Investment Agreement – Barnes & Noble Inc. and Morrison Investment Holdings, Inc.

INVESTMENT AGREEMENT

among

BARNES & NOBLE, INC.,

MORRISON INVESTMENT HOLDINGS, INC.

and

MICROSOFT CORPORATION (solely for purposes of Section 3.06)

Dated as of April 27, 2012

Table of Contents

	Page

ARTICLE I Pre-Closing; Purchase and Sale; Closing	1


SECTION 1.01	Formation of NewCo	1
SECTION 1.02	Purchase and Sale of the Preferred Membership Interests	1
SECTION 1.03	Closing	1


ARTICLE II Representations and Warranties	2


SECTION 2.01	Representations and Warranties of Parent	2
SECTION 2.02	Representations and Warranties of the Investor	8


ARTICLE III Covenants	9


SECTION 3.01	Further Assurances	9
SECTION 3.02	Expenses	11
SECTION 3.03	Confidentiality	11
SECTION 3.04	Change to Transaction Structure	11
SECTION 3.05	Taxes	11
SECTION 3.06	Guarantee	12

ARTICLE IV Conditions


SECTION 4.01	Conditions to the Obligations of Each Party153s Obligations	12
SECTION 4.02	Conditions to the Obligations of Parent and NewCo	12
SECTION 4.03	Conditions to the Obligations of the Investor	13


ARTICLE V Termination	13


	SECTION 5.01	Termination	13


ARTICLE VI Miscellaneous	14


SECTION 6.01	Survival	14
SECTION 6.02	Amendments, Waivers, etc	14
SECTION 6.03	Counterparts and Facsimile	14
SECTION 6.04	Specific Enforcement; Governing Law; Submission to Jurisdiction; Waiver of Jury Trial	15
SECTION 6.05	Notices	16
SECTION 6.06	Entire Agreement, etc	17
SECTION 6.07	Definitions	17
SECTION 6.08	Interpretation	22
SECTION 6.09	Severability	22
SECTION 6.10	No Third-Party Beneficiaries	22

	SECTION 6.11	Assignment	22
	SECTION 6.12	Public Announcements	22

Schedules

Form of Amended and Restated Limited Liability Company Agreement of NewCo LLC	Annex A
Form of Registration Rights Agreement	Annex B
Separation Principles	Annex C
Form of Joinder Agreement	Exhibit A

Index of Defined Terms

Term

Location of Definition

Act	1.01(a)
Affiliate	6.07(a)
Agreement	Preamble
Business Day	6.07(b)
Claim	6.07(c)
Closing	1.03(a)
Closing Date	1.03(a)
College Business	6.07(d)
Commercial Agreement	4.01(b)
Common Membership Interests	2.01(b)(ii)
Contract	2.01(a)(iii)(A)
control, controlling, controlled	6.07(a)
Credit Agreement	4.02(d)
Digital Business	6.07(e)
Disclosure Letter	6.07(f)
Exchange Act	2.01(a)(iv)(A)
Extended Outside Date	5.01(b)(i)
GAAP	2.01(a)(iv)(A)
Governmental Entity	2.01(a)(iii)(B)
Investor	Preamble
Joinder Agreement	1.01(b)
Judgment	2.01(a)(iii)(A)
Law	2.01(a)(iii)(A)
Liens	2.01(a)(iii)(A)
LLC Agreement	1.03(b)
Microsoft	Preamble
NewCo	Recitals
NewCo Formation Transactions	6.07(g)
NewCo Membership Interests	2.01(b)(ii)
NewCo Subsidiaries	2.01(a)(v)
Outside Date	5.01(b)(i)
Parent	Preamble
Preferred Membership Interest Purchase	1.02
Preferred Membership Interests	6.07(h)
registration	6.07(i)
Registration Rights Agreement	6.07(j)
Related Agreements	6.07(k)
Representative	6.07(l)
SEC	2.01(a)(iv)(A)
SEC Documents	2.01(a)(iv)(A)
Securities Act	2.01(a)(iii)(B)
Separation Principles	6.07(m)
Settlement and License Agreement	6.07(n)

Term

Location of Definition


Subsidiary	6.07(o)
Tax, Taxes	6.07(p)
Tax Return	6.07(q)
Voting NewCo Debt	2.01(b)(ii)

iii

INVESTMENT AGREEMENT dated as of April 27, 2012 (this “Agreement“),
among BARNES & NOBLE, INC., a Delaware corporation (the “Parent“),
MORRISON INVESTMENT HOLDINGS, INC., a Nevada corporation (the
“Investor“) and, solely for purposes of Section 3.06, MICROSOFT
CORPORATION, a Washington corporation (“Microsoft“).

WHEREAS Parent desires to sell to the Investor, and the Investor desires to
purchase, a minority interest in Parent153s Digital Business and College Business.

WHEREAS subject to Section 3.04, the form of the Investor153s investment is
intended to be the purchase pursuant to the terms and conditions set forth in
this Agreement of Preferred Membership Interests in a newly formed Delaware
limited liability company (“NewCo“) to which Parent shall, prior to the
Closing, transfer its Digital Business and College Business.

NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and subject to the
conditions set forth herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

ARTICLE I

Pre-Closing; Purchase and Sale; Closing

SECTION 1.01 Formation of NewCo. (a) Prior to the Closing, Parent
shall form NewCo pursuant to and in accordance with the Delaware Limited
Liability Company Act (the “Act“).

(b) Promptly thereafter, Parent shall cause NewCo to become a party to this
Agreement and adopt this Agreement with the same force and effect as if it were
originally a party hereto by executing a Joinder Agreement in the form attached
as Exhibit A (a “Joinder Agreement“).

SECTION 1.02 Purchase and Sale of the Preferred Membership Interests.
On the terms and subject to the conditions set forth in this Agreement, at the
Closing, Parent shall cause NewCo to issue, sell and deliver to the Investor,
and the Investor shall purchase and acquire from NewCo, 300,000 Preferred
Membership Interests for a purchase price per Preferred Membership Interest
equal to $1,000, payable as set forth in Section 1.03(b). The purchase and sale
of the Preferred Membership Interests is referred to in this Agreement as the
“Preferred Membership Interest Purchase“.

SECTION 1.03 Closing. (a) The closing of the Preferred Membership
Interest Purchase (the “Closing“) shall take place at the offices of
Cravath, Swaine & Moore LLP, Worldwide Plaza, 825 Eighth Avenue, New York,
New York 10019, on the second Business Day following the satisfaction (or, to
the extent permitted by law, the waiver by the parties entitled to the benefits
thereof) of the conditions set forth in Article IV, other than conditions that
by their nature are to be satisfied as of the Closing, or, if on such second
Business Day any condition set forth in Article IV is not satisfied (or, to the
extent permitted by Law, waived by the party or parties entitled to the benefits
thereof), as soon as practicable after all the conditions set forth in Article
IV are satisfied (or, to the extent permitted by Law, waived by the party or
parties entitled to the benefits thereof), or at such other place, time and date
as shall be agreed between Parent and the Investor. The date on which the
Closing occurs is referred to in this Agreement as the “Closing Date”.

(b) At the Closing, (i) Parent shall cause NewCo to deliver to the Investor a
certificate representing 300,000 Preferred Membership Interests issued to such
Investor, duly registered in the name of the Investor, (ii) the Investor shall
pay to NewCo, by wire transfer to a bank account designated in writing by NewCo
of immediately available funds, $300,000,000 and (iii) Parent and the Investor
shall amend and restate NewCo153s limited liability company agreement to be
substantially in the form of Annex A hereto (the “LLC Agreement“).

ARTICLE II

Representations and Warranties

SECTION 2.01 Representations and Warranties of Parent. (a) Except as
set forth in the Disclosure Letter, Parent represents and warrants as of the
date hereof and as of the Closing Date to the Investor as follows:

(i) Organization, Standing and Corporate Power. Parent and each of its
Subsidiaries is duly organized and validly existing under the Laws of its
jurisdiction of organization and has all requisite corporate or other entity
power and authority to own or lease all of its properties and assets and to
carry on its business as presently conducted. Each of Parent and its
Subsidiaries is duly qualified or licensed to do business and is in good
standing (where such concept is recognized under applicable Law) in each U.S.
jurisdiction where the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
other than where the failure to be so qualified, licensed or in good standing
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of Parent or NewCo to consummate the
transactions contemplated by this Agreement.

(ii) Authorization; Enforceability. (A) Parent has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Parent and the consummation of the transactions
contemplated by, and compliance with the provisions of, this Agreement by Parent
have been duly authorized and approved by all necessary corporate action on the
part of Parent. On or prior to the date of this Agreement, the board of
directors of Parent has duly adopted resolutions approving this Agreement and
the transactions contemplated hereby (and, as of the date of this Agreement, the
resolutions giving effect to such corporate actions have not been rescinded,
modified or withdrawn in any way). This Agreement has been duly executed and
delivered by Parent and, assuming the due authorization, execution and delivery
by the Investor, constitutes a legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other Laws of general
applicability relating to or affecting creditors153 rights and to general equity
principles, whether considered in a proceeding at law or in equity.

(B) No vote, consent or approval of the stockholders of Parent is required
under applicable Law, under Parent153s Certificate of Incorporation or Parent153s
By-Laws, or under any Contract between Parent and any stockholder of Parent, to
authorize or approve this Agreement or the transactions contemplated hereby.

(iii) No Conflict. (A) Parent is not in violation or default of any
provision of its Certificate of Incorporation or its By-Laws. The execution and
delivery by Parent of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance by Parent with the
provisions of this Agreement will not conflict with, or result in any violation
or breach of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration of
any obligation or to the loss of a benefit under, or result in the creation of
any right or benefit on the part of any third party under, or result in the
creation of any conflicts, violations, breaches, defaults, rights, losses or
pledges, liens, charges, mortgages, encumbrances or security interests of any
kind or nature (collectively, “Liens“) upon any of the properties or
assets of Parent or any of its Subsidiaries under any term, condition or
provision of (1) Parent153s Certificate of Incorporation or By-Laws or (2) (x) any
loan or credit agreement, license, contract, lease, sublease, indenture, note,
debenture, bond, mortgage or deed of trust or other agreement, arrangement or
understanding (a “Contract“) to which Parent or any of its Subsidiaries
is a party or by which any of their respective properties or assets are bound
and that is material to the business of Parent and its Subsidiaries, taken as a
whole, (y) any supranational, Federal, national, state, provincial or local
statute, law (including common law), ordinance, rule or regulation of any
Governmental Entity (“Law“) that is material to Parent and its
Subsidiaries, taken as a whole, or (z) any judgment, injunction, order or decree
of any Governmental Entity (“Judgment“), permit, concession, grant or
franchise, in each case, applicable to Parent or any of its Subsidiaries or any
of their respective properties or assets, other than, in the case of such
sub-clause (2) above, any such conflicts, violations, breaches, defaults,
rights, losses or Liens that would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of
Parent or NewCo to consummate the transactions contemplated by this Agreement.

(B) Other than in connection or in compliance with the provisions of the
Securities Act of 1933, as amended (the “Securities Act“), the securities
or blue sky laws of the various states, no notice to, registration, declaration
or filing with, review by, or authorization, consent, order, waiver or approval
of, any governmental or regulatory (including any stock exchange) authorities,
agencies, courts, commissions or other entities, whether Federal, state, local
or foreign, or applicable self-regulatory organizations (each, a
“Governmental Entity“) is necessary for the consummation by Parent of the
transactions contemplated by this Agreement.

(iv) SEC Documents; Undisclosed Liabilities; Disclosure Controls and
Procedures. (A) Parent has filed all material reports, schedules, forms,
statements and other documents with the Securities and Exchange Commission (the
“SEC“) required to be filed by Parent pursuant to the Securities Act or
the Securities Exchange Act of 1934, as amended (the “Exchange Act“),
since January 31, 2009 (the “SEC Documents“). As of their respective
effective dates (in the case of SEC Documents that are registration statements
filed pursuant to the requirements of the Securities Act) and as of their
respective dates of filing (in the case of all other SEC Documents), the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable thereto, and, except to
the extent amended or superseded by a subsequent filing with the SEC prior to
the date of this Agreement, as of such respective dates, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of the date of
this Agreement, there are no outstanding or unresolved comment letters received
from the SEC or its staff. The audited consolidated financial statements and the
unaudited quarterly financial statements (including, in each case, the notes
thereto) of Parent included or incorporated by reference in the SEC Documents
when filed complied in all material respects with the published rules and
regulations of the SEC with respect thereto, have been prepared in all material
respects in accordance with generally accepted accounting principles
(“GAAP“) (except, in the case of unaudited quarterly statements, as
permitted by Form 10-Q of the SEC or other rules and regulations of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of Parent and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end adjustments).

(B) Except for matters reflected or reserved against in the consolidated
balance sheet of Parent (or the notes thereto) included in Parent153s Form 10-Q
for the quarterly period ended January 28, 2012, neither Parent nor any of its
Subsidiaries has any liabilities (whether absolute, accrued, contingent, fixed
or otherwise) of any nature that would be required under GAAP, as in effect on
the date of this Agreement, to be reflected on a consolidated balance sheet of
Parent (including the notes thereto), except liabilities that (1) were incurred
since the date of such balance sheet in the ordinary course of business, (2) are
incurred in connection with the transactions contemplated by this Agreement or
(3) would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the business, assets or properties of Parent and
its Subsidiaries, taken as a whole. There are no unconsolidated Subsidiaries of
Parent or any off-balance sheet arrangements of any type (including any
off-balance sheet arrangement required to be disclosed pursuant to Item
303(a)(4) of Regulation S-K promulgated under the Securities Act) that have not
been so described in the SEC Documents nor any obligations to enter into any
such arrangements.

