<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 Rule 14a-11(c) or Rule 14a-12
BARNES & NOBLE, 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)(1) 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 the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO] BARNES & NOBLE INC.
Booksellers Since 1873
122 FIFTH AVENUE
NEW YORK, NEW YORK 10011
May 1, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Barnes & Noble, Inc. The meeting will be held at 10:00 a.m., New York City
time, on Wednesday, June 3, 1998 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 which 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.
Sincerely,
MICHAEL N. ROSEN
Secretary
<PAGE>
[LOGO] BARNES & NOBLE INC.
Booksellers Since 1873
122 FIFTH AVENUE
NEW YORK, NEW YORK 10011
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1998
------------------------------
The Annual Meeting of Stockholders of Barnes & Noble, Inc. (the
"Company") 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, June 3, 1998 for the following purposes:
1. To elect three Directors to serve until the 2001 annual meeting of
stockholders and until their respective successors are duly
elected and qualified;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of Common
Stock;
3. To approve an amendment to the Barnes & Noble, Inc. 1996 Incentive
Plan increasing the number of shares available for issuance;
4. To ratify the appointment of BDO Seidman, LLP as independent
certified public accountants for the Company's fiscal year ending
January 30, 1999; and
5. 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
April 15, 1998 are entitled to notice of and to vote at the meeting and at
any adjournment or postponement thereof.
MICHAEL N. ROSEN
Secretary
New York, New York
May 1, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD.
<PAGE>
BARNES & NOBLE, INC.
122 FIFTH AVENUE
NEW YORK, NEW YORK 10011
------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1998
------------------------------
INTRODUCTION
This Proxy Statement and enclosed Proxy Card are being furnished commencing
on or about May 1, 1998 in connection with the solicitation by the Board of
Directors of Barnes & Noble, Inc., a Delaware corporation (the "Company"), of
proxies for use at the Annual Meeting of Stockholders to be held on June 3, 1998
(the "Meeting") for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. Any proxy given pursuant to such solicitation and
received in time for the Meeting will be voted as specified in such proxy. If no
instructions are given, proxies will be voted FOR the election of the nominees
listed below under the caption "Election of Directors-- Information Concerning
the Directors and Nominees--Nominees for Election as Director," FOR the adoption
of the amendment to the Company's Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") increasing the number of authorized
shares of Common Stock, FOR the adoption of the amendment to the Company's 1996
Incentive Plan (the "1996 Incentive Plan") increasing the number of shares
available for issuance, FOR the ratification of the appointment of BDO Seidman,
LLP as independent certified public accountants for the Company's fiscal year
ending January 30, 1999 (collectively, the "Proposals"), and in the discretion
of the proxies named on the Proxy Card with respect to any other matters
properly brought before the Meeting and any adjournments thereof. Any proxy may
be revoked by written notice received by the Secretary of the Company at any
time prior to the voting thereof by submitting a subsequent proxy or by
attending the Meeting and voting in person.
Only holders of record of the Company's voting securities as of the close
of business on April 15, 1998 are entitled to notice of and to vote at the
Meeting. As of the record date, 68,228,566 shares of Common Stock, par value
$.001 per share ("Common Stock"), were outstanding. Each share of Common Stock
entitles the record holder thereof to one vote on each of the Proposals and on
all other matters properly brought before the Meeting. The presence of a
majority of the combined outstanding shares of the Common Stock represented in
person or by proxy at the Meeting will constitute a quorum.
The three nominees for Director receiving the highest vote totals will be
elected as Directors of the Company to serve until the 2001 annual meeting of
stockholders. The proposal to amend the restated Certificate of Incorporation
requires the affirmative vote of the holders of a majority of the shares of
Common Stock outstanding on the record date. In determining whether the proposal
to amend the Restated Certificate of Incorporation has received the requisite
number of affirmative votes, abstentions and broker non-votes will have the same
effect as a vote against that proposal.
The proposal to adopt the amendment to the 1996 Incentive Plan, to ratify
the Company's independent certified public accountants, and all other matters to
be voted on at the Meeting, will be decided by the affirmative vote of a
majority of the shares of Common Stock voting on the proposal in person or by
proxy at the Meeting. Thus, abstentions and broker non-votes will not be
included in vote totals with respect to such proposals and will have no effect
on the outcome of the votes with respect thereto. It should be noted that all of
the Directors and executive officers of the Company, together with principal
stockholders of the Company with which they are affiliated, own or control the
voting power of approximately 22.7% of the Common Stock outstanding as of April
15, 1998, and have advised the Company that they intend to vote in favor of all
of the Proposals.
<PAGE>
A Proxy Card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE
ACCOMPANYING ENVELOPE, which is postage paid if mailed in the United States.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE OF THIS PROXY STATEMENT.
2
<PAGE>
ELECTION OF DIRECTORS
PROPOSAL 1
INFORMATION CONCERNING THE DIRECTORS AND NOMINEES
The Board of Directors currently consists of nine Directors. The Directors
currently are divided into three classes, consisting of three members whose
terms expire at the Meeting, three members whose terms expire at the 1999 annual
meeting of stockholders and three members whose terms expire at the 2000 annual
meeting of stockholders.
Background information with respect to the Board of Directors and nominees
for election as Directors, all of whom are incumbent Directors, appears below.
See "Security Ownership of Certain Beneficial Owners and Management" for
information regarding such persons' holdings of equity securities of the
Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION
- ------------------------------------------------ --- -------- ------------------------------------------------
<S> <C> <C> <C>
Leonard Riggio (1) 57 1986 Chairman of the Board and Chief Executive
Officer
Stephen Riggio 43 1997 Vice Chairman
Matthew A. Berdon (2)(3) 78 1992 Director
William Dillard, II (1) 53 1993 Director
Jan Michiel Hessels (2) 55 1990 Director
Irene R. Miller 46 1995 Director
Margaret T. Monaco (2) 50 1995 Director
Michael N. Rosen 57 1986 Secretary and Director
William Sheluck, Jr. (1)(2)(3) 57 1993 Director
</TABLE>
- ---------------------------------
(1) Member of Nominating Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
At the Meeting, three Directors will be elected, each to hold office for a
term of three years and until his or her successor is elected and qualified.
Leonard Riggio, Jan Michiel Hessels and William Sheluck, Jr. are nominees for
election as Directors at the Meeting, each to hold office for a term of three
years until the annual meeting of stockholders to be held in 2001. The terms of
Stephen Riggio, Matthew A. Berdon and Margaret T. Monaco expire in 1999; and the
terms of William Dillard II, Irene R. Miller and Michael N. Rosen expire in
2000. Each of the nominees has 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.
Nominees for Election as Director
The following individuals are nominees for Director at the Meeting:
LEONARD RIGGIO has been Chairman of the Board, Chief Executive Officer and a
principal stockholder of the Company since its inception in 1986. Since 1965,
Mr. Riggio has been Chairman of the Board, Chief Executive Officer and the
principal stockholder of Barnes & Noble College Bookstores, Inc. ("B&N
College"), one of the largest operators of college bookstores in the country.*
For more than the past five years, Mr. Riggio has been Chairman of the Board and
a principal beneficial owner of MBS Textbook Exchange, Inc. ("MBS"), one of the
nation's largest wholesalers of college textbooks.* Mr. Riggio is also the
principal member and sole Manager of Babbage's Etc. LLC, a national retailer of
personal computer software and video games.
- ---------------------------------
* Based upon sales reported in trade publications and public filings.
3
<PAGE>
JAN MICHIEL HESSELS has been a Director of the Company since October 1990.
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. From January
1985 until January 1990, Mr. Hessels was President and Chief Executive Officer
of N.V. Deli-Maatschappij, an international trading company, as well as a
director of its parent company, Universal Corp. Mr. Hessels is also a director
of Amsterdam Stock Exchange, BAM Holding N.V., Yule Catto Plc., Schiphol
Airport, Royal Van Ommeren and Staal Bank.
WILLIAM SHELUCK, JR. has been a Director of the Company since November
1993. Mr. Sheluck formerly was the President, Chief Executive Officer and a
director of Nationar, a New York State-chartered commercial bank providing
services to financial institutions and corporations, from 1983 until his
retirement in April 1993. Mr. Sheluck is also the Treasurer and a director of
New Life of New York City, Inc., a not-for-profit organization which provides
services to disadvantaged teenagers.
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.
Other Directors whose Terms of Office Continue after the Meeting
STEPHEN RIGGIO has been a Director of the Company since April 1997 and was
appointed Vice Chairman of the Company in December 1997. Mr. Riggio was Chief
Operating Officer of the Company from February 1995 until December 1997. Since
February 1997 Mr. Riggio has been Chairman and Chief Executive Officer of
BarnesandNoble.com Inc., a wholly owned subsidiary of the Company. Mr. Riggio
was President of B. Dalton Bookseller, Inc. ("B. Dalton"), a wholly owned
subsidiary of the Company, from July 1993 to February 1995, and he was Executive
Vice President, Merchandising of the Company from January 1987 to February 1995.
For 13 years prior to January 1987, Mr. Riggio held various merchandising and
marketing positions at B&N College. Mr. Riggio is Leonard Riggio's brother.
MATTHEW A. BERDON has been a Director of the Company since June 1992. Mr.
Berdon has been a partner in the certified public accounting firm of Ferro
Berdon & Company ("Ferro Berdon") for more than the past five years. In January
1998, Ferro Berdon merged into the accounting firm of Urbach, Kahn & Werlin, and
Mr. Berdon became Chairman of the New York Division of that firm. Mr. Berdon is
also a director of B&N College.
WILLIAM DILLARD, II has been a Director of the Company since November 1993.
Mr. Dillard is the President and Chief Operating Officer of Dillard's, positions
he has held since 1977, and he has been a director of Dillard's since 1968. Mr.
Dillard is also a director of Simon Property Group, Texas Commerce Bancshares
Inc. and Acxiom Corp.
IRENE R. MILLER has been a Director of the Company since May 1995. Ms.
Miller was Chief Financial Officer of the Company from September 1993 to June
1997 and Vice Chairman of the Company from September 1995 to June 1997. She
joined the Company in January 1991 and held various positions until she was
appointed Chief Financial Officer in 1993. From July 1986 to December 1990, Ms.
Miller held various positions in the Retail Industry Group for Morgan Stanley &
Co. Incorporated's Investment Banking Department, most recently as a Principal.
From 1982 to 1986, she was a Vice President of Corporate Finance at Rothschild,
Inc. Ms. Miller is also a director of Oakley, Inc.
MARGARET T. MONACO has been a Director of the Company since May 1995. Ms.
Monaco has been the Vice President and Chief Administrative Officer of KECALP,
Inc., a wholly owned subsidiary of Merrill Lynch & Co., Inc. since April 1998.
KECALP, Inc. is the general partner for a number of limited partnerships which
are operated exclusively for the benefit of Merrill Lynch employees. Previously,
Ms. Monaco had been the Principal of Probus Advisors, a management and financial
consulting firm, since July 1993 and Vice President and Treasurer of The
Limited, Inc., a national specialty retailing firm, from October 1987 to June
1993. Ms. Monaco is also a director of Crown American Realty Trust and Cooker
Restaurant Corporation.
4
<PAGE>
MICHAEL N. ROSEN has been Secretary and a Director of the Company since its
inception in 1986 and a senior member of Robinson Silverman Pearce Aronsohn &
Berman LLP, counsel to the Company, for more than the past five years. Mr. Rosen
is also a director of B&N College and MBS.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met four times during the fiscal year ended January
31, 1998 and acted by unanimous written consent on four additional occasions.
All Directors attended at least 75% of all of the meetings of the Board of
Directors and the committees thereof on which they served during the fiscal year
ended January 31, 1998.
The Board of Directors has three standing committees: the Audit Committee,
the Compensation Committee and the Nominating Committee. In March 1997, the
Incentive Plan Committee of the Board of Directors was merged into the
Compensation Committee.
Audit Committee. The Audit Committee has the principal function of
reviewing the adequacy of the Company's internal system of accounting controls,
conferring with the independent certified public accountants concerning the
scope of their examination of the books and records of the Company, recommending
to the Board of Directors the appointment of independent certified public
accountants, reviewing related party transactions and considering other
appropriate matters regarding the financial affairs of the Company. The current
members of the Audit Committee are Messrs. Sheluck (Chairman) and Berdon, none
of whom is, or has ever been, an officer or employee of the Company. The Audit
Committee met twice during the fiscal year ended January 31, 1998.
Compensation Committee. The principal function of the Compensation
Committee is to make recommendations to the Board of Directors with respect to
matters regarding the approval of employment agreements, management and
consultant hiring and executive compensation. The current members of the
Compensation Committee are Mr. Berdon (Chairman), Mr. Hessels, Ms. Monaco and
Mr. Sheluck, none of whom is, or has ever been, an officer or employee of the
Company. Ms. Monaco joined the Compensation Committee in March 1997 upon the
merger of that Committee with the former Incentive Plan Committee. The
Compensation Committee met three times during the fiscal year ended January 31,
1998 and acted by unanimous written consent on eight additional occasions. As of
March 1997, the Compensation Committee assumed the principal function of the
former Incentive Plan Committee which is to make grants of options to purchase
Common Stock and of restricted shares of Common Stock under the Barnes & Noble,
Inc. 1991 Employee Incentive Plan and the Barnes & Noble, Inc. 1996 Incentive
Plan. The members of the former Incentive Plan Committee were Mr. Berdon
(Chairman), Ms. Monaco and Mr. Sheluck.
Nominating Committee. The function of the Nominating Committee is to seek
qualified individuals as Directors of the Company. The current members of the
Nominating Committee are Messrs. Riggio (Chairman), Dillard and Sheluck. The
Nominating Committee did not meet during the fiscal year ended January 31, 1998.
COMPENSATION OF DIRECTORS
Non-employee Directors receive an annual fee of $20,000 with no additional
fees for attendance at Board or committee meetings. All Directors of the Company
are reimbursed for travel, lodging and related expenses incurred in attending
Board meetings.
5
<PAGE>
EXECUTIVE OFFICERS
The Company's executive officers, as well as additional information with
respect to such persons, is set forth in the table below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------- --- --------------------------------------------------------------------------------
<S> <C> <C>
Leonard Riggio 57 Chairman of the Board and Chief Executive Officer
Stephen Riggio 43 Vice Chairman, and Chairman and Chief Executive Officer of BarnesandNoble.com
J. Alan Kahn 51 Chief Operating Officer
Mitchell S. Klipper 40 Executive Vice President, and President of Barnes & Noble Development
Marie J. Toulantis 44 Executive Vice President of Finance
Thomas A. Tolworthy 43 Vice President, and President of Barnes & Noble Booksellers
David K. Cully 45 Vice President, and President of Barnes & Noble Distribution
David S. Deason 39 Vice President Real Estate and Development
Maureen H. Golden 47 Vice President Marketing and Advertising
Frank J. O'Neill 49 Vice President, and President of B. Dalton Bookseller
Jeffrey M. Killeen 44 Chief Operating Officer of BarnesandNoble.com
Mary Ellen Keating 41 Senior Vice President Corporate Communications and Public Affairs
Michael N. Rosen 57 Secretary
</TABLE>
Information with respect to executive officers of the Company who also are
Directors is set forth in "Information Concerning the Directors and Nominees"
above.
J. ALAN KAHN joined the Company as Chief Operating Officer in December
1997. He joined B&N College in 1988 as President and Chief Operating Officer and
was made Chief Executive Officer in 1995. Prior to that, he was Executive Vice
President of B&N Trade and Mail Order from 1978 to 1988, and Vice President of
Merchandising for B. Dalton from 1971 to 1978.
MITCHELL S. KLIPPER has been President of Barnes & Noble Development, the
group responsible for selecting the Company's new store locations, since
December 1995 and is an Executive Vice President of the Company. From March 1993
to December 1995, Mr. Klipper was President of Barnes & Noble Booksellers, Inc.
("B&N Booksellers"), a wholly owned subsidiary of the Company. Until September
1993, Mr. Klipper also was Chief Financial Officer of the Company, a position to
which he was elected in September 1988. He was Vice President, Chief Financial
Officer of B&N College from June 1986 to September 1988.
MARIE J. TOULANTIS joined the Company as Executive Vice President, Finance
in July 1997. Prior to that she was Senior Vice President of The Chase Manhattan
Bank ("Chase") from May 1996 to June 1997, where she was responsible for
managing the bank's relationships with major accounts, including the Company's.
Prior to that she held the position of Vice President at Chase from 1987 to May
1996.
THOMAS A. TOLWORTHY became President of B&N Booksellers in December 1995
and is also a Vice President of the Company. Prior to December 1995, Mr.
Tolworthy was President of B. Dalton. He was Vice President of Store Operations
of B. Dalton from September 1991 to February 1995 and was a Regional Director of
B. Dalton from July 1989 to September 1991. Prior to 1989, Mr. Tolworthy was
Stores Director for Duckwall/Alco Stores, Inc., a general merchandise retailer.
DAVID K. CULLY has been Vice President of the Company and President of
Barnes & Noble Distribution, the group responsible for the Company's
distribution center operations, since June 1992. Prior to June 1992, he was Vice
President, General Merchandise Manager of the Company. Prior to joining the
Company in 1989, Mr. Cully was Executive Vice President, General Merchandise
Manager for Egghead Discount Software, Inc., a software retailer.
6
<PAGE>
DAVID S. DEASON joined the Company in January 1990 as a Director of Real
Estate and became Vice President, Real Estate in January 1997. Prior to joining
the Company, Mr. Deason was a Director of Real Estate for S&A Restaurant
Corporation, a national restaurant chain.
MAUREEN H. GOLDEN became Vice President, Marketing and Advertising in
September 1997. Prior to that, she had been Vice President, General Merchandise
Manager of the Company from June 1992 to September 1997. She joined B&N College
in July 1976 and has held various positions in buying and merchandising for the
Company since 1987 and for B&N College from 1976 to 1987.
FRANK J. O'NEILL joined the Company as President of B. Dalton in November
1997 and also as a Vice President of the Company. Before joining the Company he
was Senior Vice President, Real Estate for Lechters, a U.S. specialty retailing
corporation from February 1992 to November 1997. Prior to that, he served in the
same capacity for Melville Realty, where he was responsible for their mall real
estate division.
JEFFREY M. KILLEEN joined the Company as Chief Operating Officer of
BarnesandNoble.com in January 1998. Before joining the Company he was President
and Chief Executive Officer of Pacific Bell Interactive Media from 1994 to 1998.
During 1993 and 1994 he was President of American Insurance Services Group, a
leading electronic publisher. From 1975 to 1993, he was an executive with The
Dun & Bradstreet Corporation, most recently as Senior Vice President of its
Reuben H. Donnelly subsidiary, a leading marketer and publisher of yellow pages.
MARY ELLEN KEATING joined the Company as Senior Vice President Corporate
Communications and Public Affairs in January 1998. Before joining the Company
she was Executive Vice President and General Manager of Hill and Knowlton, Inc.
a public relations firm, from June 1991 to January of 1998.
The Company's officers are elected annually by the Board of Directors and
hold office at the discretion of the Board of Directors.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock, as of April 15, 1998, by each person known
by the Company to own beneficially more than five percent of the Company's
outstanding Common Stock, by each Director and nominee for Director, by each
executive officer named in the Summary Compensation Table contained in
"Executive Compensation," and by all Directors and executive officers of the
Company as a group. Except as otherwise noted, each person named in the table
has sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by him, her or it.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) BENEFICIALLY OWNED (1)
- ------------------------------------------------------------------------ ------------ ----------------------
<S> <C> <C>
Leonard Riggio ......................................................... 16,698,222(2) 24.0%
c/o Barnes & Noble, Inc.
122 Fifth Avenue
New York, New York 10011
Forstmann-Leff Associates, Inc ......................................... 10,642,130(3) 15.6%
55 East 52nd Street
New York, New York 10055
Neuberger & Berman, L.L.C .............................................. 3,959,300(4) 5.8%
605 Third Ave.
New York, New York 10158
Stephen Riggio.......................................................... 1,986,973(5) 2.8%
Mitchell S. Klipper..................................................... 1,505,789(5) 2.2%
Thomas A. Tolworthy..................................................... 88,154(5) *
David K. Cully.......................................................... 105,799(5) *
Matthew A. Berdon....................................................... 97,000(6) *
William Dillard, II..................................................... 50,000(5) *
Jan Michiel Hessels..................................................... 32,000(7) *
Irene R. Miller......................................................... 348,390(5) *
Margaret T. Monaco...................................................... 36,000(7) *
Michael N. Rosen........................................................ 42,000(8) *
William Sheluck, Jr..................................................... 62,640(9) *
All directors and executive officers as a group (19 persons)............ 21,223,372(10) 28.7%
</TABLE>
- ---------------------------------
* Less than 1%.
(1) Shares of Common Stock that an individual or group has a right to acquire
within 60 days after April 15, 1998 pursuant to the exercise of options,
warrants or other rights are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for computing the percentage ownership of any other
person or group shown in the table.
(2) Includes (i) 2,652,334 shares owned by B&N College (Mr. Riggio owns
substantially all of the voting securities of B&N College), (ii) 1,360,000
shares owned by The Riggio Foundation, a charitable trust established by Mr.
Riggio, with himself and his wife as trustees, and (iii) 1,318,750 shares
issuable upon the exercise of stock options. The shares of Common Stock
owned by Mr. Riggio are, and in the future may be, pledged as collateral for
certain loans, including loans which were used to purchase Common Stock. The
failure of Mr. Riggio to repay such loans, together with any sale by the
pledgees of the pledged Common Stock, could result in a change in control of
the Company.
(Footnotes continued on next page)
8
<PAGE>
(3) Forstmann-Leff Associates, Inc. ("FLA"), a New York corporation, is a
registered investment adviser under Section 203 of the Investment Advisers
Act of 1940 (the "1940 Act"), and has sole voting power with respect to
3,636,730 of its shares. FLA shares voting power with respect to 536,300 of
its shares, and dispositive power with respect to 2,405,300 of its shares,
with its subsidiary, FLA Asset Management, Inc. ("FLA Management"), a
registered investment adviser under the 1940 Act. FLA shares voting and
dispositive power with respect to 87,800 of its shares with its subsidiary
Stamford Advisers Corp., a registered investment adviser under the 1940 Act.
FLA shares voting and dispositive power with respect to 101,600 of its
shares with Forstmann-Leff Associates, L.P., a registered investment adviser
under the 1940 Act. FLA Management is the general partner of Forstmann-Leff
Associates L.P. FLA shares voting and dispositive power with respect to
3,842,400 of its shares with FLA Advisers L.L.C., a New York limited
liability company. FLA Advisers L.L.C. is a registered investment adviser
under the 1940 Act whose managing members are principals of FLA. The
foregoing information is based upon a Schedule 13G filed by FLA with the
Company in February 1998.
(4) Neuberger & Berman, L.L.C. ("N&B") has sole voting power with respect to
16,300 of its shares, and shares voting and dispositive power with respect
to 3,939,300 of its shares with unrelated third parties. Of the 3,939,300
shares for which voting and dispositive power is shared, 2,739,600 shares
are beneficially owned by Neuberger & Berman Guardian Portfolio, a series of
Equity Managers Trust. N&B and Neuberger & Berman Management, Inc. ("N&B
Management") are deemed to be beneficial owners of these shares since they
both have shared power to make decisions whether to retain or dispose of the
securities. N&B and N&B Management serve as sub-adviser and investment
manager, respectively, of Neuberger & Berman Guardian Portfolio.
(5) All of these shares are issuable upon the exercise of stock options.
(6) Of these shares, 50,000 are issuable upon the exercise of stock options. One
thousand shares are owned by Mr. Berdon's wife. Mr. Berdon disclaims any
beneficial ownership of those shares.
(7) Of these shares, 30,000 are issuable upon the exercise of stock options.
(8) Of these shares, 30,000 shares are issuable upon the exercise of stock
options. Of the other 12,000 shares, 10,000 are owned by Mr. Rosen's wife
and 2,000 are owned by Mr. Rosen's daughter. Mr. Rosen disclaims any
beneficial ownership of these shares.
(9) Of these shares, 50,000 are issuable upon the exercise of stock options. Of
the other 12,640 shares, Mr. Sheluck shares voting and dispositive power
with respect to 8,000 of these shares with his wife, and the remaining 4,640
shares are owned by minor children of Mr. Sheluck.
