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As filed with the Securities and Exchange Commission on June 15, 1999
Registration No. 333-
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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)
Michigan 38-3196915
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
100 Phoenix Drive
Ann Arbor, Michigan 48108
(734) 477-1100
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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Thomas D. Carney, Esq.
Vice President, Secretary and General Counsel
Borders Group, Inc.
100 Phoenix Drive
Ann Arbor, Michigan 48108
(734) 477-1100
(Name, address and telephone number, including area code, of agent for service)
Copy to:
Neal A. Klegerman
Baker & McKenzie
One Prudential Plaza
Chicago, IL 60601
(312) 861-8000
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being 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, check the following box. [X]
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
<TABLE>
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Title of each Proposed Proposed
class of Amount maximum maximum Amount of
securities to to be offering price aggregate registration
be registered registered per unit (1) offering price (1) fee
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<S> <C> <C> <C> <C>
Common Stock 400,000 shares $ 16.09375 $ 6,437,500 $ 1,795
==================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) promulgated under the Securities Act of 1933, as amended.
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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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 15, 1999
PROSPECTUS
400,000 SHARES
BORDERS GROUP, INC.
COMMON STOCK
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This prospectus relates to the offering from time to time of up to
400,000 shares of common stock of Borders Group by Philip M. Pfeffer, a former
Chief Executive Officer and a stockholder of Borders Group. The selling
stockholder has agreed to use proceeds from the sale of the shares being offered
to repay a loan from Borders Group to the extent any principal or accrued
interest remains outstanding at the time of sale. Except for amounts Borders
Group receives in repayment of its loan to the selling stockholder, Borders
Group will not receive any of the proceeds from the sale of the shares being
offered. See "Use of Proceeds." Borders Group is registering the resale of these
shares, but the registration of such shares does not necessarily mean that any
of such shares will be offered or sold by the selling stockholder.
The common stock is listed on the New York Stock Exchange under the
symbol "BGP." On June 11, 1999, the last sale price of the common stock as
reported on the New York Stock Exchange Composite Tape was $16 1/8 per share.
The principal executive offices of Borders Group are located at 100
Phoenix Drive, Ann Arbor, Michigan 48108. The main telephone number for Borders
Group is (734) 477-1100.
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INVESTING IN THE COMMON STOCK INVOLVES RISK. BEFORE MAKING ANY
INVESTMENT IN OUR COMPANY, YOU SHOULD CONSIDER CAREFULLY
THE RISK FACTORS BEGINNING ON PAGE 3.
------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
The date of this prospectus is , 1999.
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YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED IN THIS PROSPECTUS OR
INCORPORATED INTO IT BY REFERENCE. NO PERSON HAS BEEN AUTHORIZED TO PROVIDE YOU
WITH DIFFERENT INFORMATION. BORDERS GROUP IS NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. INFORMATION IS
ACCURATE ONLY AS OF THE DATE OF THE DOCUMENTS CONTAINING THE INFORMATION, UNLESS
THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
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TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
RISK FACTORS...................................................................................... 3
THE COMPANY....................................................................................... 7
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE................................... 7
FORWARD-LOOKING STATEMENTS........................................................................ 8
USE OF PROCEEDS................................................................................... 8
SELLING STOCKHOLDER............................................................................... 8
PLAN OF DISTRIBUTION.............................................................................. 10
LEGAL MATTERS..................................................................................... 11
EXPERTS........................................................................................... 11
</TABLE>
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RISK FACTORS
In addition to the other information contained in or incorporated into
this prospectus by reference, the following risk factors should be carefully
considered in evaluating an investment in the Common Stock. Unless the context
otherwise requires, all references to Borders Group include its consolidated
subsidiaries.
BORDERS GROUP IS ENGAGED IN BUSINESSES WHICH ARE 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 Borders Group. Approximately 85% of Borders
superstores face direct competition from other 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.
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, some of which have greater financial and other resources than
Borders Group. 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.
The Internet has emerged as a significant avenue for retailing of all
merchandise that Borders Group sells. In particular, the retailing of books and
music over the Internet is highly competitive. Competitors with Borders.com on
the Internet include Amazon.com, Barnes and Noble.com, CDnow, Inc. and others.
Borders Group believes that sales on the Internet have negatively affected
Borders Group's sales and profits. Internet sales are expected to continue to
have a negative impact on Borders Group's sales and profits.
Borders Group could also face competition from electronic or other
alternative methods of delivery of books, music and other products to consumers.
THE GROWTH STRATEGY OF BORDERS GROUP IS DEPENDENT PRINCIPALLY ON ITS ABILITY TO
OPEN NEW BOOK AND MUSIC SUPERSTORES AND OPERATE THEM PROFITABLY
Borders Group is engaged in an aggressive expansion program, primarily
through the opening of Borders books and music superstores. The rate of
expansion will depend on many factors including:
- general economic and business conditions affecting consumer
confidence and spending,
- competitive conditions affecting Borders Group's businesses,
including the impact of Internet competition on Borders Group stores
and Borders.com,
- the availability of desirable locations,
- the negotiation of acceptable lease terms,
- the availability of qualified management personnel, and
- Borders Group's ability to manage the operational aspects of its
growth.
Borders Group's future results will depend significantly on its
continued expansion. 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, Borders Group's ability to successfully implement its expansion strategy
would be adversely affected. In addition, Borders expects to open new
superstores in certain markets in which it is already operating superstores,
which could adversely affect sales at
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those existing stores.
There can be no assurance that Borders Group 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.
THE OPERATIONS AND GROWTH STRATEGY OF BORDERS GROUP DEPEND ON THE AVAILABILITY
OF ADEQUATE CAPITAL
The operations and growth strategy of Borders Group require adequate
capital, the availability of which depends on the ability of Borders Group to
generate cash flow from operations, borrow funds on satisfactory terms, and
raise funds in the capital markets. Borders Group anticipates the need for
additional seasonal borrowing capacity beyond the funds currently available
under Borders Group's credit facility and lease facility to fund its anticipated
working capital requirements.
WALDEN IS DEPENDENT ON CONDITIONS IN THE MALL RETAILING INDUSTRY AND FACES
INCREASED COMPETITION FROM SUPERSTORES AND THE INTERNET
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 Borders Group expects it to remain
sluggish for the foreseeable future. In addition, increased competition from
superstores and the Internet 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 or
Internet competition, or other factors, will not further adversely affect Walden
sales.
BORDERS GROUP'S BUSINESS IS HIGHLY SEASONAL
Sales are generally highest in the fourth quarter. Moreover, Borders
Group has experienced, and expects to continue to experience, losses or
significantly lower earnings in the first three quarters of each year. Borders
Group's results of operations depend significantly upon the holiday selling
season in the fourth quarter. Less than satisfactory net sales for that period
could have a material adverse effect on Borders Group's financial condition or
results of operations for the year. Borders Group'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.
BORDERS GROUP IS DEPENDENT ON 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 spending patterns, weather conditions, and
other factors beyond the control of Borders Group. 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 Borders Group's financial condition and results of operations
and its ability to fund its superstore growth strategy.
MICHIGAN'S CORPORATE LAWS COULD DISCOURAGE CHANGES IN CONTROL
Provisions of the Michigan Business Corporation Act, particularly the
business combination and control share provisions to which Borders Group to date
has opted not to be subject, could have the effect of making more difficult or
discouraging a proxy contest, a merger involving Borders Group, a tender offer,
an open-market purchase program or other purchases of Common Stock. If the Board
of Directors caused Borders Group to opt in to the control share provisions any
shares acquired by a stockholder in excess of percentage thresholds specified in
the Michigan Business Corporation Act would not have voting rights except under
conditions specified in the statute.
BORDERS GROUP'S CREDIT FACILITY AND ITS LEASE GUARANTY AGREEMENT WITH KMART
CONTAIN RESTRICTIVE FINANCIAL COVENANTS
Borders Group's credit facility contains restrictive financial
covenants which require:
- a minimum fixed charge coverage ratio,
- a maximum leverage ratio,
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- a minimum tangible net worth,
- limitations on dividends,
- limitation on additional debt, and
- other restrictions on the management and operation of Borders Group.
Borders Group's Lease Guaranty Agreement with Kmart Corporation
contains financial covenants that will be applicable to Borders Group unless
Borders Group achieves and maintains the investment grade status specified in
the Lease Guaranty Agreement. These covenants will include restrictions on the
ability of Borders Group to incur indebtedness and to make restricted payments
which include dividends or other distributions to stockholders and repurchases
of capital stock of Borders Group. If Borders Group defaults in payments under
the Lease Guaranty Agreement in excess of $10.0 million or fails to comply with
other provisions of that agreement, 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 Borders
Group believes will be on or after November 2019. The terms of the Lease
Guaranty Agreement may adversely affect Borders Group's ability to obtain
certain types of financing or the terms on which certain types of financing
might be obtained.
BORDERS GROUP MAY NOT BE ABLE TO ATTRACT AND RETAIN KEY OFFICERS AND KEY
EMPLOYEES
Management believes that Borders Group's continued success will depend
to a significant extent upon its ability to attract and retain key officers of
Borders Group and each of its subsidiaries. After the resignation of Philip M.
Pfeffer as Chief Executive Officer and a director of Borders Group, Robert F.
DiRomualdo assumed the positions of President and Chief Executive Officer on an
interim basis. Borders Group is conducting a search for a new President and
Chief Executive Officer. Mr. DiRomualdo would continue as the Chairman of
Borders Group. Mr. DiRomualdo served as Chief Executive Officer prior to
Mr. Pfeffer.
The components of Borders Group's compensation programs include equity
incentives, including stock options. The exercise price of many outstanding
options is significantly in excess of the current market price of Borders
Group's stock. This situation, together with the limited number of options
available for new option grants to key employees, may adversely affect morale
and limit the ability of Borders Group to attract and retain key employees.
The loss of the services of Mr. DiRomualdo or of other key officers or
key employees or the failure to find a permanent President and Chief Executive
Officer on a timely basis could have a material adverse effect on Borders Group.
Borders Group does not maintain "key man" life insurance on Mr. DiRomualdo.
BORDERS GROUP MAY BE REQUIRED TO REFINANCE INDEBTEDNESS
Four leases of which Borders is the lessee are collateral for mortgage
pass-through certificates. These mortgage pass-through certificates would
require Borders or, upon Borders' failure, Kmart to repurchase the underlying
mortgage notes if:
- Borders fails to make payments of rent under the related leases,
- Kmart fails to maintain required investment grade ratings, or
- Kmart and Borders agree to terminate Kmart's guaranty of Borders'
obligations under the related leases.
If Borders is required to repurchase all of the underlying mortgage
notes, Borders would be obligated to pay approximately $36.6 million. Kmart has
failed to maintain investment grade ratings and therefore the holder of the
underlying mortgage notes may require Borders to repurchase the notes. To date,
the holder has not exercised its right to require Borders to repurchase the
notes.
BORDERS GROUP'S EFFORTS TO EXPAND INTERNATIONALLY MAY NOT BE SUCCESSFUL AND TO
THE EXTENT BORDERS GROUP ESTABLISHES SIGNIFICANT INTERNATIONAL OPERATIONS, IT
WILL BE SUBJECT TO RISKS OF CONDUCTING INTERNATIONAL OPERATIONS
There can be no assurance that Borders Group will be successful in its
efforts to expand internationally. To
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the extent Borders Group does establish significant international operations,
Borders Group will be subject to risks associated with those operations. Risks
include:
- fluctuations in foreign currency exchange rates,
- the failure to comply with foreign regulatory requirements,
- variability of foreign economic conditions, and
- competition from local and international companies.
There can be no assurance that Borders Group will be able to manage
successfully the risks related to international markets. The inability to manage
these risks successfully would have a material adverse effect on Borders Group's
financial condition and results of operations.
BORDERS GROUP IS SUBJECT TO THE EXPENSE AND RISKS OF LITIGATION
Borders Group is involved in or affected by litigation incidental to
its businesses. In particular, as a large book retailer, Borders Group has been
sued in three antitrust cases which are currently pending and described in
greater detail in Borders Group's Annual Report on Form 10-K for the fiscal year
ended January 24, 1999 and Quarterly Report on Form 10-Q for the fiscal quarter
ended April 25, 1999 subject to possible updates in subsequent reports
incorporated by reference into this prospectus. Any decision against Borders
Group could adversely affect its financial condition or results of operations.
BORDERS GROUP COULD BE ADVERSELY AFFECTED BY YEAR 2000 RELATED PROBLEMS
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define a specific year. Absent corrective
actions, a computer program that has date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions to various activities and
operations.
Borders Group has initiated assessments in prior years to identify the
work efforts required to assure that systems supporting the business
successfully operate beyond the turn of the century. The scope of this work
effort encompasses:
- information technology systems,
- systems utilizing embedded technology, such as microcontrollers, and
- the readiness of external third parties, such as suppliers and
service providers.
There could be a material adverse effect on the financial condition and
results of operations of Borders Group if the actions taken by Borders Group to
mitigate its risk associated with the Year 2000 prove to be inadequate. Risk
factors include, without limitation:
- the failure to timely achieve Year 2000 compliance with respect to
application software and operating system software on which Borders
Group relies, including application software based in Borders
Group's distribution centers, stores and headquarters;
- the failure of embedded technology systems, such as elevators and
security systems at Borders Group's distribution centers, stores and
headquarters, to timely achieve Year 2000 compliance;
- the failure of vendors, including vendors of merchandise or
services, to timely achieve Year 2000 compliance;
- the failure of Borders Group's analysis and testing to detect
operational problems in information technology and non-information
technology systems utilized by Borders Group;
- potential litigation arising out of Year 2000 issues; and
- the failure to timely implement a contingency plan to the extent
Year 2000 compliance is not achieved.
The inability of Borders Group or its vendors to resolve Year 2000
issues in a timely manner could result in material financial risk, including
loss of revenue and substantial unanticipated costs, and service interruptions.
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BORDERS GROUP'S STOCK PRICE MAY BE VOLATILE
The stock market has from time to time experienced extreme price and
volume fluctuations which have often been unrelated to the operating performance
of particular companies. Borders Group's stock has also experienced extreme
price fluctuations. Any announcement with respect to any variance in revenue or
earnings from levels generally expected by securities analysts for a given
period could have an immediate and significant effect on the trading price of
the common stock. In addition, factors such as announcements of technological
innovations, Internet and other strategies, or products by Borders Group, its
competitors or other third parties, as well as changing market conditions in the
retail book and music business, may have a significant impact on the market
price of the common stock.
THE COMPANY
Borders Group, through its subsidiaries, Borders, Inc., Walden Book
Company, Inc., and Books etc., is the second largest operator of book
superstores and the largest operator of mall-based bookstores in the world based
upon both sales and number of stores. Borders Group, through its subsidiary
Borders Online, Inc., also operates an Internet commerce site under the name
Borders.com. Borders operates book and music superstores and is one of the
nation's largest specialty coffee retailers with cafe operations in nearly all
of its superstores. Walden operates mall-based bookstores and seasonal kiosks.
Books etc. operates book stores in the United Kingdom.
Borders Group is incorporated in Michigan. Our principal executive
offices are located at 100 Phoenix Drive, Ann Arbor, Michigan 48108. Our main
telephone number is (734) 477-1100.
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You may
read and copy (upon the payment of fees prescribed by the SEC) any document that
we file with the SEC at its public reference rooms in Washington, D.C. (450
Fifth Street, N.W. 20549), New York, New York (7 World Trade Center, Suite 1300
10048), and Chicago, Illinois (500 West Madison Street, Suite 1400 60661). You
may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our filings are also available to the public on the internet,
through the SEC's EDGAR database. You may access the EDGAR database at the SEC's
web site at http://www.sec.gov. Our SEC filings are also available at the office
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. For
further information on obtaining copies of our filings at the New York Stock
Exchange, you should call (212-656-5282).
The SEC allows us to "incorporate by reference" into this prospectus
the information we file with it. This means that we can disclose important
business, financial and other information in our filings by referring you to the
documents containing this information. All information incorporated by reference
is part of this prospectus, unless and until that information is updated and
superseded by the information contained in this prospectus or any information
incorporated later. Any information that we subsequently file with the SEC that
is incorporated by reference will automatically update and supersede any
previous information that is part of this prospectus. We incorporate into this
prospectus by reference the following documents and any subsequent filings we
make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934:
- Annual Report on Form 10-K for the fiscal year ended January 24,
1999;
- Quarterly Report on Form 10-Q for the fiscal quarter ended April 25,
1999;
- Current Report on Form 8-K dated March 5, 1999; and
- The description of our common stock contained in our registration
statement on Form 8-B dated August 28, 1997 under the Securities
Exchange Act, including any amendment or reports that we file for
the purposes of updating this description.
This prospectus is part of a registration statement on Form S-3 that we
have filed with the SEC relating to the shares of Borders Group's common stock
offered by this prospectus. As permitted by SEC rules, this prospectus does not
contain all the information contained in that registration statement and its
accompanying exhibits and schedules which we have also filed with the SEC. You
may refer to the registration statement, the exhibits and schedules for more
information about us and our shares. The registration statement, exhibits and
schedules are
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available at the SEC's public reference rooms or through its EDGAR database on
the internet.
You may obtain a copy of these filings, at no cost, by writing or
telephoning us at:
Thomas D. Carney, Esq.
Vice President, Secretary and General Counsel
Borders Group, Inc.
100 Phoenix Drive
Ann Arbor, Michigan 48108
(734) 477-1100
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference may
contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, all of which are subject to risks and
uncertainties. You can identify these forward-looking statements by their use of
words such as "expects," "anticipates," "plans," "will," "believes,"
"estimates," "forecasts," "guidance," "opinion," "projects" and other words of
similar meaning. You can also identify them by the fact that they do not relate
strictly to historical or current facts. These statements are likely to address
growth strategy, financial performance (including sales and earnings guidance),
marketing and expansion plans, Year 2000 compliance and similar matters. You
must carefully consider any such statement and should understand that many
factors could cause actual results to differ from forward-looking statements.
These factors include inaccurate assumptions and a broad variety of risks and
uncertainties, including some that are known and some that are not. No
forward-looking statement can be guaranteed and actual future results may vary
materially. Although it is not possible to predict or identify all factors which
could cause actual results to differ materially from those in forward-looking
statements, they may include the risk factors set forth above in "Risk Factors"
or in documents we incorporate by reference.
USE OF PROCEEDS
The shares of common stock being offered under this prospectus were
purchased by the selling stockholder from Borders Group pursuant to an
employment agreement between the selling stockholder and Borders Group. In
connection with the purchase of the shares, Borders Group made a loan to the
selling stockholder the proceeds of which were used by the selling stockholder
to pay a portion of the purchase price for the shares. Repayment of the loan is
secured by a pledge of the shares to Borders Group. See "Selling Stockholder."
The selling stockholder has agreed to use proceeds from the sale of the shares
of common stock offered under this prospectus to repay the loan from Borders
Group to the extent any outstanding principal or accrued interest remains
outstanding at the time of the sale. Borders Group will release shares to be
sold by the selling stockholder from the pledge when the selling stockholder
arranges for proceeds from the sales to be paid Borders Group in repayment of
the loan.
Except for any amount Borders Group receives as repayment of
outstanding principal and accrued interest on the loan to the selling
stockholder, Borders Group will not receive any of the proceeds from the sale of
the shares of common stock offered by the selling stockholder under this
prospectus. Borders Group expects to use any proceeds from the repayment of the
loan for its working capital requirements and other general corporate purposes.
SELLING STOCKHOLDER
The following table sets forth the name of the selling stockholder, the
number of shares of common stock beneficially owned by the selling stockholder
immediately prior to the offering, and the maximum number of shares of common
stock which may be offered by the selling stockholder under this prospectus.
Because the selling stockholder may sell all, some, or none of the common stock
offered under this prospectus, no estimate can be given as to the amount or
percentage of common stock that will be held by the selling stockholder upon
termination of the offering. See "Plan of Distribution."
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Number of Shares
Beneficially Owned Maximum Number
Name of Selling Stockholder Prior to the Offering of Shares Offered
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Philip M. Pfeffer 461,597 (1) 400,000
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(1) Includes 200 shares of common stock held by Mr. Pfeffer's spouse and 61,397
shares of common stock subject to currently exercisable options held by Mr.
Pfeffer.
Mr. Pfeffer served as Chief Executive Officer and as a director of
Borders Group from November 1998 until his resignation in April 1999.
Prior to his resignation, Mr. Pfeffer had an employment agreement with
Borders Group which provided for an annual salary of $700,000 and, commencing in
fiscal 1999, an annual bonus opportunity of $500,000. Pursuant to the agreement,
Mr. Pfeffer purchased 453,763 shares of common stock from Borders Group for an
aggregate consideration of $10,299,992. The shares were purchased at a price of
$23.25 per share, representing the fair market value on the date of purchase,
except that 53,763 of the shares were purchased under Borders Group's Management
Stock Purchase Plan at 80% of their fair market value in accordance with the
terms of that plan. Mr. Pfeffer also received options to purchase shares of
common stock under the employment agreement. In connection with Mr. Pfeffer's
purchase of shares from Borders Group, Borders Group made a loan to him in the
principal amount of $6.3 million. All of the proceeds of the loan were used to
pay a portion of the purchase price of the shares. The interest rate under the
loan is a floating rate equal to the US Dollar Euro-Rate, as defined in Borders
Group's credit agreement, plus 0.325% per annum, with such rate being based upon
Borders Group's borrowing rate. Payment of the loan is secured by a pledge of
the shares acquired with the proceeds of the loan and other securities. See "Use
of Proceeds." The original term of the loan was to be ten years, except that the
entire outstanding principal and interest was to be due on the 90th day
following the date upon which Mr. Pfeffer ceased for any reason to be an
employee of Borders Group.
The employment agreement provided that, in the event of Mr. Pfeffer's
termination of employment by Borders Group other than for cause or disability,
each as defined in the agreement, or at Mr. Pfeffer's election for good reason,
as defined in the agreement, Mr. Pfeffer would be entitled to a severance
payment equal to two times the sum of (1) Mr. Pfeffer's annual base salary in
effect at the time of termination and (2) the bonus amount targeted for the
fiscal year in which termination occurred. The severance payments were to be
made in equal installments during the 24-month period following the month of
termination, and were subject to reduction for amounts received from other
employment after the first year.
Pursuant to the terms of a settlement agreement dated as of April 20,
1999 executed by Borders Group and Mr. Pfeffer in connection with his
resignation, Borders Group has agreed to pay Mr. Pfeffer $2.4 million as
severance under his employment agreement, payable one-half in equal monthly
installments during the twelve month period beginning in May 1999 and the
remainder on April 20, 2000. This amount will not be subject to reduction for
other income that Mr. Pfeffer may earn. In addition, Borders Group paid Mr.
Pfeffer $1.5 million in consideration of his obligations and commitments under
the settlement agreement, including non-competition and non-solicitation
provisions, a general release and commitments to cooperate with information
requests from Borders Group and to reasonably assist Borders Group with respect
to any pending or future dispute resolutions. The non-competition and
non-solicitation provisions will be in effect for 3 years from the date of the
settlement agreement. Pursuant to the terms of the Management Stock Purchase
Plan, Borders Group paid to Mr. Pfeffer approximately $917,331 in cancellation
of the 53,763 shares of common stock that he purchased under that plan. All of
the payments described above, net of any withholding taxes, will be applied
toward the repayment of Mr. Pfeffer's promissory note to Borders Group, until
the note is repaid in full. The term of the note was extended until April 20,
2000. The principal amount of the indebtedness outstanding on the date of this
prospectus is approximately $3.9 million.
The settlement agreement terminated Mr. Pfeffer's employment agreement,
except that his registration rights with respect to 400,000 shares of common
stock remain in effect. The shares being sold pursuant to this
-9-
<PAGE> 11
prospectus have been registered pursuant to Mr. Pfeffer's exercise of his
registration rights. In accordance with the terms of Borders Group's Stock
Option Plan, all of Mr. Pfeffer's options will be forfeited except that
compensation replacement options for an aggregate of 61,397 shares will be
exercisable through July 20, 1999. Borders Group also has agreed to reimburse
Mr. Pfeffer up to $30,000 for certain expenses relating to the separation, and
will assume his apartment lease in Ann Arbor, Michigan.
