Barnes and Noble 2010 Annual Report Download - page 62

senior Seller Note has been repaid in full. On December 22,
2009, the Company consented to the pledge and assign-
ment of the Senior Seller Note by the Sellers as collateral
security.
Also in connection with the Acquisition, and as set forth in
the Purchase Agreement, B&N College made a tax distri-
bution payment of $54,997 to the Sellers related to taxes
imposed on the Sellers’ pro rata share of B&N College S
corporation taxable earnings from January 1, 2009 through
the date of Acquisition.
The Company pays COBRA benefits for certain former
employees and family members that were on the B&N
College health benefit plan (prior to the Acquisition).
Leonard Riggio has reimbursed the Company $140 to cover
such costs, based upon standard COBRA rates, for the
period subsequent to Acquisition through fiscal 2010.
In connection with the Acquisition, B&N College and the
Company amended and restated B&N College’s existing
long-term supply agreement (Supply Agreement) with
MBS Textbook Exchange, Inc. (MBS), which is majority
owned by Leonard Riggio, Stephen Riggio (the Company’s
Vice Chairman and former Chief Executive Officer) and
other members of the Riggio family. MBS is a new and used
textbook wholesaler, which also sells textbooks online and
provides bookstore systems and distant learning distribu-
tion services. Pursuant to the Supply Agreement, which has
a term of ten years, and subject to availability and com-
petitive terms and conditions, B&N College will continue
to purchase new and used printed textbooks for a given
academic term from MBS prior to buying them from other
suppliers, other than in connection with student buy-back
programs. MBS pays B&N College commissions based on
the volume of textbooks sold to MBS each year and with
respect to the textbook requirements of certain distance
learning programs that MBS fulfills on B&N College’s
behalf. MBS paid B&N College $7,014 related to these
commissions in fiscal 2010 from the date of Acquisition.
In addition, the Supply Agreement contains restrictive
covenants that limit the ability of B&N College and the
Company to become a used textbook wholesaler and that
place certain limitations on MBS’s business activities.
The Company purchases new and used textbooks at market
prices directly from MBS. Total purchases were $24,186,
$1,799, $8,250 and $7,539 for fiscal 2010, the transition
period, fiscal 2008 and 2007, respectively. Prior to fiscal
2010, MBS distributed certain proprietary products on
behalf of the Company. Net sales received by the Company
after deducting MBS fees were $9, $340 and $419 for the
transition period, fiscal 2008 and 2007, respectively. Fees
paid to MBS were $2, $50 and $65 during the transition
period, fiscal 2008 and 2007, respectively. MBS sells used
books through the Barnes & Noble.com dealer network.
MBS pays Barnes & Noble.com the same commission as
other dealers in the Barnes & Noble dealer network. Barnes
& Noble.com earned a commission of $3,115, $915, $1,410
and $1,598 on the MBS used book sales in fiscal 2010,
the transition period, fiscal 2008 and 2007, respectively.
In addition, Barnes & Noble.com maintains a link on its
website which is hosted by MBS and through which Barnes
& Noble.com customers are able to sell used books directly
to MBS. Barnes & Noble.com is paid a fixed commission on
the price paid by MBS to the customer. Total commissions
paid to Barnes & Noble.com were $172, $29, $130 and $81
for fiscal 2010, the transition period, fiscal 2008 and 2007,
respectively.
In fiscal 2010, the Company’s wholly owned subsidiary
Barnes & Noble Bookquest LLC (Bookquest) entered into
an agreement with TXTB.com LLC (TXTB), a subsidiary of
MBS, pursuant to which the Bookquest marketplace data-
base of third party sellers on the Barnes & Noble.com web-
site was made available on the TXTB website. Bookquest
receives a fee from third party sellers for sales of Bookquest
marketplace items and, upon receipt of such fee, Bookquest
remits a separate fee to TXTB for any marketplace items
sold on the TXTB website. Outstanding amounts payable to
TXTB were $33 for fiscal 2010.
Prior to the Acquisition, the Company licensed the “Barnes
& Noble” name under a royalty-free license agreement
dated February 11, 1987, as amended, from B&N College
(the General License Agreement). Barnes & Noble.com
licensed the “Barnes & Noble” name under a royalty-free
license agreement, dated October 31, 1998, as amended,
between Barnes & Noble.com and B&N College (the License
Agreement). Pursuant to the License Agreement, Barnes
& Noble.com had been granted an exclusive license to use
the “Barnes & Noble” name and trademark in perpetuity
for the purpose of selling books over the Internet (exclud-
ing sales of college textbooks). Under a separate agree-
ment dated as of January 31, 2001 (the Textbook License
Agreement), between Barnes & Noble.com, B&N College
and Textbooks.com, Barnes & Noble.com was granted the
right to sell college textbooks over the Internet using the
“Barnes & Noble” name. Pursuant to the Textbook License
Agreement, Barnes & Noble.com paid Textbooks.com a
royalty on revenues (net of product returns, applicable
sales tax and excluding shipping and handling) realized by
60 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued