SECURITIES AND EXCHANGE COMMISSION
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended May 1, 2004
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-12302
BARNES & NOBLE, INC.
Delaware
06-1196501
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
122 Fifth Avenue, New York, NY
10011
(Address of Principal Executive Offices)
(Zip Code)
(212) 633-3300
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
Number of shares of $.001 par value common stock outstanding as of May 31, 2004: 68,949,566.
BARNES & NOBLE, INC. AND SUBSIDIARIES
May 1, 2004
Index to Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
BARNES & NOBLE, INC. AND SUBSIDIARIES
See accompanying notes to
consolidated financial statements.
3
BARNES & NOBLE, INC. AND SUBSIDIARIES
(Continued)
4
BARNES & NOBLE, INC. AND SUBSIDIARIES
See accompanying notes to consolidated financial statements.
5
BARNES & NOBLE, INC. AND SUBSIDIARIES
See accompanying notes to consolidated financial statements.
6
BARNES & NOBLE, INC. AND SUBSIDIARIES
See accompanying notes to consolidated financial statements.
7
BARNES & NOBLE, INC. AND SUBSIDIARIES
The unaudited consolidated financial statements include the accounts of Barnes
& Noble, Inc. and its subsidiaries (collectively, the Company).
In the opinion of the Company’s management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly its consolidated
financial position as of May 1, 2004 and the results of its operations and its
cash flows for the 13 weeks then ended. These consolidated financial
statements are condensed and therefore do not include all of the information
and footnotes required by generally accepted accounting principles. The
consolidated financial statements should be read in conjunction with the
Company’s Annual Report on Form 10-K for the 52 weeks ended January 31, 2004
(fiscal 2003). The Company follows the same accounting policies in preparation
of interim reports.
Due to the seasonal nature of the business, the results of operations for the
13 weeks ended May 1, 2004 are not indicative of the results to be expected for
the 52 weeks ending January 29, 2005 (fiscal 2004).
(1) Barnes & Noble.com Acquisition
On September 15, 2003, the Company completed its acquisition of all of
Bertelsmann AG’s (Bertelsmann) interest in barnesandnoble.com inc. (bn.com) and
barnesandnoble.com llc (Barnes & Noble.com). The purchase price paid by the
Company was $165,406 (including acquisition related costs) in a combination of
cash and a note, equivalent to $2.80 per share in bn.com or membership unit in
Barnes & Noble.com. The note issued to Bertelsmann in the amount of $82,000 was
paid in the fourth quarter of fiscal 2003. As a result of the acquisition, the
Company increased its economic interest in Barnes & Noble.com to approximately
75 percent. The acquisition was accounted for by the purchase method of
accounting and, accordingly, the results of operations for the period
subsequent to the acquisition are included in the consolidated financial
statements.
Based upon a preliminary assessment of the fair values, the allocation of
the purchase price to the proportionate amount of assets acquired and
liabilities assumed was as follows:
8
BARNES & NOBLE, INC. AND SUBSIDIARIES
Hardware and software have been assigned a preliminary estimated useful
life of four years. The customer list and relationships intangible asset has
been assigned a preliminary estimated useful life of four years to be
amortized on an accelerated basis based on estimated usage where a
substantial portion of the asset will be amortized in the first year. The above
preliminary purchase price allocation is subject to revision as more detailed
analysis is completed and additional information on the fair value of assets
and liabilities of Barnes & Noble.com becomes available. The final allocation
to goodwill and the trade name (which is considered to have an indefinite life
and will not be amortized) will be tested at least annually for impairment in
accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
“Goodwill and Other Intangible Assets”.
The following table summarizes pro forma results for the 13 weeks ended
May 3, 2003, as if the Company had acquired Bertelsmann’s interest in Barnes &
Noble.com (resulting in a 75 percent economic interest) and recorded the above
noted preliminary allocations of purchase price on the first day of fiscal
2003:
The information has been prepared for comparative purposes only and does
not purport to be indicative of the results of operations which actually would
have occurred had the acquisition taken place on the date indicated, or which
may result in the future. The Company’s management reviews these pro forma
results internally to evaluate the Company’s performance and manage its
operations. In addition, since the Company will consolidate bn.com on a going
forward basis, the Company believes that pro forma results (as if the Company
consolidated bn.com) provide investors a better understanding of the Company’s
current operating results and provide a comparable measure to help investors
understand the Company’s future operating results.
On May 27, 2004, subsequent to the first quarter of fiscal 2004, the
Company completed its previously announced merger (the Merger) of bn.com with a
wholly owned subsidiary of the Company. Under the terms of the Merger, the
holders of bn.com’s outstanding common stock, other than the Company and its
subsidiaries, received $3.05 in cash for each share that they owned. The Merger
was approved by the shareholders of bn.com at a special meeting held on May 27,
2004. The allocation of the purchase price to the proportional amount
of assets acquired and liabilities assumed is expected to be completed during
the second quarter of fiscal 2004. As a result of the Merger, bn.com became a
privately held company, wholly owned by the Company.
9
BARNES & NOBLE, INC. AND SUBSIDIARIES
(2) Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market. Cost
is determined using the retail inventory method on the first-in, first-out
(FIFO) basis for 80 percent, 83 percent and 77 percent of the Company’s
merchandise inventories as of May 1, 2004, May 3, 2003 and January 31, 2004,
respectively. Merchandise inventories of GameStop Corp. (GameStop) stores,
Barnes & Noble.com and Calendar Club L.L.C. (Calendar Club) represent 16
percent, 11 percent and 19 percent of merchandise inventories as of May 1,
2004, May 3, 2003 and January 31, 2004, respectively and are recorded based on
the average cost method. The remaining merchandise inventories are valued on
the last-in, first-out (LIFO) method.
If substantially all of the merchandise inventories currently valued at
LIFO costs were valued at current costs, merchandise inventories would remain
unchanged as of May 1, 2004, May 3, 2003 and January 31, 2004.
(3) Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation.
(4) Income Taxes
The tax provisions for the 13 weeks ended May 1, 2004 and May 3, 2003 are
based upon management’s estimate of the Company’s annualized effective tax
rate.
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BARNES & NOBLE, INC. AND SUBSIDIARIES
(5) Stock Options
The Company grants options to purchase Barnes & Noble, Inc. (BKS),
GameStop Corp. (GME) and barnesandnoble.com inc. (BNBN) common shares under
stock-based incentive plans. The Company accounts for all transactions under
which employees receive such options based on the price of the underlying stock
in accordance with the provisions of Accounting Principles Board Opinion No.
25, “Accounting for Stock Issued to Employees”. The following table
illustrates the effect on net income (loss) and income (loss) per share as if
the Company had applied the fair value-recognition provisions of SFAS No. 123,
“Accounting for Stock-Based Compensation”, as amended by SFAS No. 148,
“Accounting for Stock-Based Compensation - Transition and Disclosure”, to
stock-based incentive plans:
(a) Subsequent to the Company acquiring a controlling interest in Barnes &
Noble.com (see footnote 1).
11
BARNES & NOBLE, INC. AND SUBSIDIARIES
(6) Comprehensive Income (Loss)
Comprehensive income (loss) is net income (loss), plus certain other items
that are recorded directly to shareholders’ equity, as follows:
(7) Net Income (Loss) Per Share
Following is a reconciliation of net income (loss) and weighted average
common shares outstanding for purposes of calculating basic and diluted
earnings per share:
12
BARNES & NOBLE, INC. AND SUBSIDIARIES
(8) Segment Information
The Company operates under two strategic groups that offer different
products. These groups have been aggregated into two reportable operating
segments: book operating segment and video game operating segment.
Book Operating Segment
This segment includes bookstores primarily under the Barnes & Noble
Booksellers and B. Dalton Bookseller trade names. The 653 Barnes & Noble
stores generally offer a comprehensive title base, a café, a children’s
section, a music department, a magazine section and a calendar of ongoing
events, including author appearances and children’s activities. The 188 B.
Dalton stores are typically small format mall-based stores. In addition, this
segment includes Barnes & Noble.com (an online retailer of books, music and
DVDs/videos), the Company’s publishing operation (which includes Sterling
Publishing) and Calendar Club (a majority-owned subsidiary of the Company that
operates seasonal kiosks and seasonal stores). The book operating segment
employs a merchandising strategy that targets the mainstream consumer book
market.
Video Game Operating Segment
This segment includes 1,603 video game and PC-entertainment stores
primarily under the GameStop trade name, a Web site (www.gamestop.com) and
Game
Informer
magazine. The principal products of these stores are comprised of
video-game hardware and software and PC-entertainment software.
The accounting policies of the segments are the same as those for the
Company as a whole. Segment operating profit includes corporate expenses in
each operating segment. The Company evaluates the performance of its segments
based on operating profit.
Segment information for the 13 weeks ended May 1, 2004 and May 3, 2003
follows:
13
BARNES & NOBLE, INC. AND SUBSIDIARIES
A reconciliation of operating profit reported by reportable segments to
consolidated income (loss) before income taxes and minority interest in the
consolidated financial statements for the 13 weeks ended May 1, 2004 and May 3,
2003 is as follows:
(9) Changes in Intangible Assets and Goodwill
The following intangible assets were acquired by the Company primarily in
connection with the purchase of Sterling Publishing in fiscal 2002 and the
purchase of Bertelsmann’s interest in Barnes & Noble.com in fiscal 2003:
Amortizable intangible assets consist primarily of author contracts which
are being amortized on a straight-line basis over a period of 10 years.
Unamortizable intangible assets consist primarily of a trade name.
14
BARNES & NOBLE, INC. AND SUBSIDIARIES
(10) Subsequent Events
On June 3, 2004, the Company announced the redemption of all of its
$300,000 outstanding 5.25 percent convertible subordinated notes due 2009 (the
Notes), effective June 28, 2004. The redemption price is equal to 103 percent
of the principal amount of the Notes, together with accrued interest to, but
excluding, the date fixed for redemption. At anytime prior to redemption, the
Notes can be converted into common stock at a conversion price of $32.512 per
share. There would have been no material effect on fully diluted
earnings per share had the redemption of the
Notes occurred at the beginning of fiscal 2004.
15
Report of Independent Certified Public Accountants
The Board of Directors
We have reviewed the condensed consolidated balance sheet of Barnes & Noble,
Inc. and Subsidiaries as of May 1, 2004 and May 3, 2003, and the related
consolidated statements of operations for the 13 week periods ended May 1, 2004
and May 3, 2003, changes in shareholders’ equity for the 13 week period ended
May 1, 2004, and cash flows for the 13 week periods ended May 1, 2004 and May
3, 2003 included in the accompanying Securities and Exchange Commission Form
10-Q for the period ended May 1, 2004. These financial statements are the
responsibility of the Company’s management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with accounting principles generally
accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Barnes & Noble, Inc. and Subsidiaries as of January 31, 2004, and the related
consolidated statements of operations, changes in shareholders’ equity, and
cash flows for the year then ended included in the Company’s Form 10-K for the
fiscal year ended January 31, 2004; and in our report dated March 17, 2004, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of January 31, 2004 is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
May 18, 2004
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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies
Securities and Exchange Commission Financial Reporting Release No. 60 requests
all companies to include a discussion of critical accounting policies or
methods used in the preparation of financial statements. Barnes & Noble, Inc.
and its subsidiaries (collectively, the Company) do not believe there is a
great likelihood that materially different amounts would be reported related to
the accounting policies described below. However, application of these
accounting policies involves the exercise of judgment and use of assumptions as
to future uncertainties and, as a result, actual results could differ from
these estimates.
