UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-12
Barnes & Noble, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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122 Fifth Avenue
New York, New York 10011
April 24, 2008
Dear Stockholder:
You are cordially invited to attend the 2008 annual meeting of stockholders of
Barnes & Noble, Inc. The meeting will be held at 9:00 a.m., Eastern Time, on
Tuesday, June 3, 2008 at Barnes & Noble Booksellers, Union Square Store, 33 East
17th Street, New York, New York.
We are very pleased that George Campbell Jr., President of The Cooper Union for
the Advancement of Science and Art, is a new nominee for the Board this year.
After 16 years of distinguished service on the Board, Mr. Matthew A. Berdon is
not a nominee for election and his term on the Board will end in June. We are
very grateful to him for his many valuable contributions and we will miss his
participation greatly.
Information about the meeting and the various matters on which the stockholders
will act is included in the Notice of Annual Meeting of Stockholders and Proxy
Statement which follow. Also included is a Proxy Card and postage paid return
envelope.
Whether or not you plan to attend the meeting, we hope you will have your shares
represented at the meeting by promptly voting and submitting your proxy by
telephone or by Internet, or by completing, signing and returning your Proxy
Card in the enclosed postage paid return envelope.
Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting of Stockholders to be held on June 3, 2008: This proxy statement and the
Company’s 2007 Annual Report to Stockholders are available online at
www.barnesandnobleinc.com/proxystatement and
www.barnesandnobleinc.com/annualreport, respectively.
Sincerely,
[[Image Removed: LOGO]]
JENNIFER M. DANIELS
General Counsel and Corporate Secretary
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122 Fifth Avenue
New York, New York 10011
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 2008
The annual meeting of stockholders of Barnes & Noble, Inc. (the “Company”) will
be held at Barnes & Noble Booksellers, Union Square Store, 33 East 17th Street,
New York, New York, at 9:00 a.m., Eastern Time, on Tuesday, June 3, 2008 for the
following purposes:
1. To elect four Directors to serve until the 2011 annual meeting of
stockholders and until their respective successors are duly elected and
qualified;
2. To ratify the appointment of BDO Seidman, LLP as independent certified
public accountants for the Company’s fiscal year ending January 31, 2009;
and
3. To transact such other business as may be properly brought before the
meeting and any adjournment or postponement thereof.
Only holders of record of Common Stock as of the close of business on April 16,
2008 are entitled to notice of and to vote at the meeting and at any adjournment
or postponement thereof.
JENNIFER M. DANIELS
General Counsel and Corporate Secretary
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New York, New York
April 24, 2008
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE AND SUBMIT YOUR PROXY
BY TELEPHONE OR BY INTERNET, OR COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY CARD.
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BARNES & NOBLE, INC.
122 Fifth Avenue
New York, New York 10011
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 2008
INTRODUCTION
This Proxy Statement and enclosed Proxy Card are being furnished commencing on
or about April 24, 2008 in connection with the solicitation by the Board of
Directors of Barnes & Noble, Inc., a Delaware corporation (the “Company”), of
proxies for use at the annual meeting of stockholders to be held on June 3, 2008
(the “Meeting”) for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. Any proxy given pursuant to such solicitation and
received in time for the Meeting will be voted as specified in such proxy. If no
instructions are given, proxies will be voted FOR the election of the nominees
listed below under the caption “Election of Directors — Information Concerning
the Directors and Nominees — Nominees for Election as Director,” FOR the
ratification of the appointment of BDO Seidman, LLP as independent certified
public accountants for the Company’s fiscal year ending January 31, 2009
(collectively, the “Proposals”), and in the discretion of the proxies named on
the Proxy Card with respect to any other matters properly brought before the
Meeting and any adjournments thereof. Any proxy may be revoked by written notice
received by the Corporate Secretary of the Company at any time prior to the
voting thereof by submitting a subsequent proxy or by attending the Meeting and
voting in person.
Only holders of record of the Company’s voting securities as of the close of
business on April 16, 2008 are entitled to notice of and to vote at the Meeting.
As of the record date, 54,811,164 shares of Common Stock, par value $.001 per
share (“Common Stock”), were outstanding. Each share of Common Stock entitles
the record holder thereof to one vote on each of the Proposals and on all other
matters properly brought before the Meeting. The presence of a majority of the
combined outstanding shares of Common Stock represented in person or by proxy at
the Meeting will constitute a quorum.
Vote Required
The four nominees for Director receiving the highest vote totals will be elected
as Directors of the Company to serve until the 2011 annual meeting of
stockholders and until their respective successors are duly elected and
qualified. The proposal to ratify the appointment of the Company’s independent
registered public accountants will require the affirmative vote of a majority of
the votes cast on the proposal in person or by proxy at the Meeting.
Abstentions and Broker Non-Votes
With respect to the proposal to elect the four nominees for Director and the
proposal to ratify the appointment of the Company’s independent registered
public accountants, abstentions and “broker non-votes” will not be included in
vote totals and will have no effect on the outcome of these proposals. A “broker
non-vote” occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power on that matter and has not received instructions from the
beneficial owner.
Abstentions and “broker non-votes” are included in determining whether a quorum
is present.
It should be noted that all of the Directors and executive officers of the
Company, together with principal stockholders of the Company with which they are
affiliated, own or control the voting power of approximately 31.9% of the Common
Stock outstanding as of April 16, 2008, and have advised the Company that they
intend to vote FOR all of the Proposals.
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A Proxy Card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS TO VOTE AND SUBMIT YOUR PROXY BY TELEPHONE OR BY INTERNET, OR
COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE,
which is postage paid if mailed in the United States.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH
INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF
THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS
PROXY STATEMENT.
ELECTION OF DIRECTORS
PROPOSAL 1
Information Concerning the Directors and Nominees
The Board of Directors currently consists of 10 Directors. The Directors
currently are divided into three classes, consisting of four members whose terms
expire at the Meeting, three members whose terms expire at the 2009 annual
meeting of stockholders and three members whose terms expire at the 2010 annual
meeting of stockholders.
Background information with respect to the Board of Directors and nominees for
election as Directors appears below. See “Security Ownership of Certain
Beneficial Owners and Management” for information regarding such persons’
holdings of equity securities of the Company.
Director
Name Age Since Position
Leonard Riggio 67 1986 Founder and Chairman of the Board
Stephen Riggio 53 1993 Vice Chairman and Chief Executive Officer
Matthew A. Berdon* 88 1992 Director
Michael J. Del Giudice 65 1999 Director
William Dillard II 63 1993 Director
Patricia L. Higgins 58 2006 Director
Irene R. Miller 55 1995 Director
Margaret T. Monaco 60 1995 Director
William F. Reilly 69 2006 Director
Lawrence S. Zilavy 57 2006 Director
* Matthew A. Berdon is not a nominee for election and his term on the Board
will expire in June 2008.
At the Meeting, four Directors will be elected, each to hold office for a term
of three years and until his or her successor is elected and qualified. Stephen
Riggio, Margaret T. Monaco, William F. Reilly and new nominee, George Campbell
Jr., are nominees for election as Directors at the Meeting, each to hold office
for a term of three years until the annual meeting of stockholders to be held in
2011. The terms of William Dillard II, Patricia L. Higgins and Irene R. Miller
expire in 2009, and the terms of Leonard Riggio, Michael J. Del Giudice and
Lawrence S. Zilavy expire in 2010. Each of the nominees has consented to serve,
if elected. However, if any nominee is unable to stand for election, proxies may
be voted for a substitute designated by the Board of Directors. Mr. William
Sheluck, Jr. (deceased) was also a member of the Board during fiscal 2007,
having joined the Board in 1993.
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Nominees for Election as Director
The following individuals are nominees for Director at the Meeting:
Stephen Riggio has been a Director of the Company since September 1993, was
appointed Vice Chairman of the Company in December 1997, and was named Chief
Executive Officer of the Company in February 2002. Mr. Riggio was Chief
Operating Officer of the Company from February 1995 until December 1997.
Mr. Riggio is the brother of Leonard Riggio, founder, Chairman of the Board and
principal stockholder of the Company.
George Campbell Jr. has been the President of The Cooper Union for the
Advancement of Science and Art, an all honors college and one of America’s most
selective institutions of higher education, since July 2000. Prior to that, he
was President and Chief Executive Officer of NACME, Inc. Mr. Campbell is also a
director of Con Edison, Inc. and the New York State Foundation for Science,
Technology and Innovation. He is also a trustee of the Commission on Independent
Colleges and Universities (CICU), Rensselaer Polytechnic Institute, Montefiore
Medical Center, the Woodrow Wilson National Fellowship Foundation, the Institute
of International Education, and the New York Hall of Science. Mr. Campbell is
also a Fellow of both the American Association for the Advancement of Science
and the New York Academy of Sciences. Mr. Campbell is a new nominee for election
as a Director of the Company. If elected, he will be a member of the
Compensation Committee.
Margaret T. Monaco has been a Director of the Company since May 1995. Ms. Monaco
is a member of the Audit Committee. Ms. Monaco resumed her position as Principal
of Probus Advisors, a financial and management consulting firm, in October 2003.
Ms. Monaco was the Chief Operating Officer of Merrill Lynch Ventures, LLC and
KECALP, Inc., wholly-owned subsidiaries of Merrill Lynch & Co., Inc., from
November 1999 to October 2003. She had been the Chief Administrative Officer of
those entities from April 1998 to November 1999. Ms. Monaco had been the
Principal of Probus Advisors from July 1993 to April 1998. Ms. Monaco is also a
director of Stage Stores, Inc. and the W. P. Stewart Growth Fund.
William F. Reilly has been a Director of the Company since January 2006.
Mr. Reilly is a member of the Compensation Committee. Mr. Reilly has been
Chairman and Chief Executive Officer of Summit Business Media, LLC, a special
interest publisher, since he founded it in November 2006. Prior to that, he was
Chairman and Chief Executive Officer of F&W Publications from 2002 until he sold
the company in August 2005. He served as founder, Chairman, and Chief Executive
Officer of Primedia Inc., a specialty media company, from February 1990 until
1999. He also served as a member of the Board of Directors of Barnes & Noble.com
from 1999 until 2004. Mr. Reilly is a member of the Board of Directors of FMC
Corporation and WNET, Channel 13. He serves on the Board of Trustees of the
University of Notre Dame and Harvard Business School Publications.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH NOMINEE FOR DIRECTOR NAMED ABOVE. PROXIES SOLICITED BY THIS PROXY STATEMENT
WILL BE VOTEDFOR EACH NOMINEE NAMED ABOVE UNLESS A VOTE AGAINST A NOMINEE OR AN
ABSTENTION IS SPECIFICALLY INDICATED.
Other Directors whose Terms of Office Continue after the Meeting
Leonard Riggio is the founder of the Company and has been Chairman of the Board
and a principal stockholder of the Company since its inception in 1986 and was
Chief Executive Officer of the Company from its inception through February 2002.
Since 1965, he has been Chairman of the Board, Chief Executive Officer and the
principal stockholder of Barnes & Noble College Booksellers, Inc. (“B&N
College”), one of the nation’s largest operators of college bookstores. Since
1985, Mr. Riggio has been Chairman of the Board and a principal beneficial owner
of MBS Textbook Exchange, Inc. (“MBS”), one of the nation’s largest wholesalers
of college textbooks. He is also a director of GameStop Corp. (“GameStop”), a
national video game retailer. Mr. Riggio is the brother of Stephen Riggio, Vice
Chairman and Chief Executive Officer of the Company.
Michael J. Del Giudice has been a Director of the Company since 1999. Mr. Del
Giudice serves as Chair of the Compensation Committee and as a member of the
Audit Committee and the Corporate Governance and
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Nominating Committee. Mr. Del Giudice is a co-founder and Senior Managing
Director at Millennium Credit Markets LLC, an investment banking firm. He is
Chairman of Rockland Capital Energy Investments LLC, Lead Director of the Board
of Directors of Con Edison, Inc., a member of the Boards of Fusion
Telecommunications Intl. and Reis, Inc., Vice Chairman of the Board of Trustees
of the New York Racing Association, and a member of the Board of Advisors of
Corinthian Capital Group, LLC, a private equity firm. He also serves as Chairman
of the Governor’s Committee on Scholastic Achievement, an educational non-profit
group.
William Dillard II has been a Director of the Company since November 1993.
Mr. Dillard serves as Chair of the Corporate Governance and Nominating Committee
and as a member of the Compensation Committee. Mr. Dillard has been the Chief
Executive Officer of Dillard’s, Inc. (“Dillard’s”) since May 1998 and he has
been a director of Dillard’s since 1968. He was appointed Chairman of Dillard’s
in May 2002. Mr. Dillard is also a member of the JPMorganChase & Co. National
Advisory Board, the JPMorganChase & Co. Dallas Region Advisory Board and a
director of Acxiom Corp.
Patricia L. Higgins has been a Director of the Company since June 2006.
Ms. Higgins serves as Chair of the Audit Committee and as a member of the
Corporate Governance and Nominating Committee. Ms. Higgins was President, Chief
Executive Officer and a director of Switch and Data Facilities Company, Inc., a
leading provider of neutral interconnection and collocation services, from
September 2000 to February 2004. Prior to that, she was Chairman and Chief
Executive Officer of The Research Board from May 1999 to August 2000 and Vice
President and Chief Information Officer of Alcoa Inc. from January 1997 to April
1999. Ms. Higgins is also a director of Travelers, Visteon and Internap.
Ms. Higgins was a director of Barnes & Noble.com from 1999 to 2004.
Irene R. Miller has been a Director of the Company since May 1995. Ms. Miller
serves on the Corporate Governance and Nominating Committee. Ms. Miller has been
the Chief Executive Officer of Akim, Inc., an investment management and
consulting firm, since July 1997. From September 1995 to June 1997, she was Vice
Chairman of the Company as well as Chief Financial Officer of the Company, a
position she held since September 1993. Ms. Miller is also a director of Coach,
Inc., Inditex, S.A. and TD Bank Financial Group.
Lawrence S. Zilavy has been a Director of the Company since June 2006.
Mr. Zilavy has served as a Senior Vice President of B&N College since May 2006.
Mr. Zilavy was Executive Vice President, Corporate Finance and Strategic
Planning for the Company from May 2003 to November 2004 and Chief Financial
Officer of the Company from June 2002 through April 2003. Mr. Zilavy is a
director of GameStop, The Hain Celestial Group, Inc. and the non-profit
Community Resource Exchange, as well as a Trustee of St. Francis College in New
York City.
Meetings and Committees of the Board
The Board of Directors met eight times during the fiscal year ended February 2,
2008 (“fiscal 2007”). All Directors attended at least 75% of all of the meetings
of the Board of Directors. All Directors also attended at least 75% of all the
meetings of the respective committees of the Board on which they served in
fiscal 2007, except William F. Reilly who attended 50% of the Compensation
Committee meetings (constituting 66% of all Board and Compensation Committee
meetings). Based on information supplied to it by the Directors, the Board of
Directors has affirmatively determined that each of George Campbell Jr., Michael
J. Del Giudice, William Dillard II, Patricia L. Higgins, Irene R. Miller,
Margaret T. Monaco and William F. Reilly are “independent” under the listing
standards of the New York Stock Exchange (the “NYSE”), and have made such
determination based on the fact that none of such persons have had, or currently
have, any relationship with the Company or its affiliates or any executive
officer of the Company or his or her affiliates, that would currently impair
their independence, including, without limitation, any such commercial,
industrial, banking, consulting, legal, accounting, charitable or familial
relationship.
Special Committee. In July 2006, the Company created a Special Committee of the
Board of Directors, consisting of Patricia L. Higgins, to review all of the
stock option grants by the Company and the Company’s wholly-owned subsidiary,
Barnes & Noble.com, during the period from 1996 through 2006 and engaged
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independent outside counsel and an independent forensic auditor to assist in
this matter. On April 2, 2007, the Special Committee presented its findings and
recommendations to the Company’s Board of Directors, as reported in the
Company’s Form 8-K filed April 4, 2007. The Special Committee indicated that the
Committee and its advisors received the Company’s full cooperation throughout
its investigation. Regarding corporate governance, the Special Committee
recommended changes to the composition of certain committees of the Board of
Directors as follows:
• the Compensation Committee should be reconstituted with independent
directors who were not members of this Committee during the period of the
option grant practices at issue;
• the Audit Committee should add independent directors; and
• the Nominating and Corporate Governance Committee should be reconstituted
to include the Chairs of the Compensation and Audit Committees as members
of this Committee and be renamed the Corporate Governance and Nominating
Committee.
The Company agreed with the foregoing recommendations and has implemented these
changes.
The Board of Directors has three standing committees: the Audit Committee, the
Compensation Committee and the Corporate Governance and Nominating Committee.
Audit Committee. The Audit Committee has the principal function of, among other
things, reviewing the adequacy of the Company’s internal system of accounting
controls, the appointment, compensation, retention and oversight of the
independent certified public accountants, conferring with the independent
certified public accountants concerning the scope of their examination of the
books and records of the Company, reviewing and approving related party
transactions and considering other appropriate matters regarding the financial
affairs of the Company. In addition, the Audit Committee has established
procedures for the receipt, retention and treatment of confidential and
anonymous complaints regarding the Company’s accounting, internal accounting
controls and auditing matters. The Board of Directors has adopted a written
charter setting out the functions of the Audit Committee, a copy of which is
available on the Company’s website at www.barnesandnobleinc.com and is available
in print to any stockholder who requests it, in writing to the Company’s
Corporate Secretary, Barnes & Noble, Inc., 122 Fifth Avenue, New York, New York
10011. Prior to May 1, 2007, the members of the Audit Committee were Mr. William
Sheluck, Jr. (deceased) (Chair) and Messrs. Berdon and Del Giudice. Effective
May 1, 2007, the members of the Audit Committee were Ms. Higgins (Chair),
Mr. Del Giudice, Ms. Monaco and Mr. Sheluck (deceased). Currently, the members
of the Audit Committee are Ms. Higgins (Chair), Mr. Del Giudice and Ms. Monaco.
In addition to meeting the independence standards of the NYSE, each member of
the Audit Committee is financially literate and meets the independence standards
established by the Securities and Exchange Commission (the “SEC”). The Board of
Directors has also determined that each member of the Audit Committee has the
requisite attributes of an “audit committee financial expert” as defined by
regulations promulgated by the SEC and that such attributes were acquired
through relevant education and/or experience. The Audit Committee met 10 times
during fiscal 2007.
Compensation Committee. The principal function of the Compensation Committee is
to review and approve the compensation and employment arrangements for the
Company’s executive officers. The Compensation Committee is also responsible for
administering the Company’s 2004 Incentive Plan and 1996 Incentive Plan, each as
amended, as well as the Company’s 2004 Executive Performance Plan. Prior to
May 1, 2007, the members of the Compensation Committee were Mr. Berdon (Chair),
Ms. Monaco and Mr. Sheluck (deceased). Effective May 1, 2007, the members of the
Compensation Committee are Messrs. Del Giudice (Chair), Dillard and Reilly. All
members of the Compensation Committee meet the independence standards of the
NYSE. The Board of Directors has adopted a written charter setting out the
functions of the Compensation Committee, which is available on the Company’s
website at www.barnesandnobleinc.com and is available in print to any
stockholder who requests it, in writing to the Company’s Corporate Secretary,
Barnes & Noble, Inc., 122 Fifth Avenue, New York, New York 10011. The
Compensation Committee met six times during fiscal 2007.
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Corporate Governance and Nominating Committee. The function of the Corporate
Governance and Nominating Committee is to, among other things, seek qualified
individuals to serve as Directors of the Company. The Corporate Governance and
Nominating Committee also has primary responsibility for overseeing the
corporate governance of the Company. The Corporate Governance and Nominating
Committee was previously named the Nominating and Corporate Governance
Committee. Prior to May 1, 2007, the members of the Corporate Governance and
Nominating Committee were Messrs. Dillard and Sheluck (deceased). Effective
May 1, 2007, the members of the Corporate Governance and Nominating Committee
were Messrs. Dillard (Co-Chair), Sheluck (deceased) (Co-Chair), Del Giudice and
Ms. Higgins. Currently, the members of the Corporate Governance and Nominating
Committee are Mr. Dillard (Chair), Mr. Del Giudice, Ms. Higgins and Ms. Miller,
all of whom meet the independence standards of the NYSE. The Board of Directors
has adopted a written charter setting out the functions of the Corporate
Governance and Nominating Committee, which is available on the Company’s website
at www.barnesandnobleinc.com and is available in print to any stockholder who
requests it, in writing to the Company’s Corporate Secretary, Barnes & Noble,
Inc., 122 Fifth Avenue, New York, New York 10011. The Corporate Governance and
Nominating Committee met four times during fiscal 2007.
Minimum Qualifications
The Company does not set specific criteria for Directors except to the extent
required to meet applicable legal, regulatory and stock exchange requirements,
including, but not limited to, the independence requirements of the NYSE and the
SEC, as applicable. Nominees for Director will be selected on the basis of
outstanding achievement in their personal careers; board experience; wisdom;
integrity; ability to make independent, analytical inquiries; understanding of
the business environment; and willingness to devote adequate time to Board
duties. While the selection of qualified Directors is a complex and subjective
process that requires consideration of many intangible factors, the Corporate
Governance and Nominating Committee believes that each Director should have a
basic understanding of (i) the principal operational and financial objectives
and plans and strategies of the Company, (ii) the results of operations and
financial condition of the Company and of any significant subsidiaries or
business segments, and (iii) the relative standing of the Company and its
business segments in relation to its competitors. The Corporate Governance and
Nominating Committee has identified and recommended George Campbell Jr. to join
the Company’s Board upon election by the Company’s stockholders at the Meeting.
Nominating Process
Although the process for identifying and evaluating candidates to fill vacancies
and/or expand the Board will inevitably require a practical approach in light of
the particular circumstances at such time, the Board of Directors has adopted
the following process to guide the Corporate Governance and Nominating Committee
in this respect. The Corporate Governance and Nominating Committee is willing to
consider candidates submitted by a variety of sources (including incumbent
Directors, stockholders (as described below), Company management and third-party
search firms) when reviewing candidates to fill vacancies and/or expand the
Board. If a vacancy arises or the Board decides to expand its membership, the
Corporate Governance and Nominating Committee may ask each Director to submit a
list of potential candidates for consideration. The Corporate Governance and
Nominating Committee then evaluates each potential candidate’s educational
background, employment history, outside commitments and other relevant factors
to determine whether he or she is potentially qualified to serve on the Board.
At that time, the Corporate Governance and Nominating Committee also will
consider potential nominees submitted by stockholders, if any, in accordance
with the procedures described below, or by the Company’s management, and if the
Corporate Governance and Nominating Committee deems it necessary, retain an
independent third-party search firm to provide potential candidates. The
Corporate Governance and Nominating Committee seeks to identify and recruit the
best available candidates, and it intends to evaluate qualified stockholder
nominees on the same basis as those submitted by Board members, Company
management, third-party search firms or other sources.
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After completing this process, the Corporate Governance and Nominating Committee
will determine whether one or more candidates are sufficiently qualified to
warrant further investigation. If the process yields one or more desirable
candidates, the Corporate Governance and Nominating Committee will rank them by
order of preference, depending on their respective qualifications and the
Company’s needs. The Corporate Governance and Nominating Committee Chair will
then contact the preferred candidate(s) to evaluate their potential interest and
to set up interviews with the full Corporate Governance and Nominating
Committee. All such interviews include only the candidate and one or more
Corporate Governance and Nominating Committee members. Based upon interview
results and appropriate background checks, the Corporate Governance and
Nominating Committee then decides whether it will recommend the candidate’s
nomination to the full Board.
When nominating a sitting Director for re-election at an annual meeting, the
Corporate Governance and Nominating Committee will consider the Director’s
performance on the Board and its committees and the Director’s qualifications in
respect of the criteria referred to above.
Consideration of Stockholder-Nominated Directors
The Corporate Governance and Nominating Committee also will consider potential
nominees submitted by stockholders if a vacancy arises or if the Board decides
to expand its membership, and at such other times as the Corporate Governance
and Nominating Committee deems necessary or appropriate. Any stockholder wishing
to submit a candidate for consideration should send the following information to
the Company’s Corporate Secretary, Barnes & Noble, Inc., 122 Fifth Avenue, New
York, New York 10011: (i) stockholder’s name, number of shares owned, length of
period held, and proof of ownership; (ii) name, age and address of candidate;
(iii) a detailed resume describing, among other things, the candidate’s
educational background, occupation, employment history for at least the previous
five years, and material outside commitments (e.g., memberships on other boards
and committees, charitable foundations, etc.); (iv) a supporting statement which
describes the candidate’s reasons for seeking election to the Board; (v) a
description of any arrangements or understandings between the candidate and the
Company; and (vi) a signed statement from the candidate, confirming his or her
willingness to serve on the Board. In accordance with the Company’s Bylaws, in
order for the Company to consider a candidate submitted by a stockholder, the
Company must receive the foregoing information not less than 30 days, nor more
than 60 days, prior to a meeting of the Company’s stockholders for the election
of Directors; provided, that if less than 40 days’ notice or prior public
disclosure of such meeting is given to stockholders, the Company must receive
the foregoing information no later than the 10th day following the day on which
notice of the date of such meeting was mailed or publicly disclosed. The
Company’s Corporate Secretary will promptly forward such materials to the
Corporate Governance and Nominating Committee. The Company’s Corporate Secretary
also will maintain copies of such materials for future reference by the
Corporate Governance and Nominating Committee when filling Board positions.
Corporate Governance
Corporate Governance Guidelines and Code of Business Conduct and Ethics
The Board of Directors has adopted Corporate Governance Guidelines. The Board of
Directors has also adopted a Code of Business Conduct and Ethics applicable to
the Company’s employees, Directors, agents and representatives, including
consultants. The Corporate Governance Guidelines and the Code of Business
Conduct and Ethics are available on the Company’s website at
www.barnesandnobleinc.com. A copy of the Corporate Governance Guidelines and a
copy of the Code of Business Conduct and Ethics are available in print to any
stockholder who requests them, in writing to the Company’s Corporate Secretary,
Barnes & Noble, Inc., 122 Fifth Avenue, New York, New York 10011.
Code of Ethics for Senior Financial Officers
The Board of Directors has also adopted a Code of Ethics applicable to the
Company’s Chairman of the Board, Chief Executive Officer, Chief Financial
Officer, and Controller, which is available on the Company’s
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website at www.barnesandnobleinc.com. A copy of the Code of Ethics for Senior
Financial Officers is available in print to any stockholder who requests it, in
writing to the Company’s Corporate Secretary, Barnes & Noble, Inc., 122 Fifth
Avenue, New York, New York 10011.
Non-Management Directors
In accordance with the Corporate Governance Guidelines, the independent
non-management Directors of the Company hold regular executive sessions without
management present. The Board of Directors has determined that the Chair of the
Committee responsible for the principal subject matter to be discussed at the
executive session will preside at the executive session.
Communications Between Stockholders and the Board
Stockholders and other interested persons seeking to communicate with the Board
should submit any communications in writing to the Company’s Corporate
Secretary, Barnes & Noble, Inc., 122 Fifth Avenue, New York, New York 10011. Any
such communication must state the number of shares beneficially owned by the
stockholder making the communication. The Company’s Corporate Secretary will
forward such communication to the full Board or to any individual Director or
Directors (including the non-management Directors as a group) to whom the
communication is directed.
Attendance at Annual Meetings
All Board members are expected to attend in person the Company’s annual meetings
of stockholders and be available to address questions or concerns raised by
stockholders. All Directors attended the 2007 annual meeting of stockholders.
Executive Officers
The Company’s executive officers, as well as additional information with respect
to such persons, are set forth in the table below:
Name Age Position
Leonard Riggio 67 Founder and Chairman of the Board
Stephen Riggio 53 Vice Chairman and Chief Executive Officer
Mitchell S. Klipper 50 Chief Operating Officer
Marie J. Toulantis 54 Chief Executive Officer of Barnes & Noble.com
J. Alan Kahn 61 President of the Barnes & Noble Publishing Group
Joseph J. Lombardi 46 Chief Financial Officer
William F. Duffy Executive Vice President of Distribution and
52 Logistics
Mary Ellen Keating 51 Senior Vice President of Corporate Communications
and Public Affairs
Jennifer M. Daniels Vice President, General Counsel and Corporate
44 Secretary
David S. Deason 49 Vice President of Barnes & Noble Development
Christopher Grady-Troia 56 Vice President and Chief Information Officer
Mark Bottini 47 Vice President and Director of Stores
Michelle Smith 55 Vice President of Human Resources
Allen W. Lindstrom 41 Vice President, Corporate Controller
Information with respect to executive officers of the Company who also are
Directors is set forth in “Information Concerning the Directors and Nominees”
above.
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Mitchell S. Klipper has been the Chief Operating Officer of the Company since
February 2002. Prior to that, he was the President of Barnes & Noble
Development, the group responsible for selecting, designing and constructing new
store locations, and an Executive Vice President of the Company from December
1995 to February 2002.
Marie J. Toulantis has been Chief Executive Officer of Barnes & Noble.com since
February 2002. Ms. Toulantis was President and Chief Operating Officer of
Barnes & Noble.com from May 2001 through February 2002. Prior to that,
Ms. Toulantis was Chief Financial Officer of Barnes & Noble.com from May 1999
through May 2001. From March 1999 through May 1999, Ms. Toulantis was Chief
Financial Officer of the Company, and from July 1997 through March 1999,
Ms. Toulantis was Executive Vice President, Finance of the Company.
J. Alan Kahn has been the President of the Barnes & Noble Publishing Group since
February 2002. Mr. Kahn was the Chief Operating Officer of the Company from
December 1997 to February 2002. Prior to that, Mr. Kahn was Chief Executive
Officer of B&N College.
Joseph J. Lombardi has been Chief Financial Officer of the Company since May
2003. Previously, he was Vice President and Controller of the Company from May
2002 to May 2003. Prior to joining the Company, Mr. Lombardi was Chief Financial
Officer at The Museum Company, Inc. from August 1999 to May 2002. From August
1995 through July 1999, he was the Vice President and Controller of Toys ‘R’ Us,
Inc. Prior to that, he was a Partner at Ernst & Young LLP. Mr. Lombardi is a
Certified Public Accountant.
William F. Duffy has been the Executive Vice President of Distribution and
Logistics for the Company since February 2002. Prior to that, he was Vice
President, Operations, Fulfillment and Customer Service of Barnes & Noble.com
from January 1999 to February 2002. Prior to his position at Barnes & Noble.com,
he was Vice President and General Manager of the Company’s mail-order catalogue
and before that he was Vice President, Finance. He was also a Director of
Barnes & Noble.com from its inception in February 1997 to October 1998.
Mary Ellen Keating joined the Company as Senior Vice President, Corporate
Communications and Public Affairs in January 1998. Prior to that, she was an
executive with Hill and Knowlton, Inc., a worldwide public relations firm, from
1991 to 1998, where she served as Executive Vice President and General Manager
of Hill and Knowlton’s flagship New York Office.
Jennifer M. Daniels has been Vice President, General Counsel and Corporate
Secretary of the Company since August 2007. Prior to joining the Company,
Ms. Daniels held senior positions in IBM’s legal department, where she served as
an attorney for over 16 years, including: Vice President, Assistant General
Counsel, and Chief Trust and Compliance Officer with worldwide responsibility
for IBM’s legal and regulatory compliance; Vice President and Assistant General
Counsel for Litigation; and Vice President and General Counsel, IBM Americas.
Ms. Daniels serves as Trustee of the Greenwich Country Day School.
David S. Deason joined the Company in January 1990 as a Director of Real Estate
and became Vice President of Barnes & Noble Development in January 1997.
Mr. Deason serves as a board member of Creative Learning 4 Kids, a nonprofit
educational charity that provides tutorial services and mentoring for children.
Christopher Grady-Troia has been the Chief Information Officer of the Company
since October 2004. Prior to that, he was Vice President of Information
Technology from May 2002 to October 2004. Mr. Troia began his career with the
Company as a Systems Manager in 1993. Prior to that, he was Assistant Director
of Information Technology at Ann Taylor Stores Corporation and a Director of
Application Development at Lord & Taylor.
Mark Bottini has been the Vice President and Director of Stores of the Company
since October 2003. Prior to that, he was a Regional Director of the Company in
New York from December 2000 to October 2003. Mr. Bottini served as a Regional
Director of the Company in Chicago from April 1999 to December 2000 and a
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District Manager of the Company in New York from September 1995 to April 1999.
