<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BOOKS-A-MILLION, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
<PAGE> 2
April 27, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Books-A-Million, Inc., which will be held at 10:00 a.m. on
Thursday, June 4, 1998 at The Wynfrey Hotel, 1000 Riverchase Galleria,
Birmingham, Alabama 35244.
The principal business of the meeting will be (i) to elect a class of
directors to serve a three-year term expiring in 2001, (ii) to approve an
amendment and restatement of the Company's Stock Option Plan that will increase
the number of shares of Common Stock reserved for grants of options under the
plan from 1,800,000 to 3,300,000 and simplify administration of the Stock Option
Plan in accordance with revisions to Section 16 of the Securities Exchange Act
of 1934, and (iii) to ratify the appointment by the Audit Committee of the Board
of Directors of Arthur Andersen LLP to serve as the Company's independent
auditor for the fiscal year ending January 30, 1999. During the meeting, we will
also review the results of the past fiscal year and report on significant
aspects of our operations during the first quarter of fiscal 1999.
Whether or not you plan to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy card in the postage-prepaid envelope
provided so that your shares will be voted at the meeting. If you decide to
attend the meeting, you may, of course, revoke your proxy and personally cast
your votes.
Sincerely yours,
/s/ Clyde B. Anderson
Clyde B. Anderson
Chief Executive Officer and President
<PAGE> 3
BOOKS-A-MILLION, INC.
402 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Books-A-Million, Inc., which will be held at 10:00 a.m. on
Thursday, June 4, 1998 at The Wynfrey Hotel, 1000 Riverchase Galleria,
Birmingham, Alabama 35244. The meeting is called for the following purposes:
(1) To elect a class of directors for a three-year term expiring
in 2001;
(2) To approve an amendment and restatement of the Company's Stock
Option Plan that will increase the number of shares of Common
Stock reserved for grants of options under the plan from
1,800,000 to 3,300,000 and simplify administration of the
Stock Option Plan in accordance with revisions to Section 16
of the Securities Exchange Act of 1934;
(3) To ratify the appointment by the Audit Committee of the Board
of Directors of Arthur Andersen LLP to serve as the Company's
independent auditor for the fiscal year ending January 30,
1999; and
(4) To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on April 20,
1998 as the record date for the purpose of determining the stockholders who are
entitled to notice of and to vote at the meeting and any adjournment or
postponement thereof.
By Order of the Board of Directors,
/s/ Cynthia W. Clark
Cynthia W. Clark
Secretary
April 27, 1998
Birmingham, Alabama
IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD SO THAT YOUR SHARES WILL
BE REPRESENTED.
<PAGE> 4
BOOKS-A-MILLION, INC.
402 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the Board of
Directors of Books-A-Million, Inc. (the "Company") in connection with the
solicitation of proxies for use at the Annual Meeting of Stockholders of the
Company to be held at 10:00 a.m. on Thursday, June 4, 1998 at The Wynfrey Hotel,
1000 Riverchase Galleria, Birmingham, Alabama 35244 and at any adjournments or
postponements thereof (the "Annual Meeting"). This Proxy Statement and the
enclosed proxy card will be first mailed on or about April 27, 1998 to the
Company's stockholders of record on the Record Date, as defined below.
THE BOARD OF DIRECTORS URGES YOU TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE PROVIDED.
SHARES ENTITLED TO VOTE
Proxies will be voted as specified by the stockholder or stockholders
granting the proxy. Unless contrary instructions are specified, if the enclosed
proxy card is executed and returned (and not revoked) prior to the Annual
Meeting, the shares of common stock, $.01 par value per share (the "Common
Stock"), of the Company represented thereby will be voted (i) FOR the election
as directors of the nominees listed in this Proxy Statement, (ii) FOR an
amendment and restatement to the Company's Stock Option Plan (the "Stock Option
Plan") that will increase the number of shares of Common Stock reserved for
grants of options under the plan from 1,800,000 to 3,300,000 and simplify
administration of the Stock Option Plan in accordance with revisions to Section
16 of the Securities Exchange Act of 1934 (the "Exchange Act"), and (iii) FOR
ratification of the appointment by the Audit Committee of the Board of Directors
of Arthur Andersen LLP to serve as the Company's independent auditor for the
Company's fiscal year ending January 30, 1999 ("fiscal 1999"). The submission of
a signed proxy will not affect a stockholder's right to attend and to vote in
person at the Annual Meeting. A stockholder who executes a proxy may revoke it
at any time before it is voted by filing with the Secretary of the Company
either a written revocation or an executed proxy bearing a later date or by
attending and voting in person at the Annual Meeting.
Only holders of record of Common Stock as of the close of business on
April 20, 1998 (the "Record Date") will be entitled to vote at the Annual
Meeting. As of the close of business on the Record Date, there were 17,443,875
shares of Common Stock (the "Shares") outstanding. Holders of Shares authorized
to vote are entitled to cast one vote per Share on all matters. The holders of a
majority of the Shares entitled to vote must be present or represented by proxy
to constitute a quorum. Shares as to which authority to vote is withheld and
abstentions are counted in determining whether a quorum exists.
Under Delaware law, directors are elected by the affirmative vote, in
person or by proxy, of a plurality of the shares entitled to vote in the
election at a meeting at which a quorum is present.
<PAGE> 5
Only votes actually cast will be counted for the purpose of determining whether
a particular nominee received more votes than the persons, if any, nominated for
the same seat on the Board of Directors.
Approval of the proposals to amend and restate the Company's Stock
Option Plan, to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditor for fiscal 1999, and any other matter that may properly come
before the Annual Meeting, requires the affirmative vote of a majority of the
Shares represented in person or by proxy and entitled to vote on such matter at
a meeting at which a quorum is present. Abstentions will be counted in
determining the minimum number of votes required for approval and will,
therefore, have the effect of votes against such proposal. Broker non-votes,
meaning those Shares held by a broker or nominee as to which such broker or
nominee does not have discretionary voting power, will not be counted as votes
for or against approval of such matters.
With respect to any other matters that may come before the Annual
Meeting, if proxies are executed and returned, such proxies will be voted in a
manner deemed by the proxy representatives named therein to be in the best
interests of the Company and its stockholders.
PROPOSAL I - ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes of
directors serving staggered terms of office. Upon the expiration of the term of
office of a class of directors, the nominee or nominees for that class are
elected for a term of three years to serve until the election and qualification
of their successors. The current term of Mr. Charles C. Anderson and Dr. J.
Barry Mason expires upon the election and qualification of the directors to be
elected at this Annual Meeting. The Board of Directors has nominated Mr.
Anderson and Dr. Mason for re-election to the Board of Directors at the Annual
Meeting, to serve until the 2001 annual meeting of stockholders and until their
successors are duly elected and qualified.
All Shares represented by properly executed proxies received in
response to this solicitation will be voted for the election of the directors as
specified therein by the stockholders. Unless otherwise specified in the proxy,
it is the intention of the persons named on the enclosed proxy card to vote FOR
the election of Mr. Anderson and Dr. Mason to the Board of Directors. Mr.
Anderson and Dr. Mason have each consented to serve as a director of the Company
if elected. If at the time of the Annual Meeting Mr. Anderson and/or Dr. Mason
are unable or decline to serve as a director, the discretionary authority
provided in the enclosed proxy card will be exercised to vote for a substitute
candidate(s) designated by the Board of Directors. The Board of Directors has no
reason to believe that Mr. Anderson or Dr. Mason will be unable or will decline
to serve as a director.
Stockholders may withhold their votes from a nominee by so indicating
in the space provided on the enclosed proxy card.
Set forth below is certain information furnished to the Company by Mr.
Charles Anderson and Dr. J. Barry Mason and by each of the incumbent directors
whose terms will continue following the Annual Meeting.
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NOMINEES FOR ELECTION - TERM EXPIRING 2001
CHARLES C. ANDERSON
Age: 63
Charles C. Anderson has served as the Chairman of the Board of the
Company for more than 28 years. He also served as the Chief Executive Officer of
the Company from 1964 to July 1992. Mr. Anderson is the father of Clyde B.
Anderson, the Company's Chief Executive Officer and a member of the Company's
Board of Directors, and Terry C. Anderson, a member of the Company's Board of
Directors.
J. BARRY MASON
Age: 57
J. Barry Mason has served as a director of the Company since April 14,
1998. Dr. Mason has held the positions of Dean and Thomas D. Russell Professor
of Business at Culverhouse College of Commerce, The University of Alabama since
1988.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED ABOVE.
INCUMBENT DIRECTORS - TERM EXPIRING 1999
TERRY C. ANDERSON
Age: 40
Terry C. Anderson has served as a director of the Company since April
14, 1998. Mr. Anderson has served as the President and Chief Executive Officer
of American Promotional Events, Inc., an importer and wholesaler of
pyrotechnics, since July 31, 1988. Mr. Anderson is the son of Charles C.
Anderson, the Chairman of the Company's Board of Directors, and the brother of
Clyde B. Anderson, the Company's Chief Executive Officer and a member of the
Company's Board of Directors.
JOHN E. SOUTHWOOD
Age: 68
John E. Southwood has served as a director of the Company since
September 1992. Mr. Southwood served as Vice Chairman of Third National
Corporation from January 1983 to December 1991 and Chairman of Third National
Bank in Nashville, Tennessee from January 1985 to July 1989.
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INCUMBENT DIRECTORS - TERM EXPIRING 2000
CLYDE B. ANDERSON
Age: 37
Clyde B. Anderson has served as a director of the Company since August
1987. Mr. Anderson has served as the Chief Executive Officer of the Company
since July 1992 and as the President of the Company since November 1987. From
November 1987 to March 1994, Mr. Anderson also served as the Company's Chief
Operating Officer. Mr. Anderson serves on the Board of Directors and the
Compensation Committee of Hibbett Sporting Goods, Inc., a sporting goods
retailer. Mr. Anderson is the son of Charles C. Anderson, the Chairman of the
Company's Board of Directors, and the brother of Terry C. Anderson, a member of
the Company's Board of Directors.
RONALD G. BRUNO
Age: 46
Ronald G. Bruno has served as the President of Bruno Capital Management
Corporation, an investment company, since September 1995 and has served as a
director of the Company since September 1992. Formerly, Mr. Bruno served as the
Chairman and Chief Executive Officer of Bruno's, Inc., a supermarket retailing
chain, for over five years. Mr. Bruno is a director of Bruno's, Inc., Russell
Corporation, a sports apparel manufacturing company, and Southtrust Bank of
Alabama, N.A.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Company's Board of Directors held four meetings during the
Company's fiscal year ended January 31, 1998 ("fiscal 1998"). The Board has an
Executive Committee, an Audit Committee and a Compensation Committee, but does
not have a Nominating Committee. Each director attended all of the meetings of
the Board and the committees of the Board on which he served.
Committees of the Board of Directors. The Executive Committee consists
of Messrs. Charles C. Anderson, Chairman of the Committee, Clyde B. Anderson and
Ronald G. Bruno. The Executive Committee is authorized to exercise all of the
power and authority of the Board of Directors in the management of the business
and affairs of the Company, including, without limitation, the power and
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law. The authority of the Executive Committee does not
extend to certain fundamental corporate transactions. The Committee does not
hold regularly scheduled meetings but meets when necessary.
The Audit Committee consists of Messrs. John E. Southwood, Chairman of
the Committee, Charles C. Anderson and Ronald G. Bruno. The responsibilities of
the Audit Committee include, in addition to such other duties as the Board may
specify, recommending independent auditors, reviewing with the independent
auditors the scope and results of the audit engagement, monitoring
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<PAGE> 8
the Company's financial policies and control procedures and reviewing and
monitoring the provision of non-audit services by the Company's auditors. The
Audit Committee held two meetings in fiscal 1998.
The Compensation Committee consists of Messrs. Ronald G. Bruno,
Chairman of the Committee, Charles C. Anderson and John E. Southwood. The
responsibilities of the Compensation Committee include, in addition to such
other duties as the Board may specify, establishing salaries, bonuses and other
compensation for the Company's executive officers and administering the
Company's Stock Option Plan, Employee Stock Purchase Plan and Executive
Incentive Plan. The Compensation Committee held one meeting in fiscal 1998.
Compensation of Directors. Directors who are not employees of the
Company receive an annual retainer fee of $10,000 and an attendance fee of $500
for each Board and committee meeting attended, as well as reimbursement of all
out-of-pocket expenses incurred in attending all such meetings. In addition, the
Company's non-employee directors are eligible to receive formula grants of stock
options under the Company's Stock Option Plan.
Under the Company's Stock Option Plan, each director who is not an
employee of the Company or its subsidiary shall, on the first day he serves as a
director, be automatically granted options to purchase 10,000 shares of Common
Stock from the Company at the "fair market value" (as defined in the Stock
Option Plan) of such Common Stock on such date. Further, each such director who
is serving as a director on the last business day of each calendar year and who
has served as a director for more than one year shall automatically be granted
options to purchase 6,000 shares of Common Stock from the Company at the fair
market value of the Common Stock on such date. Each of these options are
immediately exercisable and currently expire on the earlier of the sixth
anniversary of the date of grant or 90 days after such individual ceases to be a
director of the Company. Accordingly, each of Messrs. Bruno and Southwood
received a grant of options to purchase 6,000 shares of Common Stock at an
exercise price of $5.81 per share on December 31, 1997. In addition, upon their
appointment to the Company's Board of Directors, Mr. Terry C. Anderson and Dr.
J. Barry Mason received a grant of options to purchase 10,000 shares of Common
Stock at an exercise price of $5.69 on April 14, 1998.
Mr. Lew Burdette was named President of American Wholesale Book
Company, Inc. ("American Wholesale"), a wholly-owned subsidiary of the Company,
on January 9, 1998, and consequently, no longer serves as the Chief Operating
Officer and Executive Vice President of the Company. Further, effective March
17, 1998, Mr. Burdette resigned from the Company's Board of Directors. On April
14, 1998, the Company's Board of Directors elected Mr. Terry C. Anderson to fill
the vacancy created by Mr. Burdette's resignation. Terry C. Anderson is the son
of Charles C. Anderson and the brother of Clyde B. Anderson. On the same date,
the Board of Directors created a new seat on the Board of Directors and elected
Dr. J. Barry Mason to fill this seat. Dr. Mason's term expires upon the Annual
Meeting and the Board of Directors has nominated Dr. Mason for re-election.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers and persons who own
beneficially more than 10% of the Company's Common Stock to file reports of
ownership and changes in ownership of such stock with the Securities and
Exchange Commission (the "SEC") and the Nasdaq Stock Market, Inc. Directors,
executive officers and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all such forms they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, its directors, executive officers and greater than 10% stockholders
complied during fiscal 1998 with all applicable Section 16(a) filing
requirements, except for a Form 4 for Mr. Charles C. Anderson for the month of
September 1997. Such Form 4 was filed to report the purchase of an aggregate of
50,000 Shares pursuant to five separate transactions in that month by Mr.
Anderson and his wife and, due to an administrative oversight, was filed three
weeks after the deadline for the filing of such form.
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the beneficial
ownership of Common Stock of the Company of (i) those persons known by
management of the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) the directors of the Company, (iii) the executive
officers named in the Summary Compensation Table included elsewhere herein and
(iv) all current directors and executive officers as a group. Such information
is provided as of April 14, 1998. According to rules adopted by the SEC, a
person is the "beneficial owner" of securities if he or she has or shares the
power to vote them or to direct their investment or has the right to acquire
beneficial ownership of such securities within 60 days through the exercise of
an option, warrant, right of conversion of a security or otherwise. Except as
otherwise noted, the indicated owners have sole voting and investment power with
respect to shares beneficially owned. An asterisk in the percent of class column
indicates beneficial ownership of less than 1% percent of the outstanding Common
Stock.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership Class
- ------------------------ -------------------- -----
<S> <C> <C>
Charles C. Anderson(1) 3,190,520(2) 18.3%
Joel R. Anderson(1) 2,184,540(3) 12.5
Clyde B. Anderson(4) 2,079,100(5) 11.8
Terry C. Anderson(6) 579,680(7) 3.3
R. Lew Burdette(8) 125,424(9) *
Ronald G. Bruno 57,000(10) *
John E. Southwood 33,667(11) *
Sandra B. Cochran 81,928(12) *
Terrance G. Finley 49,688(13) *
J. Barry Mason(14) 10,000(15) *
All current directors and executive
officers as a group (8 persons) 5,981,583(16) 33.6%
</TABLE>
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(1) The business address of Mr. Charles C. Anderson and Mr. Joel R. Anderson
is 202 North Court Street, Florence, Alabama 35630. Mr. Charles C.
Anderson is the Chairman of the Company's Board of Directors. His brother,
Mr. Joel R. Anderson, does not serve as an officer or director of the
Company.
(2) Includes 368,000 shares held in the Ashley Anderson Trust, as to which Mr.
Anderson, as co-trustee, shares voting and investment power. This number
of shares also includes 100,000 shares held by a charitable foundation of
which Mr. Charles C. Anderson is the Chairman of the Board of Directors,
and 10,000 shares subject to options exercisable on or before June 13,
1998.
(3) Includes 100,000 shares held by a charitable foundation of which Mr. Joel
R. Anderson is the Chairman of the Board of Directors.
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<PAGE> 11
(4) Mr. Clyde B. Anderson's business address is 402 Industrial Lane,
Birmingham, Alabama 35211.
(5) Includes 100,000 shares held by a charitable foundation of which Mr. Clyde
B. Anderson is a member of the Board of Directors and 156,000 shares
subject to options exercisable on or before June 13, 1998.
(6) Mr. Terry C. Anderson has served as a director of the Company since April
14, 1998.
(7) Includes 10,000 shares subject to options exercisable on or before June
13, 1998.
(8) As of January 9, 1998, Mr. Burdette became the President of American
Wholesale, a wholly-owned subsidiary of the Company; at that time, Mr.
Burdette was no longer Executive Vice President and Chief Operating
Officer of the Company and is no longer considered to be an executive
officer of the Company. Further, effective March 17, 1998, Mr. Burdette
resigned from the Company's Board of Directors.
(9) Includes 101,000 shares subject to options exercisable on or before June
13, 1998.
(10) Includes 38,000 shares subject to options exercisable on or before June
13, 1998.
