SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S - 3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
==========
Borders Group, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3196915
(State or other (I.R.S.
jurisdiction of Employer
incorporation or Identification
organization) No.)
----------
500 East Washington Street, Ann Arbor, Michigan 48104
(313) 913-1100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------
THOMAS D. CARNEY
Vice President and General Counsel
BORDERS GROUP, INC.
500 E. Washington Street
Ann Arbor, MI 48104
(313)913-1100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------
Approximate date of commencement of the proposed sale of the securities to
the public: From time to time after the effective date of this
Registration Statement.
----------
If any of the securities being registered on this form are
to be offered pursuant to dividend or interest reinvestment
plans, please check the following box.[ ]
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, please check the following box. [ ]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ] If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
_________________________
CALCULATION OF REGISTRATION FEE
Proposed
maximum Proposed
offering maximum
Title price per aggregate Amount of
securities to Amount to security offering registration
be registered be Registered (1) price(1) fee
- ------------- ------------- --------- ----------- -------------
Common Stock,
par value 430,565 $35.50 $15,285,058 $5,270.71
$.001 per share
(1) Estimated solely for purposes of calculating the
registration fee in accordance with Rule 457.
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration
statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
PROSPECTUS
BORDERS GROUP, INC.
430,565 SHARES OF COMMON STOCK
This Prospectus covers 430,565 shares (the "Shares") of
common stock, par value $.001 (the "Common Stock"), of Borders
Group, Inc. (the "Company") which may be offered and sold from
time to time for the account of the persons who are identified
herein under the heading "Selling Stockholders" (the "Selling
Stockholders"). The Selling Stockholders received or will
receive the Shares (i) in connection with the conversion of
Series A Preferred Stock of the Company into Common Stock upon
completion of the Company's initial public offering (the "IPO")
and (ii) upon the exercise of certain options for Common Stock
which were received upon completion of the IPO in exchange for
options to purchase Series A Preferred Stock. The shares of
Series A Preferred Stock were originally issued to the Selling
Stockholders in connection with the acquisition of Planet Music,
Inc. by the Company and in connection with certain other
contractual relationships. The options for Series A Preferred
Stock replaced similar options for Planet Music shares in
connection with the Company's acquisition of Planet Music. See
"Selling Stockholders" and "Plan of Distribution". The Company
will receive no part of the proceeds of any sales of the Shares.
The distribution of the Shares of the Selling Stockholders
may be effected from time to time in one or more transactions on
the New York Stock Exchange (the "NYSE") (which may involve block
transactions), in special offerings, in negotiated transactions,
or otherwise, and at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, or at
negotiated prices. The Selling Stockholders may engage one or
more brokers to act as principal or agent in making sales, who
may receive discounts or commissions from the Selling
Stockholders in amounts to be negotiated. The Selling
Stockholders and any such brokers may be deemed "underwriters"
under the Securities Act of 1933, as amended (the "Securities
Act"), of the Shares sold.
Prospective purchasers should consider the factors specified
under "Risk Factors" commencing on page 5.
The Common Stock is traded on the NYSE under the symbol
"BGP". On September 24, 1996, the closing price of the Common
Stock on the NYSE, was $37.875 per share.
______________
No person has been authorized to give any information or to make
any representation not contained in this Prospectus and, if given
or made, such information or representation must not be relied
upon as having been authorized by the Company. This Prospectus
does not constitute an offer of any securities other than the
registered securities to which it relates or an offer to any
person in any jurisdiction where such offer would be unlawful.
The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its
date.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 25, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's regional offices located at 7 World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and
copies of such material may be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549, at the
prescribed rates. Such reports, proxy statements and other
information may also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, 7th Floor, New York, New
York.
INFORMATION INCORPORATED BY REFERENCE
The Annual Report of the Company on Form 10-K for the fiscal
year ended January 28, 1996, and the Quarterly Reports of the
Company on Form 10-Q for the quarters ended April 28, 1996, and
July 28, 1996, are incorporated herein by reference. All
documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of the offering of the Shares shall be deemed
to be incorporated herein by reference.
The Company will cause to be furnished without charge to
each person to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all the
documents described above, other than exhibits to such documents.
Requests should be addressed to: Borders Group, Inc., Investor
Relations, 500 E. Washington Street, Ann Arbor, Michigan, 48104,
or by phone at (313)913-1100.
----------
RISK FACTORS
In addition to the other information contained in or
incorporated into this Prospectus, the following considerations
should be carefully considered in evaluating an investment in the
Common Stock.
Expansion Strategy
The growth strategy of Borders Group, Inc. (the "Company") is
dependent principally on its ability to open new books and music
superstores and operate them profitably. The Company is engaged
in an aggressive expansion program, pursuant to which it has
opened 41 superstores in 1995 and it expects to open
approximately 40 superstores in 1996 primarily through the
opening of Borders books and music superstores, as well as
Borders book superstores on a selected basis. The rate of the
Company's expansion will depend, among other things, on general
economic and business conditions affecting consumer confidence
and spending, the availability of desirable locations, the
negotiation of acceptable lease terms, the availability of
qualified management personnel and the Company's ability to
manage the operational aspects of its growth. The rate of the
Company's expansion will also depend upon the availability of
adequate capital, which in turn will depend in large part upon
cash flow generated by Walden. See "-- Walden Mall-Based
Bookstore Operations" below.
The Company's future results will depend, among other things,
on its success in implementing its expansion strategy. If stores
are opened more slowly than expected, sales at new stores reach
targeted levels more slowly than expected (or fail to reach
targeted levels) or related overhead costs increase in excess of
expected levels, the Company's ability to successfully implement
its expansion strategy would be adversely affected. In addition,
the Company expects to open new superstores in certain markets in
which it is already operating superstores, which could adversely
affect sales at those existing stores.
There can be no assurance that the Company will sustain its
accelerated rate of superstore growth or that it will achieve and
sustain acceptable levels of profitability, particularly as other
leading national and regional book and music store chains develop
and open superstores.
Expanded Music Operations
In the last two years, the Company has expanded its presence in
the pre-recorded music business and intends to continue to do so
in the future. At August 25, 1996, 113 of the 129 Borders
superstores were in the books and music format and the Company
intends to continue opening Borders superstores in this format.
The retail pre-recorded music business is highly competitive,
however, and gross margins on pre-recorded music are, in general,
substantially lower than gross margins on books. As music sales
become an increasing percentage of the Company's total sales,
gross margins will be negatively affected. The Company expects
this trend in gross margins to be offset in part by improvements
in music distribution efficiencies and occupancy costs as a
percentage of sales; however, there can be no assurance that the
low gross margins in the pre-recorded music business will not
have an adverse effect on the Company's profitability or that
such margins will not decrease further.
Walden Mall-Based Bookstore Operations
Walden results are highly dependent upon conditions in the mall
retailing industry, including overall mall traffic. Mall traffic
has been sluggish over the past several years and the Company
expects it to remain sluggish for the foreseeable future. In
addition, increased competition from superstores has adversely
affected Walden sales. As a result, Walden's comparable store
sales results have been negatively affected. There can be no
assurance that mall traffic will not decline further or that
superstore competition, or other factors, will not further
adversely affect Walden sales.
Seasonality
The Company's business is highly seasonal, with sales generally
highest in the fourth quarter and lowest in the first quarter.
Moreover, the Company has experienced, and expects to continue to
experience, losses in the first three quarters of each year.
During 1995, approximately 38.3% of the Company's sales and
approximately 137.9% of the Company's operating income before the
effect of one-time charges were generated in the fourth quarter.
The Company's results of operations depend significantly upon the
holiday selling season in the fourth quarter; less than
satisfactory net sales for such period could have a material
adverse effect on the Company's financial condition or results of
operations for the year and may not be sufficient to cover losses
incurred in the first three quarters of the year. The Company's
expansion program generally is weighted with store openings in
the second half of the fiscal year. In the future, changes in
the number and timing of store openings, or other factors, may
result in different seasonality trends.
Competition
The retail book business is highly competitive. Competition
within the retail book industry is fragmented with Borders facing
direct competition from other superstores, such as Barnes &
Noble, Books-A-Million, Crown Books and Media Play, some of which
may have greater financial and other resources than the Company.
Approximately 85% of Borders superstores face direct competition
from other large format book superstores. Walden faces direct
competition from the B. Dalton division of Barnes & Noble, Inc.,
as well as regional chains and superstores. In addition, Borders
and Walden compete with each other, as well as with specialty
retail stores that offer books in a particular area of specialty,
independent single store operators, variety discounters, drug
stores, warehouse clubs, mail order clubs, mass merchandisers and
other retailers offering books and music. In the future, Borders
and Walden may face additional competition from other categories
of retailers entering the retail book market, in particular,
music retailers.
The music and video businesses are also highly competitive, and
Borders faces competition from large established music chains,
such as Tower Records and the Musicland and Media Play divisions
of Musicland Stores Corporation (which also sell videos) and
established video chains, such as Blockbuster and Suncoast
Motion Picture Company (a division of Musicland Stores
Corporation). In addition, Borders faces competition from
specialty retail stores, video rental stores, variety discounters,
warehouse clubs and mass merchandisers (such as Best Buy), some
of which have greater financial and other resources than the
Company. In addition, consumers receive television and mail
order offers and have access to mail order clubs. The largest
mail order clubs are affiliated with major manufacturers of
pre-recorded music and may have advantageous marketing
relationships with their affiliates.
Consumer Spending Patterns
Sales of books and music have historically been dependent upon
discretionary consumer spending, which may be affected by general
economic conditions, consumer confidence and other factors beyond
the control of the Company. In addition, Walden sales are highly
dependent on a hit-driven merchandising strategy. A decline in
consumer spending on books and music or in best-seller book
buying could have a material adverse effect on the Company's
financial condition and results of operations and its ability to
fund its superstore growth strategy.
Certain Anti-Takeover Considerations
Certain provisions of the Company's Amended and Restated
Certificate of Incorporation (the "Certificate") and By-laws,
including those relating to the classification of its Board of
Directors, may have the effect of making more difficult or
discouraging a proxy contest, a merger involving the Company, a
tender offer, an open-market purchase program or other purchases
of Common Stock that could give stockholders of the Company the
opportunity to realize a premium over the then-prevailing market
price for their shares of Common Stock. See "Description of
Capital Stock".
Covenant Restrictions
The Company's Lease Guaranty Agreement with Kmart Corporation
contains certain financial covenants that will be applicable to
the Company except in the event, and for so long as, the Company
achieves and maintains the investment grade status specified in
the Lease Guaranty Agreement. These covenants will include
restrictions on the ability of the Company to incur indebtedness
and to make certain restricted payments (including dividends or
other distributions on, and repurchases of, capital stock of the
Company). In the event of certain payment defaults by the
Company under the Lease Guaranty Agreement in excess of
$10.0 million, and in the event of certain other defaults, Kmart
will have the right to assume any or all of the guaranteed leases
and to take possession of all of the premises underlying such
leases upon 100 days' notice. The Lease Guaranty Agreement will
remain in effect until the expiration of all lease guarantees,
which the Company believes will be on or after November 2019. The
terms of the Lease Guaranty Agreement may adversely affect the
Company's ability to obtain certain types of financing or the
terms on which certain types of financing might be obtained.
The Company's Credit Facility and the Lease Facility also
contain certain restrictive financial covenants, including
financial covenants relating to the maintenance of a minimum
fixed charge coverage ratio, a maximum leverage ratio and a
minimum tangible net worth, and restrictive covenants pertaining
to limitations on dividends and the incurrence of additional debt
and other areas affecting the management and operation of the
Company.
Reliance on Key Personnel
Management believes that the Company's continued success will
depend to a significant extent upon the efforts and abilities of
Mr. Robert F. DiRomualdo, Chairman and Chief Executive Officer,
and Mr. George R. Mrkonic, Vice Chairman and President, as well
as certain other key officers of the Company and each of its
subsidiaries. The loss of the services of Messrs. DiRomualdo or
Mrkonic or of such other key officers could have a material
adverse effect on the Company. The Company does not maintain
"key man" life insurance on either Mr. DiRomualdo or Mr. Mrkonic.
Refinancing of Certain Indebtedness
The Company has entered into agreements in which leases
with respect to four Borders' locations serve as collateral for
certain mortgage pass-through certificates. These mortgage pass-
through certificates include a provision requiring the Company
or, upon the Company's failure, Kmart to repurchase the
underlying mortgage notes in certain events, including the
failure by the Company to make payments of rent under the related
leases, the failure by Kmart to maintain required investment
grade ratings or the termination of the guarantee by Kmart of the
Company's obligations under the related leases (which would
require mutual consent of Kmart and Borders). In the event the
Company is required to repurchase all of the underlying mortgage
notes, the Company would be obligated to pay approximately $36.6.
Kmart has failed to maintain investment grade ratings and
therefore these notes are now subject to put by the holder. To
date, the holder has not exercised its right to put the notes.
THE COMPANY
Borders Group, Inc., through its subsidiaries, is the
second largest operator of book superstores and the largest
operator of mall-based bookstores in the United States based upon
both sales and number of stores. At August 25, 1996, the Company
operated 129 books and music superstores under the Borders name,
964 mall-based and other bookstores primarily under the Waldenbooks
name and six music superstores. The Company had consolidated net
sales of approximately $1.7 billion for 1995 and approximately
$1.5 billion for 1994.
The Company's subsidiary, Borders, Inc., is a premier
operator of books and music superstores, offering
customers selection and service that the Company believes to be
superior to other book superstore operators. A key element of
the Company's business strategy is to accelerate its growth and
increase its profitability through the continued rapid expansion
of its Borders books and music superstore operations. In 1995,
the Company opened 41 new Borders books and music superstores.
Borders superstore operations achieved compound annual growth in
net sales for the three years ended January 28, 1996 of 74.1% and
attained comparable store sales growth in 1995 of 9.6%. Borders
superstores achieved average sales per square foot of $273 and
average sales per superstore of $7.4 million in 1995, each of
which the Company believes to be higher than the comparable
figures of any publicly reporting book superstore operator. As
of August 25, 1996, Borders had opened 13 Borders Books & Music
superstores during 1996.
Each Borders superstore offers customers a vast assortment
of books, superior customer service, value pricing and an
inviting and comfortable environment designed to encourage
browsing. A Borders superstore typically carries the broadest
selection of book titles in its market. Each Borders superstore
carries an average of 128,000 book SKUs, ranging from 85,000 SKUs
to 170,000 SKUs, across numerous categories, including many
hard-to-find titles. As of August 25, 1996, 113 of the 129
Borders superstores were in a books and music format, which also
features an extensive selection of pre-recorded music, with an
emphasis on hard-to-find recordings and categories such as jazz,
classical and foreign music, and a broad assortment of
pre-recorded videotapes, focusing primarily on classic movies and
hard-to-find titles. Each books and music superstore carries
approximately 57,000 SKUs of music and 9,300 SKUs of videotapes.
