
      	
                Name:  
      Michelle Smith

              
	 
      	
                Title:    
      Vice President, Human Resources

              
	 
      	 
      
	 	 
	 	 
	Date: 	March
      18, 2010 

      

      

      

      Accepted
and Agreed to:

      

      
        	
                WILLIAM
      J. LYNCH, JR.

              
	 
      
	
                By:

              	/s/  William
      J. Lynch, Jr. 
	 
      	
                Name:  William
      J. Lynch, Jr.

              
	 
      	 
      

      

      

      

      
        
          	
                  Date:

                	March
      16, 2010  
	 	 

        

      
         

       

      

      

      

      

      

      

      

      

      [Signature Page to Employment
Agreement]

       

       

      
        
          
          

        

        
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          EXHIBIT
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      BARNES
& NOBLE, INC.

      2009
EXECUTIVE PERFORMANCE PLAN

      

      

      BARNES &
NOBLE, INC., a corporation existing under the laws of the State of Delaware
(the “Company”), hereby establishes and adopts the following 2009 Executive
Performance Plan (the “Plan”). Certain capitalized terms used in the Plan are
defined in Article 2.

      

      RECITALS

      

      WHEREAS, the Company desires
to encourage high levels of performance by those individuals who are key to the
success of the Company, to attract new individuals who are highly motivated and
who are expected to contribute to the success of the Company and to stimulate
the efforts of such individuals to contribute to the continued success and
growth of the Company’s business; and

      

      WHEREAS, to attain these ends,
the Company has formulated the Plan embodied herein to authorize the awarding of
bonuses that are intended to qualify as “performance based compensation” within
the meaning of Section 162(m) of the Code.

      

      NOW, THEREFORE, the Company
hereby constitutes, establishes and adopts the following Plan and agrees to the
following provisions:

      

      ARTICLE
1

      

      PURPOSE
OF THE PLAN

      

      1.1. Purposes. The purposes of the
Plan are to provide personal incentive and financial rewards to senior
management who, because of the extent of their responsibilities, can and do make
significant contributions to the success of the Company by their ability,
industry, loyalty and exceptional services. Making such senior management
participants in that success will advance the interests of the Company and its
stockholders and will assist the Company in attracting and retaining such senior
management.

      

      ARTICLE 2

      

      DEFINITIONS

      

      2.1. “Award” shall mean the amount
of the Incentive Award paid to a Participant pursuant to the Plan.

      

      2.2. “Board” shall mean the board
of directors of the Company.

      

      2.3. “Certification” shall have
the meaning set forth in Section 4.2.

      

      2.4. “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time, and any successor
thereto.

      

      2.5. “Committee” shall mean the
Compensation Committee of the Board (or such other committee designated by the
Compensation Committee of the Board), consisting of no fewer than two directors,
each of whom is (i) a “Non-Employee Director” within the meaning of
Rule 16b-3 (or any successor rule) of the Exchange Act, (ii) an
“outside director” within the meaning of Section 162(m)(4)(C)(i) of the
Code, and (iii) an “independent director” for purpose of the rules and
regulations of the New York Stock Exchange.

      

      2.6. “Company” has the meaning set
forth in the introductory paragraph of the Plan.

      

      2.7. “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.

       

       

      
        
          
          

        

        
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          EXHIBIT
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      2.8. “Incentive Award” shall mean an amount
equal to 1.5% of the Company’s Operating Income for the Performance Period for
each Participant.

      

      2.9. “Operating Income” shall mean
the gross profit minus operating expenses of the Company and its Subsidiaries on
a consolidated basis, before deduction of interest payments and income taxes and
accrual of any amounts for payment under this Plan for the Performance Period,
as reported in the Company’s income statement for the applicable Performance
Period, without regard to items relating to (a) restructurings,
discontinued operations, extraordinary items, and other unusual or non-recurring
charges, (b) an event either not directly related to the operations of the
Company or not within the reasonable control of the Company’s management, or
(c) changes in accounting standards required by generally accepted
accounting principles, in each case as determined in accordance with generally
accepted accounting principles and as reported in (x) the Company’s consolidated
statement of operations, (y) notes to the Company’s consolidated financial
statements or (z) management’s discussion and analysis with respect to the
Company’s consolidated financial statements as filed with the U.S. Securities
and Exchange Commission, in each case for the applicable Performance
Period.

      

      2.10. “Participant” shall mean the
Company’s Chief Executive Officer and each other executive officer of the
Company selected by the Committee pursuant to Section 4.1 to participate in
this Plan with respect to any given Performance Period.

      

      2.11. “Performance Period” shall
mean the Company’s fiscal year or any other period during a fiscal year that the
Committee, in its sole discretion, may determine.

      

      2.12. “Shares” shall mean the
shares of common stock of the Company, par value $0.001 per
share.

      

      2.13. “Subsidiary” shall mean any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the Award, each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain, excluding any such
Subsidiary whose securities are publicly traded.

      

      ARTICLE 3

      

      ELIGIBILITY
AND ADMINISTRATION

      

      3.1. Eligibility. The individuals
eligible to participate in the Plan shall be the Company’s Chief Executive
Officer and any other executive officer of the Company or any Subsidiary
selected by the Committee to participate in the Plan.

      

      3.2. Administration.
 (a)  The Plan shall be administered by the
Committee.  The Committee shall have full power and authority, subject
to the provisions of the Plan and subject to such orders or resolutions not
inconsistent with the provisions of the Plan as may from time to time be adopted
by the Board, to: (i) select the Participants to whom Incentive Awards may
from time to time be granted hereunder; (ii) determine the terms and
conditions of Incentive Awards, not inconsistent with the provisions of the
Plan, and whether an Award shall be paid in cash or Shares; (iii) determine
the time when Incentive Awards will be made and the Performance Period to which
they relate; (iv)  certify the calculation of Operating Income and the
amount of the Incentive Award payable to each Participant in respect of
Performance Periods; (v) in connection with the determination of the amount
of each Award, determine whether and to what extent the Incentive Award shall be
reduced based on such factors as the Committee deems appropriate in its
discretion; (vi) interpret and administer the Plan; (vii) correct any
defect, supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent that the Committee shall deem desirable to carry it
into effect; (viii) establish such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for administration of the
Plan.

      

      (b) Decisions
of the Committee shall be final, conclusive and binding on all persons or
entities, including the Company, any Participant and any person claiming any
benefit or right under an Incentive Award or under the Plan. A majority of the
members of the Committee may determine its actions and fix the time and place of
its meetings.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          EXHIBIT
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      (c) To
the extent not inconsistent with the applicable provisions of
Section 162(m) of the Code, applicable law or the rules and regulations of
the New York Stock Exchange, the Committee may delegate to one or more officers
of the Company or any of its Subsidiaries the authority to take actions on its
behalf pursuant to the Plan.

      

      ARTICLE 4

      

      AWARDS

      

      4.1. Performance Period. Not later
than 90 days after the commencement of each fiscal year of the Company, the
Committee shall, in writing, (i) designate one or more Performance Periods for
such fiscal year, provided that any Performance Period of less than one year
shall be designated no later than the date on which 25% of such Performance
Period has lapsed, (ii) determine the Participants for such Performance
Period(s), and (iii) specify any adjustments to Operating Income for the
Performance Period.  If a person becomes eligible to participate in
the Plan after the Committee has made its initial written determination of the
Participants for a Performance Period, such individual may become a Participant
for the Performance Period if so designated by the Committee in
writing.

      

      4.2. Certification. As soon as
reasonably practicable following the conclusion of each Performance Period, the
Committee shall certify, in writing, the amount of Operating Income and the
Incentive Award for each Participant (the “Certification”).

      

      4.3. Payment of Incentive Awards.
Following each Certification, the Committee shall determine the amount of the
Incentive Award actually payable to each Participant in its sole discretion
based on such factors as it deems appropriate, provided that the actual Award
shall not exceed the Incentive Award with respect to such Participant. The Award
amount determined by the Committee for a Performance Period shall, subject to
Section 4.4, be paid to each Participant no later than the fifteenth day of
the third month following the end of the fiscal year of the Company in which the
applicable Performance Period ends. Awards shall be paid in cash or, in the
Committee’s sole discretion, in shares under a shareholder approved stock plan
of the Company or any combination thereof.

