UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under Rule 14a-12 | |
BARNES & NOBLE EDUCATION, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
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120 Mountain View Blvd.
Basking Ridge, New Jersey 07920
August 21, 201815, 2019
Dear Stockholder:
You are cordially invited to attend the 2018 Annual Meeting of Stockholders of Barnes & Noble Education, Inc. (the “Company”) cordially invites you to attend the 2019 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting will be held at 9:00 am, Eastern Time, on September 25, 20182019 at the Embassy Suites by Hilton, 250 Connell Dr., Berkeley Heights, NJ 07922 (the “Annual Meeting”).07922.
Information about the Annual Meeting and the various matters on which the stockholders will act is included in the Notice of Annual Meeting of Stockholders and the Proxy Statement which follow.Statement. Also included are a proxy card and postage-paid return envelope. The Proxies are being solicited on behalf of the Board of Directors of the Company.
You are urged to read the Proxy Statement carefully and, whether or not you plan to attend the Annual Meeting, to promptly submit a proxy: (a) by telephone or the Internet following the instructions on the enclosed proxy card or (b) by signing, dating and returning the enclosed proxy card in the postage-paid return envelope provided.
The Board of Directorsunanimously recommends that you vote (i) FOR the election of each of the Board of Directors’ nominees, (ii) FOR the approval, of the Company’s Amended and Restated Equity Incentive Plan, (iii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in the Proxy Statement, and (iv)(iii) FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accountants for the Company’s fiscal year ending April 27, 2019.May 2, 2020.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on September 25, 2018:2019: The Proxy Statement and the Company’s 20182019 Annual Report to Stockholders are available online atwww.bned.com/investor.
Your vote is extremely important no matter how many shares you own. If you have any questions or require any assistance with voting your shares, please contact Barnes & Noble Education, Inc.’s proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Stockholders may call toll-free: (888)750-5834
Banks and Brokers may call collect: (212)750-5833
| Sincerely, |
Michael P. Huseby
Chairman of the Board of Directors and Chief Executive Officer |
120 Mountain View Blvd.
Basking Ridge, New Jersey 07920
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 20182019
The Annual Meeting of Stockholders of Barnes & Noble Education, Inc. (the “Company”) will be heldhold its Annual Meeting of Stockholders (the “Annual Meeting”) at 9:00 am, Eastern Time, on September 25, 20182019 at the Embassy Suites by Hilton, 250 Connell Dr., Berkeley Heights, NJ 07922 for the following purposes:
| 1. | To elect seven directors to serve until the |
| 2. | To vote on |
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To ratify the appointment of Ernst & Young LLP as the independent registered public accountants for the Company’s fiscal year ending |
To transact such other business as may be properly brought before the Annual Meeting and any adjournment or postponement thereof. |
Only holders of record of common stock of the Company as of the close of business on July 27, 201829, 2019 are entitled to notice of and to vote at the annual meetingAnnual Meeting and any adjournment or postponement thereof.
The Board of Directors unanimously recommends that you vote (i) FOR the election of each of the Board of Directors’ nominees, (ii) FOR the approval, of the Company’s Amended and Restated Equity Incentive Plan, (iii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in the Proxy Statement, and (iv)(iii) FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accountants for the Company’s fiscal year ending April 27, 2019.May 2, 2020.
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The Board of Directors urges you to read the Proxy Statement carefully and, whether or not you plan to attend the Annual Meeting, to promptly submit a proxy: (a) by telephone or the Internet following the instructions on the enclosedWHITE proxy card or (b) by signing, dating and returning the enclosedWHITE proxy card in the postage-paid return envelope provided.
Sincerely, |
Michael C. Miller |
| Corporate Secretary |
| Basking Ridge, New Jersey |
| August 15, 2019 |
The following summary highlights information relating to the 20182019 annual meeting of stockholders (the “Annual Meeting”) and executive compensation and corporate governance matters. Additional information is included in this Proxy Statement.
20182019 Annual Meeting of Stockholders for Barnes & Noble Education, Inc.
General Information
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| Date and Time | September 25, (Eastern Time) | |
| Place | Embassy Suites by Hilton 250 Connell Dr. Berkeley Heights, NJ 07922 | |
| Record Date | July | |
Voting Matters and Recommendations
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| Voting Matter | Board of Directors Recommendations | |
| Election of seven Directors | FOR ALL NOMINEES | |
| Vote in an advisorynon-binding capacity to approve executive compensation | FOR | |
| Ratification of Ernst & Young LLP as the independent registered public accountants for the Company’s fiscal year ending | FOR | |
The Board of Directors and management believe that good corporate governance promotes accountability to stockholders, enhances investor confidence in the Company and supports long-term value creation. The Company has implemented and fostered a culture of good corporate governance, which includes the following:
Governance Highlights | ||
✓ We
✓ None of our Director nominees serve on an excessive number of
✓ The Board of Directors follows Corporate Governance Guidelines
✓ Each committee of our Board of Directors has a published charter that is reviewed and discussed at least annually
✓ We have adopted a Corporate Social Responsibility Policy
✓ The Board of Directors has a Lead Independent Director | ✓ We are committed to maintaining an active dialogue with our stockholders. Over the past year, we have reached out to stockholders owning approximately
✓ Each committee of our Board of Directors is 100% comprised of independent Directors
✓ Independent Directors and Board of Director committees meet regularly and frequently without management present
✓ Our Corporate Governance and Nominating Committee oversees our Board of Directors’ annual self-evaluation | |
The Board of Directors and management seek to align the executive compensation program with the Company’s business strategy to attract, retain, and engage the talent we need to compete in our industry, and to align management with stockholders’ interests. The table below highlights key aspects of our executive compensation program.
Executive Compensation Highlights | ||
✓ A majority of executive pay is tied to performance-based and equity incentives ✓ Equity awards to our Chief Executive Officer and, for Fiscal Year 2020, to our other named executive officers and other members of senior management are at least 50% performance based ✓ Performance-based equity awards are earned over atwo-year performance period and are subject to an additional one year time-based vesting period
✓
✓ Incentive awards granted are subject to clawback and/or recoupment policies under the Equity Incentive Plan and Executive Incentive Compensation Clawback Policy
✓ Long-term incentives comprise a significant portion of target compensation for executive officers
✓ The vesting of awards that are assumed or substituted in connection with a change in control only accelerates as a result of the change in control if a participant experiences a qualifying termination of employment | ✓ Restricted stock awards are generally subject to aone-year minimum vesting period
✓ The Company does not provide for any taxgross-ups on perquisites or other benefits
✓ Named executive officers are only entitled to limited perquisites
✓ Directors and executive officers are prohibited from hedging, and may not pledge our stock without the approval of the Audit Committee
✓ The Equity Incentive Plan prohibits the repricing of awards without stockholder approval
✓ Equity awards granted to executive officers in Fiscal 2019 and 2020 were decreased to reduce run rate | |
BARNES & NOBLE EDUCATION, INC.
120 Mountain View Blvd.
Basking Ridge, New Jersey 07920
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 20182019
This Proxy Statement and enclosed proxy card are being furnished commencing on or about August 21, 201815, 2019 in connection with the solicitation by the Board of Directors (the “Board of Directors”) of Barnes & Noble Education, Inc., a Delaware corporation (the “Company”), of proxies for use at its annual meeting of stockholders to be held on September 25, 20182019 (the “Annual Meeting”), and any adjournment or postponement thereof for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
The Board of Directors unanimously recommends that you vote (i) FOR the election of each of the Board of Directors’ nominees, (ii) FOR the approval, of the Company’s Amended and Restated Equity Incentive Plan, (iii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in the Proxy Statement, and (iv)(iii) FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accountants for the Company’s fiscal year ending April 27, 2019.May 2, 2020.
Only holders of record of the Company’s common stock, par value $0.01 per share (“Common Stock”), as of the close of business on July 27, 201829, 2019 are entitled to notice of and to vote at the Annual Meeting. As of the record date, 46,916,61647,607,394 shares of Common Stock were outstanding. Each share of Common Stock entitles the record holder thereof to one vote on each matter brought before the Annual Meeting.
Your vote is very important to the Board of Directors no matter how many shares of our Common Stock you own. Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares as soon as possible.
If You Are a Registered Holder of Common Stock
If you are a registered holder of Common Stock, you may vote your shares either by voting by proxy in advance of the Annual Meeting or by voting in person at the Annual Meeting. By submitting a proxy, you are legally authorizing another person to vote your shares on your behalf. We urge you to use the enclosed proxy card to vote (i) FOR the election of each of the Board of Directors’ nominees, (ii) FOR the approval, of the Company’s Amended and Restated Equity Incentive Plan, (iii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in the Proxy Statement, and (iv)(iii) FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accountants for the Company’s fiscal year ending April 27, 2019.May 2, 2020. If you submit your executed proxy card or otherwise vote by telephone or by the Internet, your shares will be voted in accordance with your instructions; however, if you do not indicate how your shares are to be voted, then your shares will be voted in accordance with the Board of Directors’ recommendations set forth in this Proxy Statement. In addition, if any other matters are brought before the Annual Meeting (other than the proposals contained in this Proxy Statement), then the individuals listed on the proxy card will have the authority to vote your shares on those other matters in accordance with their discretion and judgment.
Whether or not you plan to attend the Annual Meeting, we urge you to promptly submit a proxy: (a) by telephone or the Internet following the instructions on the enclosed proxy card or (b) by signing, dating and returning the enclosed proxy card in the postage-paid return envelope provided. If you later decide to attend the Annual Meeting and vote in person, that vote will automatically revoke any previously submitted proxy.
If You Hold Your Shares in “Street Name”
If you hold your shares in “street name”, i.e., through a bank, broker or other holder of record (a “custodian”), your custodian is the stockholder of record for purposes of voting and is required to vote your shares on your behalf in accordance with your instructions. If you do not give instructions to your custodian, your custodian will not be permitted to vote your shares with respect to“non-discretionary” items, which includes all matters on the agenda other than the ratification of the appointment of the independent registered public accountants. A “brokernon-vote” occurs when a custodian does not vote on a particular proposal because it has not received voting instructions from the applicable beneficial owner and does not have discretionary voting power on the matter in question pursuant to New York Stock Exchange (“NYSE”) rules. Accordingly, we urge you to promptly give instructions to your custodian to vote FOR all items on the agenda by using the voting instruction card provided to you by your custodian. Please note that if you intend to vote your shares held in street name in person at the Annual Meeting, you must obtain a “legal proxy” from your custodian and provide it at the Annual Meeting.
If you have any questions or require any assistance with voting your shares, please contact the Company’s proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Stockholders may call toll-free: (888)750-5834
Banks and Brokers may call collect: (212)750-5833
The presence in person or by proxy at the Annual Meeting of the holders of shares of Common Stock of the Company having a majority of the voting power of the Common Stock entitled to vote at the Annual Meeting will constitute a quorum. Withheld votes, abstentions and any “brokernon-votes” will be included in determining whether a quorum is present.
Votes Required and Treatment of Withheld Votes, Abstentions and BrokerNon-Votes
The nominees for director receiving the highest vote totals willDirectors shall be elected as directorsby a majority of the Company. Withheld votes and any “brokernon-votes”cast by the stockholders entitled to vote thereon who are not counted in determining the outcome of the election.
Approval of the Company’s Amended and Restated Equity Incentive Plan to increase the number of shares available for issuance under the plan and to amend certain provisions related to performance-based awards in connection with amendments to Section 162(m)of the Internal Revenue Code (the “Code”) requires the affirmative votes of the majority of shares present in person or represented by proxy at the Annual Meeting. Abstentions and entitled to vote on the matter. Abstentions are treated as shares present and entitled to vote on the matter and, therefore, will have the same effect as a vote “Against” the proposal. “Brokernon-votes”broker non-votes are not considered entitled to vote on this proposal, as such,votes cast for the foregoing purpose and will have no effect on the outcomeelection of the votes.nominees.
With respect to the proposal regarding approval, on an advisory basis, of compensation of the Company’s named executive officers, the Company will consider the affirmative vote of a majority of the votes cast on the proposal as approval of the compensation of the Company’s named executive officers (“NEOs”). Abstentions and brokernon-votes will not be included in the votes cast on this proposal and will not have a positive or negative effect on the outcome of this proposal.
Approval of the proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accountants requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions will not be included in the votes cast and, as such, will have no effect on the outcome of this proposal.
Attendance at the Annual Meeting
Attendance at the Annual Meeting or any adjournment or postponement thereof will be limited to stockholders of the Company as of the close of business on the record date and guests of the Company. If you are
a stockholder of record, your name will be verified against the list of stockholders of record prior to your admittance to the Annual Meeting or any adjournment or postponement thereof. Please be prepared to present photo identification for admission. If you hold your shares in street name, you will need to provide proof of beneficial ownership, such as a brokerage account statement, a copy of a voting instruction form provided by your custodian with respect to the Annual Meeting, or other similar evidence of ownership, as well as photo identification, in order to be admitted to the Annual Meeting. Please note that if you hold your shares in street name and intend to vote in person at the Annual Meeting, you must also provide a “legal proxy” obtained from your custodian.
Your proxy is revocable. The procedure you must follow to revoke your proxy depends on how you hold your shares.
If you are a registered holder of Common Stock, you may revoke a previously submitted proxy by submitting another valid proxy (whether by telephone, the Internet or mail) or by providing a signed letter of revocation to the Corporate Secretary of the Company before the closing of the polls at the Annual Meeting. Only the latest-dated validly executed proxy will count. You also may revoke any previously submitted proxy and vote your shares in person at the Annual Meeting; however, simply attending the Annual Meeting without taking one of the above actions will not revoke your proxy.
If you hold shares in street name, in general, you may revoke a previously submitted voting instruction by submitting to your custodian another valid voting instruction (whether by telephone, the Internet or mail) or a signed letter of revocation. Please contact your custodian for detailed instructions on how to revoke your voting instruction and the applicable deadlines.
PROPOSAL ONE: ELECTION OF DIRECTORS
On September 20, 2017, the Company held its 2017 Annual Meeting of Stockholders in which stockholders of the Company approved a proposal to amendPer the Company’s Amended and Restated Certificate of Incorporation, to declassify the Board and provide for the annual election of all directors. As a result, allseven of the Company’s current directors are standing forre-election, each to serve aone-year term. On June 20, 2018, the Company announced the appointment of Emily C. Chiu to the Board and the increase of the size of the Board to seven members.
The Company strives to maintain a board with broad and diverse experience and judgment. The grid below summarizes the key qualifications, skills and attributes each of our directors possesses that were most relevant to the decision to nominate him or her to serve on the Board. The lack of a mark does not mean the director does not possess that qualification or skill; rather a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Our director nominees exhibit high integrity, innovative thinking, a proven record of success, and knowledge of corporate governance. The director nominees bring a balance of important skills to our boardroom.
| Skills and Attributes | Chiu | DeMatteo | Golden | Huseby | Ryan | Thornton | Wilson | |||||||||||||||||||||||||||||||||||||
Academia / Education | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||
Business Operations | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||
CEO and Executive | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||
Commercial Business | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||
Corporate Governance | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||
Customer Engagement / Marketing | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||
Data Analytics | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||
Defense Industry or Military | ✓ | |||||||||||||||||||||||||||||||||||||||||||
Digital /e-Commerce | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||
Financial / Investment | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||
Government / Public Policy | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||
International Business | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||
Knowledge of Company Business | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||
Other Public Board | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||
Other Relevant Industry | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||
Science, Technology, and Innovation | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||
Information Concerning the Directors and the Board of Directors’ Nominees
Background information with respect to the Board of Directors’ 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.
| Name | Age | Director Since | Position | Age | Director Since | Position | ||||||
Nominees for Election at the Annual Meeting | Nominees for Election at the Annual Meeting | Nominees for Election at the Annual Meeting | ||||||||||
Emily C. Chiu* | 35 | 2018 | Director | 36 | 2018 | Director | ||||||
Daniel A. DeMatteo* | 70 | 2015 | Director | 71 | 2015 | Director | ||||||
David G. Golden* | 60 | 2015 | Director | 61 | 2015 | Director | ||||||
Michael P. Huseby | 63 | 2015 | Chairman of the Board | 64 | 2015 | Chairman of the Board | ||||||
John R. Ryan* | 73 | 2015 | Director | 74 | 2015 | Director | ||||||
Jerry Sue Thornton* | 71 | 2015 | Director | 72 | 2015 | Director | ||||||
David A. Wilson* | 77 | 2015 | Director | 78 | 2015 | Director | ||||||
| * | Independent for purposes of the NYSE listing standards. |
Nominees for Election as Director
The following individuals are nominees for director at the Annual Meeting. The Board of Directors unanimously recommends a voteFOR each of the below nominees for director using the enclosed proxy card.
Emily C. Chiu was elected to the Board of Directors in June 2018. Ms. Chiu is a Strategic Development Principal at Square, Inc. (“Square”), where she oversees innovation for Square’s Cash App, an ecosystem of financial tools for individuals and sellers. Cash App is changing how people manage their money by providing easy ways to send, spend, and store funds. It has been the number one free finance app in the U.S. App Store for the past two years, and is consistently a commerce company that enables sellerstop 20 free app, with mainstream adoption amongst tens of millions of engaged customers. Ms. Chiu is responsible for overseeing the vision, strategy, development, and commercialization of next-generation digital products and businesses to accept card payments and provides point-of-sale software and business services that help sellers start, run, and grow their businesses.serve over 15 million monthly active users on the Cash App platform. Since she joined Square in July 2017, Ms. Chiu has overseenalso led Square’s corporate development strategy and mergersacquisition and acquisitions activityintegration activities across Square’s SMB (Seller),direct-to-consumer (Cash App), and developer platform businesses. From July 2015 to July 2017, Ms. Chiu was a Partner and Head of Corporate Development at 500 Startups, LLC, a global startup accelerator and venture capital firm. In this role, Ms. Chiu led venture capital investments in the education technology space and founded 500 Startups’ M&A advisory practice.practice, advising entrepreneurs across a portfolio of over 2,000 startups in 60 countries. Prior to this, Ms. Chiu was a founding team member at UniversityNow, Inc., an education technology startup whose mission is to make higher education affordable and accessible to all students through its digital learning platform and accredited universities that offer associate, bachelor’s, and master’s degree programs without student loan debt. From 2011 to 2015, Ms. Chiu served as Vice President of Operations and Strategic Development at UniversityNow.UniversityNow, where she built the company’s operations from the ground up and led initiatives that scaled its platform to serve students worldwide, earning recognition fromEDUCAUSE and The Bill & Melinda Gates Foundation as a “breakthrough model in college completion”. Previously, Ms. Chiu served as the Head of Operations at TEDx San Francisco, an affiliate of TED devoted to “ideas worth spreading”. Before this, Ms. Chiu was a private equity investor at GI Partners, a global investment firm with over $16$17 billion in capital under management across private equity and real estate strategies. Ms. Chiu started her career at Goldman Sachs & Co., where she worked on mergers and acquisitions and financing transactions across Goldman’s technology and healthcare investment banking groups. Since March 2016, Ms. Chiu has served on the Board of Governors of the Center for Creative Leadership, a provider of executive education focused on leadership development.development, and is a member of its Executive Committee. Ms. Chiu is a graduate of The Wharton School of Business and the College of Arts &
Sciences at the University of Pennsylvania, where she was a Wharton Research Scholar and member of The Huntsman Program in International Studies and Business.
Qualifications, Experience, Attributes and Skills. Ms. Chiu has more than 15 years of experience across finance,the technology, education, and entrepreneurship.financial services industries. Ms. Chiu’s experience as ana technology investment banker specializing in the technology sector at Goldman Sachs & Co. included significant work with mergers, acquisitions, and financing transactions. Ms. Chiu’s subsequent rolesexperience as a private equity and venture capital investor at GI Partners and Partner at 500 Startups
involved principal investing and advisory roles that spanned investmentcompany stages and strategies and company stages,— from control-oriented investments to transform the business models of matureestablished companies to early-stage venture investments to scale innovative technology startups. As Head of Corporate Development at 500 Startups, Ms. Chiu advised startups across 60 countries on growth, fundraising, and exit strategies. AtAs an operator in the EdTech space, Ms. Chiu built UniversityNow’s business from the ground up and was responsible for strategic initiatives that scaled its accredited online universities and digital learning platform to serve students worldwide. In her current role at Square, Ms. Chiu is responsible for overseeinginnovation: conceptualizing, building, and scaling next-generation consumer products and digital businesses to serve tens of millions of customers. Prior to this, Ms. Chiu was responsible for leading mergers and acquisitions strategy, execution, and execution across Square’sdirect-to-consumer, developer, and SMB businesses,integration at Square, with a focus on driving technology and business transformation through inorganic strategies. At UniversityNow, Ms. Chiu built the company’s operations from the ground up and was responsible for overseeing revenue operations and strategic initiatives that scaled UniversityNow’s digital learning platform and accredited online universities to serve students worldwide. Given this experience, Ms. Chiu brings relevant industry experience to the Board across the finance, technologyof Directors relevant industry background, operating experience spanning organic and education sectors, first-hand experience scaling businesses through acquisitions, as well as organic growth,inorganic strategies, expertise in digital content and innovation, as well as anin-depth understanding of the impact of technology and digital revenuetransformation on business models.
Daniel A. DeMatteo was elected as a director in August 2015. Mr. DeMatteo has served as Gamestop Corp.’s Director and Executive Chairman since June 2010, and previously held other roles with Gamestop, including Chief Executive Officer from August 2008 to June 2010, Vice Chairman and Chief Operating Officer from March 2005 to August 2008, and President and Chief Operating Officer of Gamestop or its predecessor companies since November 1996. Mr. DeMatteo has served as an executive officer in the video game industry since 1988.
Qualifications, Experience, Attributes and Skills. Mr. DeMatteo brings to the Board of Directors over 25 years of experience as an executive officer, including 19 years of experience growing Gamestop and its predecessor companies into the world’s largest multichannel video game retailer. As one of the founders of Gamestop, Mr. DeMatteo has demonstrated a record of leadership, innovation and achievement. With his experience in the roles of Executive Chairman, Vice Chairman, Chief Executive Officer, President and Chief Operating Officer, Mr. DeMatteo provides the Board of Directors a unique and valuable perspective on corporate operations, strategy and business, including his perspective on the formula for success that has brought Gamestop to its current industry-leading position. The Board of Directors also benefits from Mr. DeMatteo’s entrepreneurial spirit and his extensive network of contacts and relationships within the retail industry.
David G. Golden was elected as a director in August 2015. Mr. Golden served as a director of Barnes & Noble, Inc. (“Barnes & Noble”) from October 2010 until the Company’s separation from Barnes & Noble in August 2015 (the “Spin Off”). Mr. Golden has been a Managing Partner at Revolution Ventures, an early-stage venture affiliate of Revolution LLC, since January 2013. From March 2006 until December 2011, Mr. Golden was a Partner, Executive Vice President and Strategic Advisor at Revolution LLC, a private investment company. Mr. Golden also served as Executive Chairman of Code Advisors, a private merchant bank focused on the intersections of technology and media from its founding in 2010 through 2012. Previously, Mr. Golden served in various senior positions over an18-year period, including as Vice Chairman and Global Director of the Technology, Media and Telecom investment banking group, at JPMorgan Chase & Co. (“JPMorgan”), a financial services firm, and a predecessor company, Hambrecht & Quist, Inc. (“Hambrecht & Quist”). Prior to that, Mr. Golden worked as a corporate attorney at Davis Polk & Wardwell LLP. Mr. Golden has previously served as a member of the Board of Directors of Blackbaud, Inc. and Everyday Health, where he also served on their respective Audit Committees. Mr. Golden also is a member of the Advisory Board for Partners for Growth LLC, a venture lending firm, and he is a director of several private companies. He is a graduate of Harvard College and Harvard Law School, where he was an editor of The Harvard Law Review.
Qualifications, Experience, Attributes and Skills. Mr. Golden has over 20 years of technology and finance experience as an investment banker specializing in the technology sector at JPMorgan, Hambrecht & Quist, and more recently as a managing partner and executive of Revolution Ventures and Executive Chairman of Code Advisors LLC. Mr. Golden’s technology experience also includes his service as a director and Advisory Board of Directors member of several technology companies including Blackbaud, Inc., a global provider of software services specifically designed for nonprofit organizations. Mr. Golden’s finance experience at
Hambrecht & Quist and JPMorgan included significant work with mergers, capital markets and principal investing, and he has participated as lead merger advisor, equity underwriter or investor on over 150 transactions. Given this experience, Mr. Golden brings to the Board of Directors substantial knowledge of the technology sector and meaningful insight into the financial, strategic and capital-related issues technology companies face.
Michael P. Huseby serves as the Chairman of the Board of Directors and Chief Executive Officer. He was a member of the Board of Directors of Barnes & Noble from January 2014 and served as the Chief Executive Officer of Barnes & Noble until the complete legal and structural separation of the Company from Barnes & Noble on August 2, 2015. He was elected to the Board of Directors of the Company and was appointed Executive Chairman effective August 2, 2015. Effective on September 19, 2017, Mr. Huseby became Chief Executive Officer of the Company in addition to his role as Chairman of the Board of Directors. Previously, Mr. Huseby was appointed President of Barnes & Noble in July 2013, and Chief Financial Officer of Barnes & Noble in March 2012. From 2004 to 2011, Mr. Huseby served as Executive Vice President and Chief Financial Officer of Cablevision Systems Corporation, a leading telecommunications and media company, which was acquired by the Altice Group in June 2016. He served on the Cablevision Systems Corporation Board of Directors in 2000 and 2001. Prior to joining Cablevision, Mr. Huseby served as Executive Vice President and Chief Financial Officer of Charter Communications, Inc., a large cable operator in the United States. Mr. Huseby served on the Board of Directors of Charter Communications from May 2013 through May 2016. Mr. Huseby served as Executive Vice President, Finance and Administration, of AT&T Broadband, a leading provider of cable television services from 1999 to 2002, when it was sold to Comcast Corporation. In addition, Mr. Huseby spent over 20 years at Arthur Andersen, LLP and Andersen Worldwide, S.C., where he held the position of Global Equity Partner serving a myriad of clients, including a number of large publicly-traded companies. Mr. Huseby served on the Board of Directors of CommerceHub, Inc., a cloud-basedcloud basede-commerce fulfillment and marketing software platform company listed on Nasdaq, from July 2016 until May 2018 with his tenure ending upon the consummation of the sale of CommerceHub to financial sponsors. While on the Board of CommerceHub, Mr. Huseby served as chair of the Audit Committee and as a member of the Compensation Committee.
Qualifications, Experience, Attributes and Skills. Mr. Huseby has more than 2030 years of financial and executive experience, having served as a senior executive at Barnes & Noble, Cablevision Systems Corporation and AT&T Broadband. Mr. Huseby’s experience also includes his service as a director and audit committee member of Charter Communications and CommerceHub, Inc., and as a member of Cablevision Systems Corporation’s Board of Directors. This experience allows Mr. Huseby to bring to the Board of Directors substantial knowledge and a wide range and depth of insights in technology, retail, financial, business and matters unique to publicly-traded companies.
John R. Ryan was elected to the Board of Directors in July 2015 and currently serves as the Lead Independent Director. Vice Admiral Ryan served as director of Barnes & Noble from July 2014 until theSpin-Off. Vice Admiral Ryan joined the Center for Creative Leadership’s Board of Directors of Governors in 2002 and has served as its President and Chief Executive Officer since 2007. From 2005 to 2007, he served as Chancellor of the State University of New York. Previously, Vice Admiral Ryan served as President of the State University of New York Maritime College from 2002 to 2005, Interim President of the State University of New York at Albany from 2004 to 2005 and Superintendent of the United States Naval Academy, Annapolis, Maryland from 1998 to 2002. Vice Admiral Ryan served in the United States Navy from 1967 until his retirement in 2002, including as Commander of the Fleet Air Mediterranean from 1995 to 1998, Commander of
the Patrol Wings for the United States Pacific Fleet from 1993 to 1995 and Director of Logistics for the US Command from 1991 to 1993. Vice Admiral Ryan is also the lead director of CIT Group, Inc. and was a director of Cablevision Systems Corporation from 2002 until it was acquired by the Altice Group in June 2016.
Qualifications, Experience, Attributes and Skills. Vice Admiral Ryan has a total of more than 35 years in military service, more than 10 years as a leader at major universities, and over a decade of executive and Board of Directors-level experience, including his service as lead director of CIT Group. Vice Admiral Ryan has substantial experience serving on public company Board of Directors undergoing multiple strategic transactions, such as separations,
including serving as a director of Cablevision during its 2010 spinoff of Madison Square Garden, L.P., its 2011 spinoff of AMC Networks, Inc., and its 2013 sales of Clearview Cinemas and Optimum West to Bow Tie Cinemas and Charter Communications, respectively. Vice Admiral Ryan has also gained experience through the acquisition of Cablevision Systems Corporation by the Altice Group in June 2016, and was one of two independent directors on the Special Committee of the Board of Directors involved in the acquisition of MBS Textbook Exchange, LLC. This experience allows Vice Admiral Ryan to bring to the Board of Directors leadership and expertise in managing large complex organizations, and in particular the environment in which the Company operates.