(C) Parent has established and maintains disclosure controls and procedures
and a system of internal controls over financial reporting (as such terms are
defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the
Exchange Act) as required by Rule 13a-15 under the Exchange Act. Since January
31, 2009, neither Parent nor Parent153s independent registered public accounting
firm has identified or been made aware of “significant deficiencies” or
“material weaknesses” (as defined by the Public Company Accounting Oversight
Board) in the design or operation of Parent153s internal controls and procedures
which would reasonably be expected to adversely affect in any material respect
Parent153s ability to record, process, summarize and report financial data, in
each case which has not been subsequently remediated. To the knowledge of
Parent, there is no fraud, whether or not material, that involves Parent153s
management or other employees who have a significant role in the preparation of
financial statements or the internal control over financial reporting utilized
by Parent and its Subsidiaries.

(v) NewCo Subsidiaries. Parent owns, directly or indirectly, all of
the outstanding membership interests of Barnes & Noble College Booksellers
LLC and barnesandnoble.com llc (the “NewCo Subsidiaries“), free and clear
of any Liens, and all of such shares or equity interests are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. As of the Closing
NewCo will own, directly or indirectly, all of the outstanding membership
interests in each NewCo Subsidiary, free and clear of any Liens, and all of such
shares or equity interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.

(b) Except as set forth in the Disclosure Letter, Parent represents and
warrants as of the Closing Date to the Investor as follows:

(i) Organization, Standing and Corporate Power of NewCo. NewCo is duly
organized and validly existing under the Act and has all requisite limited
liability company power and authority to own or lease all of its properties and
assets and to carry on its business as proposed to be conducted.

(ii) Capitalization of NewCo. The total number of Membership Interests
that NewCo shall have the authority to issue is unlimited. NewCo may issue
Common Membership Interests (the “Common Membership Interests“) and
Preferred Membership Interests (together with the Common Membership Interests,
the “NewCo Membership Interests“). After giving effect to the Closing,
(A) 1,400,000 Common Membership Interests will be issued and outstanding, (B)
300,000 Preferred Membership Interests will be issued and outstanding and (C)
300,000 Common Membership Interests will be reserved and available for issuance
in connection with conversion of the Preferred Membership Interests to Common
Membership Interests. Except as set forth in the previous sentence, as of the
Closing Date, no membership interests or other voting securities of or equity
interests in NewCo will be issued, reserved for issuance or outstanding and no
securities of NewCo or any of its Subsidiaries convertible into or exchangeable
or exercisable for membership interests or other voting securities of or equity
interests

in NewCo will be issued or outstanding. All outstanding NewCo Membership
Interests are duly authorized, validly issued, fully paid and nonassessable. As
of the Closing Date, the Preferred Membership Interests and Common Membership
Interests have the terms and conditions and entitle the holders thereof to the
rights set forth in the LLC Agreement and will be free and clear of all Liens.
There are no bonds, debentures, notes or other indebtedness of NewCo having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which holders of Common Membership Interests
may vote (“Voting NewCo Debt“). Except for any obligations pursuant to
this Agreement, or as otherwise set forth above in this Section 2.01(b)(ii),
there are no options, warrants, rights, convertible or exchangeable securities,
stock-based performance units, Contracts or undertakings of any kind to which
NewCo or any of its Subsidiaries is a party or by which NewCo is bound (A)
obligating NewCo or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional membership interests or other voting
securities of or equity interests in, or any security convertible or
exchangeable for any membership interests or other voting securities of or
equity interests in, NewCo or any Voting NewCo Debt, (B) obligating NewCo or any
of its Subsidiaries to issue, grant or enter into any such option, warrant,
right, security, unit, Contract or undertaking or (C) that give any person the
right to receive any economic interest of a nature otherwise accruing to the
holders of Common Membership Interests. There are no outstanding obligations of
NewCo or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
membership interests or options, warrants, rights, convertible or exchangeable
securities, stock-based performance units or other rights to acquire membership
interests of NewCo.

(iii) Authorization; Enforceability. NewCo will have all requisite
limited liability company power and authority to execute and deliver the Joinder
Agreement and to consummate the transactions contemplated therein. The execution
and delivery of the Joinder Agreement by NewCo and the consummation of the
transactions contemplated by, and compliance with the provisions of, the Joinder
Agreement by NewCo has been duly authorized and approved by all necessary
limited liability company action on the part of NewCo. The Joinder Agreement has
been duly executed and delivered by NewCo and, assuming the due authorization,
execution and delivery by the Investor, constitutes a legal, valid and binding
obligation of NewCo, enforceable against NewCo in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other Laws of
general applicability relating to or affecting creditors153 rights and to general
equity principles, whether considered in a proceeding at law or in equity.

(iv) No Conflict. (A) NewCo is not in violation or default of any
provision of NewCo153s certificate of formation, the limited liability company
agreement as of the date of formation of NewCo or the LLC Agreement as of the
Closing Date. The execution and delivery by NewCo of the Joinder Agreement and
compliance with the provisions thereof and hereof will not conflict with or
result in any violation or default under NewCo153s certificate of formation,
NewCo153s limited liability company agreement as of the date of formation of NewCo
or the LLC Agreement as of the Closing Date.

(B) Other than in connection or in compliance with the provisions of the
Securities Act, the securities or blue sky laws of the various states, no notice
to, registration, declaration or filing with, review by, or authorization,
consent, order, waiver or approval of, any Governmental Entity is necessary for
the consummation by NewCo of the transactions contemplated by this Agreement.

(v) Private Offering. None of NewCo, its Subsidiaries, its Affiliates
and its or their Representatives has, directly or indirectly, made any offers or
sales of the Preferred Membership Interests or Common Membership Interest or
solicited any offers to buy the Preferred Membership Interests or Common
Membership Interest, under circumstances that would require registration of the
Preferred Membership Interests or Common Membership Interest under the
Securities Act. None of NewCo, its Subsidiaries, its Affiliates and its or their
Representatives has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would cause this offering of the Preferred Membership Interests to be integrated
with prior offerings by NewCo for purposes of the Securities Act. None of NewCo,
its Subsidiaries, its Affiliates and its or their Representatives has taken any
action or steps referred to in the two preceding sentences that would require
registration of any of the Preferred Membership Interests under the Securities
Act. Assuming the accuracy of the representations made by the Investor in
Section 2.02, the sale and delivery of the Preferred Membership Interests
hereunder are exempt from the (A) registration and prospectus delivery
requirements of the Securities Act and (B) the registration and qualification
requirements of all applicable securities laws of the states of the United
States.

(vi) Sufficiency of Assets. Following consummation of the NewCo
Formation Transactions, NewCo will own all material assets, rights and
properties of Parent and its Subsidiaries, in each case subject to receipt of
applicable third party consents, that, together with the assets to be made
available to NewCo pursuant to this Agreement and the assets and services to be
made available in accordance with the Separation Principles, are necessary to
conduct the Digital Business and the College Business in all material respects
as presently conducted by Parent and its Subsidiaries on the date hereof. As of
the Closing, NewCo will not be engaged in any business, or hold any material
liabilities or assets, rights or properties relating to any business (except for
liabilities, assets, rights or properties of NewCo or its Subsidiaries the
transfer of which to Parent and its Subsidiaries other than NewCo and its
Subsidiaries is subject to receipt of third-party consent which has not been
received), other than the Digital Business and College Business and the
investment by the Investor.