(10) Includes 5,763,260 shares issuable upon the exercise of stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board of Directors
are Mr. Berdon (Chairman), Mr. Hessels, Mr. Sheluck and Ms. Monaco, none of whom
is an officer or employee or former officer or employee of the Company. See
"Meetings and Committees of the Board-- Compensation Committee."
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company for services rendered during the years indicated to the Company's Chief
Executive Officer and the Company's four other most highly compensated executive
officers. The Company did not grant any restricted stock awards or free-standing
stock appreciation rights or make any long-term incentive plan payouts during
the years indicated.
9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
FISCAL YEAR AWARDS
ENDED ON OR ANNUAL COMPENSATION SECURITIES
ABOUT ---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION JANUARY 31 SALARY BONUS OPTIONS/SARS COMPENSATION (1)
- ------------------------------------------- ----------- --------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Leonard Riggio ............................ 1998 $ 900,000(2) $540,000 -- $ --
Chairman of the Board 1997 900,000(3) 540,000 -- --
and Chief Executive Officer 1996 900,000 405,000 -- --
Stephen Riggio ............................ 1998 460,000 276,000 215,300 5,860(4)
Vice Chairman, and Chairman 1997 448,462(3) 276,000 14,384 9,636
and Chief Executive Officer of 1996 385,577 180,000 12,090 5,061
BarnesandNoble.com
Mitchell S. Klipper ....................... 1998 460,000 276,000 15,300 8,987(5)
Executive Vice President, and President 1997 448,462(3) 276,000 14,384 8,279
of Barnes & Noble Development 1996 395,192 180,000 13,950 8,506
Thomas A. Tolworthy ....................... 1998 321,154 130,000 59,978 4,216
Vice President, and 1997 300,000(3) 120,000 10,788 3,135
President of Barnes & 1996 295,266 60,000 149,300 3,346
Noble Booksellers
David K. Cully ............................ 1998 321,154 130,000 59,978 4,000
Vice President, and President of 1997 300,000(3) 90,000 10,788 3,289
Barnes & Noble Distribution 1996 279,038 76,500 149,486 669
</TABLE>
- ---------------------------------
(1) Except as set forth in notes 3 and 4 below, "All Other Compensation" for the
fiscal year ended January 31, 1998 is comprised of the Company's
contributions to the Barnes & Noble, Inc. 401(k) Savings Plan (the "401(k)
Plan").
(2) Mr. Riggio has voluntarily reduced his salary to $750,000 for the fiscal
year ending January 30, 1999.
(3) Reflects annual salary for a 52-week period. The Company's fiscal year ended
February 1, 1997 included 53 weeks. Salaries paid for that 53-week period
were $917,308 for Leonard Riggio; $457,308 for each of Stephen Riggio and
Mitchell S. Klipper; and $305,769 for each of Thomas A. Tolworthy and David
K. Cully.
(4) Represents (a) $4,000 paid by the Company as a contribution to Mr. Riggio's
401(k) Plan, and (b) $1,860 paid by the Company as a premium on a term life
insurance policy for the benefit of Mr. Riggio.
(5) Represents (a) $4,000 paid by the Company as a contribution to Mr. Klipper's
401(k) Plan, (b) 1,860 paid by the Company as a premium on a term life
insurance policy for the benefit of Mr. Klipper and (c) $3,127 paid by the
Company as a premium on a long-term disability insurance policy for the
benefit of Mr. Klipper.
The following table sets forth certain information concerning options
granted during the 52 weeks ended January 31, 1998 to the executive officers
named in the Summary Compensation Table above. The Company did not grant any
free-standing stock appreciation rights during the 52 weeks ended January 31,
1998.
10
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENTAGE
OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO PRESENT VALUE OF
UNDERLYING EMPLOYEES IN EXERCISE GRANT AT DATE OF
OPTIONS/SARS FISCAL PRICE PER EXPIRATION GRANT USING THE
NAME GRANTED 1997 SHARE DATE BLACK-SCHOLES MODEL(1)
- ------------------------------------- ------------ ------------ --------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Leonard Riggio....................... -- --% $ -- -- $ --
Stephen Riggio....................... 215,300 9.6% 17.125 4/02/07 1,554,406
Mitchell S. Klipper.................. 15,300 0.7% 17.125 4/02/07 110,466
Thomas A. Tolworthy.................. 59,978 2.7% 17.125 4/02/07 433,041
David K. Cully....................... 59,978 2.7% 17.125 4/02/07 433,041
</TABLE>
- ---------------------------------
(1) Calculated using the Black-Scholes option-pricing model with the following
assumptions: volatility of 28.0%, risk-free interest rate of 6.78% and an
expected life of six years. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options which have
no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
Black-Scholes model does not necessarily provide a reliable measure of the
fair value of the Company's stock options.
The following table sets forth information concerning option exercises and
the value of unexercised options as of January 31, 1998 for the executive
officers named in the Summary Compensation Table above.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS IN-THE MONEY OPTIONS/SARS
ACQUIRED AT JANUARY 31, 1998 AT JANUARY 31, 1998
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- -------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Riggio............ -- $ -- 1,318,750 -- $26,258,690 $ --
Stephen Riggio............ -- -- 2,124,323 228,919 48,704,523 3,353,512
Mitchell S. Klipper ...... 300,000 6,384,877 1,492,519 29,539 30,841,269 438,896
Thomas A. Tolworthy . 57,718 611,148 56,463 123,603 1,068,234 2,019,122
David K. Cully............ 45,678 597,992 80,546 123,662 1,527,884 2,020,101
</TABLE>
EMPLOYEES' RETIREMENT PLAN
The Company's Employees' Retirement Plan (the "Retirement Plan") is a
defined benefit pension plan covering all employees whose services are performed
within the United States (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 Company-funded benefits based upon an employee's years of service
and highest average annual salary for any five consecutive years in the last ten
years of service.
A participant's annual benefit is determined for an employee, including an
officer, 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,
11
<PAGE>
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 Code to
$125,000 for 1997, indexed annually. Compensation recognized under the
Retirement Plan is limited to $160,000 for 1997 and 1998, indexed annually in
accordance with Section 404(l) of the Code.
Credited years of service under the Retirement Plan as of January 31, 1998
for the individuals named in the Summary Compensation Table above are: Leonard
Riggio--10 years; Stephen Riggio-- 10 years; Mitchell S. Klipper--9 years;
Thomas A. Tolworthy--9 years; David K. Cully--8 years.
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>
$125,000.................................................. $21,675 $28,900 $36,125 $43,350 $50,575
$150,000.................................................. 26,550 35,400 44,250 53,100 61,950
$160,000 and above (1).................................... 28,500 38,000 47,500 57,000 66,500
</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 or after 1997. 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.
EMPLOYMENT AGREEMENTS
The Company recently renewed, for a two-year period, employment agreements
with Stephen Riggio and Mitchell S. Klipper which were scheduled to expire in
1998. The agreements with Mr. Riggio and Mr. Klipper provide for their
employment at an annual salary determined by the Company, subject to certain
minimums. Each is entitled to an annual bonus determined in accordance with the
Barnes & Noble, Inc. Supplemental Compensation Plan. The agreements also provide
for life and long-term disability insurance, a two-year severance arrangement
and a two-year post-employment, non-competition agreement. The agreements renew
annually, unless terminated by either party on 12 months prior notice.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive officer compensation program is administered by the
Compensation Committee of the Board of Directors, consisting of the four
non-employee directors listed below. The program is based upon the following
guiding principles:
1. The pay and benefits provided by the Company to its executive
officers should be competitive and allow the Company to attract and retain
individuals whose skills are critical to the long-term success of the
Company.
2. 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 the Company's executive compensation
program each year. This review includes a comparison of the Company's executive
compensation, corporate performance, stock appreciation and total return to the
stockholders with that of other companies, including other retailers.
12
<PAGE>
The key elements of the Company's executive compensation package consist of
base salary, annual bonus and stock options. The Company's policies with respect
to each of these elements are discussed below. In addition, while the elements
of compensation described below are considered separately, 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 Compensation Committee makes its determinations after receiving
and considering the recommendations of the Company's chief executive officer.
Base Salaries. An executive officer's base salary is determined by
evaluating the responsibilities of the position held, the individual's
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 other companies.
Annual Bonuses. In addition to a base salary, each executive officer is
eligible for an annual cash bonus. Bonuses for senior executive officers of the
Company are based upon annual net earnings of the Company and are determined
pursuant to the Barnes & Noble, Inc. Supplemental Compensation Plan (the
"Supplemental Compensation Plan"), which was approved by the Company's
shareholders at their annual meeting on May 31, 1995.
The Supplemental Compensation Plan provides that senior executive officers
designated by the Compensation Committee are entitled to a cash bonus in
accordance with a sliding scale formula based on the extent to which a
preestablished earnings-per-share target is attained. In general, not later than
90 days after the commencement of each fiscal year of the Company (and before
25% of the relevant period of service has elapsed), the Compensation Committee
establishes in writing a target earnings-per-share (the "Target"), the
attainment of which is substantially uncertain. The Target which is established
for each fiscal year must exceed the earnings-per-share for the immediately
previous fiscal year. Targets are subject to adjustment for recapitalizations,
dividends, stock splits and reverse splits, reorganizations, issuances of
additional shares, redemptions of shares, option or warrant exercises,
reclassifications, significant acquisitions and divestitures and other
extraordinary events.
Each participating executive officer is entitled to receive a cash bonus
based on a percentage of his or her base salary for the fiscal year ("Base
Salary") as follows:
<TABLE>
<CAPTION>
THEN THE AMOUNT OF
IF ACTUAL EARNINGS-PER-SHARE ARE: THE CASH BONUS IS:
- ------------------------------------------------------------------------------ -------------------
<S> <C>
Less than 80% of Target....................................................... None
80% or more but less than 91% of Target....................................... 30% of Base Salary
91% or more but less than 100% of Target...................................... 45% of Base Salary
100% or more but less than 109% of Target..................................... 60% of Base Salary
109% or more but less than 118% of Target..................................... 70% of Base Salary
118% or more of Target........................................................ 80% of Base Salary
</TABLE>
Notwithstanding the foregoing, in no event will the maximum cash bonus
payable to any participating executive officer under the Supplemental
Compensation Plan exceed $900,000 with respect to any fiscal year. In addition,
no participating executive officer is entitled to receive any bonus under the
Supplemental Compensation Plan with respect to any fiscal year unless the
Company's actual earnings-per-share for such fiscal year (subject to adjustment
as provided above) exceeds earnings-per-share for the prior fiscal year. No
bonuses are paid until the Compensation Committee certifies the extent to which
the Target has been attained.
Leonard Riggio, Stephen Riggio, J. Alan Kahn, Mitchell S. Klipper and Marie
J. Toulantis are the senior executive officers of the Company currently
participating in the Supplemental Compensation Plan.
Stock Options. The general purpose of long-term awards, currently in the
form of stock options, is to align the interests of the executive officers with
the interests of the Company's stockholders. 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. In
determining annual
13
<PAGE>
stock option grants, the Incentive Plan Committee has based its decision on the
individual's performance and potential to improve stockholder value. The
issuance of options at 100 percent of the fair market value also assures that
executives will receive a benefit only when the stock price increases.
Compensation of Chief Executive Officer. Leonard Riggio's compensation is
determined pursuant to the principles noted above, including a bonus as
determined by the Supplemental Compensation Plan. Specific consideration is
given to Mr. Riggio's responsibilities and experience in the industry and the
compensation package awarded to chief executive officers of other comparable
companies.
Impact of Section 162(m) of the Internal Revenue Code. The Compensation
Committee has considered the potential impact of Section 162(m) of the Internal
Revenue Code of 1986, as amended (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 chief executive officer or any of its four other
highest paid officers unless (i) the compensation is payable solely on account
of 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. Because it is in the best interests of the Company
to qualify to the maximum extent possible the compensation of its executives for
deductibility under applicable tax laws, the Company has implemented the
Supplemental Compensation Plan, which provides for the payment of compensation
in compliance with the above guidelines.
COMPENSATION COMMITTEE
Matthew A. Berdon, Chairman
Jan Michiel Hessels
Margaret T. Monaco
William Sheluck, Jr.
14
<PAGE>
PERFORMANCE GRAPH
Performance Graph. The following table compares the cumulative total
stockholder return on the Common Stock for the period commencing September 28,
1993 (the date on which the Common Stock commenced trading on the New York Stock
Exchange) through January 30, 1998 (the last trading date during the Company's
last completed fiscal year) with the cumulative total return on the Standard &
Poor's 500 Stock Index (the, "S&P 500") and the Dow Jones Retailers, Other
Specialty Industry Group Index (the "Dow Jones Specialty Retailers Index") over
the same period. Total return values were calculated based on cumulative total
return assuming (i) the investment of $100 in the Common Stock, the S&P 500 and
the Dow Jones Specialty Retailers Index on September 28, 1993 and (ii)
reinvestment of dividends.
Dow Jones
Barnes & Noble S&P 500 Index Specialty Retailers
-------------- -------------- --------------------
9/28/93 100.0 100.0 100.0
1/28/94 105.0 103.7 100.6
1/27/95 147.5 101.9 103.4
1/26/96 138.1 134.7 92.1
1/31/97 155.6 170.3 109.1
1/30/98 317.5 212.4 159.5
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases space for its executive offices in properties in which a
principal shareholder/director/executive officer of the Company has a minority
interest. The space was rented at an aggregate annual rent including real estate
taxes of approximately $1,309,000 in the Company's fiscal year ended January 31,
1998 ("fiscal 1997").
Marboro Books Corp., the Company's mail-order subsidiary, leases a 76,000
square foot office/warehouse from a partnership in which a principal
shareholder/director/executive officer of the Company has a 50% interest,
pursuant to a lease expiring in 2023. Pursuant to such lease, the Company paid
$743,000 in fiscal 1997.
The Company is provided with certain package shipping services by the LTA
Group, Inc. ("LTA"), a company in which the brother of a principal shareholder/
director/executive officer of the Company acquired a 20% interest during fiscal
1996. During fiscal 1997, the Company paid LTA $11,528,000 for such services.
The Company leases retail space in a building in which Barnes & Noble
College Bookstores, Inc. ("B&N College"), a company owned by a principal
shareholder/director/executive officer of the Company, subleases space for its
executive offices. Occupancy costs allocated by the Company to B&N College for
this space totaled $634,000 during fiscal 1997. In connection with the space,
the Company reimbursed B&N College, during fiscal 1997, for a landmark tax
credit totaling $726,000.
B&N College also allocated certain expenses it incurred on behalf of the
Company for salaries, employee benefit plan expenses and office support services
approximating $75,000 during fiscal 1997. The Company charged B&N College
$473,000 during fiscal 1997 for capital expenditures, business insurance, and
other operating costs incurred on their behalf.
The Company uses a jet aircraft owned by B&N College and pays for the costs
and expenses of operating the aircraft based upon the Company's usage. Such
costs, which include fuel, insurance, personnel and other costs, approximated
$1,910,000 during fiscal 1997.
On November 27, 1996, Babbage's Etc. LLC ("Babbage's"), a company owned by
a principal shareholder/director/executive officer of the Company, acquired
substantially all of the assets of Software Etc. Stores, Inc. ("Software"), a
company (formerly a division of the Company) in which two principal
shareholders/directors had an ownership interest, and assumed the operations of
14 retail software departments located within Barnes & Noble stores. As of
January 31, 1998, there are 13 of these departments remaining. The Company pays
all rent related to these properties for which it receives a license fee from
Babbage's equal to 7.0% of the gross sales of such departments. The Company also
provides real estate and construction services to Babbage's and purchases
business insurance on its behalf for which the Company is reimbursed for its
incremental costs to provide such services. The Company charged Babbage's
$1,430,000 during fiscal 1997 for such services, license fees, rent, operating
costs, insurance costs and benefit coverage. Babbage's also purchases
merchandise from the Company at prices equal to the Company's cost to obtain and
ship such merchandise.
Michael N. Rosen, the Secretary and a Director of the Company, is a senior
member of Robinson Silverman Pearce Aronsohn & Berman LLP, which law firm has
represented the Company since its organization.
The Company believes that the transactions discussed above, as well as the
terms of any future transactions and agreements (including renewals of any
existing agreements) between the Company and its affiliates, are and will be at
least as favorable to the Company as could be obtained from unaffiliated
parties. The Board of Directors will be advised in advance of any such 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. In
addition, the Board of Directors has established an Audit Committee, which
16
<PAGE>
consists of two independent directors. One of the responsibilities of the Audit
Committee is to review related party transactions. See "Election of
Directors--Meetings and Committees of the Board--Audit Committee."
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
PROPOSAL 2
The Board of Directors has voted to recommend to the stockholders that the
Company's Restated Certificate of Incorporation be amended in order to increase
the number of authorized shares of Common Stock to 300,000,000 shares. The Board
of Directors believes the approval of this amendment to the Restated Certificate
of Incorporation is in the best interests of the Company and its stockholders
and recommends a vote in favor of this proposal.
The authorized Common Stock of the Company currently consists of
100,000,000 shares, par value $.001 per share, 68,228,566 shares of which were
outstanding as of the Record Date. An additional 6,179,087 shares were reserved
for issuance pursuant to stock options granted or to be granted under the 1991
Incentive Plan and other stock options outstanding as of the Record Date, and an
additional 5,531,645 shares were reserved for issuance pursuant to the stock
options granted or to be granted under the 1996 Incentive Plan. If the proposed
amendment to the 1996 Incentive Plan contained in this Proxy Statement is
approved by the stockholders, an additional 5,000,000 shares will be reserved
for issuance pursuant to the 1996 Incentive Plan. The Board of Directors
believes that the authorization of additional shares is desirable to provide the
Company with flexibility in connection with possible future stock splits, equity
financings, joint ventures and acquisitions, in raising additional capital, for
grants and as incentives to employees, officers, directors and consultants of
the Company, and other general corporate purposes. The amendment may also have
the effect of discouraging an attempt to obtain control of the Company by means
of a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of present management. If this amendment is approved, the Board of
Directors will have additional shares of Common Stock available to effect a sale
of shares (either in public or private transactions, mergers, consolidations or
similar transactions) which would increase the number of outstanding shares and
would thereby dilute the interest of current stockholders and/or a party
attempting to obtain control of the Company. The Company has no existing
understanding or agreement for the issuance of any shares of Common Stock (other
than the shares currently reserved for issuance as described above), nor is the
Company aware of any existing or threatened efforts to obtain control of the
Company.
If the amendment to the restated certificate of incorporation is approved
by the Stockholders, the Board of Directors will have authority to issue such
shares of Common Stock without the necessity of further stockholder action.
Holders of the Common Stock have no preemptive rights with respect to any shares
which may be issued in the future.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION. PROXIES
SOLICITED HEREBY WILL BE VOTED FOR THE PROPOSAL UNLESS A VOTE AGAINST THE
PROPOSAL OR ABSTENTION IS SPECIFICALLY INDICATED.
17
<PAGE>
APPROVAL OF THE AMENDMENT TO THE BARNES & NOBLE, INC.
1996 INCENTIVE PLAN
PROPOSAL 3
The Board of Directors has approved, subject to the approval of the
Company's stockholders, an amendment to the 1996 Incentive Plan (the "Incentive
Plan"), which increases the maximum number of shares that may be the subject of
awards to 11,000,000 shares. Currently, the Incentive Plan allows a maximum of
6,000,000 shares to be the subject of awards.
The Incentive Plan provides that options to acquire shares of 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 of not fewer than two Directors of the
Company (the "Committee"), 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 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. The Board of Directors believes that stock options provide
performance incentives to eligible participants to the benefit of the Company
and its stockholders, and recommends approval of the Amendment to the Incentive
Plan by the stockholders.
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.
The following is a summary of the Incentive Plan, incorporating the
proposed amendment to increase the maximum number of shares available for
issuance. This summary is qualified in all respects by reference to the full
text of the Incentive Plan included herein as Appendix A.
SHARE AUTHORIZATION
The maximum number of Shares that may be the subject of awards under the
Incentive Plan is 11,000,000 Shares. The Incentive Plan provides that in any
given year, the maximum number of Shares with respect to which Options or SARs
may be granted to any employee is 700,000 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 an 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 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 admistered by the Compensation Committee (the
"Committee") currently consisting of Messrs. Berdon (Chairman), Hessels and
Sheluck and Ms. Monaco. The Board of Directors may remove from, add members to,
or fill vacancies in the Committee. The 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.
18
<PAGE>
Subject to the provisions of the Incentive Plan, the 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.
Any award to a member of the Committee shall be made pursuant to a formula
which provides that each person who hereafter is elected or appointed to
membership on the Board of Directors of the Company and who is a Non-Employee
Director on the date of his or her election or appointment, shall on such
effective date of election or appointment automatically be granted Options to
purchase 40,000 Shares at their then fair market value, with 25% of each such
Option (covering 10,000 Shares) becoming exercisable on each of the next four
anniversaries of said grant date, at which time (said fourth anniversary) 100%
of said Options shall be exercisable. For these purposes, a "Non-Employee
Director" shall be a Director of the Company who is not otherwise an employee of
the Company or any of its affiliates or subsidiaries on the grant date and has
not been employed by the Company or any of its affiliates or subsidiaries for
any part of the twelve months preceding such date. Each Option granted to a
Non-Employee Director under the Incentive Plan shall be exercisable for a period
of ten years from the date of automatic grant and shall be subject to the
restrictions and limitations set forth in the Incentive Plan.
OPTIONS
"Incentive Stock Options" meeting requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (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 will be determined by the Committee,
but no Option will 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 nonqualified Stock Options, where the 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 Committee. In general,
the exercise price for Incentive Options must be at least equal to 100% of the
fair market value of the Shares on the date of the grant and the exercise price
for Nonqualified Stock Options will be determined by the Committee at the time
of the grant. The exercise price can be paid in cash, or if approved by the
Committee, by tendering Shares owned by the participant.
Options are not transferable except by will or the laws of descent and
distribution and may be exercised only by the participant (or his guardian or
legal representative) during his or her lifetime, except as provided below,
provided, however, the Nonqualified Stock Options may, under certain
circumstances, be transferable to family members and trusts for the benefit of
the participant or his family members. If a participant's employment with the
Company or service as a consultant or Director terminates for any reason (other
than death or disability), any unexercised or unexpired Options will be deemed
canceled and terminated on the date of such termination, unless the Committee
decides to extend the term of such Options for a period not exceeding three
months. In addition, where a participant's service terminates other than by
reason of death or disability, under conditions satisfactory to the Company, the
Committee may, in its sole discretion, allow any unexercised or unexpired
Nonqualified Stock Options to be exercisable for a period of time to be
specified by the Committee. If a participant dies while employed by the Company
or during his term as a consultant or Director, any unexercised or unexpired
Options will be, to the extent exercisable on the date of death, exercisable by
the participant's estate or by any person who acquires such Options by bequest
or inheritance, at any time generally within one year after such death. If a
participant becomes totally disabled and his employment or service as a
consultant or Director terminates as a result of such disability, the
participant (or his guardian or legal representative) will have the unqualified
right to exercise any unexercised and unexpired Options generally for one year
after such termination.
19
<PAGE>
SHARE APPRECIATION RIGHTS
The Incentive Plan provides that 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 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.
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 will
have 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 grant 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 accomplished by granting
options for the number of Shares used to pay the exercise price of the
Underlying Option. In this way, Reload Options provide a participant with the
opportunity to build up ownership of 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 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 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 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
Committee shall determine, provided that the participant has not resigned as an
employee of the Company. 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 Committee. Stock purchase loans will be
secured by a pledge to the Company of the Shares purchased
20
<PAGE>
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 Committee.
If a participant's employment with the Company is terminated for any reason
other than death or disability, the balance of the stock purchase loans to such
participant will be immediately due and payable, unless otherwise determined by
the Committee. Notwithstanding the foregoing, if a participant's employment
terminates by reason of death, disability, termination without "cause" or a
"change of control", the balance of such participant's stock purchase loans may
be forgiven in full by the 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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE INCENTIVE PLAN
The following is a brief summary of the principal federal income tax
consequences of awards under the Incentive Plan. The summary is based upon
current federal income tax laws and interpretations thereof, all of which are
subject to change at any time, possibly with retroactive effect. The summary is
not intended to be exhaustive and, among other things, does not describe state,
local or foreign tax consequences.