Jerry Sue Thornton was elected as a director in August 2015. Dr. Thornton currently serves as Chief Executive Officer of Dream Catcher Educational Consulting, a consulting firm that provides coaching and professional development for newly selected college and university presidents. She previously served as President of Cuyahoga Community College from 1992 to 2013 (for which she is now President Emeritus). Prior to serving in that role, she was President of Lakewood College in Minnesota from 1985 to 1991. SheDr. Thornton also serves as a director of FirstEnergy Corp., Applied Industrial Technologies, Inc., Parkwood Corporation, a financial planning company headquartered in Cleveland, and RPM International Inc.JobsOhio, the economic development agency for the State of Ohio. She served as a director of American Greetings Corporation from 2000 until it became a private corporation in 2013.2013, and also previously served on the board of American Greetings Corporation, American Family Insurance, FirstEnergy Corporation, National City Corporation, OfficeMax and RPM International Inc.
Qualifications, Experience, Attributes and Skills. Dr. Thornton has extensive executive leadership and management experience in higher education as well as public corporate Board of Directors experience. She served on the Board of Directors of National City Corporation (banking) and American Family Insurance, as well as other public companies where she served on numerous key Board of Directors committees. Dr. Thornton also served as one of two independent directors on the Special Committee of the Board of Directors involved in the acquisition of MBS Textbook Exchange, LLC. She is a recognized leader in the Northeast Ohio community and the State of Ohio. She has over 40 years of higher education work experience with 32 years in leadership positions. Dr. Thornton brings to the Board of Directors broad leadership and business skills, together with her extensive Board of Directors service for public companies and community organizations.
David A. Wilson was elected to the Board of Directors in July 2015. Dr. Wilson served as a director of Barnes & Noble from October 2010 until theSpin-Off. From 1995 to December 2013, Dr. Wilson served as President and Chief Executive Officer of the Graduate Management Admission Council, anot-for-profit education association dedicated to creating access to graduate management and professional education that provides the Graduate Management Admission Test (GMAT). In 1995, as CEO of the GMAT, Dr. Wilson took the paper and pencil test to a computer delivered test worldwide and was the first person to do so. From 2009 to 2010, Dr. Wilson was a director of Terra Industries Inc., a producer and marketer of nitrogen products, where he was a member of the audit committee. From 2002 to 2007, Dr. Wilson was a director of Laureate Education, Inc. (formerly Sylvan Learning Systems, Inc.), an operator of an international network of licensed campus-based and online universities and higher education institutions, where he was chairman of the audit committee beginning in 2003. From 1978 to 1994, Dr. Wilson was employed by Ernst & Young LLP (and its predecessor, Arthur Young & Company), serving as an Audit Principal through 1981, as an Audit Partner from 1981 to 1983 and thereafter in various capacities including Managing Partner, National Director of Professional Development, Chairman of Ernst & Young’s International Professional Development Committee and as a director of the Ernst &Young& Young Foundation. From 1968 to 1978, Dr. Wilson served as a faculty member at Queen’s University
(1968-1970), the University of Illinois at Urbana-Champaign (1970-1972), the University of Texas (1972-1978), where he was awarded tenure, and Harvard Business School (1976-1977). Dr. Wilson is also on the Board of Directors of CoreSite Realty Corporation, a publicly-traded real estate investment trust, and serves as lead director chairand as a member of the audit committee and a member of the compensation committee. In November 2015, he was elected as Trustee of Johnson & Wales University, anot-for-profit institution, and serves as chair of its audit committee and as a member of its finance and budget committee. Dr. Wilson is a National Association of Corporate Directors (NACD) Governance Leadership Fellow (the highest award they give) and received the CERT Certificate in Cybersecurity Oversight awarded by the Software Engineering Institute of Carnegie Mellon University. He was also a 2015 honoree of the NACD Directorship 100 award in recognition of exemplary board leadership.
Qualifications, Experience, Attributes and Skills. Dr. Wilson has a total of more than 30 years of executive and Board of Directors-level experience, including serving on the Board of Directors of Terra Industries Inc. and Laureate Education, Inc. while those companies were involved in multiple strategic transactions, as well as serving as President and Chief Executive Officer of the Graduate Management Admission Council. Dr. Wilson also has more than 16 years of financial and accounting expertise, including as an Audit Partner at Ernst & Young LLP (and its predecessor, Arthur Young & Company). In addition, Mr. Wilson is a National Association of Corporate Directors (NACD) Governance
Fellow and received the CERT Certificate in Cybersecurity Oversight awarded by the Software Engineering Institute of Carnegie Mellon University. He was also a 2015 honoree of the NACD Directorship 100 award. HisThis experience and skills allowallows Dr. Wilson to bring to the Board of Directors substantial financial and accounting knowledge internal controls and risk management oversight, particularly related to cybersecurity.valuable insights.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTEFOR THE ELECTION OF EACH NOMINEE FOR DIRECTOR NAMED ABOVE USING THE ENCLOSED PROXY CARD.
Meetings and Committees of the Board of Directors
The Board of Directors met nine (9)ten (10) times during the Company’s fiscal year 2018,2019, which ended April 28, 201827, 2019 (“Fiscal 2018”2019”). All directors attended at least 75% of all meetings of the Board of Directors and committees of which he or she was a member.
Based on information supplied to it by the directors, the Board has affirmatively determined that each of Emily C. Chiu, Daniel A. DeMatteo, David G. Golden, John R. Ryan, Jerry Sue Thornton, and David A. Wilson is “independent” under the listing standards of the NYSE, and has made such determinations 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.
The Board has three standing committees: the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee.
Audit Committee. The responsibilities of the Audit Committee include, among other duties:
overseeing the quality and integrity of our financial statements, accounting practices and financial information we provide to the Securities and Exchange Commission (“SEC”) or the public;
reviewing our annual and interim financial statements, the report of our independent registered public accounting firm on our annual financial statements, Management’s Report on Internal Control over Financial Reporting and the disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations;
selecting and appointing an independent registered public accounting firm;
pre-approving all services to be provided to us by our independent registered public accounting firm;
reviewing with our independent registered public accounting firm and our management the accounting firm’s significant findings and recommendations upon the completion of the annual financial audit and quarterly reviews;
reviewing and evaluating the qualification, performance, fees and independence of our registered public accounting firm;
meeting with our independent registered public accounting firm and our management regarding our internal controls, critical accounting policies and practices, and other matters;
discussing with our independent registered public accounting firm and our management earnings releases prior to their issuance;
overseeing the Company’sour enterprise risk assessment and management;
overseeing our internal audit function;
reviewing and approving related party transactions (see “Certain Relationships and Related Transactions” below); and
overseeing our compliance program, response to regulatory actions involving financial, accounting and internal control matters, internal controls and risk management policies.
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 atwww.bned.com and is available in print to any stockholder who requests it in writing directed to the Company’s Corporate Secretary, Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920.
The members of the Audit Committee currently are Dr. David A. Wilson (Chair), Emily C. Chiu, Daniel A. DeMatteo and David G. Golden. In addition to meeting the independence standards of the NYSE listing standards, each member of the Audit Committee meets the independence standards established by the SEC for audit committee members and our Corporate Governance Guidelines. The Board of Directors has also determined that each of Dr. Wilson, Ms. Chiu, Mr. DeMatteo and Mr. Golden is financially literate for purposes of the NYSE listing standards and 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 ten (10)seven (7) times during Fiscal 2018.2019.
Compensation Committee. The responsibilities of the Compensation Committee include, among other duties:
setting and reviewing our general policy regarding executive compensation;
determining the compensation of our Chief Executive Officer and other executive officers;
approving employment agreements for our Chief Executive Officer and other executive officers;
reviewing the benefits provided to our Chief Executive Officer and other executive officers;
overseeing our overall compensation structure, practices and benefit plans;
administering our executive bonus and equity-based incentive plans; and
assessing the independence of compensation consultants, legal counsel and other advisors to the Compensation Committee and hiring, approving the fees and overseeing the work of, and terminating the services of such advisors.
The Board of Directors has adopted a written charter setting out the functions of the Compensation Committee, a copy of which is available on the Company’s website atwww.bned.com and is available in print to any stockholder who requests it in writing directed to the Company’s Corporate Secretary, Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920.
The members of the Compensation Committee currently are David G. Golden (Chair), Daniel A. DeMatteo, Vice Admiral John R. Ryan and Dr. Jerry Sue Thornton. All members of the Compensation Committee meet the independence standards of the NYSE listing standards and our Corporate Governance Guidelines. The members of the Compensation CommitteeGuidelines and are“non-employee directors” (withinwithin the meaning of Rule16b-3 under the Securities Exchange Act) and “outside directors” (within the meaning of Section 162(m) of the Code.
Act. The Compensation Committee met six (6)five (5) times during Fiscal 2018.2019. The Compensation Committee has engaged Mercer, an independent consulting firm, to provide information, analyses and advice regarding executive compensation and other matters. For further discussion of the nature and scope of the independent compensation consultant’s assignment, see the “Compensation Discussion and Analysis-Roles of the Compensation Committee, Management, and our Compensation Consultant in Determining the Compensation of our Named Executive Officers-Role of the Compensation Consultant” section of this Proxy Statement.
Corporate Governance and Nominating Committee. The responsibilities of the Corporate Governance and Nominating Committee include, among other duties:
overseeing our corporate governance practices;
reviewing and recommending to our Board of Directors amendments to our committee charters and other corporate governance guidelines;
reviewing and making recommendations to our Board of Directors regarding the structure of our various Board of Directors committees;
identifying, reviewing and recommending to our Board of Directors individuals for election to the Board of Directors;
adopting and reviewing policies regarding the consideration of Board of Directors candidates proposed by stockholders and other criteria for Board of Directors membership; and
overseeing our Board of Directors’ annual self-evaluation.
The Board of Directors has adopted a written charter setting out the functions of the Corporate Governance and Nominating Committee, a copy of which is available on the Company’s website atwww.bned.com and is available in print to any stockholder who requests it in writing directed to the Company’s Corporate Secretary, Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920.
The members of the Corporate Governance and Nominating Committee currently are Vice Admiral John R. Ryan (Chair), Emily C. Chiu, Dr. Jerry Sue Thornton and Dr. David A. Wilson.
The Corporate Governance and Nominating Committee consists entirely of independent directors, each of whom meet the independence requirements set forth in the listing standards of the NYSE and our Corporate Governance Guidelines. The Corporate Governance and Nominating Committee met four (4) times during Fiscal 2018.2019.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee havehas ever been an employee of the Company, and none of them had a relationship requiring disclosure in this Proxy Statement under Item 404 of SEC RegulationS-K. None of the Company’s executive officers serve, or in Fiscal 20182019 served, as a member of the Board of Directors or compensation committee of any entity that has one or more of its executive officers serving as a member of the Company’s Board of Directors or the Company’s Compensation Committee.
Director Qualifications and Nominations
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 listing standards 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 and analytical inquiries, understanding of the business environment, and willingness to devote adequate time to Board of Directors 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 (a) the principal operational and financial objectives and plans and strategies of the Company, (b) the results of operations and financial condition of the Company and of any significant subsidiaries or businesses, and (c) the relative standing of the Company and its businesses in relation to its competitors.
The Company does not have a specific policy regarding the diversity of the Board of Directors. Instead, the Corporate Governance and Nominating Committee considers the Board of Directors’ overall composition when considering director candidates, including whether the Board of Directors has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of the Company’s current and expected future needs. In addition, the Corporate Governance and Nominating Committee also believes that it is desirable for new candidates to contribute to a variety of viewpoints on the Board of Directors, which may be enhanced by a mix of different professional and personal backgrounds and experiences.
Although the process for identifying and evaluating candidates to fill vacancies and/or reduce or expand the Board of Directors 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 independent third-party search firms) when reviewing candidates to fill vacancies and/or expand the Board of Directors. If a vacancy arises or the Board of Directors 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 of Directors. 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 of Directors members, Company management, independent third-party search firms or other sources.
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 candidate(s), 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 of Directors.
When nominating a sitting director forre-election, the Corporate Governance and Nominating Committee will consider the director’s performance on the Board of Directors and its committees and the director’s qualifications in respect of the criteria referred to above.
Consideration of Stockholder-Nominated Directors
In accordance with its charter, the Corporate Governance and Nominating Committee will consider candidates for election to the Board of Directors at a stockholder meeting if submitted by aan eligible stockholder in a timely manner. Any eligible stockholder wishing to submit a candidate for consideration for election at a stockholder meeting should send the following information to the Company’s Corporate Secretary, Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920.
Stockholder’s name, number of shares owned, length of period held, and proof of ownership;
Name, age and address of candidate;
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 Board of Directors and committees, charitable foundations, etc.);
A supporting statement which describes the candidate’s reasons for seeking election to the Board of Directors;
A description of any arrangements or understandings between the candidate and the Company and/or the stockholder; and
A signed statement from the candidate, confirming his/her willingness to serve on the Board of Directors.
In accordanceEligible stockholders who do not wish to follow the foregoing procedure but who wish instead to nominate directly one or more persons for election to the Board of Directors must comply with the charterprocedures established by our bylaws. Our bylaws provide that in order to nominate a person for election as a director at next year’s annual meeting, a notice of an intention to nominate one or more directors containing certain information required by the bylaws must be delivered to the Corporate Secretary of the Corporate Governance and Nominating Committee,Company. To be timely, whether or not a stockholder wishes to have his or her nominees included in order forthe Company’s proxy materials, the Corporate Governance and Nominating Committee to consider a candidate submitted by a stockholder for election at a stockholder meeting,Secretary of the Company must receive the foregoing information not less than 90 days, nor more than 120 days, priornominations for election to such meeting. 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 of Directors positions.for its 2020 annual meeting of stockholders at Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920 no earlier than May 28, 2020 and no later than June 27, 2020. For more information on stockholder proposals, see “Stockholder Proposals” on page 50.
Additionally, the Corporate Governance and Nominating Committee will consider stockholder nominated candidates if a vacancy arises or if the Board of Directors decides to expand its membership, and at such other times as the Corporate Governance and Nominating Committee deems necessary or appropriate. In any such event, any stockholder wishing to submit a candidate for consideration should send the above-listed information to the Company’s Corporate Secretary, Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920.
All seven of the director nominees identified in this Proxy Statement currently serve as directors of the Company and all have been recommended by our Corporate Governance and Nominating Committee to our Board of Directors forre-election. The Corporate Governance and Nominating Committee recommends candidates to the full Board of Directors after receiving input from all directors. The Corporate Governance and Nominating Committee members, other members of the Board of Directors and senior management discuss potential candidates during this search process.
Certain Board of Directors’ Policies and Practices
Corporate Governance Guidelines and Code of Business Conduct and Ethics
The Board of Directors has adopted Corporate Governance Guidelines applicable to the members of the Board of Directors. 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 atwww.bned.com. Copies of the Corporate Governance Guidelines and 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 Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920.
Board of Directors Leadership Structure; Lead Independent Director
Mr. Huseby currently serves as the Chairman of the Board and Chief Executive Officer (“CEO”) of the Company. The roles of CEO and Chairman of the Board were combined following Mr. Huseby’s appointment to the position of CEO, effective September 19, 2017. The Company believes that a combined CEO and Chairman role is appropriate because it provides an efficient and effective leadership structure for the Company. It promotes alignment between the Board of Directors and management on the Company’s strategic objectives, facilitates effective presentation of information to enable the Board of Directors to fulfill its responsibilities, and allows for productive and effective Board of Directors’ meetings. The Board of Directors believes that the right Board of Directors leadership structure should, among other things, be determined by the needs and
circumstances of the Company and the then current membership of the Board of Directors, and that the Board of Directors should remain adaptable to shaping the leadership structure as those needs and circumstances change.
Vice Admiral John R. Ryan is currently the Lead Independent Director. The Lead Independent Director, among other things, (a) acts as a liaison between the independent directors and the Company’s management, (b) presides at the executive sessions ofnon-management and independent directors, and has the authority to call additional executive sessions as appropriate, (c) chairs Board of Directors meetings in the Chairman’s absence, (d) coordinates with the Chairman on agendas and schedules for Board of Directors meetings, and information sent to the Board of Directors, reviewing and approving these as appropriate, and (e) is available for consultation and communication with major stockholders as appropriate.
In accordance with the Corporate Governance Guidelines,non-management directors meet in executive sessions at every Board of Directors meeting. Independent directors also meet at least once a year in an executive session of only independent directors. Currently, all of thenon-management directors are independent directors.
The Board of Directors’ primary function is one of oversight. In connection with its oversight function, the Board of Directors oversees the Company’s policies and procedures for managing risk. The Board of Directors administers its risk oversight function primarily through its Committees. Board of Directors Committees have assumed oversight of various risks that have been identified through the Company’s enterprise risk assessment. The Audit Committee reviews the Company’s risk assessment and risk management policies and the Audit Committee reports to the Board of Directors on the Company’s enterprise risk assessment. The Compensation Committee oversees compensation risk through its review of compensation practices and assessment of the potential impact of those practices on risk-taking.
Communications Betweenbetween Stockholders and the Board of Directors
Stockholders and other interested persons seeking to communicate with the Board of Directors should submit any communications in writing to the Company’s Corporate Secretary, Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920. 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 of Directors or to any individual director or directors (including thenon-management directors as a group) to whom the communication is directed.
All Board of Directors 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 of the Board of Directors members then serving attended the 20172018 Annual Meeting of Stockholders, except for Mr. Roberts, who was not standing for reelection.Stockholders.
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 July 27, 2018,29, 2019, unless otherwise indicated, by each person known by the Company to own beneficially more than five percent of the Company’s outstanding Common Stock, by each director, by each executive officer named in the Summary Compensation Table and by all directors and executive officers of the Company as a group. Except as otherwise noted, to the Company’s knowledge, 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.
Name of Beneficial Owner | Shares Beneficially | Percent of | ||||
Five Percent Stockholders | ||||||
Abrams Capital Management, L.P. (2) | 5,872,465 | 12.52% | ||||
Leonard Riggio (3) | 6,104,609 | 13.01% | ||||
BlackRock, Inc. (4) | 4,824,294 | 10.28% | ||||
Dimensional Fund Advisors LP (5) | 3,785,133 | 8.07% | ||||
Daniel R. Tisch (6) | 3,161,212 | 6.74% | ||||
Directors and Named Executive Officers (7) | ||||||
Emily C. Chiu (8) | 0 | * | ||||
Daniel A. DeMatteo (8) | 21,587 | * | ||||
David G. Golden | 68,127 | * | ||||
John R. Ryan (8) | 24,996 | * | ||||
Jerry Sue Thornton (8) | 21,587 | * | ||||
David A. Wilson (8) | 48,424 | * | ||||
Michael P. Huseby (9) (10) | 356,081 | * | ||||
Barry Brover (9) (10) | 124,997 | * | ||||
Kanuj Malhotra (9) (10) | 120,492 | * | ||||
Patrick Maloney (9) (10) | 220,271 | * | ||||
Michael C. Miller | 19,874 | * | ||||
Max J. Roberts (11) | 296,526 | * | ||||
All directors and executive officers as a group (14 persons) (12) | 2.46% | |||||
Name of Beneficial Owner | Shares Beneficially | Percent of | ||||
Five Percent Stockholders | ||||||
BlackRock, Inc. (2) |
| 5,514,533 |
| 11.58% | ||
Leonard Riggio (3) |
| 5,421,185 |
| 11.39% | ||
Dimensional Fund Advisors LP (4) |
| 3,857,526 |
| 8.10% | ||
Daniel R. Tisch (5) |
| 3,161,212 |
| 6.64% | ||
Outerbridge Capital Management, LLC (6) |
| 2,797,358 |
| 5.9% | ||
Directors and Named Executive Officers (7) | ||||||
Michael P. Huseby (8) (9) |
| 581,376 |
| * | ||
Kanuj Malhotra (8) (9) |
| 186,845 |
| * | ||
Barry Brover (8) (9) |
| 183,795 |
| * | ||
Patrick Maloney (8) (9) (10) |
| 157,765 |
| * | ||
David G. Golden |
| 89,633 |
| * | ||
Thomas Donohue (8) (9) |
| 85,043 |
| * | ||
Michael C. Miller (8) (9) |
| 52,228 |
| * | ||
David A. Wilson (11) |
| 36,053 |
| * | ||
John R. Ryan (11) |
| 32,665 |
| * | ||
Daniel A. DeMatteo (11) |
| 9,216 |
| * | ||
Jerry Sue Thornton (11) |
| 9,216 |
| * | ||
Emily C. Chiu (12) |
| 0 |
| * | ||
All directors and executive officers as a group (14 persons) (13) | 3.12% | |||||
| * | Less than 1% |
| (1) | Pursuant to SEC rules, shares of our Common Stock that an individual or group has a right to acquire within 60 days after July |
| (2) | Based on the |
| (3) | Based on the Schedule 13D/A filed on |
| Foundation, a charitable trust established by Mr. Riggio, with himself and his wife as trustees. The address of Mr. Riggio is in the care of Barnes & Noble, Inc., 122 Fifth Avenue, New York, New York 10011. |
| (4) | Based on the Schedule 13G/A filed on |
|
Based on the Schedule 13G/A filed on January |
| (6) | Based on the Schedule 13G/A filed on July 26, 2019 by each of Outerbridge Capital Management, LLC, Outerbridge Master Fund LP, Outerbridge GP, LLC and Rory Wallace. These beneficial owners collectively share the power to vote or to direct the vote, and to dispose or to direct the disposition of, the shares. The address of Outerbridge Capital Management, LLC, Outerbridge GP, LLC and Rory Wallace is listed as 767 Third Avenue, 11th Floor, New York, New York 10017. The address of Outerbridge Master Fund LP, c/o Ogier Global (Cayman) Limited, is listed as 89 Nexus Way, Camana Bay, Grand CaymanKY1-9009, Cayman Islands. |
| (7) | The address of all of the officers and directors listed above are in the care of Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920. |
| (8) | Includes for each officer the following restricted stock units that will vest on or before September 27, 2019, but do not currently have voting rights:Mr. Huseby-51,281;Mr. Malhotra-26,923;Mr. Brover-23,077;Mr. Donohue-9,615; andMr. Miller-19,231. Includes for each officer the following performance shares that have current voting rights, but are subject to aone-year holding period:Mr. Huseby-82,077;Mr. Malhotra-18,256;Mr. Brover-18,256; andMr. Donohue-6,085.Does not include |
| (9) | Does not include the following performance share units which do not have current voting rights:Mr. Huseby-706,657;Mr. Malhotra-140,601;Mr. Brover-126,555;Mr. Donohue-79,365; andMr. Miller-74,983. |
| (10) | Mr. Maloney’s shares beneficially owned is as of April 27, 2019, the effective date of Mr. Maloney’s resignation from the Company. Upon his resignation from the Company, 447,064 unvested restricted units, performance shares or performance units were forfeited. |
| (11) | Does not include 53,581 restricted stock units for which the director has elected to defer receipt and which do not have current voting rights. |
Does not include 21,506 restricted stock units for which the director has elected to defer receipt and which do not have current voting rights. |
| (13) | Includes |
|
|
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis summarizes the material elements of our compensation program for our named executive officers (“NEOs”). For Fiscal 2018,2019, our NEOs were:
Named Executive Officer | Position | |
Michael P. Huseby | Chairman of the Board of Directors and Chief Executive Officer | |
Barry Brover (1) | Executive Vice President, Operations; Former Executive Vice President, Chief Financial Officer | |
Thomas Donohue (1) | Executive Vice President, Chief Financial Officer | |
Kanuj Malhotra | Executive Vice President, Corporate Development; President, Digital Student Solutions | |
Patrick Maloney (2) | Former Executive Vice President, Operations; President, Barnes & Noble College | |
Michael C. Miller | Executive Vice President, Corporate Strategy and General Counsel | |
| (1) |
|
| (2) | Resigned effective as of April 27, 2019. |
Our executive compensation program is designed to align with our business strategy to attract, retain, and engage the talent we need to compete in our industry, and align management with stockholders’ interests. We believe our Compensation Committee has established a compensation program that reflects our businesses, compensation governance best practices and a“pay-for-performance” philosophy.
Compensation and Governance Highlights
What we do
  | Tie a majority of executive pay to performance-based cash and equity incentives |
| Align annual incentive payouts to clearly stated target performance levels |
| Vest equity awards over time to promote retention and require aone-year minimum vesting period for equity awards |
| Require one additional year of time-based vesting for performance shares earned following the achievement of performance measures |
| Accelerate equity only upon termination of employment following a change in control (double trigger) |
| Subject incentive compensation (including cash and equity) to a clawback policy |
| Require executive officers and directors to meet stock ownership targets and retention guidelines |
| Engage with stockholders regarding governance and/or executive compensation issues |
| Conduct an annual risk assessment of our executive compensation program |
| Conduct an annualsay-on-pay vote |
What we don’t do
  | Pay current dividends or dividend equivalents on unearned performance shares and unvested restricted stock units |
| Permit option repricing without stockholder approval |
| Provide significant perquisites |
| Pay taxgross-ups to executives |
| Provide supplemental executive retirement benefits |
| Permit hedging or, without the approval of the Audit Committee, pledging by executive officers or directors |
Executive Leadership Transition
On July 20, 2017,December 13, 2018, Mr. Patrick Maloney announced his plan to retire at the Company announced Mr. Roberts’ resignationend of Fiscal Year 2019 and stepped down from the position of Executive Vice President, Operations of the Company, effective as of September 19, 2017. DueJanuary 1, 2019.
On December 13, 2018, the Board appointed the Company’s Chief Financial Officer, Barry Brover, to his anticipated resignation, he did not participate in the incentive-based equity plans for Fiscal 2018. However, in connection with Mr. Roberts’ resignation,position of Executive Vice President, Operations of the Company, effective as of January 1, 2019. Also on December 13, 2018, the Board appointed the Company’s Senior Vice President, Treasurer and Mr. Roberts entered into a retirement letter agreement, pursuantInvestor Relations, Thomas Donohue, to which Mr. Roberts was entitled to receive certain benefits as described under “Severance Arrangement for Mr. Roberts” in this proxy statement.
Mr. Huseby was elected to succeed Mr. Roberts and entered into an employment agreement withthe role of Executive Vice President, Chief Financial Officer of the Company, effective as described under “Employment Agreement with Mr. Huseby.” Mr. Huseby also received aone-time transition payment in the amount of $250,000 upon commencement of service.January 1, 2019.
Recent Actions Taken for Fiscal 2018by Compensation Committee
The Compensation Committee continuedcontinues to review and refine the Company’s executive compensation program to further align pay with Company performance and to ensure the integrity of the Company’s executive compensation program. The Compensation Committee considered the“say-on-pay” stockholder advisory vote held in September 20172018 to be supportive of the Company’s pay practices. Approximately 88%97.3% of stockholder votes cast were in favor of the executive officer compensation as described in our 20172018 proxy statement. Notwithstanding the stockholder support for the Company’s executive compensation practices in 2017,2018, the Compensation Committee respondedcontinued to respond to potential concerns of proxy advisory firms and certain questions raised by stockholders. A combination of management and directors engaged with stockholders holding more than 40%50% of the Company’s outstanding Common Stock and discussed, among other things, corporate governance and executive compensation.
| Stockholders Were Concerned About | How We Addressed Their Concerns | |||
| No performance-based long-term vesting incentive awards | • Grant a portion of long-term equity incentives in the form of time-based restricted stock units and performance shares • FY 2020 are 50% RSUs / 50% PSUs for CEO and other NEOs. FY 2019 grants were 50% RSUs / 50% PSUs for CEO and 75% RSUs / 25% PSUs for other • FY 2020 grants have payout threshold of 85% of target. | |||
| No stock ownership guidelines for executive officers | • Adopted stock ownership guidelines for executive officers (in addition to the existing | |||
| Clawback provisions only applied to equity awards | • Adopted a compensation recoupment policy (“clawback policy”) that applies to all incentive compensation (cash and equity) | |||
| Discretionary bonus for Executive Chairman | • Established performance-based annual incentive opportunity consistent with other executive officers | |||
Discretionary bonuses for executive officers | • No portion of the Annual Incentive Plan is discretionary | |||
Highlights of Fiscal 20182019 Company Performance
The Company has faced transformational and challenging trends in the higher education market. Given this landscape, the following are Company financial and operational performance highlights for Fiscal 2018.2019.
Consolidated sales of $2,203.6$2,034.6 million increased 17.6%decreased 7.7%, as compared to Fiscal 2017.2018.
