<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6 (e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-a-11(c) or ss.240.14a-12
barnesandnoble.com inc.
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
...........................................................................
(2) Aggregate number of securities to which transaction applies:
...........................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
...........................................................................
(4) Proposed maximum aggregate value of transaction:
...........................................................................
(5) Total fee paid:
...........................................................................
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify previous filing by registration statement number, or
the Form or Schedule and date of its filing.
(1) Amount Previously Paid:
...........................................................................
(2) Form, Schedule or Registration Statement No.:
...........................................................................
(3) Filing Party:
...........................................................................
(4) Date Filed:
...........................................................................
<PAGE>
barnesandnoble.com inc.
76 Ninth Avenue
New York, New York 10011
June 16, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of barnesandnoble.com inc. to be held at 10:00 a.m., New York City time, on
Wednesday, July 19, 2000 at the Marriott Marquis, 1535 Broadway at West 45th
Street, New York, New York.
Information about the meeting and the various matters on which the
stockholders will act is included in the Notice of Annual Meeting of
Stockholders and Proxy Statement that follow. Also included is a Proxy Card and
postage paid return envelope.
Whether or not you plan to attend the meeting, we hope you will have your
shares represented at the meeting by completing, signing and returning your
Proxy Card in the enclosed postage paid return envelope promptly. Alternatively,
you may vote by telephone by following the instructions set forth on your proxy
card.
Sincerely,
/s/ MICHAEL N. ROSEN
--------------------
Michael N. Rosen
Secretary
<PAGE>
barnesandnoble.com inc.
76 Ninth Avenue
New York, New York 10011
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 19, 2000
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
barnesandnoble.com inc. will be held at the Marriott Marquis, 1535 Broadway at
West 45th Street, New York, New York, at 10:00 a.m., New York City time, on
Wednesday, July 19, 2000 for the following purposes:
1. To elect three Directors to serve until the 2003 Annual Meeting of
Stockholders and until their respective successors are duly elected
and qualified;
2. To ratify the appointment of BDO Seidman, LLP as independent certified
public accountants for the Company's fiscal year ending December 31,
2000; and
3. To transact such other business as may be properly brought before the
meeting and any adjournment or postponement thereof.
Only holders of record of Common Stock as of the close of business on May
30, 2000 are entitled to vote at the meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ MICHAEL N. ROSEN
--------------------
Michael N. Rosen
Secretary
New York, New York
June 16, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD.
ALTERNATIVELY, YOU MAY VOTE BY TELEPHONE BY FOLLOWING
THE INSTRUCTIONS SET FORTH ON YOUR PROXY CARD.
<PAGE>
barnesandnoble.com inc.
76 Ninth Avenue
New York, New York 10011
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 19, 2000
GENERAL INFORMATION
The enclosed proxy is solicited by the Board of Directors of
barnesandnoble.com inc., a Delaware corporation (the "Company") to be used at
the Annual Meeting of Stockholders (the "Annual Meeting" or "Meeting") to be
held at 10:00 a.m., New York City time, on Wednesday, July 19, 2000, at the
Marriott Marquis, 1535 Broadway at West 45th Street, New York, New York and at
any adjournment thereof. This proxy statement and an accompanying proxy card are
being mailed to stockholders on or about June 16, 2000.
The Company has three classes of Common Stock, par value $0.001 per share
(the "Common Stock"), all of which are entitled to vote at this Annual Meeting.
Each holder of the Company's Class A Common Stock is entitled to one vote per
share on the matters to be considered. Each holder of the Company's Class B
Common Stock or Class C Common Stock (collectively, "High Vote Stock") is
entitled to the number of votes per share equal to: (i) ten, multiplied by the
sum of (a) the aggregate number of shares of High Vote Stock owned by such
holder and (b) the aggregate number of Membership Units in barnesandnoble.com
llc owned by such holder, divided by (ii) the aggregate number of shares of High
Vote Stock owned by such holder.
Only stockholders of record at the close of business on May 30, 2000 will
be entitled to vote. As of such date, 30,839,029 shares of Class A Common
Stock (representing 30,839,029 votes), and two shares of High Vote Stock
(representing 115,000,002 votes), were outstanding and entitled to vote. The
presence at the Annual Meeting, either in person or by proxy, of holders of
record of a majority of the shares of Common Stock outstanding will constitute a
quorum.
The three nominees for Class A Director, Class B Director and Class C
Director receiving the highest vote totals of the Common Stock, the Class B
Common Stock and the Class C Common Stock, respectively, will be elected as
Directors of the Company to serve until the 2003 Annual Meeting of Stockholders.
The ratification of the appointment of the Company's independent certified
public accountants will be decided by the affirmative vote of a majority of the
shares of Common Stock voting on the proposal. Accordingly, abstentions and
broker non-votes will not be included in vote totals and will have no effect on
the outcome of such proposal or on the election of Directors.
Barnes & Noble, Inc. ("Barnes & Noble") is the beneficial owner of all of
the Company's outstanding Class B Common Stock and Bertelsmann AG
("Bertelsmann") is the beneficial owner of all of the Company's outstanding
Class C Common Stock. Accordingly, Barnes & Noble will be entitled to elect the
Class B Director, Bertelsmann will be entitled to elect the Class C Director
and, together Barnes & Noble and Bertelsmann will be able to elect the Class A
Director and control all other votes to be taken at the Annual Meeting.
All shares represented by properly executed proxy cards received in time
for the meeting, or properly voted telephonically will be voted in accordance
with the choices indicated, or if no choice is indicated, will be voted in
accordance with the recommendations of the Board of Directors. Unless contrary
instructions are given, the persons designated as proxy holders in the proxy
card will vote to elect as Directors the three nominees listed below and to
ratify the appointment of BDO Seidman, LLP as independent certified public
accountants for the Company's fiscal year ending December 31, 2000. Stockholders
may strike out the names of proxy holders designated by the Board of Directors
on the proxy card and substitute the name of any other person whom they wish to
represent them at the meeting. A stockholder may revoke any proxy by attending
the Annual Meeting and voting in person or by filing an instrument in writing
revoking the proxy or by filing another duly executed proxy card bearing a later
date with the Secretary of the Company.
The Company bears the cost of this solicitation. Proxies may be solicited
by mail, telephone or personally by Directors, officers and employees of the
Company. The
2
<PAGE>
Company will reimburse persons holding stock in their names or in the names of
their nominees for expenses of forwarding proxy material to their principals.
The mailing address of the Company's principal executive office is 76 Ninth
Avenue, New York, New York 10011.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Directors are
to be divided into three classes with respect to the time for which they hold
office. Each class consists of one Director elected by the holders of Class B
Common Stock (each a "Class B Director"), one Director elected by the holders of
Class C Common Stock (each a "Class C Director") and one Director elected by all
stockholders of the Company voting together as a single class (each a "Class A
Director"). At each annual meeting of stockholders of the Company, successors of
the class whose term of office expires in that year are to be elected for a
three-year term or until their successors have been duly elected and qualified.
<TABLE>
<CAPTION>
Name Age Position
------------------------------- --- -----------------------------
<S> <C> <C>
Leonard Riggio (1)(4) 59 Chairman of the Board
Stephen Riggio (1)(5) 45 Vice Chairman and Acting Chief Executive Officer
Michael N. Rosen (1) 59 Secretary and Director
Thomas Middelhoff (2)(4) 46 Director
Klaus Eierhoff (2)(5) 46 Director
Markus Wilhelm (2) 42 Director
Jan Michiel Hessels (3) 57 Director
William F. Reilly (3) 61 Director
</TABLE>
----------
(1) Class B Director.
(2) Class C Director.
(3) Class A Director and member of the Audit Committee and the Compensation
Committee.
(4) Member of the Special Committee, the Executive Committee and the Nominating
Committee.
(5) Member of the Executive Committee.
At the Meeting, three Directors (one Class A Director, one Class B Director
and one Class C Director) will be elected, each to hold office for a term of
three years and until his successor is elected and qualified. William F. Reilly,
Michael N. Rosen and Markus Wilhelm are nominees for election as Class A
Director, Class B Director and Class C Director, respectively, at the Meeting,
each to hold office for a term of three years until the Annual Meeting of
Stockholders to be held in 2003. Each of the nominees have consented to serve,
if elected. However, if any nominee is unable to stand for election, proxies may
be voted for a substitute designated by the Board of Directors in the case of
the Class A Director or by the Class B Directors or the Class C Directors in the
case of the Class B Director or the Class C Director, respectively.
3
<PAGE>
NOMINEES FOR ELECTION AS DIRECTOR
CLASS A DIRECTOR
(TO BE VOTED ON BY ALL HOLDERS OF COMMON STOCK)
Mr. William F. Reilly, a Class A Director, has been a director of the
Company since August 1999. Mr. Reilly co-founded Primedia Inc. ("Primedia"), a
specialty media company, in 1989. He served as Chairman and Chief Executive
Officer of Primedia from February 1990 to 1999. Mr. Reilly is a member of the
Board of Directors of FMC Corporation. Mr. Reilly serves on the Board of
Trustees of the University of Notre Dame.
CLASS B DIRECTOR
(TO BE VOTED ON BY HOLDERS OF CLASS B COMMON STOCK ONLY)
Mr. Michael N. Rosen, a Class B Director, has been Secretary and a director
of the Company and barnesandnoble.com llc ("B&N.com") since inception. Mr. Rosen
has been the Chairman of Robinson Silverman Pearce Aronsohn & Berman LLP
("Robinson Silverman"), counsel to the Company and B&N.com, for more than the
past five years. Mr. Rosen is also a director of Barnes & Noble, the nation's
largest bookseller, Barnes & Noble College Bookstores, Inc. ("B&N College"), one
of the nation's largest operators of college bookstores, and MBS Textbook
Exchange, Inc. ("MBS"), one of the nation's largest wholesalers of college
textbooks.
CLASS C DIRECTOR
(TO BE VOTED ON BY HOLDERS OF CLASS C COMMON STOCK ONLY)
Mr. Markus Wilhelm, a Class C Director, has been a director of the
Company since inception and B&N.com since November 1, 1998. Since March 2000,
Mr. Wilhelm has been Chief Executive Officer of BOOKSPAN, a partnership between
Doubleday Direct, Inc. ("Doubleday Direct") and Book-of-the-Month Club Holdings
LLC. On March 15, 1998, Mr. Wilhelm was elected Chairman of the Board of
Doubleday Interactive, Inc., a U.S. Internet service provider. In 1998, as
director of BOL.US Online, Inc. and BOL. Global, Inc., Mr. Wilhelm developed and
launched bol.com AG, the Internet division of Bertelsmann, one of the world's
largest media companies. Mr. Wilhelm has been the President of Doubleday Direct
since May 1993, and its Chief Executive Officer and Chief Compliance Officer
since July 1994. Mr. Wilhelm is responsible for Doubleday Direct's U.S.,
Canadian, British and Australian book club businesses.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE FOR DIRECTOR NAMED ABOVE. PROXIES SOLICITED HEREBY WILL
BE VOTED FOR EACH NOMINEE NAMED ABOVE UNLESS A VOTE AGAINST A NOMINEE OR AN
ABSTENTION IS SPECIFICALLY INDICATED.
CLASS WHOSE TERM EXPIRES IN 2001
Mr. Stephen Riggio, a Class B Director, has been a director of the Company
and B&N.com since inception and Vice Chairman since January 2000. Since January
2000, he has been Acting Chief Executive Officer of the Company and B&N.com, a
position he previously held at B&N.com from inception to December 1998. Mr.
Riggio has been Vice Chairman of Barnes & Noble since December 1997 and a
director of Barnes & Noble since April 1997. From February 1995 to December
1997, Mr. Riggio was Chief Operating Officer of Barnes & Noble and, from July
1993 to February 1995, he was President of B. Dalton Bookseller, Inc., a
wholly-owned subsidiary of Barnes & Noble. Mr. Stephen Riggio is the brother of
Mr. Leonard Riggio.
4
<PAGE>
Dr. Klaus Eierhoff, a Class C Director, has been a director of the Company
since inception and B&N.com since November 1998. Dr. Eierhoff has been President
and Chief Executive Officer of Bertelsmann Multimedia Group and a member of the
Executive Board of Bertelsmann since January 1998. From 1990 to 1997, Dr.
Eierhoff served as a member of the Executive Board of Karstadt AG. Dr. Eierhoff
has been Chairman of the supervisory board of Pixelpark AG since August 1999 and
Chairman of the supervisory board of bol.com AG since March 2000. Dr. Eierhoff
has also been Chairman of the supervisory board of mediaWays GmbH, a joint
venture between Bertelsmann and Daimler-Chrysler since February 1998.
CLASS WHOSE TERM EXPIRES IN 2002
Mr. Leonard Riggio, a Class B Director, has been Chairman of the Board of
the Company and B&N.com since inception. Mr. Riggio has been Chairman of the
Board, Chief Executive Officer and a principal stockholder of Barnes & Noble
since its inception in 1986. Since 1965, Mr. Riggio has been Chairman of the
Board, Chief Executive Officer and the principal stockholder of B&N College. For
more than the past five years, Mr. Riggio has been Chairman of the Board and a
principal beneficial owner of MBS. Mr. Leonard Riggio is the brother of Mr.
Stephen Riggio.
Dr. Thomas Middelhoff, a Class C Director, has been a director of the
Company since inception and B&N.com since November 1998. Dr. Middelhoff has been
Chairman and Chief Executive Officer of Bertelsmann since November 1998. From
1994 to 1998, Dr. Middelhoff was a Member of the Executive Board of Bertelsmann,
where he was head of Corporate Development and the Coordinator of Bertelsmann's
multimedia businesses. Dr. Middelhoff has been a member of the supervisory board
of Metro AG since July 1998 and a member of the supervisory board of Vivendi
S.A. since May 1999. Dr. Middelhoff has been a member of the supervisory board
of Gruner + Jahr AG, 74.9% owned by Bertelsmann since January 1999.
Mr. Jan Michiel Hessels, a Class A Director, has been a director of the
Company since August 1999. Mr. Hessels was a director of Barnes & Noble from
October 1990 to August 1999. Mr. Hessels has been the Chief Executive Officer of
Vendex International N.V. ("Vendex") since June 1990. Vendex is a multi-billion
dollar Netherlands-based corporation with substantial international retailing
operations. Mr. Hessels is also a director of Amsterdam Stock Exchange, BAM
Holding N.V., Yule Catto Plc., Schiphol Airport, Royal Van Ommeren, Staal Bank
and Royal Philips Electronics N.V.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During 1999, the Board of Directors met three times and acted by unanimous
written consent on five additional occasions. All Directors attended at least
75% of the meetings of the Board of Directors and the committees of which they
are members.
The Special Committee consists of two members, one of whom is selected by
the Class B Directors and one of whom is selected by the Class C Directors. The
purpose of the Special Committee is to evaluate certain major corporate actions,
such as mergers, acquisitions, capital expenditures or borrowings in excess of
$20 million (each a "Major Action"). Each Major Action requires the approval of
the Special Committee prior to being submitted for the approval of the Board of
Directors. The current members of the Special Committee are Mr. Leonard Riggio
and Dr. Thomas Middelhoff.
The Executive Committee consists of four members of the Board of Directors.
The Executive Committee exercises all of the power and authority of the Board of
Directors to the extent permitted by law, provided that Major Actions will
require the approval of the Special Committee and the full Board of Directors.
5
<PAGE>
The current members of the Executive Committee are Mr. Leonard Riggio, Mr.
Stephen Riggio, Dr. Thomas Middelhoff and Dr. Klaus Eierhoff.
The Audit Committee of the Board of Directors consists solely of two
independent directors. The Audit Committee reviews, acts on and reports to the
Board of Directors with respect to various auditing and accounting matters,
including the selection of the Company's auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of the Company's
independent auditors and the accounting practices of the Company. The current
members of the Audit Committee are Mr. William F. Reilly and Mr. Jan Michiel
Hessels.
Through January 26, 2000, the full Board of Directors functioned as the
Compensation Committee. Thereafter, the Compensation Committee consisted of
William F. Reilly and Jan Michiel Hessels. The Compensation Committee determines
the salaries and incentive compensation of the officers of the Company and
provides recommendations for the salaries and incentive compensation of the
other employees and the consultants of the Company and authorizes grants under
the Company's 1999 Incentive Plan.
The role of the Nominating Committee is to conduct searches for the
potential directors to recommend candidates to the full Board of Directors for
its consideration. The current members of the Nominating Committee are Mr.
Leonard Riggio and Dr. Thomas Middelhoff.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In January 2000, the Board of Directors appointed Mr. William F. Reilly and
Mr. Jan Michiel Hessels to constitute the Compensation Committee, neither of
whom is an officer or employee or former officer or employee of the Company or
B&N.com. Prior to that time, the Board of Directors performed the functions of
the Compensation Committee. No executive officer of the Company serves as a
member of the Board of Directors or Compensation Committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee, except that Leonard Riggio, the Company's
Chairman of the Board, is also the Chairman of Barnes & Noble, B&N College and
MBS, and Michael N. Rosen, who is the Secretary and a director of the Company,
is also the Secretary and a director of Barnes & Noble, B&N College and MBS.
COMPENSATION OF DIRECTORS
All directors at the time of the Company's Initial Public Offering of Class
A Common Stock (the "Offering") other than Leonard Riggio and Stephen Riggio
received options to purchase 40,000 shares of Class A Common Stock at a per
share exercise price equal to the per share Offering price. Such options vest in
four equal annual installments on the first through fourth anniversary of the
completion of the Offering. Directors taking office after the Offering received
options to purchase 40,000 shares of Class A Common Stock at an exercise price
equal to the market price on such date, with such options vesting in four equal
annual installments on the first through fourth anniversaries of the date of
grant. Directors who are not employees of the Company, B&N.com, Barnes & Noble
or Bertelsmann may also receive compensation in the future in amounts to be
determined. In addition, all directors are reimbursed for certain expenses in
connection with attendance at Board of Directors and committee meetings. Other
than with respect to reimbursement of expenses, directors who are employees or
officers of the Company do not receive additional compensation for their
services as directors.
6
<PAGE>
EXECUTIVE OFFICERS
The Company's executive officers, as well as additional information with
respect to such persons, are set forth in the table below:
<TABLE>
<CAPTION>
Name Age Position
------------------------------- --- -----------------------------
<S> <C> <C>
Leonard Riggio 59 Chairman of the Board
Stephen Riggio 45 Vice Chairman and Acting Chief Executive Officer
Marie J. Toulantis 46 Chief Financial Officer
Gary King 42 Chief Technology Officer
Carl Rosendorf 49 Senior Vice President, Marketing, Sales and
Business Development
William F. Duffy 44 Vice President, Operations
Brenda Marsh 46 Vice President, Merchandising
Michael N. Rosen 59 Secretary and Director
</TABLE>
Information with respect to executive officers of the Company who also are
Directors is set forth in "Election of Directors" above.
Ms. Marie J. Toulantis has been Chief Financial Officer of the Company and
B&N.com since May 1999. From March 1999 through May 1999 she was Chief Financial
Officer of Barnes & Noble and from July 1997 through May 1999 she was Executive
Vice President, Finance of Barnes & Noble. Prior to that Ms. Toulantis was
Senior Vice President of The Chase Manhattan Bank ("Chase") from May 1996 to
June 1997. Prior to that Ms. Toulantis held the position of Vice President at
Chase from 1987 to May 1996.
Mr. Gary King has been Chief Technology Officer of the Company since
inception and B&N.com since January 1999, and is responsible for developing and
implementing global information technologies, as well as allocating and
evaluating the effectiveness of overall technology resources. From 1987 to
December 1998, Mr. King was with Avon Products ("Avon") serving most recently as
Vice President for Global Information Technologies. At Avon, Mr. King was
responsible for the strategic planning, evaluation, selection and implementation
of all information technology and computing architectures for Avon's businesses
in Europe, the Middle East and Africa.
Mr. Carl Rosendorf was Vice President, Marketing, Sales and Business
Development of the Company since inception and B&N.com since June 1997, and was
promoted to Senior Vice President in January 1999. Prior to that time, from
November 1994 to July 1996, Mr. Rosendorf was one of the founders and President
of Cybersmith, a premier Internet cafe. From 1988 to 1994, Mr. Rosendorf served
as Executive Vice President of B&N College where he was responsible for
coordinating all retail operations, including buying, merchandising, store
design and construction.
Mr. William F. Duffy has been Vice President, Operations of the Company and
B&N.com since inception. Mr. Duffy is responsible for operations, fulfillment
and customer service of B&N.com. He was also Chief Financial Officer of B&N.com
from inception to January 1999 and a director of B&N.com from inception to
October 1998. From April 1996 to January 1998, Mr. Duffy served as Vice
President, Finance of Barnes & Noble. From 1994 to 1997, Mr. Duffy served as the
Vice President and General Manager of Marboro Books Corp., a wholly-owned
subsidiary of Barnes & Noble through which Barnes & Noble operated its
mail-order business, where he was responsible for all of the merchandising,
marketing, management information systems and creative and fulfillment
operations.
7
<PAGE>
Ms. Brenda Marsh has been Vice President, Merchandising of the Company and
B&N.com since June 1998. From 1988 until 1997, Ms. Marsh served first as Senior
Vice President, and then President, Sales and Market Development for the general
book group of HarperCollins Publishers, where she was responsible for domestic
and international sales business development and customer service. Prior to
that, Ms. Marsh held executive positions at Viking Penguin and St. Martin's
Press.
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of April 1, 2000 by: (i) each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock; (ii) each of the Company's Directors; (iii) the executive officers named
in the Summary Compensation Table contained in "Executive Compensation" below;
and (iv) all current executive officers and directors as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address of Beneficial Owner Beneficially Owned (1) of Class
------------------------------------ ---------------------- ---------
<S> <C> <C>
Barnes & Noble, Inc 57,500,001 (2) 39.9%
122 Fifth Ave., New York, NY 10011
Bertelsmann AG 57,500,001 (2) 39.9
Carl-Bertelsmann-Strasse 270
33311 Gutersloh, Germany
Leonard Riggio 7,360,046 (3) 21.4
Stephen Riggio 890,000 (4) 3.0
Michael N. Rosen 40,000 (5) *
Thomas Middelhoff 38,800 (6) *
Klaus Eierhoff 10,000 (7) *
Markus Wilhelm 60,000 (8) *
Jan Michiel Hessels -- --
William F. Reilly -- --
Jonathan Bulkeley 638,750 (9) 2.1
Gary King 13,315 (10) *
Carl Rosendorf 431,250 (7) 1.4
William F. Duffy 301,875 (7) 1.0
Brenda Marsh 86,250 (7) *
All current executive officers and
directors as a group (13 persons) 9,655,286 (11) 26.5
</TABLE>
-----------
* Represents less than 1%.
(1) Shares of Common Stock subject to options that are currently exercisable or
exercisable within 60 days after April 1, 2000 are deemed to be outstanding
and beneficially owned by the person holding such options for the purpose
of computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Represents shares of High Vote Stock which are convertible into, and
Membership Units which are exchangeable for, shares of Class A Common Stock
on a one-for-one-basis at any time at the option of the holder thereof.
Barnes & Noble is the beneficial owner of all of the Company's outstanding
Class B Common Stock and Bertelsmann is the beneficial owner of all of the
Company's outstanding Class C Common Stock. Accordingly, Barnes & Noble
will be entitled to elect the Class B Director, Bertelsmann will be
entitled to elect the Class C Director and, together, Barnes & Noble and
Bertelsmann will be able to elect the Class A Director and control all
other votes to be taken at the Annual Meeting.
8
<PAGE>
(3) Includes options granted by the Company to Mr. Leonard Riggio to purchase
5,060,046 shares of Class A Common Stock. Does not include 57,500,001
shares of Class A Common Stock beneficially owned by Barnes & Noble. Mr.
Riggio is Barnes & Noble's Chairman of the Board, Chief Executive Officer
and principal stockholder. Accordingly, he could be considered to
beneficially own the shares owned by Barnes & Noble. Mr. Riggio disclaims
any beneficial ownership of such shares.
(4) Includes options granted by the Company to purchase 690,000 shares of Class
A Common Stock.
(5) Includes options granted by the Company to purchase 10,000 shares of Class
A Common Stock.
(6) Includes options granted by the Company to purchase 10,000 shares of Class
A Common Stock and 28,800 shares of Class A Common Stock held in trust on
behalf of Dr. Middelhoff.
(7) All of these shares are issuable upon the exercise of options granted by
the Company.
(8) Includes options granted by the Company to purchase 10,000 shares of Class
A Common Stock.
(9) All of the shares are issuable upon the exercise of options granted by the
Company. In January 2000 Mr. Bulkeley, the Chief Executive Officer of the
Company from inception and B&N.com from January 1999 to January 2000,
resigned from these positions. Pursuant to his Termination Agreement, in
March 2000 Mr. Bulkeley surrendered one million of currently exercisable
options to the Company in return for a payment of $10,940,000 and his
remaining 2,328,750 unvested options were forfeited.
(10) Includes options granted by the Company to purchase 13,125 shares of Class
A Common Stock.
(11) Includes options granted by the Company to purchase 7,046,296 shares of
Class A Common Stock.
9
<PAGE>
EXECUTIVE COMPENSATION
The salaries and other compensation (other than long-term compensation) of
the executive officers of the Company are paid by B&N.com. The following table
summarizes the compensation paid or accrued by the Company and B&N.com for the
year ended December 31, 1999, for the services rendered to the Company and
B&N.com, to the Chief Executive Officer and the four other most highly
compensated executive officers (collectively, the "Named Executive Officers").
Leonard Riggio, the Company's Chairman, receives no salary or other cash
compensation from the Company or B&N.com.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Annual Compensation Compensation
---------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation(1) Options Compensation(2)
--------------------------- ---- -------- ----- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Bulkeley(3) 1999 $ 431,606 $ -- $ -- 4,140,000 $ --
Chief Executive Officer 1998 -- -- -- -- --
Gary King 1999 275,000 100,000 -- 118,500 42,687(4)
Chief Technology Officer 1998 -- -- -- 172,500 (5) --
Carl Rosendorf 1999 300,000 100,000 -- -- --
Senior Vice President, 1998 271,154 33,333 1,500 862,500 --
Marketing, Sales and
Business Development
William F. Duffy 1999 292,040 112,880 25,000 26,750 --
Vice President, 1998 255,507 110,000 23,864 603,750 --
Operations
Brenda Marsh 1999 250,000 29,165 -- 21,500 --
Vice President, 1998 141,346 25,000 -- 172,500 --
Merchandising
</TABLE>
------------
(1) Consists of payments made under the Company's Retirement Plan, Deferred
Compensation Plan and Defined Contribution Plan.
(2) In accordance with the rules of the Securities and Exchange Commission,
except as indicated, other compensation in the form of prerequisites and
other personal benefits has been omitted for each of the Named Executive
Officers because the aggregate amount of such prerequisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of the
total of annual salary and bonuses for each of such Named Executive
Officers.
(3) Mr. Jonathan Bulkeley's employment terminated in January 2000. See
"Employment Arrangements" below for a descripition of certain payments made
to Mr. Bulkeley in connection with his employment termination.
(4) Consists solely of reimbursement of relocation expenses.
(5) Options were granted in December 1998 in connection with Mr. King's
acceptance of employment commencing in January 1999.
10
<PAGE>
OPTION GRANTS IN 1999
The following table sets forth certain information with respect to stock
grants to the Named Executive Officers during the year ended December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value
Individual Grants (1) At Assumed Annual
---------------------------------------------------------- Rates
% of Total of Stock Price
Number of Options Appreciation for
Securities Granted to Exercise Option Term (2)
Underlying Employees In Price Per Expiration --------------
Name Options Granted Fiscal Year Share (3) Date 5.0% 10.0%
---- --------------- ----------- --------- ---- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Bulkeley -- --% $ -- -- $ -- $ --
Gary King 118,500 2.01 15.75 08/04/09 1,173,753 2,974,521
Carl Rosendorf -- -- -- -- -- --
William F. Duffy 26,750 0.45 15.75 08/04/09 264,961 671,464
Brenda Marsh 21,500 0.36 15.75 08/04/09 212,959 539,681
</TABLE>
----------
(1) All options were granted with an exercise price equal to or above the fair
market value of the Common Stock at the date of grant.
(2) In accordance with the rules of the Securities and Exchange Commission, the
amounts shown on this table reflect hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5.0%
and 10.0%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock and the
date on which the options are exercised.
(3) In the first quarter 2000, the Company repriced approximately 5 million
outstanding options (net of cancellations) which were originally granted at
an average per share exercise price of $16.15. The new per share exercise
price for the options is $8.00.
11
<PAGE>
OPTIONS EXERCISED IN 1999 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
value of options held by the Named Executive Officers at December 31, 1999.
AGGREGATED OPTION EXERCISES IN 1999 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money Options
On Exercise Realized Options at December 31, 1999 at December 31, 1999(1)
----------- -------- ----------------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Bulkeley -- $ -- 1,035,000 3,105,000(2) $10,481,963 $31,445,888
Gary King 30,000 441,249 13,125 247,875 129,117 1,272,727
Carl Rosendorf -- -- 215,625 646,875 2,308,805 6,926,414
William F. Duffy -- -- 150,937 479,563 1,616,163 4,848,490
Brenda Marsh -- -- 43,125 150,875 424,242 1,272,727
</TABLE>
-----------
(1) Amounts equal the closing price of the Common Stock on December 31, 1999
($14.1875 per share), less the option exercise price, multiplied by the
number of shares exercisable or unexercisable.
(2) 2,328,750 of these were forfeited upon the termination of Mr. Bulkeley's
employment.
EMPLOYEES' RETIREMENT PLAN
The Retirement Plan is a defined benefit pension plan covering all
employees whose services are performed within the U.S. (including Puerto Rico)
who are at least 21 years of age and who have completed at least one year of
service and work a minimum of 1,000 hours per year. Vesting occurs after five
years of service. The Retirement Plan provides the Company funded benefits based
upon an employee's years of service and highest annual salary for any five
consecutive years in the last ten years of service.
A participant's annual benefit is determined, generally as (i) 0.7% of the
participant's average annual pay as determined in accordance with the Retirement
Plan up to Social Security-covered compensation, multiplied by the participant's
years of credited service, plus (ii) 1.3% of the participant's average annual
pay as determined in accordance with the Retirement Plan in excess of Social
Security-covered compensation, multiplied by the participant's years of credited
service. A participant's maximum benefit is limited pursuant to Section 415 of
the Internal Revenue Code of 1986, as amended (the "Code"), to $130,000 for
1999, indexed annually. Compensation recognized under the Retirement Plan is
limited to $160,000 for 1997, 1998 and 1999, indexed annually in accordance with
Sections 401 (a)(17) and 415 (d) of the Code.
The Retirement Plan provides that, for as long as the Barnes & Noble
pension plan provides for future benefit accruals, if a participant in the
Employees' Retirement Plan becomes employed by Barnes & Noble or an affiliate by
a direct transfer of employment from the Company, increases in such person's age
and the compensation paid by Barnes & Noble during that employment with Barnes &
Noble will be taken into account in calculating benefits under the Retirement
Plan accrued through the date of such transfer. The Retirement Plan also
provides that, with respect to any person who becomes employed by the Company,
upon a direct transfer of employment from Barnes & Noble or an affiliate,
service with Barnes & Noble or the affiliate shall be taken into account for
purposes of vesting, eligibility and early retirement subsidies under the
Retirement Plan.
12
<PAGE>
Credited years of service under the Retirement Plan as of December 31, 1999
for the Named Executive Officers are: Jonathan Bulkeley -1, Gary King -1, Carl
Rosendorf -3, William F. Duffy-6 and Brenda Marsh-2.
The following table illustrates the maximum annual amounts payable at age
65 under the Retirement Plan, based on various levels of highest average annual
salary and years of credited service:
<TABLE>
<CAPTION>
Years of Credited Service
---------------------------------------------------------------
Assumed Highest Average Salary 15 20 25 30 35
------------------------------ --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
$100,000 $16,260 $21,680 $27,100 $32,520 $37,940
$125,000 21,135 28,180 35,225 42,270 49,315
$150,000 26,010 34,680 43,350 52,020 60,690
$170,000 and above (1) 29,910 39,880 49,850 59,820 69,790
</TABLE>
------------
(1) The benefits shown corresponding to this compensation reflect the
compensation limit under Section 401 (a)(17) of the Code. A participant's
compensation in excess of $150,000 (as adjusted to reflect cost-of-living
increases) is disregarded for purposes of determining highest average
earnings in plan years beginning in 1994 through 1996; a participant's
compensation in excess of $160,000 (as adjusted to reflect cost-of-living
increases) is disregarded for purposes of determining highest average
earnings in plan years beginning in 1997 through 1999 and $170,000 in plan
year 2000. Benefits accrued as of the last day of the plan year beginning
in 1993 on the basis of compensation in excess of $150,000 are preserved.
DEFERRED COMPENSATION PLAN
B&N.com's Deferred Compensation Plan is a non-qualified plan, eligibility
for which is limited to "Eligible Executives," who include: (i) the Company's
employees who became B&N.com employees on November 1, 1998 and were eligible to
participate in the Barnes & Noble deferred compensation plan on October 31,
1998; and (ii) the Company's employees whose base salary for a calendar year
exceeds $130,000. An Eligible Executive may elect in each year he or she is an
Eligible Executive to defer no less than $5,000 and no more than 50% of his or
her base salary to a Deferral Account. The Deferral Account of each Eligible
Executive who elects to participate in the Deferred Compensation Plan (a
"Participant") is credited or debited with investment earnings or losses based
upon the performance of the investment fund or index selected by the Participant
from among alternatives selected by an Administrative Committee appointed by the
Compensation Committee of the Board of Directors.
A participant is entitled to a distribution of his or her Deferral Account
upon retirement or following termination of employment, as elected by the
Participant, but no later than the beginning of the year in which the
Participant would attain age 70 1/2. A Participant may elect whether to receive
the distribution in a lump sum or in annual installments over not more than
fifteen (15) years.
Amounts payable under the Deferred Compensation Plan are general unsecured
obligations of B&N.com, payable out of B&N.com's general assets to the extent
not paid by a grantor trust which the Company may establish. The Company may
amend or terminate the Deferred Compensation Plan at any time without affecting
any of the rights granted prior to termination.
13
<PAGE>
DEFINED CONTRIBUTION PLAN
B&N.com is a participating employer in a defined contribution plan (the
"Savings Plan"), sponsored by Barnes & Noble, for the benefit of substantially
all of its employees who meet certain eligibility requirements, primarily age
and length of service. The Savings Plan allows employees to invest up to 15% of
their current gross cash compensation on a pre-tax or post-tax basis, at their
option. B&N.com's contributions to the Savings Plan are generally in amounts
based upon a certain percentage of the employees' pre-tax contributions. B&N.com
provides matching contributions to participants in the amount of 50% of the
first 5% contributed by them, which contributions are made in the form of Barnes
& Noble common stock.
EMPLOYMENT ARRANGEMENTS
The Company was party to an Employment Agreement with Jonathan Bulkeley
pursuant to which, as of January 4, 1999, Mr. Bulkeley became the Chief
Executive Officer of the Company. On January 14, 2000 the Company entered into a
Termination Agreement with Mr. Bulkeley pursuant to which the Employment
Agreement was terminated. In connection with the Termination Agreement, the
Company agreed to pay Mr. Bulkeley severance of $808,625, less withholding for
all applicable taxes and deductions. Additionally, the Company paid Mr. Bulkeley
$10,940,000 for the surrender of one million currently exercisable options to
purchase Class A Common Stock in the Company for $4.06 per share. The
Termination Agreement also extended until December 31, 2000 the time period that
Mr. Bulkeley had to exercise vested options to purchase 801,250 shares of Class
A Common Stock in the Company for $4.06 per share. Mr. Bulkeley may sell or
cause to be sold up to 400,000 of such shares in the aggregate during the period
from February 1, 2000 through May 31, 2000, at the rate of no more than 20,000
of such shares on any single day; and may sell or cause to be sold up to 401,250
of such shares in the aggregate during the period from June 1, 2000 through
December 31, 2000, at the rate of no more than 5,000 of such shares on any
single day. Under the terms of the Termination Agreement, the balance of Mr.
Bulkeley's unvested options (for 2,328,750 shares at a per share exercise price
of $4.06) were forfeited.
INCENTIVE PLAN
GENERAL. The Company's 1999 Incentive Plan (the "Incentive Plan") provides
that options to acquire shares of Class A Common Stock ("Shares") may be granted
to key officers, employees, consultants, advisors and directors of the Company
or any of its subsidiaries or affiliates as shall be selected from time to time
by a committee not fewer than two directors of the Company, as designated by the
Board of Directors. The purpose of the Incentive Plan is to assist the Company
in attracting and retaining selected individuals to serve as directors,
officers, consultants, advisors and employees of the Company and B&N.com who
will 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 incentive inherent in the ownership of the Common Stock. Awards under
the Incentive Plan may take the form of stock options ("Options"), including
corresponding share appreciation rights ("SARs") and reload options, restricted
stock awards and stock purchase awards.
SHARE AUTHORIZATION. The maximum number of Shares that may be the subject
of awards under the Incentive Plan is 25,500,000 Shares and in any given year,
the maximum number of Shares with respect to which awards may be granted to any
employee is 7,000,000 Shares. Shares covered by any unexercised portions of
terminated Options, Shares forfeited by participants and Shares subject to any
awards that are otherwise surrendered by a participant without receiving any
payment or other benefit with respect thereto may again be subject to new awards
under the Incentive Plan. In the event the purchase price of the Option is paid
in whole or in part through the delivery of Shares, the number of Shares
issuable in connection with the exercise of the Option shall not again be
available for the grant of awards under the Incentive Plan. Shares subject to
Options, or portions thereof, with respect to which SARs are exercised, are not
again available for the grant of awards
14
<PAGE>
under the Incentive Plan. The Shares to be issued or delivered under the
Incentive Plan are authorized and unissued Shares, or issued Shares that have
been acquired by the Company, or both.
INCENTIVE PLAN ADMINISTRATION. The Incentive Plan is administered by the
Compensation Committee. The Compensation Committee is authorized, subject to the
provisions of the Incentive Plan, to establish such rules and regulations as it
may deem appropriate for the conduct of meetings and proper administration of
the Incentive Plan. Subject to the provisions of the Incentive Plan, the
Compensation Committee shall have authority, in its sole discretion, to grant
awards under the Incentive Plan, to interpret the provisions of the Incentive
Plan and, subject to the requirements of applicable law, to prescribe, amend,
and rescind rules and regulations relating to the Incentive Plan or any award
thereunder as it may deem necessary or advisable.
OPTIONS. "Incentive Stock Options" meeting requirements of Section 422 of
the Code, and "Nonqualified Stock Options" that do not meet such requirements
are both available for grant under the Incentive Plan. The term of each Option
is determined by the Compensation Committee, but no Option can be exercisable
prior to six months from the date of grant or more than ten years after the date
of grant (except in the case of Options that are not Nonqualified Stock Options,
where the Compensation Committee can specify a longer period). Options may also
be subject to restrictions on exercise, such as exercise in periodic
installments, as determined by the Compensation Committee. In general, the
exercise price for Incentive Stock Options must be at least equal to 100% of the
fair market value of the Shares on the date of grant and the exercise price for
Nonqualified Stock Options will be determined by the Compensation Committee at
the time of the grant. The exercise price can be paid in cash, or if approved by
the Compensation Committee, by delivery of a promissory note or tendering Shares
owned by the participant. Options are not transferable except by will or the
laws of descent and distribution and may generally be exercised only by the
participant (or his or her guardian or legal representative) during his or her
lifetime, provided, however, the Nonqualified Stock Options may, under certain
circumstances, be transferable to family members and trust for the benefit of
the participant or his or her family members.
SHARE APPRECIATION RIGHTS. The Incentive Plan provides SARs may be granted
in connection with the grant of Options. Each SAR must be associated with a
specific Option and must be granted at the time of grant of such Option. A SAR
is exercisable only to the extent the related Option is exercisable. Upon the
exercise of a SAR, the recipient is entitled to receive from the Company,
without the payment of any cash (except for any applicable withholding taxes),
up to, but no more than, an amount in cash or Shares equal to the excess of (A)
the fair market value of one Share on the date of such exercise over (B) the
exercise price of any related Option, multiplied by the number of Shares in
respect of which such SAR shall have been exercised. Upon the exercise of a SAR,
the related Option, or the portion thereof in respect of which such SAR is
exercised, will terminate. Upon the exercise of an Option granted in tandem with
a SAR, such tandem SAR will terminate.
RELOAD OPTIONS. The Compensation Committee may grant, concurrently with the
award of any Option (an "Underlying Option"), a reload option (a "Reload
Option") to such participant to purchase for cash or Shares a number of Shares
equal to the number of Shares delivered by the participant to the Company to
exercise the Underlying Option and, to the extent authorized by the Compensation
Committee, the number of shares used to satisfy tax withholding obligations.
Although an Underlying Option may be an Incentive Stock Option, a Reload Option
is not intended to qualify as an Incentive Stock Option. A Reload Option has the
same expiration date as the Underlying Option and an exercise price equal to the
fair market value of the Shares on the date of the Reload Option. A Reload
Option is exercisable six months from the date of grant. A Reload Option permits
a participant to retain the potential Share appreciation in the number of
already-owned Shares that are used to exercise an Underlying Option. Retention
of such potential appreciation is accompanied by granting options for the number
of Shares used to pay the exercise price of the Underlying Option or the related
tax withholding obligation. In this way, Reload Options provide a participant
with the opportunity to build up ownership of
15
<PAGE>
Shares covered by an Underlying Option earlier during the Option term than
through a single exercise at or near the end of the Option term.
RESTRICTED STOCK. The Company may award restricted Shares under the
Incentive Plan. Such a grant gives a participant the right to receive Shares
subject to a risk of forfeiture based upon certain conditions. The forfeiture
restrictions on the Shares may be based upon performance standards, length of
service or other criteria as the Compensation Committee may determine. Until all
restrictions are satisfied, lapsed or waived, the Company will maintain custody
over the restricted Shares but the participant will be able to vote the Shares
and will be entitled to all distributions paid with respect to the Shares, as
provided by the Compensation Committee. During such restrictive period, the
restricted Shares may not be sold, assigned, transferred, pledged or otherwise
encumbered. Upon termination of employment, the participant forfeits the right
to the Shares to the extent the applicable performance standards, length of
service requirements, or other measurement criteria have not been met.
