<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 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
Borders Group, Inc.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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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:
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<PAGE> 2
BORDERS LOGO
100 Phoenix Drive
Ann Arbor, Michigan 48108
---------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 24, 2000
---------------------------------------------------------------
To the Stockholders of
BORDERS GROUP, INC.
The Annual Meeting of Stockholders of Borders Group, Inc., a Michigan
corporation (the "Company") will be held at 11:30 A.M. on May 24, 2000, at The
Benjamin Hotel, 125 East 50th Street, New York, NY 10022 for the following
purposes:
1. To elect eight Directors of the Company, each to serve until the 2001
Annual Meeting of Stockholders or until a successor is elected and
qualified,
2. To approve an amendment to extend the term of the Company's Annual
Incentive Bonus Plan and to re-affirm the performance goals and maximum
amounts payable under the Plan, and
3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
Only stockholders of record at the close of business on March 29, 2000, are
entitled to notice of and to vote at the Annual Meeting and at any and all
adjournments or postponements thereof.
By Order of the Board of Directors,
THOMAS D. CARNEY
Secretary
Ann Arbor, Michigan
April 24, 2000
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YOUR VOTE IS IMPORTANT
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH DOES NOT REQUIRE POSTAGE IF
MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY WILL NOT PREVENT YOU
FROM ATTENDING THE MEETING AND VOTING IN PERSON, IF YOU SO DESIRE.
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<PAGE> 3
BORDERS GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished to the stockholders of Borders Group,
Inc., a Michigan corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders of the Company to be held at 11:30 A.M. on
Wednesday, May 24, 2000, at The Benjamin Hotel, 125 East 50th Street, New York,
NY 10022 and at any and all adjournments or postponements thereof. At the Annual
Meeting, the stockholders of the Company are being asked to consider and vote
upon the election of eight directors, each to serve until the 2001 Annual
Meeting of Stockholders or until a successor is elected and qualified, and to
adopt a proposal relating to The Company's Annual Incentive Bonus Plan.
This proxy statement and the enclosed form of proxy are first being mailed
to stockholders of the Company on or about April 24, 2000.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock ("Common Stock"), at
the close of business on March 29, 2000 (the "Record Date") are entitled to
notice of and to vote at the Annual Meeting. At the close of business on the
Record Date, there were 78,192,928 shares of Common Stock outstanding. The
presence, either in person or by proxy, of the holders of a majority of the
shares of Common Stock outstanding on the Record Date is necessary to constitute
a quorum at the Annual Meeting. All abstentions and broker non-votes will be
included as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting but will be disregarded in
tabulating the vote on the election of directors and other proposals.
Each stockholder will be entitled to one vote, in person or by proxy, for
each share of Common Stock held in such stockholder's name on the Record Date on
any matter submitted to a vote of stockholders at the Annual Meeting. The
election of the eight directors will require the affirmative vote of a plurality
of the shares of Common Stock represented and voting in person or by proxy and
entitled to vote at the Annual Meeting. Abstentions and broker non-votes will
not be counted as votes cast in connection with determining plurality required
to elect a director and will have no effect on the outcome of that vote or on
the vote on any other proposal to be brought before the meeting.
Stockholders are urged to sign and date the enclosed proxy and return it as
soon as possible in the envelope enclosed for that purpose. Stockholders of
record also may give proxies by calling a toll-free telephone number or by using
the Internet. The telephone and Internet voting procedures are designed to
authenticate the stockholders' identities, to allow stockholders to give their
voting instructions and to confirm that stockholders' instructions have been
recorded properly. Specific instructions for stockholders of record who wish to
use the telephone or Internet voting procedures are included with the enclosed
proxy card.
Shares of Common Stock represented by properly executed proxies received in
time for voting at the Annual Meeting will, unless such proxy has previously
been revoked, be voted in accordance with the instructions indicated thereon. In
the absence of specific instructions to the contrary, the persons named in the
accompanying form of proxy intend to vote all properly executed proxies received
by them FOR the election of the Board of Director's nominees as Directors and
FOR the proposal to approve the amendment to the Company's Annual Incentive
Bonus Plan and to re-affirm the performance goals and maximum amounts payable
under the Plan.
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No business other than as set forth in the accompanying Notice of Annual
Meeting is expected to come before the Annual Meeting, but should any other
matter requiring a vote of stockholders be properly brought before the Annual
Meeting, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their best judgment on such matters. For
information with respect to advance notice requirements applicable to
stockholders who wish to propose any matter for consideration or nominate any
person for election as a director at the 2001 Annual Meeting, see "Proposals of
Stockholders".
Under applicable Michigan law, none of the holders of Common Stock is
entitled to appraisal rights in connection with any matter to be acted on at the
Annual Meeting.
Execution of the enclosed proxy will not prevent a stockholder from
attending the Annual Meeting and voting in person. Any proxy may be revoked at
any time prior to the exercise thereof by delivering in a timely manner a
written revocation or a new proxy (including a proxy via telephone or Internet)
bearing a later date to the Secretary of the Company, 100 Phoenix Drive, Ann
Arbor, Michigan 48108, or by attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not, however, in and of itself constitute
a revocation of a proxy.