(vii) Taxes. All material Tax Returns required to be filed by NewCo,
any of its Subsidiaries, the College Business or the Digital Business or with
respect to any of their income or assets have been timely filed in accordance
with applicable Law, and all such Tax Returns are complete and correct in all
material respects. All material Taxes imposed on or with respect to NewCo, any
of its Subsidiaries, the College Business or the Digital Business or with
respect to any of their income or assets have been paid in full in accordance
with applicable Law. All material amounts of Taxes required to be withheld by
NewCo or any of its Subsidiaries have been duly withheld and remitted to the
appropriate taxing authority as required by applicable Law. Neither NewCo nor
any of its Subsidiaries has any liability for any Taxes of any other person
under Treasury Regulations section 1.1502-6 or any similar provision of state,
local or foreign Law, as a transferee or successor, by contract or otherwise.
Neither NewCo nor any of its Subsidiaries is a party to any Tax sharing,
indemnification, or similar agreement or arrangement. NewCo and its Subsidiaries
have collected all material sales, value-added, goods and services, use, or
similar Taxes required to be collected and have remitted such Taxes to the
applicable taxing authority as required by applicable Law. There are no material
Liens with respect to Taxes upon any of the assets of either NewCo or any of its
Subsidiaries, other than with respect to Taxes not yet due and payable. NewCo
and each of its Subsidiaries is currently, and has been since the date of its
formation, a disregarded entity for U.S. federal income tax purposes.

SECTION 2.02 Representations and Warranties of the Investor. The
Investor hereby represents and warrants to Parent as of the date hereof and as
of the Closing Date and to NewCo as of the Closing Date:

(a) Organization and Authority. The Investor is duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
organization and has all requisite corporate power and authority to carry on its
business as presently conducted.

(b) Authorization; Enforceability. The Investor has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Investor and the consummation of the
transactions contemplated by, and compliance with the provisions of, this
Agreement, by the Investor have been duly authorized by all necessary corporate
action on the part of the Investor (and, as of the date of this Agreement, the
resolutions giving effect to such corporate actions have not been rescinded,
modified or withdrawn in any way). This Agreement has been duly executed and
delivered by the Investor and, assuming the due authorization, execution and
delivery by Parent and due authorization, execution and delivery of a Joinder
Agreement by NewCo, constitutes a legal, valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other Laws of
general applicability relating to or affecting creditors153 rights and to general
equity principles.

(c) No Conflict. The execution and delivery by the Investor of this
Agreement do not, and the transaction contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation or breach of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a benefit
under, or result in the creation of any right or benefit on the part of any
third party under, or result in the creation of any Lien upon any of the
properties or assets of the Investor under, the Certificate of Incorporation or
By-laws, or similar organizational documents, of the Investor, any term,
condition or provision of any Contract to which the Investor or any of its
Subsidiaries is a party or by which any of its properties or assets are bound
and that is material to the business of the Investor and its Subsidiaries, taken
as a whole, or any Law that is material to the Investor and its Subsidiaries,
taken as a whole, or Judgment, permit, concession, grant or franchise, in each
case, applicable to the Investor or any of its Subsidiaries or any of its
properties or assets, other than any such conflicts, violations, breaches,
defaults, rights, losses or Liens that would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Investor153s ability to consummate the transactions contemplated by this
Agreement.

(d) Consents. Other than in connection or in compliance with the
provisions of the Securities Act and the securities or blue sky laws of the
various states or any applicable antitrust, merger or competition law, no notice
to, registration, declaration or filing with, review by, or authorization,
consent, order, waiver, authorization or approval of any Governmental Entity is
necessary for the consummation by the Investor of the transactions contemplated
by this Agreement.

(e) Purchase for Investment. The Investor acknowledges that the
Preferred Membership Interests will not have been registered under the
Securities Act or under any state securities laws. The Investor (i) is acquiring
the Preferred Membership Interests pursuant to an exemption from registration
under the Securities Act solely for investment with no present intention or view
to distribute any of the Preferred Membership Interests to any person in
violation of the Securities Act, (ii) will not sell or otherwise dispose of any
of the Preferred Membership Interests, except in compliance with the
registration requirements or exemption provisions of the Securities Act and any
other applicable securities laws, (iii) has such knowledge and experience in
financial and business matters and in investments of this type, that it is
capable of evaluating the merits and risks of its investment in the Preferred
Membership Interests and of making an informed investment decision, and has
conducted an independent review and analysis of the business and affairs of
NewCo that it considers sufficient and reasonable for purposes of its making its
investment in the Preferred Membership Interests, and (iv) is an “accredited
investor” (as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act).

ARTICLE III

Covenants

SECTION 3.01 Further Assurances. (a) Each of Parent, the Investor and
NewCo will cooperate and consult with the other and use commercially reasonable
efforts (i) to prepare and file all necessary documentation, (ii) to effect all
necessary applications, notices, petitions, filings and other documents, (iii)
to obtain all necessary permits, consents, orders, approvals and authorizations
of, or any exemption by, all Governmental Entities and any other third parties,
and expiration or termination of any applicable waiting periods, necessary or
advisable to consummate the transactions contemplated by this Agreement, (iv) to
take actions necessary to cause the conditions to Closing to be satisfied as
promptly as reasonably practicable and (v) to perform the covenants contemplated
by this Agreement, it being agreed that each of Parent, NewCo and the Investor
shall make or file any such applications, notices, petitions or filings required
to be made by it with Governmental Entities in connection with the transactions
contemplated by this Agreement as promptly as practicable. Parent and NewCo
shall take all material action necessary to effect the NewCo Formation
Transactions as promptly as reasonably practicable following the date hereof. To
the extent Parent and NewCo enter into any Contracts to effect the NewCo
Formation

Transactions, the terms of such Contracts shall be consistent with the
Separation Principles. Each party shall execute and deliver after the Closing
such further certificates, agreements and other documents and take such other
actions as the other party may reasonably request to consummate or implement
such transactions or to evidence such events or matters. For assets and
liabilities the transfer of which from (i) Parent (or Parent153s Subsidiaries
(other than NewCo and its Subsidiaries)) to NewCo or its Subsidiaries or (ii)
NewCo (or NewCo153s Subsidiaries) to Parent or its Subsidiaries (other than NewCo
and its Subsidiaries) is subject to receipt of third-party consent which has not
been received prior to the Closing Date, Parent and NewCo shall use commercially
reasonable efforts to implement arrangements to allow NewCo (in the case of
clause (i)) or Parent (in the case of clause (ii)) to the maximum extent
reasonably practicable to obtain the benefits and bear the burdens of such
assets and liabilities until such consent is obtained. After the Closing, Parent
and NewCo shall hold and shall promptly transfer and deliver to the other party,
from time to time as and when received by it, any cash, checks with appropriate
endorsements (using commercially reasonable efforts not to convert such checks
into cash), or other property that they may receive which properly belongs to
the other party, including any payments of accounts receivable and insurance
proceeds, and shall account to the other party for all such receipts. Each of
Parent, the Investor and NewCo will have the right to review in advance, and to
the extent practicable each will consult with the other, in each case subject to
applicable Laws relating to the exchange of information, with respect to all the
information relating to the other party, and any of their respective
Subsidiaries, which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees to keep the other party apprised of the
status of matters relating to completion of the transactions contemplated
hereby. Parent, the Investor and NewCo shall promptly furnish each other, to the
extent permitted by applicable Laws, with copies of written communications
received by them or their Affiliates from, or delivered by any of the foregoing
to, any Governmental Entity in respect of the transactions contemplated by this
Agreement.