A participant is not subject to federal income tax either at the time of
grant or at the time of exercise of an Incentive Stock Option. However, upon
exercise, the difference between the fair market value of the Shares and the
exercise price is an item of tax preference subject to the possible application
of the alternative minimum tax. If a participant does not dispose of Shares
acquired through the exercise of an Incentive Stock Option in a "disqualifying
disposition" (i.e., no disposition occurs within two years from the date of
grant of the Incentive Stock Option nor within one year of the transfer of the
Shares to the participant), then the participant will be taxed only upon the
gain, if any, from the sale of such Shares, and such gain will be taxable as
gain from the sale of a capital asset.
The Company will not receive any tax deduction on the exercise of an
Incentive Stock Option or, if the above holding period requirements are met, on
the sale of the underlying Shares. If there is a disqualifying disposition
(i.e., one of the holding period requirements is not met), the participant will
be treated as receiving compensation subject to ordinary income tax in the year
of the disqualifying disposition and the Company will be entitled to a deduction
for compensation expense in an amount equal to the amount included in income by
the participant. The participant generally will be required to include in income
an amount equal to the difference between the fair market value of the Shares at
the time of exercise and the exercise price. Any appreciation in value after the
time of exercise will be taxed as capital gain and will not result in any
deduction by the Company.
If Nonqualified Stock Options are granted to a participant, there are no
federal income tax consequences at the time of grant. Upon exercise of the
Option, the participant must report as ordinary income an amount equal to the
difference between the exercise price and the fair market value of the Shares on
the date of exercise. The Company will receive a tax deduction in like amount.
Any appreciation in value after the time of exercise will be taxed as capital
gain and will not result in any deduction by the Company.
No income will be realized by the participant in connection with the grant
of any SAR. The participant must include in ordinary income the amount of cash
received and the fair market value on
21
<PAGE>
the exercise date of any Shares received upon the exercise of a SAR. The Company
will be entitled to a deduction equal to the amount included in such
participant's income by reason of the exercise of any SAR.
The receipt of a Reload Option by a holder of an Incentive Stock Option or
a Nonqualified Stock Option who pays the exercise price in full or in part with
previously acquired Shares should not affect the tax treatment of the exercise
of such Incentive Stock Option or Nonqualified Stock Option (including the
amount of ordinary income, if any, recognized upon exercise). A participant will
not be subject to tax at the time a Reload Option is granted (except for any
income recognized upon the exercise of a Nonqualified Stock Option at the time
of grant of the Reload Option). A Reload Option will constitute a Nonqualified
Stock Option for federal income tax purposes and will be taxed as such in the
manner set forth above.
Except as described in the following paragraph, a grant of restricted
Shares does not constitute a taxable event for either a participant or the
Company. However, the participant will be subject to tax, at ordinary income
rates, based on the fair market value of the Shares when they are no longer
subject to a substantial risk of forfeiture or they become transferable. The
Company will be entitled to take a commensurate deduction at that time.
A participant may elect to recognize taxable ordinary income at the time
restricted Shares are awarded in amount equal to the fair market value of the
Shares at the time of grant, determined without regard to any forfeiture
restrictions. Any such election must be filed with the Internal Revenue Service
within 30 days following the date of grant. If such an election is made, the
Company will be entitled to a deduction at that time in the same amount. Future
appreciation on the Shares will be taxed at the capital gains rate when the
Shares are sold. However, if, after making such an election, the Shares are
forfeited, the participant will be unable to claim a deduction.
A participant who receives a stock purchase award incurs no tax liability
and the Company does not receive any deduction at the time Shares are acquired
through a stock purchase award. However, to the extent the stock purchase loan
is forgiven, the participant will be required to recognize income in an amount
equal to the forgiven portion of the loan. The Company will be entitled to take
a commensurate deduction at such time. In general, stated interest paid or
accrued on a stock purchase loan will be taxable income to the Company, and may
or may not be deductible by the participant. In general, to the extent a stock
purchase loan does not state adequate interest, interest may be imputed
resulting in a participant recognizing compensation income; however, where a
participant is a current employee, he should have a commensurate interest
expense (which may or may not be deductible by the participant).
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, AMENDMENT AND ERISA STATUS
The Incentive Plan will terminate by its terms and without any action by
the Board of Directors on May 28, 2006. No awards may be made after that date.
Awards outstanding on May 28, 2006 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 modification 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.
22
<PAGE>
If the Board of Directors determines that the Incentive Plan cannot, or
that an award need not, satisfy the requirements for exemption under Section
16(b) of the Securities Exchange Act of 1934, as amended, then the Committee can
waive or modify those provisions in the Incentive Plan pertaining to such
Section 16(b) requirements including certain holding period requirements,
restrictions on the transferability of certain options, restrictions on the
frequency of amending the Incentive Plan, and the time period for exercising
SARs.
The Board of Directors may amend or terminate the Incentive Plan. No such
amendments or termination of the Incentive Plan shall in any way impair the
rights of a participant under any award previously granted, without such
participant's consent. In addition, any amendment or termination will be subject
to stockholder approval if approval is required by federal or state law or
regulation or rule of any stock exchange or quotation system on which the Shares
are listed or quoted.
The Incentive Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE AMENDMENT TO THE 1996 INCENTIVE PLAN. PROXIES SOLICITED HEREBY
WILL BE VOTED FOR THE PROPOSAL UNLESS A VOTE AGAINST THE PROPOSAL OR ABSTENTION
IS SPECIFICALLY INDICATED.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
PROPOSAL 4
The Board of Directors has appointed the firm of BDO Seidman, LLP, which
firm was engaged as independent certified public accountants for the fiscal year
ended January 31, 1998, to audit the financial statements of the Company for the
fiscal year ending January 30, 1999. A proposal to ratify this appointment is
being presented to the stockholders at the Meeting. A representative of BDO
Seidman, LLP will be present at the Meeting and will have the opportunity to
make a statement and will be available to respond to 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 does not intend to present any other business for action at the
Meeting and does not know of any other business intended to be presented by
others. If any matters other than the matters described in the Notice of Annual
Meeting of Stockholders and this Proxy Statement should be presented for
stockholder action at the Meeting, it is the intention of the persons designated
in the proxy to vote thereon according to their best judgment.
Proxy Solicitation. Solicitation may be made personally, by telephone, by
telegraph or by mail by officers and employees of the Company who will not be
additionally compensated therefor. In addition, the Company has engaged the firm
of Corporate Investor Communications, Inc. to solicit proxies for a fee of
$7,500 plus expenses. The Company will request persons such as brokers, nominees
and fiduciaries holding stock in their names for others, or holding stock for
others who have the right to give voting instructions, to forward proxy
materials to their principals and request authority for the execution of the
proxy. The Company will reimburse such persons for their expenses in so doing.
23
<PAGE>
Financial and Other Information. The Company's Annual Report for the
fiscal year ended January 31, 1998, including financial statements, is being
sent to stockholders together with this Proxy Statement.
Compliance with Section 16(a) of the Securities Exchange Act. Section
16(a) of the Exchange Act requires the Company's executive officers and
Directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file initial statements of beneficial
ownership (Form 3), and statements of changes in beneficial ownership (Forms 4
and 5), of Common Stock of the Company with the Securities and Exchange
Commission. Executive officers, Directors and greater than ten-percent
stockholders are required to furnish the Company with copies of all such forms
they file.
To the Company's knowledge, based solely on its review of the copies of
such forms received by it, or written representations from certain reporting
persons that no additional forms were required, all filing requirements
applicable to its executive officers, Directors, and greater than ten-percent
stockholders were complied with, except that Marie J. Toulantis filed a late
Form 3, J. Alan Kahn, Frank O'Neill, Jeffrey M. Killeen and Mary Ellen Keating
filed late Form 3's by including their Form 3 information on their Form 5's, and
David K. Cully, Maureen H. Golden and William Sheluck, Jr. each filed a late
Form 4 regarding one stock sale transaction and William Sheluck, Jr. filed a
late Form 5 with respect to stock gifts made to his minor children.
Stockholder Proposals. Proposals of stockholders intended to be presented
at the Annual Meeting of Stockholders to be held in 1999 must be received by the
Secretary, Barnes & Noble, Inc., 122 Fifth Avenue, New York, New York 10011, no
later than December 31, 1998.
In addition, the Company's By-Laws provide that, in order for a stockholder
to nominate a person for election to the Board of Directors at an annual meeting
of stockholders or to propose business for consideration at such meeting, such
stockholder must give written notice to the Secretary of the Company not less
than 30 days nor more than 60 days prior to the meeting; provided, however, that
in the event that less than 40 days notice or prior public disclosure of the
date of the meeting is given to stockholders, notice by the stockholder must be
given not later than the close of business on the tenth day following the day on
which such notice of the date the meeting was mailed or such public disclosure
was made. Such notice must contain the proposing stockholder's record name and
address, and the class and number of shares of the Company which are
beneficially owned by such stockholder. Such notice must also contain: (1) in
the case of nominating a person for election to the Board of Directors, all
information relating to such nominee that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, including such person's written consent to being a nominee and to
serving as a director if elected; and (2) in the case of proposing business for
consideration, (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, and (ii) any material interest of the proposing stockholder in
such business.
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
May 1, 1998
24
<PAGE>
APPENDIX A
BARNES & NOBLE, INC.
1996 INCENTIVE PLAN*
BARNES & NOBLE, INC., a corporation formed under the laws of the State of
Delaware (the "Company"), hereby establishes and adopts the following 1996
Incentive Plan (the "Plan").
RECITALS
WHEREAS, the Company desires to encourage high levels of performance by
those individuals who are key to the success of the Company, to attract new
individuals who are highly motivated and who will contribute to the success of
the Company and to encourage such individuals to remain as directors, employees,
consultants and/or advisors of the Company and its subsidiaries by increasing
their proprietary interest in the Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated the Plan embodied
herein to authorize the granting of incentive awards through grants of stock
options ("Options"), grants of stock appreciation rights, grants of Stock
Purchase Awards (hereafter defined), and grants of Restricted Stock Awards
(hereafter defined) to those individuals whose judgment, initiative and efforts
are or have been responsible for the success of the Company.
NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the
following Plan and agrees to the following provisions:
ARTICLE 1.
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the Company in
attracting and retaining selected individuals to serve as directors, officers,
consultants, advisors and employees of the Company 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 Company's shares of common stock ("Shares").
Options granted under the Plan will be either "incentive stock options,"
intended to qualify as such under the provisions of section 422 of the Internal
Revenue Code of 1986, as from time to time amended (the "Code"), or
"nonqualified stock options." For purposes of the Plan, the term "subsidiary"
shall mean "subsidiary corporation," as such term is defined in section 424(f)
of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For
purposes of the Plan, the term "Award" shall mean a grant of an Option, a grant
of a stock appreciation right, a grant of a Stock Purchase Award, a grant of a
Restricted Stock Award, or any other award made under the terms of the Plan.
ARTICLE 2.
SHARES SUBJECT TO AWARDS
2.1. Number of Shares. Subject to the adjustment provisions of Section
9.10 hereof, the aggregate number of Shares which may be issued under Awards
under the Plan, whether pursuant to Options, stock appreciation rights, Stock
Purchase Awards or Restricted Stock Awards shall not exceed 11,000,000. No
Options to purchase fractional Shares shall be granted or issued under the Plan.
- ------------------
* Revised to reflect two-for-one stock split effected September 22, 1997 and
proposed increase in shares available for issuance.
A-1
<PAGE>
For purposes of this Section 2.1, the Shares that shall be counted toward such
limitation shall include all Shares:
(1) issued or issuable pursuant to Options that have been or may be
exercised;
(2) issued or issuable pursuant to Stock Purchase Awards; and
(3) issued as, or subject to issuance as, a Restricted Stock Award.