The Company is making this solicitation. The cost of this solicitation will
be borne by the Company. Solicitation will be made by mail, and may be made
personally or by telephone by officers and other employees of the Company who
will not receive additional compensation for solicitation. The Company may
retain Corporate Investor Communications, Inc. to assist in the distribution and
solicitation of proxies at a cost of approximately $6,000.
The principal executive offices of the Company are located at 100 Phoenix
Drive, Ann Arbor, Michigan, 48108, and its telephone number is (734) 477-1100.
PROPOSAL 1
ELECTION OF DIRECTORS
Eight directors will be elected at the Annual Meeting to serve until the
2001 Annual Meeting of Stockholders or until a successor is elected and
qualified. Each of the nominees of the Company has committed to serve as a
director if elected at the Annual Meeting and, to the best knowledge of the
Board of Directors, is and will be able to serve if so elected. In the event
that any of the nominees listed below should be unavailable to stand for
election before the Annual Meeting, the persons named in the accompanying proxy
intend to vote for such other person, if any, as may be designated by the Board
of Directors, in the place of any nominee unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
COMPANY'S NOMINEES AS DIRECTORS.
Set forth below is a brief biography of each of the Company's nominee for
election as a director.
ROBERT F. DIROMUALDO, AGE 55. Mr. DiRomualdo has been the Chairman of the
Board and a director of the Company since its formation in August 1994. He
served as Chief Executive Officer of the Company from August 1994 until November
1998, and as President and Chief Executive Officer from April 1999 until
November 1999.
PETER R. FORMANEK, AGE 56. Mr. Formanek was co-founder of AutoZone, a
retailer of aftermarket automotive parts, and served as President and Chief
Operating Officer of AutoZone, Inc. from 1986 until his retirement in May, 1994.
He currently is a director of The Perrigo Company, a manufacturer of store brand
over-the-counter medicines and vitamins, and Gart Sports Company, a retailer of
sporting goods. Mr. Formanek has served as a director of the Company since
August, 1995.
GREGORY P. JOSEFOWICZ, AGE 47. Mr. Josefowicz has served as President,
Chief Executive Officer and a director of the Company since November 1999. For
more than five years prior to
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<PAGE> 5
joining the Company, he served in a variety of executive positions with
Jewel-Osco, a food and drug retailer that is currently a division of
Albertson's, Inc., most recently as President. Mr. Josefowicz also serves as a
director of Ryerson Tull, Inc., a distributor and processor of metals.
VICTOR L. LUND, AGE 52. Mr. Lund has served as Vice Chairman of
Albertson's, Inc., a food and drug retailer, since June of 1999. Mr. Lund served
as Chairman of the Board of American Stores Company from June 1995 until its
acquisition by Albertson's in June of 1999, and as Chief Executive Officer of
American Stores Company from August 1992 until June 1999. He was President of
American Stores Company from August 1992 until June 1995. Mr. Lund has served as
a director of the Company since July 1997, and also serves as a director of
Service Corporation International, a provider of death care services.
DR. EDNA GREENE MEDFORD, AGE 48. Dr. Greene Medford is an Associate
Professor of History and a former Director of the Undergraduate Program in
History at Howard University. She has served as a director of the Company since
September, 1998.
GEORGE R. MRKONIC, AGE 47. Mr. Mrkonic has served as the Vice Chairman of
the Company since December 1994, and a director since its formation in August
1994. He also served as President of the Company from December 1994 until
January 1997. Mr. Mrkonic is also a director of Champion Enterprises, Inc., a
manufacturer and seller of manufactured homes, Syntel, Inc., a computer software
and development company, and Cheap Tickets, Inc., a retail seller of discount
tickets for domestic leisure air travel.
LARRY POLLOCK, AGE 52. Mr. Pollock has served as President and Chief
Operating Officer of Cole National Corporation, which operates retail vision and
gift stores, since January, 2000. Mr. Pollock is also a partner of Independent
Group L.P., a privately-held radio broadcasting company based in Cleveland,
Ohio. From September 1998 until June 1999, Mr. Pollock served as President and
Chief Executive Officer of HomePlace, Inc., a chain of home furnishings and
housewares superstores, which he joined in January of 1997 as Executive Vice
President and Chief Operating Officer. From 1994 until 1996, he served as the
President, Chief Operating Officer and a director of Zale Corporation, a jewelry
retailer. He has served as a director of the Company since August 1995.
In January of 1998, HomePlace, Inc. filed a voluntary petition in the
United States Bankruptcy Court for the District of Delaware for reorganization
under Chapter 11 of the Bankruptcy Code.
BETH M. PRITCHARD, AGE 52. Ms. Pritchard has served as President and Chief
Executive Officer of Bath & Body Works, a division of Intimate Brands, Inc.
since 1993. She has served as a director of the Company since March 2000.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended January 23, 2000, the Board of Directors held
eleven meetings. The Board of Directors has also established standing Audit and
Compensation Committees. The membership and functions of the committees of the
Board of Directors are as follows:
The Audit Committee was established for the purpose of reviewing and making
recommendations regarding the Company's employment of independent accountants,
the annual audit of the Company's financial statements and the Company's
internal controls, accounting practices and policies. Four meetings of the Audit
Committee were held during the fiscal year ended January 23, 2000. The current
members of the Audit Committee are Mr. Lund, Dr. Medford and Ms. Pritchard.
The Compensation Committee was established for the purpose of making
recommendations to the Board of Directors regarding the nature and amount of
compensation for executive officers of the Company. The Compensation Committee
also administers certain of the Company's employee benefit plans. Six meetings
of the Compensation Committee were held during the fiscal year ended January 23,
2000. The current members of the Compensation Committee are Mr. Formanek and Mr.
Pollock.
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<PAGE> 6
Each director attended at least 75% of the Board and Committee meetings
held during the period in which he or she was a director.
COMPENSATION OF DIRECTORS
For service as a director, each director who is not an employee of the
Company receives 2,000 restricted shares of Common Stock (the "Restricted
Shares") paid at the beginning of the relevant calendar year, subject to a
maximum value of $75,000, or, in the case of a director who is initially elected
during a year, a percentage of such amount based upon the period during the
applicable year in which he or she served as a director. The restrictions on
such Restricted Shares will generally lapse one year from the date of grant.
On the date of each of the Company's Annual Meetings, each eligible
director receives an option to purchase 5,000 shares of common stock of the
Company. The exercise price of options granted under the Plan is the fair market
value on the date of grant. To be eligible to receive an option grant at an
Annual Meeting, a director generally must have held at least 20,000 shares of
Common Stock for the one-year period prior to the date of the meeting.
Each option vests and becomes exercisable on the third anniversary of the
date of grant except that (i) an option is forfeited in its entirety if the
director ceases, at any time prior to his or her exercise of the option, to hold
the minimum number of shares that he or she was required to hold for the one
year period prior to the grant to be eligible therefor; (ii) all outstanding
options vest and become immediately exercisable in the event of a change in
control of the Company, and (iii) all options held by a director who has served
as a director for six years or more vest and become immediately exercisable as
of the date upon which he or she ceases to serve as a director.
An option may be exercised only during the period that the optionee serves
as a director of the Company or within three months after termination of such
service and only if it is vested and has not expired at the time of termination.
However, if the director ceases to serve as such as a result of death or if the
individual has served as a director of the Company for more than 10 years, such
three month period is extended to three years.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file with the Securities and Exchange
Commission initial reports of beneficial ownership and reports of changes in
beneficial ownership of Common Stock of the Company. Such officers and directors
are required by SEC regulations to furnish to the Company copies of all Section
16(a) reports that they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company during the fiscal
year ended January 23, 2000 and written representations that no other reports
were required, all officers and directors of the Company complied with the
Section 16(a) filing requirements except that Mr. Hopkins was late in reporting
one transaction that occurred in 1998 due to an inadvertent error in a report
that was timely filed.
4
<PAGE> 7
EXECUTIVE COMPENSATION
GENERAL
The following summary compensation table sets forth information regarding
the annual and long-term compensation awarded to, earned by or paid for the
fiscal year ended January 23, 2000 to the named executive officers of the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION(2) STOCK OPTIONS COMPENSATION(3)
- --------------------------- ---- --------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert F. DiRomualdo,....... 1999 -- -- -- -- 254,826 $ 2,514
Chairman of the 1998 -- -- -- -- (1) $ 2,684
Board(4) 1997 -- -- -- -- 329,041 $ 2,678
George R. Mrkonic,.......... 1999 -- -- -- -- 225,302 $ 2,623
Vice Chairman 1998 -- -- -- -- (1) $ 2,151
1997 -- -- -- -- 289,844 $ 6,995
Gregory P. Josefowicz(5).... 1999 $125,000 -- $239,625 -- 365,000 $ 200,000
President and
Chief Executive Officer
Philip M. Pfeffer(6)........ 1999 $166,923 -- -- -- 45,787 $2,931,296
1998 -- -- $249,998 -- 719,373 $ --
Bruce A. Quinnell,.......... 1999 $432,000 -- -- -- 70,000 $ 1,569
Vice Chairman 1998 -- -- -- -- (1) $ 1,218
1997 -- -- -- -- 300,048 $ 1,026
Richard L. Flanagan,........ 1999 $300,000 40,000 $ 617
President-Borders 1998 -- -- -- -- (1) $ 731
Stores(7) 1997 -- -- -- -- 217,898 $ 529
</TABLE>
- -------------------------
(1) Messrs. DiRomualdo and Mrkonic were granted options in lieu of cash for 100%
of their fiscal 1999 salary and bonus. The options grants to Messrs.
DiRomualdo and Mrkonic covered 194,826 and 94,322 shares, respectively. The
salary and bonus to which the named officers were entitled for fiscal 1999
is as follows: Mr. DiRomualdo, $474,553 salary, $474,553 bonus; Mr. Mrkonic,
$257,500 salary, $257,500 bonus. Messrs. DiRomualdo, Mrkonic, Quinnell and
Flanagan were granted options in lieu of cash for 100% of their fiscal 1998
and 1997 salary and bonus. Mr. Pfeffer was granted options in lieu of cash
for 100% of his compensation for fiscal 1998. The options grants for fiscal
1998 to Messrs. DiRomualdo, Mrkonic, Quinnell, and Flanagan, covering
123,947, 84,750, 96,270, and 72,804 shares, respectively, were made and
reported in fiscal 1997. The salary and bonus to which the named officers
were entitled for fiscal 1998 is as follows: Mr. DiRomualdo, $515,000
salary, $515,000 bonus; Mr. Mrkonic, $360,500 salary, $360,500 bonus; Mr.