      

      4.4. Deferral. A Participant shall
be entitled to elect to defer the payment of any Award payable to such
Participant under the Plan pursuant to a plan or arrangement satisfying the
requirements of Section 409A of the Code.

      

      4.5. Changes in Employment. If a
person becomes a Participant during a Performance Period (pursuant to the last
sentence of Section 4.1 herein) or if a Participant dies or retires or if a
Participant’s employment otherwise ceases during a Performance Period (except
for termination by the Company for cause, as determined by the Committee in its
sole discretion), the Incentive Award payable to such a Participant may be
proportionately reduced based on the period of actual employment during the
applicable Performance Period), as determined by the Committee in its sole
discretion.

      

      ARTICLE 5

      

      GENERALLY
APPLICABLE PROVISIONS

      

      5.1. Amendment and Termination of the
Plan. The Board may, from time to time, alter, amend, suspend or
terminate the Plan as it shall deem advisable, subject to any requirement for
stockholder approval imposed by applicable law, including Section 162(m) of
the Code or by the rules and regulations of the New York Stock
Exchange.

      

      5.2. Section 162(m) of the
Code. Unless otherwise determined by the Committee, the provisions of
this Plan shall be administered and interpreted in accordance with
Section 162(m) of the Code to ensure the deductibility by the Company or
its Subsidiaries of the payment of Awards.

      

      5.3. Tax Withholding. The Company
or any Subsidiary shall have the right to make all payments or distributions
pursuant to the Plan to a Participant, net of any applicable Federal, State and
local taxes required to be paid or withheld. The Company or any Subsidiary shall
have the right to withhold from wages, Awards or other amounts otherwise payable
to such Participant such withholding taxes as may be required by law, or to
otherwise require the Participant to pay such withholding taxes. If the
Participant shall fail to make such tax payments as are required, the Company or
any Subsidiary shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to such Participant or
to take such other action as may be necessary to satisfy such withholding
obligations.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          EXHIBIT
A

        

      

      
 

      5.4. Right of Discharge Reserved; Claims
to Awards. Nothing in the Plan nor the grant of an Award hereunder shall
confer upon any Participant the right to continue in the employment of the
Company or any Subsidiary or affect any right that the Company or any Subsidiary
may have to terminate the employment of (or to demote or to exclude from future
Awards under the Plan) any such Participant at any time for any reason. No
Participant shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants under the
Plan.

      

      5.5. Other Plans. Nothing
contained in the Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval is
required; and such arrangements may be either generally applicable or applicable
only in specific cases.

      

      5.6. Severability. If any
provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part by a court of competent jurisdiction, such
provision shall (a) be deemed limited to the extent that such court of
competent jurisdiction deems it lawful, valid and/or enforceable and as so
limited shall remain in full force and effect, and (b) not affect any other
provision of the Plan or part thereof, each of which shall remain in full force
and effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable by a court of competent jurisdiction, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the
Plan.

      

      5.7. Construction. All references
in the Plan to
“Section,” or
“Article” are intended to refer to the Section, Sections or Article, as
the case may be, of the Plan. As used in the Plan, the word  “including,” and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words  “without
limitation.”

      

      5.8. Unfunded Status of the Plan.
The Plan is intended to constitute an “unfunded” plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company or any
Subsidiary.

      

      5.9. Governing Law. The Plan and
all determinations made and actions taken thereunder, to the extent not
otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Delaware, without reference to principles
of conflict of laws that might result in the application of the laws of another
jurisdiction, and construed accordingly.

      

      5.10. Effective Date of Plan. The
Plan shall be effective on the date of the approval of the Plan by the holders
of a majority of the shares entitled to vote at a duly constituted meeting of
the stockholders of the Company. The Plan shall be null and void and of no
effect if the foregoing condition is not fulfilled.

      

      5.11. Captions. The captions in the
Plan are for convenience of reference only, and are not intended to narrow,
limit or affect the substance or interpretation of the provisions contained
herein.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          EXHIBIT
B

        

      

       

       

      GENERAL RELEASE AND
WAIVER

      

      1.           [Name]
(“Employee”) hereby acknowledges and agrees that Employee’s employment with
Barnes & Noble, Inc. (the “Company”) terminated on __________, 20__ (the
“Termination Date”).