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time pursuant to
this prospectus by the selling stockholder in one or more of the following
transactions:
(a) through brokers, acting as principal or agent, in transactions
(which may involve block transactions) on the New York Stock
Exchange, in special offerings, in the over-the-counter
market, or otherwise, at market prices obtainable at the time
of sale, at prices related to such prevailing market prices,
at negotiated prices, or at fixed prices;
(b) to underwriters who will acquire the shares for their own
account and resell them in one or more transactions, including
negotiated transactions, at a fixed public offering price or
at varying prices determined at the time of sale (any public
offering price and any discount or concessions allowed or
reallowed or paid to dealers may be changed from time to
time);
(c) directly or through brokers or agents in private sales at
negotiated prices;
(d) to lenders pledged as collateral to secure loans, credit or
other financing arrangements and any subsequent foreclosure,
if any, thereunder;
(e) through put or call options transactions relating to the
shares;
(f) through short sales of shares; or
(g) by any other legally available means.
Offers to purchase shares may be solicited by agents designated by the selling
stockholder from time to time. In addition, any shares covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
of 1933 may be sold under Rule 144 rather than pursuant to this prospectus.
This prospectus may also be used, with the consent of Borders Group, by
pledgees, donees, or assignees of the selling stockholder.
Underwriters or other agents participating in an offering made pursuant
to this prospectus, as amended or supplemented from time to time, may receive
underwriting discounts and commissions under the Securities Act, and discounts
or concessions may be allowed or reallowed or paid to dealers, and brokers or
agents participating in those transactions may receive brokerage or agent's
commissions or fees. The selling stockholder may effect sales of shares to or
through broker-dealers, and those broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the selling stockholder
and/or the purchasers of the shares for whom those broker-dealers may act as
agents or to whom they sell as principals, or both which compensation as to a
particular broker-dealer might be in excess of customary commissions.
The selling stockholder and any agents, underwriters, brokers, and
dealers that participate in the distribution of common stock may be deemed to be
underwriters for purposes of the Securities Act, and any discounts, concessions,
or commissions received by such agents, underwriters, brokers or dealers and any
profit on the resale of common stock by them may be deemed to be underwriting
discounts and commissions under the Securities Act. A selling stockholder who is
an "underwriter" within the meaning of Section 2(11) of the Securities Act will
be subject to the prospectus delivery requirements of the Securities Act. We
have informed the selling stockholder that the anti-manipulation provisions of
Regulation M of the Securities Exchange Act may restrict his sales in the
market.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers.
-10-
<PAGE> 12
If a selling stockholder notifies us that any material arrangement has
been entered into with a broker-dealer for the sale of shares through a block
trade, special offering, exchange distribution or secondary distribution or a
purchase by a broker or dealer, we will file a supplement to this prospectus if
required pursuant to Rule 424(b) under the Securities Act. The supplement will
disclose (1) the participating broker-dealer, (2) the number of shares involved,
(3) the price at which the shares were sold, (4) any applicable commissions paid
or discounts or concessions allowed to such broker-dealer, (5) that such
broker-dealer did not conduct any investigation to verify the information set
forth or incorporated by reference in this prospectus, and (6) other facts
material to the transaction. In addition, if the selling stockholder notifies us
that a donee or pledgee intends to sell more than 500 shares, a supplement to
this prospectus will be filed.
Borders Group will pay all expenses of filing this registration
statement on Form S-3. The selling stockholder will pay any selling expenses,
including brokerage commissions incurred in connection with his sale of shares.
The selling stockholder has advised us that he has not entered into any
agreements, understandings, or arrangements for the sale of the shares with any
underwriters or broker-dealers. The selling stockholder has also advised us that
no underwriter or coordinating broker is now acting in connection with the
proposed sale of shares.
We cannot guarantee that the selling stockholder will sell any or all
of the shares registered pursuant to this prospectus.
LEGAL MATTERS
The validity of the common stock offered pursuant to this prospectus
will be passed upon for Borders Group by Thomas D. Carney, Esq., Vice President,
Secretary, and General Counsel of Borders Group. As of the date of this
prospectus, Mr. Carney beneficially owns 16,238 shares of common stock and holds
options to purchase 130,040 additional shares of common stock.
EXPERTS
The consolidated financial statements incorporated in this prospectus
by reference to the Annual Report on Form 10-K of Borders Group for the fiscal
year ended January 24, 1999 have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
-11-
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
registrant in connection with the sale of the securities being registered
hereby. All amounts are estimates except the registration fee.
Registration fee............................................ $ 1,795
Legal fees and expenses..................................... 10,000
Accounting fees and expenses................................ 3,000
Miscellaneous............................................... 205
-------
Total.................................................. $15,000
=======
Item 15. Indemnification of Directors and Officers
Article IX of Borders Group's Articles of Incorporation provides that
Borders Group shall indemnify to the fullest extent permitted by the Business
Corporation Act of Michigan the ("MBCA") any director or officer. In addition,
Borders Group may, by action by the Board of Directors, provide rights to
indemnification to employees and agents similar to the foregoing indemnification
of directors and officers.
Under Sections 561, et seq. of the MBCA, 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) who was or is a
party or is threatened to be made a party to a threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal, other than an action by or in the
right of the corporation, by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation (or such other entity)
against expenses (including attorneys' fees), judgments, penalties, 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 or its stockholders 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) and amounts paid in settlement, actually and reasonably incurred by him in
connection with the action or suit, 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 or its stockholders, 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 relevant circumstances,
such person is fairly and reasonably entitled to indemnification for such
expenses as the court shall deem proper. Reasonable expenses (including
attorneys' fees) incurred by an officer, director, employee or agent in
defending any civil, criminal, administrative 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 a written undertaking by or on
behalf of such person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation and a written
affirmation of such person of his good faith belief that he is entitled to
indemnification under the standards of conduct of the statute.
Policies of insurance will be maintained by Borders Group under which
directors and officers of Borders Group 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.
Article VIII of Borders Group's Articles of Incorporation provides
that, to the fullest extent permitted by the MBCA, no director shall be
personally liable to Borders Group 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 Borders Group or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 551(l) of the MBCA or (iv)
for any transaction from which
<PAGE> 14
the director derived an improper personal benefit.
Item 16. Exhibits
The following exhibits are filed herewith unless otherwise indicated:
Exhibit
Number Description
- ------ -----------
2.1(1) Agreement and Plan of Merger dated as of April 8, 1997
between Michigan Borders Group, Inc. and Borders Group, Inc.
4.1(2) Restated Articles of Incorporation of Borders Group, Inc.