Pfeffer, $134,246 salary and no bonus; Mr. Quinnell, $400,000 salary,
$400,000 bonus; Mr. Flanagan, $260,000 salary, $345,000 bonus. The salary
and bonus to which the named officers were entitled for fiscal 1997 is as
follows: Mr. DiRomualdo, $515,000 salary, $515,000 bonus; Mr. Mrkonic,
$515,000 salary, $515,000 bonus; Mr. Quinnell, $400,000 salary, $400,000
bonus; Mr. Flanagan, $260,000 salary, $345,000 bonus.
(2) The amount for Mr. Josefowicz reflects the difference between $13.31, the
closing price for the Common Shares on November 15, 1999, and the purchase
price of $10.65 paid by Mr. Josefowicz for the purchase of restricted Common
Shares under the Management Stock Purchase Plan. The amount for Mr. Pfeffer
reflects the difference between $23.25, the closing price for the Common
Shares on November 13, 1998, and the purchase price of $18.60 paid by
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<PAGE> 8
Mr. Pfeffer for the purchase of restricted Common Shares under the
Management Stock Purchase Plan.
(3) "All Other Compensation" consists of employer contributions credited under
the Borders Group Savings Plan and the taxable portion of Company provided
life insurance for Messrs. DiRomualdo, Mrkonic, Quinnell and Flanagan. The
amount shown for Mr. Josefowicz represents a one-time payment pursuant to
the terms of his employment agreement. The amount shown for Mr. Pfeffer
represents payments, other than salary, that were includable in Mr.
Pfeffer's compensation for fiscal 1999. All of the payments to Mr. Pfeffer
were applied to reduce the amount of his indebtedness to the Company. See
"Settlement Agreement and Indebtedness of Management".
(4) Mr. DiRomualdo also served as Chief Executive Officer of the Company until
November 16, 1998, and President and Chief Executive Officer from April 19,
1999 until November 15, 1999.
(5) Mr. Josefowicz became President and Chief Executive Officer of the Company
on November 15, 1999.
(6) Mr. Pfeffer served as the Chief Executive Officer of the Company from
November 16, 1998 until his resignation on April 19, 1999. He also resigned
as a director of the Company on that date.
(7) Mr. Flanagan resigned as President of Borders Stores on January 21, 2000.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ------------ -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Robert F. DiRomualdo...... 125,763(1) 2.26% $17.13 5/1/2001 $ 220,753 $ 452,275
69,063(1) 1.24% $14.19 10/27/2001 $ 100,433 $ 205,765
60,000 1.08% $13.88 10/5/2009 $ 523,555 $1,326,791
George R. Mrkonic......... 94,322(1) 1.70% $17.13 5/1/2001 $ 165,565 $ 339,205
30,000 0.54% $13.88 10/5/2009 $ 261,777 $ 663,395
100,980(2) 1.82% $15.69 4/5/2002 $ 162,373 $ 332,666
Gregory P. Josefowicz..... 90,000 1.62% $13.31 11/14/2004 $ 331,020 $ 731,467
275,000 4.95% $13.31 11/14/2009 $2,302,344 $5,834,592
Philip M. Pfeffer......... 45,787 0.82% $17.13 7/20/1999 $ -- $ --
Bruce A. Quinnell......... 20,000 0.90% $14.31 7/22/2009 $ 180,021 $ 456,209
50,000 0.36% $13.88 10/5/2009 $ 436,296 $1,105,659
Richard L. Flanagan....... 40,000 0.72% $13.88 10/5/2009 $ 349,037 $ 884,527
</TABLE>
- -------------------------
(1) These options were granted in lieu of any salary or bonus for fiscal 1999.
(2) These options were granted in lieu of any salary or bonus for fiscal 2000.
(3) Represents hypothetical realizable value of the options granted at 5% and
10% annual appreciation over the option term from the share price at the
date of grant.
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<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF
# OF SECURITIES UNDERLYING UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR END FISCAL YEAR END(1)
ON -------------------------- -------------------------
NAME EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert F. DiRomualdo.... 224,948 $2,122,947 688,307/240,000 $2,263,218/$ 40,800
George R. Mrkonic....... -- -- 179,072/310,980 $ -- /$ 20,400
Gregory P. Josefowicz... -- -- -- /365,000 $ -- /$456,250
Philip M. Pfeffer....... -- -- -- /-- $ -- /$ --
Bruce A. Quinnell....... 233,856 $2,004,739 229,060/358,528 $ 712,131/$ 39,000
Richard L. Flanagan..... 127,252 $1,018,016 199,203/281,317 $ 762,595/$ 27,200
</TABLE>
- -------------------------
(1) Calculated using the closing market price of the Common Stock of $14.56 on
January 21, 2000, the last trading day in fiscal 1999, less the exercise
price of the related options.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has entered into an employment agreement with Mr. Josefowicz,
which provides for an annual salary of $650,000 and an annual "stretch" bonus
opportunity of $650,000 if performance goals approved by the Compensation
Committee are met for the applicable year. Pursuant to the agreement, Mr.