Other Long-Lived Assets.
The Company’s other long-lived assets include property
and equipment and amortizable intangibles. At May 1, 2004, the Company had
$685.4 million of property and equipment, net of accumulated depreciation, and
$18.7 million of amortizable intangible assets, net of amortization, accounting
for approximately 21.0% of the Company’s total assets. The Company reviews its
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable in
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets”.
Recoverability of assets held and used are measured by a comparison of the
carrying amount of an asset to undiscounted pre-tax future net cash flows.
Future events could cause the Company to conclude that impairment indicators
exist and that long-lived assets may be impaired. Any resulting impairment loss
could have a material adverse impact on the Company’s financial condition and
results of operations.
Goodwill and Unamortizable Intangible Assets.
At May 1, 2004, the Company
had $509.2 million of goodwill and $74.4 million of unamortizable intangible
assets (i.e. those with an indefinite useful life), accounting for
approximately 17.4% of the Company’s total assets. SFAS No. 142, “Goodwill and
Other Intangible Assets”, requires that goodwill and other unamortizable
intangible assets no longer be amortized, but instead be tested for impairment
at least annually or earlier if there are impairment indicators. The Company
performs a two-step process for impairment testing of goodwill as required by
SFAS No. 142. The first step of this test, used to identify potential
impairment, compares the fair value of a reporting unit with its carrying
amount. The second step (if necessary) measures the amount of the impairment.
The Company completed its annual impairment test on the goodwill in November
2003 and deemed that no impairment charge was necessary. The Company has noted
no subsequent indicators of impairment. The Company tests unamortizable
intangible assets by comparing the fair value and the carrying value of such
assets. Changes in market conditions, among other factors, could have a
material impact on these estimates.
Closed Store Expenses.
When the Company closes or relocates a store, the
Company charges unrecoverable costs to expense. Such costs include the net book
value of abandoned fixtures and leasehold improvements and, when a store is
closed, a provision for future lease obligations, net of expected sublease
recoveries. Costs associated with store closings of $0.7 million and $1.0
million during the first quarter of fiscal 2004 and fiscal 2003, respectively,
are included in selling and administrative expenses in the accompanying
consolidated statements of operations.
17
Subsequent Events
On May 27, 2004, the Company announced the completion of the previously
announced merger (the Merger) of barnesandnoble.com inc. (bn.com) with a wholly
owned subsidiary of the Company. Under the terms of the Merger, the holders of
bn.com’s outstanding common stock, other than the Company and its subsidiaries,
received $3.05 in cash for each share that they owned. The Merger was approved
by the shareholders of bn.com at a special meeting held on May 27, 2004. As a
result of the Merger, bn.com became a privately held company, wholly owned by
the Company.
On June 3, 2004, the Company announced the redemption of all of its $300.0
million outstanding 5.25% convertible subordinated notes due 2009 (the Notes),
effective June 28, 2004. The redemption price is equal to 103% of the principal
amount of the Notes, together with accrued interest to, but excluding, the date
fixed for redemption. At anytime prior to redemption, the Notes can be
converted into common stock at a conversion price of $32.512 per share.
Liquidity and Capital Resources
The primary sources of the Company’s cash are net cash flows from operating
activities, funds available under its senior credit facility and short-term
vendor financing.
The Company’s cash and cash equivalents were $354.2 million as of May 1, 2004,
compared with $196.0 million as of May 3, 2003.
Merchandise inventories increased $107.4 million, or 7.6%, to $1,525.8 million
as of May 1, 2004, compared with $1,418.4 million as of May 3, 2003. The
increase was attributable to a $69.1 million increase in the book operating
segment inventory and a $38.4 million increase in GameStop Corp. (GameStop or
video game operating segment) inventory. The increase in the book operating
segment inventory includes $45.0 million due to the inclusion of
barnesandnoble.com llc (Barnes & Noble.com) and supported the opening of 36
Barnes & Noble stores over the last twelve months. The increase in video game
operating segment inventory supported the opening of 317 GameStop stores over
the last twelve months.
The Company’s investing activities consist principally of capital expenditures
for new store construction, system enhancements and store relocations/remodels.
Capital expenditures totaled $45.4 million and $23.5 million during the 13
weeks ended May 1, 2004 and May 3, 2003, respectively.
In the second quarter of fiscal 2003, the Company exercised its option to
extend its $500.0 million senior credit facility (Credit Facility) (which was
to expire in May 2005) for one additional year, through May 2006.
On June 3, 2004, the Company announced the redemption of all of the Notes.
Cash flow from operations and borrowings under the Company’s Credit Facility
will be available to fund the redemption.
Total debt decreased 16.0% to $300.0 million as of May 1, 2004 from $357.0
million as of May 3, 2003. Average combined borrowings under the Company’s
senior credit facility and subordinated notes were $300.0 million and $319.7
million during the 13 weeks ended May 1, 2004 and May 3, 2003, respectively,
and peaked at $300.0 million and $416.4 million during the same periods. The
ratio of debt to equity decreased to 0.23:1.00 as of May 1, 2004, compared with
0.35:1.00 as of May 3, 2003.
18
Based upon the Company’s current operating levels, management believes net cash
flows from operating activities, the capacity under its Credit
Facility and its ability to issue additional debt (if required) will
be sufficient to meet the Company’s normal working capital and debt service
requirements, including the redemption of the Notes, for at least the next
twelve months.
The Company did not declare or pay any cash dividends during the 13-week
periods ended May 1, 2004 and May 3, 2003.
Seasonality
The Company’s business, like that of many retailers, is seasonal, with the
major portion of sales and operating profit realized during the quarter which
includes the Holiday selling season.
Results of Operations
13 weeks ended May 1, 2004 compared with the 13 weeks ended May 3, 2003
Sales
During the 13 weeks ended May 1, 2004, the Company’s sales increased $267.2
million, or 22.5%, to $1,452.8 million from $1,185.6 million during the 13
weeks ended May 3, 2003. This increase was attributable to a $217.2 million
increase in book operating segment sales and an increase of $50.0 million from
the video game operating segment sales.
The increase in book operating segment sales was primarily attributable to a
$106.7 million increase in Barnes & Noble store sales and the inclusion of
$114.9 million in sales due to the consolidation of Barnes & Noble.com
resulting from the Company’s acquisition of a controlling interest in Barnes &
Noble.com on September 15, 2003. During the first quarter, Barnes & Noble
store sales increased 13.3% to $910.2 million from $803.5 million during the
same period a year ago and accounted for 62.7% of total Company sales or 84.2%
of total book sales. The 13.3% increase in Barnes & Noble store sales was
attributable to an increase in comparable store sales of 9.4%, coupled with the
opening of 36 new stores since May 3, 2003, which contributed to a 4.6%
increase in square footage.
During the 13 weeks ended May 1, 2004, B. Dalton sales declined 13.3% and
represented 2.7% of total Company sales. The decrease was primarily a result of
57 store closings and a 19.7% reduction in its square footage since May 3,
2003, partially offset by an increase in comparable store sales of 6.0%.
GameStop sales during the first quarter increased 15.5%. This increase in sales
was primarily attributable to the 317 new GameStop stores opened since May 3,
2003, partially offset by a comparable store sales decline of 1.8% during the
first quarter of fiscal 2004.
During the 13 weeks ended May 1, 2004, the Company opened nine Barnes & Noble
stores and closed three, bringing its total number of Barnes & Noble stores to
653 with 16.0 million square feet. The Company closed seven B. Dalton stores,
ending the period with 188 B. Dalton stores and 0.8 million square feet. The
Company opened 103 GameStop stores and closed 14, bringing its total to 1,603
stores with 2.5 million square feet. As of May 1, 2004, the Company operated
2,444 stores in the fifty states, the District of Columbia, Puerto Rico, Guam
and Ireland.
19
Cost of Sales and Occupancy
During the 13 weeks ended May 1, 2004, cost of sales and occupancy increased
$183.0 million, or 20.7%, to $1,068.0 million from $885.0 million during the 13
weeks ended May 3, 2003, partially due to the inclusion of Barnes & Noble.com’s
cost of sales and occupancy. As a percentage of sales, cost of sales and
occupancy decreased to 73.5% from 74.6% during the same period one year ago.
This decrease was primarily attributable to increased sales volume leveraging
fixed occupancy costs in the Barnes & Noble stores.
Selling and Administrative Expenses
Selling and administrative expenses increased $58.6 million to $309.3 million
during the 13 weeks ended May 1, 2004, from $250.7 million during the 13 weeks
ended May 3, 2003, partially due to the inclusion of Barnes & Noble.com’s
selling and administrative expenses. During the first quarter, selling and
administrative expenses increased as a percentage of sales to 21.3% from 21.1%
during the prior year period. This increase was primarily due to the
de-leveraging of expenses in the video game operating segment and the inclusion
of Barnes & Noble.com’s selling and administrative expenses, partially offset
by increased sales volume leveraging the selling and administrative expenses in
the Barnes & Noble stores.
Depreciation and Amortization
During the first quarter, depreciation and amortization increased $5.7 million,
or 14.5%, to $44.7 million from $39.0 million during the same period last year.
The increase was primarily due to the inclusion of Barnes & Noble.com’s
depreciation and amortization.
Pre-opening Expenses
Pre-opening expenses increased to $2.6 million during the 13 weeks ended May 1,
2004, from $1.5 million for the 13 weeks ended May 3, 2003. The increase in
pre-opening expenses was primarily the result of opening nine new Barnes &
Noble stores during the first quarter of fiscal 2004, compared with four new
Barnes & Noble stores opened during the same prior year period.
Operating Profit
The Company’s consolidated operating profit increased to $28.2 million during
the 13 weeks ended May 1, 2004, from $9.4 million during the 13 weeks ended May
3, 2003.
Interest Expense, Net and Amortization of Deferred Financing Fees
Net interest expense and amortization of deferred financing fees decreased to
$4.3 million during the 13 weeks ended May 1, 2004, from $4.6 million during
the 13 weeks ended May 3, 2003. The decrease was primarily the result of
reduced average borrowings under the Company’s senior credit facility due to
effective working capital management.
Income Taxes
Income taxes during the 13 weeks ended May 1, 2004 were $9.5 million compared
with a tax benefit of $75.0 thousand during the 13 weeks ended May 3, 2003.
Taxes were based upon management’s estimate of the
20
Company’s annualized effective tax rates. The Company’s effective tax rate was
39.89% for the first quarter of fiscal 2004 and 40.25% for the first quarter of
fiscal 2003.
Minority Interest
Minority interest was $1.9 million during the first quarter of fiscal 2004 and
fiscal 2003 and relates primarily to GameStop.
Net Income (Loss)
As a result of the factors discussed above, the Company reported consolidated
net income of $12.5 million (or $0.17 per diluted share) during the 13 weeks
ended May 1, 2004, compared with a net loss of ($2.0) million (or ($0.03) per
share) during the 13 weeks ended May 3, 2003. Components of earnings per share
were as follows:
(1) The Company accounted for its approximate 38 percent equity interest in
Barnes & Noble.com under the equity method through September 15, 2003 (the date
the Company acquired Bertelsmann’s interest in Barnes & Noble.com) and
consolidated the results of Barnes & Noble.com thereafter.