4.2 Bylaws of Borders Group, Inc., including the First, Second
and Third Amendments thereto
5.1 Opinion of Thomas D. Carney
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Thomas D. Carney (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of the
registration statement)
- -----------------------------------
(1) Incorporated by reference to the Company's Proxy Statement dated April
9, 1997 of Borders Group, Inc.
(2) Incorporated by reference to Exhibit 3.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended January 24, 1999.
Item 17. Undertakings.
(a) 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:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(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,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(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;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, 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 post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
<PAGE> 15
the Securities Exchange Act of 1934 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, 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 Securities Act of 1933 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 of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE> 16
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and 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 this 15th day
of June, 1999.
BORDERS GROUP, INC.
By: /s/ Robert F. Di Romualdo
-----------------------------------
Robert F. DiRomualdo
Chairman, Chief Executive Officer,
President and Director
POWER OF ATTORNEY
We, the undersigned officers and directors of Borders Group, Inc.,
hereby severally and individually constitute and appoint Robert F. DiRomualdo
and Thomas D. Carney, and each of them, the true and lawful attorneys and agents
of each of us to execute in the name, place and stead of each of us
(individually and in any capacity stated below) any and all amendments to this
registration statement on Form S-3, and all instruments necessary or advisable
in connection therewith, and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have power to act with or
without the other and to have full power and authority to do and perform in the
name and on behalf of each of the undersigned every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
any of the undersigned might or could do in person, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys and agents
and each of them to any and all such amendments and other instruments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Chairman, Chief Executive Officer,
/s/ Robert F. DiRomualdo President and Director June 15, 1999
- ----------------------------------------------- (Principal Executive Officer)
Robert F. DiRomualdo
/s/ George R. Mrkonic Vice Chairman and Director June 15, 1999
- -----------------------------------------------
George R. Mrkonic
Senior Vice President and Chief Financial
/s/ Kenneth E. Scheve Officer (Principal Financial and June 15, 1999
- ----------------------------------------------- Accounting Officer)
Kenneth E. Scheve
/s/ Peter R. Formanek Director June 15, 1999
- -----------------------------------------------
Peter R. Formanek
/s/ Victor L. Lund Director June 15, 1999
- -----------------------------------------------
Victor L. Lund
/s/ Edna Greene Medford Director June 15, 1999
- -----------------------------------------------
Edna Greene Medford
/s/ Larry Pollock Director June 15, 1999
- -----------------------------------------------
Larry Pollock
/s/ Leonard A. Schlesinger Director June 15, 1999
- -----------------------------------------------
Leonard A. Schlesinger
</TABLE>
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1(1) Agreement and Plan of Merger dated as of April 8, 1997
between Michigan Borders Group, Inc. and Borders Group, Inc.
4.1(2) Restated Articles of Incorporation of Borders Group, Inc.
4.2 Bylaws of Borders Group, Inc., including the First, Second
and Third Amendments thereto
5.1 Opinion of Thomas D. Carney
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Thomas D. Carney (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of the
registration statement)
- ----------------------------------
(1) Incorporated by reference to the Company's Proxy Statement dated April
9, 1997.
(2) Incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended January 24, 1999.
<PAGE> 1
EXHIBIT 4.2
BY-LAWS
OF
MICHIGAN BORDERS GROUP, INC.
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of Michigan Borders
Group, Inc. (hereinafter called the "Corporation") shall be in the City of Ann
Arbor, County of Washtenaw, State of Michigan.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Michigan as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Michigan as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting.
SECTION 2. Annual Meetings. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than 10 days nor more than 60 days before the date of the meeting.
SECTION 3. Special Meetings. Unless otherwise prescribed by law or by the
Articles of Incorporation, Special Meetings of Stockholders, for any purpose or
purposes, may be called only by the Chief Executive Officer or by the Board of
Directors acting pursuant to a resolution adopted by a majority of the entire
Board of Directors. Written notice of a Special Meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called shall be given not less than 10 days nor more than 60 days before the
date of the meeting to each stockholder entitled to vote at such meeting.
SECTION 4. Quorum. Except as otherwise provided by law or by the Articles
of Incorporation, the holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed.
<PAGE> 2
SECTION 5. Voting. Unless otherwise required by law, the Articles of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat and each stockholder represented
at a meeting of stockholders shall be entitled to cast one vote for each share
of the capital stock entitled to vote thereat held by such stockholder. Such
votes may be cast in person or by proxy but no proxy shall be voted on or after
three years from its date, unless such proxy provides for a longer period. The
Board of Directors, in its discretion, or the officer of the Corporation
presiding at a meeting of stockholders, in his discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
SECTION 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder at the time and place of the
meeting during the whole time thereof.
SECTION 7. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 8. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Corporation. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of stockholders (a) by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (b) by any stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Section 8 and on
the record date for the determination of stockholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
this Section 8.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the date of the annual meeting
of stockholders; provided, however, that in the event that less than 70 days'
notice or prior public disclosure of the date of the meeting is given to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the Corporation
<PAGE> 3
that are owned beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation that are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in the notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 8.
If the Chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall be
disregarded.
SECTION 9. Business at Annual Meetings. No business may be transacted at an
annual meeting of stockholders, other than business that is either (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized Committee thereof),
(b) otherwise properly brought before the annual meeting by or at the direction
of the Board of Directors (or any duly authorized committee thereof) or (c)
otherwise properly brought before the annual meeting by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 9.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the date of the annual meeting
of stockholders; provided, however, that in the event that less than 70 days'
notice or prior public disclosure of the date of the meeting be given to the
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
<PAGE> 4
To be in proper written form, a stockholders notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the annual
meeting (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, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation that are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 9, provided, however, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 9 shall be deemed to preclude discussion by any
stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE III
DIRECTORS
SECTION 1. Number and Election of Directors. The Board of Directors shall
consist of not less than three nor more than eleven members, with the exact
number of directors to be determined from time to time by resolution adopted by
the affirmative vote of a majority of the directors then in office. Except as
provided in Section 2 of this Article, directors shall be elected by a plurality
of the votes cast at annual meetings of stockholders, and each director so
elected shall hold office until the next annual meeting and until his successor
is duly elected and qualified, or until his earlier resignation or removal. Any
director may resign at any time upon notice to the Corporation. Directors need
not be stockholders.
