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Yucaipa Lawsuit Against Barnes & Noble Over Poison Pill

Yucaipa Lawsuit Against Barnes & Noble Over Poison Pill

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Published by DealBook
Lawsuit by the Yucaipa Companies, Ron Burkle's investment firm, against Barnes & Noble over the bookseller's implementation of a shareholder rights plan, or poison pill.
Lawsuit by the Yucaipa Companies, Ron Burkle's investment firm, against Barnes & Noble over the bookseller's implementation of a shareholder rights plan, or poison pill.

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Published by: DealBook on May 06, 2010
Copyright:Attribution Non-commercial

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09/23/2010

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YOUNG CONAWAY STARGATT & TAYLOR, LLP
BEN T. CASTLECRAIG D. GREAR
THE BRANDYWINE BUILDING
RYAN M. BARTLEY
JENNIFER M. KINKUSSHELDON N. SANDLER
RICHARD A. LEVINE
TIMOTHY JAY HOUSEAL
MARTIN S. LESSNER
1000
WEST STREET, 17TH FLOOR
DONALD J. BOWMAN, JR.MICHELE SHERRETTA BUDICAKSARA BETH A. R. KOHUT
EVANGELOS KOSTOULASRICHARD A. Z APPA
PAULINE K. MORGAN
WILMINGTON, DELAWARE
19801
EMILY V. BURTON
PILAR G. KRAMAN
RICHARD H. MORSEC. BARR FLINNERIKA R. CAESAR
JOHN C. KUFFEL
DAVID C. MCBRIDENATALIE WOLFJEFFREY T. CASTELLANO
ANDREW A. LUNDGREN
JOSEPH M. NICHOLSONLISA B. GOODMAN
P.O. Box 391
DOUGLAS T. COATS
JAIME N. LUTONCRAIG A. KARSNITZ
BARRY M. WILLOUGHBYJOHN W. SHAWJAMES P. HUGHES, JR.
WILMINGTON, DELAWARE
19899-0391
KARA HAMMOND COYLEKRISTEN SALVATORE DEPALMA
ANDREW L. MAGAZINERADRIA B. MARTINELLI
ANTHONY G. FLYNNEDWIN J. HARRONMARGARET M. DIBIANCA
KATHALEEN MCCORMICK
JEROME K. GROSSMANMICHAEL R. NESTOR
(302) 571-6600
JUSTIN P. DUDA (NY ONLY)
TAMMY L, MERCER
EUGENE A. DIPRn
g
ZIO
JAMES L. PATTON, JR.ROLIN P. BISSELLSCOTT A. HOLT
(800) 253-2234 (DE
ONLY)
MARY F. DUGANERIN EDWARDS
MARIBETH L. MINELLALAUREN E. MOAK
ROBERT L. THOMASJOHN T. DORSEY
FAX:
(302)571-1253
KENNETH J. ENOS
MICHAEL S. NEIBURG
WILLIAM D. JOHNSTONM. BLAKE CLEARYKERRIANNE MARIE FAY
JENNIFER R. NOEL
TIMOTHY J. SNYDERCHRISTIAN DOUGLAS WRIGHT
MARLS FINNEGANROBERT F. POPPITI, JR.
BRUCE L. SILVERSTEINDANIELLE GIBBS
110
WEST PINE STREET
WILLIAM E. GAMGORT
NICHOLAS J. ROHRER
WILLIAM W. BOWSERLARRY J. TARABICOS
JOHN J. PASCHETTO
NORMAN M. POWELL
P.O Box 594
MARGARET WHITEMAN GREECHERSEAN T. GREECHER
ANDREW E. RUSSELLJUSTIN H. RUCKI
RICHARD A. DILIBERTO, JR.ELENA C. NORMAN
GEORGETOWN, DELAWARE
19947
FRANK GRESE
CHERYL A. SANTANIELLO
MELANIE K. SHARPEDMON L. MORTON
(302) 856-3571
MEGAN C. HANEY
MORGAN L. SEWARDCASSANDRA F. ROBERTS
RICHARD J.A. POPPER
JOHN E. TRACEY
ADAM W. POFF
(800) 255-2234 (DE
ONLY)
A. DAVID HANSENSTEPHANIE L, HANSEN
MONTE T. SQUIREMICHAEL P. STAFFORD
TERESA A. CHEEKSEAN M. BEACH
FAX:
(302) 856-9338
JAMES L. HIGGINS
ALEXANDER D. THALERNEILLI MULLEN WALSH
ROBERT S. BRADYJOSEPH M. BARRYSHARON M. ZIEG
WWW.yOUNGCONAWAY.COM
LAUREN HUDECKI
PATRICK A. JACKSON
RICHARD J. THOMASJAMES M. YOCH,
JOEL A. WAITEDAVID R. HURSTKAREN E. KELLERBRENT C. SHAFFERDANIEL P. JOHNSONTIMOTHY E. LENGKEEKMATTHEW B. LUNN
DIRECT DIAL:
302-571-6639
DIRECT FAx:
02-576-3315
dmcbride@ycst.com
SPECIAL COUNSEL
KAREN L. PASCALE
SENIOR COUNSELCURTIS J. CROWTHEROF COUNSELBRUCE M. STARGATTSTUART B. YOUNGEDWARD B. MAXWELL, 2ND
JOSY W. INGERSOLL
May 5, 2010
BY E-FILINGThe Honorable William B. Chandler, III
Court of Chancery
34 The Circle
Georgetown, DE 19947
Re:
Yucaipa American Alliance Fund II, L.P. v. Leonard Riggio, et al.,
Del. Ch., C.A. No.
Dear Chancellor Chandler:
We write on behalf of plaintiffs in the just-filed action, Yucaipa AmericanAlliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P. (collectively,
"Yucaipa" or "Plaintiffs").
Plaintiffs are stockholders of defendant Barnes & Noble, Inc. ("B&N" or the"Company"). By their Verified Complaint (Exhibit 1 hereto) Plaintiffs seek declaratory relief,injunctive relief, and damages in connection with a poison pill adopted by defendant LeonardRiggio and the other individual defendants — members of B&N's board of directors. As detailedin the Complaint, the pill has a trigger of 20%, but Leonard Riggio, the chairman of the Boardand former CEO of the Company, and his brother, Stephen Riggio, the current CEO of theCompany, own over 32% of the shares, and over 38% of the shares are owned by the Riggios,those beholden to them, the Board and management. The pill prevents any other stockholder orperson from acquiring sufficient shares to equal or approach the block controlled by the Riggios.
YCST01:9615867.1
66564.1002
 