2.2. Shares Subject to Terminated Awards. The Shares covered by any
unexercised portions of terminated Options granted under Articles 4 and 6,
Shares forfeited as provided in Section 8.2(a) and Shares subject to any Awards
which are otherwise surrendered by the Participant without receiving any payment
or other benefit with respect thereto may again be subject to new Awards under
the Plan. In the event the purchase price of an 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 Plan. Shares subject to Options, or portions thereof, which
have been surrendered in connection with the exercise of stock appreciation
rights shall not again be available for the grant of Awards under the Plan.
2.3. Character of Shares. Shares delivered under the Plan may be
authorized and unissued Shares or Shares acquired by the Company, or both.
2.4. Limitations on Grants to Individual Participant. Subject to
adjustments pursuant to the provisions of Section 9.10 hereof, the number of
Shares which may be granted hereunder to any employee during any fiscal year
under all forms of Awards shall not exceed 700,000 Shares. If an Option is
cancelled, the cancelled Option shall continue to be counted toward the 700,000
limit for the year granted. An Option (or a stock appreciation right) that is
repriced during any fiscal year is treated as the cancellation of the Option (or
stock appreciation right) and a grant of a new Option (or stock appreciation
right), both of which shall be counted toward the 700,000 limit for that fiscal
year.
ARTICLE 3.
ELIGIBILITY AND ADMINISTRATION
3.1. Awards to Employees and Directors. (a) Participants who receive (i)
Options under Articles 4 and 6 hereof or stock appreciation rights under Article
5 ("Optionees"), and (ii) Stock Purchase Awards under Article 7 or Restricted
Stock Awards under Article 8 (in either case, a "Participant"), shall consist of
such key officers, employees, consultants, advisors and directors of the Company
or any of its subsidiaries or affiliates as the Committee shall select from time
to time, provided, however, that an Option that is intended to qualify as an
"incentive stock option" may be granted only to an individual that is an
employee of the Company or any of its subsidiaries. The Committee's designation
of an Optionee or Participant in any year shall not require the Committee to
designate such person to receive Awards or grants in any other year. The
designation of an Optionee or Participant to receive Awards or grants under one
portion of the Plan shall not require the Committee to include such Optionee or
Participant under other portions of the Plan.
(b) No Option which is intended to qualify as an "incentive stock option"
may be granted to any employee who, at the time of such grant, owns, directly or
indirectly (within the meaning of sections 422(b)(6) and 424(d) of the Code),
shares of stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries
or affiliates, unless at the time of such grant, (i) the option price is fixed
at not less than 110% of the Fair Market Value (as defined below) of the Shares
subject to such Option, determined on the date of the grant, and (ii) the
exercise of such Option is prohibited by its terms after the expiration of five
years from the date such Option is granted.
3.2. Administration. (a) The Plan shall be administered by a committee
(the "Committee") consisting of not fewer than two directors of the Company (the
directors of the Company being hereinafter referred to as the "Directors"), as
designated by the Directors. The Directors may remove from, add members to, or
fill vacancies in the Committee. Each member of the Committee shall be a
A-2
<PAGE>
"disinterested person" within the meaning of Rule 16b-3(c)(2)(i) of the Exchange
Act and an "outside director" within the meaning of Section 162(m)(4)(C)(i) of
the Code, except that if the Directors determine that (i) the Plan cannot
satisfy the requirements of Rule 16b-3 of the Exchange Act (such that grants of
Awards are not exempt from Section 16(b) of the Exchange Act), then the members
of the Committee need not be "disinterested persons," or (ii) they no longer
want the Plan to comply with the requirements of Code Section 162(m), then the
members of the Committee need not be "outside directors." Any Award to a member
of the Committee shall be made strictly in accordance with the terms of Section
4.1(b).
(b) The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it may deem appropriate for the conduct
of meetings and proper administration of the Plan. All actions of the Committee
shall be taken by majority vote of its members.
(c) Subject to the provisions of the Plan, the Committee shall have
authority, in its sole discretion, to grant Awards under the Plan, to interpret
the provisions of the Plan and, subject to the requirements of applicable law,
including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind rules
and regulations relating to the Plan or any Award thereunder as it may deem
necessary or advisable. All decisions made by the Committee pursuant to the
provisions of the Plan shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Directors and employees, and other Plan
participants.
ARTICLE 4.
OPTIONS
4.1. Grant of Options. (a) Key Individuals, Directors and Employees. The
Committee shall determine, within the limitations of the Plan, those key
individuals and the Directors and employees of the Company and its subsidiaries
and affiliates to whom Options are to be granted under the Plan, the number of
Shares that may be purchased under each such Option and the option price, and
shall designate such Options at the time of the grant as either "incentive stock
options" or "nonqualified stock options"; provided, however, that Options
granted to employees of an affiliate (that is not also a subsidiary) or to
non-employees of the Company may only be "nonqualified stock options."
(b) Non-Employee Directors. Notwithstanding any provision of this Plan to
the contrary, all persons who are Non-Employee Directors (as defined below)
shall receive Awards under this Plan only as follows: (i) all Non-Employee
Directors on January 16, 1996 shall automatically be granted Options to purchase
40,000 Shares at their then Fair Market Value, with 25% of each such Option
(covering 10,000 Shares) exercisable immediately (or on such later date as
stockholder approval of this Plan is obtained) and an additional 25% shall
become exercisable on each January 1 thereafter through January 1, 1999, at
which time 100% of said Options shall be exercisable; and (ii) each person who
thereafter is elected or appointed to membership on the Board of Directors of
the Company and who is a Non-Employee Director on the date of his election or
appointment, shall on such effective date of election or appointment
automatically be granted Options to purchase 40,000 Shares at their then Fair
Market Value, with 25% of each such Option (covering 10,000 Shares) becoming
exercisable on each of the next four anniversaries of said grant date, at which
time (said fourth anniversary) 100% of said Options shall be exercisable. For
purposes of this paragraph (b), a "Non-Employee Director" shall be a Director
who is not otherwise an employee of the Company or any of its affiliates or
subsidiaries on the grant date and has not been employed by the Company or any
of its affiliates or subsidiaries for any part of the twelve months preceding
such date. Each Option granted to a Non-Employee Director hereunder shall be
exercisable for a period of ten years from the date of automatic grant and shall
be subject to the restrictions and limitations set forth in the Plan.
Notwithstanding any provision of this Plan to the contrary, the provisions of
this Section 4.1(b) may not be amended more than once every six (6) months,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
4.2. Stock Option Agreements; etc. All Options granted pursuant to Article
4 and Article 6 herein (a) shall be authorized by the Committee (other than
Options to Non-Employee Directors under
A-3
<PAGE>
Section 4.1(b)) and (b) shall be evidenced in writing by stock option agreements
("Stock Option Agreements") in such form and containing such terms and
conditions as the Committee shall determine which are not inconsistent with the
provisions of the Plan, and, with respect to any Stock Option Agreement granting
Options which are intended to qualify as "incentive stock options," are not
inconsistent with Section 422 of the Code. Granting of an Option pursuant to the
Plan shall impose no obligation on the recipient to exercise such option. Any
individual who is granted an Option pursuant to this Article 4 and Article 6
herein may hold more than one Option granted pursuant to such Articles at the
same time and may hold both "incentive stock options" and "nonqualified stock
options" at the same time. To the extent that any Option does not qualify as an
"incentive stock option" (whether because of its provisions, the time or manner
of its exercise or otherwise) such Option or the portion thereof which does not
so qualify shall constitute a separate "nonqualified stock option."
4.3. Option Price. Subject to Section 3.1(b), the option price per each
Share purchasable under any "incentive stock option" granted pursuant to this
Article 4 and any "non qualified stock option" granted pursuant to Article 6
herein shall not be less than 100% of the Fair Market Value (as hereinafter
defined) of such Share on the date of the grant of such Option. The option price
per each Share purchasable under any "nonqualified stock option" granted
pursuant to this Article 4 shall be such amount as the Committee shall determine
at the time of the grant of such Option. Notwithstanding the foregoing, the
option price per each Share purchasable under any Option granted to a Non-
Employee Director pursuant to Section 4.1(b) shall be equal to 100% of the Fair
Market Value of such Share on the date of grant of such Option.
4.4. Other Provisions. Options granted pursuant to this Article 4 shall be
made in accordance with the terms and provisions of Article 9 hereof and any
other applicable terms and provisions of the Plan.
ARTICLE 5.
STOCK APPRECIATION RIGHTS
5.1. Grant and Exercise. Stock appreciation rights may be granted in
conjunction with all or part of any Option granted under the Plan provided such
rights are granted at the time of the grant of such Option. A "stock
appreciation right" is a right to receive cash or Shares, as provided in this
Article 5, in lieu of the purchase of a Share under a related Option. A stock
appreciation right or applicable portion thereof shall terminate and no longer
be exercisable upon the termination or exercise of the related Option, and a
stock appreciation right granted with respect to less than the full number of
Shares covered by a related Option shall not be reduced until, and then only to
the extent that, the exercise or termination of the related Option exceeds the
number of Shares not covered by the stock appreciation right. A stock
appreciation right may be exercised by the holder thereof (the "Holder"), in
accordance with Section 5.2 of this Article 5, by giving written notice thereof
to the Company and surrendering the applicable portion of the related Option.
Upon giving such notice and surrender, the Holder shall be entitled to receive
an amount determined in the manner prescribed in Section 5.2 of this Article 5.
Options which have been so surrendered, in whole or in part, shall no longer be
exercisable to the extent the related stock appreciation rights have been
exercised.
5.2. Terms and Conditions. Stock appreciation rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(a) Stock appreciation rights shall be exercisable only at such time or
times and to the extent that the Options to which they relate shall be
exercisable in accordance with the provisions of the Plan.
(b) Upon the exercise of a stock appreciation right, a Holder shall be
entitled to receive up to, but no more than, an amount in cash or whole Shares
equal to the excess of the then Fair Market Value of one Share over the option
price per Share specified in the related Option multiplied by the number of
Shares in respect of which the stock appreciation right shall have been
exercised. The Holder shall
A-4
<PAGE>
specify in his written notice of exercise, whether payment shall be made in cash
or in whole Shares; provided, however, in the case of a stock appreciation right
exercised by a person subject to Section 16 of the Exchange Act, the Holder's
written notice specifying the form of payment is subject to the approval of the
Committee. Each stock appreciation right may be exercised only at the time and
so long as a related Option, if any, would be exercisable or as otherwise
permitted by applicable law; provided, however, that no stock appreciation right
granted under the Plan to a person then subject to Section 16 of the Exchange
Act shall be exercised during the first six months of its term for cash.
(c) No stock appreciation right shall be transferable by a Holder otherwise
than by will or by the laws of descent and distribution, and stock appreciation
rights shall be exercisable, during the Holder's lifetime, only by the Holder.
(d) Upon the exercise of a stock appreciation right, the Option or part
thereof to which such stock appreciation right is related shall be deemed to
have been exercised for the purpose of the limitation of the number of Shares to
be issued under the Plan, as set forth in Section 2.1 of the Plan.
(e) Stock appreciation rights granted in connection with an Option may be
exercised only when the Fair Market Value of the Shares subject to the Option
exceeds the option price at which Shares can be acquired pursuant to the Option.
(f) Stock appreciation rights may be exercised for cash by a person subject
to Section 16 of the Exchange Act only during the period beginning on the third
business day, and ending on the twelfth business day, following the release of
quarterly and annual summary statements of sales and earnings, as set forth in
Rule 16b-3(e)(1)(ii) of the Exchange Act.
ARTICLE 6.
RELOAD OPTIONS
6.1. Authorization of Reload Options. Concurrently with the award of any
Option (such Option hereinafter referred to as the "Underlying Option") to any
participant in the Plan, the Committee may grant a reload option (a "Reload
Option") to such participant to purchase for cash or Shares a number of Shares
as specified below. A Reload Option shall be exercisable for an amount of Shares
equal to (i) the number of Shares delivered by the Optionee to the Company to
exercise the Underlying Option, and (ii) to the extent authorized by the
Committee, the number of Shares used to satisfy any tax withholding requirement
incident to the exercise of the Underlying Option, subject to the availability
of Shares under the Plan at the time of such exercise. The grant of a Reload
Option shall become effective upon the exercise of an Underlying Option by
delivering to the Company Shares held by the Optionee for at least six months.
Notwithstanding the fact that the Underlying Option may be an "incentive stock
option," a Reload Option is not intended to qualify as an "incentive stock
option" under Section 422 of the Code.