21
Disclosure Regarding Forward-Looking Statements
This report may contain certain forward-looking statements (within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934) and information relating to the Company that
are based on the beliefs of the management of the Company as well as
assumptions made by and information currently available to the management of
the Company. When used in this report, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan” and similar expressions, as they relate
to the Company or the management of the Company, identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events, the outcome of which is subject to certain risks,
including among others general economic and market conditions, decreased
consumer demand for the Company’s products, possible disruptions in the
Company’s computer or telephone systems, 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 initiatives such as Barnes &
Noble.com, 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, and other factors which may be outside of the Company’s control. In
addition, the video-game market has historically been cyclical in nature and
dependent upon the introduction of new generation systems and related
interactive software. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
or outcomes may vary materially from those described as anticipated, believed,
estimated, expected, intended or planned. Subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the cautionary statements
in this paragraph.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The Company limits its interest rate risks by investing certain of its
excess cash balances in short-term, highly-liquid instruments with an original
maturity of one year or less. The Company does not expect any material losses
from its invested cash balances and the Company believes that its interest rate
exposure is modest. As of May 1, 2004, the Company’s cash and cash equivalents
totaled approximately $354.2 million.
Additionally, the Company may from time to time borrow money under its
Credit Facility at various interest-rate options based on the prime
rate or the London Interbank Offer Rate (LIBOR) depending upon certain
financial tests. Accordingly, the Company may be exposed to interest rate risk
on money that it borrows under its Credit Facility. The Company had $0 and
$57.0 million outstanding under the Credit Facility at May 1, 2004 and May 3, 2003,
respectively.
The Company does not have any material foreign currency exposure as nearly
all of its business is transacted in United States currency.
Item 4: Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company’s
management conducted an evaluation, under the supervision and with the
participation of the principal executive officer and principal financial
officer, of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that, as of the end of the period covered by this report, the
Company’s disclosure controls and procedures are
22
effective. Notwithstanding the foregoing, a control system, no matter how
well designed and operated, can provide only reasonable, not absolute,
assurance that it will detect or uncover failures within the Company to
disclose material information otherwise required to be set forth in the
Company’s periodic reports.
(b) Changes in Internal Controls
There was no change in the Company’s internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the Company’s most recently completed fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments with respect to previously reported legal proceedings.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities
In November 1999, the Board of Directors authorized a common stock
repurchase program for the purchase of up to $250.0 million of the Company’s
common shares. The Company may repurchase shares from time to time in the open
market or through privately negotiated transactions, depending on prevailing
market conditions and other factors. The repurchased shares will be held in
treasury.
23
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Form 10-Q:
(b) Reports on Form 8-K:
24
SIGNATURES
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 thereunto duly authorized.
BARNES & NOBLE, INC.
June 9, 2004
25
EXHIBIT INDEX
26
(unaudited)
13 weeks ended
May 1, 2004
May 3, 2003
$
1,452,845
1,185,605
1,067,978
884,960
384,867
300,645
309,274
250,673
44,717
39,040
2,631
1,502
28,245
9,430
(4,327
)
(4,643
)
—
(4,972
)
23,918
(185
)
9,541
(75
)
14,377
(110
)
(1,923
)
(1,916
)
$
12,454
(2,026
)
$
0.18
(0.03
)
$
0.17
(0.03
)
68,146,000
64,867,000
70,717,000
64,867,000
Table of Contents
May 1,
May 3,
January 31,
2004
2003
2004
(unaudited)
$
354,163
195,987
487,200
52,151
64,014
60,529
—
35,920
—
1,525,834
1,418,377
1,526,156
117,712
103,539
119,604
2,049,860
1,817,837
2,193,489
15,276
3,247
3,247
529,645
493,954
533,272
1,163,141
949,266
1,141,317
1,708,062
1,446,467
1,677,836
1,022,677
842,580
991,187
685,385
603,887
686,649
509,244
391,704
509,244
93,158
47,713
94,574
—
19,782
—
22,663
23,009
23,338
$
3,360,310
2,903,932
3,507,294
Table of Contents
Consolidated Balance Sheets
(thousands of dollars, except per share data)
May 1,
May 3,
January 31,
2004
2003
2004
(unaudited)
$
792,198
661,556
858,068
480,558
423,537
583,773
1,272,756
1,085,093
1,441,841
300,000
357,000
300,000
169,947
119,845
170,066
108,493
115,142
108,441
230,934
202,979
227,287
77
73
77
926,944
832,313
914,319
(8,775
)
(11,032
)
(8,579
)
555,957
389,624
543,503
(196,023
)
(187,105
)
(189,661
)
1,278,180
1,023,873
1,259,659
—
—
—
$
3,360,310
2,903,932
3,507,294
Table of Contents
(unaudited)
Accumulated
Additional
Other
Treasury
Common
Paid-In
Comprehensive
Retained
Stock at
Stock
Capital
Losses
Earnings
Cost
Total
$
77
$
914,319
$
(8,579
)
$
543,503
$
(189,661
)
$
1,259,659
—
—
—
12,454
—
—
—
(177)
—
—
—
—
(19
)
—
—
12,258
—
8,689
—
—
—
8,689
—
3,936
—
—
—
3,936
—
—
—
—
(6,362
)
(6,362
)
$
77
$
926,944
$
(8,775
)
$
555,957
$
(196,023
)
$
1,278,180
Table of Contents
(unaudited)
13 weeks ended
May 1, 2004
May 3, 2003
$
12,454
(2,026
)
45,475
39,739
1,923
1,916
56
799
52
326
—
4,972
(106
)
—
(152,254
)
(146,354
)
(92,400
)
(100,628
)
(45,380
)
(23,461
)
—
(1,474
)
(115
)
745
(45,495
)
(24,190
)
11,220
1,877
(6,362
)
(5,714
)
—
57,000
4,858
53,163
(133,037
)
(71,655
)
487,200
267,642
$
354,163
195,987
$
8,378
22,188
322
(22,505
)
1,892
(2,041
)
(162,846
)
(143,996
)
$
(152,254
)
(146,354
)
$
8,075
8,822
$
37,888
54,688
Table of Contents
(thousands of dollars, except per share data)
(unaudited)
Table of Contents
Notes to Consolidated Financial Statements
For the 13 weeks ended May 1, 2004 and May 3, 2003
(thousands of dollars, except per share data)
(unaudited)
13 weeks ended
May 3, 2003
1,291,569
(6,839
)
(0.11
)
(0.11
)
Table of Contents
Notes to Consolidated Financial Statements
For the 13 weeks ended May 1, 2004 and May 3, 2003
(thousands of dollars, except per share data)
(unaudited)
Table of Contents
Notes to Consolidated Financial Statements
For the 13 weeks ended May 1, 2004 and May 3, 2003
(thousands of dollars, except per share data)
(unaudited)
For the 13 weeks ended
May 1, 2004
May 3, 2003
$
12,454
(2,026
)
1,941
2,955
1,316
1,291
13
—
$
9,184
(6,272
)
$
0.18
(0.03
)
$
0.13
(0.10
)
$
0.17
(0.03
)
$
0.12
(0.10
)
Table of Contents
Notes to Consolidated Financial Statements
For the 13 weeks ended May 1, 2004 and May 3, 2003
(thousands of dollars, except per share data)
(unaudited)
Table of Contents
Notes to Consolidated Financial Statements
For the 13 weeks ended May 1, 2004 and May 3, 2003
(thousands of dollars, except per share data)
(unaudited)
Sales
May 1, 2004
May 3, 2003
$
1,081,109
863,864
371,736
321,741
$
1,452,845
1,185,605
Operating profit
May 1, 2004
May 3, 2003
$
17,475
(1,259
)
10,770
10,689
$
28,245
9,430
Table of Contents
Notes to Consolidated Financial Statements
For the 13 weeks ended May 1, 2004 and May 3, 2003
(thousands of dollars, except per share data)
(unaudited)
Aggregate Amortization Expense:
$
1,416
Estimated Amortization
Expense:
$
4,684
$
2,322
$
1,991
$
1,899
$
1,849
There were no changes in the carrying amount of goodwill for the 13
weeks ended May 1, 2004.
Table of Contents
Notes to Consolidated Financial Statements
For the 13 weeks ended May 1, 2004 and May 3, 2003
(thousands of dollars, except per share data)
(unaudited)
Table of Contents
Barnes & Noble, Inc.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
13 weeks ended
May 1, 2004
May 3, 2003
$
0.21
(0.05
)
(0.10
)
(0.04
)
$
0.11
(0.09
)
0.06
0.06
$
0.17
(0.03
)
Table of Contents
Table of Contents
Total Number
of Shares
Maximum Dollar
Purchased as
Value of Shares
Total Number
Average
Part of Publicly
That May Yet Be
of Shares
Price Paid
Announced
Purchased Under
Period
Purchased
per Share
Plans
the Plans
—
$
N/A
—
$
62,895,000
200,000
$
31.81
200,000
$
56,533,000
—
$
N/A
—
$
56,533,000
200,000
$
31.81
200,000
Table of Contents
3.1
Amended and Restated Bylaws of the Company.
10.1
Barnes & Noble, Inc. 2004 Incentive Plan.
10.2
Barnes & Noble, Inc. 2004 Executive Performance Plan.
31.1
Certification of Chief Executive Officer
pursuant to Rule 13a-14(a) under the Securities and Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer
pursuant to Rule 13a-14(a) under the Securities and Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer
pursuant to Rule 13a-14(b) under the Securities and Exchange
Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer
pursuant to Rule 13a-14(b) under the Securities and Exchange
Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
On February 20, 2004, the Company furnished a Report on Form
8-K pursuant to Items 7 and 12 of such Form announcing its
sales results for the fiscal quarter and fiscal year ended
January 31, 2004.
On March 18, 2004, the Company furnished a Report on Form 8-K
pursuant to Items 7 and 12 of such Form announcing its earnings
results for the fiscal quarter and fiscal year ended January
31, 2004.
Subsequent to the end of the quarter, on May 18, 2004, the
Company furnished a Report on Form 8-K and Form 8-K/A pursuant
to Items 7 and 12 of such Forms announcing first quarter 2004
financial results.
Subsequent to the end of the quarter, on May 27, 2004, the
Company filed a Report on Form 8-K pursuant to Items 5 and 7 of
such Form announcing the completion of the previously announced
merger of barnesandnoble.com inc. with a wholly owned
subsidiary of the Company.
Subsequent to the end of the quarter, on June 3, 2004, the
Company filed a Report on Form 8-K pursuant to Items 5 and 7 of
such Form announcing the redemption of all of its 5.25%
Convertible Subordinated Notes.
Table of Contents
(Registrant)
/s/Joseph J. Lombardi
Joseph J. Lombardi
Chief Financial Officer
(principal financial and accounting officer)
Table of Contents
3.1
Amended and Restated Bylaws of the Company.
10.1
Barnes & Noble, Inc. 2004 Incentive Plan.
10.2
Barnes & Noble, Inc. 2004 Executive Performance Plan.
31.1
Certification of Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities and Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities and Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Rule
13a-14(b) under the Securities and Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to Rule
13a-14(b) under the Securities and Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
EXHIBIT 3.1
AMENDED AND RESTATED
BY-LAWS
OF
BARNES & NOBLE, INC.*
ARTICLE I
OFFICES
SECTION 1. Delaware. Office. The office of Barnes & Noble, Inc. (the
“Corporation”) within the State of Delaware shall be in the City of Dover,
County of Kent.