Mr. Bottini began his career with the Company as a District Manager for B.
Dalton Bookseller from October 1991 to September 1995.
Michelle Smith became Vice President of Human Resources of the Company in
November 1996. Ms. Smith joined the Company in September 1993 as Director of
Human Resources. Ms. Smith is a member of the Society for Human Resource
Management and serves on the Health and Employee Benefits Committee and
Employment Law Committee of the National Retail Federation.
Allen W. Lindstrom has been Vice President, Corporate Controller of the Company
since November 2007. Prior to joining the Company, Mr. Lindstrom was Chief
Financial Officer at Liberty Travel, Inc. from April 2002 to November 2007. From
April 2000 to April 2002, he was Financial Controller of The Museum Company,
Inc. Prior to that, he held various positions at Toys ‘R’ Us, Inc. from February
1993 to April 2000. Mr. Lindstrom is a Certified Public Accountant.
The Company’s officers are elected annually by the Board of Directors and hold
office at the discretion of the Board of Directors.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of
shares of Common Stock, as of April 16, 2008, by each person known by the
Company to own beneficially more than five percent of the Company’s outstanding
Common Stock, by each Director and nominee for Director, by each executive
officer named in the Summary Compensation Table contained in “Executive
Compensation,” and by all Directors and executive officers of the Company as a
group. Except as otherwise noted, each person named in the table has sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by him, her or it.
Percent of
Shares Shares
Beneficially Beneficially
Name and Address of Beneficial Owner Owned(1) Owned(1)
Leonard Riggio 18,839,295 (2) 31.9 %
c/o Barnes & Noble, Inc.
122 Fifth Avenue
New York, New York 10011
Pershing Square Capital Management, L.P. 6,540,451 (3) 11.3 %
888 Seventh Avenue
New York, New York 10019
Stephen Riggio 2,479,530 (4) 4.1 %
Mitchell S. Klipper 1,036,114 (5) 1.8 %
Marie J. Toulantis 447,141 (6) *
J. Alan Kahn 298,808 (7) *
William F. Duffy 154,602 (8) *
Matthew A. Berdon 142,313 (9) *
William Dillard II 103,619 (10) *
Margaret T. Monaco 95,466 (11) *
Joseph J. Lombardi 62,275 (12) *
Michael Del Giudice 47,652 (13) *
Irene R. Miller 37,007 (14) *
Patricia L. Higgins 18,231 (15) *
Lawrence S. Zilavy 18,231 (16) *
William F. Reilly 3,116 (17) *
George Campbell Jr. — (18) —
All directors and executive officers as a group
(21 persons) 23,166,591 (19) 36.9 %
* Less than 1%.
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(1) Shares of Common Stock that an individual or group has a right to acquire
within 60 days after April 16, 2008, pursuant to the exercise of options,
warrants or other rights, are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for computing the percentage ownership of any other
person or group shown in the table.
(2) Includes (i) 5,467,934 shares owned by B&N College (Mr. Riggio owns all of
the voting securities of B&N College), (ii) 1,241,500 shares owned by The
Riggio Foundation, a charitable trust established by Mr. Riggio, with
himself and his wife as trustees, (iii) 990,740 shares issuable upon the
exercise of stock options, 964,202 of which are held for the benefit of
Stephen Riggio by agreement dated July 24, 2002, as amended, (iv) 22,560
restricted shares, and (v) 712,473 shares held in a rabbi trust established
by the Company for the benefit of Mr. Riggio pursuant to a deferred
compensation arrangement. Under the arrangement, Mr. Riggio is entitled to
712,473 shares of Common Stock within 30 days following the earliest of:
(i) his death; (ii) a sale of all or substantially all of the assets of the
Company; or (iii) a sale of a “controlling interest” in the Company (defined
as 40% or more of the Company’s outstanding Common Stock). The shares of
Common Stock owned by Mr. Riggio are, and in the future may be, pledged as
collateral for certain loans, including loans which were used to purchase
Common Stock. The failure of Mr. Riggio to repay such loans, together with
any sale by the pledgees of the pledged Common Stock, could result in a
change of control of the Company.
(3) This information is based upon a Schedule 13G filed with the SEC in
September 2007.
(4) Of these shares, 2,379,545 are issuable upon the exercise of stock options,
including 964,202 of which are held by Leonard Riggio for the benefit of
Stephen Riggio by agreement dated July 24, 2002, as amended, and 46,132 are
restricted shares.
(5) Of these shares, 851,814 are issuable upon the exercise of stock options and
112,689 are restricted shares.
(6) Of these shares, 345,171 are issuable upon the exercise of stock options and
70,666 are restricted shares.
(7) Of these shares, 288,740 are issuable upon the exercise of stock options and
6,364 are restricted shares.
(8) Of these shares, 147,543 are issuable upon the exercise of stock options and
4,876 are restricted shares.
(9) Of these shares, 71,612 are issuable upon the exercise of stock options and
2,681 are restricted shares.
(10) Of these shares, 99,918 are issuable upon the exercise of stock options and
2,681 are restricted shares.
(11) Of these shares, 85,765 are issuable upon the exercise of stock options and
2,681 are restricted shares.
(12) Of these shares, 2,070 are issuable upon the exercise of stock options and
19,288 are restricted shares.
(13) Of these shares, 44,536 are issuable upon the exercise of stock options and
2,681 are restricted shares.
(14) Of these shares, 33,306 are issuable upon the exercise of stock options and
2,681 are restricted shares.
(15) Of these shares, 15,000 are issuable upon the exercise of stock options and
2,681 are restricted shares.
(16) Of these shares, 15,000 are issuable upon the exercise of stock options and
2,681 are restricted shares.
(17) Of these shares, 2,681 are restricted shares.
(18) George Campbell Jr. is a new nominee for the Board this year.
(19) Of these shares, 4,634,210 are issuable upon the exercise of stock options
and 400,516 are restricted shares.
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Compensation Discussion and Analysis
The following Compensation Discussion and Analysis summarizes the Company’s
philosophy and objectives regarding the compensation of its Chairman, Chief
Executive Officer, Chief Financial Officer and the executive officers named in
the Summary Compensation Table (collectively, the “named executive officers”),
including how the Company determines elements and amounts of executive
compensation. The following Compensation Discussion and Analysis should be read
in conjunction with the report of the Compensation Committee of the Board of
Directors (the “Committee”) which immediately follows below.
Overview of Compensation Program
The Committee has the responsibility for establishing, implementing and
overseeing the Company’s compensation program for the named executive officers.
The Committee reviews and approves the Company’s compensation principles and the
compensation of the named executive officers.
Compensation Principles
The Company’s compensation program for the named executive officers is based
upon the following guiding principles:
1. Pay for performance — The compensation program is designed to reward the
named executive officers for attaining established goals that require the
dedication of their time, efforts, skills and business experience to the
success of the Company and the maximization of stockholder value. The
compensation program is designed to reward both annual and long-term
performance. Annual performance is rewarded through salary and annual
bonus and is measured principally by the Company’s EBITDA (earnings before
interest, taxes, depreciation and amortization). Long-term performance is
rewarded through stock awards, including stock options or restricted stock
awards (“stock awards”), the value of which are measured in the
performance of the Company’s stock price.
2. Pay competitively — The compensation program is designed to be competitive
relative to similarly situated executives at peer companies and to allow
the Company to attract and retain individuals whose skills are critical to
the current and long-term success of the Company.
3. Align pay to business objectives and long-term strategy — The compensation
program is designed to reward and motivate the named executive officers’
individual and team performance in attaining business objectives and
maximizing stockholder value. Compensation awards are based on the
fundamental principle of aligning the long-term interests of the named
executive officers with those of the Company’s stockholders.
Role of Executive Officers in Compensation Decisions for the Named Executive
Officers
The Chairman and the Chief Executive Officer annually review the performance of
each of the other named executive officers. The performance of the Chairman and
the Chief Executive Officer is reviewed annually by the Committee. The
Chairman’s and the Chief Executive Officer’s compensation recommendations
reached following these reviews are presented to the Committee, together with
the Chairman’s compensation recommendations with respect to the Chief Executive
Officer. The Committee considers all key elements of compensation separately and
also reviews the full compensation package afforded by the Company to the named
executive officers, including insurance and other benefits. In accordance with
the Company’s compensation principles, the Committee considers the full
compensation package provided to the named executive officers in light of:
(1) the Company’s business performance; (2) the performance of the Company’s
stock price; and (3) the compensation provided by the Company’s peers. Based on
its judgment and expertise, the Committee can exercise its discretion in
modifying any or all recommended elements of compensation or awards to the named
executive officers. The Committee also reviews recommendations regarding stock
awards to all executive officers of the Company.
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Retention of Consultants
The Committee has retained compensation consultants as more fully described
below. The Committee has established procedures that it considers adequate to
ensure that the advice of these consultants to the Committee remains objective
and is not influenced by the Company’s management. All of the decisions with
respect to determining the amount or form of executive and director compensation
under the Company’s executive and director compensation programs are made by the
Committee alone and may reflect factors and considerations other than the
information and advice provided by the compensation consultants.
In the second quarter of 2007, the Committee retained Mercer (US) Inc.
(“Mercer”) to provide information, analyses and advice regarding executive and
director compensation, as described below. The Mercer consultant who performs
these services reports directly to the Committee Chair. The Company also retains
Mercer and its related entities to perform other services.
At the Committee’s direction, Mercer provided the following services for the
Committee during fiscal 2007:
• Conducted a review of director compensation, including an evaluation of
director compensation relative to the Company’s peers;
• Conducted an evaluation of the competitive positioning of the Company’s
named executive officers’ base salaries, annual incentive and long-term
incentive compensation relative to its peers and the broader industry;
• Conducted an assessment of the alignment of Company compensation levels
relative to performance of the Company against its peers and relative to
the Company’s articulated compensation principles;
• Provided ongoing advice as needed on the design of the Company’s
compensation program; and
• Assisted with the preparation of the Compensation Discussion and Analysis
for this proxy statement.
In the course of conducting its activities, Mercer attended two meetings of the
Committee and presented its findings and recommendations for discussion. With
the consent of the Committee Chair, Mercer may, from time to time, contact the
Company’s executive officers for information necessary to fulfill its
assignments and may make reports and presentations to and on behalf of the
Committee that the executive officers also receive.
The Committee retained Frederic W. Cook & Co., Inc. (“Frederic W. Cook”) in 2004
to assist in identifying an appropriate peer group in making compensation
decisions, to analyze the direct and indirect elements of compensation (both
separately and in the aggregate) of the named executive officers relative to the
peer group, and to advise on developing trends in executive compensation. In
determining the peer group, the Committee and Frederic W. Cook looked to
retailers with similar characteristics to the Company. The peer group used by
the Committee and Frederic W. Cook consisted of Autozone, Bed Bath & Beyond,
Borders Group, Circuit City Stores, Dollar General, Kohl’s, Limited Brands,
Office Depot, OfficeMax, RadioShack, Toys ‘R’ Us and Williams-Sonoma. In this
analysis, comparative compensation was reviewed for each named executive officer
at two levels — those with similar titles and those ranked similarly within the
compensation structure of the peer group. This is in recognition of the fact
that titles and related responsibilities vary significantly from company to
company. Reviewing comparative compensation based on compensation level
exclusive of title provided a broader perspective in making compensation
decisions. The Committee also retained Frederic W. Cook in 2006 to assist in the
preparation of the Compensation Discussion and Analysis for the Company’s proxy
statement dated April 23, 2007.
Establishment of Competitiveness
A new peer group analysis was not conducted in setting 2007 compensation levels
for the named executive officers. The Committee chose not to conduct a new peer
group benchmark for 2007 because annual salaries for the named executive
officers were not modified in 2007 except: (1) a decrease in the annual salary
of Leonard
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Riggio from $500,000 in 2006 to $300,000 in 2007; and (2) a 3.6% increase in the
annual salary of William F. Duffy. In 2008, with the assistance of Mercer, the
Company and the Committee are continuing to assess the composition and size of
the Company’s peer group and to evaluate the competitive positioning of the
Company’s named executive officers’ base salaries, annual incentive and
long-term incentive compensation relative to its peers and the broader industry.
Key Elements of Compensation
The Company has entered into employment agreements with its Chief Executive
Officer and Chief Operating Officer, and with the Chief Executive Officer of its
subsidiary barnesandnoble.com llc (“Barnes & Noble.com”), which establish
minimum levels of compensation. These employment agreements, which cover certain
key elements of the Company’s executive compensation package, as well as
severance and termination benefits, are discussed below (see “Employment
Agreements”).
Consistent with the Company’s compensation principles, the following elements
make up the compensation of the named executive officers:
• Base Salary
• Performance-based Annual Bonus
• Long-term equity: Restricted Stock
• Discretionary Awards
• Retirement, Other Benefits and Limited Perquisites
The mix of compensation between these elements is designed to strike the
appropriate balance by rewarding annual performance in a competitive marketplace
while also aligning the long-term interests of the Company’s named executive
officers with those of the Company’s stockholders. Set out below are pie charts
showing the overall compensation mix for each of the Chairman of the Board, the
Chief Executive Officer and the weighted average mix for the remaining named
executive officers.
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Base Salaries
The Company pays its named executive officers a base salary to provide them with
a minimum guaranteed compensation level for their annual services. A named
executive officer’s base salary is determined by evaluating the responsibilities
of the position held, the individual’s experience and the competitive
marketplace for executive talent. The base salary is intended to be competitive
with base salaries paid to executive officers at peer group companies with
comparable qualifications, experience and responsibilities.
The base salaries of the named executive officers are established by the
Committee by the end of the first quarter of each fiscal year. The Committee met
on March 13, 2007 to establish the base salaries for fiscal 2007 for Leonard
Riggio, Chairman; Stephen Riggio, Chief Executive Officer; Mitchell S. Klipper,
Chief Operating Officer; Marie J. Toulantis, Chief Executive Officer of Barnes &
Noble.com; Joseph J. Lombardi, Chief Financial Officer; and William F. Duffy,
Executive Vice President, Distribution and Logistics. Stephen Riggio,
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Mitchell S. Klipper and Marie J. Toulantis are each entitled to the minimum base
salaries set forth in their employment agreements (see “Employment Agreements”
below). In setting salaries for fiscal 2007, the Committee considered the
following:
• The responsibilities of the executive officer and how successful he or she
was in carrying out those responsibilities.
• The industry-wide environment within which those responsibilities were
being carried out.
• Whether the executive officer had received salary increases within the past
few years and the amount of any such increases.
• The salaries of executive officers at peer companies, both in terms of
comparable responsibilities and comparable compensation rank within the
peer company.
• The salary increases to be given to other named executive officers.
• The recommendations of the Company’s Chairman and Chief Executive Officer.
Performance-based Annual Bonuses
In addition to a base salary, each named executive officer is eligible for a
performance-based annual bonus. The Company has chosen to include
performance-based annual bonuses as a material element in its compensation plan,
representing 49% of aggregate compensation for the Chairman, 66% of aggregate
compensation for the Chief Executive Officer, and 40% of the weighted average
aggregate compensation for the other named executive officers in fiscal 2007.
The annual bonus is designed to motivate individual and team performance in
attaining the current year’s performance goals and business objectives.
Bonuses for the named executive officers are determined by the Committee based
upon the attainment of EBITDA (earnings before interest, taxes, depreciation and
amortization) targets established by the Committee by the end of the Company’s
first fiscal quarter, subject to the adjustments to operating income described
below. The EBITDA targets are set in accordance with the Company’s annual budget
and financial goals. The Committee chose EBITDA (as adjusted for certain legal
and distribution center closing costs) as an appropriate measure because of the
importance of margin performance in the highly competitive retail marketplace
and because it closely aligns performance-based bonuses with the interests of
stockholders. During the first fiscal quarter of 2007, the Committee established
an EBITDA target for each named executive officer. Leonard Riggio, Stephen
Riggio and Marie J. Toulantis were each given the same EBITDA target based on
the EBITDA of the Company on a consolidated basis (the “Consolidated 2007 EBITDA
Target”). Mitchell S. Klipper, Joseph J. Lombardi and William F. Duffy were each
given the same EBITDA target based on the EBITDA of the Company’s bookstores
(the “Bookstore 2007 EBITDA Target”). The Consolidated 2007 EBITDA Target and
the Bookstore 2007 EBITDA Target are collectively referred to as the “2007
Targets.” The 2007 Targets were set to align each executive’s bonus most closely
with his or her business area of responsibility. For fiscal 2007, the Committee
also concurrently established a designated percentage of base salary as the
amount of the minimum bonus if the respective 2007 Target was achieved, as well
as a sliding scale that increased or decreased that percentage based on the
extent to which the respective Target was missed, attained or exceeded. The
sliding scale provided for no bonus payout if the named executive officer
achieved less than 85% of his or her respective 2007 Target and for a maximum
bonus payout, as more fully described below, if the named executive officer
achieved 106% or more of his or her respective 2007 Target.