6.2. Reload Option Amendment. Each Stock Option Agreement shall state
whether the Committee has authorized Reload Options with respect to the
Underlying Option. Upon the exercise of an Underlying Option, the Reload Option
will be evidenced by an amendment to the underlying Stock Option Agreement.
6.3. Reload Option Price. The option price per Share deliverable upon the
exercise of a Reload Option shall be the Fair Market Value of a Share on the
date the grant of the Reload Option becomes effective.
6.4. Term and Exercise. Each Reload Option is fully exercisable six months
from the effective date of grant. The term of each Reload Option shall be equal
to the remaining option term of the Underlying Option.
6.5. Termination of Employment. No Reload Option shall be granted to an
Optionee when Options are exercised pursuant to the terms of this Plan following
termination of the Optionee's employment.
A-5
<PAGE>
6.6. Applicability of Other Sections. Except as otherwise provided in this
Article 6, the provisions of Article 9 applicable to Options shall apply equally
to Reload Options.
ARTICLE 7.
STOCK PURCHASE AWARDS
7.1. Grant of Stock Purchase Awards. The term "Stock Purchase Award" means
the right to purchase Shares of the Company and to pay for such Shares through a
loan made by the Company to an employee (a "Purchase Loan") as set forth in this
Article 7.
7.2. Terms of Purchase Loans. (a) Purchase Loan. Each Purchase Loan shall
be evidenced by a promissory note. The term of the Purchase Loan shall be a
period of years, as determined by the Committee, and the proceeds of the
Purchase Loan shall be used exclusively by the Participant for purchase of
Shares from the Company at a purchase price equal to their Fair Market Value on
the date of the Stock Purchase Award.
(b) Interest on Purchase Loan. A Purchase Loan shall be non-interest
bearing or shall bear interest at whatever rate the Committee shall determine
(but not in excess of the maximum rate permissible under applicable law),
payable in a manner and at such times as the Committee shall determine. Those
terms and provisions as the Committee shall determine shall be incorporated into
the promissory note evidencing the Purchase Loan.
(c) Forgiveness of Purchase Loan. Subject to Section 7.4 hereof, the
Company may forgive the repayment of up to 100% of the principal amount of the
Purchase Loan, subject to such terms and conditions as the Committee shall
determine and set forth in the promissory note evidencing the Purchase Loan (the
"Conditions"). A Participant's Purchase Loan can be prepaid at any time, and
from time to time, without penalty.
7.3. Security for Loans. (a) Stock Power and Pledge. Purchase Loans
granted to Participants shall be secured by a pledge of the Shares acquired
pursuant to the Stock Purchase Award. Such pledge shall be evidenced by a pledge
agreement (the "Pledge Agreement") containing such terms and conditions as the
Committee shall determine. Purchase Loans shall be recourse or non-recourse with
respect to a Participant, as determined from time to time by the Committee. The
share certificates for the Shares purchased by a Participant pursuant to a Stock
Purchase Award shall be issued in the Participant's name, but shall be held by
the Company as security for repayment of the Participant's Purchase Loan
together with a stock power executed in blank by the Participant (the execution
and delivery of which by the Participant shall be a condition to the issuance of
the Stock Purchase Award). The Participant shall be entitled to exercise all
rights applicable to such Shares, including, but not limited to, the right to
vote such Shares and the right to receive dividends and other distributions made
with respect to such Shares. When the Purchase Loan and any accrued but unpaid
interest thereon has been repaid or otherwise satisfied in full, the Company
shall deliver to the Participant the share certificates for the Shares purchased
by a Participant under the Stock Purchase Award.
(b) Release and Delivery of Share Certificates During the Term of the
Purchase Loan. The Company shall release and deliver to each Participant
certificates for Shares purchased by a Participant pursuant to a Stock Purchase
Award, in such amounts and on such terms and conditions as the Committee shall
determine, which shall be set forth in the Pledge Agreement.
(c) Release and Delivery of Share Certificates Upon Repayment of the
Purchase Loan. The Company shall release and deliver to each Participant
certificates for the Shares purchased by the Participant under the Stock
Purchase Award and then held by the Company, provided the Participant has paid
or otherwise satisfied in full the balance of the Purchase Loan and any accrued
but unpaid interest thereon. In the event the balance of the Purchase Loan is
not repaid, forgiven or otherwise satisfied within 90 days after (i) the date
repayment of the Purchase Loan is due (whether in accordance with its term, by
reason of acceleration or otherwise), or (ii) such longer time as the Committee,
in its discretion, shall provide for repayment or satisfaction, the Company
shall retain those Shares then held by the Company in accordance with the Pledge
Agreement.
A-6
<PAGE>
7.4. Termination of Employment. (a) Termination of Employment by Death,
Disability or by the Company Without Cause; Change of Control. In the event of a
Participant's termination of employment by reason of death, "disability" or by
the Company without "cause," or in the event of a "change of control," the
Committee shall have the right (but shall not be required) to forgive the
remaining unpaid amount (principal and interest) of the Purchase Loan in whole
or in part as of the date of such occurrence. "Change of Control," "disability"
and "cause" shall have the respective meanings as set forth in the promissory
note evidencing the Purchase Loan.
(b) Termination of Employment by Voluntary Resignation. In the event of a
Participant's termination of employment for any reason other than death or
"disability," the Participant shall repay to the Company the entire balance of
the Purchase Loan and any accrued but unpaid interest thereon, which amounts
shall become immediately due and payable, unless otherwise determined by the
Committee.
7.5. Restrictions on Transfer. No Stock Purchase Award or Shares purchased
through such an Award and pledged to the Company as collateral security for the
Participant's Purchase Loan (and accrued and unpaid interest thereon) may be
otherwise pledged, sold, assigned or transferred (other than by will or by the
laws of descent and distribution).
ARTICLE 8.
RESTRICTED STOCK AWARDS
8.1. Restricted Stock Awards. (a) Grant. A grant of Shares made pursuant
to this Article 8 is referred to as a "Restricted Stock Award." The Committee
may grant to any employee an amount of Shares in such manner, and subject to
such terms and conditions relating to vesting, forfeitability and restrictions
on delivery and transfer (whether based on performance standards, periods of
service or otherwise) as the Committee shall establish (such Shares, "Restricted
Shares"). The terms of any Restricted Stock Award granted under this Plan shall
be set forth in a written agreement (a "Restricted Stock Agreement") which shall
contain provisions determined by the Committee and not inconsistent with this
Plan. The provisions of Restricted Stock Awards need not be the same for each
Participant receiving such Awards.
(b) Issuance of Restricted Shares. As soon as practicable after the date of
grant of a Restricted Stock Award by the Committee, the Company shall cause to
be transferred on the books of the Company, Shares registered in the name of the
Company, as nominee for the Participant, evidencing the Restricted Shares
covered by the Award; provided, however, such Shares shall be subject to
forfeiture to the Company retroactive to the date of grant, if a Restricted
Stock Agreement delivered to the Participant by the Company with respect to the
Restricted Shares covered by the Award is not duly executed by the Participant
and timely returned to the Company. All Restricted Shares covered by Awards
under this Article 8 shall be subject to the restrictions, terms and conditions
contained in the Plan and the Restricted Stock Agreement entered into by and
between the Company and the Participant. Until the lapse or release of all
restrictions applicable to an Award of Restricted Shares, the share certificates
representing such Restricted Shares shall be held in custody by the Company or
its designee.
(c) Stockholder Rights. Beginning on the date of grant of the Restricted
Stock Award and subject to execution of the Restricted Stock Agreement as
provided in Sections 8.1(a) and (b), the Participant shall become a stockholder
of the Company with respect to all Shares subject to the Restricted Stock
Agreement and shall have all of the rights of a stockholder, including, but not
limited to, the right to vote such Shares and the right to receive distributions
made with respect to such Shares; provided, however, that any Shares distributed
as a dividend or otherwise with respect to any Restricted Shares as to which the
restrictions have not yet lapsed shall be subject to the same restrictions as
such Restricted Shares and shall be represented by book entry and held as
prescribed in Section 8.1(b).
A-7
<PAGE>
(d) Restriction on Transferability. None of the Restricted Shares may be
assigned or transferred (other than by will or the laws of descent and
distribution), pledged or sold prior to lapse or release of the restrictions
applicable thereto.
(e) Delivery of Shares Upon Release of Restrictions. Upon expiration or
earlier termination of the forfeiture period without a forfeiture and the
satisfaction of or release from any other conditions prescribed by the
Committee, the restrictions applicable to the Restricted Shares shall lapse. As
promptly as administratively feasible thereafter, subject to the requirements of
Section 10.1, the Company shall deliver to the Participant or, in case of the
Participant's death, to the Participant's beneficiary, one or more stock
certificates for the appropriate number of Shares, free of all such
restrictions, except for any restrictions that may be imposed by law.
8.2. Terms of Restricted Shares. (a) Forfeiture of Restricted Shares.
Subject to Section 8.2(b), all Restricted Shares shall be forfeited and returned
to the Company and all rights of the Participant with respect to such Restricted
Shares shall terminate unless the Participant continues in the service of the
Company as an employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set forth in the
Restricted Stock Agreement. The Committee in its sole discretion, shall
determine the forfeiture period (which may, but need not, lapse in installments)
and any other terms and conditions applicable with respect to any Restricted
Stock Award.
(b) Waiver of Forfeiture Period. Notwithstanding anything contained in this
Article 8 to the contrary, the Committee may, in its sole discretion, waive the
forfeiture period and any other conditions set forth in any Restricted Stock
Agreement under appropriate circumstances (including the death, disability or
retirement of the Participant or a material change in circumstances arising
after the date of an Award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the Restricted Shares) as the Committee
shall deem appropriate.
ARTICLE 9.
GENERALLY APPLICABLE PROVISIONS
9.1. Option Period. Subject to Section 3.1(b), the period for which an
Option is exercisable shall not exceed ten years from the date such Option is
granted, provided, however, in the case of an Option that is not intended to be
an "incentive stock option," the Committee may prescribe a period in excess of
ten years. After the Option is granted, the option period may not be reduced.
9.2. Fair Market Value. If the Shares are listed or admitted to trading on
a securities exchange registered under the Exchange Act, the "Fair Market Value"
of a Share as of a specified date shall mean the per Share closing price of the
Shares for the day immediately preceding the date as of which Fair Market Value
is being determined (or if there was no reported closing price on such date, on
the last preceding date on which the closing price was reported) reported on the
principal securities exchange on which the Shares are listed or admitted to
trading. If the Shares are not listed or admitted to trading on any such
exchange but are listed as a national market security on the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"),
traded in the over-the-counter market or listed or traded on any similar system
then in use, the Fair Market Value of a Share shall be the last sales price for
the day immediately preceding the date as of which the Fair Market Value is
being determined (or if there was no reported sale on such date, on the last
preceding date on which any reported sale occurred) reported on such system. If
the Shares are not listed or admitted to trading on any such exchange, are not
listed as a national market security on NASDAQ and are not traded in the
over-the-counter market or listed or traded on any similar system then in use,
but are quoted on NASDAQ or any similar system then in use, the Fair Market
Value of a Share shall be the average of the closing high bid and low asked
quotations on such system for the Shares on the date in question. If the Shares
are not publicly traded, Fair Market Value shall be determined by the Committee
in its sole discretion using appropriate criteria. An Option shall be considered
granted on the date the Committee acts to grant the Option or such later date as
the Committee shall specify.