(b) NewCo or Parent, as the case may be, shall give prompt written notice to
the Investor upon becoming aware of any Claim commenced or, to the knowledge of
NewCo, to which NewCo is or may become a party (including any such Claim in the
right of NewCo) (x) relating to or involving this Agreement or the transactions
contemplated hereby, or (y) seeking to enjoin, restrain, restrict, limit or
prohibit the transactions contemplated hereby or any of the rights, privileges
or preferences to which the Investor is entitled as set forth in the LLC
Agreement or the other agreements contemplated by this Agreement. NewCo or
Parent, as the case may be, shall give the Investor the opportunity to
participate in (but not control) the defense and settlement of any such Claims
and NewCo and Parent agree to use, and to cause their or Parent153s, as the case
may be, Affiliates, directors and officers to use, its commercially reasonable
efforts to defend or contest any such Claim, subject to the right of NewCo to
settle such Claim in compliance with the LLC Agreement. The Investor will
cooperate (at Parent153s sole cost and expense) with NewCo and Parent in its
defense of such Claims as NewCo may reasonably request.

(c) Except for matters set forth in Section 3.01(c) of the Disclosure Letter
or otherwise expressly permitted or required by the terms of this Agreement or
expressly contemplated in connection with the NewCo Formation Transactions and,
to the extent applicable, consistent with the Separation Principles, from the
date of this Agreement to the earlier of the Closing or termination of this
Agreement, Parent shall conduct its Digital Business and College Business in the
usual, regular and ordinary course, and shall use commercially reasonable
efforts to keep intact its Digital Business and College Business and preserve
the relationships of its Digital Business and College Business with customers,
suppliers, licensors, licensees, strategic partners, distributors and others
with whom its Digital Business and College Business deal.

(d) At the Closing Date, Parent and the Investor shall, and Parent shall
cause NewCo to, execute and deliver the LLC Agreement and the Registration
Rights Agreement.

(e) From the date of this Agreement until the earlier of the Closing or the
termination of this Agreement, none of Parent, NewCo or any of their respective
Subsidiaries shall consummate any transaction that would require any
antidilution adjustment to be made under the LLC Agreement as if entered into on
the date of this Agreement.

SECTION 3.02 Expenses. Except as otherwise provided in this Agreement,
each party shall bear and pay its own costs, fees and expenses incurred by it in
connection with this Agreement and the transactions contemplated by this
Agreement, provided that, except as otherwise provided in the Separation
Principles, all costs, fees and expenses in connection with NewCo Formation
Transactions shall be borne by Parent.

SECTION 3.03 Confidentiality. Each of Parent, NewCo and Investor
hereby agrees to keep confidential and to cause its respective employees,
officers, directors, Affiliates and Representatives to keep confidential any and
all confidential information of the Investor on the one hand, and NewCo and
Parent on the other, including non-public information relating to their
respective finances and results, trade secrets, know-how, customers, business
plans, marketing activities, financial data and other business affairs that was
disclosed by the Investor on the one hand, and NewCo or Parent on the other, or
their respective Affiliates or Representatives on or prior to the date of this
Agreement.

SECTION 3.04 Change to Transaction Structure. The parties agree that
prior to the Closing Parent shall have the right to modify the structure of
NewCo as reasonably necessary, so long as (i) any such modification does not
alter the terms of the preferred equity interests to be purchased by the
Investor or otherwise adversely impact the Investor other than in a de
minimis respect (including with respect to the Tax consequences to the
Investor with respect to the purchase, ownership, or disposition of the
Preferred Membership Interests) and (ii) NewCo is not classified as an
association taxable as a corporation for U.S. federal income tax purposes. Upon
Parent giving written notice to the Investor of such election, the parties
shall, if necessary, enter into an amendment to this Agreement to implement any
changes to this Agreement necessitated by such modification (including replacing
or modifying the forms of governing documents of NewCo).

SECTION 3.05 Taxes. Parent shall be responsible for and shall timely
pay to the applicable taxing authority as required by Law the full amount of any
Taxes incurred in connection with the NewCo Formation Transactions, including
any sales, use, transfer or value-added Taxes imposed in connection therewith.

SECTION 3.06 Guarantee. Microsoft hereby irrevocably and
unconditionally guarantees, and agrees to cause the Investor to satisfy, all
obligations of the Investor under this Agreement, on the terms and subject to
the conditions set forth in this Agreement. This guarantee (i) is a present and
continuing guarantee of payment and not of collectability, and (ii) is in no way
conditioned or contingent upon any attempts to collect or upon any other
condition or contingency.

ARTICLE IV

Conditions

SECTION 4.01 Conditions to the Obligations of Each Party153s
Obligations. The respective obligations of each party to effect the
transactions set forth in this Agreement are subject to the satisfaction or (to
the extent permitted by law) waiver on or prior to the Closing Date of the
following conditions:

(a) Legal Restraints. No Governmental Entity shall have issued any
order, decree or ruling, and no law shall be in effect, enjoining, restraining
or otherwise prohibiting any transaction contemplated by this Agreement.

(b) Definitive Agreements. The Commercial Agreement among Parent,
NewCo and Microsoft dated on or about the date hereof and effective as of the
Closing Date (the “Commercial Agreement“) shall be effective.

SECTION 4.02 Conditions to the Obligations of Parent and NewCo. The
obligations of Parent and NewCo to effect the transactions set forth in this
Agreement are subject to the satisfaction or (to the extent permitted by law)
waiver on or prior to the Closing Date of the following conditions:

(a) LLC Agreement. The Investor shall have executed and delivered the
LLC Agreement.

(b) Representations and Warranties. The representations and warranties
of the Investor in this Agreement shall be true and correct at and as of the
Closing Date, with the same force and effect as if made on the Closing Date,
except for such failures to be true and correct (without giving effect to any
limitation or qualification as to “materiality” or “material adverse effect” set
forth in such representations and warranties) as, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a material
adverse effect on the ability of the Investor to consummate the transactions
contemplated by this Agreement.

(c) Performance of Obligations of the Investor. The Investor shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.

(d) Credit Facility Consent. Parent shall have received any required
consent of the lenders under the Parent153s Amended and Restated Credit Agreement
dated as of April 29, 2011, as amended (the “Credit Agreement“), to the
consummation of the transactions contemplated hereby and the NewCo Formation
Transactions.