Josefowicz (i) received the options set forth above under the caption "Option
Grants in Fiscal Year 1999", (ii) purchased 90,000 shares of restricted Common
Stock at a price of $ 10.65 per share (80% of the then fair market value) under
the Company's Management Stock Purchase Plan; (iii) was paid $200,000 upon
commencement of employment; and (iv) will be reimbursed for certain relocation
and temporary living expenses. The agreement provides that, in the event of Mr.
Josefowicz's termination of employment by the Company other than for Cause or
Disability (each as defined in the agreement) or at the Mr. Josefowicz's
election for Good Reason (as defined in the agreement, which includes a Change
in Control as Good Reason), Mr. Josefowicz would be entitled to a severance
payment equal to two times the sum of (i) Mr. Josefowicz's annual base salary in
effect at the time of termination and (ii) the "on plan" bonus amount targeted
for the fiscal year in which termination occurred. Such severance payment will
be made in equal installments during the 24-month period following the month of
termination. Mr. Josefowicz is under no obligation to seek employment during the
first 12 months following such termination and the severance payments will not
be affected by any compensation Mr. Josefowicz receives during such period.
Following such 12-month period, Mr. Josefowicz has an obligation to use
reasonable efforts to seek other employment and, to the extent that he earns
cash compensation from such other employment, the Company's obligation to make
severance payments will be correspondingly reduced.
Effective January 24, 2000, the employment agreements of Messrs. DiRomualdo
and Mrkonic were extended through the 2000 fiscal year. Under the terms of the
revised agreements, Mr. DiRomualdo will continue to serve as Chairman and a
member of Board and Mr. Mrkonic will continue to serve as a Vice Chairman and a
member of the Board, through January 23, 2001. Each of their duties will involve
approximately 50% of his time commitment as a full-time employee and each will
be entitled to an annual salary of $257,500 and have bonus opportunity of
$257,500. The revised agreements also prohibit competitive activities through
December 31, 2002. The agreements provide that the officer's employment may be
terminated only for Cause (as defined in the agreements) during the term of the
agreements. Subsequent to the term, Messrs. DiRomualdo and Mrkonic may continue
to serve as directors, subject to their annual election by shareholders, and
employment may continue by the mutual agreement of the Board and the individual
officer.
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<PAGE> 10
Mr. Mrkonic has elected to receive compensation replacement options in lieu of
the salary and bonus for fiscal 2000 that he would otherwise be entitled to
under the agreement.
The Company has entered into certain severance and change in control
agreements with the remaining executive officers. These agreements, which are
substantially similar, generally provide that, in the event of the officer's
termination of employment other than for Cause or Disability (as defined in the
agreements) or at such officer's election for Good Reason (as defined in the
agreements), the officer would be entitled to severance benefits. These
severance benefits include: (i) cash payment of the officer's salary in effect
through the month during which termination occurred, plus any other amount due
to such officer under any bonus plan of the Company and (ii) monthly severance
payments equal to (a) the officer's monthly base salary at the time of
termination, plus (b) 1/12th of the threshold bonus amount for such officer for
the fiscal year in which termination occurred. Such monthly severance payments
commence in the month following termination and continue for 12 months, unless
termination occurs within a two-year period following a Change in Control (as
defined in the agreement) of the Company, in which case severance payments
continue for 24 months and are equal to (x) the officer's monthly base salary at
the time of termination or immediately prior to the Change in Control, whichever
is greater, plus (y) 1/12th of the threshold bonus amount for such officer for
the fiscal year in which termination occurred or the fiscal year immediately
prior to the Change in Control, whichever bonus amount is greater.
The Company estimates that if the employment of all 11 executive officers
were terminated in 2000 following a Change in Control of the Company, the total
severance payments to those persons under the agreements, as described above,
would be approximately $8.9 million.
SETTLEMENT AGREEMENT AND INDEBTEDNESS OF MANAGEMENT
Mr. Pfeffer resigned as Chief Executive Officer and a director of the
Company effective as of April 20, 1999. Prior to his resignation, Mr. Pfeffer
had an employment agreement with the Company which provided for an annual salary
of $700,000 and, commencing in fiscal 1999, an annual bonus opportunity of
$500,000. The agreement provided that, in the event of Mr. Pfeffer's termination
of employment by the Company other than for Cause or Disability (each as defined
in the agreement) or at Mr. Pfeffer's election for Good Reason (as defined in
the Agreement), Mr. Pfeffer would be entitled to a severance payment equal to
two times the sum of (i) Mr. Pfeffer's annual base salary in effect at the time
of termination and (ii) the bonus amount targeted for the fiscal year in which
termination occurred. Such severance payments were to be made in equal
installments during the 24-month period following the month of termination, and
were subject to reduction for amounts received from other employment after the
first year.
