Barnes and Noble 2007 Annual Report Download - page 39

moved, before the District Court, to certify a new class.
On June 25, 2007, the District Court entered an order
terminating the settlement agreement.
While a new settlement may be reached, in the event that
one is not, the Company intends to vigorously defend
this lawsuit.
Barnesandnoble.com LLC v. Yee, et al.
On December 21, 2007, Barnes & Noble.com fi led a
complaint in the United States District Court for the
Eastern District of California for declaratory and injunc-
tive relief against the members of the California Board of
Equalization (the BOE) and others. The complaint seeks
a declaration that the actions of the State of California
in seeking to impose California sales and use tax on the
sales of Barnes & Noble.com for the period of May 1,
2000 through March 31, 2004 in the amount of approxi-
mately $17,000, plus interest and penalties, violate
the Commerce Clause and the First Amendment of the
United States Constitution, as well as the California
Administrative Procedures Act. This assessment is also
the subject of an administrative protest fi led by Barnes
& Noble.com. Barnes & Noble.com is also challenging
another earlier assessment by the BOE in the amount of
approximately $700, plus interest and penalties, for the
period of November 15, 1999 through January 31, 2000.
This earlier assessment was struck down by a decision
of the California Superior Court on September 7, 2007
in favor of Barnes & Noble.com, and the BOE fi led an
appeal which is still pending.
CERTAIN RELATIONSHIPS AND RELATED 16.
TRANSACTIONS
The Company believes that the transactions and agree-
ments discussed below (including renewals of any
existing agreements) between the Company and related
third parties are at least as favorable to the Company as
could have been obtained from unrelated parties. The
Audit Committee of the Board of Directors is designated
to approve in advance any new proposed transaction or
agreement with related parties and utilizes procedures
in evaluating the terms and provisions of such pro-
posed transaction or agreements as are appropriate in
accordance with the fi duciary duties of directors under
Delaware law.
The Company has leases for two locations for its corporate
offi ces with related parties: the fi rst location is leased
from an entity in which Leonard Riggio has a majority
interest and expires in 2013; the second location is leased
from an entity in which Leonard Riggio has a minority
interest and expires in 2016. The space was rented at
an aggregate annual rent including real estate taxes of
approximately $4,603, $4,559 and $4,532 in fi scal years
2007, 2006 and 2005, respectively. Rent per square foot is
currently estimated to be at or below market.
The Company leases an offi ce/warehouse from a
partnership in which Leonard Riggio has a 50% inter-
est, pursuant to a lease expiring in 2023. The space was
rented at an annual rent of $738, $727 and $760 in fi scal
years 2007, 2006, 2005, respectively. Net of subtenant
income, the Company paid $258, $260 and $312 in fi scal
years 2007, 2006 and 2005, respectively.
The Company leases retail space in a building in which
Barnes & Noble College Booksellers, Inc. (B&N College),
a company owned by Leonard Riggio, subleases space
from the Company, pursuant to a sublease expiring in
2020. Pursuant to such sublease, the Company charged
B&N College $840, $884 and $872 for such subleased
space and other operating costs incurred on its behalf
during fi scal years 2007, 2006 and 2005, respectively.
The amount paid by B&N College to the Company
approximates the cost per square foot paid by the
Company to its unaffi liated third-party landlord.
The Company purchases new and used textbooks at
market prices directly from MBS Textbook Exchange,
Inc. (MBS), a corporation majority-owned by Leonard
Riggio. Total purchases were $7,539, $6,945 and $19,129
for fi scal years 2007, 2006 and 2005, respectively. MBS
distributes certain proprietary products on behalf of the
Company for which the Company is paid a commission.
Total commissions received were $419, $362 and $321
for fi scal years 2007, 2006 and 2005, respectively.
In fi scal 2006, MBS began selling used books as part
of the Barnes & Noble.com dealer network. MBS pays
Barnes & Noble.com the same commission as other
dealers in the Barnes & Noble dealer network. Barnes &
Noble.com earned a commission of $1,598 and $1,626
on the MBS used book sales in fi scal 2007 and 2006,
respectively. In addition, Barnes & Noble.com maintains
a link on its website which is hosted by MBS and through
which Barnes & Noble.com customers are able to sell
used books directly to MBS. Barnes & Noble.com is paid
a commission based on the price paid by MBS to the
moved, before the District Court, to certify a new class.
