On
September 30, 2009, Barnes & Noble, Inc. (the “Company”)
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,
under
which the lenders committed to provide up to $1 billion in
commitments under
a four-year asset-backed revolving credit facility (the “Credit
Facility”). Banc
of America Securities
LLC, J.P. Morgan Securities Inc. and Wells Fargo Retail
Finance, LLC are the joint lead arrangers for the Credit
Facility.
The
Company and certain
of its subsidiaries will be permitted to borrow under the Credit
Facility. The
Credit Facility will be secured by substantially all of
the inventory,
accounts receivable, securities,
cash and cash equivalents and
certain other collateral of the borrowers
and guarantors under the Credit Facility (collectively, the “Loan
Parties”), but
excluding the equity interests in the Company and its subsidiaries, intellectual
property,
equipment and
certain other property. The
borrowers
have
the option to grant a security
interest in their material real property in
the future.
The
commitments by the lenders under the Credit Facility are subject to borrowing
base restrictions. Up
to $100 million of the Credit Facility may be used for the
issuance
of letters of credit
and up to $75 million of the Credit Facility may be used for the making of swing
line loans. In
addition, the
Company has the option to request the increase in commitments under the Credit
Agreement by up to $300 million subject to certain restrictions.
Interest
under the Credit Facility will accrue, at the election of the Company, at Base
Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined
by reference to the level of Availability as defined in the Credit Agreement
with the Applicable Margin for LIBO Rate loans ranging from 3.50% to 4.00% and
the Applicable Margin for Base Rate loans ranging from 2.50% to
3.00%. In addition, commitment fees ranging from 0.50% to 1.00%
(determined by reference to the level of usage under the Credit Facility) are
also payable on unused commitments. Letter of Credit fees are payable
on the maximum daily
amount
to be drawn under a letter of credit at a rate equal to the Applicable Margin
for LIBO Rate Loans ranging from 3.50% to 4.00%.
The
Credit
Agreement limits 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, certain additional covenants (including
fixed charge coverage ratio requirements)
would be
triggered if Availability
were to fall below
certain specified levels.
The lenders will assume dominion and control over
the Loan Parties’ cash
if Availability
falls below (a) the greater of (i) 20% of the
Loan Cap (as
defined in the Credit Agreement) or
(ii) $135
million for five consecutive calendar days or (b) 17% of the Loan Cap at any
time or if
an
event of default occurs (a “Trigger
Event”),
subject to certain exceptions with respect to Barnes & Noble
College Booksellers, Inc. and its subsidiaries.
A
Trigger
Event will terminate when Availability
exceeds the greater of 20% of the Loan Cap or $135 million for a period of 45
consecutive
calendar days or if
such
event of default is waived, provided that
a Trigger Event shall be deemed
continuing (even if Availability
exceeds the required amount for 45 consecutive calendar days) after a Trigger
Event has occurred and been discontinued on three occasions during the term of
the Credit Facility.
The
Credit
Agreement contains customary events of default, including, without limitation,
payment defaults, breaches of representations and warranties, covenant defaults,
cross-defaults to similar obligations, customary ERISA defaults, certain events
of bankruptcy and
insolvency, judgment defaults, the invalidity of liens on collateral, change of
control, cessation of business or the liquidation of material assets of the Loan
Parties taken as a whole,
the occurrence of an uninsured loss to a material portion of collateral and
failure of the obligations under the Credit Facility to constitute senior
indebtedness under any subordinated indebtedness.
The
Company will pay certain customary fees and expenses in connection with
obtaining the lenders’ commitments
pursuant to
the terms of a related fee letter.
The
foregoing description of the Credit Facility does not purport to be complete and
is qualified in its entirety by reference to the Credit Agreement, a copy of
which is attached as Exhibit 10.1 to this Current Report
on Form 8-K and incorporated herein by reference.
Seller
Notes
On
September 30,
2009, in connection with the closing of the Acquisition described under
Item 2.01 below, the Company issued to Leonard and Louise Riggio
(i)
a senior subordinated note in the
principal amount of $100 million, payable in full on December 15, 2010, with
interest of 8% per
annum payable
on the
unpaid principal amount (the “Senior
Seller Note”),
and (ii) a junior subordinated note in the principal amount of $150 million,
payable
in full on the fifth anniversary of the closing of the Acquisition, with
interest of 10% per
annum payable
on the unpaid principal amount (the “Junior
Seller Note”;
and together with the Senior Seller Note, the “Seller
Notes”). Mr.