SECTION 4.03 Conditions to the Obligations of the Investor. The
obligations of the Investor to effect the transactions set forth in this
Agreement are subject to the satisfaction or (to the extent permitted by law)
waiver on or prior to the Closing Date of the following conditions:

(a) Definitive Agreements. Parent and NewCo shall have executed and
delivered the LLC Agreement, the Registration Rights Agreement and the Joinder
Agreement.

(b) Representations and Warranties. The representations and warranties
of Parent in this Agreement (including with respect to NewCo) shall be true and
correct at and as of the Closing Date, with the same force and effect as if made
on the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct or true and correct on such earlier date),
except for such failures to be true and correct (without giving effect to any
limitation or qualification as to “materiality” or “material adverse effect” set
forth in such representations and warranties) as, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a material
adverse effect on NewCo and its Subsidiaries after giving effect to the NewCo
Formation Transactions, taken as a whole, or on the ability of Parent and NewCo
to consummate the transactions contemplated by this Agreement.

(c) Performance of Obligations of NewCo. Parent and NewCo shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date.

(d) NewCo Formation Transactions. The NewCo Formation Transactions
shall have been consummated.

(e) Certificate. Parent and NewCo shall have delivered to the Investor
a certificate, dated as of the Closing Date and signed on behalf of Parent and
NewCo by the Chief Executive Officers or Chief Financial Officers of Parent and
NewCo, certifying the satisfaction of the conditions in Sections 4.03(b), (c)
and (d).

ARTICLE V

Termination

SECTION 5.01 Termination. This Agreement may be terminated at any time
prior to the Closing Date:

(a) by mutual written consent of Parent and the Investor;

(b) by either Parent or the Investor, if

(i) the Closing Date shall not have occurred by February 3, 2013 (such date,
the “Outside Date“); provided that the party seeking termination
of this Agreement pursuant to this Section 5.01(b)(i) is not then in material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement; provided further, that (A) if on the
Outside Date, Parent has been pursuing completion of the NewCo Formation
Transactions in good faith but the NewCo Formation Transactions have not been
consummated, the Investor shall on the Outside Date either (1) exercise its
right to terminate this Agreement in accordance with this Section 5.01(b)(i) and
the Settlement and License Agreement shall terminate pursuant to Section 5.2.3
thereof or (2) extend the Outside Date to May 3, 2013 (the “Extended Outside
Date“) by giving written notice thereof to Parent, in which event, this
Agreement may thereafter be terminated by either party prior the Extended
Outside Date (provided that, if Parent has been pursuing completion of
the NewCo Formation Transactions in good faith, (x) in the event of a
termination by the Investor, the Settlement and License Agreement shall
terminate pursuant to Section 5.2.3 thereof and (y) in the event of a
termination by Parent, Parent shall have the right to terminate the Settlement
and License Agreement solely to the extent it is entitled to do so under Section
5.2 thereof) and (B) if the conditions to the Investor153s obligations to effect
the transactions contemplated by this Agreement are not satisfied on the
Extended Outside Date, the Investor shall not be required to concurrently
terminate the Settlement and License Agreement in order to exercise its right to
terminate this Agreement in accordance with this Section 5.01(b)(i); or

(ii) any Governmental Entity issues an order, decree or ruling or has taken
any other action permanently enjoining, restraining or otherwise prohibiting any
transaction contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable.

ARTICLE VI

Miscellaneous

SECTION 6.01 Survival. The representations and warranties of the
parties set forth in Article II of this Agreement shall survive until the second
anniversary of the Closing, except that Sections 2.01(a)(i), (ii), Sections
2.01(b)(i), (ii) and (iii) and Sections 2.02(a) and (b) shall survive
indefinitely and Section 2.01(a)(vii) shall survive until the close of business
on the 60th day following the expiration of the applicable statute of
limitations. All of the covenants or other agreements of the parties contained
in this Agreement shall survive until fully performed or fulfilled.

SECTION 6.02 Amendments, Waivers, etc. This Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed by
the party against whom such amendment or waiver shall be enforced. The failure
of any party hereto to exercise any right, power or remedy provided under this
Agreement or otherwise available in respect hereof at law or in equity, or to
insist upon compliance by any other party hereto with its obligations hereunder,
shall not constitute a waiver by such party of its right to exercise any such
other right, power or remedy or to demand such compliance.

SECTION 6.03 Counterparts and Facsimile. This Agreement may be
executed in two or more identical counterparts (including by facsimile), each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered (by
telecopy or otherwise) to the other parties.

SECTION 6.04 Specific Enforcement; Governing Law; Submission to
Jurisdiction; Waiver of Jury Trial. (a) This Agreement shall be governed by
and construed in accordance with the Laws of the State of New York.

(b) THE PARTIES ACKNOWLEDGE AND AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN
THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN
ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED. IT IS
ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OR THREATENED BREACHES OF THIS AGREEMENT AND TO
ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF
COMPETENT JURISDICTION, IN EACH CASE WITHOUT PROOF OF DAMAGES OR OTHERWISE (AND
EACH PARTY HEREBY WAIVES ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND
IN CONNECTION WITH SUCH REMEDY), THIS BEING IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY. THE PARTIES AGREE NOT TO ASSERT
THAT A REMEDY OF SPECIFIC ENFORCEMENT IS UNENFORCEABLE, INVALID, CONTRARY TO LAW
OR INEQUITABLE FOR ANY REASON, NOR TO ASSERT THAT A REMEDY OF MONETARY DAMAGES
WOULD PROVIDE AN ADEQUATE REMEDY. IN ADDITION, EACH OF THE PARTIES HERETO
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER, OR FOR RECOGNITION
AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS ARISING HEREUNDER, BROUGHT BY THE OTHER PARTY HERETO OR ITS
SUCCESSORS OR ASSIGNS SHALL BE BROUGHT AND DETERMINED EXCLUSIVELY IN ANY STATE
OR FEDERAL COURT IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, SO LONG AS ONE
OF SUCH COURTS SHALL HAVE SUBJECT MATTER JURISDICTION OVER SUCH LEGAL ACTION OR
PROCEEDING, AND THAT ANY CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT SHALL BE
DEEMED TO HAVE ARISEN FROM A TRANSACTION OF BUSINESS IN THE STATE OF NEW YORK.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS WITH REGARD TO ANY SUCH
ACTION OR PROCEEDING FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, TO THE PERSONAL JURISDICTION OF THE AFORESAID COURTS AND AGREES
THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN THE
AFORESAID COURTS. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE,
IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, (1) ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR
ANY REASON, (2) ANY CLAIM THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE FROM
JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH
COURTS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE)
AND (3) TO THE FULLEST EXTENT PERMITTED BY THE APPLICABLE LAW, ANY CLAIM THAT
(A) THE SUIT, ACTION OR PROCEEDING IN SUCH COURT IS BROUGHT IN AN INCONVENIENT
FORUM, (B) THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR (C) THIS
AGREEMENT, OR THE SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH
COURTS. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON BEHALF
OF ITSELF OR ITS PROPERTY, BY U.S. REGISTERED MAIL TO SUCH PARTY153S RESPECTIVE
ADDRESS SET FORTH BELOW, AND NOTHING IN THIS SECTION 6.04(b) SHALL AFFECT THE
RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(c) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT,
ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT. EACH PARTY HERETO (1) CERTIFIES THAT NO REPRESENTATIVE OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVER AND CERTIFICATIONS IN THIS SECTION 6.04(c).

SECTION 6.05 Notices. Any notice required to be given hereunder shall
be sufficient if in writing, and sent by facsimile transmission (provided that
any notice received by facsimile transmission or otherwise at the addressee153s
location on any Business Day after 5:00 p.m. (addressee153s local time) shall be
deemed to have been received at 9:00 a.m. (addressee153s local time) on the next
Business Day), by reliable overnight delivery service (with proof of service),
or hand delivery, addressed as follows:

(a) If to Parent or NewCo:

Barnes & Noble, Inc.

122 Fifth Avenue

New York, NY 10011

Attention: Eugene V. DeFelice

Vice President, General Counsel & Secretary

Facsimile: (212) 463-5683

with a copy to (which copy alone shall not constitute notice):

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Attention: Scott A. Barshay, Esq.

Andrew R. Thompson, Esq.

Facsimile: (212) 474-3700

(b) If to the Investor:

Morrison Investment Holdings, Inc.

c/o Microsoft Corporation

One Microsoft Way

Redmond, Washington 98052-6399

Attention: Keith R. Dolliver

President

Facsimile: (425) 706-7329

with a copy to (which copy alone shall not constitute notice):

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Attention: Alan M. Klein, Esq.

Facsimile: (212) 455-2502

Microsoft Corporation

One Microsoft Way

Redmond, Washington 98052-6399

Attention: Peter Klein

Chief Financial Officer

Fax: (425) 706-7329

with a copy to (which copy alone shall not constitute notice):

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

Attention: Alan M. Klein, Esq.

Facsimile: (212) 455-2502

or to such other address as any person shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or scheduled to be received if sent by
overnight delivery service. Any party to this Agreement may notify any other
party of any changes to the address or any of the other details specified in
this paragraph; provided, however, that such notification shall
only be effective on the date specified in such notice or five Business Days
after the notice is given, whichever is later. Rejection or other refusal to
accept or the inability to deliver because of changed address of which no notice
was given shall be deemed to be receipt of the notice as of the date of such
rejection, refusal or inability to deliver.

SECTION 6.06 Entire Agreement, etc. This Agreement (including the
Annexes hereto), together with the Related Agreements, constitutes the entire
agreement, and supersedes all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties, with
respect to the subject matter hereof and thereof, including the term sheets with
respect to the subject matter hereof and thereof and the Settlement Discussion
Agreement between Parent and Microsoft, dated as of July 12, 2011.

SECTION 6.07 Definitions. (a) “Affiliate” means, with respect to any
specified person or entity, any other person or entity directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
such specified person or entity; provided, that none of Parent and its
Subsidiaries, and NewCo and its Subsidiaries shall be deemed to be Affiliates of
the Investor or any of its respective Affiliates. For the purposes of this
definition, “control”, when used with respect to any specified person, means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

(b) “Business Day” means any weekday that is not a day on which
banking institutions in New York, New York are authorized or required by law,
regulation or executive order to be closed.

(c) “Claim” means any demand, action, claim, suit, litigation,
arbitration, prosecution, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding, at law or in equity),
hearing, examination or investigation.

(d) “College Business” means the assets, rights and properties,
including all goodwill relating thereto, whether tangible or intangible, real,
personal or mixed, and liabilities of Parent and its Subsidiaries primarily
related to, or used primarily in connection with, the college bookstore business
conducted by Parent and its Subsidiaries as of the date hereof (but with respect
to any asset, right and property or liability the transfer of which has not been
consented to by any third-party with the right to consent to such transfer,
subject to the receipt of such consent), including:

	(i)	100% of the equity interests in Barnes & Noble College Booksellers, LLC;
	(ii)	Intellectual property associated solely with such college bookstore business and a license for use (but not ownership) of the Barnes & Noble name and trademark;
	(iii)	Customer data originating in such college bookstore business (subject to applicable restrictions under privacy policies and applicable Law) and Contracts, including management agreements and licenses or other rights from publishers and authors, relating to such college bookstore business;
	(iv)	Claims arising out of or relating to the businesses, assets and liabilities transferred to NewCo primarily related to such college bookstore business, including all Claims against third parties, whether choate or inchoate, known or unknown, contingent or non-contingent, or otherwise, and the right to obtain all proceeds therefrom;
	(v)	Obligations with respect to third-party channel partner returns, price protection agreements with third-party channel partners, rebates and offsets of rebates from suppliers and liabilities with respect to gift cards, in each case primarily related to such college bookstore business;
	(vi)	Substantially all the employees of Parent or its Subsidiaries (other than Barnes & Noble College Booksellers LLC) who as of the date of the separation are engaged primarily in such college bookstore business (and the liabilities associated therewith);
	(vii)	Such other assets, rights, properties, obligations and liabilities described or referenced in the sections of Parent153s Annual Report on Form 10-K for the year ended April 30, 2011, and subsequently filed Quarterly Reports on Form 10-Q, primarily relating to “B&N College”; and
	(viii)	All credits and deposits (including customer deposits, security deposits for rent, electricity, telephone or otherwise), and prepaid charges and expenses, and all permits or franchises, in each case, primarily related to such college bookstore business;

subject, in each case, to the Separation Principles.

(e) “Digital Business” means the assets, rights and properties,
including all goodwill relating thereto, whether tangible or intangible, real,
personal or mixed, and liabilities of Parent and its Subsidiaries primarily
related to, or used primarily in connection with, the digital device, digital
content, eCommerce and nook.com businesses (including barnesandnoble.com llc,
but excluding assets and liabilities primarily related to the retail business
(including the Barnes & Noble trademark)) conducted by Parent and its
Subsidiaries as of the date hereof (but with respect to any asset or liability
the transfer of which has not been consented to by any third-party with the
right to consent to such transfer, subject to the receipt of such consent),
including:

