Barnes and Noble 2015 Annual Report Download - page 10

SEPARATION OF B&N EDUCATION, INC.
On February , , Barnes & Noble announced plans
for the legal and structural separation of Barnes & Noble
Education, Inc. (Barnes & Noble Education or B&N
Education) (formerly known as NOOK Media Inc.) from
Barnes & Noble into an independent public company (the
Spin-Off).
This Spin-Off is expected to be executed by means of a
pro-rata distribution of B&N Education’s common stock
to Barnes & Noble’s existing shareholders and is expected
to be a non-taxable event for Barnes & Noble and its
shareholders.
The distribution of B&N Education’s common stock to
Barnes & Noble shareholders is conditioned on, among
other things, final approval of the Spin-Off plan by the
Barnes & Noble Board of Directors; the receipt of opinions
from external legal counsel and KPMG LLP to Barnes &
Noble, confirming the tax-free status of the Spin-Off for
U.S. federal income tax purposes; and the United States
Securities and Exchange Commission (SEC) declaring
effective the Registration Statement, which was filed on
a Registration Statement on Form S- with the SEC on
February , , which has been amended on April ,
 and June , .
HISTORY OF B&N EDUCATION, INC.
On September , , Barnes & Noble acquired Barnes
& Noble College Booksellers, LLC (B&N College) from
Leonard and Louise Riggio. From that date until October
, , B&N College was wholly owned by Barnes & Noble
Booksellers, Inc. B&N Education was initially incorpo-
rated under the name NOOK Media Inc. in July  to
hold Barnes & Noble’s B&N College and NOOK digital
businesses. On October , , Microsoft Corporation
(Microsoft) acquired a . non-controlling preferred
membership interest in B&N Education’s subsidiary B&N
Education, LLC (formerly NOOK Media LLC) (the LLC),
and through B&N Education, Barnes & Noble maintained
an . controlling interest of the B&N College and
NOOK digital businesses.
On January , , Pearson Education, Inc. (Pearson)
acquired a  non-controlling preferred membership
interest in the LLC, entered into a commercial agreement
with the LLC relating to the B&N College business and
received warrants to purchase an additional preferred
membership interest in the LLC.
On December , , B&N Education re-acquired
Microsoft’s interest in the LLC in exchange for cash and
common stock of Barnes & Noble and the Microsoft com-
mercial agreement was terminated effective as of such date.
On December , , B&N Education also re-acquired
Pearson’s interest in the LLC and certain related warrants
previously issued to Pearson. In connection with these
transactions, Barnes & Noble entered into contingent pay-
ment agreements with Microsoft and Pearson providing for
additional payments upon the occurrence of certain events,
including upon a sale of the NOOK digital business. As a
result of these transactions, Barnes & Noble owns, and will
own prior to the Spin-Off,  of B&N Education.
On May , , B&N Education distributed to Barnes &
Noble all of the membership interests in B&N Education’s
NOOK digital business. As a result, B&N Education ceased
to own any interest in the NOOK digital business, which
will remain a wholly owned subsidiary of Barnes & Noble.
The Company expects that the completion of the potential
separation of the Company’s businesses could occur by the
end of August , although there can be no assurances
regarding the timing of such potential separation or that
such separation will be completed.
In connection with the closing of the acquisition of B&N
College, the Company issued the sellers (i) a senior
subordinated note in the principal amount of . mil-
lion, with interest of  per annum payable on the unpaid
principal amount, which was paid on December , 
in accordance with its scheduled date, and (ii) a junior
subordinated note (the Junior Seller Note) in the princi-
pal amount of . million, payable in full on the fifth
anniversary of the closing of the acquisition, with interest
of  per annum payable on the unpaid principal amount.
Pursuant to a settlement agreed to on June , , the
sellers have agreed to waive their right to receive .
million in principal amount (and interest on such princi-
pal amount) of the Junior Seller Note. The net short-term
payable of . million was paid in September , in
accordance with its terms.
SAMSUNG COMMERCIAL AGREEMENT
On June , , NOOK Digital, LLC (NOOK Digital)
(formerly barnesandnoble.com llc), a wholly owned sub-
sidiary of B&N Education as of such date and a subsidiary
of Barnes & Noble, entered into a commercial agreement
(Agreement) with Samsung Electronics America, Inc.
(Samsung) relating to tablets.
8 Barnes & Noble, Inc. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued