<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
|_| 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: 0-26063
barnesandnoble.com inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-4048787
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
76 Ninth Avenue, New York, NY 10011
(Address of Principal Executive Offices) (Zip Code)
(212) 414-6000
(Registrant's Telephone Number, Including Area Code)
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
--- ---
Number of shares of $.001 par value Class A Common Stock, Class B Common Stock
and Class C Common Stock outstanding as of May 8, 2000 was 30,780,433, one and
one, respectively.
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barnesandnoble.com inc.
March 31, 2000
Index to Form 10-Q
<TABLE>
<CAPTION>
Page No.
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PART I - FINANCIAL INFORMATION
Item 1: Financial Statements......................................................... 3
Item 2: Management's Discussion and Analysis of Financial Condition and Results of 8
Operations...............................................................
Item 3: Quantitative and Qualitative Disclosures About Market Risk.................. 15
PART II - OTHER INFORMATION............................................................
Item 1: Legal Proceedings............................................................ 16
Item 2: Changes in Securities and Use of Proceeds ................................... 16
Item 3: Defaults upon Senior Securities.............................................. 16
Item 4: Submission of Matters to a Vote of Security Holders.......................... 16
Item 5: Other Information............................................................ 16
Item 6: Exhibits and Reports on Form 8-K............................................. 17
Signatures................................................................... 18
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
--------------------
barnesandnoble.com inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands of dollars, except per share data)
(unaudited)
Three Months Ended
-------------------------
March 31, March 31,
2000 1999 (1)
----------- ----------
Net sales $ 78,244 $ 32,317
Cost of sales 63,051 25,016
----------- ----------
Gross profit 15,193 7,301
----------- ----------
Operating expenses:
Marketing and sales 32,204 18,909
Technology and web site
development 6,364 3,519
General and administrative 5,296 3,512
Depreciation and amortization 6,319 2,595
Stock based compensation 11,915 --
Equity in net loss of Enews including
amortization of intangibles 5,206 --
----------- ----------
Total operating expenses 67,304 28,535
Loss from operations (52,111) (21,234)
Interest income, net 7,907 1,016
----------- ----------
Loss before minority interest (44,204) (20,218)
Minority interest 35,204 16,174
----------- ----------
Net loss $ (9,000) $ (4,044)
=========== ==========
Basic and diluted loss before minority
interest per share ($ 0.30) ($ 0.14)
Basic and diluted weighted average shares
outstanding if converted (2) 145,176 143,750
Basic and diluted net loss per
common share . ($ 0.30) ($ 0.14)
Basic and diluted weighted average
common shares outstanding 28,809 28,750
(1) Represents pro forma results as if the shares issued in the initial public
offering of barnesandnoble.com inc. and the acquisition of the interest in
barnesandnoble.com llc was completed as of the beginning of the earliest
period presented.
(2) For periods prior to May 25, 1999, reflects the pro forma effect of the
shares issued in the Company's Initial Public Offering assuming they were
issued in the beginning of 1997.
See accompanying notes to consolidated financial statements.
3
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barnesandnoble.com inc.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,547 $ 247,403
Marketable securities 321,375 230,644
Receivables, net 20,447 15,520
Merchandise inventories 8,918 3,886
Prepaid expenses and other current assets 8,476 8,161
------------- --------------
Total current assets 398,763 505,614
------------- --------------
Fixed assets, net 110,937 97,854
Long term marketable securities 71,852 71,852
Other non-current assets 38,296 4,198
------------- --------------
Total assets $ 619,848 $ 679,518
------------- --------------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 12,089 $ 19,204
Accrued liabilities 26,569 39,627
Due to affiliate 7,415 17,109
------------- --------------
Total current liabilities 46,073 75,940
------------- --------------
Minority interest 457,931 482,896
------------- --------------
Stockholders' equity:
Preferred Stock: $0.001 par value; 50,000,000 shares
authorized; none issued and outstanding -- --
Common Stock Series A; $0.001 par value; 750,000,000
shares authorized; 30,386,261 and 0 shares issued
and outstanding, respectively 30 29
Common Stock Series B; $0.001 par value; 1,000 shares
authorized; 1 and 0 shares issued and outstanding,
respectively -- --
Common Stock Series C; $0.001 par value; 1,000 shares
authorized; 1 and 0 shares issued and outstanding,
respectively -- --
Paid-in capital 138,613 134,452
Accumulated deficit (22,799) (13,799)(1)
------------- --------------
Total stockholders' equity 115,844 120,682
------------- --------------
Commitments and contingencies
Total liabilities and stockholders' equity $ 619,848 $ 679,518
------------- --------------
</TABLE>
(1) Represents accumulated deficit of barnesandnoble.com inc. since the
Company's initial public offering on May 25, 1999.
See accompanying notes to consolidated financial statements.
4
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barnesandnoble.com inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
Pro forma (1)
March 31, March 31,
2000 1999
----------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (9,000) $ (4,044)
Adjustments to reconcile net loss to net cash flows from operating
activities:
Depreciation and amortization 6,009 2,595
Non-cash acquisition, disposition and
investment related costs 12,857 --
Decrease (increase) in receivables, net (4,927) 655
Increase in merchandise inventories (5,032) (717)
Increase in prepaid expenses and
other current assets (315) (600)
Increase (decrease) in accounts payable (7,115) 3,455
Decrease in due to affiliate (9,694) (5,126)
Decrease in accrued liabilities (13,058) (12,047)
Minority interest in loss (35,204) (16,174)
----------------- -------------
Net cash flows used in operating activities (65,479) (32,003)
Cash flows from investing activities:
Purchases of fixed assets (19,039) (3,691)
Purchases of marketable securities (90,731) --
Increase in restricted cash -- (235)
Increase in other non-current assets (34,151) (75)
----------------- -------------
Net cash flows used in investing activities (143,921) (4,001)
Cash flows from financing activities:
Proceeds from exercise of stock options 1,544 --
----------------- -------------
Net cash flows from financing activities 1,544 --
Net change in cash and cash equivalents (207,856) (36,004)
Cash and cash equivalents at beginning of period 247,403 96,940
----------------- -------------
Cash and cash equivalents at end of period $ 39,547 $ 60,936
----------------- -------------
</TABLE>
(1) Represents pro forma results as if the shares issued in the initial public
offering of barnesandnoble.com inc. and the acquisition of the interest in
barnesandnoble.com llc was completed as of the beginning of the earliest
period presented.
See accompanying notes to consolidated financial statements.
5
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barnesandnoble.com inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2000 and March 31, 1999
(in thousands of dollars, except per share data)
The unaudited consolidated financial statements include the accounts of
barnesandnoble.com inc. (the "Company") and barnesandnoble.com llc ("B&N.com").
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 March 31, 2000 and the results of its operations and
its cash flows for the three months 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 year ended December 31, 1999. The Company followed
the same accounting policies in preparation of this report as in such Annual
Report. Operating results for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
1. Organization
The Company is a holding company whose sole asset is a 20.36% equity
interest in B&N.com, an online retailer of knowledge, information, education and
entertainment related products, and whose sole business is currently acting as
sole manager of B&N.com. As sole manager of B&N.com, the Company controls all of
the affairs of B&N.com and as a result, B&N.com is consolidated with the
Company. Barnes & Noble, Inc. ("Barnes & Noble") and Bertelsmann A.G.
("Bertelsmann") each beneficially own a 39.82% equity interest (equivalent to an
aggregate of 115 million Membership Units) in B&N.com. Each Membership Unit held
by these companies is convertible into one share of the Company's Class A Common
Stock. As reflected in the statements of operations, the loss before minority
interest represents the total loss for the period and the net loss represents
the portion of the loss attributable to the Company subsequent to the
commencement of its activities.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the period reported. Actual results
could differ from these estimates.
3. Business Combinations and Investments
In January 2000, B&N.com acquired a 32% common stock interest in
Enews.com, the largest retailer of magazine subscriptions on the Internet, and
warrants to acquire an additional 8% of common stock. The purchase price was
$26,428 in cash and stock valued at $12,857, to expand its presence in the
growing on-line magazine subscription market. The Company has accounted for this
acquisition using the equity method of accounting. Pro forma results of
operations for the first quarter of 1999 have not been included as they would
not have had a material effect on overall results of operations of the Company.
6
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barnesandnoble.com inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2000 and March 31, 1999
(in thousands of dollars, except per share data)
B&N.com invests certain of its excess cash in debt instruments of the
U.S. Government and its agencies, and of high quality corporate issuers. All
highly liquid instruments with an original maturity of three months or less are
considered cash equivalents; those with original maturities greater than three
months are considered marketable securities. B&N.com classified investments in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities".
At March 31, 2000, short-term investments in marketable securities
consist primarily of U.S. Treasury Securities, U.S. government agency securities
and investments in high quality corporate issuers and were classified as
held-to-maturity. Unrealized holding gains and losses at March 31, 2000 were not
significant.
4. Stockholders' Equity
There are three classes of common stock authorized: Class A Common
Stock ("Class A Common"), Class B Common Stock ("Class B Common") and Class C
Common Stock ("Class C Common"). The holders of Class A Common generally have
rights identical to holders of Class B Common and Class C Common (collectively
"High Vote Stock"), except that each holder of Class A Common is entitled to one
vote per share and each holder of 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 High Vote Stock owned by such holder and (b) the aggregate number of
Membership Units owned by such holder; divided by (ii) the number of shares of
High Vote Stock owned by such holder. Pursuant to the Company's Amended and
Restated Certificate of Incorporation (the "Amended Charter"), the holders of
the Class B Common Stock and the holders of the Class C Common Stock have the
right to each elect three of the Company's directors. Otherwise, holders of
Class A Common and High Vote Stock (collectively "Common Stock") generally will
vote together as a single class on all matters (including the election of the
directors who are not elected directly by the holders of the High Vote Stock)
presented to the stockholders for their vote or approval, except as otherwise
required by applicable Delaware law.
The Board of Directors is authorized to issue up to an aggregate of 50
million shares of Preferred Stock. The rights and characteristics of the
Preferred Stock are at the discretion of the Board of Directors. There is no
Preferred Stock outstanding.
7
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
(in thousands of dollars)
Overview
The Company is a holding company whose sole asset is its 20.36% equity
interest in B&N.com and whose sole business is acting as sole manager of
B&N.com. Since launching its online business in May 1997, B&N.com has become one
of the world's largest Web sites and the sixth largest e-commerce site,
according to Media Metrix. Focused largely on the sale of books, music,
software, magazines, prints, posters and related products, B&N.com has
capitalized on the recognized brand value of the Barnes & Noble name to become
the second largest, and one of the fastest growing, online distributors of
books.
Customers can choose from millions of new and out-of-print titles and
enjoy a variety of related content such as author chats, book synopses and
reader reviews. The site also offers for sale thousands of bargain books
discounted up to 91 percent, the most popular software and magazine titles, gift
items for every occasion, a Prints & Posters Gallery and a free eCard service.
With access to Barnes & Noble's more than 750,000 in-stock titles, B&N.com has
the largest standing inventory of any online bookseller ready for immediate
delivery. The URL http://www.bn.com makes the site easy to find.
B&N.com's affiliate network has more than 360,000 members and the
Company maintains strategic alliances with major Web portals and content sites,
such as AOL, Lycos and MSN. The affiliate network, which began 1999 with 48,000
members, is among the fastest growing in e-commerce. B&N.com is also a leader in
business-to-business e-commerce with its unique Business Solutions program.
The results of operations discussed hereafter include the consolidated
results of the Company and B&N.com. In view of the rapidly changing nature of
B&N.com's business and its limited operating history, the Company believes that
period-to-period comparisons of the operating results of B&N.com, including
gross profit margin and operating expenses as a percentage of sales, are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
Results of Operations
Net Sales
Three Months Ended March 31,
------------------------------------------------------
2000 1999 % Change
--------------- --------------- ------------
Net sales $ 78,244 $ 32,317 142%
Net sales are composed of sales of books, music, software, prints &
posters and related products, net of returns, as well as outbound shipping and
handling charges. Growth in net sales reflects a significant increase in units
sold due to the growth of B&N.com's customer base and repeat purchases from
B&N.com's existing customers. B&N.com added more than 850,000 customers during
the first quarter 2000, raising the cumulative customer count to nearly five
million as of March 31, 2000, an increase of over 21 percent from the year-end
<PAGE>
1999 total. Cumulative repeat customer orders reached 68.1 percent in the first
quarter, a significant increase from 56.0 percent a year ago, reflecting
increased customer loyalty.
Gross Profit
Three Months Ended March 31,
---------------------------------------------------------
2000 1999 % Change
--------------- ------------------ -----------
Gross profit $ 15,193 $ 7,301 108%
Gross margin 19.4% 22.6%
Gross profit is net sales less the cost of sales, which consists of the
cost of merchandise sold to customers, and outbound and inbound shipping costs.
Gross profit increased due to the Company's increased sales volume, however,
gross margin decreased in the first quarter of 2000 to 19.4% from 22.6% in the
first quarter of 1999. The decrease in gross margin is due primarily to the
increase, from 40% to 50%, in May 1999 of the discount offered on New York Times
best sellers, the introduction of music during the third quarter of 1999 which
has a lower gross margin than the Company's book products and a lower than
anticipated internal fill rate.
The Company intends to expand its operations by promoting new or
complementary products or sales formats and by expanding the breadth and depth
of its product and service offerings. In March 2000 the Company offered a new
Stephen King short story, Riding the Bullet, as a free digital download to
customers. The response was overwhelming, with hundreds of thousands of
customers participating in the offer. Gross margins attributable to new business
areas may be lower than those associated with the Company's existing business
activities. Therefore, to the extent lower margin products become a larger
portion of the Company's product mix, a proportionate impact on overall product
gross margin is expected.
Marketing and Sales
Three Months Ended March 31,
-----------------------------------------------
2000 1999 % Change
------------- ------------- ----------
Marketing and sales $ 32,204 $ 18,909 70%
Percentage of net sales 41.1% 58.5%
Marketing and sales expenses consist primarily of advertising and
promotional expenditures, as well as payroll and related expenses for personnel
engaged in marketing, selling and fulfillment activities. All fulfillment costs,
including the cost of operating and staffing distribution and customer service
centers, are included in marketing and sales. Marketing and sales expenses
increased primarily due to the increases in the B&N.com's advertising and
promotional expenditures and increased payroll and related costs associated with
fulfilling customer demand. Such expenses decreased as a percentage of net sales
due to the significant increase in net
9
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sales and the Company's efforts to improve the productivity of its marketing
expenditures. B&N.com intends to continue pursuing its aggressive branding and
campaigns; and anticipates its variable costs of fulfillment to increase based
on anticipated sales growth. Fixed fulfillment costs are expected to increase as
a result of opening two new distribution facilities; the Memphis facility began
operation on May 1 and the Reno facility, which is expected to open later this
year. B&N.com expects total fulfillment costs as a percentage of sales to be
higher as a result. B&N.com has included in marketing expenses approximately
$4.3 million, or 5.5% of sales, of coupon redemptions for the first quarter of
2000. Had B&N.com treated coupon redemptions as a reduction to sales and
marketing expense, gross margin would have decreased from 19.4% to 14.8% and
marketing and sales expense as a percentage of sales would have decreased from
41.1% to 37.8%.
Accounting standard setters are currently reviewing financial
statements of internet companies in order to achieve a consensus with respect to
the financial statement presentation of certain items. Included in this review
is the current practice of including certain warehouse and fulfillment costs in
marketing and sales expense instead of in cost of sales. Also being reviewed by
accounting standard setters is the practice of classifying certain coupon
redemption costs as marketing and sales expense instead of as a reduction to
sales.
Technology and Web Site Development
Three Months Ended March 31,
--------------------------------------------------
2000 1999 % Change
-------------- -------------- ------------
Technology and web site
development $ 6,364 $ 3,519 81%
Percentage of net sales 8.1% 10.9%
Technology and Web site development expenses consist principally of
payroll and related expenses for web page production, editorial and network
operations personnel and consultants, and infrastructure related to systems and
telecommunications. As a percentage of net sales, technology and Web site
development expenses have steadily decreased, demonstrating the leveraging of
these expenses. The increase in technology and Web site development expenses in
dollars, was primarily attributable to increased staffing and associated costs
related to enhancing the features, content and functionality of B&N.com's Web
site and transaction-processing systems. Technology and Web site development
expenses are also a result of increased investments in systems and
telecommunications infrastructure, including investments associated with the
introduction of new product lines and the enhancement of existing product lines.
For example, in January 2000, the Company and Microsoft announced that they
would develop an eBook Superstore using Microsoft Reader software. The Company
expects to open an eBook Superstore in the second quarter of 2000. In February
2000, the Company launched bnRadio, the first Internet radio service linked to
an e-commerce company that allows customers to listen to full-length songs and
excerpts from audio books, and click to immediately order any selections they
hear. Additional technology and Web site expenses were also required to support
the significant increase in net sales. B&N.com believes that continued
investment in technology and Web site development is critical to attaining its
strategic objectives. As a result, B&N.com expects technology and Web site
development expenses to continue to increase.
10
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General and Administrative
Three Months Ended March 31,
--------------------------------------------
2000 1999 % Change
----------- ------------- ------------
General and administrative $ 5,296 $ 3,512 51%
Percentage of net sales 6.8% 10.9%
General and administrative expenses consist of payroll and related
expenses for executive, finance and administrative personnel, recruiting,
professional fees and other general corporate expenses including costs to
process credit card transactions. The increase in general and administrative
expenses was primarily a result of increased salaries and related expenses
associated with the hiring of additional personnel and professional fees related
to B&N.com's growth and expanded activities. Such expenses decreased as a
percentage of net sales due to the significant increase in net sales and the
effects of leveraging these expenses over a larger sales base. B&N.com expects
general and administrative expenses to increase as B&N.com expands its staff and
incurs additional costs related to the growth of its business; however, B&N.com
expects continued decreases of general and administrative expenses as a
percentage of sales.
Depreciation and Amortization
Three Months Ended March 31,
---------------------------------------------
2000 1999 % Change
------------- ------------- -----------
Depreciation and
amortization $ 6,319 $ 2,595 144%
Percentage of net sales 8.1% 8.0%
The increase in depreciation and amortization expenses was primarily
attributable to the increase of purchases of fixed assets of $19.0 million in
the first quarter of 2000 as compared to $3.7 million for the first quarter of
1999. Over the next twelve months the Company anticipates higher depreciation
and amortization expenses related to the significant additions of fixed assets
placed in service to support the operations of the two new distribution centers.
11
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Stock Based Compensation
Three Months Ended March 31,
------------------------------------------------
2000 1999 % Change
-------------- ------------- ------------
Stock based compensation $ 11,915 $ - -
Percentage of net sales 15.2% -
Stock based compensation for the first quarter of 2000 consists of the
expenses incurred from a payment of $10,940 to Jonathan Bulkeley, former Chief
Executive Officer, in March 2000 for the surrender and cancellation of
exercisable stock options and the repricing of a portion of the Company's
options in February 2000. An additional $800 represents a severance payment to
Mr. Bulkeley under the terms of his Employment Agreement. On March 1, 2000 the
Company repriced approximately 5 million (net of cancellations) of 16 million
then outstanding options which were originally granted at an average exercise
price of $16.15. The new exercise price for the options is $8.00, the closing
market price of the Company's stock as of March 1, 2000. Based on current
accounting pronouncements, the Company is accounting for the repriced options as
if they were variable options and as a result, recorded a non-cash charge of
$175 in the first quarter of 2000.
Equity in Net Loss of Enews including Amortization of Intangibles.
Three Months Ended March 31,
--------------------------------------------
2000 1999 % Change
------------ ------------ ------------
Equity in net loss
of Enews including
amortization of intangibles $ 5,206 $ - -
Percentage of net sales 6.7% -
Equity in net loss of Enews including amortization of intangibles
consists of expenses from the Company's previously announced acquisition of an
equity stake in Enews.com, the largest retailer of magazine subscriptions on the
Internet. In recent months Enews.com has been cited by Media Metrix as the No. 1
fastest growing e-commerce site, as measured by average daily visitors; by PC
Data as the 8th largest e-commerce site on the Web and as a Top 100 Web Site
and by Nielsen/NetRatings as the 15th Top Advertiser on the Web.
12
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Interest Income, Net
Three Months Ended March 31,
--------------------------------------------
2000 1999 % Change
----------- ----------- --------------
Interest income, net $ 7,907 $ 1,016 678%
Percentage of net sales 10.1% 3.1%
An increase in interest income on cash and marketable securities was
related to funds received from the Company's initial public offering in the
second quarter of 1999 which are currently invested in various fixed income and
money market investments.
Income Taxes
The Company has not generated any taxable income to date and therefore
has not paid any federal income taxes since inception. The Company has provided
a full valuation allowance on the deferred tax asset, consisting primarily of
net operating loss carryforwards, due to the uncertainty of its realizability.
Liquidity and Capital Resources
As of March 31, 2000, the Company's cash, cash equivalents and
short-term marketable securities were $360.9 million, compared to $478.0 million
on December 31, 1999. At March 31, 2000, the Company had $71.9 million in
long-term marketable securities, equaling the $71.9 million of long-term
marketable securities at December 31, 1999. The Company completed the first
quarter 2000 with a debt-free balance sheet and cash and investments totaling
$432.8 million. On May 25, 1999, the Company completed an initial public
offering of 28,750,000 shares of Class A Common Stock at a price of $18 per
share. The net proceeds to the Company from the initial public offering were
approximately $484.4 million. At the completion of the initial public offering,
the Company received additional capital contributions of $50.0 million.
Net cash flows used in operating activities were $65.5 million for the
three months ended March 31, 2000 and $32.0 million for the three months ended
March 31, 1999. Cash used for the three months ended March 31, 2000, was
primarily attributable to a net loss of $9.0 million and a corresponding
decrease in minority interest of $35.2 million, a decrease in payables to
affiliates of $9.7 million, a $7.1 million decrease in accounts payable and a
decrease in accrued liabilities of $13.1 million. In addition, receivables
increased $4.9 million, merchandise inventories increased $5.0 million and
prepaid expenses and other current assets increased $0.3 million. This was
partially offset by depreciation and amortization of $6.0 million and non-cash
acquisition, disposition and investment related costs of $12.9 million. Cash
used for the three months ended March 31, 1999, was primarily attributable to a
net loss of $4.0 million and a corresponding decrease in minority interest of
$16.2 million, a decrease in payables to affiliates of $5.1 million and a
decrease in accrued liabilities of $12.0 million. In addition, merchandise
inventories increased $0.7 million and prepaid expenses and other current assets
increased $0.6 million. This was partially offset by depreciation and
amortization of $2.6 million, a decrease in receivables of $0.7 million and an
increase in accounts payable of $3.5 million.
13
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Net cash used in investing activities of $143.9 million for the three
months ended March 31, 2000 was attributable to a $90.7 million increase in
marketable securities, a $34.2 million increase in other non-current assets and
purchases of fixed assets totaling $19.0 million. Net cash used in investing
activities of $4.0 million for the three months ended March 31, 1999 was
primarily attributable to purchases of fixed assets.
Net cash flows from financing activities were $1.5 million for the
three months ended March 31, 2000, attributable to proceeds from the exercise of
stock options.
At March 31, 2000, the Company's principal sources of liquidity
consisted of $39.5 million of cash and cash equivalents and $321.4 million of
short-term marketable securities. Long term marketable securities totaled $71.9
million. Preparing two distribution centers for operation this year is expected
to require continued significant capital expenditures. The Memphis distribution
facility was completed on May 1. Total capital expenditures for the Reno
facility are expected to be between $15 million and $20 million over the next
six months. The distribution centers are being established to enhance service
and availability to customers and improve purchasing efficiencies. Expenditures
to stock inventories at both facilities will continue over the next six months.
As of March 31, 2000, the Company's remaining principal commitments consisted of
obligations outstanding under operating leases and commitments for advertising,
marketing and promotion arrangements. The Company anticipates a continued
increase in its capital expenditures consistent with anticipated growth in
operations, infrastructure and personnel.
The Company believes that current cash and investments will be
sufficient to meet its anticipated cash needs for at least twelve months.
However, any projection of future cash needs and cash flows is subject to
substantial uncertainty. If current cash and short term investments in addition
to cash generated from operations is insufficient to satisfy the Company's
liquidity requirements, the Company may seek to sell additional equity or debt
securities or to obtain a credit facility. The sale of additional equity or
convertible debt securities could result in additional dilution to the Company's
stockholders. There can be no assurance that financing will be available in
amounts or on terms acceptable to the Company, if at all. In addition, the
Company will, from time to time, consider the acquisition of or investment in
complementary businesses, products and technologies, which might increase the
Company's liquidity requirements or cause the Company to issue additional equity
or debt securities.
Year 2000
Year 2000 Compliance
Neither the Company nor B&N.com have experienced any material Year 2000
problems. However, there can be no assurance that problems will not arise for
the Company or B&N.com, their suppliers or others with whom the Company or
B&N.com do business with in 2000. The Company and B&N.com intend to continue to
monitor their compliance, as well as the compliance of others whose operations
are material to B&N.com's business.
Forward-Looking Statements
This report may contain certain forward-looking statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to the Company and B&N.com 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, B&N.com or the management of
the Company, identify forward-looking statements. Such statements reflect the
current views of the Company with
14
<PAGE>
respect to future events, the outcome of which is subject to certain risks,
including among others general economic and market conditions, changes in
product demand, the growth rate of Internet usage and e-commerce, possible
disruptions in the Company's or B&N.com's computer or telephone systems,
possible increases in shipping rates or interruptions in shipping service,
effects of competition, the level and volatility of interest rates, changes in
tax and other governmental rules and regulations applicable to the Company or
B&N.com, the success of B&N.com's strategic investments, the successful
development and integration of B&N.com's new distribution centers and other
factors that may be outside of the Company's control. 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
herein as anticipated, believed, estimated, expected, intended or planned.
Subsequent written and oral forward-looking statements attributable to the
Company, B&N.com or persons acting on their behalf are expressly qualified in
their entirety by the cautionary statements in this paragraph.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
None
15
<PAGE>
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
No material developments have occurred with respect to previously
reported legal proceedings.
Item 2: Changes in Securities and Use of Proceeds
The effective date of the Company's registration statement, filed on
Form S-1 under the Securities Act of 1933 (File No. 333-64211) relating to the
initial public offering of its Class A Common Stock, was May 25, 1999. Pursuant
to the initial public offering, a total of 28,750,000 shares of the Company's
Class A Common Stock were sold to an underwriting syndicate. The managing
underwriters of the initial public offering were Goldman, Sachs & Co., Merrill
Lynch & Co., Salomon Smith Barney and Wit Capital Corporation. The initial
public offering was completed on May 28, 1999, at an initial public offering
price of $18.00 per share. The initial public offering resulted in gross
proceeds to the Company of $517.5 million, $31.1 million of which were applied
to the underwriting discount and approximately $2.0 million of which were
applied to initial public offering expenses. As a result, net proceeds of the
initial public offering to the Company were approximately $484.4 million. Such
net proceeds were used by the Company to acquire 28,750,000 Membership Units of
B&N.com. Since May 28, 1999, B&N.com has invested approximately $321.4 million
of such net proceeds in short-term marketable securities and $71.9 million in
long-term marketable securities. The remainder of the funds have been used to
purchase fixed assets and support the operations of B&N.com. Except as indicated
in the Company's prospectus, none of the net proceeds of the initial public
offering were paid by the Company or B&N.com, directly or indirectly, to any
director, officer or general partner of the Company or B&N.com or any of their
associates, or to any persons owning ten percent or more of any class of the
Company's equity securities, or any affiliates of the Company or B&N.com.
Item 3: Defaults upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Securities Holders
None
Item 5: Other Information
None
16
<PAGE>
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Form 10-Q:
Exhibit 10.1 Separation Agreement among the Company,
B&N.com and Jonathan Bulkeley
Exhibit 27 Financial Data Schedule
(b) No report on 8-K was filed by registrant during the
fiscal quarter for which this report is filed.
17
<PAGE>
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.
barnesandnoble.com inc.
-----------------------
(Registrant)
Date: May 15, 2000 By: /s/ Marie Toulantis
--------------------
Marie Toulantis
Chief Financial Officer
18
<PAGE>
1. Jonathan Bulkeley ("Employee"), on his behalf and on behalf of
Employee's heirs, executors, administrators, successors and assigns
(collectively, "Releasor"), hereby acknowledges and agrees that Employee's
employment with barnesandnoble.com inc. and barnesandnoble.com llc
(collectively, the "Company") terminated effective January 14, 2000 (the
"Termination Date").
2. In accordance with the terms and conditions of this Agreement,
Employee shall accept, as and on behalf of Releasor, and the Company shall
deliver, on its behalf and on behalf of each Releasee (as defined below), the
following consideration:
(a) Upon the execution of this Agreement by Employee and the
Company, $808,625, less withholding for all applicable taxes and deductions.
(b) With respect to the vested options previously granted to
Employee to purchase 1,000,000 shares of Class A Common Stock in the Company for
$4.06 per share, not later than March 21, 2000 the Company shall (i) cause a
third party to purchase such shares from Employee upon Employee's exercise of
the foregoing options such that Employee shall receive not less $10,940,000
(after payment to the Company of the exercise price for such shares), less
withholding for all applicable taxes and deductions, if any; or (ii) deliver to
Employee $10,940,000, less withholding for all applicable taxes and deductions,
in cancellation of the foregoing options.
(c) With respect to Employee's stock options in the Company,
the Company and Employee acknowledge and agree as follows:
(i) in addition to the vested options referred to in
clause (b) above, Employee currently has vested
options to purchase an additional 35,000 shares of
Class A Common Stock in the Company for $4.06 per
share;
(ii) as of February 1, 2000, Employee shall have
additional vested options to purchase an additional
766,250 shares of Class A Common Stock in the Company
for $4.06 per share;
(iii) the vested options referred to in clauses (b), (c)(i)
and (c)(ii) above (collectively, the "Vested
Options") shall expire, and shall no longer be
exercisable, on or after December 31, 2000, and
except for such Vested Options, Employee has no
additional options to purchase any capital stock of
the Company, and any such options which may have
heretofore been granted are forfeited and of no
<PAGE>
further force or effect; and
(iv) Employee agrees that, with respect to those shares
issuable upon the exercise of the Vested Options
referred to in clauses (c)(i) and (c)(ii) above,
Employee: (A) 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 (B) 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.
(d) All of the consideration set forth in subparagraphs (a),
(b) and (c) above shall be referred to as the Termination Consideration.
(e) Employee acknowledges and agrees that (i) the Termination
Consideration provides adequate consideration for all the terms of this
Agreement and includes monetary and other benefits to which Employee was not
otherwise entitled and which were not previously earned, accrued or vested; and
(ii) any monetary or other benefits which, prior to the execution of this
Agreement, may have been earned, accrued or vested, or to which Employee may
have been entitled, are deemed to have been satisfied or such benefits have been
released, waived or settled by Employee pursuant to this Agreement.
3. THIS PARAGRAPH PROVIDES A COMPLETE RELEASE AND WAIVER OF ALL
EXISTING AND POTENTIAL CLAIMS EMPLOYEE MAY HAVE AGAINST EVERY PERSON AND ENTITY
INCLUDED WITHIN THE DESCRIPTION BELOW OF "RELEASEE." BEFORE EMPLOYEE SIGNS THIS
AGREEMENT, EMPLOYEE MUST READ THIS PARAGRAPH CAREFULLY, AND MAKE SURE THAT HE
UNDERSTANDS IT FULLY.
(a) In consideration of Employee's receipt and acceptance of
the Termination Consideration from and on behalf of the Company and each
Releasee (as defined below), Releasor hereby irrevocably, unconditionally and
generally releases Barnes & Noble, Inc. and the Company, and their respective
current and former officers, directors, shareholders, trustees, parents,
affiliates, subsidiaries, branches, divisions, agents, attorneys and employees,
and the current and former officers, directors, shareholders, agents, attorneys
and employees of any such parent, affiliate, subsidiary, branch or division of
Barnes & Noble, Inc. and the Company, and the heirs, executors, administrators,
receivers, successors, predecessors and assigns of all of the foregoing
(collectively, "Releasee"), from or in connection with, and hereby waives and/or
<PAGE>
settles, except as may otherwise be stated in this Agreement, any and all
actions, causes of action, suits, debts, dues, sums of money, accounts,
controversies, agreements, promises, damages, judgments, executions, or any
liability, claims or demands, known or unknown and of any nature whatsoever and
which Releasor ever had, now has or hereafter can, shall or may have as of the
date of this Agreement, including, without limitation, arising directly or
indirectly pursuant to or out of Employee's employment with the Company, the
performance of services for the Company or any Releasee, the termination of such
employment or services and/or any decision not to offer to Employee any
employment with any Releasee subsequent to Employee's employment with the
Company, except any claims arising out of, relating to or based upon the
covenants, representations and acknowledgements made by the Company in this
Agreement.
(b) Specifically, without limitation, the release in this
paragraph 3 shall include and apply to any rights and/or claims (i) as to any
options to purchase shares in the Company or any Releasee (except the Vested
Options), including without limitation, under or pursuant to the Company's 1999
Incentive Plan and any Stock Option Agreement or Certificate issued thereunder,
and Releasor expressly acknowledges that no options other than the Vested
Options have vested or will vest and any options granted to Employee other than
the Vested Options have been forfeited and/or are of no force or effect; (ii) as
to any employee benefits or fringe benefits, vested or unvested, to which
Employee is, may have been or may become entitled; (iii) arising under any
contract, express or implied, written or oral, including without limitation, the
Company's 1999 Incentive Plan and any Stock Option Agreement or Certificate
issued thereunder, any other pension or employee benefit plan, policy or
practice of any Releasee, the Employment Agreement made as of November 1, 1998
and effective as of November 1, 1998, and the Amended and Restated Employment
Agreement made as of September 20, 1999 and effective as of November 1, 1998,
and Releasor expressly acknowledges that all of the foregoing are of no force or
effect with respect to Releasor; (iv) for wrongful dismissal or termination of
employment; (v) arising under any applicable foreign, federal, state, local or
other statutes, orders, laws, ordinances, regulations or the like, or case law,
that relate to employment or employment practices and/or, specifically, that
prohibit discrimination based upon age, race, religion, sex, national origin,
disability or any other unlawful bases, including without limitation, the Civil
Rights Act of 1964, as amended, the Civil Rights Act of 1991, as amended, the
Civil Rights Acts of 1866 and 1871, as amended, the Americans with Disabilities
Act of 1990, as amended, the Family Medical Leave Act of 1993, as amended, the
Employee Retirement Income Security Act of 1990, as amended, the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, the Workers Adjustment
and Relocation Notice Act, as amended, the Fair Labor Standards Act, as amended,
the Vietnam Era Veterans' Readjustment Assistance Act, as amended, the Equal Pay
Act, as amended, and any similar applicable statutes, orders, laws, ordinances,
regulations or the like, or case law, of New York and any State (or any
political subdivision thereof) in which the Company transacts business, and all
applicable rules and regulations promulgated pursuant to or concerning any of
the foregoing statutes, orders, laws, ordinances, regulations or the like; (vi)
based upon any other foreign, federal, state or local statutes, orders, laws,
ordinances, regulations or the like, or case law; (vii) for tortious or
harassing conduct, infliction of mental distress, interference with contract,
fraud, libel or slander; and (viii)
<PAGE>
for damages, including without limitation, punitive or compensatory damages, or
for attorneys' fees, expenses, costs, wages, injunctive or equitable relief.
4. (a) If a federal, state, or local income or excise tax (or any tax
of a foreign jurisdiction) shall be assessed against Employee by a tax authority
with respect to the grant, vesting or any event related to the options to
purchase Company stock previously granted to Employee (collectively, the
"Options") other than the tax on exercise of such Options or sale of the shares
underlying such Options, the Company shall upon demand pay Employee an amount
equal to the sum of: (i) an amount which, when multiplied by the difference
between Employee's Tax Rate (as hereinafter defined) for the year in which such
amount shall be paid to Employee and l00%, shall equal the additional income tax
owing; and (ii) an amount which when multiplied by the difference between
Employee's Tax Rate for the year in which such amount shall be paid to Employee
and 100% shall equal the interest and penalties, if any, payable by Employee
with respect to such tax. The term "Tax Rate" shall mean the sum of the
following: (x) the highest federal income tax rate applicable to ordinary income
of an individual taxpayer; and (y) the sum of the highest applicable state and
local tax rates for such ordinary income, reduced to account for the
deductibility of state and local taxes against federal income tax if and to the
extent such state and local taxes are so deductible by the Employee. Employee
shall give the Company notice of any proposed tax, but Employee shall be under
no obligation to contest such proposed tax, provided that Employee shall contest
such proposed tax if requested to do so by the Company and at the sole cost and
expense of the Company. It is the intention of this paragraph 4 (a) to reimburse
Employee for any additional income taxes, interest and penalties thereon arising
from any tax on the Options prior to exercise thereof, with a gross-up based
upon tax rates in effect for the year of such reimbursement and taking into
account all the benefits (deductions and/or credits) available to Employee in
connection with the payment of such taxes, interest and penalties. To the extent
the incomes taxes paid by Employee and reimbursed by the Company under this
paragraph 4(a) reduce the income taxes that would be payable by Employee, his
estate, or successors and assigns upon the exercise of the Vested Options and/or
sale of the shares acquired pursuant to the exercise of the Vested Options if
the income taxes incurred by Employee (and paid by the Company to Employee
hereunder) had not been incurred, the Company shall be reimbursed by Employee,
or his estate, successors or assigns, as the case may be, an amount equal to the
reduction in income taxes described above.
(b) Employee shall be indemnified by the Company, qua an
officer and director of the Company and its affiliates, against claims, etc. to
the fullest extent permitted by law, including partial indemnification and
indemnification of Employee's estate and his heirs, executors and assigns.
5. In consideration of Employee's execution of this Agreement and
Releasor's covenants and obligations hereunder, the Company and its parents,
affiliates and subsidiaries hereby irrevocably, unconditionally and generally
release Releasor from or in connection with, and hereby waive and/or settle,
except as may otherwise be stated in this Agreement, any and all
<PAGE>
actions, causes of action, suits, debts, dues, sums of money, accounts,
controversies, agreements, promises, damages, judgments, executions, or any
liability, claims, demands or defenses, known or unknown and of any nature
whatsoever and which the Company and its parents, affiliates and subsidiaries
ever had, now has or hereafter can, shall or may have, for, upon, or by reason
of any matter, cause or thing as of the date of this Agreement (collectively,
"Claims"), except any Claims arising out of, relating to or based upon (i) the
covenants, representations and acknowledgements made by Employee in this
Agreement; (ii) any act or omission by Employee during his employment with the
Company that is finally determined by a court of competent jurisdiction to
subject Employee or any Releasee to any criminal liability or penalties; (iii)
any conduct by Employee during his employment with the Company which is finally
determined by a court of competent jurisdiction to constitute fraud,
embezzlement or any misappropriation or conversion (on his own behalf or on
behalf of any other person or entity) of any assets or property of the Company
or any Releasee; or (iv) any act or omission by Employee during his employment
with the Company that is finally determined by a court of competent jurisdiction
to have been beyond the scope of his authority or duties for and on behalf of
the Company, and upon which any person or entity not a party to this Agreement
asserts any claim against any Releasee.
6. This Agreement and any consideration given hereunder are not
intended to be, shall not be construed as and are not an admission or concession
by any Releasee of any wrongdoing or illegal or actionable acts or omissions.
Employee, as and on behalf of Releasor, hereby represents and agrees that
Releasor shall not intentionally make or cause to be made (a) any written or
oral statements or representations that any Releasee has made or implied any
such admission or concession of any wrongdoing or illegal or actionable acts or
omissions; or (b) any oral or written disparaging statements or representations
of or concerning the Company or any Releasee. The Company hereby represents and
agrees that the Company's senior management shall not intentionally make or
cause to be made any oral or written disparaging statements or representations
of or concerning Employee.
7. (a) Except as may be required by law, in further consideration of
the Company's agreement to deliver the Termination Consideration, and in
addition to the terms of paragraph 8 hereof, Releasor shall keep confidential
and shall not disclose orally or in writing directly or indirectly to any person
(other than to Employee's attorney, accountant and immediate family, each of
whom shall be directed by Employee not to disclose such information), any and
all information concerning (i) any facts, claims or assertions relating or
referring to any experiences of Employee or treatment he received by or on
behalf of any Releasee during his employment through the date of this Agreement,
to the extent that such experiences or treatment could have provided a factual
or legal basis for any claim of any kind in any action or proceeding before any
court or administrative or arbitral body; and (ii) the terms of this Agreement
and the nature and/or amount of the Termination Consideration.
(b) Notwithstanding the foregoing, Employee (i) may state that
he voluntarily resigned his employment with the Company, (ii) may describe the
positions he held and
<PAGE>
compensation he received, the job duties and functions he performed, and the
dates of commencement and termination of his employment, and (iii) may otherwise
make any statement consistent with the Company's and Employee's joint press
release, a copy of which is annexed hereto as Exhibit A.
8. (a) Employee hereby acknowledges that during his employment he
acquired proprietary, private and/or otherwise confidential information,
processes, business methods, know-how and trade secrets ("Confidential
Information," as further defined and described in this sub-paragraph), which are
and were valuable, special and unique assets of the Company and/or Releasees,
concerning or relating to (i) the Company and Releasees, (ii) persons or
entities with whom or which the Company or Releasees transacted business during
Employee's employment, (iii) persons or entities with respect to whom or which
the Company acquired any non-public information, and (iv) all aspects of the
operation of the business and affairs of the Company and Releasees, including
without limitation, all financial, operational and statistical information.
Employee acknowledges and agrees that Confidential Information shall include all
memoranda, books, papers, letters, customer lists, processes, computer software,
records, financial information, policy and procedure manuals, training and
recruiting procedures and other data, and all copies thereof and therefrom,
whether made by him or otherwise coming into his possession. All Confidential
Information and Confidential Materials (as defined below) shall be and shall
remain the sole property of the Company.
(b) Employee hereby represents and agrees that upon execution
of this Agreement: (i) he has returned to the Company, and has not retained any
copies of, all documents, records or materials of any kind, whether written or
electronically created or stored, which contain, relate to or refer to any
Confidential Information ("Confidential Materials"), and all other property of
the Company or any Releasee, including without limitation, any building or other
identification related to Employee's employment, and all keys to all offices at
76 Ninth Avenue, New York, New York and any other premises under the management
or control of any Releasee; (ii) he has not disclosed any Confidential
Information or Confidential Materials to any person or entity without the
authorization of the Company; and (iii) in consideration of the Company's
agreement to deliver the Termination Consideration pursuant to the terms of this
Agreement, Employee and/or any Releasor shall not disclose, or make use of for
himself or on behalf of any other person or entity, any Confidential Information
or Confidential Materials, in any manner directly or indirectly, except as shall
be required by law or in the event such Confidential Information or Confidential
Materials are then in the public domain (provided that Employee was not
responsible, directly or indirectly, for such Confidential Information or
Confidential Materials entering the public domain without the Company's
consent).
(c) In the event that Employee and/or any Releasor receives a
subpoena or any other written or oral request for any Confidential Information,
Confidential Materials or any other information concerning the Company or any
Releasee, Employee shall, within five (5) business days from his actual notice
of the service of such subpoena or other request (i) notify the Company in
writing, by fax to Marie Toulantis (at 212-414-6107) on behalf of the Company,
and
<PAGE>
(ii) provide a copy to the Company of such subpoena or other request if in
writing, and/or disclose the nature of the request for information if oral.
9. For a period of one (1) year from the Termination Date, Employee
shall not directly or indirectly (a) engage in activities in any state of the
United States and any equivalent section or area of any country, in which the
Company has revenue-producing customers or activities ("Territory"), either on
Employee's own behalf or that of any other person or entity which are in direct
or indirect competition with the Company; or (b) solicit any employee of the
Company to terminate his or her employment with the Company or, either on
Employee's own behalf or that of any other person or entity, hire any employee
of the Company, except that this subparagraph (b) shall not apply to Alexandra
Wise, a current employee of the Company. Employee and the Company expressly
declare that the territorial and time limitations contained in this paragraph
Section and the definition of "Territory" are entirely reasonable at this time
and are properly and necessarily required for the adequate protection of the
business and intellectual property of the Company. If such territorial or time
limitations, or any portions thereof, are deemed to be unreasonable by a court
of competent jurisdiction, whether due to passage of time, change of
circumstances or otherwise, Employee and the Company agree to a reduction or
modification of said territorial and/or time limitations to such areas and/or
periods of time as said court shall deem reasonable.
10. Employee acknowledges that his services to the Company were of a
unique character which gave them a special value to the Company. Employee
further acknowledges that any violation by Employee of any one or more of the
provisions of paragraphs 7, 8 and 9 of this Agreement may give rise to losses or
damages for which the Company cannot be reasonably or adequately compensated in
an action at law and that such violation may result in irreparable and
continuing harm to the Company. Employee agrees that, therefore, in addition to
any other remedy which the Company may have at law and equity, the Company shall
be entitled to injunctive relief to restrain any violation, actual or
threatened, by Employee of the provisions of paragraphs 7, 8 and 9 of this
Agreement.
11. Employee will comply with all reasonable requests from the Company
for assistance and/or information in connection with any matters and/or issues
relating to or encompassed within the duties and responsibilities of Employee's
employment with the Company, including without limitation, consulting with the
Company's employees and attorneys with respect to, and/or appearing as a witness
in, any dispute, controversy, action or proceeding of any kind, and in
connection with the transition of on-going matters to other employees of the
Company. The Company agrees to promptly reimburse Employee for all expenses,
including reasonable attorneys' fees (to the extent that Employee shall require
representation by reason of the existence of any conflict preventing Employee's
representation by counsel provided by the Company), incurred in connection with
compliance with his obligations under this paragraph.
12. Releasor agrees to execute any other writings and/or documents
consistent with this Agreement and reasonably necessary to effectuate the terms
of this Agreement. The
<PAGE>
Company acknowledges and agrees that the foregoing sentence is not intended to,
and shall not, create any additional substantive obligation on the part of
Employee that is not otherwise set forth in this Agreement. The Company agrees
to promptly reimburse Employee for all expenses incurred in connection with
compliance with his obligations under this paragraph.
13. The covenants, representations and acknowledgments made by Employee
in this Agreement shall survive the execution of the Agreement and the delivery
of the Termination Consideration, and this Agreement shall inure to the benefit
of each Releasee, and the successors and assigns of each of them. Employee
represents and warrants that he has not assigned any right, claim or cause of
action that he may have had against any Releasee. In addition to any claims for
damages or other relief that either party may assert arising out of, without
limitation, any breach of the terms of this Agreement, Employee shall be
obligated to return to the Company any Termination Consideration that has been
delivered in the event that the release contained in paragraph 3 hereof is
determined to be invalid or unenforceable.
14. This Agreement constitutes the sole and complete understanding and
agreement between the parties with respect to the matters set forth herein and
there are no other agreements or understandings between the parties with respect
to such subject matter, whether written or oral and whether made
contemporaneously or otherwise. No term, condition, covenant, representation or
acknowledgment contained in this Agreement may be amended unless in a writing
signed by both parties. If any section of this Agreement is determined to be
void, voidable or unenforceable, it shall have no effect on the remainder of the
Agreement which shall remain in full force and effect. This Agreement shall in
all respects be subject to, governed by and enforced and construed pursuant to
and in accordance with the laws of the State of New York, without regard to and
excluding its choice of law rules.
15. Employee agrees and acknowledges that (a) Employee has had an
adequate opportunity to review this Agreement and all of its terms, and has been
represented by counsel; (b) Employee understands all of the terms of this
Agreement, which are fair, reasonable and are not the result of any fraud,
duress, coercion, pressure or undue influence exercised by or on behalf of any
Releasee; and (c) Employee represents and warrants that he is under no legal
disability and that he has the full right and authority to execute this
Agreement, and that he has agreed to and/or entered into this Agreement and all
of the terms hereof, knowingly, freely and voluntarily.
BARNESANDNOBLE.COM INC., individually
and on behalf of BARNESANDNOBLE.COM
LLC, as its sole manager
________________________________ By:________________________________
JONATHAN BULKELEY Marie Toulantis,
Chief Financial Officer
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 24th day of January, 2000 personally came Jonathan
Bulkeley, and being duly sworn, acknowledged that he is the person described in
and who executed the foregoing Agreement and acknowledged that he executed same.
/s/ Leona L. Lobban
-------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 31st day of January, 2000, personally came Marie
Toulantis, to me known, and known to me to be the Chief Financial Officer of
BARNESANDNOBLE.COM INC., the corporation described in, and which executed the
foregoing Agreement and who, by me duly sworn, did depose and say that the
execution was duly authorized by said company and acknowledged that she executed
same.
/s/ Richard Figueroa
-------------------------
Notary Public
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 39,547
<SECURITIES> 321,375
<RECEIVABLES> 20,447
<ALLOWANCES> 0
<INVENTORY> 8,918
<CURRENT-ASSETS> 398,763
<PP&E> 138,601
<DEPRECIATION> 27,664
<TOTAL-ASSETS> 619,848
<CURRENT-LIABILITIES> 46,073
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> 115,814
<TOTAL-LIABILITY-AND-EQUITY> 619,848
<SALES> 78,244
<TOTAL-REVENUES> 78,244
<CGS> 63,051
<TOTAL-COSTS> 63,051
<OTHER-EXPENSES> 67,304
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,907)
<INCOME-PRETAX> (9,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,000)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