Bonus levels were determined by the Committee after receiving the
recommendations of the Chairman and the Chief Executive Officer. Generally, the
Committee sets the targets such that the relative difficulty of achieving the
targets is consistent from year to year. In the last six years, the Company has
missed the target once, achieved the target three times, and exceeded the target
twice. The Consolidated 2007 EBITDA Target was $368.8 million.
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In the case of Leonard Riggio, Stephen Riggio, Mitchell S. Klipper and Marie J.
Toulantis, each was entitled to receive a bonus of 150% of base salary for
achieving between 98% and 102% of their respective 2007 Targets. They were
entitled to receive an additional 25% of base salary for achieving 106% or more
of their respective 2007 Targets. In the case of Joseph J. Lombardi, he was
entitled to receive a bonus of 100% of his base salary for achieving between 98%
and 102% of his 2007 Target and was entitled to receive an additional 25% of
base salary for achieving 106% or more of his respective 2007 Target. In the
case of William F. Duffy, he was entitled to receive a bonus of 40% of his base
salary for achieving between 98% and 102% of his 2007 Target and was entitled to
receive an additional 3.6% of base salary for achieving 106% or more of his 2007
Target.
For fiscal 2007, the Committee provided for the bonuses for Leonard Riggio,
Stephen Riggio, Mitchell S. Klipper and Marie J. Toulantis to be payable 50% in
cash and 50% in restricted stock vesting in equal annual installments over three
years. For fiscal 2007, the Committee provided for the bonuses for Joseph J.
Lombardi and William F. Duffy to be payable in cash.
The same bonus percentages apply for bonuses for the fiscal year ending
January 31, 2009 (“fiscal 2008”), except that: (1) the threshold for each named
executive officer to achieve his or her respective fiscal 2008 target has been
changed from a range of 98% to 102% to a range of 96% to 104% and the threshold
for each named executive officer to receive the maximum bonus payout has been
raised from 106% or more to 108% or more, (2) Joseph J. Lombardi will be
entitled to receive a minimum bonus of 150% of his base salary for achieving
between 96% and 104% of his fiscal 2008 target and will be entitled to receive
an additional 25% of base salary for achieving 108% or more of his fiscal 2008
target; (3) William F. Duffy will be entitled to receive a minimum bonus of 40%
of his base salary for achieving between 96% and 104% of his fiscal 2008 target
and will be entitled to receive an additional 3.0% of base salary for achieving
108% or more of his fiscal 2008 target. In addition, acknowledging the continued
integration of the Company’s business as a multi-channel retailer, the named
executive officers’ fiscal 2008 targets will all be the same and based on the
EBITDA of the Company on a consolidated basis, with the exception of William F.
Duffy, whose fiscal 2008 target will be based 20% on the consolidated EBITDA,
30% on bookstore EBITDA and 50% on personal goals related to operational metrics
associated with the Company’s distribution center. Bonuses to all of the named
executive officers for fiscal 2008 will be paid in cash.
In addition, upon the recommendation of the Chairman, the Committee also granted
Stephen Riggio, Mitchell S. Klipper and Marie J. Toulantis a bonus for fiscal
2007, based on their achievement of their respective 2007 Targets referred to
above, equal to a percentage of the per share dividend that each executive would
have received on their shares of common stock for which they have stock options
that is the same percentage as the respective named executive officer’s annual
bonus payout percentage, capped at 100% of the dividend. This bonus was intended
to provide incentives to these executives both to achieve their respective 2007
Targets as well as to retain their stock options in the Company. The Committee
has also approved this same bonus for Stephen Riggio, Mitchell S. Klipper and
Marie J. Toulantis for fiscal 2008.
To preserve the deductibility of bonuses for purposes of Section 162(m) of the
Internal Revenue Code, under the Company’s stockholder-approved 2004 Executive
Performance Plan (the “Bonus Plan”), the named executive officers are entitled
to a maximum performance-based bonus equal to a designated percentage of the
Company’s “operating income,” which is defined in the Bonus Plan as gross profit
minus operating expenses of the Company and its subsidiaries on a consolidated
basis, without regard to (a) restructurings, discontinued operations,
extraordinary items and other unusual or non-recurring charges, (b) events not
directly related to the operations of the Company or not within the reasonable
control of the Company’s management, or (c) changes in accounting standards
required by generally accepted accounting principles. Under the Bonus Plan, the
aggregate designated bonus percentage for the named executive officers may not
exceed five percent of operating income. For fiscal 2007, the Committee
allocated that five percent as follows: 1.3% for Stephen Riggio, Mitchell S.
Klipper and Marie J. Toulantis, and 0.55% for Joseph J. Lombardi and William F.
Duffy (or any executive officer who replaced Mr. Duffy as a named executive
officer in the next year’s Proxy Statement). For fiscal 2007, the Company’s
operating earnings under the Bonus Plan were $224 million. For fiscal 2008, the
Committee
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modified those percentages to 1.3% for Stephen Riggio and Mitchell S. Klipper,
1.0% for Marie J. Toulantis and Joseph J. Lombardi and 0.4% for William F. Duffy
(or any executive officer who replaces Mr. Duffy as a named executive officer in
next year’s Proxy Statement).
Set out below is a chart showing maximum, target and minimum bonus percentages
for the named executive officers for 2007.
2007 Annual Incentive Awards
Target Payout Payout Range Actual Award
as a % of as a % of Target Bonus Maximum Actual as a % of
Name Salary Salary Award Award Award Salary
Leonard Riggio 150 % 0-175 % $ 450,000 $ 525,000 $ 525,000 175 %
Stephen Riggio 150 % 0-175 % $ 1,200,000 $ 1,400,000 $ 1,400,000 175 %
Mitchell S. Klipper 150 % 0-175 % $ 1,200,000 $ 1,400,000 $ 1,400,000 175 %
Marie J. Toulantis 150 % 0-175 % $ 975,000 $ 1,137,500 $ 1,137,500 175 %
Joseph J. Lombardi 100 % 0-125 % $ 600,000 $ 750,000 $ 750,000 125 %
William F. Duffy 40 % 0-43.6 % $ 174,000 $ 189,660 $ 189,660 43.6 %
Long-term Equity: Restricted Stock
The Company chooses to grant long-term awards, currently in the form of
restricted stock, to align the interests of the named executive officers with
the interests of the Company’s stockholders. Additionally, long-term awards
offer the named executive officers an incentive for the achievement of superior
performance over time and foster their retention. Grants of long-term awards are
made to the named executive officers under the Company’s stockholder-approved
2004 Incentive Plan (the “Incentive Plan”).
As indicated above, for fiscal 2007, 50% of the performance-based bonus to
Leonard Riggio, Stephen Riggio, Mitchell S. Klipper and Marie J. Toulantis was
paid in the form of restricted stock vesting in equal annual installments over
three years. In addition, Mitchell S. Klipper and Marie J. Toulantis were
granted 33,333 and 16,666 shares of restricted stock, respectively, as a result
of achieving their respective 2007 Targets, also vesting in equal annual
installments over three years, and they are entitled to the same grant if they
achieve their targets for fiscal 2008.
In addition to the performance-based grants described above, the Company grants
restricted stock to its named executive officers as part of the Company’s
broad-based annual grant to Company employees under the Incentive Plan.
Beginning in the fiscal year ending January 28, 2006 (“fiscal 2005”), the
Committee determined that the Company should grant restricted stock as the
annual long-term incentive award, as opposed to stock options, which was the
prior preferred award. The Committee believes that the use of restricted stock
as opposed to stock options results in less dilution to stockholders, while
accomplishing similar objectives — value creation through stock price
appreciation and alignment of stockholder and executive officer interests. In
addition, the Committee believes that restricted stock is a preferred
compensation element given the growth profile of the Company.
The Committee meets within the first fiscal quarter each year to approve the
annual grants of restricted stock. Awards are granted to the named executive
officers, other executive officers and eligible full-time employees based on a
formula keyed to a percentage of salary. For the named executive officers for
fiscal 2007, the percentage was 15%.
Historical Stock Option Grants
Previously the Company granted stock options as its preferred long-term
incentive tool. In July 2006, the Company created a Special Committee of the
Board of Directors (the “Special Committee”) to review all of the stock option
grants by the Company and the Company’s wholly-owned subsidiary, Barnes &
Noble.com, during
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the period from 1996 through 2006 and engaged independent outside counsel and an
independent forensic auditor to assist in this matter. On April 2, 2007, the
Special Committee presented its findings and recommendations to the Company’s
Board of Directors, as reported in the Company’s Form 8-K filed April 4, 2007.
The Special Committee indicated that the Committee and its advisors received the
Company’s full cooperation throughout its investigation.
The Special Committee determined that there were instances where historical
option grants were misdated. In connection with this review, in December 2006,
the Board members and all current Section 16 officers holding options unvested
as of December 31, 2004 voluntarily agreed to reprice such options to an
exercise price determined to be the appropriate fair market value by the Special
Committee. All incorrectly dated and unexercised stock options issued to current
Section 16 officers and directors of the Company other than hiring grants were
repriced to reflect the greater of the original grant price or the price
appropriate to the measurement date as determined by the Special Committee. The
Board members and Section 16 officers did not receive cash payments to
compensate them for the increase in exercise price due to their voluntary
agreements to reprice such options. The total difference in exercise price as a
result of the re-pricing of these unexercised options was approximately $2.64
million.
Consistent with the Special Committee’s recommendation that all incorrectly
dated and unexercised options issued to current Section 16 officers be repriced,
current Section 16 officers who had exercised incorrectly dated options agreed
to voluntarily repay to the Company the difference in the price at which the
stock options were exercised and the price at which the Special Committee
believes the stock options should have been priced, net of any allocable portion
of income taxes paid in connection with such exercise. The total amount
voluntarily repaid to the Company by Section 16 officers was approximately $1.98
million, prior to any netting of allocable income taxes.
Holders of incorrectly dated options that vested after December 31, 2004 and
were exercised in 2006 were subject to penalty taxes under Section 409A of the
Internal Revenue Code (“Section 409A”). The Company reimbursed Section 16
officers who voluntarily repaid the Company if they were subject to these
penalty taxes. The Board approved payment to such executives who were subject to
Section 409A taxes in connection with exercised options in an amount equal to
the cost of the Section 409A penalty tax, any interest or penalties, plus an
amount to offset the associated income tax consequences of the reimbursement
payments. In reaching this decision, the Board took into consideration, among
other factors, the fact that the applicable taxes under Section 409A far
exceeded the amount of any possible enrichment to such officers as a result of
improper grant dating and the agreement by such officers to repay the amount of
any enrichment as a result of the improper dating. The aggregate cost of the
payments to such officers, including the gross-up amounts, was approximately
$960,000, not taking into account interest and penalties.
Consistent with the recommendation of the Special Committee, the Board
implemented improvements to the stock option grant process to the extent options
are used as a compensation tool. The Special Committee recommended and the Board
resolved that responsibility for oversight of the process related to the
issuance of stock options be vested in the Chief Financial Officer, with
assistance from the Vice President of Human Resources. The Company implemented
internal procedures to improve communication between the Human Resources and
Finance Departments, enhanced interaction with the Company’s external auditors
and counsel, enhanced the interaction between internal and external auditors,
and promoted periodic reviews of procedures for stock option grants.
The Special Committee recommended and the Board established a policy that all
stock options be priced where possible on the date of a meeting, either in
person or telephonically, of the Compensation Committee. Stock options, if
granted, are granted by the Compensation Committee with an exercise price equal
to the closing price of the Company’s Common Stock as reported on the NYSE on
the date of the grant. In addition, the Board established a policy that all
restricted stock grants approved by the Committee will have specific grant dates
documented in the minutes of the meeting of the Compensation Committee at which
such grant or grants are approved.
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The Company has vested responsibility for all internal accounting and finance
functions in the Company’s Chief Financial Officer. The Chief Financial Officer
has been instructed to review periodically the Company’s equity awards
processes, document the results of such review and to report these results to
the Compensation and Audit Committees.
Discretionary Awards
From time to time the Committee may approve discretionary awards for the named
executive officers in recognition of efforts that are beyond the normal
requirements of their assigned duties or as further incentive for continued
employment. No discretionary awards were granted to the named executive officers
in fiscal 2007.
Other Considerations
Retirement Benefits
Each of the named executive officers is entitled to participate in the Company’s
tax-qualified defined contribution 401(k) plan on the same basis as all other
eligible employees. The Company matches the contributions of participants,
subject to certain criteria. Under the terms of the 401(k) plan, as prescribed
by the Internal Revenue Code, the 401(k) contribution of any participating
employee is limited to a maximum percentage of annual pay or a maximum dollar
amount ($15,500 for 2007) subject to a $5,000 increase for participants who are
age 50 or older). The amount of the Company’s matching payments for each of the
named executive officers is set forth in Note 7 to the Summary Compensation
Table.
As of December 31, 1999, substantially all employees of the Company were covered
under the Company’s Employees’ Retirement Plan (the “Retirement Plan”). The
Retirement Plan is a defined benefit pension plan. As of January 1, 2000, the
Retirement Plan was amended so that employees no longer earn benefits for
subsequent service. Subsequent service continues to be the basis for vesting of
benefits not yet vested at December 31, 1999 and the Retirement Plan will
continue to hold assets and pay benefits.
A participant’s annual benefit is determined for an employee, including an
officer, generally as (i) 0.7% of the participant’s average annual pay as
determined in accordance with the Retirement Plan up to Social Security-covered
compensation, multiplied by the participant’s years of credited service, plus
(ii) 1.3% of the participant’s average annual pay as determined in accordance
with the Retirement Plan in excess of Social Security-covered compensation,
multiplied by the participant’s years of credited service. A participant’s
maximum benefit is limited, pursuant to Section 415 of the Internal Revenue
Code, to $130,000, indexed annually. For 1999, compensation recognized under the
Retirement Plan was limited to $160,000.
Credited years of service under the Retirement Plan as of February 2, 2008 for
the named executive officers are: Stephen Riggio — 13 years; Mitchell S. Klipper
— 11.25 years; Marie J. Toulantis — 4 years; and William F. Duffy — 7 years.
Leonard Riggio and Joseph J. Lombardi are not participants in the Retirement
Plan.
The estimated pension benefits to be made by the Company to the named executive
officers are set forth in the Table entitled “Pension Benefits Table” on page 28
of this Proxy Statement.
Deferred Compensation Plan
The Company has a Deferred Compensation Plan that permits Company employees
making an annual salary in excess of $160,000 ($130,000 prior to May 1, 2006) to
elect to defer receipt of up to 50% of their annual salary and up to 100% of
their annual bonus. Participants may elect to have deferred amounts paid after
one of the following events: (1) retirement; (2) termination of employment; or
(3) the beginning of a designated year, not earlier than three years after the
deferral is made, and not later than the year in which the participant would
attain the age of 70-1/2. This plan allows employees, if they so choose, to save
for retirement.
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Amounts paid to a participant under the Deferred Compensation Plan are paid in a
lump sum, except in the case of retirement, where a participant may elect to
have payments made in equal annual installments for a period of up to 15 years.
Amounts in the Deferred Compensation Plan may be withdrawn by a participant at
any time subject to a 10% penalty, which may be waived by the Committee in the
case of financial hardship.
William F. Duffy is the only named executive officer who participates in the
Deferred Compensation Plan. See the table entitled “Non-Qualified Deferred
Compensation” on page 29 of this Proxy Statement.
Limited Perquisites
The Company does not have a formal program providing perquisites to its
executive officers. Messrs. Stephen Riggio and Klipper and Ms. Toulantis are
entitled to the limited perquisites set forth in their employment agreements, as
described below. (See “Employment Agreements”).
The perquisites received by the named executive officers are set forth in Note 7
of the Summary Compensation Table.
