| Subsequent Events | Note 15. Subsequent Events
Separation from Barnes & Noble, Inc.
On February 26, 2015, Barnes & Noble announced plans
for the Spin-Off. Under the Separation and Distribution Agreement,
Barnes & Noble planned to distribute all of its equity
interest in us, consisting of all of the outstanding shares of our
Common Stock, to Barnes & Noble’s stockholders on a
pro rata basis. Following the Spin-Off, Barnes & Noble
would not own any equity interest in us, and we would operate
independently from Barnes & Noble.
On July 14, 2015, Barnes & Noble approved the final
distribution ratio and declared a pro rata dividend of the
outstanding shares of our common stock to Barnes &
Noble’s existing stockholders. The pro rata dividend was made
on August 2, 2015 to the Barnes & Noble stockholders
of record (as of July 27, 2015). Each Barnes & Noble
stockholder of record received a distribution of 0.632 shares of
our Common Stock for each share of Barnes & Noble Common
Stock held on the record date (the “Distribution”). On
August 2, 2015, we completed the legal separation from
Barnes & Noble, at which time we began to operate as an
independent publicly-traded company.
Following the Spin-Off on August 2, 2015, our authorized
capital stock consisted of 200 million shares of Common Stock
and five million shares of preferred stock, par value $0.01 per
share. As of August 2, 2015, 48,186,900 shares and 0 shares of
our Common Stock and preferred stock, respectively, were issued and
outstanding. Our Common Stock began to trade on a
“when-issued” basis on the NYSE under the symbol
“BNED WI” beginning on July 23, 2015. On
August 3, 2015, when-issued trading of our Common Stock ended,
our Common Stock began “regular-way” trading under the
symbol “BNED.”
On-going Agreements with Barnes & Noble
In connection with the separation from Barnes & Noble, we
entered into a Separation and Distribution Agreement with
Barnes & Noble on July 14, 2015 and several other
ancillary agreements on August 2, 2015. These agreements
govern the relationship between the parties after the separation
and allocate between the parties various assets, liabilities,
rights and obligations following the separation, including employee
benefits, intellectual property, information technology, insurance
and tax-related assets and liabilities. The agreements
also describe Barnes & Noble’s future commitments to
provide us with certain transition services following the Spin-Off.
These agreements include the following:
• a Separation and Distribution
Agreement that set forth Barnes & Noble’s and our
agreements regarding the principal actions that both parties took
in connection with the Spin-Off and aspects of our relationship
following the Spin-Off;
• a Transition Services Agreement
pursuant to which Barnes & Noble agreed to provide us with
specified services for a limited time to help ensure an orderly
transition following the Distribution. The Transition Services
Agreement specifies the calculation of our costs for these
services;
• a Tax Matters Agreement governs the
respective rights, responsibilities and obligations of
Barnes & Noble and us after the Spin-Off with respect to
all tax matters (including tax liabilities, tax attributes, tax
returns and tax contests);
• an Employee Matters Agreement with
Barnes & Noble addressing employment, compensation and
benefits matters; and
• a Trademark License Agreement
pursuant to which Barnes & Noble grants us an exclusive
license in certain licensed trademarks and a non-exclusive license
in other licensed trademarks.
A description of the material terms and conditions of these
agreements can be found in the section titled “Certain
Relationships and Related Party Transactions” of the
Prospectus dated July 15, 2015 and filed with the SEC on that
date. The descriptions of the Transition Services Agreement, Tax
Matters Agreement, Employee Matters Agreement and Trademark License
Agreement are qualified in their entirety by reference to the full
text of the Transition Services Agreement, Tax Matters Agreement,
Employee Matters Agreement and Trademark License Agreement, which
are attached as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively,
to the Current Report on Form 8-K dated August 2, 2015 and
filed with the SEC on August 3, 2015. The description of the
Separation and Distribution Agreement is qualified in its entirety
by reference to the full text of the Separation and Distribution
Agreement, which is attached as Exhibit 2.1 to this Form 10-Q.
New Credit Facility
Until August 3, 2015, we were party to the B&N Credit
Facility. All outstanding debt under the B&N Credit Facility
was recorded on Barnes & Noble’s balance sheet as of
August 1, 2015. See Note 7. Credit Facility
On August 3, 2015, the Company and certain of its subsidiaries
from time to time party thereto entered into a credit agreement
(the “Credit Agreement”) with Bank of America, N.A., as
administrative agent, collateral agent and swing line
lender, and other lenders from time to time party
thereto, under which the lenders committed to provide a five-year
asset-backed revolving credit facility in an aggregate committed
principal amount of $400,000 (the “New Credit
Facility”). Proceeds from the New Credit Facility will be
used for general corporate purposes, including seasonal working
capital needs. Bank of America Merrill Lynch, J.P. Morgan
Securities LLC, Wells Fargo Bank, N.A. and SunTrust Robinson
Humphrey, Inc. are the joint lead arrangers for the New Credit
Facility.
The Company and certain of its subsidiaries (collectively, the
“Loan Parties”) will be permitted to borrow under the
New Credit Facility. The New Credit Facility is secured by
substantially all of the inventory, accounts receivable and related
assets of the borrowers under the New Credit Facility, but
excluding the equity interests in the Company and its subsidiaries,
intellectual property, equipment and certain other property. The
Company has the option to request an increase in commitments under
the New Credit Facility of up to $100,000, subject to certain
restrictions.
Interest under the New Credit Facility accrues, at the election of
the Company, at a LIBOR or alternate base rate, plus, in each case,
an applicable interest rate margin, which is determined by
reference to the level of excess availability under the New Credit
Facility. Loans will initially bear interest at LIBOR plus
2.000% per annum, in the case of LIBOR borrowings, or at the
alternate base rate plus 1.000% per annum, in the alternative,
and thereafter the interest rate will fluctuate between LIBOR plus
2.000% per annum and LIBOR plus 1.750% per annum (or
between the alternate base rate plus 1.000% per annum and the
alternate base rate plus 0.750% per annum), based upon the
excess availability under the New Credit Facility at such time.
The Credit Agreement contains customary negative covenants, which
limit the Company’s ability to incur additional indebtedness,
create liens, make investments, make restricted payments or
specified payments and merge or acquire assets, among other things.
In addition, if excess availability under the New Credit Facility
were to fall below certain specified levels, certain additional
covenants (including fixed charge coverage ratio requirements)
would be triggered, and the lenders will assume dominion and
control over the Loan Parties’ cash.
The Credit Agreement contains customary events of default,
including payment defaults, material breaches of representations
and warranties, covenant defaults, default on other material
indebtedness, customary ERISA events of default, bankruptcy and
insolvency, material judgments, invalidity of liens on collateral,
change of control or cessation of business. The Credit Agreement
also contains customary affirmative covenants and representations
and warranties. |