(11) Includes 28,000 shares subject to options exercisable on or before June
13, 1998.
(12) Includes 75,200 shares subject to options exercisable on or before June
13, 1998.
(13) Includes 47,200 shares subject to options exercisable on or before June
13, 1998.
(14) Dr. Mason has served as a director of the Company since April 14, 1998.
(15) Represents shares subject to options exercisable on or before June 13,
1998.
(16) Includes 374,400 shares subject to options exercisable on or before June
13, 1998.
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<PAGE> 12
EXECUTIVE COMPENSATION
Pursuant to SEC rules for Proxy Statement disclosure of executive
compensation, the Compensation Committee of the Board of Directors of the
Company has prepared the following Report on Executive Compensation. The
Committee intends that this report clearly describe the current executive
compensation program of the Company, including the underlying philosophy of the
program and the specific performance criteria on which executive compensation is
based. This report also discusses in detail the compensation paid to the
Company's Chief Executive Officer, Mr. Clyde B. Anderson, during fiscal 1998.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which consists of Messrs. Ronald G. Bruno
(who served as Chairman throughout fiscal 1998), Charles C. Anderson and John E.
Southwood, was responsible for establishing salaries, bonuses and other
compensation for the Company's executive officers for fiscal 1998, as well as
for administering the Company's Stock Option Plan, Employee Stock Purchase Plan
and Executive Incentive Plan. Each member of the Compensation Committee is a
non-employee director other than Mr. Charles C. Anderson, who is an executive
officer of the Company.
Compensation Policy. The Company's executive compensation policy is
designed to provide levels of compensation that integrate compensation with the
Company's annual and long-term performance goals and reward above-average
corporate performance, thereby allowing the Company to attract and retain
qualified executives. Specifically, the Company's executive compensation policy
is intended to:
- Provide compensation levels that are consistent with the
Company's business plan, financial objectives and operating
performance;
- Reward performance that facilitates the achievement of the
Company's business plan goals;
- Motivate executives to achieve strategic operating objectives;
and
- Align the interests of executives with those of stockholders and
the long-term interest of the Company by providing long-term
incentive compensation in the form of stock options.
In light of the Company's compensation policy, the components of its
executive compensation program for fiscal 1998 were base salaries, cash bonuses
and stock options.
Base Salary. Each executive officer's base salary (including the Chief
Executive Officer's base salary) is based upon a number of factors, including
the responsibilities borne by the executive officer and his or her length of
service to the Company. Each executive officer's base salary is reviewed
annually and generally adjusted to account for inflation, the Company's
financial performance, any change in the executive officer's responsibilities
and the executive officer's overall performance. Factors considered in
evaluating performance include financial results such as
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increases in sales, net income before taxes and earnings per share, as well as
non-financial measures such as improvements in service and relationships with
customers, suppliers and employees, employee safety and leadership and
management development. These non-financial measures are subjective in nature.
No particular weight is given by the Compensation Committee to any particular
factor.
Cash Bonuses. Each executive officer, including the Chief Executive
Officer, is eligible to receive an annual cash bonus of up to 70% of his or her
base salary at the time of the award. Cash bonuses generally are paid pursuant
to a bonus program established at the beginning of a fiscal year in connection
with the preparation of the Company's annual operating budget for such year.
Under this bonus program, an executive officer (including the Chief Executive
Officer) is eligible to receive a bonus upon the Company achieving certain net
income goals and the executive officer accomplishing certain individual
performance goals related to his or her job functions.
Stock Options. In September 1992, the Company adopted a Stock Option
Plan under which executive officers, including the Chief Executive Officer, are
eligible to receive stock options. In general, stock option awards are granted
on an annual basis if warranted by the Company's growth and profitability. The
Compensation Committee evaluates the Company's performance against
pre-determined target levels of sales, net income and earnings per share in
determining whether option grants are warranted and the aggregate amount of such
grants. Under the Stock Option Plan, all stock options granted have had exercise
prices no less than the fair market value (generally, the closing sale price of
a share) of the Company's Common Stock on the date of grant. All options granted
to date to employees become exercisable in equal annual increments over a
five-year period and expire on the sixth anniversary of the date of grant. The
Compensation Committee believes that these features serve to align the interests
of executives with those of stockholders and the long-term interests of the
Company. Options to purchase 280,000 shares of Common Stock were granted to a
total of five executive officers in fiscal 1998. The amount of each executive
officer's grant of stock options was based upon an evaluation of such executive
officer's responsibilities and performance, the desirability of long-term
service from the particular executive officer, the aggregate amount of prior
stock option awards to the executive officer and the Company's overall financial
performance. While the Compensation Committee has not established a target level
of stock ownership by the Company's executive officers, it does encourage such
ownership and intends to gradually increase the ownership of the Company's
Common Stock by executive officers and other key employees.
Executive Incentive Plan. During fiscal 1995, the Company adopted the
Books-A-Million, Inc. Executive Incentive Plan (the "Incentive Plan"). The
Incentive Plan provides for awards to certain executive officers of cash, shares
of restricted stock or both, based on the achievement of specific
pre-established performance goals during a three consecutive fiscal year
performance period. No awards were made under the Incentive Plan during fiscal
1998.
Compensation of Chief Executive Officer. During fiscal 1998, the
Company's Chief Executive Officer, Mr. Clyde B. Anderson, earned compensation
comprised of each of the three components of the Company's executive
compensation program described above. The Compensation Committee established his
compensation after reviewing the compensation packages of other chief executive
officers of publicly-traded retailers (as reported in such companies' proxy
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statements). The Compensation Committee considered the size, location, revenues,
earnings and capital structure of the retailers whose chief executive officers'
compensation packages were reviewed, and attempted to provide Mr. Anderson with
comparable compensation based upon the Committee's subjective comparison of the
size, location, revenues, earnings and capital structure of the Company. In
addition, the Compensation Committee awarded Mr. Anderson a bonus based upon the
achievement of specific performance goals. During fiscal 1998, Mr. Anderson also
received options to purchase 75,000 shares of Common Stock at an exercise price
of $5.88 per share. Mr. Anderson's options have an exercise price equal to the
fair market value (generally, the closing sale price of a share) of the
Company's Common Stock on the date of grant and vest in equal annual increments
over five years, as do the options granted to other executive officers of the
Company.
Limitations on Deductibility of Compensation. Under the 1993 Omnibus
Budget Reconciliation Act, a portion of annual compensation payable after 1993
to any of the Company's five highest paid executive officers would not be
deductible by the Company for federal income tax purposes to the extent such
officer's overall compensation exceeds $1,000,000. Qualifying performance-based
incentive compensation, however, would be both deductible and excluded for
purposes of calculating the $1,000,000 limit. Although the Compensation
Committee does not presently intend to award compensation in excess of the
$1,000,000 limit, it will continue to address this issue when formulating
compensation arrangements for the Company's executive officers.
Mr. Ronald G. Bruno (Chairman)
Mr. Charles C. Anderson
Mr. John E. Southwood
The Report on Executive Compensation of the Compensation Committee of
the Board of Directors shall not be deemed to be incorporated by reference as a
result of any general incorporation by reference of this Proxy Statement or any
part hereof in the Company's Annual Report to Stockholders or its Annual Report
on Form 10-K.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Interlocks. As indicated above, the Compensation Committee of the Board
of Directors consists of Messrs. Ronald G. Bruno, Charles C. Anderson (the
Company's Chairman) and John E. Southwood. During fiscal 1998, Charles C.
Anderson, Clyde B. Anderson and Terry C. Anderson served as executive officers
or directors of a total of eight companies owned or controlled by the Anderson
family (the "Other Companies"), with which there is an "interlock" relationship,
as defined by the SEC, arising from the concurrent participation of (i) Charles
C. Anderson and Clyde B. Anderson, both as executive officers of the Company and
as members of the boards of directors (and/or the compensation committees) of
certain of the Other Companies and (ii) Charles C. Anderson and Terry C.
Anderson, both as executive officers of certain of the Other Companies and as
members of the Board of Directors (and/or the Compensation Committee of the
Board of Directors) of the Company.
-11-
<PAGE> 15
Certain Transactions. During fiscal 1998, the Company entered into
certain transactions in the ordinary course of business with certain entities
affiliated with Messrs. Charles C. Anderson, Terry C. Anderson and Clyde B.
Anderson. The Board of Directors of the Company believes that all such
transactions were on terms no less favorable to the Company than terms available
from unrelated parties for comparable transactions. Significant activities with
these entities are discussed in the following paragraphs.
The Company and American Wholesale purchase certain of their books and
collectibles from Treat Entertainment, Inc. ("Treat"), which is wholly-owned by
members of the Anderson family. During fiscal 1998, such purchases from Treat
totaled $3,170,529. The Company and American Wholesale also purchase certain of
their paperback books, newspapers, comics, music and a substantial portion of
their magazines from Anderson News Corporation ("Anderson News"), virtually all
of the outstanding stock of which is owned by members of the Anderson family.
During fiscal 1998, purchases of these items from Anderson News totaled
$28,989,850. The Company and American Wholesale also purchase certain
merchandise from time to time from ANCO Far East Importers, Inc., a majority of
the outstanding stock of which is owned by members of the Anderson family. Such
purchases totaled $143,135 in fiscal 1998. The Company also purchased $202,000
of promotional marketing material in fiscal 1998 from Publication Marketing
Corporation, which is also controlled by members of the Anderson family. During
fiscal 1998, the Company and American Wholesale sold books to Treat and Anderson
News in the amounts of $2,531,793 and $7,740,805, respectively.
The Company leases its principal executive offices from a trust which
was established for the benefit of the grandchildren of Mr. Charles C. Anderson.
The lease extends to January 31, 2001 and the Company has an option to extend
the term of this lease for five years. During fiscal 1998, the Company paid rent
of approximately $120,000 to the trust under this lease. Anderson & Anderson LLC
("A&A"), which is wholly-owned by members of the Anderson family, also leases
three buildings to the Company. During fiscal 1998, the Company paid A&A a total
of $291,013 in connection with such leases. The Company recently sold a partial
interest in an airplane it owned to A&A for $1.5 million, the fair market value
of such interest. The Company and A&A will share certain expenses of operating
this airplane.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation -
Certain Transactions" above for a description of certain transactions and
relationships between the Company (or American Wholesale) and other entities
affiliated with certain of its executive officers.
-12-
<PAGE> 16
EXECUTIVE OFFICER COMPENSATION
This section of the Proxy Statement discloses the compensation awarded,
paid to or earned by, the Company's Chief Executive Officer and its four most
highly compensated officers other than the Chief Executive Officer during fiscal
1998. Such executive officers are hereinafter referred to as the Company's
"Named Executive Officers."
TABLE I - SUMMARY COMPENSATION TABLE
The following table presents the total compensation of the Company's
Named Executive Officers during each of the fiscal years set forth below.
TABLE I - SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Fiscal Salary Bonus Number of Securities All Other
Name Year $ $ (1) Underlying Options(1)(2) Compensation($)
---- ---- ------ ----- ------------------------ ---------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Clyde B. Anderson 1998 297,000 29,700 75,000 5,530(3)
Chief Executive Officer 1997 290,000 10,000 75,000 5,565(4)
and President 1996 275,000 149,200 35,000 7,319(5)
- ------------------------------------------------------------------------------------------------------------------------
Charles C. Anderson 1998 82,000 0 50,000 251(3)
Chairman 1997 80,000 0 50,000 247(4)
1996 75,000 37,500 0 200(5)
- ------------------------------------------------------------------------------------------------------------------------
R. Lew Burdette 1998 190,000 23,400 50,000 5,288(3)
President of American Wholesale(6) 1997 160,000 8,500 50,000 5,261(4)
1996 150,000 82,100 27,500 7,368(5)
- ------------------------------------------------------------------------------------------------------------------------
Sandra B. Cochran 1998 180,000 27,000 60,000 5,246(3)
Executive Vice President and 1997 144,000 6,500 50,000 5,381(4)
Chief Financial Officer 1996 128,504 68,668 22,500 6,924(5)
- ------------------------------------------------------------------------------------------------------------------------
Terrance G. Finley 1998 140,000 20,400 45,000 4,667(3)
Sr. Vice President-Merchandising 1997 110,000 3,500 40,000 5,143(4)
1996 100,000 53,600 15,000 4,242(5)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In fiscal 1995, the Company's Board of Directors adopted the
Books-A-Million, Inc. Executive Incentive Plan and authorized R. Lew Burdette,
Sandra B. Cochran and Terrance G. Finley to participate in such plan. However,
because no awards were made under the Executive Incentive Plan during fiscal
1998, no amounts are included in the table with respect to such plan.
(2) All of the options granted to the Company's Named Executive Officers become
exercisable in 20% increments on the first, second, third, fourth and fifth
anniversaries of the date of grant and expire six years from the date of grant
(or earlier if the optionee dies or ceases to be employed full-time by the
Company).
(3) For fiscal 1998, the amounts shown include (i) matching contributions by
the Company to the Company's 401(k) savings plan ("Matching Contributions") of
$4,750 on behalf of each of Clyde B. Anderson, R. Lew Burdette and Sandra B.
Cochran and $4,285 on behalf of Terrance G. Finley and (ii) life insurance
premiums of $780, $251, $538, $496 and $382 paid by the Company on behalf of
Clyde B. Anderson, Charles C. Anderson, R. Lew Burdette, Sandra B. Cochran and
Terrance G. Finley, respectively.
-13-
<PAGE> 17
(4) For fiscal 1997, the amounts shown include (i) Matching Contributions of
$4,785, $4,773, $4,946 and $4,815 on behalf of Clyde B. Anderson, R. Lew
Burdette, Sandra B. Cochran and Terrance G. Finley, respectively, and (ii) life
insurance premiums of $780, $247, $488, $435 and $328 paid by the Company on
behalf of Clyde B. Anderson, Charles C. Anderson, R. Lew Burdette, Sandra B.
Cochran and Terrance G. Finley, respectively.
(5) For fiscal 1996, the amounts shown include (i) Matching Contributions of
$6,923, $6,972, $6,528 and $3,936 on behalf of Clyde B. Anderson, R. Lew
Burdette, Sandra B. Cochran and Terrance G. Finley, respectively, and (ii) life
insurance premiums of $396, $200, $396, $396 and $306 paid by the Company on
behalf of Clyde B. Anderson, Charles C. Anderson, R. Lew Burdette, Sandra B.
Cochran and Terrance G. Finley, respectively.
(6) As of January 9, 1998, Mr. Burdette became the President of American
Wholesale, a wholly-owned subsidiary of the Company; at that time, Mr. Burdette
was no longer Executive Vice President and Chief Operating Officer of the
Company and is no longer considered to be an executive officer of the Company.
Further, effective March 17, 1998, Mr. Burdette resigned from the Company's
Board of Directors.
-14-
<PAGE> 18
TABLE II - OPTION GRANTS IN FISCAL 1998
This table presents information regarding options granted to the
Company's Named Executive Officers during fiscal 1998 to purchase shares of the
Company's Common Stock. The Company has no outstanding stock appreciation rights
("SARs") and granted no SARs during fiscal 1998. In accordance with SEC rules,
the table shows the hypothetical "gains" or "option spreads" that would exist
for the respective options based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
TABLE II - OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------
Realizable Value
At Assumed Annual
Number of Rates of Stock Price
Securities Percent of Appreciation for
Underlying Total Options Option Term
Options Granted to Exercise Price Expiration -----------
Name Granted(1) Employees Per Share Date 5% 10%
- ---- ---------- ------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Clyde B. Anderson 75,000 16.4% $5.88 1/30/04 $149,855 $339,969
Charles C. Anderson 50,000 10.9% $5.88 1/30/04 $ 99,903 $226,646
R. Lew Burdette 50,000 10.9% $5.88 1/30/04 $ 99,903 $226,646
Sandra B. Cochran 60,000 13.1% $5.88 1/30/04 $119,884 $271,975
Terrance G. Finley 45,000 9.8% $5.88 1/30/04 $ 89,913 $203,981
</TABLE>
(1) All of the options granted to the Company's Named Executive Officers become
exercisable in 20% increments on the first, second, third, fourth and fifth
anniversaries of the date of grant and expire six years from the date of grant
or earlier if the optionee dies or ceases to be employed full-time by the
Company.
-15-
<PAGE> 19
TABLE III - OPTION EXERCISES IN FISCAL 1998 AND FISCAL 1998 YEAR-END OPTION
VALUES
None of the Company's Named Executive Officers exercised any stock
options during fiscal 1998. The following table shows the number of shares of
Common Stock subject to exercisable and unexercisable stock options held by each
of the Named Executive Officers as of January 31, 1998. The table also reflects
the values of such options based on the positive spread between the exercise
price of such options and $5.88, which was the closing sale price of a share of
Common Stock reported in the Nasdaq National Market on January 30, 1998 (the
last trading day prior to the end of the Company's fiscal year).
TABLE III - FISCAL 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Subject to Value of Unexercised
Unexercised Options at In-the-Money Options
January 31, 1998 at January 31, 1998
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------
<S> <C> <C>
Clyde B. Anderson 156,000/178,000 $1,875/$7,500
Charles C. Anderson 10,000/90,000 $1,250/$5,000
R. Lew Burdette 101,000/122,500 $1,250/$5,000
Sandra B. Cochran 75,200/126,300 $1,250/$5,000
Terrance G. Finley 47,200/93,800 $1,000/$4,000
</TABLE>
-16-
<PAGE> 20
PERFORMANCE GRAPH
The following indexed line graph indicates the Company's total return
to stockholders from January 29, 1993, to January 30, 1998, the last trading day
prior to the Company's 1998 fiscal year end, as compared to the total return for
the Nasdaq Composite Index and the Nasdaq Retail Trade Stock Index for the same
period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Jan. 29, 1993 Jan. 28, 1994 Jan. 27, 1995 Feb. 2, 1996 Jan. 31, 1997 Jan. 30, 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Books-A-Million, Inc. $100 $133 $193 $120 $ 78 $ 78
- -------------------------------------------------------------------------------------------------------------------------
NASDAQ Composite Index $100 $115 $110 $155 $203 $241
- -------------------------------------------------------------------------------------------------------------------------
NASDAQ Retail Trade Stocks $100 $107 $ 95 $107 $131 $154
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE> 21
PROPOSAL 2 - AMENDMENT AND RESTATEMENT
OF THE COMPANY'S STOCK OPTION PLAN
The purpose of the Stock Option Plan is to promote the interests of the
Company and its stockholders by providing additional incentives to employees and
non-employee directors to increase the value of the Company's stock and to
provide employees and non-employee directors with a stake in the future of the
Company that corresponds to the stake of each of the Company's stockholders. The
Board of Directors feels that the Stock Option Plan has proved to be of
substantial value in stimulating the efforts of employees and non-employee
directors by increasing their ownership stake in the Company.
In light of the Company's continued growth, the number of shares
remaining for issuance under the Stock Option Plan is insufficient to provide
adequately for the continued participation of employees and non-employee
directors in the Stock Option Plan in future years. The Stock Option Plan
currently provides for options to purchase up to 1,800,000 shares of Common
Stock to be granted to full-time employees, including executive officers, and to
non-employee directors of the Company. As of April 14, 1998, options to purchase
1,591,130 shares (net of forfeitures) had been granted under the Stock Option
Plan, leaving only 208,870 shares available for future grants. For this reason,
the Board of Directors has adopted an amended and restated Stock Option Plan
(the "Amended Plan") to increase the number of shares available for issuance
under the Stock Option Plan by an additional 1,500,000 shares of Common Stock.
In addition to the increase in shares of Common Stock reserved for
grants of options under the Stock Option Plan, the Amended Plan also contains
certain changes which the Board of Directors believes are appropriate in
response to revisions to Section 16 of the Exchange Act. Such changes to Section
16 were effective as of November 1996 and were designed to simplify the
administration of stock option plans.
The primary features of the Amended Plan are summarized below. This
summary is qualified in its entirety, however, to the specific provisions of the
Amended Plan, the full text of which is set forth as Appendix A to this Proxy
Statement.
SUMMARY OF THE PLAN
Shares Subject to the Amended Plan. The Amended Plan provides for
options to purchase up to 3,300,000 shares of Common Stock, in the aggregate, to
be granted to full-time employees, including executive officers, and to
non-employee directors of the Company.
Eligibility. Options to purchase shares of Common Stock reserved for
issuance under the Amended Plan may be granted to full-time employees (2,611
persons as of April 14, 1998), including executive officers (4 persons), and to
non-employee directors of the Company (4 persons) on the terms set forth in the
Amended Plan. Under the Amended Plan, non-employee directors are eligible to
receive only grants of non-qualified stock options. The Amended Plan provides
for each non-employee director to automatically be granted options to purchase
10,000 shares of Common Stock as of his or her first day of service as a
director, and also provides that each non-employee director who is serving as a
director on the last business day of each calendar year, and has served
-18-
<PAGE> 22
as such for more than one year, is automatically granted options to purchase
6,000 shares of Common Stock. Non-employee directors are not allowed to receive
any grants of stock options under the Amended Plan except as pursuant to the
foregoing formula. Options are not transferable by the holder other than by will
or the applicable laws of descent or distribution.
Expiration of Stock Options. Options granted to employees under the
Stock Option Plan expire no later than ten years after the date of grant, or
five years after the date of grant for incentive stock options if the holder,
after the application of certain attribution rules, owns more than 10% of the
Common Stock. Non-qualified options granted to non-employee directors under the
Stock Option Plan expire six years after the date of grant.
Exercise Price. The exercise price of an incentive stock option (an
"ISO") must be at least (i) 100% of the fair market value of the Common Stock on
the date of grant and (ii) at least 110% of the fair market value of the Common
Stock on the date of grant if the employee owns, after application of certain
attribution rules, more than 10% of the Common Stock. The exercise price of a
non-qualified stock option granted under the Amended Plan is the fair market
value on the date of grant if granted to a non-employee director, or it may be
more or less than, or equal to, the fair market value on the date of grant if
granted to an employee.
Six-Month Holding Period. Options granted to employees under the
Amended Plan are not exercisable until at least six months after the date of
grant. Non-qualified options granted to non-employee directors under the Amended
Plan, however, are immediately exercisable.
Administration. The Amended Plan is administered by the Compensation
Committee of the Board of Directors. The Compensation Committee selects the
individuals to receive options and determines the terms and conditions of the
options to be granted, including the type of option to be granted, the vesting
schedule and the exercise price, to the extent not otherwise inconsistent with
the terms of the Amended Plan. Aside from the formula grants of non-qualified
options to non-employee directors described above, options granted under the
Amended Plan are at the discretion of the Compensation Committee and are based
upon, among other things, the employee's performance and the Company's growth
and profitability.
Amendments. The Amended Plan may be amended from time to time by the
Compensation Committee, except that stockholder approval is required, in
accordance with Section 422 of the Internal Revenue Code, as amended (the
"Code"), for any amendment (i) to further increase the number of shares of
Common Stock that may be granted under the Amended Plan or (ii) to change the
class of employees eligible to participate in the Amended Plan. No provision of
the Amended Plan may be amended more than once every six months if such
amendment would result in the loss of an exemption under Rule 16b-3 of the
Exchange Act, and amendments which apply specifically to non-qualified options
require stockholder approval only when such approval is required to comply with
Section 16 of the Exchange Act.
Adjustments for Changes in Capitalization. The Amended Plan provides
that the number of shares of Common Stock subject to outstanding options and the
exercise prices of outstanding options will be adjusted to reflect changes in
the capitalization of the Company. The Amended Plan further provides that, if
the Company agrees to sell all or substantially all of its assets or agrees
-19-
<PAGE> 23
to any merger, consolidation, reorganization, division or other corporate
transaction in which the Common Stock is converted into another security and
which does not provide for the assumption or substitution of options granted
under the Amended Plan, the Compensation Committee may in its discretion
unilaterally cancel any unexercised in-the-money employee options in exchange
for whole shares of Common Stock or unilaterally cancel without such exchange
any employee options that are not in-the-money and any director options. The
Amended Plan further provides that, upon a change in control of the Company or
the making of a tender or exchange offer for the Common Stock other than by the
Company, the Compensation Committee may in its discretion take such actions with
respect to unexercised employee options as it deems appropriate, including the
actions described above in the context of a sale or merger of the Company. The
Compensation Committee may take different actions with respect to different
employees or groups of employees as it deems appropriate. With respect to
unexercised director options, the Compensation Committee may take such actions
as are described above in the context of a sale or merger of the Company.
For additional information concerning the number and type of options
issued pursuant to the Stock Option Plan through the end of fiscal 1998, see
"Executive Compensation - Table I - Summary Compensation Table" and "Table II -
Option Grants in Fiscal 1998." For additional information concerning option
values at the end of fiscal 1998, see "Executive Compensation - Table III -
Option Exercises in Fiscal 1998 and Fiscal 1998 Year-End Option Values." As of
April 14, 1998, the closing sale price of a share of Common Stock reported on
the Nasdaq National Market was $5.69.
Set forth below is the number of non-qualified stock options that had
been granted to certain employees and certain groups of employees or
non-employee directors under the Stock Option Plan as of April 14, 1998. To
date, the Company has not granted any ISOs under the Stock Option Plan.
<TABLE>
<CAPTION>
Non-Qualified
Name Options Granted(1)
- ------------------------------ ------------------
<S> <C>
Clyde B. Anderson........................................ 334,000
Charles C. Anderson...................................... 100,000
R. Lew Burdette(2)....................................... 223,500
Sandra B. Cochran........................................ 201,500
Terrance G. Finley....................................... 141,000
All current executive officers as a
group (4 persons)........................................ 776,500
All current directors who are not
executive officers as a group
(4 persons).............................................. 86,000
All non-executive employees as
a group.................................................. 728,630(3)
</TABLE>
(1) Options granted to non-employee directors are immediately exercisable.
Options granted to executive officers and non-executive employees become
exercisable in 20% increments on the first, second, third, fourth and fifth
anniversaries of the date of grant. All of the options granted to date expire
six years from the date of grant or earlier if the optionee dies or ceases to be
employed full-time by the Company.
(2) As of January 9, 1998, Mr. Burdette became the President of American
Wholesale, a wholly-owned subsidiary of the Company; at that time, Mr. Burdette
was no longer Executive Vice President and Chief Operating Officer of the
Company and is no longer considered to be an executive officer of the Company.
(3) Net of forfeitures.
-20-
<PAGE> 24
SUMMARY OF AMENDMENTS
The Board of Directors believes that the approval of the proposal to
amend and restate the Stock Option Plan is necessary to achieve the purposes of
the Stock Option Plan and to promote the welfare of the Company and its
stockholders generally.
The Board of Directors proposes to amend the Stock Option Plan by
making an additional 1,500,000 shares of Common Stock available for grant.
Assuming adoption of the proposal, a total of 1,708,870 shares of Common Stock
would be available under the Stock Option Plan. Such an increase is necessary to
provide for the continued participation of employees and non-employee directors
in the Stock Option Plan in future years.