Consolidated GAAP net loss of $(24.4) million, compared to a net loss of $(252.6) million asin Fiscal 2018. The Fiscal 2019 net loss includes anon-cash impairment loss of $(57.8) million and restructuring and other charges of $(7.2) million, compared to net income of $5.4 in Fiscal 2017. Fiscal 2018 net loss includes thewhich included apre-taxnon-cashnon-cash goodwill impairment chargeloss of $313.1$(313.1) million or $302.9and restructuring and other charges of $(5.4) million.
Consolidatednon-GAAP Adjusted EBITDA of $104.9 million, compared to $126.8 million in Fiscal 2018.
Consolidatedafter-tax.non-GAAP Adjusted Earnings of $25.4 million, compared to $56.9 million in Fiscal 2018.
Made substantial investments in technology, content and human capital to facilitate continued transformation of all businesses to digital platforms and offerings.
| • | Demonstrated ability to leverage expansive store footprint to drive subscriptions ofbartleby®, the Company’s digital study offering, which gained more than 50,000 subscribers following its first major |
| • | Expanded catalogue of |
| • |
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| • |
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Expanded and enhanced the Company’s First Day™ inclusive access solution throughSigned agreements with major publishers including Oxford University Press, Wiley, Macmillan Learning, SAGE and Norton, to offer theirmake the publishers’ digital content available through inclusive access models atprograms offered on BNED campuses nationwide.
Ongoing integration of our Barnes & Noble College Booksellers, LLC (“BNC”) and MBS stores nationwide.Textbook Exchange, LLC (“MBS”) operations, including a unified and expanded sales team to help drive new business growth with a dynamic, newgo-to-market strategy.
Strengthened partnershipsthe value of BNED’s campus retail footprint with publishing partners McGraw-Hill Educationpilot testing of highly relevant and Pearson through two separatecurated concept shops that drove improvements in sales trends and significant strategic initiatives: the distributionhigher levels of theire-content through inclusive access models to campuses served by BNED, and, also the distribution of their designated rental titles through BNED channels.
Announced a strategic partnership with Portland State University toco-develop a degree planning solution to help more students graduate on time with better pathways to employment.
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Expanded available LoudCloud Courseware™ to 32 course offerings and significantly reduced pricing consistent with the Company’s ongoing mission to drive affordability and accessibility on campuses nationwide.customer engagement.
Pay and Performance Alignment in Fiscal 20182019
Annual incentives for Fiscal 20182019 were awarded based on Company EBITDA (earnings before interest, taxes, depreciation and amortization adjusted for certain items) performance relative to apre-defined target level. As described below in more detail, our Fiscal 20182019 Company EBITDA performance was 88.2%89.7% of target, which yielded a payout factor of 65%82% of the target award allocated to the Company goal. In determining individual NEO awards, the Compensation Committee also considered individual performance against individual performance goals.
The performance shares granted to management in Fiscal 2017 were earned to the extent that the previously established goals based on BNC Adjusted EBITDA (75% of award) and BNC New Business (25% of award) were achieved over Fiscal 2017 and Fiscal 2018. Because actual BNC EBITDA fell short of the threshold amount established for BNC Adjusted EBITDA, and BNC New Business exceeded the target and achieved the maximum payout, the overall grant earned was at a 37.5% achievement. As designed, below target Company performance resulted in below target payouts under the performance share plan. The earned shares remain subject to an additionalone-year holding period.
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Fiscal 20182019 equity grants for the executive officers were delivered in a combination of performance shares, which accounted for 50% of the target award amount for Mr. Huseby and 25% of the target award amount for the other NEOs, and restricted stock units, which accounted for 50% of the target award amount.for Mr. Huseby and
75% of the target award amount for the other NEOs. The Compensation Committee believes the mix of awards provides a strong link between the Company’s financial performance and executive compensation, aligns executives with the Company’s stockholders and provides an important retention tool. The performance shares will vest if and only to the extentpre-established performance goals for thetwo-year period covering Fiscal years 20182019 and 20192020 are achieved and an additional one year of time-based vesting is met. The restricted stock units vest in equalone-third increments on the first, second and third anniversary of the grant date.
Compensation Decisions for Fiscal 20192020
In connection with seeking shareholder approval for the Amended and Restated Equity Incentive Plan, theThe Compensation Committee reviewed its equity granting practices and determined thatcontinues to believe it would beis in the Company’s best interest to manage therun-rate of equity awards granted in Fiscal 2019. Because of a decline in the Company’s stock price, limiting the number of shares of Fiscal 2019 equity awards2020. Pursuant to be granted to executive officers will have a grant date fair value lower than awards historically granted.Mr. Huseby’s employment agreement, Mr. Huseby’s annual equity award value is set at three times his salary pursuant to his employment agreement.
salary. In order to align his equity award with the objective of managing therun-rate of equity awards, without inequitably reducing, or eliminating entirely, other management and employee awards, Mr. Huseby agreed to an award for Fiscal 20192020 with a significantly lower grant date value than that required by his employment agreement. In addition, the other NEOs also received Fiscal 2020 awards with lower grant date values than would have been awarded had the actual stock price on the day of grant been used in calculating such awards versus the higher twelve month trailing average stock price employed by the Compensation Committee. Calculating the number of shares to be awarded using the twelve month trailing average stock price rather than the grant date stock price resulted in approximately 1.2 million fewer shares being granted in the Fiscal 2020 award cycle. In keeping with a“pay-for-performance” philosophy, both the Compensation Committee and senior management believe that it is appropriate for the Board, management, and stockholders to be aligned and that given the transformational and challenging trends facing the Company and the higher education market, that management bear the negative impact of the short termvolatile and lower stock price while continuing to maintain a significant portion of target compensation being delivered in the form of performance-based equity compensation, reflective of the opportunities that lie ahead for the Company. In addition, the Compensation Committee raised the threshold payout for annual incentive awards and long-term incentive awards from 75% to 85% and increased the performance-based portion of the long-term incentive awards from 25% to 50% of the aggregate awards.
Compensation Philosophy and Objectives
We are engaged in a very competitive and rapidly changing industry, and our success depends on our ability to attract, motivate and retain qualified executives. Accordingly, the Compensation Committee aims to create total compensation packages that are competitive with programs offered by other companies with which we compete for talent. At the same time, our Compensation Committee believes that a significant portion of the compensation paid to our executive officers should be tied to our performance, execution of our strategic plan and the value we create for stockholders.
The Compensation Committee’s objectives are to:
attract, retain, and motivate talented executives responsible for the success of our organization;
provide compensation to executives that is externally competitive, internally equitable, performance-based, and aligned with stockholder interests; and
ensure that total compensation levels are reflective of company and individual performance and provide executives with the opportunity to receive above-market total compensation for exceptional business performance.
Compensation Market References
In establishing compensation for Fiscal 2018,2019, the Compensation Committee worked with Mercer, its compensation consultant, to develop a peer group for the Company and review executive compensation against
that peer group. In support of its compensation philosophy, the Compensation Committee reviews the following: a) base salary; b) target short-term incentive; c) target total cash compensation; d) actual total cash compensation; e) long-term incentive; and f) target total direct compensation. Executives are matched to market positions based on titles, responsibilities and contributions to the Company. The Compensation Committee reviewed compensation among the peer group companies to determine the competitiveness of pay levels and pay mix for executives.
Although no other public companies are directly comparable to the Company and its businesses, the Compensation Committee considers the Company’s competitors for executive talent to be companies engaged in retail education services, and outsourcing and consultingeducation services. Our peer group, which is reviewed annually, includes companies that are similar in size to the Company based on revenues and market capitalization and also companies with overlapping business model characteristics (e.g., education / technology focus, combination of products and services, strong relationships with business partners,go-to-market strategy, and geographic footprint) as follows:
Adtalem Global Education Inc. | ||
Houghton Mifflin Harcourt Company | ||
American Eagle Outfitters, Inc. | John Wiley & Sons, Inc. | |
Barnes & Noble, Inc. | K12 Inc. | |
Bright Horizons Family Solutions Inc. | Lands’ End, Inc. | |
Chegg, Inc. | Meredith Corporation | |
GNC Holdings, Inc. | Scholastic Corporation | |
Graham Holdings Company | Urban Outfitters, Inc. | |
Grand Canyon Education, Inc. | Vitamin Shoppe, Inc. | |
Following the acquisitions of Student Brands, Loud Cloud, and MBS, BNED’s revenue is substantially above the median of the peer group. The Committee reviews the peer group annually and will continue to consider the Company’s current size and strategic direction in the nextits review.
Total Revenue (Most Recent FY, $M) | Market Cap (as of 6/30/2019, $M) | |||
| Peer Group Median | $1,714 | $2,372 | ||
| BNED | $2,035 | $160 | ||
However, peer group compensation is just one factor that is considered in determining compensation levels for our executive officers. We also consider: (a) the Company’s business performance; (b) each executive officer’s job responsibilities, experience and prior performance; (c) relative compensation among our executive officers; (d) industry-wide business conditions; and (e) the recommendations of our Chairman of the Board and Chief Executive Officer (in the case of Messrs. Brover, Donohue, Malhotra, Maloney, and Miller).Miller.)
Overview of Compensation Program Design
Our compensation structure is primarily composed of base salary, performance-based annual incentive compensation and performance-based and time-vested long-term equity incentives. The mix of Fiscal 20182019 target total direct compensation was as follows:
Note that Target Annual Incentive reflects Fiscal 20182019 target opportunity and restricted stock units (“RSUs”) and performance shares (“PS”) reflect Fiscal 20182019 target value on the respective grant date.
We pay our NEOs a base salary to provide them with a guaranteed minimum compensation level for their services. An NEO’s base salary is determined by evaluating the external competitive marketplace, internal equity and individual contributions. For Fiscal 2018,2019, the Compensation Committee made no increases toonly increased the base salarysalaries for Messrs. Brover, Donohue, and Miller upon their appointments as Executive Vice President, Operations of any NEO, except with respect to Mr. Huseby upon his appointment asthe Company, Executive Vice President, Chief Financial Officer of the Company, and Executive Officer.Vice President, Corporate Strategy of the Company, respectively.
Named Executive Officer | Base Salary in Fiscal 2017 | Base Salary in Fiscal 2018 | Percentage Change | Base Salary in Fiscal 2018 | Base Salary in Fiscal 2019 | Percentage Change | |||||||||||||||||||||
Michael P. Huseby | $ | 500,000 | $ | 1,100,000 | 120 | % | $ | 1,100,000 | $ | 1,100,000 |
| 0 | % | ||||||||||||||
Barry Brover | $ | 535,000 | $ | 535,000 | 0 | % | $ | 535,000 | $ | 610,000 |
| 14 | % | ||||||||||||||
Thomas Donohue | $ | 445,000 | $ | 500,000 |
| 12.4 | % | ||||||||||||||||||||
Kanuj Malhotra | $ | 523,400 | $ | 523,400 | 0 | % | $ | 523,400 | $ | 523,400 |
| 0 | % | ||||||||||||||
Patrick Maloney | $ | 767,000 | $ | 767,000 | 0 | % | $ | 767,000 | $ | 767,000 |
| 0 | % | ||||||||||||||
Michael C. Miller | $ | 475,000 | $ | 475,000 | 0 | % | $ | 475,000 | $ | 500,000 |
| 5.3 | % | ||||||||||||||
Max J. Roberts | $ | 900,000 | $ | 900,000 | 0 | % | |||||||||||||||||||||
Donohue, Malhotra, Maloney and Miller were granted performance-based annual incentive compensation opportunities. The target award under the Annual Incentive Plan is expressed as a percentage of base salary as follows:Mr. Huseby-150%, Mr. Brover-75%,Mr. Malhotra-100%,Mr. Maloney-125% andMr. Miller-60%.set forth in the table below. For Messrs. Huseby, Brover, Donohue, Maloney and Maloney,Miller, the individual Annual Incentive Plan payouts were based 50% on Company performance as measured by Company EBITDA and 50% on individual performance goals. For Mr. Malhotra, the individual Annual Incentive Plan payout was based 40% on digital education EBITDA, 10% on Company EBITDA and 50% on individual performance goals. Individual performance goals are closely linked to the Company’s business and strategic objectives and reflect the executive’s scope of responsibility, as noted below. Participants had the opportunity to earn up to 150% of the Company EBITDA component and between 50% and 150% of the individual performance goal components established for each of them. For Mr. Miller, the Annual Incentive Plan payout was 100% of target pursuant to the terms of his employment letter.
Named Executive Officer | Target as Percentage of Salary | |
Michael P. Huseby | 150% | |
Barry Brover | 75%/100% (1) | |
Thomas Donohue | 40%/60% (1) | |
Kanuj Malhotra | 100% | |
Patrick Maloney | 125% | |
Michael C. Miller | 60% | |
| (1) | In connection with Mr. Brover’s and Mr. Donohue’s election to new positions, their respective targets were adjusted effective January 1, 2019, and payouts were made pro rata based on months served in each position. |
Fiscal 20182019 Performance Targets and Actual Results. The chart below shows the payout scale on which the Company EBITDA portion of the individual annual incentive target compensation was based.
Company EBITDA Performance Relative to Target | Payout Percentage (% of Target Payout) | |
Less than | 0% | |
| 50-100%* | |
98% to less than 102% | 100% | |
102% to less than 115% | 100-150%* | |
115% or more | 150% | |
| * | Payout percentage is interpolated for results within range. |
The chart below shows the target and actual Company EBITDA results for Fiscal 2018 (excluding Student Brands)2019 and actual results as a percentage of target results and target pay. Based on actual Company EBITDA, (excluding Student Brands), the NEOs earned a payout of 65%82% of the Company EBITDA component.
Target ($) (in thousands) | Actual ($) (in thousands) | % Target Achieved | % Target Payout | |||||
Company EBITDA * | $130,276 | $114,886 | 88.2% | 65% |
Target ($) (in millions) | Actual ($) (in millions) | % Target Achieved | % Target Payout | |||||
Company EBITDA * | $118.1 | $105.9 | 89.7% | 82% |
| * | Company EBITDA is used in our compensation programs and is presented in order to show the correlation between these financial measures and compensation to our NEOs. Both target Company EBITDA and actual Company EBITDA were determined by using Adjusted EBITDA, as calculated and reported in the Company’s SEC filings and disclosure and further adjusted to exclude certain adjustments related to the |
Fiscal 20182019 Individual Performance Results and Incentive Payouts. Our Compensation Committee determined that our NEOs had achieved the individual performance goals discussed below. Individual performance goal components accounted for 50% of the aggregate target amount, and a payout between 90%96% and 100% was established for each individual performance component.
Mr. Huseby. Mr. Huseby’s individual performance goals were established to reflect his role as Chairman of the Board and Chief Executive Officer and included the execution of various operational priorities, strategic transactions, and shareholder outreach.stockholder outreach and the achievements of the management team. The Committee approved an individual payout of 95%100% of target.
Mr. Brover. The Compensation Committee established individual performance goals for Mr. Brover focused on execution of the integration of identifying synergies and expense opportunities within BNC/MBS, expense reductionraising additional capital/debt, enhancing monthly management reporting and General Merchandise System implementation.financials for new segments, and supporting product development. The Committee approved an individual payout of 92%100% of target.
Mr. Donohue. Mr. Donohue’s individual performance goals were established based on achieving financing support, mergers and acquisitions support, investor outreach, and proxy outreach. The Committee approved an individual payout of 100% of target.
Mr. Maloney. The Compensation Committee established individual performance goalsBecause of his retirement, Mr. Maloney was not paid under the Annual Incentive Plan. For information regarding payments made to Mr. Maloney in connection with his retirement see “Severance Arrangement for Mr. Maloney focusedMaloney” on performance of MBS, successful renegotiations of current contracts, securing new store contracts and performance of the digital education business. The Committee approved an individual payout of 90% of target.page 39.
Mr. Malhotra. Mr. Malhotra’s individual performance goals were established based on executionachieving a Company EBITDA target of $118.1 million, successfully launching thebartleby product to marketplace, and contributing to the Company’s acquisition strategy, thebuild-out of the digital organization, developing strategic plan for the digital business and performance of the digital education business.strategy. The Committee approved an individual payout of 93%96% of target.
Mr. Miller. The committeeCompensation Committee established individual performance goals for Mr. Miller focused on consolidating and reviewing strategic priorities, assisting with strategic initiatives, including transactions, and increasing operational efficiencies. The Committee approved an individual payout of 100% consistent with the terms of Mr. Miller’s employment letter.target.
Fiscal 20182019 Performance-Based Annual Incentive Compensation Payment Amounts. Set forth below is a table showing target, maximum and actual Fiscal 20182019 performance-based annual incentive compensation for our NEOs.
Named Executive | Company EBITDA/ Individual Weighting | Target Annual Incentive ($) | Maximum Annual Incentive ($) | Actual Company EBITDA Payout | Actual Individual Performance Payout | Actual Total Payout | Total Payout as a % of Target | Company EBITDA/ Individual Weighting | Target Annual Incentive ($) | Maximum Annual Incentive ($) | Actual Company EBITDA Payout | Actual Individual Performance Payout | Actual Total Payout | Total Payout as a % of Target | ||||||||||||||||||||||||||||||||||||||
Michael P. Huseby | 50% / 50% | $ | 1,650,000 | $ | 2,475,000 | $ | 536,250 | $ | 783,750 | $ | 1,320,000 | 80% | 50% / 50% | $ | 1,650,000 |
| $ | 2,475,000 | $ | 676,500 | $ | 825,000 | $ | 1,501,500 |
| 91% |
| |||||||||||||||||||||||||
Barry Brover | 50% / 50% | $ | 401,250 | $ | 601,875 | $ | 130,406 | $ | 184,575 | $ | 314,982 | 79% | 50% / 50% | $ | 508,333 | (2) | $ | 762,500 | $ | 208,417 | $ | 254,167 | $ | 462,583 |
| 91% |
| |||||||||||||||||||||||||
Thomas Donohue | 50% / 50% | $ | 233,333 | (3) | $ | 350,000 | $ | 95,667 | $ | 116,667 | $ | 212,333 |
| 91% |
| |||||||||||||||||||||||||||||||||||||
Kanuj Malhotra | 50% / 50% | $ | 523,400 | $ | 785,100 | $ | 348,061 | $ | 243,381 | $ | 591,442 | 113%(1) | 50% / 50% | $ | 523,400 |
| $ | 785,100 | $ | 110,437 | $ | 252,279 | $ | 362,716 |
| 69(1) |
| |||||||||||||||||||||||||
Patrick Maloney | 50% / 50% | $ | 958,750 | $ | 1,438,125 | $ | 311,594 | $ | 431,438 | $ | 743,032 | 78%(2) | ||||||||||||||||||||||||||||||||||||||||
Michael C. Miller | 50% / 50% | $ | 285,000 | $ | 427,500 | $ | 142,500 | (1) | $ | 142,500 | (1) | $ | 285,000 | 100%(1) | 50% / 50% | $ | 300,000 |
| $ | 450,000 | $ | 123,000 | $ | 150,000 | $ | 273,000 |
| 91% |
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| (1) |
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| (2) |
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| (3) | Target bonus reflects 8 months at 40% of base salary and 4 months at 60% of new salary. |
The performance-based annual incentive awards earned by our NEOs under the annual incentive plan for Fiscal 20182019 are set forth in the “Summary Compensation Table” on page 34. The threshold, target and maximum incentive award opportunities for each of our NEOs for Fiscal 20182019 are set forth in the “2018“2019 Grants of Plan-Based Awards Table” on page 36.
Long-term equity incentives are a critical component of the Company’s compensation program. They are designed to promote the Company’s long-term financial interests and growth, to attract, motivate, and retain key employees, and to align the interests of management with those of the Company’s stockholders. The Company grants long-term equity incentive awards under the Company’s Equity Incentive Plan (the “Equity Incentive Plan”), which is administered by the Compensation Committee. The Compensation Committee reviews, discusses and approves the types and number of awards made to senior management, including the NEOs, and approves the terms, conditions and limitations applicable to each award. The Committee delegates authority to the CEO, withinpre-established limitations, to make awards to newly-hired employees or current employees who are not executive officers. The Compensation CommitteeEquity awards are generally grants awards of Performance Shares in July of each year and Restricted Shares in September. We are seeking stockholders’ approval of the Company’s Amended and Restated Equity Incentive Plan to increase the number of authorized shares available for grant under the Equity Incentive Plan and to amend certain provisions related to performance-based awardsgranted in connection with amendments to Section 162(m) of the Code.
In granting long-term incentive awards, theJune Compensation Committee establishes a target long-term incentive amount for each of the NEOs denominated in dollars. For Fiscal 2018, the Compensation Committee determined to make awards with a mix of performance shares, which accounted for 50% of the target award amount, and restricted stock units, which accounted for 50% of the target award amount. The Compensation Committee grants a portion of the award in the form of restricted stock units because it believes such grants immediately align the interests of our executives with those of stockholders and provide a retention incentive. The number of performance shares and restricted stock units granted is based on the dollar value of the award divided by the market value of the shares of Common Stock on the respective grant date.meeting.
In Fiscal 2018,2019, the Compensation Committee established a target long-term incentive amount for each of the NEOs denominated in dollars. The Compensation Committee determined to make awards with a mix of performance shares, which accounted for 50%25% of the target award amount, and restricted stock units, which accounted for 50%75% of the target award amount.amount, except that Mr. Huseby’s award was split equally between performance and restricted shares. For fiscal 2020, the mix of performance shares and restricted stock units is 50%/50% for all executive officers. The Compensation Committee believes that granting a portion of the award in the form of restricted stock units is desirable because such grants immediately align the interests of our executives with those of stockholders and provide a retention incentive. The numberIn order to manage therun-rate of performanceequity awards, for both the fiscal 2019 and 2020, long-term incentive awards, the NEOs and other senior members of management agreed to accept fewer shares and restricted stock unitsthan otherwise would have been granted was based onhad the dollar value of the award divided by the market value of the shares of Common Stock on the respective grant date.date been used.
Performance Shares. Performance share units are generally granted annually to each of the NEOs. Performance share units are earned and settled for shares of common stock if and only to the extent that certainpre-established performance goals are met for atwo-year performance period. For the performance share units granted in Fiscal 2019, the metrics included Adjusted EBITDA and New Business. Actual results for thetwo-year period beginning on the first day of the fiscal year period and ending on the last day of the second fiscal year will be compared to the targeted goals to determine the number of performance share units that will be earned. The NEOs can earn up to 150% of the number of performance share units at target for performance that exceeds 115% of target. If a threshold level of performance, 85%75% of target (75%(85% for Fiscal 20192020 grants), is not met, all of the performance share units will be forfeited. Once performance share units are earned and held for an additional one year period, the units will be settled for shares of common stock, the shares of common stock are subject to an additional one year time-based vesting.stock.
Restricted Stock Units. Restricted stock units are Common Stock equivalents that are granted to a recipient and vest after a period of time has elapsed. The restricted share units granted to the NEOs vest in one third annual increments over the three years from the date of grant. These share units vest only if the executive is employed by the Company at the end of the vesting period or if his or her employment was terminated due to death, disability or a change in control during that period. The Compensation Committee believes the use of
restricted stock units strengthens the retention aspects of the Company’s pay program, consistent with one of its key principles. The following grants were made for Fiscal 2018.2019.
Named Executive Officer | Performance Shares at Target | Performance Shares at Maximum | Restricted Stock Units | Aggregate Award Target ($) | Performance Shares at Target | Performance Shares at Maximum | Restricted Stock Units | Aggregate Award Target ($) | ||||||||||||||||||||||||
Michael P. Huseby | 211,538 | 317,307 | 281,090 | $ | 3,300,000 | (1) |
| 180,834 |
|
| 271,251 |
|
| 153,845 |
| $ | 1,858,467 |
| ||||||||||||||
Barry Brover | 47,051 | 70,576 | 63,884 | $ | 750,000 |
| 27,124 |
|
| 40,686 |
|
| 69,232 |
| $ | 536,310 |
| |||||||||||||||
Thomas Donohue |
| 11,302 |
|
| 16,953 |
|
| 28,847 |
|
| 223,466 |
| ||||||||||||||||||||
Kanuj Malhotra | 47,051 | 70,576 | 63,884 | $ | 750,000 |
| 31,646 |
|
| 47,469 |
|
| 80,769 |
| $ | 625,693 |
| |||||||||||||||
Patrick Maloney | 94,102 | 141,153 | 127,769 | $ | 1,500,000 |
| 47,243 |
|
| 70,865 |
|
| 120,577 |
| $ | 934,073 |
| |||||||||||||||
Michael C. Miller | — | — | 59,625 | $ | 350,000 | (2) |
| 22,603 |
|
| 33,905 |
|
| 57,694 |
| $ | 446,927 |
| ||||||||||||||
|
|
ForIn Fiscal 2018, Performance shares were granted at2019, the target level. The number of performance sharesshare units and restricted stock units granted were determined based on the award dollar value target divided by the stock price on the date of grant. Performance share units were awarded at the target level.
In Fiscal 2016, Performance SharesJune 2017, performance shares were granted for thetwo-year period covering Fiscal 20172018 and Fiscal 2018.2019. The chart below sets forth the performance targets and actual results for Fiscal 20172018 and Fiscal 2018,2019, in thousands, which resulted in 37.5%38.8% of the Performance Shareperformance share target award being earned. These earned shares are subject to an additional one year vesting period.
(in thousands)
| Weighting | Threshold | Target | Max | Fiscal 2017 Actual | Fiscal 2018 Actual | Cumulative Results | Weighted Payout | |||||||||||||||||||||||||
Adjusted EBITDA (1) | 75 | % | $ | 156,000 | $ | 182,000-$190,000 | $ | 214,000 | $ | 82,500 | $ | 64,300 | $ | 146,800 | 0 | % | ||||||||||||||||
New Business | 25 | % | $ | 134,000 | $ | 157,000-$163,000 | $ | 184,000 | $ | 118,100 | $ | 66,100 | $ | 184,200 | 37.5 | % | ||||||||||||||||
TOTAL |
| 37.5 | % | |||||||||||||||||||||||||||||
| Weighting | Threshold | Target | Max | Fiscal 2018 Actual | Fiscal 2019 Actual | Cumulative Results | Weighted Payout | |||||||||||||||||||||||||
Adjusted EBITDA (1) | 75 | % | $ | 212,000 | $ | 248,000-$258,000 | $ | 291,000 | $ | 114,900 | $ | 98,800 | $ | 213,700 | 51.8 | % | ||||||||||||||||
New Business (2) | 25 | % | $ | 151,000 | $ | 17,0006-$184,000 | $ | 207,000 | $ | 66,100 | $ | 53,300 | $ | 119,400 | 0 | % | ||||||||||||||||
TOTAL |
| 38.8 | % | |||||||||||||||||||||||||||||
| (1) | Adjusted EBITDA excludes Student Brands, MBS |
| (2) | New Business means the annual sales (based upon the first full fiscal year budget) associated with new stores opened during the fiscal year consistent with what is reported in the Company’s annual report. |
Messrs. Huseby and Roberts wereMr. Miller was awarded bonusesa retention bonus in the amount of $200,000 in Fiscal 20182019. If Mr. Miller is terminated by the Company for “cause” or by Mr. Miller other than for “good reason” (as such terms are defined in the amounts of $250,000letter agreement between the Company and $562,500, respectively, in connection with CEO management transition. Mr. Miller received a $50,000 signingdated April 12, 2017), in either case prior to March 1, 2020, Mr. Miller will be required to repay an amount equal to the retention bonus in connection with hisless any amounts withheld by the Company for income and employment which was paid in Fiscal 2018.taxes.
Other Components of Compensation
401(k) Plan. Each of our NEOs is entitled to participate in ourtax-qualified defined contribution 401(k) plan on the same basis as all other eligible employees. The 401(k) plan provides our employees, including our NEOs, with a way to accumulatetax-deferred savings for retirement. The Company matches the contributions of participants, subject to certain criteria. Under the terms of the 401(k) plan, as prescribed by the Code, the contribution of any participating employee is limited to the lesser of 75% of annual salary before taxes or a maximum dollar amount ($18,50019,000 for 2018)2019), subject to a $6,000 increase for participants who are age 50 or older. The amount of the Company’s matching contributions for each of our NEOs is set forth in footnotes to the “Summary Compensation Table” on page 34. We do not provide supplemental executive retirement benefits.
Limited Perquisites and Other Compensation. The Company’s NEOs are entitled to only the limited perquisites set forth in their employment agreements or letters and disclosed in the footnotes to the “Summary Compensation Table” on page 34.