As of August 25, 1996, 125 of the 129 Borders superstores
featured an espresso bar.
Over the past two decades, Borders has developed what
it believes is the most sophisticated inventory management
system in the retail book industry. The inventory management
system includes a centrally controlled "expert" system that
uses artificial intelligence principles to forecast sales and
recommend inventory levels for each book in each store.
Management believes that Borders' inventory management system,
which reflects both overall sales trends and local buying
patterns, results in higher in-stock positions, a broader
selection of book titles, and increased inventory turnover,
sales per store and sales per square foot, while
simultaneously reducing costs to thereby provide Borders
stores with a more productive inventory assortment. As a
result, management believes this proprietary system has been a
principal reason for Borders' superior performance. The
Company is adapting this system for use in its music and
mall-based book businesses, and believes that over the long
term it will enable the Company to offer a more productive
assortment of inventory throughout its operations.
The Borders books and music superstores average approximately
30,000 square feet including approximately 8,500 square feet
devoted to music, approximately 400 square feet devoted to videos
and approximately 1,500 square feet devoted to the espresso bar.
The remaining book superstores generally range in size from
approximately 12,000 square feet to approximately 23,000 square
feet. Each store is distinctive in appearance and architecture
and is designed to complement its local surroundings, although
Borders utilizes certain standardized specifications to increase
the speed and lower the cost of new store openings.
Walden is the leading operator of mall-based bookstores in
terms of sales and number of stores, offering customers a
convenient source for new releases, hardcover and paperback
bestsellers, selected children's books and a standard selection
of business, cooking, reference and general interest books.
Walden has a well established name and reputation and generates
cash flow that the Company plans to use in large part toward
financing the Company's superstore growth. "Waldenbooks" average
approximately 3,300 square feet and typically carry between
15,000 and 25,000 titles.
Walden recently has developed an alternative mall-based
bookstore utilizing a large format. This addresses the desires
of some developers to include a larger format bookstore in malls,
including, in many cases, where developers plan to include only
one bookstore in a mall, and is designed to take advantage of
what management believes is the desire by mall customers in some
markets for greater selection and service. The larger format
consists of approximately 6,000 to 8,000 square feet and carries
between 43,000 and 48,000 titles. As of August 25, 1996, 85 of
the larger format stores had been opened.
Planet Music, Inc. a subsidiary of the Company, operates
superstores that combine a vast assortment of compact discs and
cassettes in all music categories, including rock, pop,
alternative, jazz and classical, in an exciting store atmosphere
with superior customer service. Each Planet Music superstore
carries approximately 110,000 SKUs, with over 85,000 compact disc
SKUs. The administrative support for the Planet Music operations
is provided by Borders and the chain has been reduced to a total
of 6 units as of August 25, 1996.
Expansion of Books and Music Superstores. The Company intends
to expand rapidly in a manner consistent with its high standards
of execution and return objectives, and expects to open
approximately 40 superstores in 1996 and 1997 in both new and
existing markets. The Company believes that offering books and
music together in a superstore format provides the Company with
unique opportunities to cross-sell merchandise to both its book
and music customers.
Continued Core Focus and Cost Reductions at Walden. The
Company intends to focus on Walden's core convenience bookstore
operations and to reduce overhead and inventory shrinkage. In
addition, the Company believes that the adaptation of Borders'
sophisticated inventory management system at Walden could result
in improved inventory productivity over the long term.
Achievement of Synergies and Economies of Scale. The Company
is combining certain management functions across its businesses
in order to reduce corporate overhead, allocate corporate
resources to strategically important opportunities and achieve
synergies and economies of scale in such areas as merchandise
distribution and real estate. The Company intends to enhance the
efficiency of each of the Company's businesses while preserving
the separate corporate identity and culture at Borders and Walden
by maintaining separate management over such areas as store
operations.
Creation of Ownership Culture. The Company seeks to enhance
profitability by fostering an ownership culture throughout its
entire organization through the use of equity incentives related
to the performance of the Company.
The Company was incorporated in Delaware on August 9, 1994.
The Company's principal executive offices are located at 500 East
Washington Street, Ann Arbor, Michigan 48104, and the Company's
telephone number is (313) 913-1100.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares
of Common Stock by the Selling Stockholders. The expenses of
this offering will be paid by the Company.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
ownership prior to the offering of Common Stock by each of the
Selling Stockholders.
Number Shares
of Offered
Shares Percent Hereby
Paul B. Mayer & Karen W. 85,196 (1),(2) 85,196
Mayer
Edward S. Fadel 83,687 (2) 83,687
William L. Hampton 57,239 (2) 57,239
Charles R. Cumello 45,702 (2) 46,021
J. David Wimberly 34,299 (2) 34,299
E. Bruce Dunn 20,469 (2) 20,469
Mary Bell Fitzgerald 17,517 (2) 17,517
Morton S. Mayer 11,348 (2) 11,348
Waldemar Smith 8,850 (2) 8,850
Arline L. Mayer 7,565 (2) 7,565
Arrow & Co 6,637 (2) 6,637
Richard Alan Birgel, Jr. 6,195 (2) 6,195
Dean P. Karadimos 5,642 (2) 5,642
Coleman Cone Birgel 4,425 (2) 4,425
Barry Curtis 4,425 (2) 4,425
Frank Owen Fitzgerald, III 3,436 (2) 3,436
Richard A. Fadel &
Maureen P. Fadel 2,212 (2) 2,212
Joseph K. L. Reckford 2,212 (2) 2,212
Mary C. Hampton 1,965 (2) 1,965
Anne T. Fitzgerald Hulka 1,913 (2) 1,913
David S. Morrell 1,637 (2) 1,637
Thomas W. Graves, Jr. 1,327 (2) 1,327
Russell A. Fadel 1,227 (2) 1,227
Andrew P. Dalgliesh 1,106 (2) 1,106
Gregory Fabian Hulka 1,106 (2) 1,106
Benjamin Cone III 1,106 (2) 1,106
Josephine W. Stipe &
Robert E. Stipe 1,106 (2) 1,106
O. Kenneth Bagwell, Jr. 570 (2) 570
Mary Sparks Birgel 553 (2) 553
Randolph R. Few 442 (2) 442
William Steed Rollins 221 (2) 221
Chris S.Ong 167 (2) 167
Jeffrey Hill 885 (2) 885
Allan Wodarski 885 (2) 885
Brad B. Anderson 442 (2) 442
Timothy Nicholas Burbich 442 (2) 442
Sean Michael Conant 442 (2) 442
Michael Wayne Davis 442 (2) 442
Franklin Pierce Donaldson Jr. 442 (2) 442
Kie Armfield Gray Jr. 442 (2) 442
John D. Hayes III 442 (2) 442
Eric Kniffin 442 (2) 442
Jeffery Lewis Love 442 (2) 442
Rebecca J. Nicholas 442 (2) 442
Robert Pungello Jr. 442 (2) 442
Michelle Meech Rhodes 442 (2) 442
Teri Elyse Vaughn 442 (2) 442
Dawn West 442 (2) 442
Clement Matthew Berard 221 (2) 221
Frederick E. Boesch 221 (2) 221
Clise, Greg Scott 221 (2) 221
Robert Allen Deal 221 (2) 221
Withers Gill Dunovant Jr. 221 (2) 221
_________
(1)All such shares of Common Stock are owned jointly by
Paul B. Mayer and Karen W. Mayer.