      

      2.           Employee
acknowledges and agrees that Employee’s executing this General Release and
Waiver (“Release”) is a condition precedent to the Company’s obligation to pay
(and the Employee’s right to retain) the payments and benefits set forth in
Section 3.8 of the employment letter agreement, dated as of March 17, 2010,
between Employee and the Company (such agreement referred to herein as the
“Employment Agreement” and such payments and benefits collectively referred to
herein as the “Separation Benefit”), that the Separation Benefit is adequate
consideration for this Release, and that any monetary or other benefits that,
prior to the execution of this Release, Employee may have earned or accrued, or
to which Employee may have been entitled, have been paid or such payments or
benefits have been released, waived or settled by Releasor (as defined below)
except as expressly provided in this Release.

      

      3.           (a)           THIS
SECTION PROVIDES A COMPLETE RELEASE AND WAIVER OF ALL EXISTING AND POTENTIAL
CLAIMS EMPLOYEE MAY HAVE AGAINST EVERY PERSON AND ENTITY INCLUDED WITHIN THE
DESCRIPTION BELOW OF “RELEASEE.”  BEFORE EMPLOYEE SIGNS THIS RELEASE,
EMPLOYEE MUST READ THIS SECTION CAREFULLY, AND MAKE SURE THAT EMPLOYEE
UNDERSTANDS IT FULLY.

      

       (b)           In
consideration of Employee’s receipt and acceptance of the Separation Benefit
from the Company, and on behalf of the Company and each Releasee (as defined
below), Employee, on Employee’s behalf and on behalf of Employee’s heirs,
executors, administrators, successors and assigns (collectively, “Releasor”),
hereby irrevocably, unconditionally and generally releases the Company, its
current and former officers, directors, shareholders, trustees, parents,
members, managers, affiliates, subsidiaries, branches, divisions, benefit plans,
agents, attorneys, advisors, counselors and employees, and the current and
former officers, directors, shareholders, agents, attorneys, advisors,
counselors and employees of any such parent, affiliate, subsidiary, branch or
division of the Company and the heirs, executors, administrators, receivers,
successors and assigns of all of the foregoing (each, a “Releasee”), from or in
connection with, and hereby waives and/or settles, except as provided in Section
3(c), any and all actions, causes of action, suits, debts, dues, sums of money,
accounts, controversies, agreements, promises, damages, judgments, executions,
or any liability, claims or demands, known or unknown and of any nature
whatsoever, whether or not related to employment, and which Releasor ever had,
now has or hereafter can, shall or may have as of the date of this Release,
including, without limitation, (i) any rights and/or claims arising under any
contract, express or implied, written or oral, including, without limitation,
the Employment Agreement; (ii) any rights and/or claims arising under any
applicable foreign, Federal, state, local or other statutes, orders, laws,
ordinances, regulations or the like, or case law, that relate to employment or
employment practices, including, without limitation, family and medical, and/or,
specifically, that prohibit discrimination based upon age, race, religion, sex,
color, creed, national origin, sexual orientation, marital status, disability,
medical condition, pregnancy, veteran status or any other unlawful bases,
including, without limitation, the Civil Rights Act of 1964, as amended, the
Civil Rights Act of 1991, as amended, the Civil Rights Acts of 1866 and 1871, as
amended, the Age Discrimination in Employment Act of 1967, as amended, the
Americans with Disabilities Act of 1990, as amended, the Family Medical Leave
Act of 1993, as amended, the Employee Retirement Income Security Act of 1974, as
amended, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as
amended, the Worker Adjustment and Retraining Notification Act of 1988, as
amended, and any similar applicable statutes, orders, laws, ordinances,
regulations or the like, or case law, of the State of New York and any State in
which any Releasee is subject to jurisdiction, or any political subdivision
thereof, including, without limitation, the New York State Human Rights Law, the
New York State Labor Law and the New York City Human Rights Law, and all
applicable rules and regulations promulgated pursuant to or concerning any of
the foregoing statutes, orders, laws, ordinances, regulations or the like; (iii)
any waivable rights and/or claims relating to wages and hours, including under
state or local labor or wage payment laws; (iv) any rights and/or claims to
benefits that Employee may have or become entitled to receive under any
severance, termination, change of control, bonus or similar policy, plan,
program, agreement or similar or related arrangements, including, without
limitation, any offer letter, letter agreement or employment agreement between
Employee and the Company; (v) any rights and/or claims that Employee may have to
receive any equity in the Company (whether restricted or unrestricted) in the
future; and (vi) and any rights and/or claims for attorneys’
fees.  Employee agrees not to challenge or contest the reasonableness,
validity or enforceability of this Release.