SECTION 2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and qualified,
or until their earlier resignation or removal.
SECTION 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by these By-Laws directed
or required to be exercised or done by the stockholders.
SECTION 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
<PAGE> 5
Michigan. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board, if there be one, the President, or by a majority of
the directors then in office. Notice thereof stating the place, date and hour of
the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or telegram
or similar means of communication on twenty-four (24) hours notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
SECTION 5. Quorum. Except as may be otherwise specifically provided by law,
the Articles of Incorporation or these By-Laws, at all meetings of the Board of
Directors, a majority of the entire Board of Directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 6. Actions of Board Without a Meeting. Unless otherwise provided by
the Articles of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 7. Meeting by Means of Conference Telephone. Unless otherwise
provided by the Articles of Incorporation or these By-Laws, members of the Board
of Directors of the Corporation, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
SECTION 8. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 9. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because the votes of such
director are counted for such purpose if (i) the material facts as to the
<PAGE> 6
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors; or (ii) the
material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
COMMITTEES
SECTION 1. Audit Committee. There shall be an audit committee consisting of
not less than two members of the Board of Directors who are not officers of the
Corporation or any of its subsidiaries with the members thereof designated by
the entire Board of Directors. The audit committee shall review and make
recommendations regarding the Corporation's employment of independent
accountants, the annual audit of the Corporation's financial statements and the
Corporation's internal controls, accounting practices and policies. From time to
time, as considered necessary and desirable, the committee shall confer with
such accountants for the exchanging of views relating to the scope and results
of the auditing of books and accounts of the Corporation and shall provide to
the Board of Directors such assistance as may be required with respect to the
corporate and reporting practices of the Corporation. The audit committee shall
perform such other duties as the Board of Directors may prescribe.
SECTION 2. Compensation Committee. There shall be a compensation committee
consisting of not less than two members of the Board of Directors who are not
officers of the Corporation or any of its subsidiaries with the members thereof
designated by the entire Board of Directors. The compensation committee shall
make recommendations to the Board of Directors regarding the nature and amount
of compensation for executive officers of the Corporation and, as may be
prescribed by the Board of Directors, administer certain of the Corporation's
employee benefit plans. The compensation committee shall perform such other
duties as the Board of Directors may prescribe.
SECTION 3. Committee Vacancies; Quorum, Voting and Procedures. Each member
of a committee shall serve at the pleasure of the Board of Directors, and
vacancies on a committee may be filled by the Board of Directors at any time.
The Board of Directors may also increase the number of members of a committee at
any time. A majority of all members of a committee shall constitute a quorum,
and the affirmative vote of a majority of all the members of a committee shall
constitute the action of the committee. The Board of Directors may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not a quorum is
constituted, may unanimously appoint another member of the Board of Directors to
<PAGE> 7
act at the meeting in the place of any absent or disqualified member. Each
committee shall determine its own rules of procedure and shall meet as provided
by such rules, or by resolution of the Board of Directors, or on the call of any
member thereof. Each committee shall keep regular minutes and report to the
Board of Directors when required.
SECTION 4. Other Committees. From time to time, the Board of Directors may
constitute and appoint any other committee or committees which the Board of
Directors may deem necessary or proper for the conduct of the Corporation's
business. Any such committee created by the Board of Directors shall have such
duties, powers and authority as shall be specified in the resolution
constituting such committee.
ARTICLE V
OFFICERS
SECTION 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
(who must be a director), a Vice Chairman of the Board, and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Articles of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board, need such officers be directors of the
Corporation.
SECTION 2. Election. The Board of Directors at its first meeting held after
each annual meeting of stockholders shall elect the officers of the Corporation
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors or a committee thereof.
SECTION 3. Voting Securities Owed by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors, may, by resolution, from time to time confer
like powers upon any other person or persons.
SECTION 4. Chief Executive and Chief Operating Officers. The Board of
Directors shall designate one of the Corporation's officers as the chief
executive officer and may, from time to time, but shall not be required to do
<PAGE> 8
so, designate one of the officers as the chief operating officer. In the absence
of any designation, the President shall serve as the chief executive officer.
Subject to the direction of the Board of Directors, the chief executive officer
shall have general supervision of the Corporation's business, departments,
officers, and employees, and shall prescribe duties of other officers and
employees insofar as they are not specified by the By-Laws or by the Board of
Directors. The chief executive officer shall preside at all meetings of the
stockholders and Board of Directors. The chief operating officer shall have such
duties as may be designated by the chief executive officer or by the Board of
Directors.
SECTION 5. Chairman of the Board. The Chairman of the Board shall perform
such duties as may be designated by the chief executive officer or by the Board
of Directors. In the chief executive officer's absence or disability, the
Chairman shall preside at meetings of the stockholders and Board of Directors.
SECTION 6. Vice Chairman of the Board. The Vice Chairman of the Board shall
perform such duties as may be designated by the chief executive officer or by
the Board of Directors. In the chief executive officer's and Chairman's absence
or disability, the Vice Chairman shall preside at meetings of the stockholders
and Board of Directors.
SECTION 7. President. The President shall perform such duties as may be
designated by the chief executive officer or by the Board of Directors, and
shall have authority to execute on behalf of the Corporation any and all
contracts, agreements, bonds, deeds, mortgages, leases or other obligations of
the Corporation. In the absence or incapacity of the President, the Board of
Directors shall determine which other officer shall perform the duties of that
office.
SECTION 8. Vice Presidents. The Vice Presidents shall perform such duties
as may be designated by the chief executive officer, subject to the direction of
the Board of Directors. Any Vice President shall have authority to execute on
behalf of the Corporation any and all contracts, agreements, bonds, deeds,
mortgages, leases or other obligations of the Corporation.
SECTION 9. Treasurer. The Treasurer shall have the custody of and the
responsibility for all funds and securities of the Corporation, subject to the
control of the Board of Directors. The Treasurer shall keep bank accounts in the
name of the Corporation. The Treasurer shall perform all duties incident to the
position of Treasurer, subject to the control of the Board of Directors, and
shall have authority to sign and endorse all notes, checks, drafts and other
obligations of the Corporation.