(2)Less than 1%.
_________
The Selling Stockholders received or will receive the Shares
(i) in connection with the automatic conversion of Series A
Preferred Stock upon completion of the IPO and (ii) upon the
exercise of certain options for Common Stock which were received
upon completion of the IPO in exchange for options to purchase
Series A Preferred Stock. The Series A Preferred Stock was
originally issued to the Selling Stockholders (other than Charles
R. Cumello) in connection with the acquisition of Planet Music on
September 1, 1994. The shares of Series A Preferred Stock issued
to Charles R. Cumello, former President and Chief Executive
Officer of Walden, were issued pursuant to an agreement with the
Company in consideration of certain covenants of Mr. Cumello,
including a covenant not to compete for a period of three years.
The options to purchase Common Stock issued in exchange for
Series A options were granted as replacement options in
connection with the Company's acquisition of Planet Music.
PLAN OF DISTRIBUTION
The distribution of the Shares by the Selling Stockholders may
be effected from time to time in one or more transactions on the
NYSE (which may involve block transactions), in special
offerings, in negotiated transactions, or otherwise, at market
prices prevailing at the time of sale, at prices rated to such
prevailing market prices, or at negotiated prices. This
Prospectus may also be used, with the Company's consent, by
pledgees, donees, or assignees of the Selling Stockholders. The
Selling Stockholders or such other persons may engage one or more
brokers to act as principal or agent in making sales, who may
receive discounts or commissions from the Selling Stockholders in
amounts to be negotiated. The Selling Stockholders or such other
persons and any such brokers may be deemed "underwriters" under
the Securities Act of the Shares sold.
The Company will pay all expenses of filing the Registration
Statement and preparing and reproducing this Prospectus. The
Selling Stockholders will pay any selling expenses, including
brokerage commissions incurred in connection with their sale of
Shares.
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of
210,000,000 shares of capital stock, 200,000,000 of such shares
being Common Stock, par value $.001 per share, and 10,000,000 of
such shares being preferred stock, par value $.001 per share.
Common Stock
Subject to the rights of holders of any preferred stock then
outstanding, holders of Common Stock are entitled to receive such
dividends out of assets legally available therefor as may from
time to time be declared by the Board. Holders of Common Stock
are entitled to one vote per share on all matters on which the
holders of Common Stock are entitled to vote. Because holders of
Common Stock do not have cumulative voting rights, holders of a
majority of the shares of Common Stock represented at a meeting
can elect all of the directors. In the event of liquidation,
dissolution or winding up of the Company, holders of Common Stock
would be entitled to share ratably in assets of the Company
available for distribution to holders of Common Stock. All
outstanding shares of Common Stock are, and shares of Common
Stock being issued and sold by the Company hereby, will be, when
issued and paid for, fully paid and nonassessable.
Holders of shares of Common Stock are not liable to further
calls or assessments by the Company and holders of Common Stock
are not liable for any liabilities of the Company. Holders of
Common Stock have no preemptive rights under the Certificate.
First Chicago Trust Company of New York acts as transfer agent
and registrar for the Common Stock.
Preferred Stock
The Certificate authorizes the Board to provide for the
issuance, from time to time, of classes or series of preferred
stock, to establish the number of shares to be included in any
such series and to fix the designations, voting powers,
preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. Because the
Board has the power to establish the preferences and rights of
the shares of any such series of preferred stock, it may afford
holders of any preferred stock preferences, powers and rights
(including voting rights), senior to the rights of holders of
Common Stock, which could adversely affect the rights of holders
of Common Stock.
Certain Certificate and By-Law Provisions
Set forth below is a summary of certain provisions of the
Certificate. Such provisions could be deemed to have an
anti-takeover effect. These provisions are intended to enhance
the likelihood of continuity and stability in the composition of
the Board and in the policies formulated by the Board and to
discourage an unsolicited takeover of the Company if the Board
determines that such takeover is not in the best interests of the
Company and its stockholders. However, these provisions could
have the effect of discouraging certain attempts to acquire the
Company or remove incumbent management even if some or a majority
of stockholders deemed such an attempt to be in their best
interests.
The Certificate provides for a classified Board consisting of
three classes as nearly equal in size as the then authorized
number of directors constituting the Board permits. At each
annual meeting of stockholders, the class of directors to be
elected at such meeting will be elected for a three-year term and
the directors in the other two classes will continue in office.
Each class shall hold office until the date of the third annual
meeting for the election of directors following the annual
meeting at which such director was elected, except that the
initial terms of Class II and Class III expire on the date of the
annual meeting in 1997 and 1998, respectively. As a result,
approximately one-third of the Board will be elected each year.
Under the Delaware General Corporation Law, in the case of a
corporation having a classified board, stockholders may remove a
director only for cause. This provision, when coupled with
provisions of the Certificate and By-laws authorizing the Board
to fill vacant directorships, precludes a stockholder from
removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling the
vacancies created by such removal with its own nominees.
The By-laws establish an advance notice procedure for the
nomination, other than by or at the direction of the Board, of
candidates for election as directors as well as for other
stockholder proposals to be considered at annual meetings of
stockholders. In general, notice must be received by the Company
not less than 60 days nor more than 90 days prior to the date of
the annual meeting and must contain certain specified information
concerning the persons to be nominated or the matters to be
brought before the meeting and concerning the stockholder
submitting the proposal.
The Certificate provides that no action may be taken by
stockholders except at an annual or special meeting of
stockholders and prohibits action by written consent in lieu of a
meeting. The By-laws provide that special meetings of
stockholders of the Company may be called only by the Chairman of
the Board, the President or the Secretary or by a majority of the
members of the Board. This provision will make it more difficult
for stockholders to take action opposed by the Board.
LEGAL OPINIONS
The validity of the Shares will be passed upon for the
Company by Thomas D. Carney, Esq., Vice President and General
Counsel of the Company.
EXPERTS
The consolidated financial statements of the Company
incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for the year ended January 28, 1996,
have been so incorporated in reliance on the report of Price
Waterhouse, LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
The following statement sets forth the estimated amounts of
expenses to be borne by the Company in connection with the
offering described in this Registration Statement:
Securities and Exchange Commission
Registration Fee $5,270.71
Legal Fees and Expenses 2,000.00
Miscellaneous Expenses 2,500.00
---------
Total Expenses $9,770.71
=========
Item 15. Indemnification of Directors and Officers
Article Eight of the Company's Amended and Restated
Certificate of Incorporation provides that the Company shall
indemnify to the fullest extent permitted by the Delaware General
Corporation Law (the "DGCL") any director or officer who is or
was a party to any civil, criminal, administrative or
investigative suit or proceeding by reason of the fact that he or
she is or was a director or officer of the Company or is or was
serving another corporation, partnership, joint venture, trust or
other enterprise at the request of the Company including service
with respect to employee benefit plans; provided that the Company
shall indemnify any person seeking indemnity in connection with
an action (or part thereof) initiated by such person only if the
action (or part thereof) was authorized by the Board of
Directors. In addition, the Company may, by action by the Board
of Directors, provide indemnification to employees and agents
with the same scope and effect as the foregoing indemnification
of directors and officers.