YOUNG CONAWAY STARGATT & TAYLOR, LLP
The Honorable William B. Chandler, III
May 5, 2010
Page 2
In addition, the pill allows members of the Riggio family to acquire additional shares. Lastly, thepill includes an expansive definition of "beneficial ownership" that arguably would cause the pillto be triggered if any stockholders with more than 20% of the shares cooperate to nominate
directors or conduct a proxy contest.
The Plaintiffs in this action presently own 19.6% of the shares and are preparingto conduct a proxy contest for the election of directors at the next annual meeting of the
Company's stockholders. The existence of the pill is precluding Plaintiffs from even cooperating
with other stockholders to nominate a slate for election as directors or organize a proxy contest.In addition, the pill is precluding Plaintiffs from acquiring additional shares to compete with theRiggios. As outlined in the Complaint, we seek expedited relief from the Court that would
address both of these issues.
Also as detailed in the Complaint, Plaintiffs expect to propose a slate of threedirectors to oppose management's slate at the next annual meeting of B&N stockholders, whichB&N publicly has stated will be held not later than September 30, 2010. In order to acquireshares before the yet-to-be-set record date for the annual meeting, Plaintiffs seek an expeditedfinal trial sufficiently in advance of the record date to allow resolution of these matters sometime before the record date. In addition, if the Defendants continue to use the pill to block effortsby Plaintiffs to work with other stockholders to nominate a slate of directors or organize a proxycontest, Plaintiffs may require preliminary injunctive relief to allow Plaintiffs to proceed withsuch efforts without triggering the pill. Accordingly, we also have filed a Motion for ExpeditedProceedings (Exhibit 2 hereto). The precise schedule we will need to meet is unknown to usbecause the Company has not yet scheduled the stockholders' meeting, but the Plaintiffs areprepared to begin organizing a slate of nominees and a proxy contest at the present time.We respectfully request the opportunity to present the Motion for ExpeditedProceedings as soon as the schedule of a member of the Court may reasonably permit.With regard to possible assignment of the matter, we (respectfully) note that ViceChancellor Strine has before him consolidated shareholder litigation, C.A. No. 4813-VCS, whichaddresses part of the self-dealing that prompted Plaintiffs in this action to become concernedwith the governance of the Company and to determine to conduct a proxy contest, as explainedin our Complaint. However, that shareholder litigation does not address the poison pill and its
effects.
YCST01:9615867.1
66564.1002
 
ly submitted,
YOUNG CONAWAY STARGATT & TAYLOR,
LLP
The Honorable William B Chandler, III
May 5, 2010Page 3
Counsel are available at Your Honor's convenience if we can provide any furtherinformation. As a courtesy, we are copying on this letter counsel for the parties in theconsolidated shareholder litigation as well as the General Counsel of B&N.
David C. McBride(Bar I.D. No. 408)
Enclosures
cc: Register in ChanceryMichael J. Barry, Esquire (co-lead counsel for shareholder plaintiffs) (With Enclosures)
(By E-Mail)
Pamela S. Tikellis, Esquire (co-lead counsel for shareholder plaintiffs) (With Enclosures)
(By E-Mail)
Peter J. Walsh, Jr., Esquire (counsel for Barnes & Noble, Inc.) (With Enclosures)
(By E-Mail)
Jennifer M. Daniels, Esquire (General Counsel for Barnes & Noble, Inc.) (With Enclosures)
(By E-Mail)
Kenneth J. Nachbar, Esquire (counsel for George Campbell, Jr., Michael J. Del Giudice,
William Dillard, II, Patricia L. Higgens, Irene R. Miller, and Margaret T. Monaco)
(With Enclosures) (By E-Mail)
Gregory P. Williams, Esquire (counsel for Leonard Riggio, Stephen Riggio and Lawrence S.Zilavy) (With Enclosures) (By E-Mail)
YCST01:9615867.1
66564.1002

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