SECTION 2. Other Offices. The Corporation may also have an office or
offices and keep the books and records of the Corporation, except as otherwise
may be required by law, in such other place or places, either within or without
the State of Delaware, as the Board of Directors of the Corporation (the
“Board”) may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. All meetings of holders of shares of
capital stock of the Corporation shall be held at the office of the Corporation
in the State of Delaware or at such other place, within or without the State of
Delaware, as may from time to time be fixed by the Board or specified or fixed
in the respective notices or waivers of notice thereof.
SECTION 2. Annual Meetings. An annual meeting of stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting (an “Annual Meeting”) shall be
held at such place, on such date, and at such time as the Board shall each year
fix, which date shall be within thirteen (13) months of the last annual meeting
of stockholders or, if no such meeting has been held, the date of
incorporation.
SECTION 3. Special Meetings. Special meetings of stockholders, unless
otherwise provided by law, may be called at any time by the Chairman of the
Board or by the Board pursuant to a resolution adopted by a majority of the
then authorized number of directors. Any such call must specify the matter or
matters to be acted upon at such meeting and only such matter or matters shall
be acted upon thereat.
*Includes all amendments through June 2, 2004.
SECTION 4. Notice of Meetings. Except as otherwise may be required by law, notice of each meeting of stockholders, whether an Annual Meeting or a special meeting, shall be in writing, shall state the purpose or purposes of the meeting, the place, date and hour of the meeting and, unless it is an Annual Meeting, shall indicate that the notice is being issued by or at the direction of the person or persons calling the meeting, and a copy thereof shall be delivered or sent by mail, not less than 10 or more than 60 days before the date of said meeting, to each stockholder entitled to vote at such meeting. If mailed, such notice shall be directed to such stockholder at his address as it appears on the stock records of the Corporation, unless he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address in which case it shall be directed to him at such other address. Notice of an adjourned meeting need not be given if the time and place to which the meeting is to be adjourned was announced at the meeting at which the adjournment was taken, unless (i) the adjournment is for more than 30 days, or (ii) the Board shall fix a new record date for such adjourned meeting after the adjournment.
SECTION 5. Quorum. At each meeting of stockholders of the Corporation, the holders of shares having a majority of the voting power of the capital stock of the Corporation issued and outstanding and entitled to vote thereat shall be present or represented by proxy to constitute a quorum for the transaction of business, except as otherwise provided by law. Where a separate vote by a class or classes is required, a majority of the shares of such class or classes in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter.
SECTION 6. Adjournments. In the absence of a quorum at any meeting of stockholders or any adjournment or adjournments thereof, the Chairman of the Board or holders of shares having a majority of the voting power of the capital stock present or represented by proxy at the meeting may adjourn the meeting from time to time until a quorum shall be present or represented by proxy. At any such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called if a quorum had been present or represented by proxy thereat.
SECTION 7. Order of Business. (a) At any Annual Meeting, only such business shall be conducted as shall have been brought before the Annual Meeting (i) by or at the direction of the Board, or (ii) by any stockholder who complies with the procedures set forth in this Section 7.
(b) For business properly to be brought before an Annual Meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the Annual Meeting; provided, however, that in the event that less than 40 days’ notice or prior public disclosure of the date of the Annual Meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure was made. To be in proper written form, a stockholder’s notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the Annual Meeting: (i) a brief description of the business desired to be
2
brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting; (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business; (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder; and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at an Annual Meeting except in accordance with the procedures set forth in this Section 7. The chairman of an Annual Meeting shall, if the facts warrant, determine and declare to the Annual Meeting that business was not properly brought before the Annual Meeting in accordance with the provisions of this Section 7 and, if he should so determine, he shall so declare to the Annual Meeting and any such business not properly brought before the Annual Meeting shall not be transacted.
SECTION 8. Proxies and Voting. Except as otherwise provided in the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) or in a resolution of the Board adopted pursuant to the Certificate of Incorporation establishing a series of Preferred Stock of the Corporation (“Preferred Stock”), at each meeting of stockholders, every stockholder of the Corporation shall be entitled to one vote for every share of capital stock standing in his name on the stock records of the Corporation (i) at the time fixed pursuant to Section 4 of Article VII of these By-laws as the record date for the determination of stockholders entitled to vote at such meeting, or (ii) if no such record date shall have been fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given. At each meeting of stockholders, all matters (except as otherwise provided in Section 3 of Article III of these By-laws and except in cases where a larger vote is required by law or by the Certificate of Incorporation or these By-laws) shall be decided by a majority of the votes cast at such meeting by the holders of shares of capital stock present or represented by proxy and entitled to vote thereon, a quorum being present. At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section 8 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. All voting, including on the election of directors but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefore by a stockholder entitled to vote or by his or her proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting.
SECTION 9. Inspectors. For each election of directors by the stockholders and in any other case in which it shall be advisable, in the opinion of the Board, that the voting upon any matter shall be conducted by inspectors of election, the Board shall appoint an inspector or inspectors of election. If, for any such election of directors or the voting upon any such other matter, any inspector appointed by the Board shall be unwilling or unable to serve, or if the Board shall fail to appoint inspectors, the chairman of the meeting shall appoint the necessary inspector or inspectors. The inspector(s) so appointed, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of inspectors with strict impartiality,
3
and according to the best of their ability, and the oath so taken shall be subscribed by them. Such inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each of the shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of election of directors. Inspectors need not be stockholders.
SECTION 10. Consent of Stockholders in Lieu of Meeting. Any action required to be taken at any Annual Meeting or special meeting of stockholders of the Corporation, or any action which may be taken at any Annual Meeting or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in the first paragraph of this Section.
ARTICLE III
DIRECTORS
SECTION 1. Powers. The business of the Corporation shall be managed under the direction of the Board. The Board may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;
4
(3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith;
(4) To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with these By-laws, for the management of the Corporation’s business and affairs.
SECTION 2. Terms and Vacancies. The directors, other than those who may be elected by the holders of any series of the Preferred Stock pursuant to a resolution of the Board adopted pursuant to the Certificate of Incorporation establishing such series, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as determined by the Board, one class initially to be elected for a term expiring at the Annual Meeting to be held in 1993, another class initially to be elected for a term expiring at the Annual Meeting to be held in 1994, and another class initially to be elected for a term expiring at the Annual Meeting to be held in 1995, with the members of each class to hold office until their successors have been elected and qualified. At each Annual Meeting, the successors of the class of directors whose term expires at the Annual Meeting shall be elected to hold office for a term expiring at the Annual Meeting held in the third year following the year of their election. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.
SECTION 3. Nominations of Directors; Election. The Board shall consist of not less than nine and not more than twelve members, as determined from time to time by resolution of the Board, except as may be provided pursuant to resolutions of the Board, adopted pursuant to the provisions of the Certificate of Incorporation, establishing any series of Preferred Stock and granting to holders of shares of such series of Preferred Stock rights to elect additional directors under specified circumstances. Nominations for the election of directors may be made by the Board or a committee appointed by the Board, or by any stockholder entitled to vote generally in the election of directors who complies with the procedures set forth in this Section 3. Directors shall be at least 21 years of age. Directors need not be stockholders. At each meeting of stockholders for the election of directors at which a quorum is present, the persons receiving a plurality of the votes cast shall be elected directors. All nominations by stockholders shall be
5
made pursuant to timely notice in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper written form, such stockholder’s notice shall set forth in writing (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, including, without limitation, such person’s written consent to being a nominee and to serving as a director if elected; and (ii) as to the stockholder giving the notice, the (x) name and address, as they appear on the Corporation’s books, of such stockholder and (y) the class and number of shares of the corporation which are beneficially owned by such stockholder. At the request of the Board, any person nominated by the Board for election as a director shall furnish to the Secretary of the Corporation the information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.
SECTION 4. Place of Meetings. Meetings of the Board shall be held at the Corporation’s office in the State of Delaware or at such other places, within or without such State, as the Board may from time to time determine or as shall be specified or fixed in the notice or waiver of notice of any such meeting.
SECTION 5. Regular Meetings. Regular meetings of the Board shall be held in accordance with a yearly meeting schedule as determined by the Board; or such meetings may be held on such other days and at such other times as the Board may from time to time determine.
SECTION 6. Special Meetings. Special meetings of the Board may be called by a majority of the directors then in office (rounded up to the nearest whole number) or by the Chairman of the Board and shall be held at such place, on such date, and at such time as they or he shall fix.
SECTION 7. Notice of Meetings. Notice of each special meeting of the Board stating the time, place and purposes thereof, shall be (i) mailed to each director not less than five days prior to the meeting, addressed to him at his residence or usual place of business, or (ii) shall be sent to him by facsimile, telex, cable or telegram so addressed, or shall be given personally or by telephone, on 24 hours’ notice.
SECTION 8. Quorum and Manner of Acting. The presence of at least a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board. If a quorum shall not be present at any meeting of the Board, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Except where a different vote is required or permitted by law or these By-laws or otherwise, the act of a majority of the directors present at any meeting at which a quorum shall
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be present shall be the act of the Board. Any action required or permitted to be taken by the Board may be taken without a meeting if all the directors consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the directors shall be filed with the minutes of the proceedings of the Board. Any one or more directors may participate in any meeting of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall be deemed to constitute presence in person at a meeting of the Board.
SECTION 9. Resignation. Any director may resign at any time by giving written notice to the Corporation; provided, however, that written notice to the Board, the Chairman of the Board, the President of the Corporation or the Secretary of the Corporation shall be deemed to constitute notice to the Corporation. Such resignation shall take effect upon receipt of such notice or at any later time specified therein and, unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective.
SECTION 10. Compensation of Directors. The Board may provide for the payment to any of the directors, other than officers or employees of the Corporation, of a specified amount for services as director or member of a committee of the Board, or of a specified amount for attendance at each regular or special Board meeting or committee meeting, or of both, and all directors shall be reimbursed for expenses of attendance at any such meeting; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES OF THE BOARD
SECTION 1. Appointment and Powers of Executive Committee. The Board may, by resolution adopted by the affirmative vote of a majority of the authorized number of directors, designate an Executive Committee of the Board, which shall consist of such number of members as the Board shall determine. Any committee so designated may exercise the power and authority of the Board to declare dividends, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law if the resolution that designates the committee or a supplemental resolution of the Board shall-so provide. Except as provided by Delaware law, during the interval between the meetings of the Board, the Executive Committee shall possess and may exercise all the powers of the Board in the management and direction of all the business and affairs of the Corporation (except the matters hereinafter assigned to any other Committee of the Board), in such manner as the Executive Committee shall deem in the best interests of the Corporation in all cases in which specific directions shall not have been given by the Board. The Executive Committee may determine its manner of acting and fix the time and place of its meetings, unless the Board shall otherwise provide. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business by the committee and the act of a majority of the members of the committee present at a meeting at which a quorum shall be present shall be the act of the committee. Either the Chairman of the Board or the Chairman of the Executive Committee may call the meetings of the Executive Committee.