Under Section 145 of the DGCL, a corporation may indemnify a
director, officer, employee or agent of the corporation (or other
entity if such person is serving in such capacity at the
corporation's request) against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. In the case of an action brought by or
in the right of a corporation, the corporation may indemnify a
director, officer, employee or agent of the corporation (or other
entity if such person is serving in such capacity at the
corporation's request) against expenses (including attorneys'
fees) actually and reasonably incurred by him if he acted in good
faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that, despite
the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses as the court shall
deem proper. Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administra
tive or investigative action, suit or proceeding may be paid by
the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such director or officer to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Policies of insurance will be maintained by the Company
under which directors and officers of the Company will be
insured, within the limits and subject to the limitations of the
policies, against certain expenses in connection with the defense
of actions, suits or proceedings, and certain liabilities which
might be imposed as a result of such actions, suits or
proceedings, to which they are parties by reason of being or
having been a director or officer.
The Company's Amended and Restated Certificate of
Incorporation provides that, to the fullest extent permitted by
the DGCL, no director shall be personally liable to the Company
or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Company or its stockhold
ers, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the DGCL or (iv) for any
transaction from which the director derived any improper personal
benefit.
Item 16. Exhibits
(a) The following exhibits are filed herewith unless otherwise
indicated:
Description
3.1(i) Amended and Restated Certificate of Incorporation of
Borders Group, Inc.
3.2(iii) Amendment to Restated Certificate of Incorporation of
Borders Group, Inc.
3.3(ii) Bylaws of the Borders Group, Inc.
5.1 Opinion of Thomas D. Carney regarding validity of
the Common Stock.
10.1(i) Stockholder Agreement dated as of February 17, 1995,
between Borders Group, Inc. and Kmart Corporation.
10.2(ii) Employment Agreement dated as of February 1, 1995
between Borders Group, Inc. and Robert F. DiRomualdo.
10.3(i) Employment Agreement dated as of November 15, 1994
among Borders Group, Inc., Walden Book Company, Inc.
and George R. Mrkonic.
10.4(ix) Form of Severance Agreement.
10.5(i) 1992 Stock Appreciation Rights Plan of Borders, Inc.
10.8(i) Borders Group, Inc. Stock Option Plan.
10.9(v) First Amendment to the Borders Group, Inc. Stock Option
Plan.
10.10 Second Amendment to the Borders Group, Inc. Stock
Option Plan.
10.11(iii)Intercompany Agreement dated May 24, 1995 between
Borders Group, Inc. and Kmart Corporation.
10.12(iii)Tax Allocation Agreement dated May 24, 1995
between Borders Group, Inc. and Kmart Corporation.
10.13(iii)Lease Guaranty Agreement dated May 24, 1995
between Borders Group, Inc. and Kmart Corporation.
10.14(ii) Management Stock Purchase Plan.
10.15(v) First Amendment to the Management Stock Purchase Plan
10.16(ii) Employee Stock Purchase Plan
10.17(vi) First Amendment to the Employee Stock Purchase Plan
10.18(ii) Annual Incentive Bonus Plan.
10.19(ii) Director Stock Plan.
10.20 First Amendment to the Borders Group, Inc.
Director Stock Plan.
10.21(iii)Revolving Credit Facility Credit Agreement (the
"Credit Agreement") dated as of March 28, 1995 by and
among Borders Group, Inc., Borders, Inc., Walden Books
Company, Inc. and Planet Music, Inc. and the lenders
party thereto, and PNC BANK, National Association, as
Administrative Agent and First National Bank of
Chicago, as Syndication Agent.
10.22(iv) Amendment No. 1 and Consent to Credit Agreement among
Borders Group, Inc., its subsidiaries and the lenders
party thereto.
10.23(iv) Amendment No. 2 and Consent to Credit Agreement among
Borders Group, Inc., its subsidiaries and the lenders
Party thereto.
10.24(v) Amendment No. 3 to the Credit Agreement among Borders
Group, Inc., its subsidiaries and the lender Party
thereto.
10.25(v) Amendment No. 4 to the Credit Agreement among Borders
Group, Inc., its subsidiaries and the lender Party
thereto.
10.26(ix) Amendment No. 5 to the Credit Agreement among
Borders Group, Inc., its subsidiaries and the lender
Party thereto.
10.27(viii)Amendment No. 6 and Consent to Credit Agreement among
Borders Group, Inc., its Subsidiaries and the Lenders
Party Thereto.
10.28(v) Consent dated October 20, 1995 under the Credit
Agreement among Borders Group, Inc., its subsidiaries
and the Lenders Party Thereto.
10.29(v) Participation Agreement dated as of November 22, 1995
by and among Borders Group, Inc., its subsidiaries,
Wilmington Trust Company, SAM Project Funding Corp. I,
Bankers Trust Company, PNC Bank National Association
and the Lenders Party Thereto, including exhibits
thereto.
10.30(v) Guarantee Agreement dated as of November 22, 1995 by
and among Bankers Trust Company, Borders Group, Inc.
and its subsidiaries, including exhibits thereto.
10.31(ix) First Amendment to the Guarantee Agreement dated as of
February 9, 1996, by and among Borders Group, Inc. and
its subsidiaries.
10.32(viii)Amendment No. 2 and Consent to Guarantee
10.33(v) Agreement dated November 16, 1995 between Borders
Group, Inc. and Richard L. Flanagan.
10.34(vii)Agreement dated April 19, 1996, between Borders
Group, Inc. and Bruce A. Quinnell.
10.35(vii)Agreement dated April 10, 1996, between Borders
Group, Inc. and Philip C. Semprevivo.
10.36 Borders Group, Inc. Voluntary Deferred Compensation
Plan.
21.1(i) Subsidiaries of Registrant.
23.1 Consent of Independent Accountants
__________
(i) Incorporated by reference from the Company's Registration
Statement on Form S-4 (File No. 33-90016).
(ii) Incorporated by reference from the Company's Registration
Statement on Form S-1 (File No. 33-90918).
(iii)Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended April 23, 1995
(File No. 1-13740).
(iv) Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended July 23, 1995
(File No. 1-13740).
(v) Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the Quarter ended October 22, 1995.
(File No. 1-13740).
(vi) Incorporated by reference from the Company's Registration
Statement on Form S-1 (File No. 33-80643).
(vii)Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the Quarter ended April 28, 1996.
(File No.1-13740).
(viii)Incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the Quarter ended July 28, 1996.
(File No.1-13740).
(ix) Incorporated by reference from the Company's Annual Report
for the Fiscal Year Ended January 28, 1996 on Form 10-K
(File No. 1-13740).
__________
(b) Financial Statement Schedules:
All financial statement schedules are omitted as they are not
applicable or the required information is included in the
consolidated financial statements of the Registrant.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement (other than as provided in the proviso and instructions
to Item 512(a) of Regulation S-K) (i) to include any prospectus
required by Section 10(a)(3) of the Securities Act of 1933 (the
"Securities Act"); (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represents a fundamental
change in the registration statement; and (iii) to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any
material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability under
the Securities Act, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described in Item 15 above, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted
by such officer, director or controlling person in connection
with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether or not such indemnification
by it is against public policy as expressed in the Securities act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Ann Arbor, State of Michigan, on
September 24, 1996.
Borders Group, Inc.
(Registrant)
By: \s\
Robert F. DiRomualdo
Chairman and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints GEORGE R.
MRKONIC and THOMAS D. CARNEY, and each of them, as his true and
lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place
and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-
in-fact and agent full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or any of them, or his
substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities indicated on September 24, 1996.