On June 25, 2007, the District Court entered an order
terminating the settlement agreement.
While a new settlement may be reached, in the event that
one is not, the Company intends to vigorously defend
this lawsuit.
Barnesandnoble.com LLC v. Yee, et al.
On December 21, 2007, Barnes & Noble.com filed a
complaint in the United States District Court for the
Eastern District of California for declaratory and injunc-
tive relief against the members of the California Board of
Equalization (the BOE) and others. The complaint seeks
a declaration that the actions of the State of California
in seeking to impose California sales and use tax on the
sales of Barnes & Noble.com for the period of May 1,
2000 through March 31, 2004 in the amount of approxi-
mately $17,000, plus interest and penalties, violate
the Commerce Clause and the First Amendment of the
United States Constitution, as well as the California
Administrative Procedures Act. This assessment is also
the subject of an administrative protest filed by Barnes
& Noble.com. Barnes & Noble.com is also challenging
another earlier assessment by the BOE in the amount of
approximately $700, plus interest and penalties, for the
period of November 15, 1999 through January 31, 2000.
This earlier assessment was struck down by a decision
of the California Superior Court on September 7, 2007
in favor of Barnes & Noble.com, and the BOE filed an
appeal which is still pending.
CERTAIN RELATIONSHIPS AND RELATED 16.
TRANSACTIONS
The Company believes that the transactions and agree-
ments discussed below (including renewals of any
existing agreements) between the Company and related
third parties are at least as favorable to the Company as
could have been obtained from unrelated parties. The
Audit Committee of the Board of Directors is designated
to approve in advance any new proposed transaction or
agreement with related parties and utilizes procedures
in evaluating the terms and provisions of such pro-
posed transaction or agreements as are appropriate in
accordance with the fiduciary duties of directors under
Delaware law.
The Company has leases for two locations for its corporate
offices with related parties: the first location is leased
from an entity in which Leonard Riggio has a majority
interest and expires in 2013; the second location is leased
from an entity in which Leonard Riggio has a minority
interest and expires in 2016. The space was rented at
an aggregate annual rent including real estate taxes of
approximately $4,603, $4,559 and $4,532 in fiscal years
2007, 2006 and 2005, respectively. Rent per square foot is
currently estimated to be at or below market.
The Company leases an office/warehouse from a
partnership in which Leonard Riggio has a 50% interest,
pursuant to a lease expiring in 2023. The space was
rented at an annual rent of $738, $727 and $760 in fiscal
years 2007, 2006 and 2005, respectively. Net of subten-
ant income, the Company paid $258, $260 and $312 in
fiscal years 2007, 2006 and 2005, respectively.
The Company leases retail space in a building in which
Barnes & Noble College Booksellers, Inc. (B&N College),
a company owned by Leonard Riggio, subleases space
from the Company, pursuant to a sublease expiring in
2020. Pursuant to such sublease, the Company charged
B&N College $840, $884 and $872 for such subleased
space and other operating costs incurred on its behalf
during fiscal years 2007, 2006 and 2005, respectively.
The amount paid by B&N College to the Company
approximates the cost per square foot paid by the
Company to its unaffiliated third-party landlord.
The Company purchases new and used textbooks at
market prices directly from MBS Textbook Exchange,
Inc. (MBS), a corporation majority-owned by Leonard
Riggio. Total purchases were $7,539, $6,945 and $19,129
for fiscal years 2007, 2006 and 2005, respectively. MBS
distributes certain proprietary products on behalf of the
Company for which the Company is paid a commission.
Total commissions received were $419, $362 and $321
for fiscal years 2007, 2006 and 2005, respectively.
In fiscal 2006, MBS began selling used books as part
of the Barnes & Noble.com dealer network. MBS pays
Barnes & Noble.com the same commission as other
dealers in the Barnes & Noble dealer network. Barnes &
Noble.com earned a commission of $1,598 and $1,626
on the MBS used book sales in fiscal 2007 and 2006,
respectively. In addition, Barnes & Noble.com maintains
a link on its website which is hosted by MBS and through
which Barnes & Noble.com customers are able to sell
used books directly to MBS. Barnes & Noble.com is paid
a commission based on the price paid by MBS to the
37
200 Annual Report7