STOCK PURCHASE AWARDS. The Incentive Plan also permits the grant of stock
purchase awards. Participants who are granted a stock purchase award are
provided with a stock purchase loan to enable them to pay the purchase price for
the Shares acquired pursuant to the award. A stock purchase loan will have a
term of years to be determined by the Compensation Committee. The purchase price
of Shares acquired with a stock purchase loan is the price equal to the fair
market value on the date of the award. The Incentive Plan provides that up to
100% of the stock purchase loan may be forgiven over the loan term subject to
such terms and conditions as the Compensation Committee shall determine,
provided that the participant has not resigned as an employee. At the end of the
loan term, the unpaid balance of the stock purchase loan will be due and
payable. The interest rate on a stock purchase loan will be determined by the
Compensation Committee. Stock purchase loans will be secured by a pledge to the
Company of the Shares purchased pursuant to the stock purchase award and such
loans will be recourse or non-recourse to a participant, as determined from time
to time by the Compensation Committee.
ANTIDILUTION PROVISIONS. The number of Shares authorized to be issued under
the Incentive Plan and subject to outstanding awards (and the grant or exercise
price thereof) may be adjusted to prevent dilution or enlargement of rights in
the event of any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities, the issuance
of warrants or other rights to purchase Shares or other securities, or other
similar capitalization change.
CHANGE IN CONTROL. Upon the occurrence of a change in control of the
Company, all Options and related SARs may become immediately exercisable, the
restricted Shares may fully vest and stock purchase loans may be forgiven in
full.
TERMINATION AND AMENDMENT. The Incentive Plan will terminate by its terms
and without any action by the Board of Directors in 2008. No awards may be made
after that date. Awards outstanding on such termination date will remain valid
in accordance with their terms.
The Committee may amend or alter the terms of awards under the Incentive
Plan, including to provide for the forgiveness in whole or in part of stock
purchase loans, the release of the Shares securing such loans or the termination
or modifications of the vesting or performance provisions of the grants of
restricted Shares, but no such action shall in any way impair the rights of a
participant under any award, without such participant's consent.
16
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Through January 26, 2000, the full Board of Directors functioned as the
Compensation Committee. Thereafter, the Compensation Committee consisted of
William F. Reilly and Jan Michiel Hessels. The Company offers compensation
packages designed to attract and retain individuals whose skills are critical to
the long-term success of the Company. The compensation offered by the Company
should reward and motivate individual and team performance in attaining business
objectives and maximizing stockholder value.
The Compensation Committee reviews and approves the Company's executive
compensation program each year. This includes a comparison of the Company's
executive compensation, corporate performance, stock performance and total
return to the stockholders with that of peer companies, including other
e-commerce companies. In addition, the Compensation Committee also considers and
reviews the full compensation package afforded by the Company to its executive
officers, including pension, insurance and other benefits.
The key elements of the Company's executive compensation package consist of
base salary and stock options. Prior to the Offering, annual bonuses were also a
key element of the Company's executive compensation package. The Company's
policies with respect to each of these elements are discussed below. The
Compensation Committee makes its determinations after receiving and considering
the recommendations of the Company's Chairman.
Base Salaries. An executive officer's base salary is determined primarily
on the basis of the executive officer's responsibility, qualification,
experience and the competitive marketplace for executive talent. The base salary
is intended to be competitive with base salaries paid to executive officers with
comparable qualifications, experience and responsibilities at peer companies.
Stock Options. Stockholder grants to executive officers promote success by
aligning employee financial interests with long-term stockholder value.
Additionally, long-term awards offer executive officers an incentive for the
achievement of superior performance over time and foster the retention of key
management personnel. Annual stock option grants are determined based on various
subjective factors, primarily related to the individual's performance and
potential to improve stockholder value.
Chief Executive Officer Compensation. The compensation of the Company's
Chief Executive Officer is determined pursuant to the principles noted above.
Specific consideration is given to the Chief Executive Officer's
responsibilities and experience in the industry and the compensation package
awarded to chief executive officers of peer companies.
Section 162(m) of the Internal Revenue Code. The Compensation Committee has
considered the potential impact of Section 162(m) of the Code, adopted under the
Revenue Reconciliation Act of 1993. This section disallows a tax deduction for
any publicly held corporation, for individual compensation exceeding $1,000,000
in any taxable year paid to its Named Executive Officers unless (i) the
compensation is payable solely on account of
17
<PAGE>
the attainment of performance goals, (ii) the performance goals are determined
by a compensation committee of two or more outside directors, (iii) the material
terms under which compensation is to be paid are disclosed to and approved by
stockholders and (iv) the compensation committee certifies that the performance
goals were met.
BOARD OF DIRECTORS
Leonard Riggio
Stephen Riggio
Michael N. Rosen
Thomas Middelhoff
Klaus Eierhoff
Markus Wilhelm
Jan Michiel Hessels
William F. Reilly
PERFORMANCE GRAPH
The graph set forth below compares cumulative total return on the Common
Stock of the Company with the cumulative total return of the Standard and Poors
500 Index ("S&P 500") and a peer group of eleven companies, consisting of
Amazon.com, Inc., Autoweb.com, Inc., Beyond.com Corp., CDnow, Inc., Cyberian
Outpost, Inc., Egghead.com, Inc., eToys Inc., iVillage Inc., Peapod, Inc., Value
America, Inc. and Webvan Group, Inc. resulting from an initial assumed
investment of $100 in each for the period beginning on the date of the Company's
Offering of the Common Stock on May 25, 1999 and ending on December 31, 1999.
[THE FOLLOWING TABLE IS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
barnesandnoble.com inc. Peer Group S&P 500
----------------------- ---------- -------
5/25/99 100.00 100.00 100.00
12/31/99 78.82 108.65 122.91
18
<PAGE>
CERTAIN TRANSACTIONS (in thousands of dollars)
Through its distribution facilities, Barnes & Noble accounted for
approximately 58.9%, 60.3% and 38.5%, or $64,112, $26,929 and $3,900, of
B&N.com's purchases during the years ended December 31, 1999, 1998 and 1997,
respectively. B&N.com has entered into an agreement (the "Supply Agreement")
with Barnes & Noble whereby Barnes & Noble charges B&N.com the costs associated
with such purchases plus incremental overhead incurred by Barnes & Noble in
connection with providing such inventory. As of December 31, 1999 and 1998,
$18,495 and $13,250, respectively, was payable to Barnes & Noble in connection
with such purchases. The Supply Agreement is subject to certain termination
provisions.
B&N.com has entered into agreements (the "Services Agreements") whereby
B&N.com receives various services from Barnes & Noble and its subsidiaries,
including, among other things, services for payroll processing, benefits
administration, insurance (property and casualty, medical, dental and life), tax
and traffic. In accordance with the terms of the Services Agreements, B&N.com
has paid, and expects to continue to pay, fees to Barnes & Noble and its
subsidiaries in an amount equal to the direct costs plus incremental expenses
associated with providing such services. B&N.com paid $1,672, $870 and $200 for
such services during the years ended December 31, 1999, 1998 and 1997,
respectively. The Services Agreements are subject to certain termination
provisions.
Since 1998, B&N.com has used the music distributor AEC One Stop Group, Inc.
("AEC'), as its primary supplier, to fulfill its orders for music and to provide
a music database. Subsequent to an agreement between AEC and B&N.com, AEC's
parent corporation was acquired by an investor group in which Leonard Riggio,
the Company's Chairman, was a significant minority investor. B&N.com paid AEC
$2,908 in connection with this agreement during the year ended December 31,
1999. At December 31, 1999, $4,508 was payable to AEC in connection with this
agreement.