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          EXHIBIT
B

        

      

      
 

      (c)           Notwithstanding
the foregoing, Employee does not release any Releasee from any of the following
rights and/or claims:  (i) any rights and/or claims Employee may have
that arise after the date Employee signs this Release; (ii) any rights and/or
claims that by law cannot be waived by private agreement; (iii) Employee’s right
to file a charge with or participate in any investigation or proceeding
conducted by the U.S. Equal Employment Opportunity Commission (“EEOC”) or
similar government agency; provided that even though Employee can file a charge
or participate in an investigation or proceeding conducted by the EEOC or
similar government agency, by executing this Release, Employee is waiving his
ability to obtain relief of any kind from any Releasee to the extent permitted
by law; (iv) Employee’s non-forfeitable rights to accrued benefits (within the
meaning of Sections 203 and 204 of ERISA); (v) any rights and/or claims to
insurance coverage under any directors’ and officers’ personal liability
insurance or fiduciary insurance policy; and (vi) any rights and/or claims to
enforce the Employment Agreement in accordance with its terms.

      

      4.           Employee
represents and warrants that Employee has not filed or commenced any complaints,
claims, actions or proceedings of any kind against any Releasee with any
Federal, state or local court or any administrative, regulatory or arbitration
agency or body.  Employee hereby waives any right to, and agrees not
to, seek reinstatement or employment of any kind with any Releasee and, without
waiver by any Releasee of the foregoing, the existence of this Release shall be
a valid, nondiscriminatory basis for rejecting any such application or, in the
event Employee obtains such employment, for terminating such
employment.  This Release and the Separation Benefit are not intended
to be, shall not be construed as and are not, an admission or concession by any
Releasee of any wrongdoing or illegal or actionable acts or
omissions.

      

      5.           (a)           Employee
hereby represents and agrees that Employee shall keep confidential and not
disclose orally or in writing, to any person, except as may be required by law,
any and all information concerning the existence or terms of this Release and
the amount of any payments made hereunder.  Employee further agrees
that, except as shall be required by law, Employee shall keep confidential and
not disclose orally or in writing, directly or indirectly, to any person (except
Employee’s immediate family, attorneys and accountant), any and all information
concerning any facts, claims or assertions relating or referring to any
experiences of Employee or treatment Employee received by or on behalf of any
Releasee through the date of this Release.

       

       
(b)           If Employee
is requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any information covered by Section 5(a), Employee shall
promptly notify the Company of such request or requirement so that the Company
may seek to avoid or minimize the required disclosure and/or to obtain an
appropriate protective order or other appropriate relief to ensure that any
information so disclosed is maintained in confidence to the maximum extent
possible by the agency or other person receiving the disclosure, or, in the
discretion of the Company, to waive compliance with the provisions of this
Release.  Employee shall use reasonable efforts, in cooperation with
the Company or otherwise, to avoid or minimize the required disclosure and/or to
obtain such protective order or other relief.  If, in the absence of a
protective order or the receipt of a waiver hereunder, Employee is compelled to
disclose such information or else stand liable for contempt or suffer other
sanction, censure or penalty, Employee shall disclose only so much of such
information to the party compelling disclosure as he believes in good faith on
the basis of advice of counsel is required by law, and Employee shall give the
Company prior notice of such information he believes he is required to
disclose.

      

      6.           (a)           Employee
shall not make, either directly or by or through another person, any oral or
written negative, disparaging or adverse statements or representations of or
concerning any Releasee.