Severance and Change of Control Payments and Benefits. The Company has an employment agreementsagreement with Mr. Huseby and each of Messrs. Huseby, Brover, and Maloney that were entered into prior to the legal and structural separation from Barnes & Noble, Inc. on August 2, 2015 (the“Spin-Off”). Mr.Donohue, Malhotra and Mr. Miller do not have employment letter agreements but have similarthat contain severance and change in control benefits as outlined in an employment letter.benefits. The agreements provide for certain severance payments and benefits upon termination of employment by the Company without cause or by the NEO for good reason (including upon termination within two years following a change of control). The triggering events that would result in the severance payments and benefits and the amount of those payments and benefits are intended to provide our NEOs with financial protection upon loss of employment and to support our executive retention goals and enable our NEOs to focus on the interests of the Company in the event of a potential change of control. Equity awards are subject to a “double-trigger” and vesting will only be accelerated if there is a termination of employment without” cause” or for “good reason” following a change of control. The Company does not pay any taxgross-ups in connection with the severance payments. The Compensation Committee believes that the terms of the employment agreements, including triggering events and amounts payable, are competitive with severance protection being offered by other companies with whom we compete for highly qualified executives. The compensation that could be received by each of our NEOs upon termination or change of control is set forth in the “Potential Payments Upon Termination or Change of Control Table” on page 42. The material terms of these agreements are described in the “Narrative to the Summary Compensation TableTable” and the Grants“Grants of Plan-Based Awards Table-Employment Arrangements with the Named Executive Officers.”
Governance Policies
Executive Incentive Compensation Clawback Policy
In Fiscal 2017, theThe Board of Directors has adopted the Executive Incentive Compensation Clawback Policy (the “Clawback Policy”). The Clawback Policy allows the Compensation Committee to take action to recover incentive compensation from certain key employees, including executive officers, in the event that the Company is required to prepare an accounting restatement due to material noncompliance with financial reporting requirements. The Clawback Policy only applies to incentive-based compensation paid in excess of what would have been paid or granted under the circumstances reflected by such restatement, and applies irrespective of the responsibility of the key employee for the accounting restatement. The Clawback Policy applies to all Section 16 officers and covers all incentive-based compensation (including cash and equity) paid or granted after adoption of the policy.
Prohibition on Hedging and Pledging Transactions
The Company’s Insider Trading Policy prohibits directors and executive officers from hedging their ownership of Company stock, including selling Company stock short, buying or selling puts or calls or other derivative instruments related to Company stock. Directors and executive officers are also prohibited from pledging Company stock, purchasing Company stock on margin or incurring any indebtedness secured by a margin or similar account in which Company stock is held, without prior approval of the Audit Committee.
Executive Stock Ownership and Retention Guidelines
In Fiscal 2017, theThe Compensation Committee has adopted executive stock ownership and retention guidelinestargets (“Stock Ownership Targets”) based on a multiple of annual salary (“Retention Requirements”) as follows: Chief Executive Officer-five times; all otherNEOs-two times; and all other Section 16officers-one time. Officers are required to retain 50% of netafter-tax shares earned from equity grants until the Stock Ownership Target is met (“Retention Requirement is met.Guidelines”). Only vested and fully-owned shares owned by an officer directly or indirectly through the 401(k) plan, immediate family members or
trusts or similar arrangements count toward the Retention Requirements.Stock Ownership Targets. The Compensation Committee reviews progress toward the Stock Ownership Targets and compliance with the Retention RequirementsGuidelines annually.
| Named Executive Officer | Stock Ownership as a Multiple of Salary | In Compliance with Retention Yes/No | ||||||||
Michael P. Huseby | 5 x | Yes | ||||||||
Barry Brover | 2 x | Yes | ||||||||
Thomas Donohue | 2 x | Yes | ||||||||
Kanuj Malhotra | 2 x | Yes | ||||||||
| ||||||||||
Michael C. Miller | 2 x | Yes | ||||||||
Compensation Policies and Practices as Related to Risk Management
With the assistance of its compensation consultant, the Compensation Committee conducted its risk assessment of the Company’s incentive compensation plans covering employees. The Compensation Committee evaluated the levels of risk-taking to determine whether they are appropriate in the context of the Company’s strategic objectives, the overall compensation arrangements, and the Company’s overall risk profile. The Compensation Committee concluded the Company has a balancedpay-for-performance executive compensation program that does not encourage excessive risk-taking and the Company does not maintain compensation policies and practices that are reasonably likely to have a material adverse effect on the Company.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code, as in effect prior to the adoption in December 2017 of The Tax Cuts and Jobs Act (the “TCJA”), includes a performance-based compensation exception to its limits on the deductibility of compensation in excess of $1 million earned by specified executive officers of publicly held companies. The Equity Incentive Plan contains the provisions necessary to potentially qualify certain awards under the Equity Incentive Plan under the Section 162(m) exception and preserve the tax deductibility to the Company of compensation paid to executives under the plan. Performance share units previously granted are intended to qualify as performance-based compensation, but time-based restricted stock units, which vest solely on the passage of time, do not qualify as performance-based compensation. The annual incentive compensation program has also been structured to potentially provide for Section 162(m) tax deductibility. The TCJA eliminated the performance-based compensation exception, so that for Fiscal 2019 all compensation paid to specified executive officers in excess of $1 million will be nondeductible (except for any amounts that qualify as performance-based that have been grandfathered pursuant to the written binding contract transition rule under the TCJA). The Compensation Committee intends to evaluate the impact of the adoption of the TCJA on Section 162(m) and our compensation practices.
Roles of the Compensation Committee, Management, and our Compensation Consultant in Determining the Compensation of our Named Executive Officers
Roles of the Compensation Committee and Management
The Compensation Committee is responsible for establishing, implementing and overseeing our compensation program, and reviews and approves our compensation philosophy and objectives. The Compensation Committee also annually reviews and approves annual base salary levels, annual incentive
opportunity levels, long-term incentive opportunity levels, employment and severance agreements and any special or supplemental benefits for each of the NEOs and any other executive officers, Section 16 officers and employees of the Company earning a base salary of $400,000 or more.
The compensation of our Chairman and Chief Executive Officer is determined by the Compensation Committee in executive session. The Chairman and Chief Executive Officer reviews the performance of each of our other executive officers and makes compensation recommendations to the Compensation Committee. The Compensation Committee considers all key elements of compensation separately and also reviews the full compensation package of each executive officer.
Role of the Compensation Consultant
The Compensation Committee has retained Mercer, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc., to assist with the committee’s responsibilities related to the Company’s executive compensation program and the director compensation program. Mercer’s engagement by the Compensation Committee includes reviewing and recommending the structure of our compensation program and advising on all significant aspects of executive compensation, including base salaries, annual incentives and long-term equity incentives for executives. At the request of the Compensation Committee, Mercer collects relevant market data to allow the Compensation Committee to compare components of our compensation program to those of our peers, provides information on executive compensation trends and implications and makes other recommendations to the Committee regarding our executive compensation program. Our management, Chief Executive Officer and(on certain occasions), Senior Vice President, Human Resources, General Counsel and the chair of the Compensation Committee, meet with representatives of Mercer before Compensation Committee meetings.
In making its final decisions regarding the form and amount of compensation to be paid to the executives, the Compensation Committee considers the information gathered by and recommendations of Mercer. Mercer has also advised the Compensation Committee on our compensation program fornon-employee directors. Mercer’s fees for executive and director compensation consulting to the Compensation Committee in Fiscal 20182019 were approximately $198,303.$365,641. MMC Securities LLC, a subsidiary of Marsh & McLennan Companies, Inc., provides advisory services to the Company’s Benefits Committee, which administers the Company’s 401(k) plan, and other human resource services for which the Company paid approximately $28,432. The Company also paid Marsh & McLennan Companies, Inc., the parent company of Mercer, for insurance brokerage services totaling approximately $600,913. The Compensation Committee has assessed the independence of Mercer taking into account the following factors identified by the SEC and NYSE as bearing upon independence: (i) Mercer’s provision of other services to the Company; (ii) the fees Mercer received for such services as a percentage of the revenues of Marsh & McLennan, Mercer’s parent; (iii) the policies and procedures of Mercer that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Mercer consultants with a member of the Compensation Committee; (v) any of our stock owned by the Mercer consultants; and (vi) any business or personal relationship of the Mercer consultants or Mercer with any of our executive officers. The Compensation Committee concluded that no conflict of interest exists with respect to its engagement of Mercer.
The Compensation Committee reviewed and discussed the foregoing Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee as of that date recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee |
David G. Golden,Chair |
Daniel A. DeMatteo |
John R. Ryan |
Jerry Sue Thornton |
The Company is required to provide the ratio of the annual total compensation of the Company’s CEO to the median annual total compensation of all employees under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The pay ratio information provided below is a reasonable estimate calculated in a manner consistent with Item 402(u) of SEC RegulationS-K.
For Fiscal 2018,2019, the median annual total compensation of our employees, excluding our CEO, was $5,604$3,728 and the annual total compensation of our CEO was $6,046,444.$4,496,072. Accordingly, the ratio of the CEO’s annual total compensation to the median annual compensation of all employees was 1,079:1,206:1.
The Company used the employee population of 11,21810,422 on the final day of the payroll year, April 30, 2018.2019. Temporary, seasonal, and seasonalpart time employees make up 45%66% of the Company’s total population and on average work approximatelyless than 15 hours per week. As permitted under SEC rules, we excluded the employees of Student Brands, a business that we acquired during Fiscal 2018.103 employees in India were also excluded as de minimis. We used cash compensation (base salary, overtime and cash bonuses paid during Fiscal 2018)2019) to determine the median employee in our population.
Given the appointment of Michael Huseby as our CEO during Fiscal 2018, we annualized his compensation to reflect a full year in the CEO role. Therefore, our CEO’s compensation for purposes of calculating the pay ratio was $6,046,444 which differs from the Summary Compensation Table reported amount of $5,775,343.
When we include only our full time “permanent” staff as of April 30, 2018,2019, our median employee’s annualized total compensation was $33,051$39,208 for Fiscal 2018.2019. Under this calculation, the CEO pay ratio is 183:115:1. We believe this is a more representative indication of how our CEO pay compares to that of our workforce. (Note this population totals 3,577).
The SEC rules do not specify a single methodology for identifying the median employee or calculating the CEO pay ratio. Since other companies use different assumptions, adjustments, or estimates in their own calculation, disclosure and methodology is inconsistent across companies. Therefore, our CEO pay ratio is not comparable to another company’s CEO pay ratio. Our information and pay ratio calculation is a reasonable good faith estimate, based on our methodology and SEC rules as required for disclosure.
Unless otherwise stated, the compensation tables included in this section reflect amounts paid or payable or awards granted to our NEOs by the Company under the Company’s compensation plans and programs during Fiscal 2017, Fiscal 2018 and Fiscal 2018. For Messrs. Roberts, Brover, and Maloney, all of whom were officers of Barnes & Noble College, an operating subsidiary of Barnes & Noble, Inc., amounts for Fiscal 2016 include payments by Barnes & Noble, Inc. prior to the Company’sspin-off from Barnes & Noble, Inc. on August 2, 2015 (the“Spin-Off”). Following the completion of theSpin-Off, our NEOs received compensation and benefits under our compensation plans and programs.2019.
Name and Principal Position | Fiscal Year | Salary (1) | Stock Awards (2) | Non-Equity Incentive Plan Compensation (3) | Bonus (4) | All Other (5) | Total | |||||||||||||||||||||
Michael P. Huseby (7) | 2018 | $ | 866,923 | $ | 3,299,995 | $ | 1,320,000 | $ | 250,000 | $ | 38,425 | $ | 5,775,343 | |||||||||||||||
Chairman and Chief Executive Officer | 2017 | $ | 500,000 | $ | 1,687,495 | $ | 852,000 | $ | — | $ | 35,194 | $ | 3,074,689 | |||||||||||||||
| 2016 | $ | 375,000 | $ | 1,499,995 | $ | — | $ | 1,000,000 | $ | 32,019 | $ | 2,907,014 | ||||||||||||||||
Barry Brover | 2018 | $ | 535,000 | $ | 749,996 | $ | 314,982 | $ | — | $ | 38,370 | $ | 1,638,348 | |||||||||||||||
Executive Vice President, Chief Financial Officer | 2017 | $ | 530,385 | $ | 562,498 | $ | 289,903 | $ | 439,998 | $ | 41,752 | $ | 1,864,536 | |||||||||||||||
| 2016 | $ | 501,923 | $ | 378,739 | $ | 378,750 | $ | 489,998 | $ | 41,302 | $ | 1,790,712 | ||||||||||||||||
Kanuj Malhotra (8) | 2018 | $ | 523,400 | $ | 749,996 | $ | 591,442 | $ | — | $ | 7,640 | $ | 1,872,478 | |||||||||||||||
Executive Vice President, Corporate Development | 2017 | $ | 523,400 | $ | 478,117 | $ | 298,600 | $ | 527,785 | $ | 11,193 | $ | 1,839,085 | |||||||||||||||
| 2016 | $ | 389,158 | $ | 350,397 | $ | 366,380 | $ | 577,775 | $ | 13,566 | $ | 1,697,275 | ||||||||||||||||
Patrick Maloney | 2018 | $ | 767,000 | $ | 1,499,997 | $ | 743,032 | $ | — | $ | 39,333 | $ | 3,049,362 | |||||||||||||||
Executive Vice President, Operations | 2017 | $ | 767,000 | $ | 1,725,744 | $ | 620,791 | $ | 377,775 | $ | 37,048 | $ | 3,528,358 | |||||||||||||||
| 2016 | $ | 761,615 | $ | 766,995 | $ | 934,781 | $ | 377,775 | $ | 37,136 | $ | 2,878,302 | ||||||||||||||||
Michael C. Miller | 2018 | $ | 475,000 | $ | 349,999 | $ | 285,000 | $ | — | $ | 6,904 | $ | 1,116,903 | |||||||||||||||
Executive Vice President, Corporate Strategy and General Counsel | 2017 | $ | 9,135 | $ | — | $ | — | $ | 50,000 | $ | — | $ | 59,135 | |||||||||||||||
| 2016 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Max J. Roberts (6) | 2018 | $ | 353,077 | $ | — | $ | — | $ | 562,500 | $ | 4,432,083 | $ | 5,347,660 | |||||||||||||||
Former Chief Executive Officer | 2017 | $ | 900,000 | $ | 3,037,501 | $ | 975,375 | $ | — | $ | 46,183 | $ | 4,959,059 | |||||||||||||||
| 2016 | $ | 896,154 | $ | 1,799,989 | $ | 1,350,000 | $ | — | $ | 46,912 | $ | 4,093,055 | ||||||||||||||||
Name and Principal Position | Fiscal Year | Salary (1) | Bonus (2) | Stock Awards (3) | Non-Equity Incentive Plan Compensation (4) | All Other (5) | Total | |||||||||||||||||||||
Michael P. Huseby | 2019 | $ | 1,100,000 | $ | — | $ | 1,858,467 | $ | 1,501,500 | $ | 36,105 | $ | 4,496,072 | |||||||||||||||
Chairman and Chief Executive Officer | 2018 | $ | 866,923 | $ | 250,000 | $ | 3,299,995 | $ | 1,320,000 | $ | 38,425 | $ | 5,775,343 | |||||||||||||||
| 2017 | $ | 500,000 | $ | — | $ | 1,687,495 | $ | 852,000 | $ | 35,194 | $ | 3,074,689 | ||||||||||||||||
Barry Brover | 2019 | $ | 560,962 | $ | — | $ | 536,310 | $ | 462,583 | $ | 37,268 | $ | 1,597,123 | |||||||||||||||
Executive Vice President, Operations; Former Chief Financial Officer | 2018 | $ | 535,000 | $ | — | $ | 749,996 | $ | 314,982 | $ | 38,370 | $ | 1,638,348 | |||||||||||||||
| 2017 | $ | 530,385 | $ | 439,998 | $ | 562,498 | $ | 289,903 | $ | 41,752 | $ | 1,864,536 | ||||||||||||||||
Thomas Donohue | 2019 | $ | 462,462 | $ | — | $ | 223,466 | $ | 212,333 | $ | 13,050 | $ | 911,311 | |||||||||||||||
Executive Vice President, Chief Financial Officer | 2018 | $ | 435,000 | $ | 50,000 | $ | 249,995 | $ | 143,550 | $ | 6,416 | $ | 884,961 | |||||||||||||||
| 2017 | $ | 433,462 | $ | 132,222 | $ | 393,754 | $ | 141,810 | $ | 10,913 | $ | 1,112,161 | ||||||||||||||||
Kanuj Malhotra | 2019 | $ | 523,400 | $ | — | $ | 625,693 | $ | 362,716 | $ | 12,750 | $ | 1,524,559 | |||||||||||||||
Executive Vice President, Corporate Development | 2018 | $ | 523,400 | $ | — | $ | 749,996 | $ | 591,442 | $ | 7,640 | $ | 1,872,478 | |||||||||||||||
| 2017 | $ | 523,400 | $ | 527,785 | $ | 478,117 | $ | 298,600 | $ | 11,193 | $ | 1,839,095 | ||||||||||||||||
Patrick Maloney (6) | 2019 | $ | 767,000 | $ | 657,448 | $ | 934,073 | $ | — | $ | 1,876,765 | $ | 4,235,286 | |||||||||||||||
Former Executive Vice President, Operations | 2018 | $ | 767,000 | $ | — | $ | 1,499,997 | $ | 743,032 | $ | 39,333 | $ | 3,049,362 | |||||||||||||||
| 2017 | $ | 767,000 | $ | 377,775 | $ | 1,725,744 | $ | 620,791 | $ | 37,048 | $ | 3,528,358 | ||||||||||||||||
Michael C. Miller | 2019 | $ | 496,154 | $ | 200,000 | $ | 446,927 | $ | 273,000 | $ | 16,481 | $ | 1,432,562 | |||||||||||||||
Executive Vice President, Corporate Strategy and General Counsel | 2018 | $ | 475,000 | $ | — | $ | 349,999 | $ | 285,000 | $ | 6,904 | $ | 1,116,903 | |||||||||||||||
| 2017 | $ | 9,135 | $ | 50,000 | $ | — | $ | — | $ | — | $ | 59,135 | ||||||||||||||||
| (1) | This column represents base salary earned during |
| (2) | This column represents a retention bonus paid in Fiscal 2019 of $200,000 to Mr. Miller; management transition bonuses earned in Fiscal 2019 of $657,448 paid to Mr. Maloney and in Fiscal 2018 of $250,000 and $50,000 paid to Messrs. Huseby and Donohue, respectively; a signing bonus earned in Fiscal 2017 of $50,000 to Mr. Miller; discretionary bonuses earned in Fiscal 2017 of $100,000, $132,222 and $150,000, paid to Messrs. Brover, Donohue and Malhotra, respectively; and retention payments earned in Fiscal 2017 of $339,998, $377,785, and $377,775 paid to Messrs. Brover, Malhotra, and Maloney, respectively. |
| (3) | This column represents the aggregate grant date fair value of stock awards granted |
| grant date fair value and may not be equivalent to the actual value recognized by the NEO. The amounts reported in the Summary Compensation Table for the performance-based awards assume a future payout at the target level and may not represent the amounts that the NEOs will actually realize from the awards. Whether and to what extent an NEO realizes value with respect to these performance-based awards will depend on our actual performance and the NEO’s continued employment. If our performance results in a future payout at the maximum level (150% of target), the aggregate grant date fair value of the performance-based stock awards granted in 2019 would be as follows: Mr. Huseby-$1,500,018; Mr. Brover-$224,994; Mr. Donohue-$93,750; Mr. Malhotra-$262,504; Mr. Maloney-$391,881; and Mr. Miller-$187,492. |
This column represents the dollar value of performance-based annual incentive compensation earned for |
|
| (5) | This column represents the value of all other compensation, as detailed in the table below. |
| (6) | Mr. |
|
Name | Fiscal Year | Long-Term Disability Insurance(1) | Life and AD&D Insurance(2) | Car Allowance | 401(k) Company Match | Total Other Income | Fiscal Year | Long-Term Disability Insurance(1) | Life and AD&D Insurance(2) | Car Allowance | 401(k) Company Match | Cell Phone | Total Other Income | |||||||||||||||||||||||||||||||||||||||
Michael P. Huseby | 2018 | $ | 13,086 | $ | 12,108 | $ | — | $ | 13,231 | $ | 38,425 | 2019 | $ | 13,086 | $ | 12,065 | $ | — | $ | 10,154 | $ | 800 | $ | 36,105 | ||||||||||||||||||||||||||||
| 2017 | $ | 13,086 | $ | 12,108 | $ | — | $ | 10,000 | $ | 35,194 | 2018 | $ | 13,086 | $ | 12,108 | $ | — | $ | 13,231 | $ | — | $ | 38,425 | |||||||||||||||||||||||||||||
| 2016 | $ | 13,086 | $ | 12,010 | $ | — | $ | 6,923 | $ | 32,019 | 2017 | $ | 13,086 | $ | 12,108 | $ | — | $ | 10,000 | $ | — | $ | 35,194 | |||||||||||||||||||||||||||||
Barry Brover | 2018 | $ | 9,950 | $ | 3,012 | $ | 18,000 | $ | 7,408 | $ | 38,370 | 2019 | $ | 9,461 | $ | 2,969 | $ | 12,000 | $ | 12,038 | $ | 800 | $ | 37,268 | ||||||||||||||||||||||||||||
| 2018 | $ | 9,950 | $ | 3,012 | $ | 18,000 | $ | 7,408 | $ | — | $ | 38,370 | ||||||||||||||||||||||||||||||||||||||||
| 2017 | $ | 9,940 | $ | 3,012 | $ | 18,000 | $ | 10,800 | $ | — | $ | 41,752 | ||||||||||||||||||||||||||||||||||||||||
Thomas Donohue | 2019 | $ | — | $ | 350 | $ | — | $ | 11,900 | $ | 800 | $ | 13,050 | |||||||||||||||||||||||||||||||||||||||
| 2017 | $ | 9,940 | $ | 3,012 | $ | 18,000 | $ | 10,800 | $ | 41,752 | 2018 | $ | — | $ | 393 | $ | — | $ | 6,023 | $ | — | $ | 6,416 | |||||||||||||||||||||||||||||
| 2016 | $ | 9,690 | $ | 3,012 | $ | 18,000 | $ | 10,600 | $ | 41,302 | 2017 | $ | — | $ | 393 | $ | — | $ | 10,520 | $ | — | $ | 10,913 | |||||||||||||||||||||||||||||
Kanuj Malhotra | 2018 | $ | — | $ | 393 | $ | — | $ | 7,247 | $ | 7,640 | 2019 | $ | — | $ | 350 | $ | — | $ | 11,000 | $ | 1,400 | $ | 12,750 | ||||||||||||||||||||||||||||
| 2017 | $ | — | $ | 393 | $ | — | $ | 10,800 | $ | 11,193 | 2018 | $ | — | $ | 393 | $ | — | $ | 7,247 | $ | — | $ | 7,640 | |||||||||||||||||||||||||||||
| 2016 | $ | — | $ | 66 | $ | 2,900 | $ | 10,600 | $ | 13,566 | 2017 | $ | — | $ | 393 | $ | — | $ | 10,800 | $ | — | $ | 11,193 | |||||||||||||||||||||||||||||
Patrick Maloney | 2018 | $ | 10,320 | $ | 393 | $ | 18,000 | $ | 10,620 | $ | 39,333 | 2019 | $ | 3,462 | $ | 350 | $ | 18,000 | $ | 11,000 | $ | 1,400 | $ | 34,213 | (3) | |||||||||||||||||||||||||||
| 2017 | $ | 7,855 | $ | 393 | $ | 18,000 | $ | 10,800 | $ | 37,048 | 2018 | $ | 10,320 | $ | 393 | $ | 18,000 | $ | 10,620 | $ | — | $ | 39,333 | |||||||||||||||||||||||||||||
| 2016 | $ | 8,143 | $ | 393 | $ | 18,000 | $ | 10,600 | $ | 37,136 | 2017 | $ | 7,855 | $ | 393 | $ | 18,000 | $ | 10,800 | $ | — | $ | 37,048 | |||||||||||||||||||||||||||||
Michael C. Miller | 2018 | $ | — | $ | 328 | $ | — | $ | 6,577 | $ | 6,905 | 2019 | $ | — | $ | 350 | $ | — | $ | 14,731 | $ | 1,400 | $ | 16,481 | ||||||||||||||||||||||||||||
| 2017 | $ | — | $ | — | $ | — | $ | — | $ | — | 2018 | $ | — | $ | 328 | $ | — | $ | 6,577 | $ | — | $ | 6,905 | |||||||||||||||||||||||||||||
| 2016 | $ | — | $ | — | $ | — | $ | — | $ | — | 2017 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||
Max J. Roberts | 2018 | $ | 720 | $ | 164 | $ | 7,500 | $ | — | $ | 8,384 | (3) | ||||||||||||||||||||||||||||||||||||||||
| 2017 | $ | 12,145 | $ | 6,346 | $ | 18,000 | $ | 9,692 | $ | 46,183 | ||||||||||||||||||||||||||||||||||||||||||
| 2016 | $ | 12,874 | $ | 6,346 | $ | 18,000 | $ | 9,692 | $ | 46,912 | ||||||||||||||||||||||||||||||||||||||||||
| (1) | This represents the premiums paid by the Company for the long-term disability insurance. |
| (2) | This represents the premiums paid by the Company for life and accidental death and dismemberment insurance. |
| (3) | This total does not include |
20182019 Grants of Plan-Based Awards Table
The following table provides additional information aboutnon-equity incentive awards and long-termequity incentive awards granted to our NEOs by the Company during Fiscal 2018.2019.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Value of Stock and Option Awards ($) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Award(1) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Award(1) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael P. Huseby | PS | 7/19/17 | 105,769 | 211,538 | 317,307 | $ | 1,649,997 |
PS |
|
7/19/18 |
| 90,417 | 180,834 | 271,251 | $ | 1,000,012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AIP | 7/14/16 | $ | 500,000 | $ | 1,000,000 | $ | 1,500,000 | AIP | 7/19/18 | $ | 825,000 | $ | 1,650,000 | $ | 2,475,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 9/19/17 | 281,090 | $ | 1,649,998 | RSU | 9/26/18 | 153,845 | $ | 858,455 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Barry Brover | PS | 7/13/17 | 23,526 | 47,051 | 70,577 | $ | 374,997 |
PS | 7/19/18 | 13,562 | 27,124 | 40,686 | $ | 149,996 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AIP | 7/14/16 | $ | 200,625 | $ | 401,250 | $ | 601,875 | AIP | 7/19/18 | $ | 254,167 | $ | 508,333 | $ | 762,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 9/19/17 | 63,884 | $ | 374,999 | RSU | 9/26/18 | 69,232 | $ | 386,315 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Thomas Donohue |
PS | 7/19/18 | $ | 62,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AIP | 7/19/18 | $ | 116,667 | $ | 233,333 | $ | 350,000 | 5,651 | 11,302 | 16,953 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 9/26/18 | 28,847 | $ | 160,966 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kanuj Malhotra | PS | 7/13/17 | 23,526 | 47,051 | 70,577 | $ | 374,997 |
PS | 7/19/18 | 15,823 | 31,646 | 47,469 | $ | 175,002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AIP | 7/14/16 | $ | 183,190 | $ | 366,380 | $ | 549,570 | AIP | 7/19/18 | $ | 261,700 | $ | 523,400 | $ | 785,100 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 9/19/17 | 63,884 | $ | 374,999 | RSU | 9/26/18 | 80,769 | $ | 450,691 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Patrick Maloney | PS | 7/13/17 | 47,051 | 94,102 | 141,153 | $ | 749,993 |
PS | 7/19/18 | 23,622 | 47,243 | 70,865 | $ | 261,254 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AIP | 7/14/16 | $ | 479,375 | $ | 958,750 | $ | 1,438,125 | AIP | 7/19/18 | $ | 479,375 | $ | 958,750 | $ | 1,438,125 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 9/19/17 | 127,769 | $ | 750,004 | RSU | 9/26/18 | 120,577 | $ | 672,820 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael C. Miller | RSU | 9/19/17 | 11,302 | 22,603 | 33,905 | 59,625 | $ | 349,999 |
PS | 7/19/18 | 11,302 | 22,603 | 33,905 | $ | 124,995 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael C. Miller | AIP | 7/19/18 | $ | 150,000 | $ | 300,000 | $ | 450,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU | 9/26/18 | 57,694 | $ | 321,933 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Forms of awards granted to executive officers during Fiscal |
| (2) | These columns represent the threshold payout level, target payout level and maximum payout level for the performance-based incentive compensation awards under the Company’s AIP. For additional information regarding the performance-based annual incentive compensation program, see the discussion in the “Compensation Discussion and Analysis-Overview of Compensation Program Design-Performance-Based Annual Incentive Compensation” section of this Proxy Statement. |
| (3) | These columns represent the threshold payout level, target payout level and maximum payout level for the Performance Shares issued under the Company’s Long-Term Incentive Plan. For additional information regarding the Performance Shares, see the discussion in the “Compensation Discussion and Analysis-Overview of Compensation Program Design- Long-Term Equity Incentives-Performance Shares” section of this Proxy Statement. |
Narrative to the Summary Compensation Table and the Grants of Plan-Based Awards Table
Employment Arrangements with the Named Executive Officers
The Company has entered into an employment agreement or employment letter with each of the NEOs and compensation of each of these NEOs is based on their respective employment agreement or employment letter, as the case may be, as well as their job responsibilities. The Company entered into an employment agreement with Mr. Huseby on June 26, 2015 in connection with theSpin-Off, and entered into an amended and restated employment agreement with Mr. Huseby on July 19, 2017 in connection with his role as Chief Executive Officer and Chairman of the Board effective as of September 19, 2017. The Company entered into an employment agreement with Mr. Roberts on June 22, 2015, which was effective through September 19, 2017, the effective date of Mr. Roberts’ resignation as CEO. The Company also entered into employment agreements with each of Messrs. Brover and Maloney on June 23, 2015. The employment agreements with these NEOs provideprovides severance payments and benefits upon termination of employment by the Company without “cause” or by the
NEO for “good reason” (including upon termination within two years following a change of control). EachThe employment agreement continues for three years with respect to Messrs. Brover,has atwo-year term and Maloney and continues for two years with respect to Mr. Huseby. All agreements renewrenews automatically for one year unless theeither party gives
notice ofnon-renewal at least three months prior to automatic renewal. The Company entered into an employment letterletters outlining employment terms with Mr.each of Messrs. Brover, Donohue, Malhotra on July 22, 2015 and a similar form of employment letter with Mr. Miller on April 13, 2017.June 19, 2019. The employment letters provide Messrs. Malhotra and Millerthe officers with severance payments and benefits upon termination of employment by the Company without “cause” or by the NEO for “good reason” (including upon termination within two years following a change of control). Messrs. Malhotra and Miller are employed at will.
Employment Arrangements-General Provisions
Pursuant to their employment agreements,agreement or letters, the annual base salaries of Messrs. Huseby, Brover, Donohue, Malhotra and Maloney,Miller can be no less than $1,100,000, $505,000,$610,000, $500,000, $523,400 and $767,000,$500,000, respectively, during the terms of their employment. With respect toEach of Messrs. Huseby, Brover, Donohue, Malhotra and Maloney, each NEO is eligible for a minimum target annual incentive compensation award of 75%, and 125% of his base salary, respectively. Mr. Huseby is entitled to receive annual bonus compensation as determined by the Compensation Committee. The annual base salary of Mr. Malhotra can be no less than $515,000 during the term of his employment, and he isMiller are eligible for a minimum target annual incentive compensation award of not less than 70%150%, 100%, 85%, 100% and 85%, respectively, of his base salary, which we subsequently increased to 100%. Mr. Miller’s initial annual base salary was $475,000, and he is eligible for a minimum target annual incentive compensation award of 50% of base salary (which was subsequently increased to 60% in September of 2017).as determined by the Compensation Committee.
The employment agreements or employment letters also provide that the NEO is eligible for grants of equity-based awards under the Barnes & Noble Education, Inc. Equity Incentive Plan. With respect to Messrs. Brover, Maloney,Donohue, Malhotra and Miller, the amounts of such grants are determined by the Compensation Committee, and with respect to Mr. Huseby, the amount of such equity award shall have an aggregate target value of 300% of his base salary. The employment agreements provideagreement for a $1,500 monthly car allowance, withMr. Huseby and the exception of Messrs. Huseby, Malhotra and Miller. The employment agreementsletter for Messrs.Mr. Brover Maloney and Huseby also provide for $1,000,000 of life insurance and long-term disability (providing for monthly payments of $12,800) payable during the disability period through the earlier of death or the attainment of age 65. Each of our NEOs is entitled to all other benefits afforded to executive officers and employees of the Company.
Under their respective employment agreements or employment letters with the Company, our NEOs are subject to certain restrictive covenants regarding competition, solicitation, confidentiality and disparagement. TheMr. Huseby’s agreement containsnon-competition andnon-solicitation covenants that apply during each of the employment terms of Messrs. Brover, Maloney, and Husebyterm and for thetwo-year period following the termination of employment of employment.
Messrs. Brover, Maloney and Huseby.
Messr.Donohue, Malhotra and Miller are restricted by anon-competition andnon-solicitation covenant during their term of employment and for aone-year period thereafter. The confidentiality andnon-disparagement covenants apply during the term of each respective employment agreementletters of each NEO and at all times thereafter.
Employment Arrangements-Severance and Change of Control Benefits
TheMr. Huseby’s employment agreements provideagreement provides that the employment of Messrs. Huseby, Brover, and Maloneyhe may be terminated by the Company upon death or disability or for “cause”, and by the NEOMr. Huseby without “good reason”. If theMr. Huseby’s employment of Messrs. Brover, Maloney, or Huseby is terminated by the Company upon death, disability or for “cause,” or by the NEO without “good reason”, the NEOMr. Huseby is entitled to payment of base salary through the date of death, disability or termination of employment.
If the employment of Messrs. Huseby, Brover, MaloneyDonohue, Malhotra or MalhotraMiller is terminated by the Company without “cause” or by the NEO for “good reason,” the NEO is entitled, provided he signs a release of claims
against the Company, to alump-sum severance payment equal toone-time (or, in the case of Mr. Huseby, two times) (a) annual base salary, (b) with respect to Mr. Huseby, the average of annual incentive compensation actually paid to himMr. Huseby with respect to the preceding three completed years preceding the date of termination, and with respect to Messrs. Brover, Donohue, Malhotra and Miller, the target annual incentive compensation for the fiscal year in which termination takes place, and (c) the cost of benefits. If the employment of Mr. Miller is terminated by the Company without “cause” or by Mr. Miller for “good reason,” Mr. Miller is entitled, provided he signs a release of claims against the Company, to his annual base salary.
Further, if the employment of any NEO is terminated by the Company without “cause” or by the NEO for “good reason” within two years (or the remainder of his term of employment under his employment agreement, whichever is longer) following a “change of control” of the Company, the NEO is entitled, regardless of whether he signs a release of claims against the Company, to alump-sum severance payment equal to two times (or, in the case of Mr. Huseby, three times) (a) annual base salary, (b) with respect to Mr. Huseby, the average of annual incentive compensation actually paid to himMr. Huseby with respect to the preceding three completed years preceding the date of termination, and with respect to Messrs. Brover, Donohue, Malhotra and Miller, the target annual incentive compensation for the fiscal year in which termination takes place, and (c) the cost of benefits. However, if such severance payments trigger the “golden parachute” excise tax under Sections 280G and 4999 of the Code, the severance benefits for an NEO would be reduced if such reduction would result in a greaterafter-tax benefit to him.
Except as otherwise provided by the applicable award agreement, if the successor company assumes or substitutes for an outstanding equity award such award will continue in accordance with its applicable terms and will not be accelerated. Under the restricted stock unit award agreements, if the holder were terminated other than for “cause” at any time following a change of control, then the unvested restricted stock units underlying the award would immediately vest.
Under the award agreements executed under the Barnes & Noble Education, Inc. Equity Incentive Plan, “change of control” generally has the same meaning as provided under the Barnes & Noble Education, Inc. Equity Incentive Plan and means any of the following: (a) a change in the ownership of the Company; (b) a change in the effective control of the Company; or (c) a change in the ownership of a substantial portion of the Company’s assets, in each case, within the meaning of Section 409A of the Code and the regulations promulgated thereunder.
Under the restricted stock unit award agreements, “cause” generally means (a) a material failure by the holder to perform his or her duties (other than as a result of incapacity due to physical or mental illness) during his or her employment with the Company after written notice of such breach or failure and the holder failed to cure such breach or failure to the Company’s reasonable satisfaction within five days after receiving such written notice; or (b) any act of fraud, misappropriation, misuse, embezzlement or any other material act of dishonesty in respect of the Company or its funds, properties, assets or other employees.
The estimated payments to be made by the Company to our NEOs in the event of a change of control are set forth belowon page 42 in the “Potential Payments Upon Termination or Change of Control Table”.
Employment Arrangements-Defined Terms
“Cause”,Cause,” for purposes of the employment agreementsagreement and employment letters, generally means any of the following: (a) the NEO engaging in intentional misconduct or gross negligence that, in either case, is injurious to the Company; (b) the NEO’s indictment, entry of a plea of nolo contendere or conviction by a court of competent jurisdiction with respect to any crime or violation of law involving fraud or dishonesty (with the exception of misconduct based in good faith on the advice of professional consultants, such as attorneys and accountants) or any felony (or equivalent crime in anon-U.S. jurisdiction); (c) any gross negligence, intentional acts or intentional omissions by the NEO that constitutein connection with the performance of the NEO’s duties and responsibilities; (d) fraud, dishonesty, embezzlement or misappropriation in connection with the performance of the NEO’s duties and responsibilities; (d)(e) the NEO engaging in any act of intentional misconduct or moral turpitude reasonably likely to adversely affect the Company or its business; (e)(f) the NEO’s abuse of or dependency on alcohol or drugs (illicit or otherwise) that adversely affects the NEO’s job performance; (f)(g) the NEO’s willful failure or refusal to properly perform the duties, responsibilities or
obligations of the NEO’s service for reasons other than disability or authorized leave, or to properly perform or follow any lawful direction by the Company; or (g)(h) the NEO’s material breach of the agreement or of any other contractual duty to, written policy of, or written agreement with, the Company.
“Change of control”,Control,” for purposes of the employment agreementsagreement and employment letters, generally means any of the following: (a) the acquisition by any person or group (other than the executive or his or her affiliates) of 40% or more of the Company’s voting securities; (b) the Company’s directors immediately prior to a merger, consolidation, liquidation or sale of assets cease within two years thereafter to constitute a majority of the Company’s Board of Directors; or (c)(b) the Company’s directors immediately prior to a tender or exchange offer for the Company’s voting securities cease within two years thereafter to constitute a majority of the Company’s Board of Directors. The consummation of a corporate transaction constituting a Reorganization or a Sale, if such transaction requires the approval of the Company’s stockholders, subject to certain exceptions outlined in the agreement and letters; or (c) the acquisition by any person or group (other than the executive or his or her affiliates) of 40% or more of the Company’s voting securities.
“Good reason”,Reason,” for purposes of the employment agreementsagreement and employment letters, generally means any of the following:following without the NEO’s written consent: (a) a material diminution of authority, duties or responsibilities; (b) a greater than 10%material diminution in the authority, duties or responsibilities of the supervisor to whom the NEO reports; (c) a reduction in current annual base salary; (c)salary or target annual bonus; (d) the relocation of the Company’s principal executive offices outside of themore than 50 miles from both New York City, New York orand Basking Ridge, New Jersey metropolitan area; or (d)Jersey; (e) a failure by the Company to make material payments under the agreement.agreement; (f) a reduction in title; or (g) a material reduction in the value of employee benefits following a Change of Control. Notwithstanding the foregoing, an NEO will only have grounds to resign for Good Reason if the NEO notifies the Company in writing with 60 days of the Good Reason occurrence, the Company does not cure such grounds within 30 days following receipt of notice, and the NEO actually resigns employment 30 days following the end of such cure period.
Severance Arrangement for Mr. RobertsMaloney
On July 19, 2017,December 13, 2018, Mr. RobertsMaloney resigned as CEOExecutive Vice President, Operations of the Company, effective as of September 19, 2017, and informed the Company of his intention not to stand forre-election as a director when his term expired at the 2017 Annual Meeting.April 27, 2019. On July 19, 2017,December 13, 2018, the Board of Directors appointed Mr. HusebyBrover to serve as Executive Vice President, Operations of the Company, and Mr. Donohue to serve as Executive Vice President, Chief ExecutiveFinancial Officer of the Company, both effective as of September 19, 2017.January 1, 2019.
In connection with his resignation, the Company and Mr. RobertsMaloney entered into a retirement letter agreement. Under the retirement agreement and consistent with Mr. Roberts’Maloney’s employment agreement, effective April 27, 2019, Mr. Roberts continued to receive compensation arrangements and employee benefits through September 19, 2017. Mr. Roberts executedMaloney received, among other things, a general releaselump sum payment of claims in favor of the Company, and the Company provided Mr. Roberts with severance benefits in accordance with his former employment agreement, including an amount equal to 21.0 times the sum of (i) base salary ($767,000), (ii) the average of the annual bonuses actually paid with respect to the three completed years preceding the date of Mr. Roberts’sMaloney’s termination of employment ($1,018,051) and (iii) the aggregate annual dollar amount of the amount payments made or to be made in respect to hisof employee benefit plans,benefits, car allowanceallowances and company-paidCompany-paid life and disability insurance. Pursuant to his employment agreement, Mr. Roberts is prohibited from competing withinsurance ($57,501), totaling $1,842,552 in the Company or soliciting its employees for two years following his termination of employment.aggregate. In addition, the Company paid Mr. Roberts a transition bonus of $562,500 following his termination of employment, subject to his cooperation in transitioning his duties to Mr. Huseby.
Employment Agreement with Mr. Huseby
On July 19, 2017, the Company entered into an agreement with Mr. Huseby, who became the Chief Executive Officer of the Company effective as of September 19, 2017. The agreement provides for (i) Mr. Huseby to continue to serve as Chairman of the Board; (ii) be paid an annual base salary of $1,100,000 (subject to discretionary annual adjustment); (iii) be eligible to earn a bonus, pursuant to the terms and conditions of the Company’s bonus plan asretirement letter agreement, including Mr. Maloney’s cooperation in effect fromtime-to-time, with a target of 150%the transition of his base salary, uponrole, the achievement of performance objectives determined by the Compensation Committee of the Board; (iv) receive annually long-term incentive awards of 3 times his base salary, on the same vesting and other terms as the Company’s equity awardsCompany agreed to other executive officers; and (v) receivepay Mr. Maloney aone-time cash transition payment of $250,000 upon his commencement$657,448. Mr. Maloney forfeited any unvested equity awards. As a condition to payment of service as Chief Executive Officer.all of the foregoing amounts, Mr. Maloney executed a release of claims in favor the Company, BNC, and its affiliates.
applicable SEC disclosure guidance, this table and the accompanying footnotes do not account for any awards that may have been exercised or have vested pursuant to their terms in the ordinary course since the end of Fiscal 2018.2019.
Name | Stock Award Grant Date | Number of Shares or Units of Stock That Have Not Vested (1) | Market Value of Shares or Units of Stock That Have Not Vested (2) | Vesting Dates | Stock Award Grant Date | RSU/ PSU | Number of Shares or Units of Stock That Have Not Vested (1) | Market Value of Shares or Units of Stock That Have Not Vested (2) | Vesting Dates | |||||||||||||||||||||||||
Michael P. Huseby | 9/16/15 | 38,403 | $ | 284,950 | 9/16/18 | 9/16/2016 | RSU | 38,661 | $ | 170,108 | 9/16/19 | |||||||||||||||||||||||
| 6/14/16 | 14,771 | $ | 109,603 | 6/14/19 | 7/19/2017 | PSU | 82,077 | $ | 361,138 | 7/19/20 | ||||||||||||||||||||||||
| 9/16/16 | 77,321 | $ | 573,722 | 9/16/18; 9/16/19 | 9/19/2017 | RSU | 187,394 | $ | 824,534 | 9/19/19, 9/19/20 | ||||||||||||||||||||||||
| 7/19/17 | 211,538 | $ | 1,569,612 | 7/19/20 | 7/19/2018 | PSU | 180,834 | $ | 795,670 | 7/19/21 | ||||||||||||||||||||||||
| 9/19/17 | 281,090 | $ | 2,085,688 | 9/19/18; 9/19/19; 9/19/20 | 9/26/2018 | RSU | 153,845 | $ | 676,918 | 9/26/19, 9/26/20, 9/26/21 | ||||||||||||||||||||||||
| 6/19/2019 | PSU | 314,285 | $ | 1,382,854 | 6/19/22 | |||||||||||||||||||||||||||||
| 6/19/2019 | RSU | 314,285 | $ | 1,382,854 | 6/19/20, 6/19/21, 6/19/22 | |||||||||||||||||||||||||||||
Barry Brover | 9/16/15 | 9,697 | $ | 71,952 | 9/16/18 | 9/16/2016 | RSU | 12,887 | $ | 56,703 | 9/16/19 | |||||||||||||||||||||||
| 7/13/2017 | PSU | 18,256 | $ | 80,325 | 7/13/20 | |||||||||||||||||||||||||||||
| 9/19/2017 | RSU | 42,590 | $ | 187,396 | 9/19/19, 9/19/20 | |||||||||||||||||||||||||||||
| 7/19/2018 | PSU | 27,124 | $ | 119,346 | 7/19/21 | |||||||||||||||||||||||||||||
| 9/26/2018 | RSU | 69,232 | $ | 304,621 | 9/26/19, 9/26/20, 9/26/21 | |||||||||||||||||||||||||||||
| 6/19/2019 | PSU | 52,380 | $ | 230,472 | 6/19/22 | |||||||||||||||||||||||||||||
| 6/19/2019 | RSU | 52,380 | $ | 230,472 | 6/19/20, 6/19/21, 6/19/22 | |||||||||||||||||||||||||||||
Thomas Donohue | 9/16/2016 | RSU | 9,021 | $ | 39,692 | 9/16/19 | ||||||||||||||||||||||||||||
| 7/13/2017 | PSU | 6,085 | $ | 26,774 | 7/13/20 | |||||||||||||||||||||||||||||
| 9/19/2017 | RSU | 14,197 | $ | 62,467 | 9/19/19, 9/19/20 | |||||||||||||||||||||||||||||
| 6/14/16 | 4,924 | $ | 36,354 | 6/14/19 | 7/19/2018 | PSU | 11,302 | $ | 49,729 | 7/19/21 | ||||||||||||||||||||||||
| 9/16/16 | 25,774 | $ | 191,243 | 9/16/18; 9/16/19 | 9/26/2018 | RSU | 28,847 | $ | 126,927 | 9/26/19, 9/26/20, 9/26/21 | ||||||||||||||||||||||||
| 7/13/17 | 47,051 | $ | 349,118 | 7/13/20 | 6/19/2019 | PSU | 52,380 | $ | 230,472 | 6/19/22 | ||||||||||||||||||||||||
| 9/19/17 | 63,884 | $ | 474,019 | 9/19/18; 9/19/19; 9/19/20 | 6/19/2019 | RSU | 52,380 | $ | 230,472 | 6/19/20, 6/19/21, 6/19/22 | ||||||||||||||||||||||||
Kanuj Malhotra | 9/16/15 | 6,401 | $ | 47,495 | 9/16/18 | 9/16/2016 | RSU | 10,954 | $ | 48,198 | 9/16/19 | |||||||||||||||||||||||
| 3/16/16 | 3,334 | $ | 24,738 | 3/16/19 | 7/13/2017 | PSU | 18,256 | $ | 80,325 | 7/13/20 | ||||||||||||||||||||||||
| 6/14/16 | 4,185 | $ | 31,053 | 6/14/19 | 9/19/2017 | RSU | 42,590 | $ | 187,396 | 9/19/19, 9/19/20 | ||||||||||||||||||||||||
| 9/16/16 | 21,908 | $ | 162,557 | 9/16/18; 9/16/19 | 7/19/2018 | PSU | 31,646 | $ | 139,242 | 7/19/21 | ||||||||||||||||||||||||
| 7/13/17 | 47,051 | $ | 349,118 | 7/13/20 | 9/26/2018 | RSU | 80,769 | $ | 355,384 | 9/26/19, 9/26/20, 9/26/21 | ||||||||||||||||||||||||
| 9/19/17 | 63,884 | $ | 474,019 | 9/19/18; 9/19/19; 9/19/20 | 6/19/2019 | PSU | 61,904 | $ | 272,378 | 6/19/22 | ||||||||||||||||||||||||
Patrick Maloney | 9/16/15 | 19,637 | $ | 145,707 | 9/16/18 | |||||||||||||||||||||||||||||
| 6/19/2019 | RSU | 61,904 | $ | 272,378 | 6/19/20, 6/19/21, 6/19/22 | |||||||||||||||||||||||||||||
Michael Miller | 9/19/2017 | RSU | 39,751 | $ | 174,904 | 9/19/19, 9/19/20 | ||||||||||||||||||||||||||||
| 6/14/16 | 15,106 | $ | 112,088 | 6/14/19 | 7/19/2018 | PSU | 22,603 | $ | 99,453 | 7/19/21 | ||||||||||||||||||||||||
| 9/16/16 | 79,073 | $ | 586,722 | 9/16/18; 9/16/19 | 9/26/2018 | RSU | 57,694 | $ | 253,854 | 9/26/19, 9/26/20, 9/26/21 | ||||||||||||||||||||||||
| 7/13/17 | 94,102 | $ | 698,237 | 7/13/20 | 6/19/2019 | PSU | 52,380 | $ | 230,472 | 6/19/22 | ||||||||||||||||||||||||
| 9/19/17 | 127,769 | $ | 948,046 | 9/19/18; 9/19/19; 9/19/20 | 6/19/2019 | RSU | 52,380 | $ | 230,472 | 6/19/20, 6/19/21, 6/19/22 | ||||||||||||||||||||||||
Michael C. Miller | 9/19/17 | 59,625 | $ | 442,418 | 9/19/18; 9/19/19; 9/19/20 | |||||||||||||||||||||||||||||
Max J. Roberts | 9/16/15 | 0 | $ | 0 | (3) | |||||||||||||||||||||||||||||
| 6/14/16 | 0 | $ | 0 | (3) | ||||||||||||||||||||||||||||||
| 9/16/16 | 0 | $ | 0 | (3) | ||||||||||||||||||||||||||||||
| (1) | This column represents outstanding grants of shares of restricted stock units and performance shares. |
| (2) | Market values have been calculated using a stock price of |
|
Option Exercises and Stock Vested
The following table provides additional information about the value realized by our NEOs upon the vesting of stock or stock unit awards during Fiscal 2018.2019. The Company has not issued any stock options.
| Stock Awards | Stock Awards | |||||||||||||||||||||||
Name | Fiscal Year | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | Fiscal Year | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | ||||||||||||||||||
Michael P. Huseby | 2018 | 77,061 | $ | 483,943 |
| 2019 |
|
| 170,759 |
| $ | 962,476 |
| |||||||||||
Barry Brover | 2018 | 22,582 | $ | 141,815 |
| 2019 |
|
| 43,878 |
| $ | 247,233 |
| |||||||||||
Thomas Donohue |
| 2019 |
|
| 22,520 |
| $ | 126,775 |
| |||||||||||||||
Kanuj Malhotra | 2018 | 20,686 | $ | 131,841 |
| 2019 |
|
| 41,983 |
| $ | 233,883 |
| |||||||||||
Patrick Maloney | 2018 | 59,171 | $ | 371,594 |
| 2019 |
|
| 101,762 |
| $ | 573,180 |
| |||||||||||
Michael C. Miller | 2018 | — | $ | — |
| 2019 |
|
| 19,874 |
| $ | 112,288 |
| |||||||||||
Max J. Roberts | 2018 | 115,670 | $ | 726,408 | ||||||||||||||||||||
| (1) | The amounts in this column are calculated by multiplying the number of shares vested by the closing price of our Common Stock on the date of vesting. |
Potential Payments Upon Termination or Change of Control(1)
Event | Michael P. Huseby | Barry Brover | Kanuj Malhotra | Patrick Maloney | Michael C. Miller | Michael P. Huseby | Barry Brover | Thomas Donohue | Kanuj Malhotra | Michael C. Miller | ||||||||||||||||||||||||||||||
| Involuntary Termination or Voluntary Termination with Good Reason | ||||||||||||||||||||||||||||||||||||||||
Cash severance payment (2) | $ | 4,597,483 | $ | 1,264,068 | $ | 1,388,017 | $ | 1,837,932 | $ | 475,000 | $ | 4,940,363 | $ | 1,171,885 | $ | 746,383 | $ | 1,085,793 | $ | 842,724 | ||||||||||||||||||||
Accelerated equity-based awards (3) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 4,597,483 | $ | 1,264,068 | $ | 1,388,017 | $ | 1,837,932 | $ | 475,000 | $ | 4,940,363 | $ | 1,171,885 | $ | 746,383 | $ | 1,085,793 | $ | 842,724 | ||||||||||||||||||||
Death | ||||||||||||||||||||||||||||||||||||||||
Cash severance payment (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
Accelerated equity-based awards (3) | 4,623,575 | 1,122,867 | 1,088,981 | 2,490,799 | 442,418 | 5,594,075 | 1,209,335 | 766,533 | 1,355,300 | 989,155 | ||||||||||||||||||||||||||||||
Health benefits (4) | 4,393 | 5,264 | 6,471 | 1,779 | 6,471 | 6,692 | 4,153 | — | 6,692 | 6,692 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 4,627,968 | $ | 1,128,131 | $ | 1,095,452 | $ | 2,492,578 | $ | 448,889 | $ | 5,600,767 | $ | 1,213,488 | $ | 766,533 | $ | 1,361,992 | $ | 995,847 | ||||||||||||||||||||
Disability | ||||||||||||||||||||||||||||||||||||||||
Cash severance payment (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
Accelerated equity-based awards (3) | 4,623,575 | 1,122,867 | 1,088,981 | 2,490,799 | 442,418 | 5,594,075 | 1,209,335 | 766,533 | 1,355,300 | 989,155 | ||||||||||||||||||||||||||||||
Health benefits (5) | 11,462 | 11,462 | 11,462 | 7,903 | 11,462 | 11,632 | 7,734 | — | 11,632 | 11,632 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 4,635,037 | $ | 1,134,329 | $ | 1,100,443 | $ | 2,498,702 | $ | 453,880 | $ | 5,605,707 | $ | 1,217,069 | $ | 766,533 | $ | 1,366,932 | $ | 1,000,787 | ||||||||||||||||||||
Change of Control with Involuntary Termination (without Cause) or Termination with Good Reason | ||||||||||||||||||||||||||||||||||||||||
Cash severance payment (2) | $ | 6,896,224 | $ | 2,528,136 | $ | 2,776,034 | $ | 3,675,863 | $ | 1,573,110 | $ | 7,410,545 | $ | 2,343,771 | $ | 1,492,766 | $ | 2,171,587 | $ | 1,685,449 | ||||||||||||||||||||
Accelerated equity-based awards (3) | 4,623,575 | 1,122,867 | 1,088,981 | 2,490,799 | 442,418 | 5,594,075 | 1,209,335 | 766,533 | 1,355,300 | 989,155 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 11,519,799 | $ | 3,651,003 | $ | 3,865,015 | $ | 6,166,662 | $ | 2,015,528 | $ | 13,004,620 | $ | 3,553,106 | $ | 2,259,299 | $ | 3,526,887 | $ | 2,674,604 | ||||||||||||||||||||
| (1) | The values in this table reflect estimated payments associated with various termination scenarios, assume a stock price of |
| (2) | Cash severance is equal to the sum of (i) the NEO’s annual base salary, (ii) with respect to Mr. Huseby, the average of annual incentive compensation actually paid to the NEO with respect to the three completed years preceding the date of termination, |
| (3) | This row represents the value of restricted stock unit awards and performance shares and performance share units at expected vested amounts that would automatically vest upon a termination due to death or disability and the value restricted stock unit awards upon a termination following a change of control. Except as provided below, in the event of a change of control, unless otherwise provided by the applicable award agreement, if the successor company assumes or substitutes for an outstanding equity award such award will continue in accordance with its applicable terms and not be accelerated. Absent a change of control, in the event of involuntary termination, termination for “cause” or resignation for any reason, each restricted stock unit award will be forfeited. In the event of an involuntary termination other than for “cause” within 24 months following a change of control, each restricted stock unit award will immediately vest. |
| (4) | Following the termination of employment due to death, the Company provides the NEO’s spouse three months’ of premiums for medical and dental insurance in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). |
| (5) | Following the termination of employment due to disability, the Company provides the NEO a seven-month subsidy for premiums for medical and dental insurance in accordance with COBRA. |
For the table above, the amount of potential payments to our NEOs, other than Mr. Maloney, in the event of a termination of their employment in connection with a change of control was calculated assuming that a change of control occurred on the last business day of Fiscal 20182019 (April 28, 2018)27, 2019), each NEO’s employment terminated on that date due to involuntary termination without “cause” or for “good reason” and the successor company did not assume the NEO’s equity awards. Mr. Maloney’s employment was terminated effective April 27, 2019, and, in connection with that termination he was paid the amounts described under “Severance Arrangement for Mr. Maloney.”
For a summary of the provisions of the employment agreements with our NEOs that were effective as of April 28, 201827, 2019 and the outstanding equity awards that were held by our NEOs as of April 28, 2018,27, 2019, and therefore affect the amounts set forth in the table above in the event of involuntary termination without “cause” or for “good reason” or a “change of control”, see the discussions in the “Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table-Employment Arrangements-General Provisions” and “Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table-Employment Arrangements-Severance and Change of Control Benefits” sections of this Proxy Statement.
Eachnon-employee director receives an annual Board of Directors retainer fee of $65,000, paid in quarterly installments. The Lead Director of the Board of Directors receives an additional $25,000 annual retainer. Audit Committee members receive an additional $15,000 annual retainer, and the Chair of the Audit Committee receives an additional $30,000 annual retainer. Compensation Committee members receive an additional $10,000 annual retainer, and the Chair of the Compensation Committee receives an additional $20,000 annual retainer. Corporate Governance and Nominating Committee members receive an additional $10,000 annual retainer, and the Chair of the Corporate Governance and Nominating Committee receives an additional $17,500 annual retainer. All retainer fees are paid quarterly in cash. Directors who are our employees will not receive additional compensation for serving on our Board of Directors or its committees. All directors are also reimbursed for travel, lodging and related expenses incurred in attending Board of Directors meetings. The Company has not increased the compensation paid to directors since theSpin-Off in 2015.
Eachnon-employee director is eligible for equity award grants under the Company’s Equity Incentive Plan. In Fiscal 2018,2019, these awards were in the form of restricted stock units with a grant date value of $120,000 for eachnon-employee director. Such awards vest after one year. Directors have the option to defer receipt of such awards under the Company’s director’s deferral plan.
Director Stock Ownership and Retention Guidelines
In 2016, the Board of Directors adopted Director Stock Ownership and Retention Guidelines, which require eachnon-employee director to maintain a minimum stock ownership amount equal to four times the annual cash retainer of $65,000, which currently equals $260,000. Directors have a three-year period following their appointment or election to the Board to achieve the minimum ownership level. Shares beneficially owned by a director and vested shares or units are deemed to be owned for purposes of the ownership guidelines. A director is deemed to have complied with these guidelines once they hold a number of shares sufficient to satisfy the minimum ownership level, regardless of subsequent fluctuations in the market price of the Company’s common stock. Directors are required to retain 100% ofnet-after-tax shares earned from the annual equity grants until the then-current minimum ownership level is met and may not sell or otherwise transfer common stock unless he or she has satisfied the then-current minimum ownership level. All of the Company’s directors are in compliance with the current Director Stock Ownership and Retention Guidelines.
Name | Paid in Cash | Number of Restricted Stock Units (Number of Shares) | Value | Total Compensation | Paid in Cash | Number of Restricted Stock Units (Number of Shares) | Value | Total Compensation | ||||||||||||||||||||||||
Emily C. Chiu (1) | $ | — | — | $ | — | $ | — | $ | 68,833 |
|
| 21,506 |
| $ | 120,003 |
| $ | 188,836 |
| |||||||||||||
Daniel A. DeMatteo | $ | 90,000 | 19,704 | $ | 119,997 | $ | 209,997 | $ | 90,000 |
|
| 21,506 |
| $ | 120,003 |
| $ | 210,003 |
| |||||||||||||
David G. Golden | $ | 100,000 | 19,704 | $ | 119,997 | $ | 219,997 | $ | 100,000 |
|
| 21,506 |
| $ | 120,003 |
| $ | 220,003 |
| |||||||||||||
John R. Ryan | $ | 117,500 | 19,704 | $ | 119,997 | $ | 237,497 | $ | 117,500 |
|
| 21,506 |
| $ | 120,003 |
| $ | 237,503 |
| |||||||||||||
Jerry Sue Thornton | $ | 85,000 | 19,704 | $ | 119,997 | $ | 204,997 | $ | 85,000 |
|
| 21,506 |
| $ | 120,003 |
| $ | 205,003 |
| |||||||||||||
David A. Wilson | $ | 105,000 | 19,704 | $ | 119,997 | $ | 224,997 | $ | 105,000 |
|
| 21,506 |
| $ | 120,003 |
| $ | 225,003 |
| |||||||||||||
| (1) |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policy and Procedures Governing Related Person Transactions
Our Audit Committee of the Board of Directors of Directors utilizes procedures in evaluating the terms and provisions of proposed related party transactions or agreements in accordance with the fiduciary duties of directors under Delaware law. Our related party transaction procedures contemplate Audit Committee review and approval of all new agreements, transactions or courses of dealing with related parties, including any modifications, waivers or amendments to existing related party transactions. We conduct tests to ensure that the terms of related party transactions are at least as favorable to us as could have been obtained from unrelated parties at the time of the transaction. The Audit Committee considers, at a minimum, the nature of the relationship between us and the related party, the history of the transaction (in the case of modifications, waivers or amendments), the terms of the proposed transaction, our rationale for entering into the transaction and the terms of comparable transactions with unrelated third parties. In addition, management and internal audit annually analyze all existing related party agreements and transactions and review them with the Audit Committee.
We believe that the transactions and agreements discussed below between us and related third parties are at least as favorable to us as could have been obtained from unrelated parties at the time they were entered into.
MBS Supply AgreementLease.. We have a long-term supply agreement (“Supply Agreement”) with MBS Textbook Exchange, LLC (“MBS”), which was majority owned by Leonard Riggio (“Mr. Riggio”), who is a principal owner holding substantial shares of our common stock, and other members of the Riggio family. As discussed below, wewas acquired MBS in February 2017, and it is now a wholly-owned subsidiary of the Company. The Supply Agreement was terminated at the time of the acquisition. Total purchases from MBS were $93.0 million (amount prior to returns which occurred subsequent to the February 27, 2017 acquisition date), and $58.0 million for Fiscal 2017 and Fiscal 2016, respectively. Additionally, the Supply Agreement provides that we may sell to MBS certain textbooks that we cannot return to suppliers or use in our stores. MBS pays us commissions based on the volume of these textbooks sold to MBS each year and with respect to the textbook requirements of certain distance learning programs that MBS fulfills on our behalf. MBS paid us $7.4 million and $5.0 million related to these commissions in Fiscal 2017 and Fiscal 2016, respectively. We also entered into an agreement with MBS in Fiscal 2011 pursuant to which MBS purchases books from us, which have no resale value for a flat rate per box. Total sales to MBS under this program were $0.3 million and $0.6 million for Fiscal 2017 and Fiscal 2016, respectively. Total outstanding amounts payable to MBS for all arrangements net of any amounts due were $0 and $21.5 million as of April 29, 2017 and April 30, 2016.
Subsequent to the acquisition of MBS, the consolidated financial statements include the accounts of MBS and all material intercompany accounts and transactions have been eliminated in consolidation.
MBS Lease. MBS leases its main warehouse and distribution facility located in Columbia, Missouri from MBS Realty Partners, L.P., which is majority-owned by Mr. Riggio, with the remaining ownership by other sellers of MBS. The lease was originally entered into in 1991 and included a renewal option which extended the lease term through September 1, 2023. Based upon a valuation performed as of the acquisition date, the lease was determined to be favorable from a lessee perspective with below market rent. Rental payments to MBS Realty Partners L.P. were approximately $1.4 million in both Fiscal 20182019 and $0.2 million from the acquisition date, February 27, 2017 through April 29, 2017.Fiscal 2018.
Independent Registered Public Accountants
The Audit Committee has retained Ernst & Young LLP (“E&Y”) as the Company’s independent auditor for Fiscal 2019.2020. E&Y served as our independent auditors for Fiscal 20182019 and has served as the independent auditor for the Company since 2015. E&Y, as the independent registered public accountants, examine annual financial statements and providetax-related services for the Company.
Audit Fees. For Fiscal 20182019 and Fiscal 2017,2018, the Company was billed $2,003,570 ($603,500 of which was attributable to activity related to MBS)$2,029,763 and $1,482,200 ($297,500 of which was attributable to MBS),$2,003,570, respectively, by E&Y for audit services, including (a) the annual audit (including quarterly reviews) and other procedures required to be performed by the independent auditor to be able to form an opinion on the Company’s consolidated financial statements, (b) the audit of the effectiveness of the Company’s internal control over financial reporting, (c) consultation with management as to the accounting or disclosure treatment of transactions or events, (d) international statutory audits, and (e) services that only the independent auditor reasonably can provide, such as services associated with SEC registration statements, periodic reports and other documents filed with the SEC and review of draft responses to SEC comment letters. The Fiscal 2018 audit fees were significantly higher than Fiscal 2017 audit fees due to the acquisition of MBS Textbook Exchange, LLC.
Audit-Related Fees. For bothFiscal 2019 and Fiscal 2018, and Fiscal 2017, the Company was billed $41,700 and $44,400, respectively, by E&Y for sales audits.
Tax Fees. For Fiscal 20182019 and Fiscal 2017,2018, the Company was billed $6,250$20,700 and $1,500,$6,250, respectively, by E&Y for services related to consultation on tax matters.
All Other Fees. For both Fiscal 2018 and Fiscal 2017, the Company was billed $1,995 by E&Y for fees related to licensed accounting research software.
Pre-approval Policies and Procedures. The Audit Committee Charter adopted by the Board of Directors requires that, among other things, the Audit Committeepre-approve the rendering by the Company’s independent auditor of all audit and permissiblenon-audit services. The Audit Committee has approved all of the services provided by E&Y referred to above. The Audit Committee has also authorized the Company’s management in advance to engage the Company’s independent registered public accountants from time to time in the future to perform certain services in areaspre-approved by the Audit Committee that at any one time will not involve more than $25,000 per project and more than $100,000 in the aggregate.
The Audit Committee assists the Board of Directors with its oversight responsibilities regarding the Company’s financial reporting process. The Company’s management is responsible for the preparation, presentation and integrity of the Company’s financial statements and the reporting process, including the Company’s accounting policies, internal audit function, internal control over financial reporting and disclosure controls and procedures. Ernst & Young LLP, the Company’s independent registered public accounting firm, is responsible for performing an audit of the Company’s financial statements.
With regard to the fiscal year ended April 28, 2018,27, 2019, the Audit Committee (i) reviewed and discussed with management our audited consolidated financial statements as of April 28, 2018,27, 2019, and for the year then ended; (ii) discussed with Ernst & Young LLP, the independent auditors, the matters required by Public Company Accounting Oversight Board of Directors (“PCAOB”) AU Section 380, Communications with Audit Committees; (iii) received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee regarding independence; and (iv) discussed with Ernst & Young LLP their independence.
Based on the review and discussions described above, the Audit Committee recommended to our Board of Directors that our audited financial statements be included in our Annual Report on Form10-K for the fiscal year ended April 28, 2018,27, 2019, for filing with the Securities and Exchange Commission.
| Audit Committee |
David A. Wilson,Chair Emily C. Chiu |
| Daniel A. DeMatteo |
| David G. Golden |
PROPOSAL TWO: APPROVAL OF THE COMPANY’S AMENDED AND RESTATED EQUITY INCENTIVE PLAN
The Company’s Equity Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock and restricted stock units and performance awards to ournon-employee directors, employees, consultants and/or advisors of the Company. We believe the Equity Incentive Plan assists the Company and its affiliates in attracting and retaining selected individuals who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company.
The purpose of this Proposal 2 is to amend and restate the Equity Incentive Plan to increase the number of shares of Common Stock available for issuance under the Plan by 4,000,000 and to amend certain provisions related to performance-based awards in connection with amendments to Section 162(m) of the Code that eliminated the exemptions to the $1 million deductibility limit for “covered employees” imposed by Section 162(m). The Board of Directors is seeking shareholder approval of the Plan so that the shares reserved for issuance under the Plan may be listed on the New York Stock Exchange. Shareholder approval is also being sought so that the Company may grant options that qualify as incentive stock options under the Code. Outstanding awards under the Equity Incentive Plan will continue in effect in accordance with their terms. If our stockholders do not approve this Proposal 2, the Equity Incentive Plan will continue in its current form.
Key Features of the Equity Incentive Plan
Fixed Reserve of Shares. The number of shares of common stock available for grant under the Equity Incentive Plan is fixed and will not automatically increase because of an “evergreen” feature; shareholder approval is required to issue any additional shares, allowing our shareholders to have direct input on our equity compensation program.
No Repricing. The Equity Incentive Plan prohibits the repricing of awards without shareholder approval.
Award Limitations. The Equity Incentive Plan places limitations on the number of shares of Common Stock underlying Awards that can be granted to participants and the amount of cash and equity compensation that may be paid tonon-employee directors.
Minimum Vesting Period. Awards generally cannot vest earlier than one year from the date of grant.
No Discounted Stock Options or Stock Appreciation Rights. All stock options and stock appreciation rights must have an exercise price or base price equal to or greater than the fair market value of the underlying shares on the date of grant.
No Liberal Definition of “Change in Control”. The change in control definition is not a “liberal” definition that would be triggered on mere shareholder approval of a transaction.
Limitation on Term of Stock Options and Stock Appreciation Rights. The maximum term of a stock option or stock appreciation right is 10 years.
No Dividends or Dividend Equivalents on Unvested or Unearned Awards. Current payment of dividends or dividend equivalent rights on unvested or unearned awards is prohibited.
Double-Trigger Vesting. The vesting of awards that are assumed or substituted in connection with a change in control only accelerates as a result of the change in control if a participant experiences a qualifying termination of employment.
Clawback. Awards granted under the Equity Incentive Plan are subject to our clawback and/or recoupment policies.
Hedging and Pledging. Directors and executive officers are prohibited from hedging, and may not pledge our stock without the approval of the Audit Committee.
Performance Awards. The Compensation Committee may grant performance-based awards that vest based on the achievement of performance goals established by the Compensation Committee.
Independent Compensation Committee. Our Compensation Committee, which will administer the Equity Incentive Plan, consists entirely of independent directors.
No TaxGross-Ups. The Equity Incentive Plan does not provide for any taxgross-ups.
Increase in Number of Shares of Common Stock Available for Issuance under the Equity Incentive Plan and other Amendments
The Company’s Board of Directors has approved, subject to shareholder approval, the Amended and Restated Equity Incentive Plan to increase by 4,000,000 the number of shares of common stock available for issuance under the Equity Incentive Plan, for an aggregate total of 10,409,345 shares. The Equity Incentive Plan currently provides that the total number of shares of common stock reserved and available for issuance pursuant to awards under the plan is 6,409,345, of which 1,204,673 may be used for awards of incentive stock options.
As of the date of this proxy, there were a total of 3,593,768 shares subject to outstanding awards under the Equity Incentive Plan and 972,743 remaining shares reserved for issuance. The Company’s Board of Directors believes that it is essential to have a sufficient number of reserved shares available for issuance under the Equity Incentive Plan to compensate and incentivize the Company’s employees, directors, and officers, and the Board of Directors and Compensation Committee believe that the proposed increase will provide a sufficient number of available shares of common stock for future granting needs to help the Company achieve the purposes of the Equity Incentive Plan.
In any fiscal year (subject to certain adjustments described herein):
No participant may be granted awards with respect to more than 1.5 million shares in the aggregate. Canceled awards, and awards settled in cash, will continue to be count towards this limitation.
The aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all awards granted to anynon-employee director during any single fiscal year, together with any amounts paid to such Directors for annual and committee retainer fees, during any12-month period shall not exceed $700,000.
The proposed Amended and Restated Equity Incentive Plan also amends certain provisions of the current plan that reference, or relate to, Section 162(m) of the Code because of the elimination of the exemptions to the $1 million deductibility limit for “covered employees” imposed by Section 162(m).
Background for Requested Share Authorization
The Board of Directors is asking shareholders to approve the Amended and Restated Equity Incentive Plan to authorize an additional 4 million shares for the Equity Incentive Plan, thereby increasing the total number of shares available for issuance under the Equity Incentive Plan to 10,409,345 and allowing for equity-based grants to employees for approximately the next three (3) years through Fiscal 2021.
In determining the proposed number of additional shares to request, the Compensation Committee considered a number of factors, which are discussed in further detail below, including:
Remaining shares available under the Equity Incentive Plan after the July 2018 equity award grant,
Projected equity granting practices, and
Current and total potential dilution of outstanding awards, remaining available shares, and newly requested shares.
The increase to the number of shares available to grant under the Equity Incentive Plan will enable us to better deliver market competitive compensation packages to our employees and continue to attract and retain top talent that is key to the successful execution of our business strategy. If we do not increase the number of shares remaining under our Equity Incentive Plan, we will not have sufficient shares for future employee grants, thereby significantly impairing our ability to attract and retain top talent.
When compared to our peers, our current dilution approximates the 25th percentile; increasing the share reserve by the requested 4 million shares will position our potential dilution approximately at the median of peers. Note that actual dilution associated with the new reserve will depend on several factors, including the types of awards granted under the Equity Incentive Plan.
Reasons for the Amended and Restated Equity Incentive Plan
The Amended and Restated Equity Incentive Plan is intended to ensure that a sufficient reserve of shares of our Common Stock remains available to allow the Company to continue to use equity incentives to attract and retain the services of qualified employees, directors, and officers of the Company and its subsidiaries whom are essential to the Company’s long-term growth and success. The Company relies on equity incentives in the form of grants of performance awards, restricted stock, stock appreciation rights, stock options, bonus awards, deferred stock, or any combination of the foregoing, in order to attract and retain employees, directors, and officers of the Company and its subsidiaries, and the Company believes that such equity incentives are necessary for the Company to remain competitive in the marketplace for talented employees, directors, and officers.
Currently only 972,743 shares reserved for issuance under the Equity Incentive Plan remain. An aggregate of 3,593,768 shares were granted under the Equity Incentive Plan in Fiscal 2017. Thus, for grants expected to be made by the Company in the future, additional authorized shares are necessary under the Equity Incentive Plan for the Company to meet the Compensation Committee’s compensation objectives in future years. As a result, the Company is seeking shareholder approval of the proposal to adopt the Amended and Restated Equity Incentive Plan to increase the number of shares authorized for issuance thereunder and to amend certain provisions related to performance-based awards in connection with amendments to Section 162(m) of the Code.
The Compensation Committee first granted Performance Shares in Fiscal 2017. The performance period is two fiscal years after which all or a portion of the award is earned based on actual performance. Performance Shares not earned are forfeited. For the grant made in Fiscal 2017, 37.5% of the target Performance
Shares were earned. The earned Performance Shares are subject to an addition one year of time-based vesting. The chart below shows the number of Performance Shares granted, earned, fully vested and forfeited to date.
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If the foregoing Amended and Restated Equity Incentive Plan is approved by the Company’s shareholders, the effective date of the Amended and Restated Equity Incentive Plan will be September 25, 2018 and will terminate ten years from the date of such approval, unless sooner terminated by the Board of Directors. If the Amended and Restated Equity Incentive Plan is not approved by our shareholders, then the Equity Incentive Plan will continue in existence in its current state, and will remain in effect until terminated by the Company or until all shares available for awards under the plan have been granted.
The following summarizes the terms of the Amended and Restated Equity Incentive Award Plan. The following summary is qualified in its entirety by reference to the full text of the Amended and Restated Equity Incentive Plan, as proposed, which is attached hereto as Appendix A.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE PROPOSAL TO APPROVE THE COMPANY’S AMENDED AND RESTATED EQUITY INCENTIVE PLAN.
Unless you instruct otherwise on your proxy card or by telephone or Internet voting instructions, your proxy will be voted in accordance with the Board of Directors’ recommendation.
Description of the Equity Incentive Plan
Purpose of the Equity Incentive Plan
The purpose of the Equity Incentive Plan is to assist the Company and its affiliates in attracting and retaining selected individuals to serve asnon-employee directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the awards granted under the Equity Incentive Plan.
Effective Date
The Equity Incentive Plan originally became effective on the date of the approval of theSpin-Off on July 13, 2015. If approved by the stockholders, the effective date of the Amended and Restated Equity Incentive Plan will be September 25, 2018 and will terminate ten years from the date of such approval, unless sooner terminated by the Board of Directors.
Stock Limits
The maximum number of shares of the Company’s common stock available for grant under the Equity Incentive Plan when initially adopted was 2,409,345 shares of the Company’s common stock. The plan was amended to increase the shares by 4,000,000 to 6,409,345 in 2016. If the Amended and Restated Equity Incentive Plan is approved, the maximum number of shares that will be available for grant will be 10,409,345. Any common stock that is the subject of an award under the Equity Incentive Plan shall be counted against the limit as one share for every share issued. In general, common stock is counted against the limit only to the extent that it is actually issued. Thus, stock subject to any award under the Equity Incentive Plan which terminates by expiration, forfeiture, cancellation or otherwise is settled in cash in lieu of stock, or exchanged for awards not involving stock, shall again be available for grant. Awards that are required to be settled in cash will not reduce the number of shares of the Company’s common stock available for grant. Substitute awards shall not reduce the shares authorized for issuance under the Equity Incentive Plan or authorized for grant to a participant in any calendar year. If shares issued upon vesting or settlement of an award, or shares owned by a participant, are surrendered or tendered to the Company in payment of any taxes required to be withheld in respect of such award, such surrendered or tendered shares shall again become available to be delivered pursuant to awards under the Equity Incentive Plan provided, however, that shares surrendered or tendered to the Company in payment of the exercise price of an option or any taxes required to be withheld in respect of an option or stock appreciation right shall not become available again to be delivered pursuant to Awards granted under the Plan.
Additionally, the Equity Incentive Plan imposes certainper-participant award limits. In any fiscal year of the Company (subject to certain adjustments resulting from corporate transactions as discussed in the following paragraph), no participant may be granted awards with respect to more than 1.5 million shares. Canceled awards, and awards settled in cash, will continue to be counted towards this limitation. The aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all awards granted to anynon-employee director during any single fiscal year, together with any amounts paid to such Directors for annual and committee retainer fees, during any12-month period shall not exceed $700,000.
The number, class and kind of securities that may be issued, the number, class and kind of securities subject to outstanding awards, the option price or base price applicable to outstanding awards, theper-participant award limits, and other value determinations are subject to adjustment by the Compensation Committee to reflect stock dividends, stock splits, reverse stock splits and other corporate events or transactions. The Compensation Committee may also make adjustments to reflect unusual or nonrecurring events such as mergers, recapitalizations, consolidations, spin-offs and other corporate reorganizations. However, the Compensation Committee cannot make any adjustments that would cause an award not otherwise “deferred compensation” within the meaning of Section 409A of the Code to become or create “deferred compensation” under Section 409A of the Code.
Other Company Plans
Stock available under the Equity Incentive Plan may be used by the Company as a form of payment of performance-based compensation under other Company compensation plans, whether or not existing on the date hereof. To the extent any stock is used by the Company under its other compensation plans, this stock will reduce the then number of shares available under the Equity Incentive Plan for future awards, but will not be subject to the fiscal year stock or dollar limitations referred to above.
Administration
The Compensation Committee is responsible for administering the Equity Incentive Plan and has the discretionary power to interpret the terms and intent of the Equity Incentive Plan and any Equity Incentive Plan-related documentation. The Board may remove from, add members to, or fill vacancies on, the Compensation Committee. The Compensation Committee is also responsible for determining the eligibility for awards, the
types, terms and conditions of awards (including when and under what circumstances awards will vest, become exercisable or be paid or settled, subject to limitations regarding the minimum period for vesting and the attainment of certain performance criteria), whether and how an award may be settled, deferred or canceled, subject to certain limitations applicable to awards subject to performance-based vesting, whether an award will have the right to accumulate dividends, whether to accelerate the vesting or exercisability and whether to amend an outstanding award or grant a replacement award. The Compensation Committee may establish rules and regulations pertaining to the Equity Incentive Plan and may make any determination and take any other action it deems necessary or desirable for administration of the Equity Incentive Plan. Determinations of the Compensation Committee made under the Equity Incentive Plan are final and binding. The Compensation Committee may delegate administrative duties and powers to a committee of one or morenon-employee directors and, to the extent permitted by law, to one or more officers or a committee of officers the right to grant awards to employees who are not directors or officers of the Company and to cancel or suspend awards to employees who are not directors or officers of the Company, subject to the requirements of Rule16b-3 of the Exchange Act and the rules of the NYSE. The full Board may at any time grant awards tonon-employee directors or administer the Equity Incentive Plan with respect to those awards.
Eligibility
Individuals eligible to receive awards under the Equity Incentive Plan are employees andnon-employee directors (including prospective employees and directors) of the Company or of any of its affiliates, and consultants and advisors (including prospective consultants and advisors) who provide services to the Company and any of its affiliates, as selected by the Compensation Committee. Approximately 150 people are currently eligible to participate in the Equity Incentive Plan.
Minimum Vesting Schedule
The award agreement for each award shall provide that no portion of any award may vest earlier than 12 months after the applicable grant date, except for awards subject to vesting in whole or part based on performance criteria, awards granted tonon-employee directors, or, solely in the case of awards granted prior to the first annual meeting of the stockholders after theSpin-Off, such period as determined by the Compensation Committee in its sole discretion, subject to any accelerated vesting and/or exercisability, as applicable, in such award agreement, the Equity Incentive Plan or any other applicable arrangement to apply upon the occurrence of a specified event. Notwithstanding the foregoing minimum vesting and nonforfeitability requirements, the Committee may authorize the grant of Awards that are subject to periods of vesting and forfeiture less than 12 months, provided the amount of such Awards, when taken together with any other Awards that are similarly not subject to the minimum vesting or forfeiture time limits, in the aggregate do not exceed five percent of the maximum number of Shares that may be issued or delivered under the Equity Incentive Plan.
Options
The Compensation Committee may grant options under the Equity Incentive Plan either alone or in addition to other awards granted under the Equity Incentive Plan. The exercise price for options cannot be less than the fair market value of the Company’s common stock on the date of grant, which shall be the closing price of the stock as reported on the NYSE on the date of grant. The Compensation Committee may provide that an option will be automatically exercised, without further action by the holder, on the last day of such option’s exercise period if, on such day, the fair market value of the Company’s common stock to be acquired exceeds the aggregate exercise price. The Equity Incentive Plan expressly prohibits repricing of options/canceling an option with an exercise price that exceeds the fair market value of the stock underlying such option in exchange for another award or cash (other than in connection with a change of control). The latest expiration date of an option cannot be later than the tenth anniversary of the date of grant. The exercise price may be paid with cash or its equivalent, with previously acquired stock, or by certain other means with the consent of the Compensation Committee. With respect to options intended to qualify as “incentive stock options” as defined in Code
Section 422, the maximum number of shares with respect to which such options may be granted under the Equity Incentive Plan is 1,204,673 shares.
Stock Appreciation Rights
The Compensation Committee may grant stock appreciation rights (“SARs”) under the Equity Incentive Plan either alone or in addition to other awards granted under the Equity Incentive Plan. Upon the exercise of an SAR, the holder will have the right to receive the excess of (i) the fair market value of one share on the date of exercise over (ii) the base price of the SAR on the date of grant, which will not be less than the fair market value of one share of the Company’s common stock on the date of grant. The Compensation Committee may provide that an SAR will be automatically exercised, without further action by the holder, on the last day of such SAR’s exercise period, if on such day, the fair market value of the stock to which such SAR relates exceeds the aggregate base price. The latest expiration date of an SAR cannot be later than the tenth (10th) anniversary of the date of grant. Upon the exercise of an SAR, the Compensation Committee will determine, in its sole discretion, whether payment will be made in cash, stock or other property, or any combination thereof. The Equity Incentive Plan expressly prohibits repricing of SARs/canceling an SAR with a base price that exceeds the fair market value of the stock underlying such SAR in exchange for another award or cash (other than in connection with a change of control).
Restricted Stock
The Compensation Committee may award restricted stock either alone or in addition to other awards under the Equity Incentive Plan. Restricted stock awards consist of stock that is granted to a participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. A holder of restricted stock is generally treated as a stockholder of the Company (subject to certain restrictions) and has the right to vote such stock and the right to receive distributions made with respect to such stock; however, any dividends otherwise payable with respect to a restricted stock award will not be paid currently but will be accumulated until the applicable restricted stock award has vested. In the case of restricted stock awards that are subject to vesting based on the achievement of performance goals, a participant will not be entitled to receive payment for any dividends with respect to such restricted stock awards unless, until and except to the extent that the applicable performance goals are achieved or are otherwise deemed to be satisfied.
Other Stock Unit Awards
Other awards of stock and other awards that are valued in whole or in part by reference to, or are otherwise based on, stock or other property, may be granted to participants, either alone or in addition to other awards granted under the Equity Incentive Plan. Unlike restricted stock awards, other stock unit awards result in the transfer of stock to the participant only after specified conditions and the holder of such an award is treated as a stockholder with respect to the award when the stock is delivered in the future. Other stock unit awards may be paid in cash, stock, other property, or any combination thereof, in the sole discretion of the Compensation Committee at the time of payment. Dividends otherwise payable with respect to any other stock unit award will not be paid currently but will be accumulated until the applicable other stock unit award has vested. In the case of other stock unit awards that are subject to vesting based on the achievement of performance goals, a participant will not be entitled to receive payment for any dividends with respect to such other stock unit awards unless, until and except to the extent that the applicable performance goals are achieved or are otherwise deemed to be satisfied.