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SECTION 2. Appointment and Powers of Audit Committee. The Board may, by resolution adopted by the affirmative vote of a majority of the authorized number of directors, designate an Audit Committee of the Board, which shall consist of such number of members as the Board shall determine. The Audit Committee shall (i) make recommendations to the Board as to the independent accountants to be appointed by the Board; (ii) review with the independent accountants the scope of their examinations; (iii) receive the reports of the independent accountants and meet with representatives of such accountants for the purpose of reviewing and considering questions relating to their examination and such reports; (iv) review, either directly or through the independent accountants, the internal accounting and auditing procedures of the Corporation; (v) review related party transactions and (vi) perform such other functions as may be assigned to it from time to time by the Board. The Audit Committee may determine its manner of acting and fix the time and place of its meetings, unless the Board shall otherwise provide. A majority of the members of the Audit Committee shall constitute a quorum for the transaction of business by the committee and the act of a majority of the members of the committee present at a meeting at which a quorum shall be present shall be the act of the committee.
SECTION 3. Compensation Committee; Other Committees. The Board may, by resolution adopted by the affirmative vote of a majority of the authorized number of directors, designate members of the Board to constitute a Compensation Committee and such other committees of the Board as the Board may determine. Such committees shall in each case consist of such number of directors as the Board may determine, and shall have and may exercise, to the extent permitted by law, such powers as the Board may delegate to them in the respective resolutions appointing them. Each such committee may determine its manner of acting and fix the time and place of its meetings, unless the Board shall otherwise provide. A majority of the members of any such committee shall constitute a quorum for the transaction of business by the committee and the act of a majority of the members of such committee present at a meeting at which a quorum shall be present shall be the act of the committee.
SECTION 4. Action by Consent; Participation by Telephone or Similar Equipment. Unless the Board shall otherwise provide, any action required or permitted to be taken by any committee may be taken without a meeting if all members of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the committee shall be filed with the minutes of the proceedings of the committee. Unless the Board shall otherwise provide, any one or more members of any such committee may participate in any meeting of the committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting of the committee.
SECTION 5. Changes in Committees; Resignations; Removals. The Board shall have power, by the affirmative vote of a majority of the authorized number of directors, at anytime to change the members of, to fill vacancies in, and to discharge any committee of the Board. Any member of any such committee may resign at any time by giving notice to the Corporation; provided, however, that notice to the Board, the Chairman of the Board, the President of the Corporation, the chairman of such committee or the Secretary of the Corporation shall be deemed to constitute notice to the Corporation. Such resignation shall take effect upon
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receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. Any member of any such committee may be removed at any time, either with or without cause, by the affirmative vote of a majority of the authorized number of directors at any meeting of the Board called for that purpose.
ARTICLE V
OFFICERS
SECTION 1. Number and Qualification. The corporation shall have such officers as may be necessary or desirable for the business of the Corporation. The officers of the Corporation shall consist of a Chairman of the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer and such other officers as may from time to time be appointed by the Board. Officers shall be elected by the Board, which shall consider that subject at its first meeting after every Annual Meeting of stockholders. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. The failure to elect a Chairman of the Board, President, Vice President, Secretary or Treasurer shall not affect the existence of the Corporation.
SECTION 2. Chairman of the Board. The Chairman of the Board shall have general and active responsibility for the management of the business of the Corporation and shall be responsible for implementing all orders and resolutions of the Board. The Chairman of the Board shall also be a director and shall preside at all meetings of the stockholders and directors.
SECTION 3. President. The President shall be the chief operating officer of the Corporation and shall supervise the daily operations of the business of the Corporation. Subject to the provisions of these By-laws and to the direction of the Board, he or she shall perform all duties and have all powers which are commonly incident to the office of President or which are delegated to him or her by the Board. He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the Corporation.
SECTION 4. Vice President. Each Vice President shall have such powers and duties as may be delegated to him or her by the Board. One Vice President shall be designated by the Board to perform the duties and exercise the powers of the President in the event of the President’s absence or disability.
SECTION 5. Treasurer. The Treasurer shall have the responsibility for maintaining the financial records of the Corporation. He or she shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the Corporation. The Treasurer shall also perform such other duties as the Board may from time to time prescribe.
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SECTION 6. Secretary. The Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board. He or she shall have charge of the corporate books and shall perform such other duties as the Board may from time to time prescribe.
SECTION 7. Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.
SECTION 8. Removal. Any officer of the Corporation may be removed at any time, with or without cause, by the Board.
SECTION 9. Resignations. Any officer may resign at any time by giving written notice to the Corporation; provided, however, that notice to the Board, Chairman of the Board, the President or the Secretary shall be deemed to constitute notice to the Corporation. Such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 10. Vacancies. Any vacancy among the officers, whether caused by death, resignation, removal or any other cause, shall be filled in the manner prescribed for election or appointment to such office.
SECTION 11. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board, the Chairman of the Board or any officer of the Corporation authorized by the Chairman of the Board shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.
SECTION 12. Bonds of Officers. If required by the Board, any officer of the Corporation shall give a bond for the faithful discharge of his duties in such amount and with such surety or sureties as the Board may require.
SECTION 13. Compensation. The salaries of the officers shall be fixed from time to time by the Board, unless and until the Board appoints a Compensation Committee.
SECTION 14. Officers of Operating Companies or Divisions. The Chairman of the Board shall have the power to appoint, remove and prescribe the terms of office, responsibilities, duties and salaries of, the officers of the operating companies or divisions, other than those who are officers of the Corporation.
ARTICLE VI
CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC.
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SECTION 1. Contracts. The Board may authorize any officer or officers, agent or agents, in the name and on behalf of the Corporation, to enter into any contract or to execute and deliver any instrument, which authorization may be general or confined to specific instances; and, unless so authorized by the Board, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable peculiarly for any purpose or for any amount.
SECTION 2. Checks, etc. All checks, drafts, bills of exchange or other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed in the name and on behalf of the Corporation in such manner as shall from time to time be authorized by the Board, which authorization may be general or confined to specific instances.
SECTION 3. Loans. No loan shall be contracted on behalf of the Corporation, and no negotiable paper shall be issued in its name, unless authorized by the Board, which authorization may be general or confined to specific instances. All bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation issued for such loans shall be made, executed and delivered as the Board shall authorize.
SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositors as may be selected by or in the manner designated by the Board. The Board or its designees may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of the Certificate of Incorporation or these By-laws, as they may deem advisable.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the Chairman of the Board, President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile.
SECTION 2. Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list
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shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
SECTION 3. Transfers of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 5 of Article VII of these By-laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.
SECTION 4. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall be not more than ten (10) days after the date upon which the resolution fixing the record date is adopted. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board to fix a record date. The Board shall promptly, but in all events within 10 days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board and no prior action by the Board is required by the Delaware General Corporation Law, the record date shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in the manner prescribed by Article II, Section 10 hereof. If no record date has been fixed by the Board and prior action by the Board is required by the Delaware General Corporation Law with respect to the proposed action by written consent of the stockholders, the record date for determining stockholders entitled to consent to corporate action in writing shall
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be at the close of business on the day on which the Board adopts the resolution taking such prior action.
SECTION 5. Lost, Stolen or Destroyed Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board may establish concerning proof of such loss, theft or destruction and concerning the giving of satisfactory bond or bonds of indemnity.
SECTION 6. Regulations. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board may establish.
ARTICLE VIII
NOTICES
SECTION 1. Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or with a recognized overnight delivery service or by sending such notice by prepaid telegram, mailgram or by facsimile transmission. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received, if hand delivered, or dispatched, if delivered through the mails or by overnight delivery service, or by telegram, mailgram or facsimile, shall be the time of the giving of the notice.
SECTION 2. Waivers. A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE IX
MISCELLANEOUS
SECTION 1. Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board or a committee thereof.
SECTION 2. Corporate Seal. The Board may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.
SECTION 3. Reliance Upon Books, Reports and Records. Each director, each member of any committee designated by the Board, and each officer of the Corporation shall, in
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the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board of Directors.
SECTION 5. Time Periods. In applying any provision of these By-laws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter, a “proceeding”), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter, an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section 3 of this Article X with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of the Corporation.
SECTION 2. Right to Advancement of Expenses. The right to indemnification conferred in Section 1 of this Article X shall include the right to be paid by the Corporation the expenses (including attorneys’ fees) incurred in defending any such proceeding in advance of its final disposition (hereinafter, an “advancement of expenses”); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which
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service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter, an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter, a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 2 or otherwise. The rights to indemnification and to the advancement of expenses conferred in Sections 1 and 2 of this Article X shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.
SECTION 3. Right of Indemnitee to Bring Suit. If a claim under Section 1 or 2 of this Article X is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article X or otherwise shall be on the Corporation.
SECTION 4. Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article X shall not be exclusive of any other right which any person may have or hereafter acquire by any statute, the Corporation’s Certificate of Incorporation or By-laws, agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense,
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liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.
SECTION 6. Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article X with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
ARTICLE XI
AMENDMENTS
These By-laws or any of them may be amended or supplemented in any respect at any time, either (i) at any meeting of stockholders, provided that any amendment or supplement proposed to be acted upon at any such meeting shall have been described or referred to in the notice of such meeting; or (ii) at any meeting of the Board, provided that any amendment or supplement proposed to be acted upon at any such meeting shall have been described or referred to in the notice of such meeting or an announcement with respect thereto shall have been made at the last previous Board meeting, and provided further that no amendment or supplement adopted by the Board shall vary or conflict with any amendment or supplement adopted by the stockholders. Notwithstanding the preceding sentence, the affirmative vote of holders of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, Section 3 or Section 7 of Article II of these By-laws, Section 2, Section 3, Section 8 of Article III of these By-laws, Article X of these By-laws or this sentence.
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EXHIBIT 10.1
BARNES & NOBLE, INC.
2004 INCENTIVE PLAN
BARNES & NOBLE, INC., a corporation existing under the laws of the State of Delaware (the “Company”), hereby establishes and adopts the following 2004 Incentive Plan (the “Plan”). Certain capitalized terms used in the Plan are defined in Article 2.
RECITALS
WHEREAS , the Company desires to encourage high levels of performance by those individuals who are key to the success of the Company, to attract new individuals who are highly motivated and who are expected to contribute to the success of the Company and to encourage such individuals to remain as directors, employees, consultants and/or advisors of the Company and its Affiliates by increasing their proprietary interest in the Company’s growth and success; and
WHEREAS , to attain these ends, the Company has formulated the Plan embodied herein to authorize the granting of Awards to Participants whose judgment, initiative and efforts are or have been or are expected to be responsible for the success of the Company.
NOW, THEREFORE , the Company hereby constitutes, establishes and adopts the following Plan and agrees to the following provisions:
ARTICLE 1
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the Company and its Affiliates in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder.
ARTICLE 2
DEFINITIONS
2.1. “ Affiliate ” shall mean (i) any person or entity that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company (including any Subsidiary) or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.
2.2. “ Award ” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Dividend Equivalent, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan.
2.3. “ Award Agreement ” shall mean any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder.
2.4. “ Board ” shall mean the board of directors of the Company.
2.5. “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
2.6. “ Committee ” shall mean the Compensation Committee of the Board (or such other committee designated by the Compensation Committee of the Board), consisting of no fewer than two Directors, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m)(4)(C)(i) of the Code, and (iii) an “independent director” for purpose of the rules and regulations of the New York Stock Exchange.
2.7. “ Company ” has the meaning set forth in introductory paragraph of the Plan.