Riggio is the Chairman
of the Company’s
Board of Directors and
the beneficial
owner of approximately 30.8%
of the Company’s
outstanding common stock.
The
Seller Notes are unsecured
and subordinated to the obligations under the Credit Facility described
above and
certain other
senior obligations. The Company may prepay the Seller Notes at any
time without premium or penalty to the extent not prohibited by the senior debt
documents, provided that the Company may not prepay the Junior Seller Note until
the Senior Seller Note has
been repaid in full. In the event of a change in control (as defined
in the Seller Notes) of the Company, the Sellers will have the right to require
the Company to repurchase the Seller Notes for cash at 100% of the principal
amounts thereof plus accrued
interest. The Seller Notes contain certain covenants with respect to
the incurrence of indebtedness, liens, and merger and consolidation
transactions. Events
of default in the Seller Notes include payment defaults, covenant defaults,
cross-defaults to senior
obligations and certain events of bankruptcy and insolvency. The
foregoing description of the Seller Notes does not purport to be complete and is
qualified in its entirety by reference to the Seller Notes, copies
of which
are attached as
Exhibits 10.2
and 10.3, respectively, to this Current Report on Form 8-K and incorporated
herein by reference.
Item
1.02 Termination
of a Material Definitive Agreement
In
connection with the entry into the Credit Facility described under Item 1.01,
the Company repaid all amounts outstanding under its prior credit facility with
Bank of America, N.A. as administrative agent, and the other lenders party
thereto, and terminated such credit facility effective as of September 30,
2009.
Item
2.01 Completion
of Acquisition or Disposition of Assets
On
September 30, 2009, the Company completed the previously announced acquisition
(the “Acquisition”) of Barnes & Noble College Booksellers, Inc. (“B&N
College”) from Leonard Riggio and Louise Riggio (the “Sellers”) pursuant a Stock
Purchase Agreement dated as of August 7, 2009 among the Company and
the Sellers (the “Purchase Agreement”). Mr. Riggio is the Chairman of the
Company’s Board of Directors and the
beneficial owner of
approximately 30.8% of the
Company’s outstanding common
stock.
The
purchase price paid to the Sellers under the Purchase Agreement was $596
million, consisting of $346 million in cash and $250 million in aggregate
principal amount of the Seller Notes described under Item 1.01
above. However, pursuant to the terms of the Purchase Agreement, the
cash paid to the Sellers was reduced by approximately $82 million in cash
bonuses paid by B&N College to 192 members of its management team and
employees (the “Bonus Recipients”), not including Leonard Riggio.
The
consideration paid to the Sellers under the Purchase Agreement was determined by
arms’-length negotiation between the Sellers and a special committee of the
Board of Directors of the Company comprised solely of independent directors (the
“Transaction Committee”), and no specific formula or principle (as used in Item
2.01(d) of Form 8-K) was used in determining the amount of consideration paid by
the Company in the Acquisition. The Transaction Committee, with the
assistance of its independent financial advisor, considered a number of factors
in negotiating the purchase price for the Acquisition, including, without
limitation, traditional valuation methods and the fairness opinion from its
financial advisor.
The
Company financed the Acquisition through $250 million of seller financing, $150
million from the Credit Facility and the remainder from both the Company’s and
B&N College’s cash on hand.
Pursuant
to the terms of the Purchase Agreement, prior to the closing of the Acquisition,
B&N College distributed to the Sellers certain assets that are not related
to B&N College’s core business, including common stock in the
Company. In connection with such distribution, 667,058 shares of the
common stock in the Company previously held by B&N College were transferred
to certain of the Bonus Recipients.
In
connection with the Acquisition, B&N College amended and restated its
existing long-term supply agreement with MBS Textbook Exchange, Inc. (“MBS”), a
textbook wholesaler that is majority-owned by Leonard Riggio, Stephen Riggio and
other members of the Riggio family. Also in
connection with the closing of the Acquisition, on September 30, 2009,
the Company terminated its existing license agreement with Textbooks.com, Inc.,
which is wholly-owned by Leonard Riggio, and as a result will no longer pay a
royalty with respect to online textbook sales.
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Item 2.03
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Creation of a Direct Financial
Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant
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The information set forth under Item 1.01
above is incorporated into this Item 2.03 by reference.