A-8
<PAGE>
9.3. Exercise of Options. Options granted under the Plan shall be
exercised by the Optionee thereof (or by his executors, administrators, guardian
or legal representative, as provided in Sections 9.6 and 9.7 hereof) as to all
or part of the Shares covered thereby, by the giving of written notice of
exercise to the Company, specifying the number of Shares to be purchased,
accompanied by payment of the full purchase price for the Shares being
purchased. Full payment of such purchase price shall be made within five
business days following the date of exercise and shall be made (i) in cash or by
certified check or bank check, (ii) with the consent of the Committee, by
delivery of a promissory note in favor of the Company upon such terms and
conditions as determined by the Committee, (iii) with the consent of Committee,
by tendering previously acquired Shares (valued at its Fair Market Value, as
determined by the Committee as of the date of tender), or (iv) with the consent
of the Committee, any combination of (i), (ii) and (iii); provided, however,
that payment may not be pursuant to (iii) above unless the Optionee shall have
owned the Shares being tendered in payment for a period of at least six months
prior to the date of exercise of the Option. Such notice of exercise,
accompanied by such payment, shall be delivered to the Company at its principal
business office or such other office as the Committee may from time to time
direct, and shall be in such form, containing such further provisions consistent
with the provisions of the Plan, as the Committee may from time to time
prescribe. In no event may any Option granted hereunder be exercised for a
fraction of a Share. The Company shall effect the transfer of Shares purchased
pursuant to an Option as soon as practicable, and, within a reasonable time
thereafter, such transfer shall be evidenced on the books of the Company. No
person exercising an Option shall have any of the rights of a holder of Shares
subject to an Option until certificates for such Shares shall have been issued
following the exercise of such Option. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date of such
issuance.
9.4. Non-Transferability of Options. Except as provided in Section 9.11,
no Option shall be assignable or transferable by the Optionee, other than by
will or the laws of descent and distribution, and may be exercised during the
life of the Optionee only by the Optionee or his guardian or legal
representative.
9.5. Termination of Employment. In the event of the termination of
employment of an Optionee or the termination or separation from service of an
advisor or consultant or a Director (who is an Optionee) for any reason (other
than death or disability as provided below), any Option(s) granted to such
Optionee under this Plan and not previously exercised or expired shall be deemed
cancelled and terminated on the day of such termination or separation, unless
the Committee decides, in its sole discretion, to extend the term of the Option
for a period not to exceed three months after the date of such termination or
separation, provided, however, that in no instance may the term of the Option,
as so extended, exceed the maximum term established pursuant to Section
3.1(b)(ii) or 9.1 above. Notwithstanding the foregoing, in the event of the
termination or separation from service of an Optionee for any reason other than
death or disability, under conditions satisfactory to the Company, the Committee
may, in its sole discretion, allow any "nonqualified stock options" granted to
such Optionee under the Plan and not previously exercised or expired to be
exercisable for a period of time to be specified by the Committee, provided,
however, that in no instance may the term of the Option, as so extended, exceed
the maximum term established pursuant to Section 9.1 above.
9.6. Death. In the event an Optionee dies while employed by the Company or
any of its subsidiaries or affiliates or during his term as a Director of the
Company or any of its subsidiaries or affiliates, as the case may be, any
Option(s) granted to him not previously expired or exercised shall, to the
extent exercisable on the date of death, be exercisable by the estate of such
Optionee or by any person who acquired such Option by bequest or inheritance, at
any time within one year after the death of the Optionee, unless earlier
terminated pursuant to its terms, provided, however, that if the term of such
Option would expire by its terms within six months after the Optionee's death,
the term of such Option shall be extended until six months after the Optionee's
death, provided further, however, that in no instance may the term of the
Option, as so extended, exceed the maximum term established pursuant to Section
3.1(b)(ii) or 9.1 above.
A-9
<PAGE>
9.7. Disability. In the event of the termination of employment of an
Optionee or the separation from service of a Director (who is an Optionee) due
to total disability, the Optionee, or his guardian or legal representative,
shall have the unqualified right to exercise any Option(s) which have not been
previously exercised or expired and which the Optionee was eligible to exercise
as of the first date of total disability (as determined by the Committee), at
any time within one year after such termination or separation, unless earlier
terminated pursuant to its terms, provided, however, that if the term of such
Option would expire by its terms within six months after such termination or
separation, the term of such Option shall be extended until six months after
such termination or separation, provided further, however, that in no instance
may the term of the Option, as so extended, exceed the maximum term established
pursuant to Section 3.1(b)(ii) or 9.1 above. The term "total disability" shall,
for purposes of this Plan, be defined in the same manner as such term is defined
in Section 22(e)(3) of the Code.
9.8. Six-Month Holding Period. Notwithstanding anything to the contrary in
the Plan, each Option (or the Shares underlying the Option) granted to an
individual who is subject to Section 16 of the Exchange Act, must be held by
such individual for a combined period of at least six months from the date the
Option is granted (or until such earlier date as satisfies any legal requirement
for exemption under Rule 16b-3 of the Exchange Act and as satisfies all other
applicable law); provided that the sale, transfer or other disposition of any
Shares underlying any Option shall be permitted within such period to the extent
the sale, transfer or other disposition is exempt under Rule 16b-3 of the
Exchange Act and all other applicable law.
9.9. Amendment and Modification of the Plan. The Board of Directors of the
Company may, from time to time, alter, amend, suspend or terminate the Plan as
it shall deem advisable, subject to any requirement for stockholder approval
imposed by applicable law or any rule of any stock exchange or quotation system
on which Shares are listed or quoted; provided that the Board of Directors may
not amend the Plan in any manner that would result in noncompliance with Rule
16b-3 of the Exchange Act or any applicable law, except as otherwise provided in
Sections 3.2 or 9.11 hereof; and further provided that the Board of Directors
may not, without the approval of the Company's stockholders, amend the Plan to
(a) increase the number of Shares that may be the subject of Options under the
Plan (except for adjustments pursuant to Section 9.10 hereof), (b) reduce the
minimum option price specified by Sections 3.1(b) and 4.3 hereof, (c) increase
the maximum permissible term of any Option specified by Section 3.1(b)(ii) or
9.1 hereof, and (d) remove responsibility for administering the Plan from the
Committee. In addition, no amendments to, or termination of, the Plan shall in
any way impair the rights of an Optionee or a Participant under any Award
previously granted without such Optionee's or Participant's consent.
9.10. Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), 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
corporate transaction or event affects the Shares with respect to which Options
have been or may be issued under the Plan, such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, then the Committee shall, in such manner as the Committee may deem
equitable, adjust any or all of (i) the number and type of Shares that
thereafter may be made the subject of Options, (ii) the number and type of
Shares subject to outstanding Options and stock appreciation rights, and (iii)
the grant or exercise price with respect to any Option, or, if deemed
appropriate, make provision for a cash payment to the holder of any outstanding
Option; provided, in each case, that with respect to "incentive stock options,"
no such adjustment shall be authorized to the extent that such adjustment would
cause such options to violate Section 422(b) of the Code or any successor
provision; and provided further, that the number of Shares subject to any Option
denominated in Shares shall always be a whole number.
9.11. Other Provisions. Notwithstanding anything in this Plan to the
contrary, if the Board of Directors determine that the Plan cannot, or that an
Award need not, satisfy the requirements of Rule 16b-3 of the Exchange Act (such
that grants of Awards are not exempt from Section 16(b) of the
A-10
<PAGE>
Exchange Act), then the Committee shall have the authority to waive or modify
those provisions of the Plan which are intended to satisfy such Rule 16b-3
requirements and shall allow an Optionee who has been granted "nonqualified
stock options" to transfer any or all of such options to any one or more of the
following persons: (i) the spouse, parent, issue, spouse of issue, or issue of
spouse ("issue" shall include all descendants whether natural or adopted) of
such Optionee; or (ii) a trust for the benefit of those persons described in
clause (i) above or for the benefit of such Optionee, or for the benefit of any
such persons and such Optionee; provided, however, that such transferee shall be
bound by all of the terms and conditions of this Plan and shall execute an
agreement satisfactory to the Company evidencing such obligation; and provided
further, however, that such Optionee shall remain bound by the terms and
conditions of this Plan. The Company shall cooperate with an Optionee's
transferee and the Company's transfer agent in effectuating any transfer
permitted pursuant to this Section 9.11.
ARTICLE 10.
MISCELLANEOUS
10.1. Tax Withholding. The Company shall notify an Optionee or Participant
of any income tax withholding requirements arising as a result of the grant of
any Award, exercise of an Option or stock appreciation rights or any other event
occurring pursuant to this Plan. The Company shall have the right to withhold
from such Optionee or Participant such withholding taxes as may be required by
law, or to otherwise require the Optionee or Participant to pay such withholding
taxes. If the Optionee or Participant shall fail to make such tax payments as
are required, the Company or its subsidiaries or affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to such Optionee or Participant or to take such other
action as may be necessary to satisfy such withholding obligations.
10.2. Right of Discharge Reserved. Nothing in the Plan nor the grant of an
Award hereunder shall confer upon any employee, Director or other individual the
right to continue in the employment or service of the Company or any subsidiary
or affiliate of the Company or affect any right that the Company or any
subsidiary or affiliate of the Company may have to terminate the employment or
service of (or to demote or to exclude from future Options under the Plan) any
such employee, Director or other individual at any time for any reason. Except
as specifically provided by the Committee, the Company shall not be liable for
the loss of existing or potential profit from an Award granted in the event of
termination of an employment or other relationship even if the termination is in
violation of an obligation of the Company or any subsidiary or affiliate of the
Company to the employee or Director.
10.3. Nature of Payments. All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
subsidiary or affiliate of the Company. Any income or gain realized pursuant to
Awards under the Plan and any stock appreciation rights constitutes a special
incentive payment to the Optionee, Participant or Holder and shall not be taken
into account, to the extent permissible under applicable law, as compensation
for purposes of any of the employee benefit plans of the Company or any
subsidiary or affiliate of the Company except as may be determined by the
Committee or by the Directors or directors of the applicable subsidiary or
affiliate of the Company.
10.4. Severability. If any provision of the Plan shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, such unlawfulness,
invalidity or unenforceability shall not affect any other provision of the Plan
or part thereof, each of which remain in full force and effect. If the making of
any payment or the provision of any other benefit required under the Plan shall
be held unlawful or otherwise invalid or unenforceable, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the Plan.
A-11
<PAGE>
10.5. Gender and Number. In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of such
phrases as "his or her" and any masculine terminology herein shall also include
the feminine, and the definition of any term herein in the singular shall also
include the plural except when otherwise indicated by the context.
10.6. Governing Law. The Plan and all determinations made and actions
taken thereunder, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Delaware and
construed accordingly.
10.7. Effective Date of Plan; Termination of Plan. The Plan shall be
effective on the date of the approval of the Plan by the holders of a majority
of the shares entitled to vote at a duly constituted meeting of the
stockholders; provided, however, that the adoption of the Plan is subject to
such stockholder approval within 12 months after the date of adoption of the
Plan by the Board of Directors. The Plan shall be null and void and of no effect
if the foregoing condition is not fulfilled and in such event each Award and
related stock appreciation rights shall, notwithstanding any of the preceding
provisions of the Plan, be null and void and of no effect. Awards may be granted
under the Plan at any time and from time to time on or prior to May 28, 2006, on
which date the Plan will expire except as to Awards and related stock
appreciation rights then outstanding under the Plan. Such outstanding Awards and
stock appreciation rights shall remain in effect until they have been exercised
or terminated, or have expired.
10.8. Captions. The captions in this Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.
A-12
<PAGE>
1. Election of Directors
FOR all nominees
listed below
WITHHOLD AUTHORITY to vote
for all nominees listed below
*EXCEPTIONS
Nominees: Leonard Riggio, Jan Michiel Hessels, and William Sheluck, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions
2. Approval of the amendment of the company's restated certificate of
incorporation to increase the number of authorized shares of Common Stock.
FOR AGAINST ABSTAIN
3. Approval of the amendment to the Barnes & Noble, Inc. 1996 Incentive Plan to
increase the maximum number of shares that may be the subject of awards.
FOR AGAINST ABSTAIN
4. Ratification of the appointment of BDO Seidman, LLP, as the independent
certified public accountants of the company for the fiscal year ending
January 30, 1999.
FOR AGAINST ABSTAIN
Change of Address and
or Comments Mark Here
Please sign exactly as name appears to the left. 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.
Dated: , 1998
Signature
Signature if held jointly
Please Mark, Sign, Date and Return this Proxy Card Promptly Using the Enclosed
Envelope.
x
BARNES & NOBLE, 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 the shares of common stock of Barnes
& Noble, Inc. held of record by the undersigned on April 15, 1998, at the Annual
Meeting of Stockholders to be held on June 3, 1998, 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 May 1, 1998 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" PROPOSAL 2, "FOR" PROPOSAL 3, AND "FOR" PROPOSAL 4.
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.)
BARNES & NOBLE, INC.
P.O. BOX 11280
NEW YORK, N.Y. 10203-0280