Title Signature
Robert F. DiRomualdo \s\
Chairman, Chief Executive
Officer and Director
(Principal Executive Officer)
George R. Mrkonic \s\
Vice Chairman, President and Director
(Principal Financial and Accounting Officer)
Peter R. Formanek \s\
Director
Brian Lamb \s\
Director
Amy B. Lane \s\
Director
Larry Pollock \s\
Director
Leonard A. Schlesinger \s\
Director
Exhibit 5.1
September 24, 1996
Borders Group, Inc.
500 East Washington Street
Ann Arbor, Michigan 48104
Ladies and Gentlemen:
The undersigned, Vice President and General Counsel of
Borders Group, Inc., a Delaware corporation (the "Company"), is
rendering this opinion in connection with the Registration
Statement on Form S-3 (the "Registration Statement") which is
being filed by the Company with the Securities and Exchange
Commission (the "Commission") on September 25, 1996. The
Registration Statement relates to the registration by the Company
under the Securities Act of 1933, as amended (the "1933 Act"), of
430,565 shares of Common Stock of the Company, par value $.001
per share (the "Shares").
This opinion is being furnished to you in accordance with
requirements of Item 601(b)(5) of Regulation S-K under the 1933
Act.
In connection with this opinion, I have examined and am
familiar with originals or copies, certified or otherwise
identified to my satisfaction, of such documents as I have deemed
necessary or appropriate as a basis for the opinion set forth
herein, including, without limitation, (i) the Registration
Statement (together with the form of preliminary prospectus
forming a part there of); (ii) the Amended and Restated
Certificate of Incorporation of the Company (the "Articles"),
included as Exhibits 3.1 and 3.2 to the Registration Statement;
(iii) the By-laws of the Company, included as Exhibit 3.3 to the
Registration Statement and (iv) resolutions of the Board of
Directors of the Company relating to the transactions in which
the Shares were issued. In my examination, I have assumed the
genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such copies. In making my
examination of documents executed by parties other than the
Company, I have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations
thereunder and also have assumed the due authorization by all
requisite action, corporate and other, and execution and delivery
by such parties of such documents and the validity and binding
effect thereof.
Based upon and subject to the foregoing, I am of the opinion
that the issuance and sale of the Shares has been duly
authorized, and the Shares have been validly issued and are fully
paid and nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement. I also consent to the reference
to me under the caption "Validity of Common Stock" in the
prospectus filed as part of the Registration Statement. In
giving this consent, I do not thereby admit that I am in the
category of persons whose consent is required under Section 7 of
the 1933 Act or the rules and regulations of the Commission
promulgated thereunder.
Sincerely,
BORDERS GROUP, INC.
Thomas D. Carney
Vice President and General Counsel
TDC/ksc
Exhibit 10.10
SECOND AMENDMENT TO THE
BORDERS GROUP, INC. EMPLOYEE STOCK OPTION PLAN
Section 5 (d) of the Borders Group, Inc. Stock Option Plan (the
"Plan") is hereby amended to read as follows:
(d) Nontransferability. Except as otherwise provided in Section
4(g)(3) hereof, no option or any rights with respect thereto
shall be subject to any debts or liabilities of an optionee, nor
be assignable or transferable except by will or the laws of
descent and distribution, nor be exercisable during the
optionee's lifetime other than by him or her, nor shall Shares be
issued to or in the name of one other than the optionee;
provided, however, that (i) an option may after the death or
Disability of an optionee be exercised pursuant to paragraph (iv)
of Section 5(b); (ii)any Shares issued to an optionee hereunder
may at the request of the optionee be issued in the name of the
optionee and one other person, as joint tenants with right of
survivorship and not as tenants in common, or in the name of a
trust for the benefit of the optionee or for the benefit of the
optionee and others; and (iii) if so provided in a Share Option
Agreement executed by the optionee and approved by the Committee,
the option and rights covered by such Agreement may be
transferred without consideration to an immediate family
member(s) or to a trust for the benefit of such family member(s),
in which event the transferee(s) must agree in writing to accept
the terms and conditions of such option and such option shall not
be covered under Rule 16(b)-3 of the Exchange Act.
Exhibit 10.20
FIRST AMENDMENT TO
THE BORDERS GROUP, INC.
DIRECTOR STOCK PLAN
The Borders Group, Inc. Director Stock Plan (the "Plan") is
hereby amended in the following particulars:
1. Section 1.2 of Article 1 of the Plan is hereby amended to
insert the words "and Article 19" after the words "Article
4" in the eighth line thereof.
2. The following paragraph (o) is hereby added to Article 2 of
the Plan:
"(o) "Option" or "Options" shall mean an option or options
granted under Article 19 of this Plan"
3. Article 3 of the Plan is hereby amended in its entirety to
read as follows:
"3. Shares.
The maximum number of shares which will be reserved for
the grant of Shares, Restricted Shares and Options under the
Plan shall be 155,521 Shares, which number shall be subject
to adjustment as provided in Article 11 hereof. Such shares
may be either authorized but unissued Shares or Shares that
may have been or may be reacquired by the Company.
If any outstanding Restricted Shares or Options under
the Plan shall be forfeited, such Shares or the Shares
subject to such Options, as the case may be, shall (unless
the Plan shall have been terminated) again become available
for use under the Plan to the extent permitted by Rule 16b-
3."
4. The word " and" appearing before clause (iii) in paragraph
(a) of Article 9 of the Plan is hereby moved to the end of
such clause and the following clause (iv) is hereby added at
the end of such paragraph:
" (iv) any Options held by such Participant that have not
yet become exercisable shall be forfeited.
5. The word " and" appearing before clause (ii) in paragraph
(b) of Article 9 of the Plan is hereby moved to the end of
such clause and the following clause (iii) is hereby added
at the end of such paragraph:
" (iii) all outstanding Options held by such Participant
shall become immediately exercisable."
6. Article 11 of the Plan is hereby amended to substitute the
words " the number of outstanding Restricted Shares,
Deferred Shares and Options" for the words "the number of
outstanding Restricted Shares and Deferred Shares" in each
place in which such words appear therein.
7. Article 15 of the Plan is hereby amended to substitute the
words "the Plan" for the words "Article 4" in the eighth
line thereof.
8. Section 17.2 of Article 17 of the Plan is hereby amended in
its entirety to read as follows:
"17.2 The Plan shall remain in effect until December
31, 2005, unless sooner terminated by the Board; provided,
however, that, except as provided in Article 9 hereof,
Shares and Dividend Equivalents may be delivered pursuant to
a Deferral Election or the exercise of an Option after such
date and the Restricted Period of Restricted Shares and the
term of Options may extend beyond such date, and the
provisions of the Plan shall continue to apply such Deferred
Shares, Dividend Equivalents, Restricted Shares and
Options."
9. The following Article 19 is hereby added to the Plan:
"19. Stock Options
Section 19.1 Annual Grant of Options. On the date of
each Annual Meeting of shareholders of the Company
commencing with the May 16, 1996 Annual Meeting, each
eligible director shall receive an Option to purchase 5,000
shares of common stock of the Company.
