Barnes and Noble 2015 Annual Report Download - page 27

devices from Samsung within  months after the launch
of the initial co-branded device, which launch occurred on
August , . The -month period was automatically
extended by three months due to the quantity of sales of
such co-branded devices through December , , and
the period was further extended until June ,  by an
amendment executed by the parties on March , .
NOOK Digital and Samsung have agreed to coordinate
customer service for the co-branded NOOK® devices and
have both agreed to a license of intellectual property to
promote and market the devices. Additionally, Samsung
has agreed to fund a marketing fund for the co-branded
NOOK® devices at the initial launch and for the duration of
the Agreement.
The Agreement has a two year term, with certain termina-
tion rights, including termination (i) by NOOK Digital for
a Samsung material default; (ii) by Samsung for a NOOK
Digital material default; (iii) by NOOK Digital if Samsung
fails to meet its shipping and delivery obligations in any
material respect on a timely basis; and (iv) by either party
upon insolvency or bankruptcy of the other party.
The companies introduced the Samsung Galaxy Tab® 
NOOK® in a -inch version in the U.S. in August  and
a -inch version in October . The co-branded device
combines the popular Samsung Galaxy Tab®  hardware
with customized NOOK® software to give customers power-
ful, full-featured tablets that are designed for reading, with
easy access to Barnes & Noble’s expansive digital collection
of approximately four million eBooks, digital magazines
and newspapers.
On August , , the Company entered into an invest-
ment agreement between the Company and Liberty GIC,
Inc. (Liberty) pursuant to which the Company issued and
sold to Liberty, and Liberty purchased, , shares of
the Company’s Series J Preferred Stock, par value .
per share (Preferred Stock), for an aggregate purchase
price of . million in a private placement exempt
from the registration requirements of the  Act. The
shares of Preferred Stock will be convertible, at the option
of the holders, into shares of Common Stock representing
. of the Common Stock outstanding as of August ,
 (after giving pro forma effect to the issuance of the
Preferred Stock) based on the initial conversion rate. The
initial conversion rate reflects an initial conversion price
of . and is subject to adjustment in certain circum-
stances. The initial dividend rate for the Preferred Stock is
equal to . per annum of the initial liquidation prefer-
ence of the Preferred Stock to be paid quarterly and subject
to adjustment in certain circumstances.
On April , , Liberty sold the majority of its shares
to qualified institutional buyers in reliance on Rule A
under the Securities Act and initially retained an approxi-
mate  percent stake of its initial investment. As a result,
Liberty no longer has the right to elect two preferred stock
directors to the Company’s Board. Additionally, the consent
rights and pre-emptive rights to which Liberty was previ-
ously entitled ceased to apply.
On June , , the Company entered into Conversion
Agreements with five existing beneficial owners (Series J
Holders) of its Preferred Stock, pursuant to which each of
the Series J Holders has agreed to convert (Conversion)
shares of Preferred Stock it beneficially owns into shares
of the Company’s common stock, par value . per
share (Company Common Stock), and will in addition
receive a cash payment from the Company in connection
with the Conversion. The Series J Holders have agreed
to convert an aggregate of , shares of Preferred
Stock into ,, shares of Company Common Stock
in the Conversion, and the Company has agreed to make
an aggregate cash payment to the Series J Holders of .
million plus cash in lieu of fractional shares in connection
with the Conversion, in each case, subject to adjustment
under certain circumstances. The Company expects to issue
the shares of Company Common Stock to be issued in the
Conversion on or about July , .
The number of shares of Company Common Stock to be
issued was determined based on a conversion ratio of
. shares of Company Common Stock per share of
Preferred Stock converted, which is the conversion rate
in the Certificate of the Designations with respect to the
Preferred Stock dated as of August , .
On September , , 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 . million, with interest of  per annum
payable on the unpaid principal amount, which was paid
on December ,  in accordance to its scheduled date,
and (ii) a junior subordinated note (the Junior Seller Note)
in the principal 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 waived their right to receive .
million in principal amount (and interest on such princi-
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