Employment Agreements
The Company has entered into employment agreements with Stephen Riggio, Mitchell
S. Klipper and Marie J. Toulantis. The terms of the employment agreements for
Messrs. Stephen Riggio and Klipper commenced on February 18, 2002, continued for
a period of three years thereafter, and now renew each year automatically for
one year unless either party gives notice of non-renewal at least six months
prior to automatic renewal. The initial term of the employment agreement for
Ms. Toulantis commenced on March 9, 2005 and continued through March 9, 2008,
with automatic annual one-year renewals thereafter unless either party gives
notice of non-renewal at least six months prior to automatic renewal. The
Committee will review these agreements on an annual basis to assess their
continued competitiveness.
Stephen Riggio’s minimum annual salary during the term of his employment under
the employment agreement can be no less than $650,000. Mitchell S. Klipper’s and
Marie J. Toulantis’ minimum annual salary during the term of their employment
under their respective employment agreements can be no less than $600,000. For
Messrs. Stephen Riggio and Klipper, minimum annual bonus compensation will be
based on the formula and targets established under and in accordance with the
Bonus Plan. For Ms. Toulantis, minimum annual bonus compensation is based on the
zero to 175% of the base salary formula set forth above for pre-set targets
established under the Bonus Plan. Ms. Toulantis’ employment agreement also
provides for a $2,000,000 merger bonus, which was paid in equal installments on
May 27, 2005 and May 27, 2006.
The employment agreements also provide for certain limited perquisites,
including a monthly car allowance ($1,500 in the case of Messrs. Stephen Riggio
and Klipper and $1,000 in the case of Ms. Toulantis), $1,000,000 of life
insurance, and long-term disability (providing for monthly payments of $12,800
in the case of Messrs. Stephen Riggio and Klipper and $12,500 in the case of
Ms. Toulantis) payable during the disability period through the earlier of death
or the attainment of age 65. Each executive is also entitled to all other
benefits afforded to executive officers and employees of the Company.
Each executive is also restricted from competing with the Company, directly or
indirectly, during the term of his or her agreement and for two years after
termination of employment, unless the contract is terminated by the Company
(other than for cause prior to a “change of control”) or by the executive for
good cause (as defined in the employment agreements and as discussed below).
Change of Control/Severance Benefits in Employment Agreements
The employment agreements of Stephen Riggio, Mitchell S. Klipper and Marie J.
Toulantis provide that each executive’s employment may be terminated by the
Company upon death, disability or for cause, and by the
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executive for “good cause” (defined as a material modification of duties, title
or direct reports, or a material reduction in compensation and benefits, or a
relocation of the Company’s principal executive offices outside the New York
metropolitan area). If an executive’s employment is terminated due to death or
disability, by the Company with cause or by the executive without good cause,
the executive is entitled to payment of base salary through the date of death,
disability or termination of employment.
If the executive is terminated by the Company without cause or by the executive
for good cause, the executive is entitled to lump sum severance equal to two
times the sum of annual salary, most recent annual bonus and the cost of annual
benefits, unless such event occurred within two years following a “change of
control” of the Company, in which case the executive is entitled to lump sum
severance equal to three times the sum of annual salary, most recent annual
bonus and the cost of annual benefits, up to the maximum severance permitted to
be paid to the executive by the Company without triggering the “golden
parachute” excise tax under the Internal Revenue Code. In the case of
Ms. Toulantis, she also received performance-based stock options for 50,000
shares of the Company’s common stock in accordance with her employment
agreement, vesting in equal annual installments over four years. Under her
agreement, any unvested options would immediately vest in the event of a “change
of control” or upon a termination of her employment (other than by the Company
for cause or by her voluntarily).
In addition, Mr. Joseph J. Lombardi is entitled to severance equal to six
months’ salary in the event of the termination of his employment, other than for
termination for cause.
The triggering events which would result in the severance benefits and the
amount of those benefits were selected to provide these named executive officers
with a guaranteed level of financial protection upon loss of employment to
enable them to focus on the interests of the Company and its stockholders in the
event of a potential change of control. They were considered competitive with
severance provisions being offered by other companies at the time the agreements
were entered into. The Committee will review these agreements on an annual basis
to assess their continued competitiveness.
For similar reasons, the Company’s outstanding stock options and restricted
stock awards, including those held by the named executive officers, vest
immediately upon a “change of control” of the Company.
The estimated payments to be made by the Company to the named executive officers
in the event of a change of control are set forth in the Table entitled
“Potential Payments Upon Termination or Change of Control” on page 30 of this
Proxy Statement.
Tax Implications
Impact of Section 162(m) of the Internal Revenue Code. In making its
determinations, the Committee considers the potential impact of Section 162(m)
of the Internal Revenue Code (“Section 162(m)”), which disallows a tax deduction
for any publicly held corporation for individual compensation exceeding
$1,000,000 in any taxable year paid to its chief executive officer or any of its
three other highest paid officers (other than the CFO) unless (i) the
compensation is payable solely on account of the attainment of performance
goals, (ii) the performance goals are determined by a committee of two or more
outside directors, (iii) the material terms under which compensation is to be
paid are disclosed to and approved by stockholders, and (iv) the determining
committee certifies that the performance goals were met. Because it is in the
best interests of the Company to qualify to the maximum extent possible the
compensation of its executives for deductibility under applicable tax laws, the
Company obtained stockholder approval in June 2004 for the Bonus Plan and the
Incentive Plan, which provides for the payment of compensation in compliance
with Section 162(m), and the Committee administers the Bonus Plan and the
Incentive Plan in a manner intended to comply with Section 162(m). However, it
is possible that one or more option grants for which revised measurement dates
have been determined for accounting purposes as a result of the Special
Committee review of historical stock option grants may not qualify as
performance-based awards as may be determined by the Internal Revenue Service.
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Compensation Committee Report
The Compensation Committee has reviewed and discussed the foregoing Compensation
Discussion and Analysis with management and, based on such review and
discussions, has recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Compensation Committee1
Michael Del Giudice, Chair
William Dillard II
William F. Reilly
1 From February 4, 2007 to April 30, 2007, the Compensation Committee consisted
of Matthew A. Berdon (Chair), Margaret T. Monaco and William Sheluck, Jr.
(deceased). As of May 1, 2007, the Compensation Committee consisted of
Michael Del Giudice (Chair), William Dillard II and William F. Reilly.
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Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee has ever been an employee of
the Company, and none of them had a relationship requiring disclosure in this
Proxy Statement under Items 404 or 407 of SEC Regulation S-K. See “Meetings and
Committees of the Board — Compensation Committee.”
Summary Compensation Table
Changes in
Pension Value
and
Non-Equity Non-Qualified
Incentive Deferred All
Name and Principal Fiscal Bonus(2) Stock Stock Plan Comp Other
Position Year Salary(1) (Discretionary) Awards(3) Options(4) Comp(5) Earnings(6) Comp(7) Total
Leonard Riggio 2007 $ 338,462 $ — $ 184,226 $ — $ 525,000 $ — $ 17,926 $ 1,065,614
Chairman 2006 $ 500,000 $ — $ 161,278 $ — $ 750,000 $ — $ 15,228 $ 1,426,506
Stephen Riggio 2007 $ 800,000 $ — $ 278,153 $ — $ 2,249,206 $ 11,715 $ 50,072 $ 3,389,146
Chief Executive Officer 2006 $ 786,538 $ — $ 241,866 $ — $ 2,049,206 $ 1,070 $ 48,994 $ 3,127,674
Mitchell S. Klipper 2007 $ 800,000 $ — $ 1,168,425 $ 334,391 $ 1,926,088 $ 8,421 $ 495,421 $ 4,732,746
Chief Operating Officer 2006 $ 786,538 $ — $ 694,383 $ 1,451,687 $ 2,026,088 $ 146 $ 67,840 $ 5,026,682
Marie J. Toulantis 2007 $ 650,000 $ — $ 658,602 $ 151,625 $ 1,352,103 $ 1,280 $ 63,766 $ 2,877,376
CEO, Barnes & Noble.com 2006 $ 636,538 $ 1,000,000 $ 410,347 $ 151,625 $ 1,309,603 $ 329 $ 43,460 $ 3,551,902
Joseph J. Lombardi 2007 $ 600,000 $ — $ 451,963 $ 136,077 $ 750,000 $ — $ 27,488 $ 1,965,528
Chief Financial Officer 2006 $ 590,385 $ 240,000 $ 424,863 $ 136,077 $ 360,000 $ — $ 29,945 $ 1,781,270
William F. Duffy 2007 $ 434,578 $ — $ 48,039 $ 8,942 $ 189,660 $ 4,757 $ 496,159 $ 1,182,135
EVP, Distribution & Logistics 2006 $ 417,115 $ — $ 28,902 $ 584,553 $ 543,000 $ 317 $ 19,160 $ 1,593,047
(1) This column represents base salary earned. Mr. Duffy elected to defer a
portion of his salary included in this column under the Company’s
Non-Qualified Deferred Compensation Plan. See the “Non-Qualified Deferred
Compensation Table” on page 29 of this Proxy Statement.
(2) The Company made the following discretionary bonus payments for the fiscal
year ended February 3, 2007 (“fiscal 2006”): $1,000,000 to Ms. Toulantis as a
cash retention bonus pursuant to her employment agreement and $240,000 to
Mr. Lombardi as a result of his successful performance under a significantly
increased workload.
(3) This column represents the dollar amount recognized for financial statement
reporting purposes under Statement of Financial Accounting Standards No. 123R
(“SFAS 123R”) for the respective fiscal years set forth in this column as
well as for restricted stock awards granted prior to such fiscal year. Note
that the dollar amount does not include amounts associated with restricted
stock granted as part of the incentive bonuses. Refer to the Grants of
Plan-Based Awards Table for information on awards made in fiscal 2007. The
assumptions used in calculating these amounts are set forth in Note 3 to the
Company’s Financial Statements for the fiscal year ending February 2, 2008
which is located on page F-27 of the Company’s Annual Report on Form 10-K.
The values in this column represent the accounting expense values incurred
during the fiscal year and may not be equivalent to the actual value
recognized by the named executive officer.
(4) This column represents the dollar amount recognized for financial statement
reporting purposes (under SFAS 123R) for the respective fiscal years set
forth in this column as well as for stock option awards granted prior to such
fiscal year. Refer to the Grants of Plan-Based Awards Table for information
on awards made in fiscal 2007. The assumptions used in calculating these
amounts are set forth in Note 3 to the Company’s Financial Statements for the
fiscal year ending February 2, 2008 which is located on page F-27 of the
Company’s Annual Report on Form 10-K. The values in this column represent the
accounting expense values incurred during the fiscal year and may not be
equivalent to the actual value recognized by the named executive officer.
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(5) This column represents the dollar value of annual incentive bonuses awarded
in March 2008 and March 2007 for performance in fiscal 2007 and 2006,
respectively. For a more complete description of the Company’s annual
incentive bonus plan, refer to page 16 of this Proxy Statement. Note that,
for 2006 and 2007, the incentive award to each of Messrs. Stephen Riggio and
Klipper and to Ms. Toulantis were paid 50% in cash and 50% in restricted
stock vesting in equal annual installments over three years as set out in the
table below:
Annual
Bonus in
Fiscal Annual Bonus Restricted Additional
Name Year in Cash Stock Bonus(a) Total
Leonard Riggio 2007 $ 262,500 $ 262,500 $ — $ 525,000
2006 $ 375,000 $ 375,000 $ — $ 750,000
Stephen Riggio 2007 $ 700,000 $ 700,000 $ 849,206 $ 2,249,206
2006 $ 600,000 $ 600,000 $ 849,206 $ 2,049,206
Mitchell S. Klipper 2007 $ 700,000 $ 700,000 $ 526,088 $ 1,926,088
2006 $ 600,000 $ 600,000 $ 826,088 $ 2,026,088
Marie J. Toulantis 2007 $ 568,750 $ 568,750 $ 214,603 $ 1,352,103
2006 $ 487,500 $ 487,500 $ 334,603 $ 1,309,603
(a) In addition, as the result of the attainment of pre-established targets,
Stephen Riggio, Mitchell S. Klipper and Marie J. Toulantis were also
awarded bonuses in amounts equal to the annual dividend they each would
have received on the shares of Company common stock reserved for issuance
upon the exercise of their respective Company stock options. This bonus was
intended to provide incentives to these executives both to achieve their
respective targets in fiscal 2006 and fiscal 2007 as well as to retain
their stock options in the Company. The Committee has also approved this
same bonus for Stephen Riggio, Mitchell S. Klipper and Marie J. Toulantis
for fiscal 2008.
(6) This column represents the actuarial increase in the present value under the
Retirement Plan.
(7) Includes all other compensation as described in the table below:
All Other Compensation Table
Long- Dividends Section
Term Life and 401(k) on Unvested 409A Tax Total
Fiscal Disability AD&D Car Company Restricted Payments Other
Name Year Insurance Insurance Allowance Match Shares (a) Income
Leonard Riggio 2007 $ 3,437 $ 327 $ — $ — $ 14,162 $ — $ 17,926
2006 $ 3,437 $ 327 $ — $ — $ 11,464 $ — $ 15,228
Stephen Riggio 2007 $ — $ 1,308 $ 18,000 $ 9,000 $ 21,764 $ — $ 50,072
2006 $ — $ 1,308 $ 18,000 $ 12,492 $ 17,194 $ — $ 48,994
Mitchell S. Klipper 2007 $ 3,204 $ 1,308 $ 18,000 $ 9,000 $ 52,054 $ 411,855 $ 495,421
2006 $ 3,204 $ 1,308 $ 18,000 $ 12,492 $ 32,836 $ — $ 67,840
Marie J. Toulantis 2007 $ — $ 327 $ 12,000 $ 9,000 $ 42,439 $ — $ 63,766
2006 $ — $ 327 $ 12,000 $ 9,954 $ 21,179 $ — $ 43,460
Joseph J. Lombardi 2007 $ — $ 327 $ — $ 9,000 $ 18,161 $ — $ 27,488
2006 $ — $ 327 $ — $ 5,077 $ 24,541 $ — $ 29,945
William F. Duffy 2007 $ — $ 327 $ 7,578 $ 9,069 $ 2,262 $ 476,923 $ 496,159
2006 $ — $ 327 $ 7,941 $ 9,415 $ 1,477 $ — $ 19,160
(a) Reimbursement for penalty taxes under Section 409A of the Internal Revenue
Code as more fully discussed in Note 3 to the Company’s Financial Statements
for the fiscal year ending February 2, 2008 which is located on page F-27 of
the Company’s Annual Report on Form 10-K.
For a summary of the provisions of the employment agreements with Stephen
Riggio, Mitchell S. Klipper and Marie J. Toulantis that affect the amounts set
forth in this Table, see the discussion under “Employment Agreements” in the
Compensation Discussion and Analysis on page 21 of this Proxy Statement.
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For fiscal 2007, the salary of the named executive officers represented between
17% (Mitchell S. Klipper) and 37% (William F. Duffy) of total compensation as
reported in this Table.
Grants of Plan-Based Awards in Fiscal Year 2007
All
Other
Stock
Estimated Future Payouts Awards: All Other
Estimated Future Payouts Under Under Number Option
Non-Equity Incentive Plan Awards(1) Equity Incentive Plan Awards of Awards: Exercise Grant Date
Shares Number of or Base Fair Value
of Stock Securities Price of of Stock &
Threshold Threshold or Underlying Option Option
Grant (Minimum) Target Maximum(2) (Minimum) Target Maximum Units(3) Options Awards Awards(4)
Name Date ($) ($) ($) (#) (#) (#) (#) (#) ($/Sh) ($)
Leonard Riggio 4/9/2007(5) 9,169 $ 375,000
5/9/2007 2,460 $ 100,122
3/26/2007 $ 0 $ 450,000 $ 525,000
Stephen Riggio 4/9/2007(5) 14,670 $ 600,000
5/9/2007 3,935 $ 160,155
3/26/2007 $ 0 $ 1,200,000 $ 1,400,000
Mitchell S. Klipper 4/9/2007(5) 14,670 $ 600,000
4/9/2007 33,333 $ 1,363,320
5/9/2007 3,935 $ 160,155
3/26/2007 $ 0 $ 1,200,000 $ 1,400,000
Marie J.