Pursuant to the terms of a settlement agreement (the "Settlement
Agreement") dated as of April 20, 1999 executed by the Company and Mr. Pfeffer
in connection with this resignation, the Company agreed to pay Mr. Pfeffer (i)
$2.4 million as severance under his employment agreement (payable one-half in
installments over the next twelve months and the remainder on April 20, 2000),
and (ii) $1.5 million in consideration of his obligations and commitments under
the Settlement Agreement, including non-competition and non-solicitation
provisions, a general release and commitments to cooperate with information
requests from the Company and to reasonably assist the Company with respect to
any pending or future dispute resolutions. The non-competition and non-
solicitation provisions will be in effect for three years from the date of the
Settlement Agreement. Pursuant to the Management Stock Purchase Plan, the
Company also paid to Mr. Pfeffer approximately $917,331 in cancellation of the
53,763 Common Shares that he purchased under that Plan. All of the payments
described above, net of any withholding taxes, have been and will be applied
toward the repayment of Mr. Pfeffer's promissory note to the Company until the
note is repaid in full. The Company also reimbursed Mr. Pfeffer for $30,000 of
expenses relating to the separation, and assumed his apartment lease in Ann
Arbor, MI. The Separation Agreement terminated Mr. Pfeffer's
8
<PAGE> 11
employment agreement, except that his registration rights with respect to
400,000 shares of Common Stock remain in effect.
In connection with Mr. Pfeffer's purchase of shares from the Company during
1998, the Company made a loan to him in the principal amount of $6.3 million.
All of the proceeds of the loan were used to pay a portion of the purchase price
of the shares. The interest rate under the loan is a floating rate equal to the
US Dollar Euro-Rate (as defined in the Company's Credit Agreement) plus 0.325%
per annum, with such rate being based upon the Company's borrowing rate. The
loan constitutes full recourse debt which is collateralized by the shares
acquired with the proceeds of the loan and other securities. The term of the
loan was to be ten years, except that the entire outstanding principal and
interest was to be due on the 90th day following the date upon which Mr. Pfeffer
ceased for any reason to be an employee of the Company. Pursuant to the
Settlement Agreement, the term of the note was extended until April 20, 2000.
The principal amount of the indebtedness outstanding on March 29, 2000 was
approximately $2.0 million.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The Compensation Committee (the "Committee") is comprised of two
independent, non-employee directors who have no "interlocking" relationships as
defined by the Commission. The Committee's goal is to ensure the establishment
of executive compensation policies and practices that will enable the Company to
attract, retain, and motivate outstanding management that will drive superior
operating performance.
The Committee has established an executive compensation philosophy that is
designed to foster a performance oriented and equity based ownership culture. In
establishing a compensation program consistent with that philosophy, the
Committee has focused on providing: (i) a mix of cash, bonus and equity
incentives that is intended to generate below- market compensation in the event
of poor operating performance and above-market compensation in the event of
superior performance; (ii) an orientation toward equity incentives that includes
a combination of stock and options and encourages some investment in the Company
on the part of management; and (iii) a greater proportion of performance-based
compensation relative to base salary at higher levels of responsibility.
The primary components of the Company's executive compensation program are:
(a) base salary; (b) annual cash bonus incentive opportunities provided through
the Annual Incentive Bonus Plan; (c) long-term incentive opportunities provided
through the Stock Option Plan; and (d) Common Stock purchase opportunities under
the Management Stock Purchase Plan. Each of these components is discussed
separately in this report.
The Committee relates total compensation levels for executive officers to
compensation paid to executives at other companies. The companies chosen as the
basis of comparison are other retailers that the Company believes most closely
resemble itself in terms of compensation philosophy and performance objectives.
BASE SALARY
The objective of the Company is to drive base salary levels that are
competitive and close to the average of the average of salaries provided by
comparable retailers. The "market" rate for salaries provided by comparable
retailers is determined from information gathered from published surveys. With
respect to the $650,000 base salary established for Mr. Josefowicz, the
Committee believes that such base salary is an appropriate "market" wage.
9
<PAGE> 12
ANNUAL CASH INCENTIVES
Under the Company's Annual Incentive Bonus Plan (the "Bonus Plan"),
executive officers are eligible to receive cash awards based on the Company's
attainment of specific performance goals. The performance goals may be different
from year to year, expressed in either quantitative and/or qualitative terms,
and to the extent applicable, performance against these goals must be determined
in accordance with generally accepted accounting principles and reported upon by
the Company's independent public accountants.
Generally, target incentive bonus opportunities are expressed as a dollar
amount based upon a percentage of the executives' actual base salary. The Bonus
Plan requires that a threshold level of performance be met, below which no bonus
award would be paid and levels of performance at which specified percentages of
the target bonus would be paid. The performance criteria are based upon the
Company's attainment of specified levels of earnings and the executive's
satisfaction of individual objectives.
For any bonus earned, the Bonus Plan requires each executive officer to
take a minimum of 20% and a maximum of 100% of their actual bonus award in the
form of restricted Common Stock subject to the terms and conditions of the
Management Stock Purchase Plan.
LONG TERM INCENTIVES
The Company attempts to foster an ownership culture that encourages deep
personal commitment and superior performance by its executive officers. To
promote that culture, the Company has adopted a Stock Option Plan and a
Management Stock Purchase Plan. Both Plans are intended to align the executive
officers' interests with the long-term interests of the Company's stockholders
by providing incentives that focus attention on managing the Company from the
perspective of an owner.
