2004 EXECUTIVE PERFORMANCE PLAN



 





EXHIBIT 10.2




BARNES & NOBLE, INC.

2004 EXECUTIVE PERFORMANCE PLAN




     BARNES & NOBLE, INC., a corporation existing under the laws of the State
of Delaware (the “Company”), hereby establishes and adopts the following 2004
Executive Performance 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 stimulate the efforts of such individuals to
contribute to the continued success and growth of the Company’s business; and



     WHEREAS, to attain these ends, the Company has formulated the Plan
embodied herein to authorize the awarding of bonuses that are intended to
qualify as “performance based compensation” within the meaning of Section
162(m) of the Code.



     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. Purposes. The purposes of the Plan are to provide personal incentive
and financial rewards to senior management who, because of the extent of their
responsibilities, can and do make significant contributions to the success of
the Company by their ability, industry, loyalty and exceptional services.
Making such senior management participants in that success will advance the
interests of the Company and its stockholders and will assist the Company in
attracting and retaining such senior management.



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 amount granted to a Participant under the Plan.



     2.3. “Board” shall mean the board of directors of the Company.



     2.4. “Certification” shall have the meaning set forth in Section 4.2.



 









 





     2.5. “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.



     2.6. “Committee” shall mean the Compensation Committee of the Board (or
such other committee designated by the Compensation Committee of the Board),
consisting of no fewer than two directors, each of whom is (i) a “Non-Employee
Director” within the meaning of Rule 16b-3 (or any successor rule) of the
Exchange Act, (ii) an “outside director” within the meaning of Section
162(m)(4)(C)(i) of the Code, and (iii) an “independent director” for purpose of
the rules and regulations of the New York Stock Exchange.



     2.7. “Company” has the meaning set forth in the introductory paragraph of
the Plan.



     2.8. “Covered Employee” shall mean any executive officer of the Company or
of any Subsidiary who is, or is or is likely to be, a “covered employee” within
the meaning of Section 162(m)(3) of the Code, or any successor provision
thereto.



     2.9. “Eligible Participant” shall have the meaning set forth in Section
3.1.



     2.10. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.



     2.11. “Incentive Plan” shall mean the Company’s 2004 Incentive Plan, as
the same may be amended, modified, supplemented, superceded or replaced from
time to time, and any other equity compensation plan of the Company adopted
after the date hereof.



     2.12. “Incentive Pool” shall mean 5% of the Company’s Operating Income, on
a consolidated basis, for a given Performance Period.



     2.13. “Incentive Pool Allocation” shall mean the percentage of the
Incentive Pool allocated to each Participant by the Committee for a given
Performance Period.



     2.14. “Maximum Payment” shall have the meaning set forth in Section 4.3.



     2.15. “Named Executive Officers” shall have the meaning given to such term
in Item 402(a)(3) of Regulation S-K of the rules and regulations of the
Securities and Exchange Commission, or any successor rule or regulation
thereto.



     2.16. “Operating Income” shall mean the gross profit minus operating
expenses of the Company and its Subsidiaries on a consolidated basis, without
regard to items relating to (a) restructurings, discontinued operations,
extraordinary items, and other unusual or non-recurring charges, (b) an event
either not directly related to the operations of the Company or not within the
reasonable control of the Company’s management, or (c) changes in accounting
standards required by generally accepted accounting principles, in each case as
determined in accordance with generally accepted accounting principles and as
reported on the Company’s consolidated statement of operations, notes to the
consolidated financial statements or management’s discussion and analysis with
respect to the consolidated financial statements, for the applicable
Performance Period.



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     2.17. “Participant” shall mean an Eligible Participant selected by the
Committee pursuant to Section 4.1 to participate in this Plan with respect to
any given Performance Period.



     2.18. “Performance Period” shall mean the Company’s fiscal year or any
other period during a fiscal year that the Committee, in its sole discretion,
may determine.



     2.19. “Proportionate Maximum Payment” shall have the meaning set forth in
Section 4.5.



     2.20. “Shares” shall mean the shares of common stock of the Company, par
value $0.001 per share.



     2.21. “Subsidiary” shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Award, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain, excluding any such Subsidiary whose securities are
publicly traded.



ARTICLE 3




ELIGIBILITY AND ADMINISTRATION




     3.1. Eligibility. The individuals entitled to participate in the Plan
shall be the Company’s Chief Executive Officer, any other Covered Employee and
any other officer of the Company or any Subsidiary selected by the Committee to
participate in the Plan (each, an “Eligible Participant”).



     3.2. Administration. (a) The Plan shall be administered by the Committee.
The Board may remove from, add members to, or fill vacancies on, the
Committee, consistent with the qualifying criteria set forth in Section 2.6.



               (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 Participants to whom Awards may from
time to time be granted hereunder; (ii) determine the allocation and terms of
an Award and whether an Award shall be paid in cash or Shares, not inconsistent
with the provisions of the Plan; (iii) determine the time when Awards will be
made and the Performance Period to which they relate; (iv) establish or affirm
the Incentive Pool formula in respect of Performance Periods and to certify as
to the amount of the Incentive Pool in respect of Performance Periods; (v)
interpret and administer the Plan; (vi) correct any defect, supply any omission
or reconcile any inconsistency in the Plan in the manner and to the extent that
the Committee shall deem desirable to carry it into effect; (vii) establish
such rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and (viii) make any other
determination and take any other action that the Committee deems necessary or
desirable for administration of the Plan.