2.8. “ Covered Employee ” shall mean a “covered employee” within the meaning of Section 162(m)(3) of the Code, or any successor provision thereto.
2.9. “ Director ” shall mean a non-employee member of the Board or a non-employee member of the board of directors of a Subsidiary.
2.10. “ Dividend Equivalents ” shall have the meaning set forth in Section 12.5.
2.11. “ Employee ” shall mean any employee of the Company or any Affiliate. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor who provides services to the Company or any Affiliate, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Company’s securities.
2.12. “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.
2.13. “ Fair Market Value ” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the New York Stock Exchange on that date (or if there was no reported closing price on such date, on the last preceding date on which the closing price was reported) or, if the Company is not then listed on the New York Stock Exchange, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria.
2.14. “ Freestanding Stock Appreciation Right ” shall have the meaning set forth in Section 6.1.
2.15. “ Limitations ” shall have the meaning set forth in Section 10.5.
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2.16. “ Option ” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.
2.17. “ Option Proceeds ” shall mean the cash actually received by the Company for the option price in connection with the exercise of Options or options granted under the Prior Plans that are exercised after the effective date of the Plan, plus the maximum tax benefit that could be realized by the Company as a result of the exercise of such Options or options granted under the Prior Plans, which tax benefit shall be determined by multiplying (a) the amount that is deductible for Federal income tax purposes as a result of any such option exercise (currently, equal to the amount upon which the Participant’s withholding tax obligation is calculated), times (b) the sum of the maximum federal corporate income tax rate for the year of exercise plus an assumed 6% state income tax rate. With respect to Options or options granted under the Prior Plans, to the extent that a Participant pays the option price and/or withholding taxes with Shares, Option Proceeds shall not be calculated with respect to the amounts so paid in Shares.
2.18. “ Other Stock Unit Award ” shall have the meaning set forth in Section 8.1.
2.19. “ Participant ” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan.
2.20. “ Payee ” shall have the meaning set forth in Section 13.1.
2.21. “ Performance Award ” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9.
2.22. “ Performance Period ” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.
2.23. “ Performance Share ” shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
2.24. “ Performance Unit ” shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
2.25. “ Permitted Assignee ” shall have the meaning set forth in Section 12.3.
2.26. “ Prior Plans ” shall mean, collectively, the Company’s 1991 Incentive Plan, as amended, and the Company’s 1996 Incentive Plan, as amended.
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2.27. “ Restricted Stock ” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.
2.28. “ Restricted Period ” shall have the meaning set forth in Section 7.1.
2.29. “ Restricted Stock Award ” shall have the meaning set forth in Section 7.1.
2.30. “ Shares ” shall mean the shares of common stock of the Company, par value $0.001 per share.
2.31. “ Stock Appreciation Right ” shall mean the right granted to a Participant pursuant to Article 6.
2.32. “ Subsidiary ” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
2.33. “ Substitute Awards ” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.34. “ Tandem Stock Appreciation Right ” shall have the meaning set forth in Section 6.1.
ARTICLE 3
SHARES SUBJECT TO THE PLAN
3.1. Number of Shares . (a) Subject to adjustment as provided in Section 12.2, a total of 7,300,000 Shares shall be authorized for grant under the Plan, plus any Shares remaining available for grant under the Prior Plans on the effective date of the Plan. Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share issued. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two (2) Shares for every one (1) Share granted.
(b) If any Shares subject to an Award or to an award under the Prior Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or award under the Prior Plans is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture,
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expiration, termination, cash settlement or non-issuance, again be available for Awards under the Plan, subject to Section 3.1(g) below.
(c) In the event that (i) any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, or (ii) withholding tax liabilities arising from such Option or other Award are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then only the number of Shares issued net of the Shares tendered or withheld shall be counted for purposes of determining the maximum number of Shares available for issuance under the Plan. In the event that (i) any option or award granted under the Prior Plans is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, or (ii) withholding tax liabilities arising from such options or awards are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then the Shares so tendered or withheld shall again be available for Awards under the Plan.
(d) Shares reacquired by the Company on the open market using Option Proceeds shall be available for Awards under the Plan. The increase in Shares available pursuant to the repurchase of Shares with Option Proceeds shall not be greater than the amount of such proceeds divided by the Fair Market Value of a Share on the date of exercise of the Option giving rise to such Option Proceeds.
(e) Substitute Awards shall not reduce the Shares authorized for issuance under the Plan or authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for issuance under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors or any Affiliate prior to such acquisition or combination.
(f) Grants of Awards as a material inducement to a person becoming an employee of the Company or any Subsidiary, including new employees in connection with a merger or acquisition, or a former employee being rehired as an employee following a bona fide period of interruption of employment, shall not reduce the Shares authorized for issuance under the Plan if the Committee determines to not grant such Awards under the Plan.
(g) Any Shares that again become available for grant pursuant to this Article 3 shall be added back as one (1) Share if such Shares were subject to Options or Stock Appreciation Rights granted under the Plan or options or stock appreciation rights granted under
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the Prior Plans, and as two (2) Shares if such Shares were subject to Awards other than Options or Stock Appreciation Rights granted under the Plan.
3.2. Character of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.
ARTICLE 4
ELIGIBILITY AND ADMINISTRATION
4.1. Eligibility . Any Employee or Director shall be eligible to be selected as a Participant.
4.2. Administration . (a) The Plan shall be administered by the Committee. The Directors may remove from, add members to, or fill vacancies on, the Committee.
(b) The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.
(c) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, any stockholder and any Employee or any Affiliate. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. Notwithstanding the foregoing or anything else to the contrary in the Plan, any action or determination by the Committee specifically affecting or relating to an Award to a Director shall require the prior approval of the Board.
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(d) The Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more officers or a committee of officers the right to grant Awards to Employees who are not Directors or officers of the Company and to cancel or suspend Awards to Employees who are not Directors or officers of the Company.
ARTICLE 5
OPTIONS
5.1. Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option shall be subject to the terms and conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable.
5.2. Award Agreements . All Options granted pursuant to this Article 5 shall be evidenced by a written Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article 5 may hold more than one Option granted pursuant to the Plan at the same time.
5.3. Option Price . Other than in connection with Substitute Awards, the option price per each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. Other than pursuant to Section 12.2, the Committee shall not be permitted to (a) lower the option price per Share of an Option after it is granted, (b) cancel an Option when the option price per Share exceeds the Fair Market Value of the underlying Shares in exchange for another Award (other than in connection with Substitute Awards), and (c) take any other action with respect to an Option that may be treated as a repricing under the rules and regulations of the New York Stock Exchange.
5.4. Option Period . The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted, except in the event of death or disability.
5.5. Exercise of Options . Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or by certified check or bank check or wire transfer of immediately available funds, (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings),
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(c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combination of any of the foregoing. In connection with a tender of previously acquired Shares pursuant to clause (b) above, the Committee, in its sole discretion, may permit the Participant to constructively exchange Shares already owned by the Participant in lieu of actually tendering such Shares to the Company, provided that adequate documentation concerning the ownership of the Shares to be constructively tendered is furnished in form satisfactory to the Committee. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance.
5.6. Form of Settlement . In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or may reserve the right so to provide after the time of grant.
5.7. Incentive Stock Options. With respect to the Options that may be granted by the Committee under the Plan, the Committee may grant Options intended to qualify as “incentive stock options” as defined in Section 422 of the Code, to any employee of the Company or any Affiliate, subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of “incentive stock options” under the Plan, the maximum aggregate number of Shares with respect to which “incentive stock options” may be granted under the Plan shall be 7,300,000 Shares.
ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1. Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option (“Tandem Stock Appreciation Right”), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan or at any subsequent time during the term of such Award, or (c) without regard to any Option or other Award (a “Freestanding Stock Appreciation Right”), in each case upon such terms and conditions as the Committee may establish in its sole discretion.
6.2. Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following:
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(a) Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise or such other amount as the Committee shall so determine at any time during a specified period before the date of exercise over (ii) the grant price of the right on the date of grant, or in the case of a Tandem Stock Appreciation Right granted on the date of grant of the related Option, as specified by the Committee in its sole discretion, which, except in the case of Substitute Awards or in connection with an adjustment provided in Section 12.2, shall not be less than the Fair Market Value of one Share on such date of grant of the right or the related Option, as the case may be.
(b) Upon the exercise of a Stock Appreciation Right, the Committee shall determine in its sole discretion whether payment shall be made in cash, in whole Shares or other property, or any combination thereof.
(c) Any Tandem Stock Appreciation Right may be granted at the same time as the related Option is granted or at any time thereafter before exercise or expiration of such Option.
(d) Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of its term for cash.
(e) Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised.
(f) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient.
(g) The Committee may impose such other conditions or restrictions on the terms of exercise and the exercise price of any Stock Appreciation Right, as it shall deem appropriate, including providing that the exercise price of a Tandem Stock Appreciation Right may be less than the Fair Market Value on the date of grant if the Tandem Stock Appreciation Right is added to an Option following the date of the grant of the Option. In connection with the foregoing, the Committee shall consider the applicability and effect of Section 162(m) of the Code. Notwithstanding the foregoing provisions of this Section 6.2(g), but subject to Section 12.2, a Freestanding Stock Appreciation Right shall not have (i) an exercise price less than Fair Market Value on the date of grant, or (ii) a term of greater than ten years. In addition to the foregoing, but subject to Section 12.2, the base amount of any Stock Appreciation Right shall not be reduced after the date of grant.
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(h) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion.
ARTICLE 7
RESTRICTED STOCK AWARDS
7.1. Grants . Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “Restricted Stock Award”). A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “Restriction Period”). The provisions of Restricted Stock Awards need not be the same with respect to each recipient. The Committee has absolute discretion to determine whether any consideration (other than services) is to be received by the Company or any Affiliate as a condition precedent to the issuance of Restricted Stock.
7.2. Award Agreements . The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan.
7.3. Rights of Holders of Restricted Stock. Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares; provided, however , that any Shares or any other property (other than cash) distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Shares.
7.4. Minimum Vesting Period. Except for certain limited situations (including the death, disability or retirement of the Participant or a Change of Control referred to in Article 11), Restricted Stock Awards subject solely to continued employment restrictions shall have a Restriction Period of not less than three years from date of grant (but permitting pro-rata vesting over such time); provided, that the provisions of this Section 7.4 shall not be applicable to any Substituted Awards or grants of Restricted Stock in payment of Performance Awards pursuant to Article 9. Subject to the foregoing three-year minimum vesting requirement, the Committee may, in its sole discretion and subject to the limitations imposed under Section 162(m) of the Code and the Treasury Regulations thereunder in the case of a Restricted Stock Award intended to comply with the performance-based exception under Code Section 162(m), waive the forfeiture period and any other conditions set forth in any Award Agreement subject to such terms and conditions as the Committee shall deem appropriate.
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ARTICLE 8
OTHER STOCK UNIT AWARDS
8.1. Stock and Administration . Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property (“Other Stock Unit Awards”) may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan, and such Other Stock Unit Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan. Other Stock Unit Awards shall be paid only in Shares. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees and Directors to whom and the time or times at which such Other Stock Unit Awards shall be made, the number of Shares to be granted pursuant to such Awards, and all other conditions of the Awards. The provisions of Other Stock Unit Awards need not be the same with respect to each recipient. Except for certain limited situations (including the death, disability or retirement of the Participant or a Change of Control referred to in Article 11), Other Stock Unit Awards subject solely to continued employment restrictions shall be subject to restrictions imposed by the Committee for a period of not less than three years from date of grant (but permitting pro-rata vesting over such time); provided, that such restrictions shall not be applicable to any Substituted Awards, grants of Other Stock Unit Awards in payment of Performance Awards pursuant to Article 9, or grants of Other Stock Unit Awards on a deferred basis.