The Stock Option Plan provides for the grant at fair market value of stock
options with such vesting and exercise periods as the Committee may determine.
In determining the number of shares in a stock option grant, the Committee takes
into consideration the individual's performance, the level of the position, and
the individual's present and potential contribution to the success of the
Company.
Under the Management Stock Purchase Plan, the executive officers of the
Company are required to designate a minimum of 20%, and may designate up to
100%, of their annual bonus for the purchase of restricted shares of common
stock at a 20% discount from the fair market value of the stock. In addition,
under the Plan, executive officers are given a one-time opportunity to purchase
up to $1,000,000 in restricted shares. If the employee ceases to be an employee
during the three year restricted period, he or she generally will receive
unrestricted shares or cash equal in value to the lesser of cost or market value
of the restricted shares. However, in the event of termination by the Company
without cause, a participant will receive unrestricted shares or cash equal in
value to (i) the market value of a percentage of restricted shares, such
percentage being based upon the number of months of employment during the
restricted period, and (ii) with respect to the balance of the shares, the
lesser of cost or market value of such shares.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee believes that Mr. Josefowicz's compensation arrangement is
consistent with the policies described above. The salary of $650,000 is intended
to provide a "market " salary and the combination of bonus opportunity, options
and share purchase rights granted to Mr. Josefowicz provide the mix of incentive
compensation and individual investment contemplated by the Committee's policies.
10
<PAGE> 13
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the proxy to $1
million, unless certain requirements are met.
The Committee intends to consider carefully any plan or compensation
arrangement that would result in the disallowance of compensation deductions. It
will use its best judgment in such cases, however, taking all factors into
account, including the materiality of any deductions that may be lost.
CONCLUSION
As described above, the Company's executive compensation program is
intended to provide a mix of base compensation and incentives that will provide
superior compensation levels only in the event of superior operating and share
price performance. As such, it is intended that there be a direct alignment of
the long-term interests between the executives and the stockholders of the
Company.
Peter Formanek
Larry Pollock
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
on the Company's Common Stock from May 24, 1995, the date of the Company's
Initial Public Offering of the Company's Common Stock, through January 23, 2000,
with the cumulative total return on the Standard & Poor's 500 Stock Index ("S&P
500") and a specialty retail index supplied by Worden Brothers, Inc., which
includes the collective performance of 22 specialty retailers for the same
period. In accordance with the rules of the Securities and Exchange Commission,
the returns are indexed to a value of $100 at May 24, 1995.
COMPARISON OF CUMULATIVE TOTAL RETURN
BORDERS GROUP, INC., SPECIALTY RETAIL INDEX, S&P 500
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
BORDERS GROUP, INC. SPECIALTY RETAIL INDEX S&P 500
------------------- ---------------------- -------
<S> <C> <C> <C>
5/24/95 100.00 100.00 100.00
7/21/95 113.08 110.57 105.72
10/20/95 110.70 100.07 112.19
1/26/96 131.31 96.59 118.71
4/26/96 220.48 131.19 124.79
7/26/96 222.99 122.68 121.44
10/25/96 211.36 136.10 133.85
1/24/97 246.90 127.16 147.14
4/25/97 277.41 140.67 146.16
7/25/97 345.18 161.48 179.28
10/24/97 343.46 175.19 179.82
1/23/98 414.53 173.62 182.87
4/24/98 421.93 208.44 211.57
7/24/98 450.86 223.67 217.86
10/23/98 318.76 192.36 204.46
1/22/99 246.90 242.64 233.97
4/25/99 192.34 294.05 259.11
7/25/99 190.75 309.19 259.13
10/24/99 161.82 301.36 248.57
1/23/00 192.34 279.30 275.25
</TABLE>
12
<PAGE> 15
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S ANNUAL INCENTIVE BONUS PLAN AND
REAFFIRMATION OF THE PERFORMANCE GOALS AND MAXIMUM AMOUNT PAYABLE UNDER THE PLAN
DESCRIPTION OF AMENDMENT
The Company's Annual Incentive Plan was established in February of 1995.
Prior to the amendment for which stockholder approval is being requested, the
Plan provided that no bonuses could be granted under the Plan with respect to
any year after fiscal 1999. The amendment extends the term of the Plan until it
is terminated by the Board of Directors.
BACKGROUND INFORMATION
The stockholders of the Company are being asked to approve the amendment to
preserve the Company's tax deduction with respect to bonuses earned under the
Plan by the chief executive officer and the four (4) other highest paid
officers, and to re-affirm the performance goals and the maximum amount payable
under the Plan.
Section 162(m) under the Code generally limits the deductibility of
compensation paid to the chief executive officer and the four (4) other highest
paid officers to $1,000,000 per year. Performance-based compensation is not
subject to this limitation on deductibility. Compensation qualifies as
performance-based only it is payable on account of performance and satisfies
certain other requirements, one of which is that the plan under which the
compensation is payable be approved by stockholders. The Code also requires that
the stockholders re-affirm the performance goals and the maximum amount payable
under the Plan every five years, and approval of the amendment will constitute
such reaffirmation.