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Item 2.04
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Triggering Events that Accelerate
or Increase a Direct
Financial Obligation
or an Obligation under an Off-Balance Sheet Arrangement
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The information set forth under Item
1.02 above with respect to the prepayment of the
Company’s prior credit facility is incorporated into this Item
2.04 by
reference.
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Item 5.03
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Amendments to Articles of Incorporation or
Bylaws; Change in Fiscal
Year
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On
September 29, 2009, subject to and effective upon the closing of the
Acquisition, the Board of Directors of the Company authorized a change in the
Company’s fiscal year end from the Saturday closest to the last day of January
to the Saturday closest to the last day of April, which is the same fiscal year
end used by B&N College, to better align the Company’s fiscal year with that
of both companies’ business cycles. As a result, the Company’s 2010
fiscal year will begin on May 3, 2009 and end on
May 1, 2010. The Company expects to file a transition
report for the three-month transition period of February 1, 2009 through
May 2, 2009 on Form 10-QT.
In
connection with the change in the Company’s fiscal year end, also on September
29, 2009, the Board of Directors approved an amendment (the “Amendment”) to the
Company’s Amended and Restated By-laws in order to reflect the fact that the
Company’s annual meeting of shareholders for 2010 will occur at a later date as
a result of the change in fiscal year end. In light of the work
required to prepare for the annual meeting, including the preparation of a proxy
statement (which can only be completed after the preparation of audited
financials), the Company will not be able to hold the annual meeting of
shareholders for 2010 within thirteen months after the last annual meeting, as
required by the Amended and Restated By-laws (prior to the
Amendment). As amended, the Amended and Restated By-laws provide an
exception to this requirement with respect to the 2010 annual meeting of
shareholders only. The Company expects to hold the 2010 annual
meeting of shareholders no later than September 30, 2010. The
foregoing description of
the
Amendment does not purport to be complete and is qualified in its entirety by
the Amendment, a copy of which is attached as Exhibit 3.1 to this Current
Report on Form 8-K and incorporated herein by reference.
Item
8.01 Other Events
On September 30, 2009, the Company
issued a press release
announcing the entry into
the Credit Facility, the completion of the Acquisition and the change
in the Company’s fiscal
year end. A copy
of the press release is attached hereto as Exhibit 99.1.
Item
9.01. Financial
Statements and Exhibits
(a) Financial
statements of business acquired
The
financial statements required by Item 9.01(a) of Form 8-K will be filed by
amendment within 71 calendar days after the date by which this Current Report is
required to be filed.
(b) Pro
forma financial information
The pro
forma financial information required by Item 9.01(b) of Form 8-K will be filed
by amendment within 71 calendar days after the date by which this Current Report
is required to be filed.
(d) Exhibits
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3.1
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Amendment
to Amended and Restated By-laws
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10.1
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Credit
Agreement dated September
30, 2009
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10.2
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Senior
Subordinated Seller Note dated September 30,
2009
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10.3
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Junior
Subordinated Seller Note dated September 30,
2009
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99.1
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Press
Release dated September 30, 2009
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Forward-Looking Statements --
This Form 8-K may contain “forward-looking statements.” Barnes
& Noble is including this statement for the express purpose of availing
itself of the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. These forward-looking statements are based on currently available
information and represent the beliefs of the management of the company.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially. These risks include, but are not limited to,
general economic and market conditions, decreased consumer demand for the
company’s products, possible disruptions in the company’s computer or telephone
systems, possible risks associated with data privacy and information security,
possible work stoppages or increases in labor costs, possible increases in
shipping rates or interruptions in shipping service, effects of competition,
possible disruptions or delays in the opening of new stores or the inability to
obtain suitable sites for new stores, higher than anticipated store closing or
relocation costs,
higher interest rates, the performance of the company’s online and
other initiatives, the performance and successful integration of acquired
businesses, the success of the company’s strategic investments, unanticipated
increases in merchandise or occupancy costs, unanticipated adverse litigation
results or effects, the results or effects of any governmental review of the
company’s stock option practices, product shortages, and other factors which may
be outside of the company’s control. Please refer to the company’s
annual, quarterly and periodic reports on file with the SEC for a more detailed
discussion of these and other risks that could cause results to differ
materially.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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BARNES
& NOBLE, INC.
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October
1, 2009
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By:
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/s/ Joseph J. Lombardi
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Joseph
J. Lombardi
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Chief
Financial Officer
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