In connection with the recent amendments to Section 16, it is proposed
to: (i) delete the present requirement of stockholder approval of any amendment
to the Stock Option Plan to (A) increase materially the benefits accruing to an
employee or non-employee director under the Stock Option Plan, (B) increase
materially the number of securities which may be issued under the Stock Option
Plan (although, as described below, such approval requirement would be
maintained for tax purposes), or (C) otherwise modify materially the
requirements as to eligibility for participation in the Stock Option Plan, and
(ii) delete the concept in the Stock Option Plan of "disinterested" directors,
which is irrelevant in light of the revisions to Section 16. The proposed
amendment, however, would not affect the requirement under the Stock Option Plan
for stockholder approval required under Section 422 of the Internal Revenue Code
of 1986, as amended, to (1) increase the number of shares of Common Stock
reserved for grants of options under the Stock Option Plan, or (2) change the
class of employees eligible for options under the Stock Option Plan. The Company
believes that these proposed amendments to the Stock Option Plan will provide
the Company with the flexibility necessary to attract and retain key employees
and non-employee directors for the Company.
The restatement of the Stock Option Plan is intended to reflect other
minor technical amendments and clarifications and to provide for one integrated
document to avoid confusion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion outlines the federal income tax consequences
of participation in the Amended Plan. Individual circumstances may vary these
results. The federal income tax law and regulations are frequently amended, and
each participant in the Amended Plan (a "Participant") should rely on his or her
own tax counsel for advice regarding the federal income tax consequences of
participation in the Amended Plan.
Federal Income Tax Treatment of ISOs. A Participant generally will not
recognize taxable income on the grant or the exercise of an ISO (although the
exercise of an ISO can increase the
-21-
<PAGE> 25
Participant's alternative minimum tax liability). A Participant will recognize
taxable income if and when he disposes of the shares of Common Stock acquired
under the ISO. If the disposition occurs more than two years after the grant of
the ISO and more than one year after the shares are transferred to the
Participant on exercise of the ISO (the "ISO holding period"), the Participant
will recognize as capital gain or loss the difference between the amount
realized from disposition of the Common Stock and the Participant's tax basis in
that Common Stock. A Participant's tax basis in the Common Stock generally is
the amount the Participant paid for the stock on exercise of the ISO.
If Common Stock acquired under an ISO is disposed of before the
expiration of the ISO holding period (a "disqualifying disposition"), a
Participant generally will recognize as ordinary income in the year of the
disqualifying disposition the difference between the fair market value of the
Common Stock on the date of exercise of the ISO and the option price paid by the
Participant. Any additional gain will be treated as long-term or short-term
capital gain, depending on the length of time the Participant held the shares of
Common Stock.
A special rule applies to a disqualifying disposition of Common Stock
in which the amount realized on the disposition is less than the Fair Market
Value of the Common Stock on the date of exercise of the ISO. In that event, the
Participant generally will recognize as ordinary income the difference between
the amount realized on the disposition of the Common Stock and the exercise
price in lieu of the ordinary income amount described above for a disqualifying
disposition. Any additional loss will be treated as a long-term or short-term
capital loss, depending on the length of time the Participant held the shares of
Common Stock.
The Company generally will not be entitled to a federal income tax
deduction with respect to the grant or exercise of an ISO. In the event a
Participant disposes of Common Stock acquired under an ISO before the expiration
of the ISO holding period, the Company generally will be entitled to a federal
income tax deduction equal to the amount of ordinary income recognized by the
Participant.
Federal Income Tax Treatment of Non-qualified Options. A Participant
generally will not recognize any taxable income on the grant of a non-qualified
stock option. On the exercise of a non-qualified stock option, a Participant
will recognize as ordinary income the difference between the Fair Market Value
of the Common Stock acquired and the exercise price. A Participant's tax basis
in Common Stock acquired upon the exercise of a non-qualified stock option is
the amount paid for the stock plus any amounts included in income with respect
to the stock. The Participant's holding period for the stock begins on the day
the Common Stock is acquired. Any gain or loss that a Participant realizes on a
subsequent disposition of Common Stock acquired upon the exercise of a
non-qualified stock option generally will be treated as long-term or short-term
capital gain or loss, depending on the length of time the Participant held such
shares. The amount of the gain or loss will equal the difference between the
amount realized on the subsequent disposition and the Participant's tax basis in
his shares.
The exercise of a non-qualified stock option generally will entitle the
Company to claim a federal income tax deduction equal to the amount of ordinary
income recognized by the Participant. The transfer of Common Stock to a
Participant pursuant to the exercise of a non-qualified stock option will
constitute wages for withholding and employment tax purposes in an amount equal
to
-22-
<PAGE> 26
the amount of income recognized by the Participant. Accordingly, the Company
will be required to withhold or obtain payment from the Participant as each
option agreement permits for the amount of required withholding and employment
taxes.
Special tax rules apply to a recipient who exercises either an
incentive or a non-qualified option by paying the exercise price, in whole or in
part, by the transfer of shares of Common Stock of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE IN FAVOR OF THE PROPOSAL TO AMEND AND RESTATE
THE STOCK OPTION PLAN.
-23-
<PAGE> 27
PROPOSAL 3 - RATIFICATION OF INDEPENDENT PUBLIC AUDITOR
The Audit Committee of the Company's Board of Directors has appointed
Arthur Andersen LLP to serve as the Company's independent auditor for its
current fiscal year (fiscal 1999). A representative of this firm is expected to
attend the Annual Meeting to respond to questions from stockholders and to make
a statement if he or she so desires.
The Board of Directors believes it is in the Company's interest for the
stockholders to have a role in ratifying the Audit Committee's selection of
independent auditor. If the stockholders were to vote against ratification of
Arthur Andersen LLP as the Company's independent auditor, the Audit Committee
may select another independent auditing firm.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE IN FAVOR OF THE RATIFICATION OF ARTHUR ANDERSEN LLP
AS THE COMPANY'S INDEPENDENT PUBLIC AUDITOR
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting. However, if any other matters are properly brought before
the Annual Meeting, the persons appointed in the accompanying proxy intend to
vote the Shares represented thereby in accordance with their best judgment.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies on behalf of the Company will
be borne by the Company. In addition, directors, officers and other employees of
the Company may, without additional compensation except reimbursement for actual
expenses, solicit proxies by mail, in person or by telecommunication. The
Company will reimburse brokers, fiduciaries, custodians and other nominees for
out-of-pocket expenses incurred in sending the Company's proxy materials to, and
obtaining instructions relating to such materials from, beneficial owners.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposal that a stockholder may desire to have included in the
Company's proxy material for presentation at the 1999 annual meeting must be
received by the Company at its executive offices at 402 Industrial Lane,
Birmingham, Alabama 35211, Attention: Mr. Clyde B. Anderson, on or prior to
December 28, 1998.
ANNUAL REPORT
The Company's Annual Report to Stockholders for fiscal 1998 (which is
not part of the Company's proxy soliciting material) is being mailed to the
Company's stockholders with this proxy statement.
April 27, 1998
Birmingham, Alabama
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<PAGE> 28
APPENDIX A
BOOKS-A-MILLION, INC.
STOCK OPTION PLAN
AS AMENDED AND RESTATED AS OF MARCH 18, 1998
SECTION 1
PURPOSE
The purpose of this Plan is to promote the interests of the Company and
its stockholders by granting Options to purchase stock to Employees and
Directors in order 1)" (1) to provide an additional incentive to each Employee
or Director to work to increase the value of the Company's stock, and 2)" (2) to
provide each Employee or Director with a stake in the future of the Company
which corresponds to the stake of each of the Company's stockholders.
SECTION 2
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1 Board - means the Board of Directors of the Company.
2.2 Change in Control - means (a) the acquisition of the power to
direct, or cause the direction of, the management and policies of the Company by
a person (not previously possessing such power), acting alone or in conjunction
with others, whether through the ownership of Stock, by contract or otherwise,
or (b) the acquisition, directly or indirectly, of the power to vote more than
50% of the outstanding Stock by any person or by two or more persons acting
together. For purposes of this definition, 1)" (1) the term "person" means a
natural person, corporation, partnership, joint venture, trust, government or
instrumentality of a government, and 2)" (2) customary agreements with or
between underwriters and selling group members with respect to a bona fide pubic
offering of Stock shall be disregarded.
2.3 Code - means the Internal Revenue Code of 1986, as amended.
2.4 Committee - means the committee appointed by the Board to
administer this Plan which at all times shall consist of two or more members of
the Board.
2.5 Company - means Books-A-Million, Inc., a Delaware corporation, and
any successor to such corporation.
2.6 Director - means any member of the Board who is not an employee of
the Company or a Subsidiary.
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2.7 Employee - means any full-time employee of the Company who the
Committee, acting in its absolute discretion, has determined to be eligible for
the grant of an Option under this Plan.
2.8 Exchange Act - means the Securities Exchange Act of 1934, as
amended.
2.9 Fair Market Value - means a)" (a) the closing price on any date
for a share of Stock as reported by The Wall Street Journal under the New York
Stock Exchange Composite Transactions quotation system (or under any successor
quotation system), or b)" (b) if the Stock is not traded on the New York Stock
Exchange, under the quotation system under which such closing price is reported,
or c)" (c) if The Wall Street Journal does not report such closing price, such
closing price as reported by a newspaper or trade journal selected by the
Committee, or d)" (d) if no such closing price is available on such date, such
closing price as so reported or so quoted in accordance with Section 2.9(a) for
the immediately preceding business day, or e)" (e) if no newspaper or trade
journal reports such closing price or if no such price quotation is available,
the price which the Committee acting in good faith determines through any
reasonable valuation method that a share of Stock might change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy or
to sell and both having reasonable knowledge of the relevant facts.