8.2. Terms and Conditions . Shares (including securities convertible into Shares) subject to Awards granted under this Article 8 may be issued for no consideration or for such minimum consideration as may be required by applicable law. Shares (including securities convertible into Shares) purchased pursuant to a purchase right awarded under this Article 8 shall be purchased for such consideration as the Committee shall determine in its sole discretion.
ARTICLE 9
PERFORMANCE AWARDS
9.1. Terms of Performance Awards . Performance Awards may be issued hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award; provided, however, that a Performance Period shall not be shorter than 12 months nor longer than five years. Except as provided in Article 11 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 10.2. The amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis.
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ARTICLE 10
CODE SECTION 162(m) PROVISIONS
10.1. Covered Employees . Notwithstanding any other provision of the Plan, if the Committee determines at the time Restricted Stock, a Performance Award or an Other Stock Unit Award is granted to a Participant who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this Article 10 is applicable to such Award.
10.2. Performance Criteria . If Restricted Stock, a Performance Award or an Other Stock Unit Award is subject to this Article 10, then the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one or any combination of the following: net sales; pretax income before allocation of corporate overhead and bonus; earnings per share; net income; division, group or corporate financial goals; return on stockholders’ equity; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; market share; gross profits; earnings before taxes; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; reductions in costs, and/or return on invested capital of the Company or any Affiliate, division or business unit of the Company for or within which the Participant is primarily employed. Such performance goals also may be based solely by reference to the Company’s performance or the performance of an Affiliate, division or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. The Committee may also exclude the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) a change in accounting standards required by generally accepted accounting principles. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder.
10.3. Adjustments . Notwithstanding any provision of the Plan (other than Article 11), with respect to any Restricted Stock, Performance Award or Other Stock Unit Award that is subject to this Article 10, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals, except in the case of the death or disability of the Participant.
10.4. Restrictions . The Committee shall have the power to impose such other restrictions on Awards subject to this Article 10 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
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10.5. Limitations on Grants to Individual Participant . Subject to adjustment as provided in Section 12.2, no Participant may be granted (i) Options or Stock Appreciation Rights during any 36-month period with respect to more than 2,000,000 Shares or (ii) Restricted Stock, Performance Awards and/or Other Stock Unit Awards that are denominated in Shares in any 36-month period with respect to more than 1,000,000 Shares (the “Limitations”). In addition to the foregoing, the maximum dollar value payable to any Participant in any 12-month period with respect to Performance Awards and/or Other Stock Unit Awards that are valued with reference to property other than Shares is $5,000,000. If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable Limitations.
10.6. Other Company Compensation Plans . Shares available for Awards under the Plan may be used by the Company as a form of payment of performance based compensation under other Company compensation plans, whether or not existing on the date hereof. Notwithstanding anything in this Article 10 to the contrary, to the extent any Shares are used as such by the Company, such Shares will reduce the then number of Shares available under Article 3 of the Plan for future Awards, but will not be subject to the Share or dollar limitations set forth in Section 10.5 above.
ARTICLE 11
CHANGE OF CONTROL PROVISIONS
11.1. Impact of Change of Control. The terms of any Award may provide in the Award Agreement evidencing the Award that, upon a “Change of Control” of the Company (as that term may be defined therein), (a) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control immediately vest and become fully exercisable, (b) restrictions and deferral limitations on Restricted Stock lapse and the Restricted Stock become free of all restrictions and limitations and become fully vested, (c) all Performance Awards shall be considered to be earned and payable (either in full or pro-rata based on the portion of Performance Period completed as of the date of the Change in Control), and any deferral or other restriction shall lapse and such Performance Awards shall be immediately settled or distributed, (d) the restrictions and deferral limitations and other conditions applicable to any Other Stock Unit Awards or any other Awards shall lapse, and such Other Stock Unit Awards or such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant, and (e) such other additional benefits as the Committee deems appropriate shall apply, subject in each case to any terms and conditions contained in the Award Agreement evidencing such Award. For purposes of the Plan, a “Change of Control” shall mean an event described in an Award Agreement evidencing the Award or such other event as determined in the sole discretion of the Board. Notwithstanding any other provision of the Plan, the Committee, in its discretion, may determine that, upon the occurrence of a Change of Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and such Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of
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stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine.
11.2. Assumption Upon Change of Control. Notwithstanding the foregoing, the terms of any Award Agreement may also provide that, if in the event of a Change of Control the successor company assumes or substitutes for an Option, Stock Appreciation Right, Share of Restricted Stock or Other Stock Unit Award, then each outstanding Option, Stock Appreciation Right, Share of Restricted Stock or Other Stock Unit Award shall not be accelerated as described in Sections 11.1(a), (b) and (d). For the purposes of this Section 11.2, an Option, Stock Appreciation Right, Share of Restricted Stock or Other Stock Unit Award shall be considered assumed or substituted for if following the Change of Control the award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Restricted Stock Award or Other Stock Unit Award immediately prior to the Change of Control, the consideration (whether stock, cash or other securities or property) received in the transaction constituting a Change of Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the transaction constituting a Change of Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Restricted Stock Award or Other Stock Unit Award, for each Share subject thereto, will be solely common stock of the successor company substantially equal in fair market value to the per share consideration received by holders of Shares in the transaction constituting a Change of Control. The determination of such substantial equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. Notwithstanding the foregoing, on such terms and conditions as may be set forth in an Award Agreement, in the event of a termination of a Participant’s employment in such successor company within a specified time period following such Change in Control, each Award held by such Participant at the time of the Change in Control shall be accelerated as described in Sections 11.1(a), (b) and (d) above.
ARTICLE 12
GENERALLY APPLICABLE PROVISIONS
12.1. Amendment and Modification of the Plan . The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the New York Stock Exchange or any rule or regulation of any stock exchange or quotation system on which Shares are listed or quoted; provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 12.2), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.3, (e) increase the maximum permissible term of any Option specified by Section 5.4, or (f) amend any provision of Section 10.5. In addition, no amendments to, or
14
termination of, the Plan shall in any way impair the rights of a Participant under any Award previously granted without such Participant’s consent.
12.2. Adjustments . In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number.
12.3. Transferability of Awards . Except as provided below, and except as otherwise authorized by the Committee in an Award Agreement, no Award and no Shares subject to Awards described in Article 8 that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. Notwithstanding the foregoing, a Participant may assign or transfer an Award with the consent of the Committee (each transferee thereof, a “Permitted Assignee”); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 12.3.
12.4. Termination of Employment . The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Affiliate (including as a Director), whether by reason of death, disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final.
12.5. Deferral ; Dividend Equivalents . The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, currently or on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares (“Dividend Equivalents”) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion,
15
and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested.
ARTICLE 13
MISCELLANEOUS
13.1. Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “Payee”) net of any applicable Federal, State and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Rights, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Affiliate shall have the right to withhold from wages or other amounts otherwise payable to such Payee such withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the employee’s minimum required tax withholding rate) otherwise deliverable in connection with the Award.
13.2. Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Affiliate or affect any right that the Company or any Affiliate may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan.
13.3. Prospective Recipient . The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an agreement or other instrument evidencing the Award and delivered a copy thereof to the Company, and otherwise complied with the then applicable terms and conditions.
13.4. Cancellation of Award . Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant shall be canceled if the Participant, without the consent of the Company, while employed by the Company or any Affiliate or after termination of such employment or service, establishes a relationship with a competitor of the
16
Company or any Affiliate or engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate, as determined by the Committee in its sole discretion.
13.5. Stop Transfer Orders . All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
13.6. Nature of Payments . All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Affiliate, division or business unit of the Company. Any income or gain realized pursuant to Awards under the Plan and any Stock Appreciation Rights constitute a special incentive payment to the Participant and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any Affiliate except as may be determined by the Committee or by the Board or board of directors of the applicable Affiliate.
13.7. Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
13.8. Severability . If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.
13.9. Construction . All references in the Plan to “ Section,” “ Sections, ” or “ Article ” are intended to refer to the Section, Sections or Article, as the case may be, of the Plan. As used in the Plan, the words “ include ” and “ including ,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “ without limitation .”
13.10. Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights
17
that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
13.11. Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed accordingly.
13.12. Effective Date of Plan; Termination of Plan . The Plan shall be effective on the date of the approval of the Plan by the holders of a majority of the shares entitled to vote at a duly constituted meeting of the stockholders of the Company. The Plan shall be null and void and of no effect if the foregoing condition is not fulfilled and in such event each Award shall, notwithstanding any of the preceding provisions of the Plan, be null and void and of no effect. Awards may be granted under the Plan at any time and from time to time on or prior to the tenth anniversary of the effective date of the Plan, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired.
13.13. Foreign Employees . Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the judgment of the Committee, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country.
13.14. Captions . The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.
18
EXHIBIT 10.2
BARNES & NOBLE, INC.
2004 EXECUTIVE PERFORMANCE PLAN
BARNES & NOBLE, INC., a corporation existing under the laws of the State of Delaware (the “Company”), hereby establishes and adopts the following 2004 Executive Performance Plan (the “Plan”). Certain capitalized terms used in the Plan are defined in Article 2.
RECITALS
WHEREAS , the Company desires to encourage high levels of performance by those individuals who are key to the success of the Company, to attract new individuals who are highly motivated and who are expected to contribute to the success of the Company and to stimulate the efforts of such individuals to contribute to the continued success and growth of the Company’s business; and
WHEREAS , to attain these ends, the Company has formulated the Plan embodied herein to authorize the awarding of bonuses that are intended to qualify as “performance based compensation” within the meaning of Section 162(m) of the Code.
NOW, THEREFORE , the Company hereby constitutes, establishes and adopts the following Plan and agrees to the following provisions:
ARTICLE 1
PURPOSE OF THE PLAN
1.1. Purposes. The purposes of the Plan are to provide personal incentive and financial rewards to senior management who, because of the extent of their responsibilities, can and do make significant contributions to the success of the Company by their ability, industry, loyalty and exceptional services. Making such senior management participants in that success will advance the interests of the Company and its stockholders and will assist the Company in attracting and retaining such senior management.
ARTICLE 2
DEFINITIONS
2.1. “ Affiliate” shall mean (i) any person or entity that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company (including any Subsidiary) or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.
2.2. “ Award ” shall mean any amount granted to a Participant under the Plan.
2.3. “ Board ” shall mean the board of directors of the Company.
2.4. “ Certification ” shall have the meaning set forth in Section 4.2.
2.5. “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
2.6. “ Committee ” shall mean the Compensation Committee of the Board (or such other committee designated by the Compensation Committee of the Board), consisting of no fewer than two directors, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m)(4)(C)(i) of the Code, and (iii) an “independent director” for purpose of the rules and regulations of the New York Stock Exchange.
2.7. “ Company ” has the meaning set forth in the introductory paragraph of the Plan.