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               (c) Decisions of the Committee shall be final, conclusive and binding on
all persons or entities, including the Company and any Participant. A majority
of the members of the Committee may determine its actions and fix the time and
place of its meetings.



               (d) To the extent not inconsistent with the applicable provisions of
Section 162(m) of the Code, the Committee may delegate to one or more officers
of the Company or any of its Subsidiaries the authority to take actions on its
behalf pursuant to the Plan.



ARTICLE 4




AWARDS




     4.1. Performance Period. Not later than 90 days after the commencement of
each fiscal year of the Company, the Committee shall, in writing, designate one
or more Performance Periods for such fiscal year, provided that any Performance
Period of less than one year shall be designated no later than the date on
which 25% of such Performance Period has lapsed, and shall (i) determine the
Participants for such Performance Period(s), which shall
be, except as otherwise determined by the Committee, each Eligible Participant
that shall be a Named Executive Officer in the Company’s annual proxy statement
following the conclusion of the applicable Performance Period(s), (ii) affirm
the performance goal as the Incentive Pool for such Performance Period(s), and
(iii) assign to each Participant such Participant’s Incentive Pool Allocation
for such Performance Period(s), provided that no Participant’s Incentive Pool
Allocation shall exceed 40% of the Incentive Pool for any Performance Period.
The aggregate amount of all Awards under the Plan for any Performance Period
shall not exceed 100% of the Incentive Pool for such Performance Period.



     4.2. Certification. As soon as reasonably practicable following the
conclusion of each Performance Period, the Committee shall certify, in writing,
the size of the Incentive Pool for each such Performance Period (the
“Certification”).



     4.3. Payment of Awards. Following each Certification, the Committee shall
determine the maximum Award payable to each Participant (such amount, the
“Maximum Payment”) based on the size of the Incentive Pool and each
Participant’s Incentive Pool Allocation. The amount of the Award actually paid
to a Participant shall be any amount equal to or less than the Maximum Payment
payable to each such Participant (including zero), as determined by the
Committee in its sole discretion. The actual amount of the Award determined by
the Committee for a Performance Period shall, subject to Section 4.4, be paid
to each Participant at such time as determined by the Committee in its sole
discretion following the end of the applicable Performance Period. Awards
shall be paid in cash or, in the Committee’s sole discretion, in Shares
obtained from any other Incentive Plan or any combination thereof.
Notwithstanding anything to the contrary contained herein, the maximum
aggregate value of any Award(s) to any Participant with respect to any
Performance Period shall not exceed 2% of the Company’s Operating Income for
such Performance Period.



     4.4. Deferral. With the prior written consent of the Committee, a
Participant shall be entitled to elect to defer the payment of any Award
payable to such Participant under the Plan.



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     4.5. Termination of Employment. If a Participant dies or retires, or if
the Participant’s employment otherwise ceases during a Performance Period
(except for termination by the Company for cause, as determined by the
Committee in its sole discretion), the Maximum Payment payable to such a
Participant shall be proportionately reduced based on the period of actual
employment during the applicable Performance Period (such amount, the
“Proportionate Maximum Payment”), and the amount of the Award actually paid to
such a Participant shall be any amount equal to or less than the Proportionate
Maximum Amount (including zero), as determined by the Committee in its sole
discretion.



ARTICLE 5




GENERALLY APPLICABLE PROVISIONS




     5.1. 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 Section 162(m) of the Code.



     5.2. Section 162(m) of the Code. Unless otherwise determined by the
Committee, the provisions of this Plan shall be administered and interpreted in
accordance with Section 162(m) of the Code to ensure the deductibility by the
Company or its Subsidiaries of the payment of Awards.



     5.3. Tax Withholding. The Company or any Subsidiary shall have the right
to make all payments or distributions pursuant to the Plan to a Participant,
net of any applicable Federal, State and local taxes required to be paid or
withheld. The Company or any Subsidiary shall have the right to withhold from
wages, Awards or other amounts otherwise payable to such Participant such
withholding taxes as may be required by law, or to otherwise require the
Participant to pay such withholding taxes. If the Participant shall fail to
make such tax payments as are required, the Company or any Subsidiary 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 Participant or to take such other
action as may be necessary to satisfy such withholding obligations.



     5.4. Right of Discharge Reserved; Claims to Awards. Nothing in the Plan
nor the grant of an Award hereunder shall confer upon any Participant the right
to continue in the employment of the Company or any Subsidiary or affect any
right that the Company or any Subsidiary may have to terminate the employment
of (or to demote or to exclude from future Awards under the Plan) any such
Participant at any time for any reason. No Participant shall have any claim to
be granted any Award under the Plan, and there is no obligation for uniformity
of treatment of Participants under the Plan.



     5.5. 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.



     5.6. 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



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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.



     5.7. 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.”



     5.8. 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 or any Subsidiary.



     5.9. 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.



     5.10. Effective Date of Plan. The Plan shall be effective on the date of
the approval of the Plan by the holders of a majority of the shares entitled to
vote at a duly constituted meeting of the stockholders of the Company. The
Plan shall be null and void and of no effect if the foregoing condition is not
fulfilled.



     5.11. 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.




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