Section 19.2 Eligibility for Options. Each director
of the Company who is not an officer or employee of the
Company and who is serving as a director of the Company on
the date of the 1996 Annual Meeting shall be eligible to
receive Options on that date. The persons eligible to
receive Options on the date of subsequent Annual Meetings
shall be persons serving as directors of the Company on such
date (including persons elected on such date), who are not
officers or employees of the Company and who have held at
least the following minimum number of shares since the
preceding Annual Meeting: (i) 1997 Annual Meeting - 5,000
shares; (ii) 1998 Annual Meeting - 7,500 shares; (iii) 1999
Annual Meeting and Annual Meetings thereafter - 10,000
shares; provided, however, that the minimum shareholding
requirement shall not be applicable to a director who is
being initially elected on the date of the applicable Annual
Meeting. In calculating the number of shares owned by a
director for purposes of the minimum shareholding
requirement, all shares previously issued to the director
under Section 4 of the Plan and then held by the director,
whether restricted or unrestricted, shall be deemed owned by
the director.
Section 19.3 Terms and Conditions of Options. The
Options granted to directors under this Plan shall have the
following terms and conditions:
(a) EXERCISE PRICE. The exercise price shall
be the Fair Market Value per Share on the date of
grant.
(b) TERM OF OPTIONS. The term of each Option
shall be ten years from the date of grant.
(c) VESTING AND EXERCISE DATE. Each Option shall
vest and become exercisable on the third anniversary of
the date of grant; provided, however, that (i) an
Option shall be forfeited in its entirety if the
director ceases, at any time prior to his or her
exercise of the Option, to hold the minimum number of
shares that he or she was required to hold for the one
year period prior to the grant to be eligible therefor;
(ii) all outstanding Options shall vest and become
immediately exercisable in the event of a Change in
Control, and (iii) all options held by a director who
has served as a director for six years or more shall
vest as of the date upon which he or she ceases to
serve as a director.
(d) DISCONTINUANCE OF SERVICE AS A DIRECTOR.
An Option may be exercised by a director only while he
or she is serving as such or within three months
thereafter and only if the Option is fully vested and
exercisable and has not expired on the date of
exercise; provided however, that if on the date upon
which the director ceases to serve as such, he or she
has ten or more years of full time service as a
director of the Company, or if termination of service
as a director results from the death or Disability of
the director, such three month period shall be extended
to three years. In the event of a death of a director,
either before or after termination of his or her
service as a director, an Option which is otherwise
exercisable may be exercised by the person or persons
whom the director shall have designated in writing on
forms prescribed by and filed with the Board
("Beneficiaries") or, if no such designation has been
made, by the person or persons to whom the director's
rights shall have passed by the laws of decent and
distribution ("Successors"). In the event of a
Disability of a director, an option which is otherwise
exercisable may be exercised by the director's legal
representative or guardian. The Board may require an
indemnity and/or such other evidence or assurances as
it may deem necessary in connection with an exercise by
a legal representative, guardian, Beneficiary, or
Successor.
(e) EXERCISE AND PAYMENT. Subject to the terms
hereof, an Option may be exercised by noticed in
writing to the Company specifying the number of shares
to be purchased. Payment for the number of shares
purchased upon the exercise of an Option shall be made
in full at the per share exercise price and such
purchase price shall be paid by delivery to the Company
of cash (including check or similar draft), in United
States dollars or previously owned whole shares
otherwise not subject to holding periods under Rule 16b-
3. Shares used in payment of the purchase price shall
be valued at their Fair Market Value as of the date of
notice of exercise is received by the Company. Any
shares delivered to the Company shall be in such form
as acceptable to the Company.
(f) WITHHOLDING TAXES. The Company may defer
making delivery of shares under the Plan until
satisfactory arrangements have been made for the
payment of any tax attributable to the exercise of the
Option. A director may pay all or any portion of all
taxes: (i) in cash; (ii) by having the Company withhold
whole Shares; (iii) by delivering to the Company whole
Shares previously owned by the director having a Fair
Market Value not greater than the amount to be
withheld; provided, however, that the amount to be
withheld may not exceed the director's estimated total
Federal, State and local tax obligations associated
with the transaction.
(g) NON-TRANSFERABILITY. No Option or any
rights with respect thereto shall be subject to any
debts or liabilities of an Director, nor be assignable
or transferable except by will or the laws of decent
and distribution, or be exercisable during the
Director's lifetime other than by him or her, nor shall
shares be issued to or in the name of anyone other than
the Director, provided, however that an Option may be
exercised after the death of an Director in accordance
with Section 19.3 above and, provided further that any
shares issued to an Director may be, at the request of
the Director, issued in the name of the Director and/or
one other person, as joint tenants with right of
survivorship and not as tenants-in-common, or in the
name of a trust for the benefit of the Director or for
the benefit of the Director and others.
(h) TERMINATION BY A DIRECTOR. A director
may at any time elect, in a written notice filed with
the Board, to terminate an Option with respect to any
number of shares as to which such Option shall not have
been exercised.
(i) TYPE OF OPTION. All Options issued under
the Plan shall be non-qualified Options.
(j) RIGHTS AS A STOCKHOLDER. A director shall
not have any rights as a stockholder with respect to
shares covered by his or her Option until the date of
issuance to him or her of a certificate evidencing such
shares after the exercise of such Option and payment in
full of the exercise price. No adjustment will be made
for dividends or other rights for which the record date
is prior to the date such certificate is issued.
10. Notwithstanding any other provision hereof, this Amendment
shall not be effective unless and until it is approved and
adopted by the shareholders of the Company.
Exhibit 10.36
BORDERS GROUP, INC.
VOLUNTARY DEFERRED COMPENSATION PLAN
1. Purpose
The purpose of the Deferred Compensation Plan ( the "Plan") is to
provide selected senior executive employees of Borders Group,
Inc. (the "Corporation") and its Subsidiaries and Affiliates
(hereinafter, with the Corporation, collectively referred to as
the "Company") an opportunity to defer salary that they would
otherwise receive from the Company in accordance with the terms
and conditions set forth herein.
2. Administration
The Plan shall be administered in accordance with its terms by
the Compensation Committee of the Board of Directors of the
Corporation (the "Committee"). The Committee shall have the
authority to interpret the terms and provisions of the Plan and
to adopt, alter and repeal such administrative rules, regulations
and practices governing the operation of the Plan as it shall
from time to time deem advisable and as are consistent with the
terms of the Plan.
3. Eligibility
The Committee shall select those senior executive employees who
shall be eligible to participate in the Plan.
Such persons shall be collectively referred to as the
"Participant" or "Participants" as the case may be.
4. Election to Defer
(a) A Participant may elect in writing to defer receipt of
all or a specified portion of his/her base salary. Amounts
deferred under this Paragraph 4(a) shall be referred to as
the "Deferred Amounts." Such elections shall be irrevocable.
(b) Subject to Section 15 hereof, the election must be made
prior to the beginning of the fiscal year (or period) to
which the salary applies. A Participant must make a
separate election with respect to each year of participation
in the Plan. A new Participant in the Plan shall have 15
days following his/her selection by the Committee to make an
election with respect to compensation to be earned for the
balance of the fiscal year.
(c) Unless otherwise specified herein or in the
Participant's deferral election, the period of deferral
shall be until as soon as practicable after the Participant
ceases to be a Covered Employee.
5. Establishment of Deferred Compensation Account
At the time of the Participant's initial election to defer
pursuant to Paragraph 4, the Company shall establish a memorandum
account (a "Deferred Compensation Account") for such Participant
on its books. Deferred Amounts shall be credited to the
Participant's Deferred Compensation Account as of the day upon
which the Participant would have received the amount in salary if
the deferral election had not been made or at such other time or
times as shall be established by the Committee with the consent
of the Participants. Additions, as provided in Paragraph 6,
below, shall be credited to the Participant's Deferred
Compensation Account as of the last day of each calendar quarter.