Performance Awards
Performance awards may be granted under the Equity Incentive Plan, either alone or in addition to other awards granted under the Equity Incentive Plan. Performance awards will be earned only if the participant meets certain performance goals established by the Compensation Committee over a designated performance
period. Performance awards may be paid in cash, stock, other property, or any combination thereof, in the sole discretion of the Compensation Committee at the time of payment. The performance goals to be achieved for each performance period will be determined by the Compensation Committee and may be based upon the criteria described below the heading “Performance Criteria.” Performance periods will be established by the Compensation Committee for each performance award and are not less than 12 months. No participant will be entitled to receive payment for any dividends with respect to any performance awards unless, until and except to the extent that the performance goals applicable to such awards are achieved or are otherwise deemed to be satisfied.
Performance Criteria
Covered Awards will be subject to the achievement of one or more performance goals established by the Compensation Committee, which will be based on the attainment of specified levels of one or any combination of the following: sales (including same store or comparable sales); net sales; return on sales; cash flow (including operating cash flow and free cash flow); cash flow per share (before or after dividends); cash flow return on investment; cash flow return on capital; pretax income before allocation of corporate overhead and bonus; earnings per share; net income; division, group or corporate financial goals or ratios including those measuring liquidity, activity, profitability or leverage; return on stockholders’ equity; total stockholder return; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; customer satisfaction; customer growth; user time spent online; unique users; registered users; user frequency; user retention; web page views; employee satisfaction; employee turnover; productivity or productivity ratios; strategic partnerships or transactions (includingin-licensing andout-licensing of intellectual property); establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Company’s products (including with group purchasing organizations, distributors and other vendors); supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products);co-development,co-marketing, profit sharing, joint venture or other similar arrangements; gross profits; gross or net profit margin; operating margin; gross profit growth;year-end cash; cash margin; revenue; net revenue; product revenue or system-wide revenue (including growth of such revenue measures); operating earnings; operating income; earnings before taxes; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passingpre-approval inspections (whether of the Company or the Company’s third-party manufacturer) and validation of manufacturing processes (whether the Company’s or the Company’s third-party manufacturer’s)); improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; general and administrative expense savings; inventory control; operating efficiencies; average inventory; inventory turnover; inventory shrinkage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities; debt levelyear-end cash position; book value; factoring transactions; competitive market metrics; timely completion of new product roll-outs; timely launch of new facilities (such as new store openings, gross or net); sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); royalty income; implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures, succession and hiring projects, reorganization and other corporate transactions, expansions of specific business operations and meeting divisional or project budgets; factoring transactions; and recruiting and maintaining personnel; debt reduction; reductions in costs, and/or return on invested capital of the Company or any affiliate, division or business unit of the Company for or within which the participant is primarily employed. Any performance criteria that are financial metrics may be determined in accordance with United States Generally Accepted Accounting Principles (“GAAP”), or may be adjusted when established to include or exclude any items otherwise includable or excludable under GAAP.
Additionally, the Compensation Committee may also exclude the impact of an event or occurrence that the Compensation Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items, and other unusual ornon-recurring charges or infrequently occurring items, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, (c) a change in accounting standards required by generally accepted accounting principles, (d) asset write-downs, (e) litigation or claim judgments or settlements, (f) acquisitions or divestitures, (g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) tax law changes, (j) costs associated with refinancing or repurchase of bank loans or debt securities, (k) unbudgeted capital expenditures or (l) a business interruption event.
Adjustments
To prevent the dilution or enlargement of benefits or potential benefits intended to be made available under the Equity Incentive Plan, the aggregate number, class and kind of securities that may be delivered under the Equity Incentive Plan, including certain limitations under the Equity Incentive Plan, the number, class and kind and option or base price of securities subject to outstanding awards, theper-participant award limits, and other value determinations are subject to adjustment by the Compensation Committee to reflect stock dividends, stock splits, reverse stock splits and other corporate events or transactions, including a Change of Control (defined below). The Compensation Committee may also make adjustments to reflect unusual or nonrecurring events such as mergers, recapitalizations, consolidations, spin-offs and other corporate reorganizations.
Termination of Employment
The Compensation Committee will determine how each award will be treated following termination of the holder’s employment with, or service for, the Company, including the extent to which unvested portions of the award will be forfeited and the extent to which options, SARs or other awards requiring exercise will remain exercisable.
Treatment of Awards upon a Change of Control
One or more awards may be subject to the terms and conditions set forth in a written or electronic agreement between the Company and a participant providing for different terms or provisions with respect to such awards upon a “Change of Control” (as defined in the Equity Incentive Plan) of the Company. Unless otherwise provided in the applicable award agreement, in the event of a Change of Control, if the successor company assumes or substitutes for an outstanding award, then such award will be continued in accordance with its applicable terms and vesting will not be accelerated. If an award is not assumed or substituted for, generally it will vest and become free of all restrictions and limitations, and if the award is a performance award then the Compensation Committee will determine the portion and level of the award considered to be earned and payable. For purposes of the Equity Incentive Plan, “Change of Control” will generally have the meaning set forth in the applicable award agreement (subject to the limitations described below). If there is no definition set forth in the applicable award agreement, “Change of Control” will mean:
(i) during any period of 24 consecutive months, a change in the composition of a majority of the Board, as constituted on the first day of such period, that was not supported by a majority of the incumbent directors;
(ii) the consummation of certain mergers or consolidations of the Company with any other corporation, or the sale of all or substantially all the assets of the Company, following which the Company’s then current stockholders cease to own more than 50% of the combined voting power of the surviving entity; or
(iii) the acquisition by a third party (other than Mr. Leonard Riggio and his affiliates) of 40% or more of the combined voting power of the then outstanding voting securities of the Company. An award agreement may provide for a different definition of Change of Control than is provided for in the Equity Incentive Plan, any
definition of Change of Control set forth in any award agreement will provide that a Change of Control would not occur until consummation or effectiveness of a Change of Control of the Company, rather than upon the announcement, commencement, stockholder approval or other potential occurrence of any event or transaction that, if completed, would result in a change of control of the Company.
Amendments
The Board may at any time alter, amend, suspend or terminate the Equity Incentive Plan, except that no amendment of the Equity Incentive Plan will be made without stockholder approval if stockholder approval is required by applicable law or regulation. Stockholder approval is also generally required for any amendment that would: (i) increase the number of shares that may be the subject of awards; (ii) expand the types of awards available; (iii) materially expand the class of persons eligible to participate; (iv) permit options or SARs to be issued or repriced at option or base prices less than 100% of fair market value; (v) increase the maximum permissible term for options or SARs; (vi) modify the limitations on the number of shares or maximum dollar amounts that may be awarded to participants or (vii) permit awards to be transferred to third parties in exchange for value. No amendment to an award previously granted may materially impair the rights of any participant to whom such award was granted without such participant’s consent, provided, however, that the Board may amend, modify or terminate the Equity Incentive Plan without the consent of such participant if it deems it necessary to comply with applicable law, tax rules, stock exchange rules or accounting rules, provided that all participants similarly situated are similarly affected.
Transferability
Except to the participant’s spouse, domestic partner and/or children (and/or trusts and/or partnerships established for the benefit of the participant’s spouse, domestic partner or children or in which the participant is a beneficiary or partner) as approved by the Compensation Committee, awards are not transferable other than by will or the laws of descent and distribution. No award is transferable to a third party in exchange for value unless the transfer is specifically approved by the Company’s stockholders.
Clawback
The Compensation Committee may provide that an award shall be cancelled if the participant, without the consent of the Company, while employed by or providing services to the Company or any affiliate of the Company or after termination of such employment or service, (a) violates anon-competition,non-solicitation ornon-disclosure covenant or agreement, (b) otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any of its affiliates, including fraud, or conduct contributing to any financial restatements or irregularities, as determined by the Compensation Committee in its sole discretion or (c) otherwise violates any policy adopted by the Company or any of its affiliates relating to the recovery of compensation granted, paid, delivered, awarded or otherwise provided to any participant by the Company or any of its affiliates as such policy is in effect on the date of grant of the applicable award or, to the extent necessary to address the requirements of applicable law (including Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10D of the Exchange Act, Section 304 of the Sarbanes-Oxley Act of 2002 or any other applicable law), as may be amended from time to time. Additionally, the Compensation Committee may also provide that (i) a participant will forfeit any gain realized on the vesting or exercise of such award if the participant engages in such activities referred to in the preceding sentence, or (ii) a participant must repay the gain to the Company realized under a previously paid performance award if a financial restatement reduces the amount that would have been earned under such performance award.
Federal Income Tax Consequences to Participants
The Company believes generally that awards under the Equity Incentive Plan will have the following consequences under current U.S. Federal income tax laws:
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Federal Income Tax Consequences to the Company
At the time and to the extent that a recipient recognizes ordinary income in the circumstances described above, the Company will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code, and is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code.
Equity Compensation Plan Information
The following table sets forth information as of the date of this proxy statement regarding the Company’s equity compensation plan. The only plan pursuant to which the Company may currently make additional equity grants is the Equity Incentive Plan.
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Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted-average exercise price of outstanding options, warrants and rights (1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column [a]) | |||||||||
Equity compensation plans approved | 3,593,768 | $ | 7.34 | 972,743 | ||||||||
Equity compensation plans not | N/A | N/A | N/A | |||||||||
Total | 3,593,768 | $ | 7.34 | 972,743 | ||||||||
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PROPOSAL THREE: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) enables the Company’s stockholders to vote to approve, on an advisory ornon-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with SEC rules.
The Company’s executive compensation program is designed to advance the philosophy of the Compensation Committee of the Board of Directors of paying for performance, paying competitively and aligning pay to business objectives and the Company’s long-term strategy. To align executive pay with both the Company’s financial performance and long-term strategy, a significant portion of the NEOs’ compensation is based on the performance of the Company, and the compensation program is designed to reward both annual and long-term performance. Annual performance is rewarded through base salary and annual incentive compensation. Annual performance is measured principally by the Company’s EBITDA (in each case, as defined in this Proxy Statement) and individual performance goals. Long-term performance is rewarded through equity-based awards, the value of which is based upon the performance of the Company’s Common Stock price.
The Compensation Committee and the Board of Directors believe that the Company’s Fiscal 20182019 executive compensation program aligned well with the Compensation Committee’s philosophy and sufficiently linked to the Company’s performance.
For additional information on the Company’s executive compensation program and how it reflects the Compensation Committee’s philosophy and is linked to the Company’s performance, see the “Compensation Discussion and Analysis” herein.
We are asking for stockholder approval, on an advisory basis, of the compensation of our NEOs as disclosed in this Proxy Statement in accordance with SEC rules, which disclosures include the disclosures under the Compensation Discussion and Analysis above, the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the policies and practices described in this Proxy Statement.
This vote is advisory and therefore not binding on the Company, the Board of Directors or the Compensation Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE FOLLOWING RESOLUTION:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed in this Proxy Statement pursuant to Item 402 of SEC RegulationS-K, including the Compensation Discussion and Analysis above, the compensation tables and narrative discussion be, and hereby is, approved.
Unless you instruct otherwise on your proxy card or by telephone or Internet voting instructions, your proxy will be voted in accordance with the Board of Directors’ recommendation.
PROPOSAL FOUR:THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee has appointed the firm of Ernst & Young LLP, which firm was engaged as independent registered public accountants for Fiscal 2018,2019, to audit the financial statements of the Company for the Company’s 20192020 fiscal year ending April 27, 2019.May 2, 2020. A proposal to ratify this appointment is being presented to the stockholders at the Annual Meeting. A representative of Ernst & Young LLP will be present at the Annual Meeting and will have the opportunity to make a statement and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS CONSIDERS ERNST & YOUNG LLP TO BE WELL QUALIFIED AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTEFOR RATIFICATION.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than10-percent of the Common Stock, to file initial statements of beneficial ownership of Common Stock (Form 3) and statements of changes in beneficial ownership of Common Stock (Forms 4 and 5) with the SEC. Executive officers, directors and greater than10-percent stockholders are required to furnish the Company with copies of all such forms they file.
Based solely on a review of these reports and written representations from the executive officers and directors, the Company believes that there was compliance with all such filing requirements for the fiscal year ended April 28, 2018.27, 2019.
Other Matters Brought Before the Annual Meeting
As of the date of this Proxy Statement, the Company does not intend to present any business for action at the Annual Meeting other than as described in this Proxy Statement, and the Company has not been notified of any stockholder proposals intended to be raised at the Annual Meeting.
Proxies are being solicited through the mail, in person, by telephone, email, the Internet or other electronic means. The Company will pay all solicitation expenses in connection with this Proxy Statement and related proxy soliciting material of the Board of Directors, including the expense of preparing, printing, assembling and mailing this Proxy Statement and any other material used in the Board of Directors’ solicitation of proxies. In addition, the Company has retained Innisfree M&A Incorporated to assist with the solicitation of proxies for a fee not to exceed $17,500, plus reimbursement forout-of-pocket expenses.
The Company will request banks, brokers and other custodians, nominees and fiduciaries to forward proxy soliciting material to the beneficial owners of shares held of record by such persons and obtain their voting instructions. The Company will reimburse such persons for their expenses in connection with the foregoing activities.
Financial and Other Information
The Company’s Annual Report for Fiscal 2018,2019, including financial statements, is being sent to stockholders together with this Proxy Statement.
ProposalsUnder the SEC proxy rules, proposals of stockholders intended to be included in the Company’s proxy materials for the annual meeting of stockholders to be held in 20192020 must be received by the Company’s Corporate Secretary, at Barnes & Noble Education, Inc., 120 Mountain View Blvd., Basking Ridge, New Jersey 07920, no later than April 23, 2019.17, 2020.
In addition, the Company’sBy-laws provide bylaws require that in orderany eligible stockholder wishing to make a nomination for a stockholderdirector, or wishing to propose business for consideration at such meeting, such stockholder must deliver written notice to the Corporate Secretary of the Company not less than 90 days nor more than 120 days prior to the annual meeting. 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: (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting suchintroduce any business, at the annual meeting, and (b) any material interest of the proposing stockholder in such business. Similar notice must be given with respect to any stockholder nominees for director. Accordingly, the business of theour 2020 annual meeting of stockholders to be held in 2018 shall not include voting on any stockholder nominee or proposal if proper notice as to such nominee or proposal is not properly delivered tomust give the Company advance notice in accordance with the Company’sBy-laws. bylaws. To be timely, the Company must receive such notice for its 2020 annual meeting of stockholders at its offices mentioned above no earlier than May 28, 2020 and no later than June 27, 2020. Notices by eligible stockholders wishing to make a nomination for director, or wishing to introduce any business, at our 2020 annual meeting of stockholders must comply with the Company’s bylaws. These requirements are separate from and in addition to the SEC requirements that a stockholder must meet in order to have a stockholder proposal included in our Proxy Statement.
The delivery of this Proxy Statement after the date 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. Other than the Company and the Company’s proxy solicitor, no person has been authorized by the Board of Directors to give you any information or to make any representations in connection with the solicitation of proxies by the Board of Directors, and if any such information is given or any such representations are made, they must not be relied upon as having been authorized by the Board of Directors.
Your vote is very important no matter how many shares you own. You are urged to read this Proxy Statement carefully and, whether or not you plan to attend the Annual Meeting, to promptly submit a proxy:
(a) by telephone or the Internet following the instructions on the enclosed proxy card or (b) by signing, dating and returning the enclosed proxy card in the postage-paid return envelope provided. A prompt response will be greatly appreciated.
If you have any questions or require any assistance with voting your shares, please contact the Company’s proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Stockholders may call toll-free: (888)750-5834
Banks and Brokers may call collect: (212)750-5833
* * *
By Order of the Board of Directors
Michael P. Huseby, Chairman of the Board of Directors and Chief Executive Officer |
| August |
BARNES & NOBLE EDUCATION, INC. AMENDED AND RESTATED
EQUITY INCENTIVE PLAN
[as proposed to be amended and restated at the 2018 Annual Meeting of Stockholders to increase authorized shares by 4,000,000 and to amend provisions relating to Section 162(m) of the IRC]
BARNES & NOBLE EDUCATION, INC., a corporation existing under the laws of the State of Delaware, together with any successor thereto (the “Company”), hereby establishes and adopts the following Equity Incentive Plan (the “Plan”). Certain capitalized terms used in the Plan are defined in Article 2.
RECITALS
WHEREAS, the Company desires to encourage high levels of performance by those individuals who are key to the success of the Company, to attract new individuals who are highly motivated and who are expected to contribute to the success of the Company and to encourage such individuals to remain asnon-employee directors, employees, consultants and/or advisors of the Company and its Affiliates by increasing their proprietary interest in the Company’s growth and success; and
WHEREAS, to attain these ends, the Company has formulated the Plan embodied herein to authorize the granting of Awards to Participants whose judgment, initiative and efforts are or have been or are expected to be responsible for the success of the Company.
NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the following Plan and agrees to the following provisions:
ARTICLE 1
PURPOSE OF THE PLAN
1.1.Purpose. The purpose of the Plan is to assist the Company and its Affiliates in attracting and retaining selected individuals to serve asnon-employee directors, employees, consultants and/or advisors of the Company and its Affiliates who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder.
ARTICLE 2
DEFINITIONS
2.1.“Affiliate” shall mean (i) any person or entity that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company (including any Subsidiary) or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.
2.2.“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan.
2.3.“Award Agreement” shall mean any written or electronic agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder.
2.4.“Board” shall mean the board of directors of the Company.
2.5.“Change of Control” shall (a) have the meaning set forth in an Award Agreement; provided, however, that any definition of Change of Control set forth in an Award Agreement shall provide that a Change of Control shall not occur until consummation or effectiveness of a change of control of the Company, rather than upon the announcement, commencement, stockholder approval or other potential occurrence of any event or transaction that, if completed, would result in a change of control of the Company, or (b) if there is no definition set forth in an Award Agreement, mean the occurrence of any of the following events:
(i) during any period of 24 consecutive months, individuals who were Directors of the Company on the first day of such period (the “Incumbent Directors”) cease for any reason to constitute a majority of the Board; provided, however, that any individual becoming a Director of the Company subsequent to the first day of such period whose election, or nomination for election, by the Company’s stockholders was approved by a vote of at least a majority of the Incumbent Directors shall be considered as though such individual were an Incumbent Director;
(ii) the consummation of (A) a merger, consolidation, statutory share exchange or similar form of corporate transaction involving (x) the Company or (y) any of its Subsidiaries, but in the case of this clause (y) only if Company Voting Securities (as defined below) are issued or issuable (each of the events referred to in this clause (A) being hereinafter referred to as a “Reorganization”) or (B) the sale or other disposition of all or substantially all the assets of the Company to an entity that is not an Affiliate (a “Sale”), in each case, if such Reorganization or Sale requires the approval of the Company’s stockholders under the law of the Company’s jurisdiction of organization (whether such approval is required for such Reorganization or Sale or for the issuance of securities of the Company in such Reorganization or Sale), unless, immediately following such Reorganization or Sale, (1) all or substantially all the individuals and entities who were the “beneficial owners” (as such term is defined in Rule13d-3 under the Exchange Act (or a successor rule thereto)) of the securities eligible to vote for the election of the Board (“Company Voting Securities”) outstanding immediately prior to the consummation of such Reorganization or Sale beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the corporation resulting from such Reorganization or Sale (including a corporation that, as a result of such transaction, owns the Company or all or substantially all the Company’s assets either directly or through one or more subsidiaries) (the “Continuing Corporation”) in substantially the same proportions as their ownership, immediately prior to the consummation of such Reorganization or Sale, of the outstanding Company Voting Securities (excluding any outstanding voting securities of the Continuing Corporation that such beneficial owners hold immediately following the consummation of the Reorganization or Sale as a result of their ownership prior to such consummation of voting securities of any company or other entity involved in or forming part of such Reorganization or Sale other than the Company), (2) no “person” (as such term is used in Section 13(d) of the Exchange Act) (each, a “Person”) (excluding (x) any employee benefit plan (or related trust) sponsored or maintained by the Continuing Corporation or any corporation controlled by the Continuing Corporation or (y) the Riggio Stockholders) beneficially owns, directly or indirectly, 40% or more of the combined voting power of the then outstanding voting securities of the Continuing Corporation and (3) at least a majority of the members of the board of directors of the Continuing Corporation were Incumbent Directors at the time of the execution of the definitive agreement providing for such Reorganization or Sale or, in the absence of such an agreement, at the time at which approval of the Board was obtained for such Reorganization or Sale; or
(iii) any Person, corporation or other entity or “group” (as used in Section 14(d)(2) of the Exchange Act) (other than (A) the Company, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an Affiliate, (C) any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the voting power of the Company Voting Securities or (D) the Riggio Stockholders) becomes the beneficial owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company Voting Securities; provided, however, that for purposes of this subparagraph (iii), the following acquisitions shall not constitute a Change of Control: (w) any acquisition directly from the Company, (x) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company
or an Affiliate, (y) any acquisition by an underwriter temporarily holding such Company Voting Securities pursuant to an offering of such securities or any acquisition by a pledgee of Company Voting Securities holding such securities as collateral or temporarily holding such securities upon foreclosure of the underlying obligation or (z) any acquisition pursuant to a Reorganization or Sale that does not constitute a Change of Control for purposes of subparagraph (ii) above.
The determination as to the occurrence of a Change of Control shall be based on objective facts and, to the extent applicable, in accordance with the requirements of Code Section 409A and the regulations promulgated thereunder.
2.6.“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
2.7.“Committee” shall mean the Compensation Committee of the Board (or such other committee designated by the Compensation Committee of the Board).
2.8.“Company” has the meaning set forth in introductory paragraph of the Plan.
2.9.“Director” shall mean anon-employee member (including any prospectivenon-employee member) of the Board or anon-employee member (including any prospectivenon-employee member) of the board of directors of a Subsidiary.
2.10.“Director Award Limitations” shall have the meaning set forth in Section 4.3.
2.11.“Distribution” shall mean the distribution by Barnes & Noble, Inc., a Delaware corporation, to its stockholders of all Shares.
2.12.“ “Employee” shall mean any employee (including any prospective employee) of the Company or any Affiliate. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor (or prospective consultant or advisor) who provides services to the Company or any Affiliate, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Company’s securities.
2.13.“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
2.14.“Fair Market Value” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the New York Stock Exchange on that date (or if there was no reported closing price on such date, on the last preceding date on which the closing price was reported) or, if the Company is not then listed on the New York Stock Exchange, the per Share closing price of the Shares as reported on an established securities market (within the meaning of Treasury RegulationsSection 1.897-1(m)) on which the Shares are traded. If the Company is not listed on an established securities market (within the meaning of Treasury RegulationsSection 1.897-1(m)), the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. Notwithstanding the foregoing, the Fair Market Value of Shares shall, in all events, be determined in accordance with Code Section 409A.
2.15.“ISO Limitation” shall have the meaning set forth in Section 5.7.
2.16.“Limitations” shall mean, collectively, (i) the Plan Share Limitation, (ii) the Director Award Limitations, (iii) the Participant Award Limitations, and (iv) the ISO Limitation.
2.17.“Option” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.
2.18.“Other Stock Unit Award” shall have the meaning set forth in Section 8.1.
2.19.“Participant” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan.
2.20.“Participant Award Limitations” shall have the meaning set forth in Section 4.3.
2.21.“Payee” shall have the meaning set forth in Section 12.1.
2.22.“Performance Award” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9.
2.23.“Performance Period” shall mean one or more periods of time not less than one fiscal year, as the Committee may select, over which the attainment of one or more performance goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Award, in each case, established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.
2.24.“Performance Share” shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
2.25.“Performance Unit” shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
2.26.“Permitted Assignee” shall have the meaning set forth in Section 11.3.
2.27.“Plan Share Limitation” shall have the meaning set forth in Section 3.1.
2.28.“Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.
2.29.“Restricted Period” shall have the meaning set forth in Section 7.1.
2.30.“Restricted Stock Award” shall have the meaning set forth in Section 7.1.
2.31.“Riggio Stockholders” shall mean Leonard Riggio, his spouse, his lineal descendants, trusts for the exclusive benefit of any such individuals, the executor or administrator of the estate or the legal representative of any of such individuals and any entity controlled by any of the foregoing Persons.
2.32.“Shares” shall mean the shares of common stock of the Company, par value $0.01 per share.
2.33.“Stock Appreciation Right” shall mean the right granted to a Participant pursuant to Article 6.
2.34.“Subsidiary” shall mean any entity in which the Company, directly or indirectly, possesses fifty percent (50%) or more of the total combined voting power of all classes of its stock or similar equity interests.
2.35.“Substitute Awards” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.36.“Treasury Regulations” shall mean the federal income tax regulations promulgated under the Code.
ARTICLE 3
SHARES SUBJECT TO THE PLAN
3.1.Number of Shares. (a) Subject to adjustment as provided in Section 11.2, a total of 10,409,345 Shares shall be authorized for grant under the Plan (the “Plan Share Limitation”).
(b) If any Shares subject to an Award are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement ornon-issuance, again be available for Awards under the Plan. Awards that are required to be settled in cash will not reduce the Plan Share Limitation.
(c) If Shares issued upon vesting or settlement of an Award other than an Option or Stock Appreciation Right, or Shares owned by a Participant, are surrendered or tendered to the Company in payment of any taxes required to be withheld in respect of such Award, in each case, in accordance with the terms and conditions of the Plan and any applicable Award Agreement, such surrendered or tendered Shares shall again become available to be delivered pursuant to Awards under the Plan;provided,however, that in no event shall such Shares increase the ISO Limitation and, for the avoidance of doubt, no Shares that are surrendered or tendered to the Company in payment of the exercise price of an Option or any taxes required to withheld in respect of an Option or Stock Appreciation Right shall again become available to be delivered pursuant to Awards granted under the Plan.
(d) Substitute Awards shall not reduce the Shares authorized for issuance under the Plan or authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under apre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of suchpre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for issuance under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of thepre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors or employees, other service providers ornon-employee directors of any Affiliate prior to such acquisition or combination.
3.2.Character of Shares. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.
ARTICLE 4
ELIGIBILITY AND ADMINISTRATION
4.1.Eligibility. Any Employee or Director shall be eligible to be selected as a Participant.
4.2.Administration. (a) The Plan shall be administered by the Committee. The Board may remove from, add members to, or fill vacancies on, the Committee.
(b) The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares or dollar value to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder (including when and under what circumstances Awards shall vest, become exercisable or be paid or settled, subject to Section 4.4) and, if certain performance goals must be attained in order for an Award to vest or be settled or paid, establish such performance goals and determine in its sole discretion whether, and to what extent, such performance goals have been attained); (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) subject to Sections 8.1 and 9.1, determine whether dividends on the shares of Common Stock underlying any Award will accumulate; (xii) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards, (xiii) amend an outstanding Award or grant a replacement Award for an Award previously granted under the Plan if, in its sole discretion, the Committee determines that (A) the tax consequences of such Award to the Company or the Participant differ from those consequences that were expected to occur on the date the Award was granted or (B) clarifications or interpretations of, or changes to, tax law or regulations permit Awards to be granted that have more favorable tax consequences than initially anticipated; and (xiv) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.
(c) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, any stockholder and any Employee or any Affiliate. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. Notwithstanding the foregoing or anything else to the contrary in the Plan, any action or determination by the Committee specifically affecting or relating to an Award to a member of the Committee shall require the prior approval of the Board if the Award is not comparable and consistent with Awards to Directors who are not members of the Committee. The full Board may, in its sole discretion, at any time and from time to time, grant Awards to any Director or administer the Plan with respect to such Awards. In any such case, the Board shall have all the power and authority granted to the Committee herein.
(d) The Committee may delegate to a committee of one or morenon-employee directors of the Company or, to the extent permitted by law, to one or more officers or a committee of officers the right to grant Awards to Employees who are not Directors or officers of the Company and to cancel or suspend Awards to Employees who are not Directors or officers of the Company. Such delegation shall be subject to the requirements of Rule16b-3 of the Exchange Act and the rules of the New York Stock Exchange.
4.3.Award Limitations. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to any Director, together with any amounts paid to such Directors for annual and committee retainer fees, during any12-month period shall not exceed $700,000 (the “Director Award Limitations”). Subject to adjustment as provided in Section 11.2, no Participant shall be granted during any 12
month period, Awards with respect to more than 1,500,000 shares of Common Stock in the aggregate (the “Participant Award Limitations”).
4.4.Minimum Vesting Requirements. Notwithstanding any other provision of the Plan to the contrary, equity-based Awards granted under the Plan shall vest no earlier than the first anniversary of the date the Award is granted (excluding, for this purpose, any (A) Substitute Awards, (B) shares delivered in lieu of fully vested cash Awards and (C) Awards to non-employee directors that vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of shareholders (provided that such vesting period may not be less than 50 weeks after grant)); provided, that, the Committee may grant equity-based Awards without regard to the foregoing minimum vesting requirement with respect to a maximum of five percent (5%) of the available share reserve authorized for issuance under the Plan pursuant to Section 3.1 (subject to adjustment under Section 11.2); and, provided further, for the avoidance of doubt, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death or a Change in Control (in accordance with Section 10), in the terms of the Award or otherwise.