Toulantis 4/9/2007(5) 11,920 $ 487,500
4/9/2007 16,666 $ 681,639
5/9/2007 3,195 $ 130,037
3/26/2007 $ 0 $ 975,000 $ 1,137,500
Joseph J. Lombardi 5/9/2007 2,950 $ 120,065
3/26/2007 $ 0 $ 600,000 $ 750,000
William F. Duffy 5/9/2007 2,065 $ 84,046
3/26/2007 $ 0 $ 174,000 $ 189,660
(1) The amounts in these columns reflect the minimum payout level, target payout
level and maximum payout level under the Company’s annual incentive bonus
plan. Note that for Mr. S. Riggio, Ms. Toulantis, Mr. Klipper and Mr. L.
Riggio, the incentive award was paid 50% in cash and 50% in restricted stock
in fiscal 2006 and fiscal 2007. For additional information regarding this
bonus plan refer to page 16 of this Proxy Statement.
(2) The maximum amounts shown in the column reflect values derived from each
executive’s internal target bonus percentage. However, to preserve the
maximum deductibility of bonuses for purposes of Section 162(m) of the
Internal Revenue Code, the Company’s stockholder-approved Bonus Plan provides
for a maximum bonus payable to the named executive officers equal to five
percent of the Company’s operating earnings for the fiscal year to which the
bonus relates or such lesser percentage as established by the Committee by
the end of the first quarter of such fiscal year. For additional information
regarding the Bonus Plan refer to page 16 of this Proxy Statement.
(3) This column shows the number of shares of restricted stock granted in fiscal
2007 to the named executive officers.Restricted stock granted on April 9,
2007 vests in equal annual installments on the first through third
anniversaries of the date of grant. Restricted stock granted on May 9, 2007
vests in equal annual installments on the first through fourth anniversaries
of the date of grant.
(4) This column shows the full grant date fair value of stock awards under SFAS
123R granted to the named executive officers. The assumptions used in
calculating these amounts are set forth in Note 3 to the Company’s Financial
Statements for the fiscal year ending February 2, 2008 which is located on
page F-27 of the Company’s Annual Report on Form 10-K.
(5) These restricted stock awards were granted in fiscal 2007 as part of the
annual incentive bonuses for fiscal 2006. Restricted stock awards made as
part of the annual incentive bonus for fiscal 2007 were paid after the end of
fiscal 2007 and will be included in next year’s table.
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Outstanding Equity Awards at Fiscal 2007 Year-End(1)
Option Awards Stock Awards
Equity Equity
Incentive Incentive
Plan Plan
Awards: Awards:
Equity Number Market
Incentive of or Payout
Plan Unearned Value of
Awards: Number Market Shares, Unearned
Number of Securities Number of of Shares Value of Units or Shares,
Underlying Unexercised Securities or Units Shares or Other Units or
Options Underlying of Stock Units of Rights Rights
Unexercised Option Option That Stock That That That
Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable Unexercisable Options Price Date Vested(2) Vested(3) Vested Vested(3)
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Leonard Riggio 990,740 (4) — — $ 16.96 3/12/2011
24,484 $ 833,191 — —
Stephen Riggio 1,415,343 (4) — — $ 21.67 6/2/2014
37,883 $ 1,289,158 — —
Mitchell S. Klipper 389,219 — — $ 21.90 2/17/2012
41,534 — — $ 12.12 2/25/2013
10,615 — — $ 11.27 3/12/2013
328,547 — — $ 16.38 6/11/2013
5,174 1,725 (5) — $ 22.98 6/13/2014
50,000 50,000 (6) — $ 31.96 3/17/2015
93,804 $ 3,192,150 — —
Marie J. Toulantis 307,671 — — $ 21.67 6/2/2014
25,000 25,000 (6) — $ 31.96 3/17/2015
58,203 $ 1,980,648 — —
Joseph J. Lombardi 1,035 1,035 (5) — $ 22.98 6/13/2014
18,233 $ 620,469 — —
William F. Duffy 35,384 — — $ 13.23 7/23/2012
3,319 — — $ 11.27 3/12/2013
106,151 — — $ 20.44 10/19/2013
1,794 897 (5) — $ 22.98 6/13/2014
4,088 $ 139,115 — —
(1) This table includes only those grants outstanding as of the end of fiscal
2007 and reflects any repricings as a result of the findings of the stock
option review conducted by the Special Committee of the Board. See “Meetings
and Committees of the Board — Special Committee” on page 4 of this Proxy
Statement.
(2) Represents outstanding grants of restricted stock, with all shares vesting
ratably over three or four years.
(3) Market values have been calculated using a stock price of $34.03 (closing
price of the Company’s common stock on February 1, 2008, the last trading day
of fiscal 2007).
(4) Options with respect to 964,202 of the shares listed for Leonard Riggio are
held by him for the benefit of Stephen Riggio by agreement dated July 24,
2002, as amended. These shares are not listed in Stephen Riggio’s total.
(5) Granted on June 14, 2004; with related amount under column (b), with all
shares vesting in equal annual installments on the first through fourth
anniversaries of the date of grant.
(6) Granted on March 18, 2005; with related amount under column (b), with all
shares vesting in equal annual installments on the first through fourth
anniversaries of the date of grant.
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Option Exercises and Stock Vested in Fiscal Year 2007
Option Awards Stock Awards
Number of Shares Value Realized Number of Shares Value Realized
Acquired on Exercise on Exercise(1) Acquired on Vesting on Vesting(2)
Name (#) ($) (#) ($)
Leonard Riggio — — 8,109 $ 305,230
Stephen Riggio — — 12,164 $ 457,865
Mitchell S. Klipper 500,000 $ 13,405,630 23,749 $ 859,900
Marie J. Toulantis 200,000 $ 3,389,100 15,228 $ 574,345
Joseph J. Lombardi 92,148 $ 2,674,714 13,592 $ 489,698
William F. Duffy — — 791 $ 31,016
(1) The amounts in this column are calculated by multiplying the number of shares
acquired on exercise by the difference between the closing price of the
Company’s common stock on the date of exercise and the exercise price of the
options.
(2) The amounts in this column are calculated by multiplying the number of shares
vested by the closing price of the Company’s common stock on the date of
vesting.
Pension Benefits
Number of Years Present Value of Payments During
of Credited Service Accumulated Benefit Last Fiscal Year
Name Plan Name (#) ($) ($)
Leonard Riggio N/A — — —
Stephen Riggio Employees’ Retirement Plan 13.00 $ 134,978 —
Mitchell S. Klipper Employees’ Retirement Plan 11.25 $ 97,015 —
Marie J. Toulantis Employees’ Retirement Plan 4.00 $ 38,848 —
Joseph J. Lombardi N/A — — —
William F. Duffy Employees’ Retirement Plan 7.00 $ 2,496 —
Effective as of January 1, 2000, the “Retirement Plan”, a tax-qualified defined
benefit plan which had covered substantially all of the Company’s employees, was
amended to “freeze” benefits. Accordingly, participants as of December 31, 1999
no longer earned benefits for service with the Company and no new employees
became participants in the Retirement Plan after that date. Service with the
Company after December 31, 1999 continues to be taken into account for
determining whether participants are vested in their accrued benefits on
December 31, 1999, if they were not vested on that date. The Retirement Plan
continues to pay benefits in accordance with its provisions as in effect on
December 31, 1999.
A participant’s annual benefit payable at normal retirement age (65) is equal to
the sum of:
(i) 0.7% of the participant’s five-year average annual pay up to the Social
Security-covered compensation limit, multiplied by the participant’s years
of credited service; and
(ii) 1.3% of the participant’s five-year average annual pay in excess of
Social Security-covered compensation limit, multiplied by the
participant’s years of credited service.
For purposes of the Retirement Plan, pay is the sum of the participant’s base
compensation, overtime, bonus and commissions. Pay under the Retirement Plan
does not include any amounts paid on or after January 1, 2000, and is limited to
the Internal Revenue Code maximum amount permitted for 1999 ($160,000) and
previous years.
The calculation of the present value of accumulated benefit shown in the Pension
Benefits Table assumes a discount rate of 6.25% and mortality under the 1995
George B. Buck Mortality Table.
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Benefits under the Retirement Plan are generally not payable as a lump sum; they
are paid as a monthly annuity for the life of the retiree. Participants who
retire at the later of normal retirement age or the completion of five years of
service receive an unreduced benefit. Participants may elect early retirement
with reduced benefits after attaining age 55 and completing five years of
vesting service. An immediate benefit is payable at early retirement equal to
the normal retirement benefit, reduced by an annual reduction factor of 6-2/3%
for each of the first five years and 3-1/3% for each of the next five years that
payment commences prior to normal retirement age.
Participants may elect payment in the form of a 50%, 75% or 100% joint and
survivorship annuity or in the form of a ten-year certain and life annuity.
Election of these payment forms will result in a lower annuity payment during
the retiree’s life.
Non-Qualified Deferred Compensation
Aggregate
Executive Registrant Aggregate Aggregate Balance at
Contributions in Contributions in Earnings in Withdrawals/ Last Fiscal
Last Fiscal Year Last Fiscal Year Last Fiscal Year Distributions Year End
Name (a) (b) (c) (d) (e) (f)
Leonard Riggio — — — — —
Stephen Riggio — — — — —
Mitchell S. Klipper — — — — —
Marie J. Toulantis — — — — —
Joseph J. Lombardi — — — — —
William F. Duffy(1) $ 50,000 — $ (3,059 ) $ 67,339 $ 172,535
(1) This amount is from salary deferred by the executive and has been included in
the “Summary Compensation Table” on page 24.
The Company has a Deferred Compensation Plan that permits employees with an
annual salary in excess of $160,000 ($130,000 prior to May 1, 2006) to elect to
defer receipt of up to 50% of annual salary and up to 100% of bonus. The minimum
annual salary deferral is $5,000 (unless the participant is hired or first
eligible for the Deferred Compensation Plan after March 31) and the minimum
annual bonus deferral is $2,500.
Deferred amounts are credited to accounts for participants under the Deferred
Compensation Plan. Participants direct the deemed investment of their accounts
among Fidelity Investments mutual funds. Participants may change the deemed
investment of their accounts at any time.
Payments from the Deferred Compensation Plan may be made, as elected by
participants, at: (i) retirement (age 55 or later with at least five years of
service); (ii) termination of employment; or (iii) the beginning of a designated
year, not earlier than three years after the deferral is made, and not later
than the year in which the participant would attain the age of 70-1/2. Payments
are accelerated if a participant is disabled and in the event of a change of
control. In addition, a participant may make a hardship withdrawal for financial
emergency if the participant’s request is approved by the Compensation
Committee. Amounts deferred prior to 2005 (and related earnings) may also be
withdrawn by a participant at any time subject to a 10% penalty. A participant’s
account under the Deferred Compensation Plan is paid in a lump sum, except for
payments on retirement which may be made in equal annual installments for a
period of up to 15 years if elected by the participant.
William F. Duffy is the only named executive officer who currently participates
in the Deferred Compensation Plan.
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Potential Payments Upon Termination or Change of Control(1)
Leonard Stephen Mitchell S. Marie J. Joseph J. William F.
Event Riggio Riggio Klipper Toulantis Lombardi Duffy
Involuntary
Termination
Cash severance
payment(2) — (3) $ 6,165,156 $ 5,518,920 $ 4,048,967 $ 300,000 — (3)
Accelerated stock
options(4) — — — 51,750 — —
Accelerated restricted
stock(5) — — — — — —
Total — $ 6,165,156 $ 5,518,920 $ 4,100,717 $ 300,000 —
Death
Accelerated stock
options(4) — — — $ 51,750 — —
Accelerated restricted
stock(5) $ 833,191 $ 1,289,158 $ 3,192,150 1,980,648 $ 620,469 $ 139,115
Health benefits(6) 2,565 3,586 3,586 2,565 3,586 3,586
Total $ 835,756 $ 1,292,744 $ 3,195,736 $ 2,034,963 $ 624,055 $ 142,701
Disability
Accelerated stock
options(4) — — — $ 51,750 — —
Accelerated restricted
stock(5) $ 833,191 $ 1,289,158 $ 3,192,150 1,980,648 $ 620,469 $ 139,115
Health benefits(7) 4,763 6,511 6,511 4,763 6,511 6,511
Total $ 837,954 $ 1,295,669 $ 3,198,661 $ 2,037,161 $ 626,980 $ 145,626
Change of Control with
Involuntary
Termination or
Voluntary with Good
Reason
Cash severance
payment(2) — (3) $ 9,247,734 $ 8,278,380 $ 6,073,450 $ 300,000 — (3)
Accelerated stock
options(8) — — 122,567 51,750 11,440 9,915
Accelerated restricted
stock(5) $ 833,191 $ 1,289,158 $ 3,192,150 $ 1,980,648 $ 620,469 $ 139,115
Excise tax gross-up N/A N/A N/A N/A N/A N/A
Total $ 833,191 $ 10,536,892 $ 11,593,097 $ 8,105,848 $ 931,909 $ 149,030
(1) The values in this table reflect estimated payments associated with various
termination scenarios, assumes a stock price of $34.03 (based on the closing
price of the Company’s common stock as of the end of fiscal 2007, except
where otherwise noted) and includes all outstanding grants through the
assumed termination date of February 2, 2008. Actual value will vary based on
changes in the Company’s common stock price.
(2) With the exception of Mr. Lombardi, cash severance equal to the sum of the
executive’s annual salary plus annual bonus for the most recently completed
fiscal year (assumes bonus for fiscal 2007 that was paid in fiscal 2008) plus
the aggregate annual benefit dollar amount times the executive’s severance
multiple as follows: two times for non-change of control and three times for
change of control for Mr. Klipper, Mr. S. Riggio and Ms. Toulantis.
Mr. Lombardi would receive cash severance equal to six months’ base salary.
(3) Mr. Leonard Riggio and Mr. Duffy do not have formal severance arrangements
with the Company. Any severance payments would be provided at the Board’s
discretion.
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(4) Under the Company’s 2004 Incentive Plan, all unvested options are forfeited
upon an involuntary termination, death or disability except for awards
granted in connection with Mr. Klipper and Ms. Toulantis’ employment
agreements. Under these agreements, any unvested options granted as part of
these agreements will vest upon an involuntary termination, death or
disability. Note that all of Mr. Klipper’s option awards made under his
agreement have already vested. Ms. Toulantis has 25,000 options that are
unvested as part of her employment agreement. The value represents the
intrinsic value (defined as the difference between a $34.03 stock price, the
closing price of the Company’s common stock as of the end of fiscal 2007, and
the exercise price of the option multiplied by the number of unvested option
shares) of unvested stock options that would vest in the event of an
involuntary termination, death or disability.
(5) Represents the value of unvested shares that would automatically vest upon a
termination due to death, disability or termination following a change of
control. Unvested shares are forfeited upon an involuntary termination or
termination for cause.
(6) The Company provides three months of COBRA premiums for medical and dental
coverage following death.
(7) The Company provides a seven-month subsidy of COBRA premiums for medical and
dental coverage following termination due to disability.
(8) Under the Company’s 2004 Incentive Plan, all unvested options vest upon a
change of control. The value represents the intrinsic value (based on a
$34.03 stock price, the closing price of the Company’s common stock as of the
end of fiscal 2007) of unvested stock options that would vest in the event of
a change of control.
The amounts shown in the table above in the event of involuntary termination
were calculated assuming that the termination of employment of each named
executive officer occurred on the last day of fiscal 2007 (February 2, 2008).
The amounts shown in the table above in the event of a change of control were
calculated assuming that a change of control occurred on the last day of fiscal
2007 and each named executive officer’s employment terminated on that date due
to involuntary termination or for good cause.
In addition to the amounts shown in the above table, in the event of a change of
control the named executive officers would be entitled to exercise their vested
stock options as shown in the “Option Awards-Number of Securities Underlying
Unexercised Options-Exercisable” column of the Outstanding Equity Awards at
Fiscal Year-End table on page 27 of this Proxy Statement.
For a summary of the provisions of the employment agreements with Stephen
Riggio, Mitchell S. Klipper and Marie J. Toulantis that affect the amounts set
forth in the table above in the event of involuntary termination or a change of
control, see the discussion under “Employment Agreements” and “Change of
Control/Severance Benefits in Employment Agreements” in the Compensation
Discussion and Analysis on page 21 of this Proxy Statement.