6. Additions to Deferred Amounts
The Committee shall increase or decrease, as the case may be, the
balance in the Participant's Deferred Compensation Account as of
the last day of each fiscal quarter to reflect the performance of
investments from time to time selected by the Committee after
consultation with the Participant; provided, however, that the
Company shall not obligated to invest any funds in any such
investments. Such adjustments to the Participant's Deferred
Compensation Account shall occur so long as there is a balance in
the Account, regardless of whether the Participant has terminated
employment with the Company or has died. Each Participant's
Deferred Compensation Account will be separately adjusted to
reflect only the performance of investments selected by the
Committee to serve as the performance measurement of the
applicable individual Participant, and thus the adjustment rates
may vary from Participant to Participant.
7. Payment of Deferred Amounts
(a) Except as otherwise provided in subparagraph (c) or (d)
below and subject to paragraph 4(c) above, a Participant's
Deferred Compensation Amount shall be paid, or commence to
be paid, to the Participant, or the Participant's
beneficiary, as soon as practicable after the date set forth
in (i) or (ii) below, as elected by the Participant at least
one year prior to the initial payment date (with such
election(s) being subject to change by the Participant at
any time prior to one year from the beginning payment date):
(i) The date upon which the Participant ceases to be a
Covered Employee; or
(ii) The later of the date upon which the Participant ceases
to be a Covered Employee or the date upon which he/she
ceases to be an employee of the Company.
In the event of the Participant's death, payment of the
balance in the Participant's Deferred Compensation Account
at the end of the fiscal year subsequent to the death of the
Participant shall be made to the Participant's designated
beneficiary, or if none, to the Participant's estate;
provided, however, that the Participant or his or her
beneficiary may elect to have installment payments continue
as originally selected by the Participant.
(b) The Participant may elect to receive payment of balance in
his/her Deferred Compensation Account either (i) in a lump
sum or (ii) in such number of annual installments, not to
exceed fifteen, as the Participant shall elect. The
election must be made at least one year before the Deferred
Compensation Amount is payable. If no election is made, a
lump sum payment will be made.
(c) A Participant may elect to receive the balance in the
Deferred Compensation Account upon the occurrence of a
Change in Control of the Corporation. A "Change in Control"
shall be deemed to have occurred if:
(i) the "beneficial ownership" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of securities representing more
than 20% of the combined voting power of the
Corporation is acquired by any "person" as defined in
sections 13(d) and 14(d) of the Exchange Act (other
than the Corporation; any Subsidiary of the Corporation
(i.e., any corporation of which a majority of the
shares of voting stock are owned directly or indirectly
by the Corporation); any trustee or other fiduciary
holding securities under an employee benefit plan of
the Corporation; or any corporation owned, directly or
indirectly, by the shareholders of the Corporation in
substantially the same proportions as their ownership
of shares of the Corporation; or
(ii) the shareholders of the Corporation approve a
definitive agreement to merge or consolidate the
Corporation with or into another corporation, or to
sell or otherwise dispose of all or substantially all
of its assets, or adopt a plan of liquidation, or
(iii) during any period of three consecutive years,
individuals who at the beginning of such period were
members of the Board of Directors of the Corporation
cease for any reason to constitute at least a majority
thereof (unless the election, or the nomination for
election by the Corporation's shareholders, of each new
director was approved by a vote of at least a majority
of the directors then still in office who were
directors at the beginning of such period).
(d) Notwithstanding any other provision of the Plan or any
election by a Participant, the Committee, in its sole
discretion, may direct immediate payment of all or any
portion of the then current value of such Participant's
Deferred Compensation Account (i) in the event that a
Participant incurs a severe financial hardship or becomes
disabled, provided that, a hardship payment shall in no
event exceed the amount necessary to alleviate such
financial hardship; and (ii) upon termination of the Plan or
under such other circumstances as the Committee may deem to
be in the best interest of the Company or the
Participant(s).
8. Participant Reports
The Committee shall provide a statement to the Participant at
least annually concerning the status of his/her Deferred
Compensation Account.
9. Transferability of Interests
During the Deferral Period, all Deferred Amounts shall be
considered as general assets of the Company for use as it deems
necessary and shall be subject to the claims of the Company's
creditors.
The rights and interests of a Participants during the Deferral
Period shall be those of a general creditor except that such
Participant's rights and interests may not be anticipated,
assigned, pledged, transferred or otherwise encumbered except in
the event of the death of the Participant, and then only to the
designated beneficiary of such Participant or by will or the laws
of descent and distribution.
10. Amendment, Suspension and Termination
The Corporation may amend, suspend or terminate the Plan or any
portion thereof in such manner and to such extent as it may deem
advisable and in the best interests of the Company. Subject to
paragraph 7(d) hereof, no amendment, suspension and termination
shall alter or impair any then Deferred Amounts without the
written consent of the Participant affected thereby.
11. Definitions
(a) The terms "Affiliate" means any corporation or other entity
which is not a subsidiary but as to which the Corporation or
a Subsidiary possesses a direct or indirect ownership
interest.
(b) The term "Covered Employee" shall have the meaning set forth
in Section 162(m)(3) of the Internal Revenue Code or any
successor provision. All Participant's who have made the
election under Paragraph 4(a) shall, for purposes of this
Plan, be treated as continuing as a Covered Employee until
the earlier of (i) the date upon which he/she ceases to be
an employee of the Company or (ii) the end of the fiscal
year for which the Participant is not a Covered Employee
within the meaning set forth in Section 162(m) of the
Internal Revenue Code or any successor provision. The
foregoing shall not, however, preclude the redesignation of
an employee as a Covered Employee in any subsequent fiscal
year or, in the case of a former employee, upon re-
employment by the Company.
(c) The term "Fiscal Year" shall mean the taxable year of the
Corporation for federal income tax purposes.
(d) The term "Subsidiary" shall mean any corporation 50 percent
or more of the voting stock of which shall at the time be
owned directly or indirectly by the Corporation.
12. Unfunded Obligation
The Plan shall not be funded, and no trust, escrow or other
provisions shall be established to secure payments due under the
Plan. A Participant shall be treated as a general, unsecured
creditor at all times under the Plan.
13. No Right to Employment
Nothing contained herein shall be construed as conferring upon
any Participant the right to continue in the employ of the
Company.
14. Other Benefits
Any salary deferred under this Plan shall be included in
creditable compensation in computing benefits under any employee
benefit plan of the Company except the Borders Group Savings Plan
(the "Savings Plan"). The Company shall annually credit the
Participant's Deferred Compensation with 50% of the maximum
elective deferral permitted to be made to a 401k plan for the
applicable year. To illustrate, the credit for 1996 shall be
$4,750 representing 50% of $9,500. Such Credit shall be made
on a pro rata basis on the dates that amounts are credited to the
Participants' Deferred Compensation Accounts under Paragraph 5.
15. Effective Date
The Plan shall be effective June 1, 1996. Eligible Participants
shall be permitted to make an election within 60 days thereafter
with respect to salary to be earned for the balance of the
Corporation's 1996 fiscal year.
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Registration Statement on
Form S-3 of our report dated March 11, 1996, except for Note 11
which is as of March 27, 1996, which appears on page 37 of the
Borders Group, Inc. Annual Report on Form 10-K for the year ended
January 28, 1996. We also consent to the reference to us under
the heading "Experts".
Price Waterhouse LLP
Detroit, MI
September 23, 1996