B&N.com subleases from Barnes & Noble approximately one-third of a 300,000
square foot warehouse facility located in New Jersey. B&N.com paid Barnes &
Noble $473, $271 and $0 for such subleased space during the years ended December
31, 1999, 1998 and 1997, respectively.
Michael N. Rosen, a director of the Company, is also the Chairman of
Robinson Silverman, which is outside counsel to the Company and B&N.com.
B&N.com believes that the transactions discussed above, as well as the
terms of any future transactions and agreements (including renewals of any
existing agreements) between B&N.com and its affiliates, are and will be at
least as favorable to B&N.com as could be obtained from unaffiliated parties.
The Board of Directors and its Audit Committee must approve in advance any
proposed transaction or agreement and will utilize such procedures in evaluating
the terms and provisions of such proposed transaction or agreement as are
appropriate in light of the fiduciary duties of directors under Delaware law.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers, and persons who own more than
10% of a registered class of the Company's securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common stock
and other equity securities of the Company. Officers, Directors and
greater-than-10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16 (a) forms they file.
19
<PAGE>
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that during the year ended December
31, 1999 its officers, Directors and greater-than-10% stockholders complied with
all Section 16 (a) filing requirements, except William F. Reilly and Jan Michiel
Hessels did not File a Form 3 and included their Form 3 information on a
Form 5, and Gary King did not File a Form 4 with respect to one exercise of
stock options and contemporaneous sale of the underlying Class A Common Stock.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of BDO Seidman, LLP, which
was engaged as independent certified public accountants for the fiscal year
ended December 31, 1999, to audit the financial statements of the Company for
the fiscal year ending December 31, 2000. A proposal to ratify this appointment
is being presented to the stockholders at the Annual Meeting. A representative
of BDO Seidman, LLP will be present at the Annual Meeting and will have the
opportunity to make a statement and will be available to respond to the
appropriate questions.
THE BOARD OF DIRECTORS CONSIDERS BDO SEIDMAN, LLP TO BE WELL QUALIFIED AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR RATIFICATION. PROXIES SOLICITED HEREBY
WILL BE VOTED FOR THE PROPOSAL UNLESS A VOTE AGAINST THE PROPOSAL OR ABSTENTION
IS SPECIFICALLY INDICATED.
OTHER MATTERS
The Company knows of no other matters that are likely to be brought before
the Annual Meeting. If, however, other matters not now known or determined
properly come before the Annual Meeting, the persons named as proxies in the
enclosed card or their substitutes will vote such proxy in accordance with their
discretion with respect to such matters.
PROPOSALS OF STOCKHOLDERS
Proposals of Stockholders to be considered for inclusion in the Proxy
Statement and proxy card for the 2001 Annual Meeting of Stockholders must be
received by the Secretary, barnesandnoble.com inc., 76 Ninth Avenue, New York,
New York 10011 no later than February 16, 2001.
In addition, the Company's Amended By-laws provide that stockholders
seeking to bring business before an annual meeting of stockholders, or to
nominate candidates for election as directors at an annual meeting of
stockholders, must provide timely notice thereof in writing. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company, not less than 30 days nor more than
60 days prior to the annual meeting; provided, 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 by the close of business on the 10th day following the date on which
notice of the date of the meeting is given to stockholders' or made public,
whichever first occurs. The Company reserves the right to reject, rule out of
order, or take other appropriate action with respect to any proposal that does
not comply with these and other applicable requirements.
20
<PAGE>
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 accompanies this Proxy Statement.
STOCKHOLDERS ARE URGED TO FORWARD THEIR PROXIES WITHOUT DELAY.
A PROMPT RESPONSE WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
Leonard Riggio
Chairman
June 16, 2000
21
<PAGE>
barnesandnoble.com inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Leonard Riggio and Stephen Riggio, and
each of them, as his true and lawful Agents and Proxies, with full power of
substitution in each, and hereby authorizes them to represent and to vote, as
designated on the reverse side hereof, all of the shares of common stock of
barnesandnoble.com inc. held on record by the undersigned on May 30, 2000, at
the Annual Meeting of Stockholders to be held on July 19, 2000, and any
adjournments or postponements thereof, with the same effect as if the
undersigned were present and voting such shares, on all matters as further
described in the accompanying Proxy Statement.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders dated June 16, 2000 and the accompanying Proxy Statement.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS MADE, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" EACH OF THE BOARD OF
DIRECTORS' NOMINEES FOR WHICH THE HOLDER OF THE SHARES REPRESENTED BY THIS PROXY
IS ENTITLED TO VOTE, AND "FOR" THE RATIFICATION OF THE APPOINTMENT OF BDO
SEIDMAN, LLP AS THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE COMPANY FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2000. THE PROXIES, IN THEIR DISCRETION, ARE
AUTHORIZED TO VOTE UPON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
By executing this proxy, the undersigned hereby revokes all prior proxies.
(Continued, and to be signed and dated on the reverse side.)
--------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
22
<PAGE>
Please mark
your votes as
indicated in [X]
this example
1. ELECTION OF DIRECTORS
FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] EXCEPTIONS [_]
listed below (except for all nominees listed below
as marked to the
contrary).
Nominees:
For Class A Director (to be voted on by all holders of Common Stock):
01 William F. Reilly
For Class B Director (to be voted on by holders of Class B Common Stock
only): 02 Michael N. Rosen
For Class C Director (to be voted on by holders of Class C Common Stock
only): 03 Markus Wilhelm
INSTRUCTIONS: To withhold authority to vote for any individual nominee for
which the undersigned is entitled to vote, mark the "Exceptions" box and
write that nominee's name in the space provided below.
Exceptions: ________________________________________________
2. RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP, as the independent
certified public accountants of the Company for the fiscal year ending
December 31, 2000.
FOR [_] AGAINST [_] ABSTAIN [_]
Change of Address and or Comments Mark Here [_]
Please sign exactly as name appears on this Proxy Card. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
-------------------------------------
Date
Please Mark, Sign, Date and Return this Proxy Card Promptly Using the
Enclosed Envelope.
---------------------------------------------------------------------------
-FOLD AND DETACH HERE-
23
<PAGE>
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
--------------------------------------------------------------------------------
VOTE BY PHONE: FOR U.S. stockholders only, call toll-free 1-800-840-1208
on a touch tone telephone 24 hours a day, 7 days a week.
There is NO CHARGE to you for this call. Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the
lower right hand corner of this form.
OPTION 1: To vote as the Board of Directors recommends on ALL proposals,
press 1.
When asked, please confirm by Pressing 1
OPTION 2: If you choose to vote on each proposal separately, Press 0. You will
hear these instructions:
Proposal 1. Director Election Proposal: to vote FOR ALL nominees, press 1; to
WITHHOLD FOR ALL nominees, press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0 and listen to the instructions.
Proposal 2 and All Other Proposals: To vote FOR, press 1; AGAINST, press 9;
ABSTAIN, press 0
The instructions are the same for all other proposals.
When asked, please confirm by Pressing 1
--------------------------------------------------------------------------------
or
--------------------------------------------------------------------------------
VOTE BY PROXY CARD Mark, sign and date your proxy card and return promptly in
the enclosed envelope.
NOTE: If you voted by telephone, THERE IS NO NEED TO MAIL BACK your proxy card.
--------------------------------------------------------------------------------
THANK YOU FOR VOTING.