2.10 ISO - means an option granted under this Plan to purchase Stock
which is intended by the Company to satisfy the requirements of Code Section
422.
2.11 Non-ISO - means an option granted under this Plan to purchase
Stock which is not intended by the Company to satisfy the requirements of Code
Section 422.
2.12 Option - means an ISO or a Non-ISO.
2.13 Option Certificate - means the written certificate or instrument
which sets forth the terms of an Option granted to an Employee or Director under
this Plan.
2.14 Option Price - means the price which shall be paid to purchase one
share of Stock upon the exercise of an Option granted under this Plan.
2.15 Parent Corporation - means any corporation which is a parent of
the Company within the meaning of Section 424(e) of the Code.
2.16 Plan - means this Books-A-Million, Inc. Stock Option Plan, as
amended from time to time.
2.17 Rule 16b-3 - means the exemption under Rule 16b-3 to Section
16(b) of the Exchange Act or any successor to such rule.
2.18 Stock - means the $.01 par value common stock of the Company.
2.19 Subsidiary - means a corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) of the Company.
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<PAGE> 30
2.20 Ten Percent Stockholder - means a person who owns (after taking
into account the attribution rules of code Section 424(d)) more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of its Parent Corporation or its Subsidiary.
SECTION 3
SHARES RESERVED UNDER THE PLAN
There shall be 3,300,000 shares of Stock reserved for use under this
Plan, and such shares of Stock shall be reserved to the extent that the Company
deems appropriate from authorized but unissued shares of Stock and from shares
of Stock which have been reacquired by the Company. Furthermore, any shares of
Stock subject to an Option which remain unissued after the cancellation,
expiration or exchange of such Option thereafter shall again become available
for use under this Plan.
SECTION 4
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided that the stockholders of the Company shall approve this Plan
after the date of its adoption and, to the extent this Plan provides for the
issuance of ISOs, the stockholders of the Company shall approve those portions
of this Plan related to the granting of ISOs within twelve (12) months after the
date of adoption. If any Options are granted under this Plan before the date of
such stockholder approval, such Options automatically shall be granted subject
to such approval.
SECTION 5
ADMINISTRATION
The Plan shall be administered by the Committee. The Board may from
time to time remove members from, or add members to, the Committee. Vacancies on
the Committee shall be filled by the Board. The Committee shall select one of
its members as Chairman and shall hold meetings at such times and places as it
may determine. The Committee acting in its absolute discretion shall exercise
such powers and take such action as expressly called for under this Plan and,
further, the Committee shall have the power to interpret this Plan and (subject
to Rule 16b-3) to take such other action (except to the extent the right to take
such action is expressly and exclusively reserved for the Board or the Company's
stockholders) in the administration and operation of this Plan as the Committee
deems equitable under the circumstances, which action shall be binding on the
Company, on each affected Employee or Director and on each other person directly
or indirectly affected by such action.
SECTION 6
ELIGIBILITY
Only Employees and Directors shall be eligible for the grant of Options
under this Plan.
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<PAGE> 31
SECTION 7
GRANT OF OPTIONS
7.1 Committee Action. The Committee, acting in its absolute discretion,
shall have the right to grant Options to Employees under this Plan from time to
time to purchase shares of Stock and, further, shall have the right to grant new
Options in exchange for outstanding Options which have a higher or lower Option
Price. Each grant of an Option to an Employee shall be evidenced by an Option
Certificate, and each such Option Certificate shall 1)" (1) specify whether the
Option is an ISO or Non-ISO and 2)" (2) incorporate such other terms and
conditions as the Committee, acting in its absolute discretion, deems consistent
with the terms of this Plan, including (without limitation) a restriction on the
number of shares of Stock subject to the Option which first become exercisable
during any calendar year. If the Committee grants an ISO and a Non-ISO to an
Employee on the same date, the right of the Employee to exercise one such Option
shall not be conditioned on his or her failure to exercise the other such
Option.
7.2 $100,000 Limit. To the extent that the aggregate Fair Market Value
of Stock (determined as of the date the ISOs are granted) with respect to which
ISOs first become exercisable in any calendar year exceeds $100,000, such
Options in excess of the limitation shall be treated as Non-ISOs. The Fair
Market Value of the Stock subject to any other option (determined as of the date
such option was granted) which 1)" (1) satisfies the requirements of Section 422
of the Code and 2)" (2) is granted to an Employee under a plan maintained by the
Company, a Subsidiary or a Parent Corporation shall be treated (for purposes of
this $100,000 limitation) as if granted under this Plan. This $100,000
limitation shall be administered in accordance with the rules under Section
422(d) of the Code.
7.3 Grants to Directors. Each Director shall be granted (without any
further action on the part of the Committee) a Non-ISO under this Plan as of the
first day he serves as such to purchase 10,000 shares of Stock at the Fair
Market Value of such Stock on such date; provided, however, that for Non-ISOs
granted under this Section 7.3 prior to the completion by the Company of an
initial public offering of Stock (the "Initial Public Offering"), the exercise
price shall be the Price to the public to be set forth on the cover of the final
prospectus relating to the Initial Public Offering; and provided further,
however, that any such Non-ISOs granted under this Section 7.3 prior to the
completion by the Company of an Initial Public Offering shall be forfeited if
the Initial Public Offering is not completed on or before December 31, 1992.
Thereafter, each Director who is serving as such on the last business day of
each calendar year and who has served as such for more than one year shall be
granted (without any further action on the part of the Committee) a Non-ISO
under this Plan as of the last business day of each calendar year to purchase
6,000 shares of Stock from the Company at the Fair Market Value of such Stock on
such date. Each Non-ISO granted under this Plan to a Director shall be evidenced
by an Option Certificate, shall be fully vested upon grant and shall expire 90
days after a Director ceases to serve as such or, if earlier, on the sixth
anniversary of the date of the grant of the Non-ISO. A Non-ISO granted to a
Director under this Plan shall conform in all other respects to the terms and
conditions of a Non-ISO under this Plan, and no Director shall be eligible to
receive an Option under this Plan except as provided in this Section 7.3.
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<PAGE> 32
SECTION 8
OPTION PRICE
The Option Price for each share of Stock subject to an ISO shall be no
less than the Fair Market Value of a share of Stock on the date the ISO is
granted; provided, however, if the Option is an ISO granted to a Ten Percent
Stockholder, the Option Price for each share of Stock subject to such ISO shall
be no less than 110% of the Fair Market Value of a share of Stock on the date
such ISO is granted. The Option Price for each share of Stock subject to a
Non-ISO which is granted to an Employee may (in the absolute discretion of the
Committee) be more or less than or equal to the Fair Market value of a share of
Stock on the date the Non-ISO is granted; provided, however, that in no event
shall the Option Price be less than adequate consideration as determined by the
Committee. The Option Price for each share of Stock subject to a Non-ISO which
is granted to a Director shall equal the fair market value of a share of Stock
on the date the Non-ISO is granted. The Option Price shall be payable in full
upon the exercise of any Option and, at the discretion of the Committee, an
Option Certificate can provide for the payment of the Option Price either in
cash, by check, or in Stock acceptable to the Committee. Any payment made in
Stock shall be treated as equal to the Fair Market Value of such Stock on the
date the properly endorsed certificate for such Stock is delivered to the
Committee or its delegate.
SECTION 9
EXERCISE PERIOD
Each Option granted under this Plan to an Employee shall be exercisable
in whole or in part at such time or times as set forth in the related Option
Certificate, but no Option Certificate shall make an Option granted to an
Employee exercisable (1) before the last day of the six-month period which
begins on the date such Option is granted or (2) after the earlier of:
(a) the date such Option is exercised in full,
(b) the date which is the fifth anniversary of the date the
Option is granted, if the Option is an ISO and the Employee is a Ten
Percent Stockholder on the date the Option is granted, or
(c) the date which is the tenth anniversary of the date the
Option is granted, if the Option is i)" (i) a Non-ISO or ii)" (ii) an
ISO which is granted to an Employee who is not a Ten Percent
Stockholder on the date the Option is granted.
An Option Certificate may provide for the exercise of an Option granted
to an Employee after the employment of such Employee has terminated for any
reason whatsoever, including death or disability.
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<PAGE> 33
SECTION 10
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee
or Director other than by will or by the laws of descent and distribution, and
such Option shall be exercisable during the lifetime of an Employee or Director
only by such Employee or Director. The person or persons to whom an Option is
transferred by will or by the laws of descent and distribution thereafter shall
be treated for purposes of such Option as the Employee or Director under this
Plan.
SECTION 11
SECURITIES REGISTRATION
Each Option Certificate shall provide that, upon the receipt of shares
of Stock as a result of the exercise of an Option, the Employee or Director
shall, if so requested by the Company, hold such shares of Stock for investment
and not with a view to resale or distribution to the public and, if so requested
by the Company, shall deliver to the Company a written statement satisfactory to
the Company to that effect. Each Option Certificate also shall provide that, if
so requested by the Company, the Employee or Director shall make a written
representation to the Company that he or she will not sell or offer to sell any
of such Stock unless a registration statement shall be in effect with respect to
such Stock under the Securities Act of 1933, as amended ("1933 Act") and any
applicable state securities law or unless he or she shall have furnished to the
Company an opinion, in form and substance satisfactory to the Company, of legal
counsel acceptable to the Company, that such registration is not required.