	(i)	100% of the equity interests in barnesandnoble.com llc;
	(ii)	Digital device manufacturing, development, sale and distribution work and rights and each Nook line of devices;
	(iii)	Application software development, sale and distribution work and rights;
	(iv)	Intellectual property to the extent associated with such digital device, digital content, eCommerce and nook.com businesses (including patents primarily related to such digital device, digital content, eCommerce and nook.com businesses, the Nook trademark and copyrights and licenses for digital content, but only including certain URLs, such as nook.com);
	(v)	Customer data, including all data associated with a customer153s consumption of digital content (including bookmarks, last page read, highlighting and annotations), originating in such digital device, digital content, eCommerce and nook.com businesses and rights to maintain digital lockers for digital customers (subject to applicable restrictions under privacy policies and applicable Law);
	(vi)	Rights to sell digital content, including electronic books, magazines, newspapers, periodicals, comic books, children153s books and other reading and reading-related content, together with associated data thereto including any annotations by such end user, and Contracts related to such digital device, digital content, eCommerce and nook.com businesses;
	(vii)	Claims primarily relating to the businesses, assets and liabilities transferred to NewCo primarily related to such digital device, digital content, eCommerce and nook.com businesses, including all Claims against third parties, whether choate or inchoate, known or unknown, contingent or non-contingent, or otherwise, and the right to obtain all proceeds therefrom;
	(viii)	Rights and obligations under the leases for office space located at 3400 Hillview Avenue, Palo Alto, California and 76 9th Avenue, New York, New York;
	(ix)	Obligations with respect to third-party channel partner returns, price protection agreements with third-party channel partners, rebates and offsets of rebates from suppliers and liabilities with respect to gift cards, in each case primarily related to such digital device, digital content, eCommerce and nook.com businesses;
	(x)	Obligations under digital device warranties (including pre-separation digital device warranties);
	(xi)	Obligations under the Settlement and License Agreement from and after the date of separation;

	(xii)	Substantially all the employees of Parent or its Subsidiaries who as of the date of the separation are engaged primarily in such digital device, digital content, eCommerce and nook.com businesses (and the liabilities associated therewith);
	(xiii)	Such other assets, rights, properties, obligations and liabilities described or referenced in the sections of Parent153s Annual Report on Form 10-K for the year ended April 30, 2011, and subsequently filed Quarterly Reports on Form 10-Q as are primarily related to “B&N.com”; and
	(xiv)	All credits and deposits (including customer deposits, security deposits for rent, electricity, telephone or otherwise), and prepaid charges and expenses, and all permits or franchises, in each case, primarily related to such digital device, digital content, eCommerce and nook.com businesses;

subject, in each case, to the Separation Principles.

(f) “Disclosure Letter” means the letter dated as of the date hereof
delivered by Parent to the Investor.

(g) “NewCo Formation Transactions” means (i) the formation of NewCo,
(ii) the separation of substantially all the Digital Business and College
Business from Parent and the transfer of substantially all the Digital Business
and College Business into NewCo, including the transfer of the assets, rights
and properties primarily related to the Digital Business and the College
Business to NewCo free and clear of all Liens (other than any Liens under the
Credit Agreement and any Permitted Encumbrances (as defined in the Credit
Agreement)), (iii) the transfer of substantially all the employees who as of the
date of separation were primarily engaged in the conduct of the Digital Business
and College Business and (iv) the entry of NewCo and Parent into commercial
arrangements and transition services arrangements, in each case, in accordance
with the Separation Principles.

(h) “Preferred Membership Interests” means the Series A Preferred
Membership Interests of NewCo, having the powers, preferences and rights, and
the qualifications, limitations and restrictions, specified in the LLC
Agreement.

(i) “registration” shall refer to a registration effected by preparing
and filing a registration statement with the SEC in compliance with the
Securities Act and applicable rules and regulations thereunder, and the
declaration or ordering of effectiveness of such registration statement by the
SEC.

(j) “Registration Rights Agreement” means the registration rights
agreement among Parent, NewCo and the Investor dated as of the Closing Date and
to be substantially in the form of Annex B hereto.

(k) “Related Agreements” means (i) the Settlement and License
Agreement, (ii) the Commercial Agreement and (iii) any other agreements between
or among Parent, NewCo, Microsoft and any of their respective Affiliates entered
into in connection with the transactions contemplated herein or therein.

(l) “Representative” means, with respect to any person, the directors,
officers, employees, investment bankers, financial advisors, attorneys,
accountants or other advisors, agents or representatives of such person.

(m) “Separation Principles” means the principles with respect to the
separation of Parent153s Digital Business and College Business to NewCo which are
set forth on Annex C.

(n) “Settlement and License Agreement” means the Settlement and Patent
License Agreement among Parent, barnesandnoble.com llc, Microsoft and Microsoft
Licensing GP, dated as of the date hereof.

(o) A “Subsidiary” of any person means another person, an amount of
the voting securities, other voting rights or voting partnership interests of
which is sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, more than 50%
of the equity interests of which) is owned directly or indirectly by such first
person. For purposes of this Agreement, “person” means any individual,
corporation, partnership, limited liability company, joint venture, association,
joint-stock company, trust, unincorporated organization or Governmental Entity
or other entity.

(p) “Tax” or “Taxes” means any federal, state, local or foreign
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add on minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any taxing authority.

(q) “Tax Return” means any return, declaration, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.

SECTION 6.08 Interpretation. When a reference is made in this
Agreement to an Article, Section or Schedule, such reference shall be to an
Article or Section of, or a Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”. The words “hereof”, “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
word “or” shall not be exclusive. All references to “$” mean the lawful currency
of the United States of America. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Except as
specifically stated herein, any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. Except as otherwise specified herein, references to a
person are also to its permitted successors and assigns. Each of the parties has
participated in the drafting and negotiation of this Agreement. If an ambiguity
or question of intent or interpretation arises, this Agreement must be construed
as if it is drafted by all the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of authorship of any of
the provisions of this Agreement.

SECTION 6.09 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.

SECTION 6.10 No Third-Party Beneficiaries. Nothing expressed or
referred to in this Agreement will be construed to give any person, other than
the parties to this Agreement, any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement.

SECTION 6.11 Assignment. Except as otherwise provided herein, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties;
provided that the Investor (and any of the Investor153s permitted assignees
under this Section 6.11) may assign its rights, interests and obligations
hereunder to Microsoft or any of Microsoft153s wholly owned subsidiaries;
provided, however, that any assignment of the rights, interests or
obligations hereunder shall not modify the obligations of Microsoft under
Section 3.06.

SECTION 6.12 Public Announcements. Parent and the Investor agree that
the initial press release announcing the execution and delivery of this
Agreement and the transactions contemplated by this Agreement shall be a joint
release of Parent and the Investor. Subject to each party153s disclosure
obligations imposed by Law or the rules of any stock exchange upon which its
securities are listed compliance with which shall not require consultation with,
or the consent of, the other party, neither Parent nor the Investor will make
any public news release or other public disclosure with respect to this
Agreement or the transactions contemplated hereby in which the other party is
named without first consulting with the other, and, in each case, also receiving
the other153s consent (which shall not be unreasonably withheld or delayed).

[Signature Pages Follow]

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

BARNES & NOBLE, INC.,


by	/s/ Eugene V. DeFelice
	Name: Eugene V. DeFelice
	Title: Vice President, General Counsel & Secretary

[Signature Page to the Investment Agreement]

MORRISON INVESTMENT HOLDINGS, INC.,


by	/s/ Keith R. Dolliver
	Name: Keith R. Dolliver
	Title: President

[Signature Page to the Investment Agreement]

Solely for purposes of Section 3.06,

MICROSOFT CORPORATION,


by	/s/ Steven A. Ballmer
	Name: Steven A. Ballmer
	Title: Chief Executive Officer

[Signature Page to the Investment Agreement]

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