For purposes of the employment agreements, involuntary termination by the
Company of the named executive officer’s employment means termination other than
due to death, disability or cause (conviction of a felony that impacts the
performance of the named executive officer’s duties or involving a crime of
moral turpitude; misappropriation or embezzlement in the performance of duties;
or willfully engaging in conduct materially injurious to the Company that is in
violation of obligations under the agreement and continues for at least 30 days
after written notice from the Company that specifies the violation in reasonable
detail). Good cause is defined in the employment agreements as a material
modification of duties, titles or direct reports; a material reduction in
compensation and benefits; or the relocation of the Company’s principal
executive offices to a location outside of the New York City metropolitan area.
Under the agreements, change of control is defined as the acquisition by any
person or group (other than named executive officer or Leonard Riggio or any of
his heirs or affiliates) of 40% or more of the Company’s voting securities; the
Company’s directors immediately prior to a merger, consolidation, liquidation or
sale of
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assets cease within two years thereafter to be a majority of the board of
directors; or the Company’s directors immediately prior to a tender or exchange
offer for the Company’s voting securities cease within two years thereafter to
be a majority of the board of directors.
All outstanding stock options and restricted stock awards held by the Company’s
employees would vest immediately in the event of a change of control, including
those held by the named executive officers. The stock option and restricted
stock award agreements define change of control as: (i) a change of control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934; (ii) a
merger or consolidation of the Company with another company; or (iii) a sale of
substantially all of the assets of the Company to another company.
Director Compensation
Change in Pension
Value and
Non-Qualified
Fees Earned Non-Equity Deferred
or Paid in Stock Stock Incentive Plan Compensation All Other
Name Cash(1) Awards(2) Options(2) Compensation Earnings Compensation Total
Matthew A. Berdon $ 52,500 $ 11,674 $ 68,956 — — — $ 133,130
Michael J. Del Giudice $ 83,750 $ 11,674 $ 42,938 — — — $ 138,362
William Dillard II $ 70,000 $ 11,674 $ 68,956 — — — $ 150,630
Patricia L. Higgins $ 105,000 $ 14,999 $ 74,467 — — — $ 194,466
Irene R. Miller $ 45,000 $ 11,674 $ 68,956 — — — $ 125,630
Margaret T. Monaco $ 57,500 $ 11,674 $ 68,956 — — — $ 138,130
William F. Reilly $ 55,000 $ 11,674 $ 164,661 — — — $ 231,335
Lawrence S. Zilavy $ 45,000 $ 14,999 $ 74,467 — — — $ 134,466
(1) This column represents the amount of cash compensation earned during fiscal
2007. Effective November 1, 2007, non-employee Directors received an annual
board retainer fee of $50,000. Audit Committee members received an additional
$15,000 annual cash retainer, and the Chair of the Audit Committee received
an additional $25,000 annual cash retainer. Compensation Committee members
received an additional $10,000 annual cash retainer, and the Chair of the
Compensation Committee received an additional $17,500 annual cash retainer.
Corporate Governance and Nominating Committee members received an additional
$10,000 annual cash retainer, and the Chair of the Corporate Governance and
Nominating Committee received an additional $15,000 annual cash retainer. All
Directors are also reimbursed for travel, lodging and related expenses
incurred in attending Board meetings. Mr. William Sheluck, Jr. (deceased) was
paid $85,000 for fiscal 2007 board, committee and lead director fees. In
light of his lengthy and distinguished service to the Board and to the
Company, by resolution of the Board, Mr. William Sheluck, Jr.’s estate was
paid one year of director fees, including all committee fees and lead
director fees to which he would have been entitled in fiscal 2008, in the
total amount of $100,000. Additionally, Mr. William Sheluck, Jr.’s (deceased)
unvested stock options, in the total amount of 10,000 options, were vested as
of February 12, 2008. The exercise period for all of Mr. Sheluck’s stock
options was extended to two years from the date of his death. The total
additional stock compensation expense recorded in February 2008 for the
modification of Mr. Sheluck’s options was $136,065.
(2) This column represents the dollar amount recognized for financial statement
reporting purposes (under SFAS 123R) with respect to fiscal 2007 restricted
stock and stock option awards as well as for restricted stock and stock
option awards granted in prior fiscal years. The assumptions used in
calculating these amounts are set forth in Note 3 to the Company’s Financial
Statements for the fiscal year ending February 2, 2008 which is located on
page F-27 of the Company’s Annual Report on Form 10-K. The values in this
column represent the accounting expense values incurred during the fiscal
year and may not be equivalent to the actual value recognized by the
non-employee Directors. Refer to the Fiscal Year 2007 Non-Employee Director
Equity Award Table below for information on awards made in fiscal 2007.
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The table below illustrates the fair market value of the fiscal 2007 restricted
stock awards and fiscal 2007 stock options awards on the date of grant and the
aggregate number of awards outstanding at fiscal year end for each non-employee
Director.
Fiscal Year 2007 Non-Employee Director Equity Award Table
2007
Restricted 2007 Stock
Stock Option Aggregate Aggregate
Grant Grant Shares Options
Director Value* Value* Outstanding Outstanding
Matthew A. Berdon $ 100,000 — 2,681 76,612
Michael J. Del Giudice $ 100,000 — 2,681 44,536
William Dillard II $ 100,000 — 2,681 104,918
Patricia L. Higgins $ 100,000 — 2,681 20,000
Irene R. Miller $ 100,000 — 2,681 38,306
Margaret T. Monaco $ 100,000 — 2,681 90,765
William F. Reilly $ 100,000 $ 232,200 2,681 20,000
Lawrence S. Zilavy $ 100,000 — 2,681 20,000
* On November 1, 2007, the non-employee Directors received a grant of 2,681
restricted shares of Company common stock vesting in equal annual installments
on the first through the third anniversaries of the date of grant. In
connection with becoming a Director, Mr. Reilly received 20,000 stock options
of which 10,000 became exercisable on May 9, 2007, 5,000 became exercisable on
April 1, 2008 and 5,000 become exercisable on April 1, 2009.
Mr. William Sheluck, Jr.’s (deceased) unvested stock options, in the total
amount of 10,000 options, were vested as of February 12, 2008. The exercise
period for all of Mr. Sheluck’s stock options was extended to two years from the
date of his death. The total additional stock compensation expense recorded in
February 2008 for the modification of Mr. Sheluck’s options was $136,065.
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PERFORMANCE GRAPH
The following table compares the cumulative total stockholder return on the
Common Stock for the period commencing January 31, 2003 through February 1, 2008
(the last trading date of fiscal 2007) with the cumulative total return on the
Standard & Poor’s 500 Stock Index (the “S&P 500”) and the Dow Jones Retailers,
Other Specialty Industry Group Index (the “Dow Jones Specialty Retailers Index”)
over the same period. Total return values were calculated based on cumulative
total return assuming (i) the investment of $100 in the Common Stock, the S&P
500 and the Dow Jones Specialty Retailers Index on January 31, 2003 and
(ii) reinvestment of dividends.
[[Image Removed: LOGO]]
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company believes that the transactions and agreements discussed below
(including renewals of any existing agreements) between the Company and related
third parties are at least as favorable to the Company as could have been
obtained from unrelated parties. The Audit Committee of the Board of Directors
is designated to approve in advance any new proposed transaction or agreement
with related parties and utilizes procedures in evaluating the terms and
provisions of such proposed transaction or agreements as are appropriate in
accordance with the fiduciary duties of directors under Delaware law.
The Company has leases for two locations for its corporate offices with related
parties: the first location is leased from an entity in which Leonard Riggio has
a majority interest and expires in 2013; the second location is leased from an
entity in which Leonard Riggio has a minority interest and expires in 2016. The
space was rented at an aggregate annual rent including real estate taxes of
approximately $4,603,000, $4,559,000 and $4,532,000 in fiscal years 2007, 2006
and 2005, respectively. Rent per square foot is currently estimated to be at or
below market.
The Company leases an office/warehouse from a partnership in which Leonard
Riggio has a 50% interest, pursuant to a lease expiring in 2023. The space was
rented at an annual rent of $738,000, $727,000 and $760,000 in fiscal years
2007, 2006 and 2005, respectively. Net of subtenant income, the Company paid
$258,000, $260,000 and $312,000 in fiscal years 2007, 2006 and 2005,
respectively.
The Company leases retail space in a building in which B&N College, a company
owned by Leonard Riggio, subleases space from the Company, pursuant to a
sublease expiring in 2020. Pursuant to such sublease, the Company charged B&N
College $840,000, $884,000 and $872,000 for such subleased space and other
operating costs incurred on its behalf during fiscal years 2007, 2006 and 2005,
respectively. The amount paid by B&N College to the Company approximates the
cost per square foot paid by the Company to its unaffiliated third-party
landlord.
The Company purchases new and used textbooks at market prices directly from MBS
Textbook Exchange, Inc. (“MBS”), a corporation majority-owned by Leonard Riggio.
Total purchases were $7,539,000, $6,945,000 and $19,129,000 for fiscal years
2007, 2006 and 2005, respectively. MBS distributes certain proprietary products
on behalf of the Company for which the Company is paid a commission. Total
commissions received were $419,000, $362,000 and $321,000 for fiscal years 2007,
2006 and 2005, respectively.
In fiscal 2006, MBS began selling used books as part of the Barnes & Noble.com
dealer network. MBS pays Barnes & Noble.com the same commission as other dealers
in the Barnes & Noble dealer network. Barnes & Noble.com earned a commission of
$1,598,000 and $1,626,000 on the MBS used book sales in fiscal 2007 and 2006,
respectively. In addition, Barnes & Noble.com maintains a link on its website
which is hosted by MBS and through which Barnes & Noble.com customers are able
to sell used books directly to MBS. Barnes & Noble.com is paid a commission
based on the price paid by MBS to the customer. Total commissions paid to
Barnes & Noble.com were $81,000, $34,000, and $46,000 for fiscal years 2007,
2006 and 2005, respectively.
The Company licenses the “Barnes & Noble” name under a royalty-free license
agreement dated February 11, 1988, as amended, from B&N College. Barnes &
Noble.com licenses the “Barnes & Noble” name under a royalty-free license
agreement, dated October 31, 1998, as amended, between Barnes & Noble.com and
B&N College (the “License Agreement”). Pursuant to the License Agreement,
Barnes & Noble.com has been granted an exclusive license to use the “Barnes &
Noble” name and trademark in perpetuity for the purpose of selling books over
the Internet (excluding sales of college textbooks). Under a separate agreement
dated as of January 31, 2001, between Barnes & Noble.com, B&N College and
Textbooks.com, Inc. (“Textbooks.com”), a corporation owned by Leonard Riggio,
Barnes & Noble.com was granted the right to sell college textbooks over the
Internet using the “Barnes & Noble” name. Pursuant to this agreement, Barnes &
Noble.com pays Textbooks.com a royalty on revenues (net of product returns,
applicable sales tax and excluding shipping and
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handling) realized by Barnes & Noble.com from the sale of books designated as
textbooks. The current term of the agreement is through January 31, 2010 and
renews annually for additional one-year periods unless terminated 12 months
prior to the end of any given term. Royalty expense was $4,864,000, $3,916,000
and $4,870,000 for fiscal years 2007, 2006 and 2005, respectively, under the
terms of this agreement.
The Company reimbursed B&N College certain operating costs B&N College incurred
on the Company’s behalf. These charges were $200,000, $248,000 and $198,000 for
fiscal 2007, 2006 and 2005, respectively. B&N College purchased inventory, at
cost plus an incremental fee, of $50,597,000, $48,574,000 and $49,997,000 from
the Company during fiscal 2007, 2006 and 2005, respectively. B&N College
reimbursed the Company $4,889,000, $2,698,000 and $2,527,000 for fiscal years
2007, 2006 and 2005, respectively, for capital expenditures, business insurance
and other operating costs incurred on its behalf.
The Company uses a jet aircraft owned by B&N College and pays for the costs and
expenses of operating the aircraft based upon the Company’s usage. Such costs
which include fuel, insurance and other costs were $1,921,000, $1,722,000 and
$2,590,000 during fiscal 2007, 2006 and 2005, respectively.
GameStop, a company in which Leonard Riggio is a member of the Board of
Directors and a minority shareholder, operates departments within some of the
Company’s bookstores. GameStop pays a license fee to the Company in an amount
equal to 7% of the gross sales of such departments, which totaled $1,221,000,
$996,000 and $857,000 during fiscal 2007, 2006 and 2005, respectively.
In fiscal 2005, GameStop began selling new and used video games and consoles on
the Barnes & Noble.com website. Barnes & Noble.com receives a commission on
sales made by GameStop. For fiscal years 2007, 2006 and 2005, the commission
earned by Barnes & Noble.com was $447,000, $343,000 and $264,000, respectively.
Until June 2005, GameStop participated in the Company’s worker’s compensation,
property and general liability insurance programs. The costs incurred by the
Company under these programs were allocated to GameStop based upon GameStop’s
total payroll expense, property and equipment, and insurance claim history.
GameStop reimbursed the Company for these services $289,000, $838,000 and
$1,726,000 during fiscal 2007, 2006 and 2005, respectively. Although GameStop
secured its own insurance coverage, costs are continuing to be incurred by the
Company on insurance claims which were made under its programs prior to June
2005 and any such costs applicable to insurance claims against GameStop will be
charged to GameStop at the time incurred.
On October 1, 2004, the Company’s independent directors approved an overall plan
for the complete disposition of all of its Class B common stock in GameStop.
This disposition was completed in two steps. The first step in the disposition
was completed on October 1, 2004 and included the sale of 6,107,338 shares of
GameStop Class B common stock held by the Company to GameStop (the Stock Sale)
for an aggregate consideration of $111,520,000. This consideration included a
$74,020,000 note payable to the Company, $12,173,000 of which was received in
each of the last three fiscal years. The second step in the disposition was the
spin-off by the Company of its remaining 29,901,662 shares of GameStop’s Class B
common stock (the “Spin-Off”). The Spin-Off was completed on November 12, 2004
with the distribution of 0.424876232 of a share of GameStop Class B common stock
as a tax-free distribution on each outstanding share of the Company’s common
stock to the Company’s stockholders of record as of the close of business on
November 2, 2004.
The Company is provided with national freight distribution, including trucking
services by the Argix Direct Inc. (“Argix”) (formerly the LTA Group, Inc.), a
company in which a brother of Leonard and Stephen Riggio owns a 20% interest,
pursuant to a transportation agreement expiring in 2012. The Company paid Argix
$18,953,000, $20,524,000 and $20,120,000 for such services during fiscal years
2007, 2006 and 2005, respectively. The Company believes the cost of freight
delivered to the stores is comparable to the prices charged
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by publishers and other third-party freight distributors. Argix subleases
warehouse space from the Company in Jamesburg, New Jersey, pursuant to a
sublease expiring in 2011. The Company charged Argix $2,642,000, $2,005,000 and
$1,993,000 for such subleased space and other operating costs incurred on its
behalf during fiscal 2007, 2006 and 2005, respectively. Rent per square foot is
currently estimated to be at or above market.
The Company uses Source Interlink Companies, Inc. (“Source Interlink”) as its
primary supplier of music and DVD/video, as well as magazines and newspapers.
Leonard Riggio is an investor in an investment company that owns a minority
interest in Source Interlink. The Company paid Source Interlink $438,159,000,
$442,685,000 and $383,382,000 for merchandise purchased at market prices during
fiscal 2007, 2006 and 2005, respectively. In addition, during fiscal 2005,
Source Interlink spun-off its Digital on Demand subsidiary, which provides
database equipment and services to the Company. Leonard Riggio owns a minority
interest in Digital on Demand through the same investment company through which
he owns a minority interest in Source Interlink. The Company paid Digital on
Demand $4,396,000, $4,705,000 and $4,974,000 for database equipment and services
during fiscal 2007, 2006 and 2005, respectively. The Company believes the cost
charged by Digital on Demand is comparable to other suppliers. Outstanding
amounts payable to Source Interlink for merchandise purchased were $58,822,000
and $68,048,000 as of February 2, 2008 and February 3, 2007, respectively.
Legal Proceedings
The Company is involved in a variety of claims, suits, investigations and
proceedings that arise from time to time in the ordinary course of its business,
including actions with respect to contracts, intellectual property (IP),
taxation, employment, benefits, securities, personal injuries and other matters.
The results of these proceedings in the ordinary course of business are not
expected to have a material adverse effect on the Company’s consolidated
financial position or results of operations.
The following is a discussion of the material legal matters involving the
Company.