2.8. “ Covered Employee ” shall mean any executive officer of the Company or of any Subsidiary who is, or is or is likely to be, a “covered employee” within the meaning of Section 162(m)(3) of the Code, or any successor provision thereto.
2.9. “ Eligible Participant ” shall have the meaning set forth in Section 3.1.
2.10. “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.
2.11. “ Incentive Plan ” shall mean the Company’s 2004 Incentive Plan, as the same may be amended, modified, supplemented, superceded or replaced from time to time, and any other equity compensation plan of the Company adopted after the date hereof.
2.12. “ Incentive Pool ” shall mean 5% of the Company’s Operating Income, on a consolidated basis, for a given Performance Period.
2.13. “ Incentive Pool Allocation ” shall mean the percentage of the Incentive Pool allocated to each Participant by the Committee for a given Performance Period.
2.14. “ Maximum Payment ” shall have the meaning set forth in Section 4.3.
2.15. “ Named Executive Officers ” shall have the meaning given to such term in Item 402(a)(3) of Regulation S-K of the rules and regulations of the Securities and Exchange Commission, or any successor rule or regulation thereto.
2.16. “ Operating Income ” shall mean the gross profit minus operating expenses of the Company and its Subsidiaries on a consolidated basis, without regard to items relating to (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) changes in accounting standards required by generally accepted accounting principles, in each case as determined in accordance with generally accepted accounting principles and as reported on the Company’s consolidated statement of operations, notes to the consolidated financial statements or management’s discussion and analysis with respect to the consolidated financial statements, for the applicable Performance Period.
2
2.17. “ Participant ” shall mean an Eligible Participant selected by the Committee pursuant to Section 4.1 to participate in this Plan with respect to any given Performance Period.
2.18. “ Performance Period ” shall mean the Company’s fiscal year or any other period during a fiscal year that the Committee, in its sole discretion, may determine.
2.19. “ Proportionate Maximum Payment ” shall have the meaning set forth in Section 4.5.
2.20. “ Shares ” shall mean the shares of common stock of the Company, par value $0.001 per share.
2.21. “ Subsidiary ” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, excluding any such Subsidiary whose securities are publicly traded.
ARTICLE 3
ELIGIBILITY AND ADMINISTRATION
3.1. Eligibility . The individuals entitled to participate in the Plan shall be the Company’s Chief Executive Officer, any other Covered Employee and any other officer of the Company or any Subsidiary selected by the Committee to participate in the Plan (each, an “Eligible Participant”).
3.2. Administration . (a) The Plan shall be administered by the Committee. The Board may remove from, add members to, or fill vacancies on, the Committee, consistent with the qualifying criteria set forth in Section 2.6.
(b) The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Participants to whom Awards may from time to time be granted hereunder; (ii) determine the allocation and terms of an Award and whether an Award shall be paid in cash or Shares, not inconsistent with the provisions of the Plan; (iii) determine the time when Awards will be made and the Performance Period to which they relate; (iv) establish or affirm the Incentive Pool formula in respect of Performance Periods and to certify as to the amount of the Incentive Pool in respect of Performance Periods; (v) interpret and administer the Plan; (vi) correct any defect, supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (vii) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.
3
(c) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company and any Participant. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings.
(d) To the extent not inconsistent with the applicable provisions of Section 162(m) of the Code, the Committee may delegate to one or more officers of the Company or any of its Subsidiaries the authority to take actions on its behalf pursuant to the Plan.
ARTICLE 4
AWARDS
4.1. Performance Period . Not later than 90 days after the commencement of each fiscal year of the Company, the Committee shall, in writing, designate one or more Performance Periods for such fiscal year, provided that any Performance Period of less than one year shall be designated no later than the date on which 25% of such Performance Period has lapsed, and shall (i) determine the Participants for such Performance Period(s), which shall be, except as otherwise determined by the Committee, each Eligible Participant that shall be a Named Executive Officer in the Company’s annual proxy statement following the conclusion of the applicable Performance Period(s), (ii) affirm the performance goal as the Incentive Pool for such Performance Period(s), and (iii) assign to each Participant such Participant’s Incentive Pool Allocation for such Performance Period(s), provided that no Participant’s Incentive Pool Allocation shall exceed 40% of the Incentive Pool for any Performance Period. The aggregate amount of all Awards under the Plan for any Performance Period shall not exceed 100% of the Incentive Pool for such Performance Period.
4.2. Certification . As soon as reasonably practicable following the conclusion of each Performance Period, the Committee shall certify, in writing, the size of the Incentive Pool for each such Performance Period (the “Certification”).
4.3. Payment of Awards . Following each Certification, the Committee shall determine the maximum Award payable to each Participant (such amount, the “Maximum Payment”) based on the size of the Incentive Pool and each Participant’s Incentive Pool Allocation. The amount of the Award actually paid to a Participant shall be any amount equal to or less than the Maximum Payment payable to each such Participant (including zero), as determined by the Committee in its sole discretion. The actual amount of the Award determined by the Committee for a Performance Period shall, subject to Section 4.4, be paid to each Participant at such time as determined by the Committee in its sole discretion following the end of the applicable Performance Period. Awards shall be paid in cash or, in the Committee’s sole discretion, in Shares obtained from any other Incentive Plan or any combination thereof. Notwithstanding anything to the contrary contained herein, the maximum aggregate value of any Award(s) to any Participant with respect to any Performance Period shall not exceed 2% of the Company’s Operating Income for such Performance Period.
4.4. Deferral . With the prior written consent of the Committee, a Participant shall be entitled to elect to defer the payment of any Award payable to such Participant under the Plan.
4
4.5. Termination of Employment . If a Participant dies or retires, or if the Participant’s employment otherwise ceases during a Performance Period (except for termination by the Company for cause, as determined by the Committee in its sole discretion), the Maximum Payment payable to such a Participant shall be proportionately reduced based on the period of actual employment during the applicable Performance Period (such amount, the “Proportionate Maximum Payment”), and the amount of the Award actually paid to such a Participant shall be any amount equal to or less than the Proportionate Maximum Amount (including zero), as determined by the Committee in its sole discretion.
ARTICLE 5
GENERALLY APPLICABLE PROVISIONS
5.1. Amendment and Modification of the Plan . The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for stockholder approval imposed by applicable law, including Section 162(m) of the Code.
5.2. Section 162(m) of the Code . Unless otherwise determined by the Committee, the provisions of this Plan shall be administered and interpreted in accordance with Section 162(m) of the Code to ensure the deductibility by the Company or its Subsidiaries of the payment of Awards.
5.3. Tax Withholding . The Company or any Subsidiary shall have the right to make all payments or distributions pursuant to the Plan to a Participant, net of any applicable Federal, State and local taxes required to be paid or withheld. The Company or any Subsidiary shall have the right to withhold from wages, Awards or other amounts otherwise payable to such Participant such withholding taxes as may be required by law, or to otherwise require the Participant to pay such withholding taxes. If the Participant shall fail to make such tax payments as are required, the Company or any Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant or to take such other action as may be necessary to satisfy such withholding obligations.
5.4. Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Participant the right to continue in the employment of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment of (or to demote or to exclude from future Awards under the Plan) any such Participant at any time for any reason. No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants under the Plan.
5.5. Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
5.6. Severability . If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it
5
lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.
5.7. Construction . All references in the Plan to “ Section, “ Sections, ” or “ Article ” are intended to refer to the Section, Sections or Article, as the case may be, of the Plan. As used in the Plan, the words “ include ” and “ including ,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “ without limitation .”
5.8. Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
5.9. Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed accordingly.
5.10. Effective Date of Plan . The Plan shall be effective on the date of the approval of the Plan by the holders of a majority of the shares entitled to vote at a duly constituted meeting of the stockholders of the Company. The Plan shall be null and void and of no effect if the foregoing condition is not fulfilled.
5.11. Captions . The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.
6
Exhibit 31.1
CERTIFICATION PURSUANT TO
I, Stephen Riggio, Chief Executive Officer of Barnes & Noble, Inc., certify
that:
17 CFR 240.13a-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this report on Form 10-Q of Barnes & Noble, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a.
designed such
disclosure controls
and procedures, or
caused such
disclosure controls
and procedures to be
designed under our
supervision, to
ensure that material
information relating
to the registrant,
including its
consolidated
subsidiaries, is made
known to us by others
within those
entities,
particularly during
the period in which
this report is being
prepared;
b.
evaluated the
effectiveness of the
registrant’s
disclosure controls
and procedures and
presented in this
report our
conclusions about the
effectiveness of the
disclosure controls
and procedures, as of
the end of the period
covered by this
report based on such
evaluation; and
c.
disclosed in this
report any change in
the registrant’s
internal control over
financial reporting
that occurred during
the registrant’s most
recent fiscal quarter
(the registrant’s
fourth fiscal quarter
in the case of an
annual report) that
has materially
affected, or is
reasonably likely to
materially affect,
the registrant’s
internal control over
financial reporting;
and
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |||
Date: June 9, 2004
|
|
By: | /s/ Stephen Riggio | ||||
|
|
|
|||||
|
|
Stephen Riggio | |||||
|
|
Chief Executive Officer | |||||
|
|
Barnes & Noble, Inc. |
Exhibit 31.2
CERTIFICATION PURSUANT TO
I, Joseph J. Lombardi, Chief Financial Officer of Barnes & Noble, Inc., certify
that:
17 CFR 240.13a-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this report on Form 10-Q of Barnes & Noble, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a.
designed such
disclosure controls
and procedures, or
caused such
disclosure controls
and procedures to be
designed under our
supervision, to
ensure that material
information relating
to the registrant,
including its
consolidated
subsidiaries, is made
known to us by others
within those
entities,
particularly during
the period in which
this report is being
prepared;
b.
evaluated the
effectiveness of the
registrant’s
disclosure controls
and procedures and
presented in this
report our
conclusions about the
effectiveness of the
disclosure controls
and procedures, as of
the end of the period
covered by this
report based on such
evaluation; and
c.
disclosed in this
report any change in
the registrant’s
internal control over
financial reporting
that occurred during
the registrant’s most
recent fiscal quarter
(the registrant’s
fourth fiscal quarter
in the case of an
annual report) that
has materially
affected, or is
reasonably likely to
materially affect,
the registrant’s
internal control over
financial reporting;
and
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |||
Date: June 9, 2004
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By: | /s/ Joseph J. Lombardi | ||||
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Joseph J. Lombardi | |||||
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Chief Financial Officer | |||||
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Barnes & Noble, Inc. |
Exhibit 32.1
CERTIFICATION PURSUANT TO
In connection with the quarterly report of Barnes & Noble, Inc. (the
“Company”) on Form 10-Q for the period ended May 1, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I,
Stephen Riggio, Chief Executive Officer of the Company, certify, to the best
of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act
of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will
be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
/s/Stephen Riggio
Stephen Riggio
Chief Executive Officer
Barnes & Noble, Inc.
June 9, 2004
Exhibit 32.2
CERTIFICATION PURSUANT TO
In connection with the quarterly report of Barnes & Noble, Inc. (the
“Company”) on Form 10-Q for the period ended May 1, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I,
Joseph J. Lombardi, Chief Financial Officer of the Company, certify, to the
best of my knowledge, pursuant to Rule 13a-14(b) under the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will
be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
/s/Joseph J. Lombardi
Joseph J. Lombardi
Chief Financial Officer
Barnes & Noble, Inc.
June 9, 2004