ARTICLE 5
OPTIONS
5.1.Grant of Options. Subject to the Limitations, Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option shall be subject to the terms and conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. The provisions of Options need not be the same with respect to each recipient.
5.2.Award Agreements. All Options granted pursuant to this Article 5 shall be evidenced by a written or electronic Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article 5 may hold more than one Option granted pursuant to the Plan at the same time. The Committee may provide in the Award Agreement relating to an Option that such Option will be automatically exercised, without further action required by the holder, on the last day of such Option’s exercise period if, on such day, the Fair Market Value of the Shares to be acquired pursuant to an exercise of such Option exceeds the aggregate option price payable to exercise such Option.
5.3.Option Price. Other than in connection with Substitute Awards, the option price per each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. Other than pursuant to Section 12.2, the Committee shall not be permitted to (a) lower the option price per Share of an Option after it is granted, (b) cancel an Option (at a time when the option price per Share exceeds the Fair Market Value of the underlying Shares) in exchange for another Award or cash (other than in connection with a “change of control” of the Company), and (c) take any other action with respect to an Option that may be treated as a repricing under the rules and regulations of the New York Stock Exchange.
5.4.Option Period. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted.
5.5.Exercise of Options. Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or by certified check or bank check or wire transfer of immediately
available funds, (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value), (c) with the consent of the Committee, by delivery of other consideration having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combination of any of the foregoing. In connection with a tender of previously acquired Shares pursuant to clause (b) above, the Committee, in its sole discretion, may permit the Participant to constructively exchange Shares already owned by the Participant in lieu of actually tendering such Shares to the Company, provided that adequate documentation concerning the ownership of the Shares to be constructively tendered is furnished in form satisfactory to the Committee. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance.
5.6.Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or may reserve the right so to provide after the time of grant.
5.7.Incentive Stock Options. With respect to the Options that may be granted by the Committee under the Plan, the Committee may grant Options intended to qualify as “incentive stock options” as defined in Section 422 of the Code, to any employee of the Company or any Affiliate, subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of “incentive stock options” under the Plan, the maximum aggregate number of Shares with respect to which “incentive stock options” may be granted under the Plan shall be 1,204,673 Shares (the “ISO Limitation”).
ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1.Grant and Exercise. Subject to the Limitations, the Committee may provide Stock Appreciation Rights either alone or in addition to other Awards granted under the Plan.
6.2.Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following:
(a) Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the base price of the right on the date of grant, as specified by the Committee in its sole discretion, which, except in the case of Substitute Awards or in connection with an adjustment provided in Section 11.2, shall not be less than the Fair Market Value of one Share on such date of grant of the right or the related Option, as the case may be. The Committee may provide in the Award Agreement relating to a Stock Appreciation Right that such Stock Appreciation Right will be automatically exercised, without further action required by the holder, on the last day of such Stock Appreciation Right’s exercise period if, on such day, the Fair Market Value of the Shares to which such Stock Appreciation Right relates exceeds the aggregate base price of such rights on their date of grant.
(b) Upon the exercise of a Stock Appreciation Right, the Committee shall determine in its sole discretion whether payment shall be made in cash, in whole Shares or other property, or any combination thereof.
(c) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient.
(d) The Committee may impose such other conditions or restrictions on the terms of exercise and the base price of any Stock Appreciation Right, as it shall deem appropriate. Notwithstanding the foregoing provisions of this Section 6.2(d), but subject to Section 11.2, a Stock Appreciation Right shall not have (i) a base price less than Fair Market Value on the date of grant, or (ii) a term of greater than ten years. In addition to the foregoing, other than pursuant to Section 11.2, the Committee shall not be permitted to (A) reduce the base price of any Stock Appreciation Right after it is granted, (B) cancel any Stock Appreciation Right (at a time when the base price per Share exceeds the Fair Market Value of the underlying Shares) in exchange for another Award or cash (other than in connection with a “change of control” of the Company), and (C) take any other action with respect to a Stock Appreciation Right that may be treated as a repricing under the rules and regulations of the New York Stock Exchange.
(e) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion.
ARTICLE 7
RESTRICTED STOCK AWARDS
7.1.Grants. Subject to the Limitations, Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “Restricted Stock Award”). A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “Restriction Period”). The provisions of Restricted Stock Awards need not be the same with respect to each recipient. The Committee has absolute discretion to determine whether any consideration (other than services) is to be received by the Company or any Affiliate as a condition precedent to the issuance of Restricted Stock.
7.2.Award Agreements. The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written or electronic Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan.
7.3.Rights of Holders of Restricted Stock. Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a stockholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a stockholder, including, except as set forth in this Section 7.3, the right to vote such Shares and the right to receive distributions made with respect to such Shares; however, subject to compliance with Code Section 409A, any dividends otherwise payable with respect to a Restricted Stock Award shall not be paid currently but shall be accumulated until the applicable Restricted Stock Award has vested. Furthermore, notwithstanding any provisions of the Plan to the contrary, in the case of Restricted Stock Awards that are subject to vesting based on the achievement of performance goals, a Participant shall not be entitled to receive payment for any dividends with respect to such Restricted Stock Awards unless, until and except to the extent that the applicable performance goals are achieved or are otherwise deemed to be satisfied. In any event, any Shares or any other property (other than cash) distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock.
ARTICLE 8
OTHER STOCK UNIT AWARDS
8.1.Stock and Administration. Subject to the Limitations, other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property (“Other Stock Unit Awards”) may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan, and such Other Stock Unit Awards shall also be available as a form of payment in the
settlement of other Awards granted under the Plan. Other Stock Unit Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees and Directors to whom and the time or times at which such Other Stock Unit Awards shall be made, the number of Shares to be granted pursuant to such Awards, and all other conditions of the Awards. The provisions of Other Stock Unit Awards need not be the same with respect to each recipient. Subject to compliance with Code Section 409A, any dividends otherwise payable with respect to an Other Stock Unit Award shall not be paid currently but shall be accumulated until the applicable Other Stock Unit Award has vested. Furthermore, notwithstanding any provision of the Plan to the contrary, in the case of Other Stock Unit Awards that are subject to vesting based on the achievement of performance goals, a Participant shall not be entitled to receive payment for any dividends with respect to such Other Stock Unit Awards unless, until and except to the extent that the applicable performance goals are achieved or are otherwise deemed to be satisfied.
8.2.Terms and Conditions. Shares (including securities convertible into Shares) subject to Awards granted under this Article 8 may be issued for no consideration or for such minimum consideration as may be required by applicable law. Shares (including securities convertible into Shares) purchased pursuant to a purchase right awarded under this Article 8 shall be purchased for such consideration as the Committee shall determine in its sole discretion.
ARTICLE 9
PERFORMANCE AWARDS
9.1.Terms of Performance Awards. Subject to the Limitations, Performance Awards may be issued hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. The provision of Performance Awards need not be the same with respect to each Participant. Except as provided in Article 10 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 9.2 or such other criteria as the Committee deems appropriate. The amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis. Notwithstanding any provision of the Plan to the contrary, a Participant shall not be entitled to receive payment for any dividends with respect to any Performance Awards unless, until and except to the extent that the performance goals applicable to such Performance Awards are achieved or are otherwise deemed to be satisfied.
9.2.Performance Goals. The performance goals to be determined by the Compensation Committee in establishing the terms of Performance Awards shall relate to the attainment of a specified level of performance of one or more performance criteria established by the Committee, which may include, but are not limited any of the following: sales (including same store or comparable sales); net sales; return on sales; cash flow (including operating cash flow and free cash flow); cash flow per Share (before or after dividends); cash flow return on investment; cash flow return on capital; pretax income before allocation of corporate overhead and bonus; earnings per share; net income; division, group or corporate financial goals or ratios including those measuring liquidity, activity, profitability or leverage; return on stockholders’ equity; total stockholder return; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; market share; customer satisfaction; customer growth; user time spent online; unique users; registered users; user frequency; user retention; web page views;
employee satisfaction; employee turnover; productivity or productivity ratios; strategic partnerships or transactions (includingin-licensing andout-licensing of intellectual property; establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Company’s products (including with group purchasing organizations, distributors and other vendors); supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products);co-development,co-marketing, profit sharing, joint venture or other similar arrangements); gross profits; gross or net profit margin; operating margin; gross profit growth;year-end cash; cash margin; revenue; net revenue; product revenue or system-wide revenue (including growth of such revenue measures); operating earnings; operating income; earnings before taxes; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passingpre-approval inspections (whether of the Company or the Company’s third-party manufacturer) and validation of manufacturing processes (whether the Company’s or the Company’s third-party manufacturer’s)); improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; general and administrative expense savings; inventory control; operating efficiencies; average inventory; inventory turnover; inventory shrinkage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities; debt levelyear-end cash position; book value; factoring transactions; competitive market metrics; timely completion of new product roll-outs; timely launch of new facilities (such as new store openings, gross or net); sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); royalty income; implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures, succession and hiring projects, reorganization and other corporate transactions, expansions of specific business operations and meeting divisional or project budgets; factoring transactions; and recruiting and maintaining personnel; debt reduction; reductions in costs, and/or return on invested capital of the Company or any Affiliate, division or business unit of the Company for or within which the Participant is primarily employed. Such performance goals also may be based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. When determining whether performance goals have been attained, the Committee will have the discretion to make adjustments to take into account extraordinary or nonrecurring items or events, or unusual nonrecurring gains or losses identified in the Company’s financial statements, and include or exclude the impact of an event or occurrence which the Committee determines should appropriately be excluded, including, but not limited to (a) restructurings, discontinued operations, extraordinary items, and other unusual ornon-recurring charges or infrequently occurring items, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, (c) a change in accounting standards required by generally accepted accounting principles, (d) asset write-downs, (e) litigation or claim judgments or settlements, (f) acquisitions or divestitures, (g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) tax law changes, (j) costs associated with refinancing or repurchase of bank loans or debt securities, (k) unbudgeted capital expenditures or (l) a business interruption event.
ARTICLE 10
CHANGE OF CONTROL PROVISIONS
10.1.Assumption Upon Change of Control. Unless otherwise provided in the Award Agreement evidencing the applicable Award, in the event of a Change of Control, if the successor company assumes or substitutes for an outstanding Award (or in which the Company is the ultimate parent corporation and continues the Award), then such Award shall be continued in accordance with its applicable terms and shall not be accelerated as described in Section 10.2. For the purposes of this Section 10.1, an Award shall be considered assumed or substituted for if, following the Change of Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change of Control, the consideration
(whether stock, cash or other securities or property) received in the transaction constituting a Change of Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the transaction constituting a Change of Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an Award, for each Share subject thereto, will be solely common stock of the successor company substantially equal in fair market value to the per share consideration received by holders of Shares in the transaction constituting a Change of Control. The determination of such substantial equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. Notwithstanding the foregoing, on such terms and conditions as may be set forth in an Award Agreement, in the event of a termination of a Participant’s employment in such successor company within a specified time period following such Change of Control, each Award held by such Participant at the time of the Change of Control shall be accelerated as described in Section 10.2. Notwithstanding the foregoing, no Award shall be assumed or substituted pursuant to this Section 10.1 if such action would cause an Award not otherwise “deferred compensation” within the meaning of Code Section 409A to become or create “deferred compensation” within the meaning of Code Section 409A.
10.2.Acceleration Upon Change of Control. Notwithstanding Section 10.1, and except as provided in the applicable Award Agreement, in the event of a Change of Control, unless provision is made in connection with the Change of Control for assumption or continuation of Awards previously granted or substitution of such Awards in accordance with Section 10.1, upon the Change of Control (a) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control shall immediately vest and become fully exercisable, (b) restrictions on Restricted Stock shall lapse and the Restricted Stock shall become free of all restrictions and limitations and become fully vested, (c) all Performance Awards shall be considered to be earned and payable (either in full orpro-rata based on the portion of Performance Period completed as of the date of the Change of Control and at the level determined by the Committee), and any deferral or other restriction shall lapse and such Performance Awards shall be immediately settled or distributed, (d) the restrictions and other conditions applicable to any Other Stock Unit Awards or any other Awards shall lapse, and such Other Stock Unit Awards or such other Awards shall become free of all restrictions, limitations or conditions and become fully vested, and (e) such other additional benefits as the Committee deems appropriate shall apply, subject in each case to any terms and conditions contained in the Award Agreement evidencing such Award. Notwithstanding any provision of this Section 10.2, unless otherwise provided in the applicable Award Agreement, if any amount payable pursuant to an Award constitutes deferred compensation within the meaning of Code Section 409A, in the event of a Change of Control that does not qualify as an event described in Code Section 409A(a)(2)(A)(v), such Award (and any other Awards that constitute deferred compensation that vested prior to the date of such Change of Control but are outstanding as of such date) shall not be settled until the earliest permissible payment event under Code Section 409A following such Change of Control. Notwithstanding any other provision of the Plan, the Committee, in its discretion, may determine that, upon the occurrence of a Change of Control of the Company, (i) each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and such Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the option or base price, as applicable, per Share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine and (ii) each Option and Stock Appreciation Right outstanding at such time with an option or base price, as applicable, per Share that exceeds the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control shall be canceled for no consideration.
ARTICLE 11
GENERALLY APPLICABLE PROVISIONS
11.1.Amendment and Modification of the Plan. The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the New York Stock Exchange or any rule or regulation of any stock exchange or quotation system on which Shares are listed or quoted; provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 11.2), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.3 or Section 6.2(d), (e) increase the maximum permissible term of any Option or Freestanding Stock Appreciation Right specified by Section 5.4 or Section 6.2(d), as applicable, or (f) amend the penultimate sentence of Section 11.3. In addition, no amendments to, or termination of, the Plan shall materially impair the rights of a Participant under any Award previously granted without such Participant’s consent, provided, however, that the Board may amend, modify or terminate the Plan without the consent of such Participant if it deems such action necessary to comply with applicable law, tax rules, stock exchange rules or accounting rules, provided such action affects the rights of all similarly situated Participants.
11.2.Adjustments. To prevent the dilution or enlargement of benefits or potential benefits intended to be made available under the Plan, in the event of any corporate transaction (including any Change of Control) or event such as a merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split,spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan, including each of the Plan Share Limitation and the ISO Limitation, and, in the aggregate or to any one Participant, in the number, class, kind and option or base price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. Notwithstanding the foregoing, no Award shall be adjusted, substituted or otherwise modified pursuant to this Section 11.2 if such action would cause an Award not otherwise “deferred compensation” within the meaning of Code Section 409A to become or create “deferred compensation” within the meaning of Code Section 409A.
11.3.Transferability of Awards. Except as provided below, no Award and no Shares subject to Awards described in Article 8 that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. Notwithstanding the foregoing, a Participant may assign or transfer an Award with the consent of the Committee (each transferee thereof, a “Permitted Assignee”) to the Participant’s spouse, domestic partner and/or children (and/or trusts and/or partnerships established for the benefit of the Participant’s spouse, domestic partner and/or children or in which the Participant is a beneficiary or partner); provided that such Permitted Assignee(s) shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. Notwithstanding the foregoing, in no event shall any Award (or any rights and obligations thereunder) be transferred to a third party in exchange for value unless such transfer is specifically approved by the Company’s stockholders. The Company shall cooperate
with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 11.3.
11.4.Termination of Employment. The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Affiliate (including as a Director), whether by reason of death, disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final.
ARTICLE 12
MISCELLANEOUS
12.1.Tax Withholding. The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “Payee”) net of any applicable Federal, State and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Affiliate shall have the right to withhold from wages or other amounts otherwise payable to such Payee such withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the employee’s minimum required tax withholding rate or such other rate that will not cause adverse accounting consequences and is permitted under applicable Internal Revenue Service withholding rules) otherwise deliverable in connection with the Award.
12.2.Right of Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Affiliate or affect any right that the Company or any Affiliate may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan.
12.3.Prospective Recipient. The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an agreement or other instrument evidencing the Award and delivered a copy thereof to the Company, and otherwise complied with the then applicable terms and conditions.
12.4.Stop Transfer Orders. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
12.5.Nature of Payments. All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Affiliate, division or business unit of the Company. Any income or gain realized pursuant to Awards under the Plan constitute a special incentive payment to the Participant and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any Affiliate except as may be determined by the Committee or by the Board or board of directors of the applicable Affiliate.
12.6.Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
12.7.Severability. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.
12.8.Construction. All references in the Plan to “Section”, “Sections”, or “Article” are intended to refer to the Section, Sections or Article, as the case may be, of the Plan. As used in the Plan, the words “include” and “including”, and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation”, and the word “or” shall not be deemed to be exclusive.
12.9.Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
12.10.Governing Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed accordingly.
12.11.Effective Date of Plan; Termination of Plan. The Plan, as amended, is adopted by the Board as of July 19, 2018, and will be effective upon approval by the Company stockholders at the 2018 annual meeting or such other meeting held to approve the Plan (the “Effective Date”). Awards may be granted under the Plan at any time and from time to time on or prior to the tenth anniversary of the effective date of the Plan, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired.
12.12.Foreign Employees. Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the judgment of the Committee, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions
on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country.
12.13.Captions. The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.
12.14.Code Section 409A. All provisions of the Plan shall be interpreted in a manner consistent with Code Section 409A, and the regulations and other guidance promulgated thereunder. Notwithstanding the preceding, the Company makes no representations concerning the tax consequences of participation in the Plan under Code Section 409A or any other federal, state, or local tax law. Tax consequences will depend, in part, upon the application of relevant tax law, including Code Section 409A, to the relevant facts and circumstances. Participant should consult a competent and independent tax advisor regarding the tax consequences of the Plan.
12.15.Clawback. Notwithstanding anything to the contrary contained herein, an Award Agreement may provide that an Award granted thereunder shall be cancelled if the Participant, without the consent of the Company, while employed by or providing services to the Company or any Affiliate or after termination of such employment or service, (a) violates anon-competition,non-solicitation ornon-disclosure covenant or agreement, (b) otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion or (c) to the extent applicable to the Participant, otherwise violates any policy adopted by the Company or any of its Affiliates relating to the recovery of compensation granted, paid, delivered, awarded or otherwise provided to any Participant by the Company or any of its Affiliates as such policy is in effect on the date of grant of the applicable Award or, to the extent necessary to address the requirements of applicable law (including Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10D of the Exchange Act, Section 304 of the Sarbanes-Oxley Act of 2002 or any other applicable law), as may be amended from time to time. The Committee may also provide in an Award Agreement that (i) a Participant will forfeit any gain realized on the vesting or exercise of such Award if the Participant engages in any activity referred to in the preceding sentence, or (ii) a Participant must repay the gain to the Company realized under a previously paid Performance Award if a financial restatement reduces the amount that would have been earned under such Performance Award.
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q000004 ENDORSEMENT_LINE SACKPACK MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,
MMMMMMMMMMMM MMMMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received by 11:59 p.m. EDT on September 24, 2019. Online Go to www.envisionreports.com/BNED or scan the QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.investorvote.com/BNED 1234 5678 9012 345 2019 Annual Meeting Proxy Card 1234 5678 9012 345 qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
| A | Proposals — THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES IN PROPOSAL 1, “FOR” | |||||||||||||||||||||||
| PROPOSALS 2, 3 and 4. | ||||||||||||||||||||||||
| 1. | Election of Directors: | For | Withhold | For | Withhold | For | Withhold |  | ||||||||||||||||
| 01 - Emily C. Chiu | ☐ | ☐ | 02 - Daniel A. DeMatteo | ☐ | ☐ | 03 - David G. Golden | ☐ | ☐ | ||||||||||||||||
| 04 - Michael P. Huseby | ☐ | ☐ | 05 - John R. Ryan | ☐ | ☐ | 06 - Jerry Sue Thornton | ☐ | ☐ | ||||||||||||||||
| 07 - David A. Wilson | ☐ | ☐ | ||||||||||||||||||||||
| For Against Abstain | For | Against | Abstain | |||||||||||||||||||||
| 2. | To approve the Company’s Amended and Restated Equity Incentive Plan to increase the number of shares of common stock authorized to be issued under the plan and to amend certain provisions related to performance-based awards in connection with amendments to Section 162(m) of the Internal Revenue Code. | ☐ ☐ ☐ | 3. | Advisory vote on executive compensation. | ☐ | ☐ | ☐ | |||||||||||||||||
| For Against Abstain | ||||||||||||||||||||||||
| 4. | Ratification of the Appointment of Ernst & Young LLP, as the independent registered public accountants for the Company for the fiscal year ending April 27, 2019.
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain 01 - Emily C. Chiu 02 - Daniel A. DeMatteo 03 - David G. Golden 04 - Michael P. Huseby 05 - John R. Ryan 06 - Jerry Sue Thornton 07 - David A. Wilson For Against Abstain For Against Abstain 2. Approval, on an advisory basis, of the compensation of the 3. The ratification of the appointment of Ernst & Young LLP as the Company’s named executive officers as disclosed in the independent registered public accountants for the Company’s Proxy Statement. fiscal year ending May 2, 2020. B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C ON BOTH SIDES OF THIS CARD.
02W8GB1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMM 72BM 427164 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 033XEF
PLEASE VOTE TODAY!
Regardless2019 Annual Meeting Admission Ticket 2019 Annual Meeting of whether you plan to attendBarnes & Noble Education Stockholders September 25, 2019, 9:00 am EDT Embassy Suites by Hilton 250 Connell Drive, Berkeley Heights, NJ 07922 Upon arrival, please present this admission ticket and photo identification at the registration desk. Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders,
you can be sure your shares are representedStockholders. The material is available at: www.envisionreports.com/BNED Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at the Annual Meeting by promptly voting.
SEE REVERSE SIDE
FOR THREE EASY WAYS TO VOTE.
qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,www.investorvote.com/BNED qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barnes & Noble Education, Inc. + Notice of 2019 Annual Meeting of Stockholders Proxy Solicited by Board of Directors for Annual Meeting — September 25, 2019 Mr. Michael P. Huseby, Mr. Barry BroverThomas D. Donohue, and Mr. Michael C. Miller, and eachor any of them, individually, as his or her true and lawful agents and proxies,each with fullthe power of substitution, in each, andare hereby authorizes themauthorized to represent and to vote as designated on the reverse side hereof, all the shares of Common Stock of Barnes & Noble Education, Inc. that the undersigned, is entitled to votewith all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Barnes & Noble Education to be held at the Embassy Suites by Hilton, 250 Connell Dr., Berkeley Heights, NJ 07922, on September 25, 2018,2019 or at 9:00 a.m., Eastern Time, and any adjournmentspostponement or postponements thereof, with the same effect as if the undersigned were personally present and voting such shares, on all matters as further described in the Proxy Statement or that may otherwise come before the Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement, each dated August 21, 2018.
The sharesadjournment thereof. Shares represented by this Proxyproxy will be voted in accordance withby the specification made onstockholder. If no such directions are indicated, the other side.If this Proxy is signed but no specification is made,Proxies will have authority to vote FOR the shares represented by this Proxy will be voted “FOR” eachelection of the Board of Directors’ nominees, “FOR” ProposalsDirectors and FOR items 2 3 and 4.Mr. Michael P. Huseby, Mr. Barry Brover and Mr. Michael C. Miller, and each of them individually, in3. In their discretion, and judgment,the Proxies are authorized to vote upon anysuch other matters thatbusiness as may properly come before the Annual Meeting. In the event that any of the Board of Directors’ nominees named on the other side of this Proxy are unable to serve or for good cause will not serve, this Proxy confers discretionary authority to Mr. Michael P. Huseby, Mr. Barry Brover and Mr. Michael C. Miller, and each of them individually, to vote as recommended by the Board of Directors with respect to the election of any person to replace such nominee.
By executing this Proxy, the undersigned hereby revokes all prior proxies that the undersigned has given with respect to the Annual Meeting and any adjournment or postponement thereof.
(Continued, andmeeting. (Items to be signed and datedvoted appear on the reverse side.)side) C Non-Voting Items Change of Address — Please print new address below. Comments — Please print your comments below. +
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q PLEASE FOLD ALONG THE PERFORATION,Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. 2019 Annual Meeting Proxy Card qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3. 1. Election of Directors: + For Against Abstain For Against Abstain For Against Abstain 01 - Emily C. Chiu 02 - Daniel A. DeMatteo 03 - David G. Golden 04 - Michael P. Huseby 05 - John R. Ryan 06 - Jerry Sue Thornton 07 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - David A. Wilson For Against Abstain For Against Abstain 2. Approval, on an advisory basis, of the compensation of the 3. The ratification of the appointment of Ernst & Young LLP as the Company’s named executive officers as disclosed in the independent registered public accountants for the Company’s Proxy Statement. fiscal year ending May 2, 2020. B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. 72BM 427164 + 033XFE
| A | Proposals — THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES IN PROPOSAL 1, “FOR” PROPOSALS | |||||||||||||||||||||
| 2, 3 and 4. | ||||||||||||||||||||||
| 1. | Election of Directors: | For | Withhold | For | Withhold | For | Withhold | | ||||||||||||||
| 01 - Emily C. Chiu | ☐ | ☐ | 02 - Daniel A. DeMatteo | ☐ | ☐ | 03 - David G. Golden | ☐ | ☐ | ||||||||||||||
| 04 - Michael P. Huseby | ☐ | ☐ | 05 - John R. Ryan | ☐ | ☐ | 06 - Jerry Sue Thornton | ☐ | ☐ | ||||||||||||||
| 07 - David A. Wilson | ☐
| ☐
| For Against Abstain | For | Against | Abstain | ||||||||||||||||
| 2. | To approve the Company’s Amended and Restated Equity Incentive Plan to increase the number of shares of common stock authorized to be issued under the plan and to amend certain provisions related to performance-based awards in connection with amendments to Section 162(m) of the Internal Revenue Code. | ☐ ☐ ☐ | 3. | Advisory vote on executive compensation. | ☐ | ☐ | ☐ | |||||||||||||||
| For Against Abstain | ||||||||||||||||||||||
| 4. | Ratification of the Appointment of Ernst & Young LLP, as the independent registered public accountants for the Company for the fiscal year ending April 27, 2019.
| ☐ ☐ ☐ | ||||||||||||||||||||
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02W8HB
PLEASE VOTE TODAY!
Regardless of whether you plan to attend the Annual Meeting of Stockholders,
you can be sure your shares are represented at the Annual Meeting by promptly voting.
q PLEASE FOLD ALONG THE PERFORATION,qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barnes & Noble Education, Inc. Notice of 2019 Annual Meeting of Stockholders Proxy Solicited by Board of Directors for Annual Meeting — September 25, 2019 Mr. Michael P. Huseby, Mr. Barry BroverThomas D. Donohue, and Mr. Michael C. Miller, and eachor any of them, individually, as his or her true and lawful agents and proxies,each with fullthe power of substitution, in each, andare hereby authorizes themauthorized to represent and to vote as designated on the reverse side hereof, all the shares of Common Stock of Barnes & Noble Education, Inc. that the undersigned, is entitled to votewith all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Barnes & Noble Education to be held at the Embassy Suites by Hilton, 250 Connell Dr., Berkeley Heights, NJ 07922, on September 25, 2018,2019 or at 9:00 a.m., Eastern Time, and any adjournmentspostponement or postponements thereof, with the same effect as if the undersigned were personally present and voting such shares, on all matters as further described in the Proxy Statement or that may otherwise come before the Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement, each dated August 21, 2018.
The sharesadjournment thereof. Shares represented by this Proxyproxy will be voted in accordance withby the specification made onstockholder. If no such directions are indicated, the other side.If this Proxy is signed but no specification is made,Proxies will have authority to vote FOR theshares represented by this Proxy will be voted “FOR” each election of the Board of Directors’ nominees, “FOR” ProposalsDirectors and FOR items 2 3 and 4. Mr. Michael P. Huseby, Mr. Barry Brover and Mr. Michael C. Miller, and each of them individually, in3. In their discretion, and judgment,the Proxies are authorized to vote upon anysuch other matters thatbusiness as may properly come before the Annual Meeting. In the event that any of the Board of Directors’ nominees named on the other side of this Proxy are unable to serve or for good cause will not serve, this Proxy confers discretionary authority to Mr. Michael P. Huseby, Mr. Barry Brover and Mr. Michael C. Miller, and each of them individually, to vote as recommended by the Board of Directors with respect to the election of any person to replace such nominee.
By executing this Proxy, the undersigned hereby revokes all prior proxies that the undersigned has given with respect to the Annual Meeting and any adjournment or postponement thereof.
(Continued, andmeeting. (Items to be signed and datedvoted appear on the reverse side.)side)