In re Barnes & Noble, Inc. Derivative Litigation
In July and August 2006, four putative stockholder derivative actions were filed
in New York County Supreme Court against certain members of the Company’s Board
of Directors and certain current and former executive officers of the Company,
alleging breach of fiduciary duty and unjust enrichment in connection with the
grant of certain stock options to certain executive officers and directors of
the Company. These actions were subsequently consolidated under the caption In
re Barnes & Noble, Inc. Derivative Litigation (the “State Derivative Action”).
The Company is named as a nominal defendant only. The consolidated complaint
sought on behalf of the Company unspecified money damages, disgorgement of any
proceeds from the exercise of the options that are the subject of the action
(and any subsequent sale of the underlying stock), rescission of any unexercised
stock options, other equitable relief, and costs and disbursements, including
attorneys’ fees. The Company filed a motion to dismiss the consolidated
complaint. On May 4, 2007, the court heard argument on the Company’s motion. The
motion was voluntarily withdrawn, subject to the right of re-filing, to permit
the parties to pursue efforts to resolve the dispute amicably without the need
for any decision on the motion.
In September 2006, three putative stockholder derivative actions were filed in
the United States District Court for the Southern District of New York naming
the directors of the Company and certain current and former executive officers
as defendants and alleging that the defendants backdated certain stock option
grants to executive officers and caused the Company to file false or misleading
financial disclosures and proxy statements. These actions were subsequently
consolidated under the caption In re Barnes & Noble, Inc. Shareholders
Derivative Litigation (the “Federal Derivative Action”). The consolidated
complaint purports to set forth claims under Section 14(a) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and under Delaware law for breach of
fiduciary duty, insider trading, unjust enrichment, rescission, accounting,
gross mismanagement, abuse of control, and waste of corporate assets. The
Company is named as a nominal defendant only. The consolidated complaint seeks
on behalf of the Company unspecified money damages, disgorgement of any proceeds
from the
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exercise of the options that are the subject of the action (and any subsequent
sale of the underlying stock), rescission of any unexercised stock options,
other equitable relief, and costs and disbursements, including attorneys’ fees.
The Company filed a motion to dismiss the consolidated complaint, but no
decision has been issued in light of the parties’ efforts to resolve the matter
through out-of-court settlement.
On September 6, 2007, the parties in the State Derivative Action and in the
Federal Derivative Action signed a Stipulation of Compromise and Settlement (the
“Settlement Agreement”) with respect to these matters. In entering into the
Settlement Agreement, neither Barnes & Noble nor any of the named defendants has
admitted to any liability or wrongdoing. Under the terms of the Settlement
Agreement, which is subject to court approval, the Company will institute
certain corporate governance and internal control measures and will pay
plaintiffs’ attorneys’ fees and expenses in the total amount of $2,750,000.
On November 14, 2007, upon notice duly given to the Company’s shareholders, a
hearing was held in the State Derivative Action regarding the terms of the
Settlement Agreement. No objections were filed, and no shareholder appeared to
contest any aspect of the Settlement Agreement. At the hearing, the court issued
an order approving the settlement subject only to a determination by a Special
Referee as to the reasonableness of plaintiffs’ attorneys’ fees and expenses.
Following a conference before the Special Referee on January 2, 2008, the
Special Referee determined that the requested attorneys’ fees and expenses were
reasonable. The Court in the State Derivative Action has not yet issued a final
order approving the settlement. Once that order issues, the parties will move
voluntarily to dismiss the Federal Derivative Action.
In re Initial Public Offering Securities Litigation
The class action lawsuit In re Initial Public Offering Securities Litigation
filed in the United States District Court for the Southern District of New York
in April 2002 (the “Action”) named over one thousand individuals and 300
corporations, including Fatbrain.com, LLC (“Fatbrain”) (a subsidiary of Barnes &
Noble.com) and its former officers and directors. The amended complaints in the
Action all allege that the initial public offering registration statements filed
by the defendant issuers with the SEC, including the one filed by Fatbrain, were
false and misleading because they failed to disclose that the defendant
underwriters were receiving excess compensation in the form of profit sharing
with certain of its customers and that some of those customers agreed to buy
additional shares of the defendant issuers’ common stock in the after market at
increasing prices. The amended complaints also allege that the foregoing
constitute violations of: (i) Section 11 of the Securities Act of 1933, as
amended (the “Securities Act”) by the defendant issuers, the directors and
officers signing the related registration statements, and the related
underwriters; (ii) Rule 10b-5 promulgated under the Exchange Act by the same
parties; and (iii) the control person provisions of the Securities and Exchange
Acts by certain directors and officers of the defendant issuers. A motion to
dismiss by the defendant issuers, including Fatbrain, was denied.
After extensive negotiations among representatives of plaintiffs and defendants,
the parties entered into a memorandum of understanding (“MOU”), outlining a
proposed settlement resolving the claims in the Action between plaintiffs and
the defendants issuers. Subsequently a settlement agreement was executed between
the defendants and plaintiffs in the Action, the terms of which are consistent
with the MOU. The settlement agreement was submitted to the court for approval
and on February 15, 2005, the judge granted preliminary approval of the
settlement.
On December 5, 2006, the federal appeals court for the Second Circuit issued a
decision reversing the District Court’s class certification decision in six
focus cases. In light of that decision, the District Court has stayed all
proceedings, including consideration of the settlement. Plaintiffs then filed,
in January 2007, a Petition for Rehearing En Banc before the Second Circuit,
which was denied in April 2007. On May 30, 2007, Plaintiffs moved, before the
District Court, to certify a new class. On June 25, 2007, the District Court
entered an order terminating the settlement agreement.
While a new settlement may be reached, in the event that one is not, the Company
intends to vigorously defend this lawsuit.
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Barnesandnoble.com LLC v. Yee, et al.
On December 21, 2007, Barnes & Noble.com filed a complaint in the United States
District Court for the Eastern District of California for declaratory and
injunctive relief against the members of the California Board of Equalization
(the “BOE”) and others. The complaint seeks a declaration that the actions of
the State of California in seeking to impose California sales and use tax on the
sales of Barnes & Noble.com for the period of May 1, 2000 through March 31, 2004
in the amount of approximately $17 million, plus interest and penalties, violate
the Commerce Clause and the First Amendment of the United States Constitution,
as well as the California Administrative Procedures Act. This assessment is also
the subject of an administrative protest filed by Barnes & Noble.com. Barnes &
Noble.com is also challenging another earlier assessment by the BOE in the
amount of approximately $700,000, plus interest and penalties, for the period of
November 15, 1999 through January 31, 2000. This earlier assessment was struck
down by a decision of the California Superior Court on September 7, 2007 in
favor of Barnes & Noble.com, and the BOE filed an appeal which is still pending.
Independent Registered Public Accountants
The firm of BDO Seidman, LLP (“BDO Seidman”) has been selected as independent
registered public accountants for the Company. The independent registered public
accountants examine annual financial statements and provide other non-audit and
tax-related services for the Company. The Company and the Audit Committee have
considered whether other non-audit services provided by BDO Seidman are
compatible with maintaining the independence of BDO Seidman in its audit of the
Company and are not considered prohibited services under the Sarbanes-Oxley Act
of 2002.
Audit Fees. For fiscal 2007, the Company was billed $1,143,400 by BDO Seidman
for professional services rendered for the Company’s audit of the annual
financial statements and management’s assessment of internal controls and for
reviews of the Company’s financial statements included in the Company’s
quarterly reports on Form 10-Q filed with the SEC. For fiscal 2006, the Company
was billed $1,218,531 by BDO Seidman for professional services rendered for the
Company’s audit of the annual financial statements and management’s assessment
of internal controls and for reviews of the Company’s financial statements
included in the Company’s quarterly reports on Form 10-Q filed with the SEC.
Audit-Related Fees. In fiscal 2007, the Company was billed $13,900 for
consultation concerning financial accounting and reporting standards. The
Company was also billed $32,000 for employee benefit plan audits in fiscal 2007.
In fiscal 2006, the Company was billed $408,790 for consultation concerning
financial accounting and reporting standards. The Company was also billed
$28,000 for employee benefit plan audits in fiscal 2006.
Tax Fees. In fiscal 2007, the Company was billed $299,512 by BDO Seidman for tax
fees. In fiscal 2006, the Company was billed $56,177 by BDO Seidman for tax
fees.
All Other Fees. The Company was not billed by BDO Seidman for any other fees in
fiscal 2007 and fiscal 2006.
Pre-approval Policies and Procedures. The Audit Committee Charter adopted by the
Board of Directors of the Company requires that, among other things, the Audit
Committee pre-approve the rendering by the Company’s independent auditor of all
audit and permissible non-audit services. The Audit Committee has approved all
of the services provided by BDO Seidman referred to above. The Audit Committee
has also authorized the Company’s management in advance to engage the Company’s
independent auditor from time to time in the future to perform certain services
in areas pre-approved by the Audit Committee that at any one time will not
involve more than $25,000 per project and more than $50,000 in the aggregate.
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AUDIT COMMITTEE REPORT
The Audit Committee reviews the Company’s financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and reporting process. The Company’s independent auditors
are responsible for expressing an opinion on the conformity of the Company’s
audited financial statements to generally accepted accounting principles and the
effectiveness of the Company’s internal controls over financial reporting.
In this context, the Audit Committee has reviewed and discussed with management
and the independent auditors the Company’s audited financial statements. The
Audit Committee has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, as amended
(Communication with Audit Committees). In addition, the Audit Committee has
received from the independent auditors the written disclosures and letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and discussed with them their independence
from the Company and its management.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the Company’s audited financial statements and management’s report on
internal controls be included in the Company’s Annual Report on Form 10-K for
the fiscal year ended February 2, 2008 for filing with the SEC.
Audit Committee
Patricia L. Higgins, Chair
Michael J. Del Giudice
Margaret T. Monaco
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PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Audit Committee has appointed the firm of BDO Seidman, LLP, which firm was
engaged as independent certified public accountants for the fiscal year ended
February 2, 2008, to audit the financial statements of the Company for the
fiscal year ending January 31, 2009. A proposal to ratify this appointment is
being presented to the stockholders at the Meeting. A representative of BDO
Seidman will be present at the Meeting and will have the opportunity to make a
statement and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS CONSIDERS BDO SEIDMAN TO BE WELL QUALIFIED AND RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR RATIFICATION. PROXIES SOLICITED BY THIS PROXY
STATEMENT WILL BE VOTED FOR THE PROPOSAL UNLESS A VOTE AGAINST THE PROPOSAL OR
ABSTENTION IS SPECIFICALLY INDICATED.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s executive officers and
Directors, and persons who own more than 10 percent of a registered class of the
Company’s equity securities, to file initial statements of beneficial ownership
(Form 3) and statements of changes in beneficial ownership (Forms 4 and 5) of
Common Stock of the Company with the SEC. Executive officers, Directors and
greater than 10-percent stockholders are required to furnish the Company with
copies of all such forms they file.
To the Company’s knowledge, based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no additional forms were required, all filing requirements applicable to
its executive officers, Directors and greater than 10-percent stockholders were
complied with.
OTHER MATTERS
The Company does not intend to present any other business for action at the
Meeting and does not know of any other business intended to be presented by
others. If any matters other than the matters described in the Notice of Annual
Meeting of Stockholders and this Proxy Statement should be presented for
stockholder action at the Meeting, it is the intention of the persons designated
in the proxy to vote thereon according to their best judgment.
Proxy Solicitation. Solicitation may be made personally, by telephone, by
telegraph or by mail by officers and employees of the Company who will not be
additionally compensated for any such services. In addition, the Company has
retained MacKenzie Partners, Inc. to assist with the solicitation of proxies for
a fee not to exceed $30,000, plus reimbursement for out-of-pocket expenses. The
Company will request persons such as brokers, nominees and fiduciaries holding
stock in their names for others, or holding stock for others who have the right
to give voting instructions, to forward proxy materials to their principals and
request authority for the execution of the proxy. The Company will reimburse
such persons for their expenses in so doing. The Company is bearing all costs of
this solicitation.
Financial and Other Information. The Company’s Annual Report for the fiscal year
ended February 2, 2008, including financial statements, is being sent to
stockholders together with this Proxy Statement.
Stockholder Proposals. Proposals of stockholders intended to be included in the
proxy materials for the annual meeting of stockholders to be held in 2009 must
be received by the Company’s Corporate Secretary, at Barnes & Noble, Inc., 122
Fifth Avenue, New York, New York 10011, no later than December 25, 2008.
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In addition, the Company’s Bylaws provide that, in order for a stockholder to
propose business for consideration at such meeting, such stockholder must give
written notice to the Corporate Secretary of the Company not less than 30 days
nor more than 60 days prior to the meeting; provided, however, that in the event
that less than 40 days notice or prior public disclosure of the date of the
meeting is given to stockholders, notice by the stockholder must be given not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such notice must contain the proposing stockholder’s record name and
address, and the class and number of shares of the Company which are
beneficially owned by such stockholder. Such notice must also contain: (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, and
(ii) any material interest of the proposing stockholder in such business.
STOCKHOLDERS ARE URGED TO FORWARD THEIR PROXIES WITHOUT DELAY. A PROMPT RESPONSE
WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
LEONARD RIGGIO
Chairman
April 24, 2008
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[x] Votes must be indicated Please Mark, Sign, Date and Return this Proxy Card Promptly Using the Enclosed Envelope. Please [ ]
(x) in Black or Blue ink. Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
1. ELECTION OF DIRECTORS
WITHHOLD
AUTHORITY
FOR all to vote for
Nominees: nominees all nominees *EXCEPTIONS
01 Stephen Riggio [ ] [ ] [ ]
02 George Campbell Jr.
03 Margaret T. Monaco
04 William F. Reilly
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the “Exceptions” box and write that nominee’s name in the space provided below.)
*Exceptions
2. RATIFICATION OF THE FOR AGAINST ABSTAIN
APPOINTMENT OF BDO [ ] [ ] [ ]
SEIDMAN, LLP, as the independent
certified public accountants of
the Company for the fiscal year
ending January 31, 2009.
Signature Signature
Date
Please sign exactly as name appears to the left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
p FOLD AND DETACH HERE p
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time the day
prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner
as if you marked, signed and returned your proxy card.
INTERNET
http://www.eproxy.com/bks TELEPHONE
1-866-580-9477
Use the Internet to vote your OR
proxy. Have your proxy card in Use any touch-tone telephone to
hand when you access the web vote your proxy. Have your proxy
site. card in hand when you call.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back
your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the
enclosed postage-paid envelope.
Choose MLinkSM for fast, easy and secure 24/7 online access to your future proxy
materials, investment plan statements, tax documents and more. Simply log on to
Investor ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step
instructions will prompt you through enrollment.
Barnes & Noble, Inc.’s Annual Report is available at
www.barnesandnobleinc.com/annualreport
and the Proxy Statement is available at www.barnesandnobleinc.com/proxystatement
--------------------------------------------------------------------------------
BARNES & NOBLE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Leonard Riggio and Stephen Riggio, and each of
them, as his true and lawful Agents and Proxies, with full power of substitution
in each, and hereby authorizes them to represent and to vote, as designated on
the reverse side hereof, all the shares of common stock of Barnes & Noble, Inc.
held of record by the undersigned on April 16, 2008, at the Annual Meeting of
Stockholders to be held on June 3, 2008, and any adjournments or postponements
thereof, with the same effect as if the undersigned were present and voting such
shares, on all matters as further described in the accompanying Proxy Statement.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS MADE, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED “FOR” EACH OF THE BOARD OF
DIRECTORS’ NOMINEES AND “FOR” PROPOSAL 2. THE PROXIES, IN THEIR DISCRETION, ARE
AUTHORIZED TO VOTE UPON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
By executing this proxy, the undersigned hereby revokes all prior proxies.
(Continued, and to be signed and dated on the reverse side.)
Address Change/Comments (Mark the corresponding box on the reverse side)
p FOLD AND DETACH HERE p
You can now access your BARNES & NOBLE, INC. account online.
Access your Barnes & Noble, Inc. shareholder account online via Investor
ServiceDirect® (ISD).
The transfer agent for Barnes & Noble, Inc. now makes it easy and convenient to
get current information on your shareholder account.
• View account status
• View certificate history
• View book-entry information
• View payment history for dividends
• Make address changes
• Obtain a duplicate 1099 tax form
• Establish/change your PIN
Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
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