SECTION 10. Secretary. The Secretary shall keep a record in proper books
provided for that purpose of all the meetings and proceedings of the Board of
Directors and the minutes of the stockholders meetings, and shall keep such
other records and shall perform such other duties as the Board of Directors or
the chief executive officer shall designate. The Secretary shall notify the
directors and stockholders of their respective meetings, shall attend to the
giving and service of all notices of the Corporation, and shall in general do
and perform all the duties pertaining to the office, subject to the control of
the Board of Directors.
SECTION 11. Other Officers. Such other officers as the Board of Directors
<PAGE> 9
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the chief executive officer or the Board of
Directors. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
ARTICLE VI
STOCK
SECTION 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board, the President or a Vice President and (ii) by
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by the
holder in the Corporation.
SECTION 2. Signatures. When a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employees, or (ii) a registrar
other than the Corporation or its employees, any other signature on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person was such officer, transfer agent or registrar at the date of
issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 4. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these By-Laws. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate or
by such person's attorney lawfully constituted in writing and upon the surrender
of the certificate therefor, which shall be canceled before a new certificate
shall be issued.
SECTION 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than 60 days nor less than 10 days before the date
of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
<PAGE> 10
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 6. Beneficial Owners. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
ARTICLE VII
NOTICES
SECTION 1. Notices. Whenever written notice is required by law, the
Articles of Incorporation or these By-Laws, to be given to any director, member
of a committee or stockholder, such notice may be given by mail, addressed to
such director, member of a committee or stockholder, at his or her address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
SECTION 2. Waivers of Notice. Whenever any notice is required by law, the
Articles of Incorporation or these By-Laws, to be given to any director, member
of a committee or stockholder, a waiver thereof in writing, signed, by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock.
SECTION 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation and the words "Corporate Seal, Michigan". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SECTION 5. Control Share Acquisitions. Chapter 7B of the Michigan Business
Corporation Act (being Section 450.1790 through 450.1799 of Michigan Compiled
Laws) shall not apply to control share acquisitions of shares of the
Corporation's capital stock.
<PAGE> 11
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office.
SECTION 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the exact
number of directors determined pursuant to Section 1 of Article III.
<PAGE> 12
CERTIFIED
AMENDMENT
TO
THE BY-LAWS
OF
BORDERS GROUP, INC.
The undersigned, the duly elected Secretary of Borders Group, Inc. (the
"Company"), hereby certifies that the second sentence of Section 1 of Article V
of the By-Laws of the Company was hereby amended on November 11, 1998 to read as
follows:
"The Board of Directors, in its discretion, also may choose a Chairman
of the Board (who must be a director), a Chief Executive Officer, a Vice
Chairman of the Board, and one or more Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers."
/s/ Thomas D. Carney
---------------------------
Thomas D. Carney
Secretary
<PAGE> 13
CERTIFIED
SECOND AMENDMENT
TO
THE BY-LAWS
OF
BORDERS GROUP, INC.
The undersigned, the duly elected Secretary of Borders Group, Inc. (the
"Company") hereby certifies that Section 8 of Article II of the By-Laws has been
amended to read as set forth below and Section 9 of the Article II of the
By-Laws has been deleted, effective for meetings of stockholders after the 1999
Annual Meeting of Stockholders:
SECTION 8. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or
at the direction of the Board of Directors or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this By-Law, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this By-Law.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this By-Law, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must be a
proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 90th day nor earlier
than the close of business on the 120th day prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 120th day prior to such
annual meeting and not later than the close of business on the later of the 90th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made. In no event shall
the public announcement of an adjournment of an annual meeting commence a new
time period for giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder
<PAGE> 14
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this By-Law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all the nominees for
director or specifying the size of the increased Board of Directors made by the
Corporation at least 100 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this By-Law shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) by any stockholders for the Corporation who is a stockholder of
record at the time of giving of notice provided for in this By-Law, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in this By-Law. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may be), for election to such position(s) as specified in the Corporation's
notice of meeting, if the stockholder's notice required by paragraph (A)(2) of
this By-Law shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the close of business on the 120th
day prior to such special meeting and not later than the close of business on
the later of the 90th day prior to such special meeting or the 10th day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
(C) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this By-Law shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this By-Law. Except as otherwise provided by law, the Certificate of
Incorporation or the By-Laws of the Corporation, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made, or proposed, as the case may
be, in accordance with the procedures set forth in this By-Law and, if any
proposed nomination or business in not in compliance with this By-Law, to
declare that such defective proposal or nomination shall be disregarded.
<PAGE> 15
(2) For purposes of this Law "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14, or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law,
a stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights of (i) stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) the holders of any series of Preferred Stock to elect directors under
specified circumstances.
/s/ Thomas D. Carney
-------------------------------
Thomas D. Carney
Secretary
<PAGE> 16
CERTIFIED
THIRD AMENDMENT
TO
THE BY-LAWS
OF
BORDERS GROUP, INC.
The undersigned, the duly elected Secretary of Borders Group, Inc. (the
"Company"), hereby certifies that the second sentence of Section 1 of the
Article V of the By-Laws of the Company has been amended to read as follows:
"The Board of Directors, in its discretion, may also choose a Chairman
of the Board (who must be a director), one or more Vice Chairmen of the Board
(who need not be directors), and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers."
/s/ Thomas D. Carney
----------------------------
Thomas D. Carney
Secretary
<PAGE> 1
EXHIBIT 5.1
June 15, 1999
Borders Group, Inc.
100 Phoenix Drive
Ann Arbor, Michigan 48108
Ladies and Gentlemen:
The undersigned, Vice President, Secretary and General Counsel of
Borders Group, Inc., a Michigan 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 the date hereof. The
Registration Statement relates to the registration by the Company under the
Securities Act of 1933, as amended (the "1933 Act"), of 400,000 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 prospectus forming a part thereof), (ii)
the Articles of Incorporation of the Company, (iii) the By-laws of the Company
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.
<PAGE> 2
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 legally issued and are fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. I also consent to the reference to me under the caption
"Legal Matters" 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.
/s/ Thomas D. Carney
Thomas D. Carney
Vice President, Secretary and General Counsel
-2-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 8, 1999 appearing on page 31 of
the Borders Group, Inc. Annual Report on Form 10-K for the year ended January
24, 1999. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
PricewaterhouseCoopers LLP
Bloomfield Hills, Michigan
June 10, 1999