Certificates representing the Stock transferred upon the exercise of an Option
granted under this Plan may at the discretion of the Company bear a legend to
the effect that such Stock has not been registered under the 1933 Act or any
applicable state securities law and that such Stock may not be sold or offered
for sale in the absence of an effective registration statement as to such Stock
under the 1933 Act and any applicable state securities law or an opinion, in
form and substance satisfactory to the Company, of legal counsel acceptable to
the Company, that such registration is not required.
SECTION 12
LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of:
(1) the tenth anniversary of the effective date of this Plan
(as determined under Section 4 of this Plan), in which event this Plan
thereafter shall continue in effect until all outstanding Options have
been exercised in full or no longer are exercisable, or
(2) the date on which all of the Stock reserved under Section
3 of this Plan has (as a result of the exercise of Options granted
under this Plan) been issued or no longer is available for use under
this Plan, in which event this Plan also shall terminate on such date.
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<PAGE> 34
SECTION 13
ADJUSTMENT
The number of shares of Stock reserved under Section 3 of this Plan,
the number of shares of Stock subject to Options granted under this Plan and the
Option Price of such Options shall be adjusted by the Committee in an equitable
manner to reflect any change in the capitalization of the Company, including,
but not limited to, such changes as stock dividends or stock splits. The
Committee shall have the right to adjust (in a manner which satisfies the
requirements of Section 424(a) of the Code) the number of shares of Stock
reserved under Section 3 of this Plan, the number of shares of Stock subject to
Options granted under this Plan, and the Option Price of such Options in the
event of any corporate transaction described in Section 424(a) of the Code which
provides for the substitution or assumption of Options. If any adjustment under
this Section 13 would create a fractional share of Stock or a right to acquire a
fractional share of Stock, such fractional share shall be disregarded and the
number of shares of Stock reserved under this Plan and the number subject to any
Options granted under this Plan shall be the next lower number of shares of
Stock, rounding all fractions downward. An adjustment made under this Section 13
by the Committee shall be conclusive and binding on all affected persons.
SECTION 14
SALE OR MERGER OR CHANGE IN CONTROL
14.1 Sale or Merger. If the Company agrees to sell all or substantially
all of its assets for cash or property or for a combination of cash and property
or agrees to any merger, consolidation, reorganization, division or other
corporate transaction in which Stock is converted into another security or into
the right to receive securities or property and such agreement does not provide
for the assumption or substitution of the Options granted under this Plan, each
Option granted a)" (a) to an Employee may, at the direction of the Committee,
1)" (1) be canceled unilaterally by the Company (subject to such conditions, if
any, as the Committee deems appropriate under the circumstances) in exchange for
whole shares of Stock (and cash in lieu of a fractional share) the number of
which, if any, shall be determined by the Committee on a date set by the
Committee for this purpose by dividing A)" (A) the excess of the then Fair
Market Value of the Stock then subject to exercise under such Option (as
determined without regard to any vesting schedule for such Option) over the
Option Price of such Stock by B)" (B) the then Fair Market Value of a share of
such Stock, or 2)" (2) be canceled unilaterally by the Company if the Option
Price equals or exceeds the Fair Market Value of a share of Stock on such date,
and b)" (b) to a Director may be canceled unilaterally by the Company as of any
date to the extent then unexercised after advance written notice to each
affected Director.
14.2 Change in Control. If there is a Change in Control of the Company
or a tender or exchange offer is made for Stock other than by the Company, the
Committee thereafter shall have the right a)" (a) to take such action with
respect to any unexercised Options granted to Employees, or all such Options, as
the Committee deems appropriate under the circumstances to protect the interest
of the Company in maintaining the integrity of such grants under this Plan,
including following the procedures set forth in Section 14.1 for a sale or
merger of the Company, and (b) to
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<PAGE> 35
follow the procedures for Directors set forth in Section 14.1 with respect to
any and all unexercised Options granted to Directors. The Committee shall have
the right to take different action under this Section 14.2 with respect to
different Employees or different groups of Employees, as the Committee deems
appropriate under the circumstances.
SECTION 15
AMENDMENT OR TERMINATION
This Plan may be amended by the Committee from time to time to the
extent that the Committee deems necessary or appropriate; provided, however (a)
no such amendment shall be made absent the approval of the stockholders of the
Company required under Section 422 of the Code 1)" (1) to increase the number of
shares of Stock reserved under Section 3, or 2)" (2) to change the class of
employees eligible for Options under Section 6 and (b) no provision of this Plan
shall be amended more than once every 6 months if amending such provision would
result the in loss of an exemption under Rule 16b-3. Subject to the other
limitations set forth in this Section 15, any amendment which specifically
applies to Non-ISOs shall not require stockholder approval unless such approval
is necessary to comply with Section 16 of the Exchange Act. The Committee also
may suspend the granting of Options under this Plan at any time and may
terminate this Plan at any time; provided, however, that the Committee shall not
have the right unilaterally to modify, amend or cancel any Option granted before
such suspension or termination unless (1) the Employee or Director consents in
writing to such modification, amendment or cancellation, or (2) there is a
dissolution or liquidation of the Company or a transaction described in Section
13 or Section 14 of this Plan.
SECTION 16
MISCELLANEOUS
16.1 No Stockholder Rights. No Employee or Director shall have any
rights as a stockholder of the Company as a result of the grant of an Option to
him or to her under this Plan or his or her exercise of such Option pending the
actual delivery of Stock subject to such Option to such Employee.
16.2 No Contract of Employment. The grant of an Option to an Employee
or Director under this Plan shall not constitute a contract of employment or a
right to continue to serve on the Board and shall not confer on any Employee or
Director any rights upon his or her termination of employment or service in
addition to those rights, if any, expressly set forth in the Option Certificate
which evidences his or her Option.
16.3 Other Conditions. Each Option Certificate may require that an
Employee or Director (as a condition to the exercise of an Option) enter into
any agreement or make such representations prepared by the Company, including
any agreement which restricts the transfer of Stock acquired pursuant to the
exercise of such Option or provides for the repurchase of such Stock by the
Company under certain circumstances.
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<PAGE> 36
16.4 Withholding. The exercise of any Option granted under this Plan
shall constitute full and complete consent by an Employee to whatever action the
Committee deems necessary to satisfy the federal and state tax withholding
requirements, if any, which the Committee acting in its discretion deems
applicable to such exercise. The Committee also shall have the right to provide
in an Option Certificate that an Employee may elect to satisfy federal and state
withholding requirements through a reduction in the number of shares of Stock
actually transferred to him or her under this Plan, and if the Employee is
subject to the reporting requirements under Section 16 of the Exchange Act, any
such election and any such reduction shall be effected so as to satisfy the
conditions to the exemption under Rule 16b-3 under the Exchange Act.
16.5 Construction. This Plan shall be construed under the laws of the
State of Delaware.
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<PAGE> 37
APPENDIX B
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
BOOKS-A-MILLION, INC.
The undersigned stockholder(s) of Books-A-Million, Inc., a Delaware
corporation (the "Company"), hereby acknowledge(s) receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement, each dated April 27, 1998,
and hereby appoints Clyde B. Anderson and Sandra B. Cochran, or either of them,
proxies and attorneys-in-fact, with full power of substitution, on behalf and in
the name of the undersigned to represent the undersigned at the 1998 Annual
Meeting of Stockholders of the Company to be held at 10:00 a.m. on Thursday,
June 4, 1998 at The Wynfrey Hotel, 1000 Riverchase Galleria, Birmingham,
Alabama, 35244 and at any adjournment(s) thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below:
(1) To elect the nominees listed below to serve as directors of the Company for
a three-year term expiring in 2001:
Charles C. Anderson J. Barry Mason
<TABLE>
<S> <C>
[ ]FOR the nominees listed above, [ ] WITHHOLD authority to vote
except as indicated below. for both of the nominees listed above.
</TABLE>
* To withhold authority for any individual nominee, mark "FOR" above and
write the name of the nominee as to whom you wish to withhold authority
in the space below:
- --------------------------------------------------------------------------------
(2) To approve an amendment and restatement of the Company's Stock Option Plan
that will increase the number of shares of Common Stock reserved for grants
of options under the plan from 1,800,000 to 3,300,000 and simplify
administration of the Stock Option Plan in accordance with revisions to
Section 16 of the Securities Exchange Act of 1934.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To ratify the appointment by the Audit Committee of the Board of Directors
of Arthur Andersen LLP to serve as the Company's independent auditor for the
fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on Reverse Side)
(4) In their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment(s) thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 ABOVE AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING (PROPOSAL 4).
Dated , 1998
-------------------
------------------------------
Signature
------------------------------
Signature (if held jointly)
Title or authority (if
applicable)
NOTE: Please sign exactly as
name appears hereon. If shares
are registered in more than
one name, the signature of all
such persons are required. A
corporation should sign in its
full corporate name by a duly
authorized officer, stating
his or her title. Trustees,
guardians, executors and
administrators should sign in
their official capacity,
giving their full title as
each. If a partnership, please
sign in the partnership name
by an authorized person.