      

                   
(b)           Without
limitation to the survival of any other terms of the Employment Agreement
subsequent to the end of Employee’s employment, the expiration or termination of
the Employment Agreement, and/or the execution and effectiveness of this
Release, Employee and the Company expressly acknowledge that the terms of
Sections 4 and 5 of the Employment Agreement survive and shall be in full force
and effect as provided in the Employment Agreement.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          EXHIBIT
B

        

      

      
 

      7.           The
covenants, representations and acknowledgments made by Employee in this Release
shall continue to have full force and effect after the execution and
effectiveness of this Release and the delivery of the Separation Benefit, and
this Release shall inure to the benefit of each Releasee, and the successors and
assigns of each of them, to the extent necessary to preserve the intended
benefits of such provisions.  If any section of this Release is
determined to be void, voidable or unenforceable, it shall have no effect on the
remainder of this Release, which shall remain in full force and effect, and the
provisions so held invalid or unenforceable shall be deemed modified as to give
such provisions the maximum effect permitted by applicable
law.  Without limitation to Section 3.8 of the Employment Agreement,
the Company shall be excused and released from any obligation to make payment of
the Separation Benefit, and Employee shall be obligated to return to the Company
the Separation Benefit, in the event that Employee is found to have (a) made a
material misstatement in any term, condition, covenant, representation or
acknowledgment in this Release, or (b) Employee is found to have committed or
commits a material breach of any term, condition or covenant in this
Release.

      

      8.           This
Release and the Employment Agreement constitute the sole and complete agreement
between the parties with respect to the matters set forth therein and supersedes
all prior agreements, understandings and arrangements, oral or written, between
Employee and the Company with respect to the subject matter
thereof.  This Release may not be amended or modified except by an
instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought.  Either
party may, by an instrument in writing, waive compliance by the other party with
any term or provision of this Release to be performed or complied with by such
other party.

      

      9.           With
respect to any claims or disputes under or in connection with this Release or
any claims released under Section 3 of this Release, Employee and the Company
hereby acknowledge and agree that Sections 6.7 and 6.9 of the Employment
Agreement shall govern.  Employee acknowledges that a breach or
threatened breach of the provisions of this Release may give rise to losses or
damages for which the Company cannot be reasonably or adequately compensated in
an action at law, and that such violation may result in irreparable and
continuing harm to the Company.  Accordingly, Employee agrees that, in
addition to any other remedy that the Company may have at law or in equity, the
Company shall be entitled to seek equitable relief, including, without
limitation, injunction and specific performance and Employee hereby waives any
requirements for security or posting of any bond in connection with such
relief.  No specification in this Release of any particular remedy
shall be construed as a waiver or prohibition of any other remedies (including
claims for damages) in the event of a breach or threatened breach of this
Release.

      

      10.           Employee
agrees and acknowledges that (a) Employee has had an adequate opportunity to
review this Release and all of its terms, (b) Employee understands all of the
terms of this Release, which are fair, reasonable and are not the result of any
fraud, duress, coercion, pressure or undue influence exercised by or on behalf
of any Releasee and (c) Employee has agreed to and/or entered into this Release
and all of the terms hereof, knowingly, freely and voluntarily.

      

      11.           By executing this Release, Releasor
acknowledges that (a) Employee has been advised by the Company to consult with
an attorney before executing this Release; (b) Employee was provided adequate
time (i.e., at least 21 days) to review this Release and to consider whether to
sign this Release and (c)
Employee has been advised that Employee has 7 days following execution to revoke
this Release (“Revocation Period”).  Notwithstanding anything to the
contrary contained herein or in the Employment Agreement, this Release shall not
be effective or enforceable, and the Separation Benefit is not payable and shall
not be delivered or paid by the Company, until the Revocation Period has expired
and provided that Employee has not revoked this Release.  Employee
agrees that any revocation shall be made in writing and delivered to
____________, Vice President, Human Resources, Barnes & Noble, Inc., 122
Fifth Avenue, NY, NY 10011.  Employee acknowledges that revocation of
this Release shall result in the Company’s not having an obligation to pay the
Separation Benefit.

       

       

      
        
          	
                  Signature:

                	 
      	 
      	
                  Date:

                	 
      
	 
      	
                  [Name]

                	 
      	 
      	 
      

        

      

    

     

                                                                                                                                                                      

    
      
        

         

        3

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