THE ADOPTION OF THE PROPOSAL WILL BE A TAX BENEFIT TO THE COMPANY AND THE
FAILURE TO ADOPT THE PROPOSAL WILL DEPRIVE THE COMPANY OF THIS TAX BENEFIT.
DESCRIPTION OF PLAN
The Annual Incentive Bonus Plan (the "Annual Bonus Plan" ) is administered
by the Compensation Committee and is intended to serve as a qualified
performance-based compensation program under Section 162(m) of the Code.
Such officers and key employees of the Company and its subsidiaries as are
designated by the Committee are eligible to participate in the Annual Bonus
Plan. Except as otherwise provided in the Plan, the Annual Bonus Plan provides
for the payment of annual incentive cash bonus awards to participants if, and
only to the extent that, annual performance goals established by the Committee
are met and only if the participant is employed by the Company on the date the
bonus is paid (or the last day of the fiscal year if the Committee so
determines).
The goals established by the Committee can be expressed in terms of the
Company's return on equity, assets, capital or investment; either pre-tax or
after-tax profit levels of the Company and /or the Company's subsidiaries;
expense reduction levels; implementation of critical projects or processes;
level of sales; and/or changes in the market price of the Company's stock. The
goals can include standards for minimum attainment, target attainment and
maximum attainment. The goals established by the Committee can be (but need not
be) different each year and different goals may be applicable to different
participants. All determinations with respect to performance goals under the
Annual Bonus Plan will be made in accordance with generally accepted accounting
principles.
A participant's target incentive bonus for each fiscal year is generally
expressed as a dollar amount based upon the participant's salary at the
beginning of such year. The actual amount of bonus payable under the Annual
Bonus Plan is generally expressed as a percentage of the
13
<PAGE> 16
participant's target bonus, which percentage will vary depending upon the extent
to which the performance goals have been attained. However, the annual bonus of
the Company's Chief Executive Officer under the Annual Bonus Plan may not exceed
three times the salary midpoint for that salary grade at the beginning of such
year, as determined by the Committee prior to the beginning of such year on
competitive data, including a survey of comparable companies, and the annual
bonus for each of the four (4) other highest paid officers under the Annual
Bonus Plan may not exceed two times the salary midpoint for such officer's
salary grade at the beginning of such year. In addition, the amount of the bonus
paid to any participant for any fiscal year may not exceed $900,000. Generally,
before any awards for a particular year can be paid to the chief executive
officer and the four (4) other highest paid officers of the Company, the
Committee must certify the extent to which performance goals were satisfied.
All participants are required to receive 20% of their annual incentive
bonus (less certain payroll deductions) in restricted shares in accordance with
the terms and conditions of the Company's Management Stock Purchase Plan. At the
election of each participant, he or she may elect to receive up to 100% of his
or her annual incentive bonus (less certain payroll deductions) in restricted
stock. Restricted shares are purchased at a 20% discount from their market value
and are restricted for three years. If the employee ceases to be an employee
during the restricted period, he or she generally will receive unrestricted
shares or cash equal in value to the lesser of cost or market value of the
restricted shares. However, in the event of termination by the Company without
cause, a participant will receive unrestricted shares or cash equal in value to
(i) the market value of a percentage of restricted shares, such percentage being
based upon the number of months of employment during the restricted period, and
(ii) with respect to the balance of the shares, the lesser of cost or market
value of such shares.
No shares of any Common Stock will be issued under the Annual Bonus Plan.
To the extent that annual incentive bonuses are paid in Restricted Shares, such
Restricted Shares are issued under, and subject to the terms and conditions of,
the Management Stock Purchase Plan or, with respect to certain Restricted Shares
purchased at the time of the Company's initial public offering, the Stock Option
Plan.
For fiscal 1999: (i) 162 employees participated in the Plan; (ii) no
bonuses were paid under the Plan to the executive officers of the Company; and
(iii) bonuses aggregating approximately $2.0 million were paid to other
employees participating in the Plan.
If stockholders approve the amendment, the Plan will remain in effect until
the Board of Directors terminates it.
The Board can from time to time amend, suspend or discontinue the Annual
Bonus Plan; provided, however, that no amendment which requires stockholder
approval in order for the Annual Bonus Plan to continue to comply with Code
Section 162(m) will be effective unless it receives the requisite stockholder
approval. In addition, the Committee can make such amendments as it deems
necessary to comply with other applicable laws, rules and regulations.
The foregoing is a summary of the terms of the Annual Bonus Plan and does
not purport to be complete. Reference is made to the Annual Bonus Plan, a copy
of which is attached hereto as Appendix A, for a complete statement of the terms
of the Plan.
14
<PAGE> 17
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of the March 29, 2000 Record Date, the Common Stock was held of record
by 4,521 stockholders. The following table sets forth certain information
concerning the beneficial ownership of Common Stock and Share Units by each
stockholder who is known by the Company to own beneficially in excess of 5% of
the outstanding Common Stock, by each director, by the executive officers named
in the Summary Compensation table above, and by all directors and executive
officers as a group, as of the Record Date. Except as otherwise indicated, all
persons below have (i) sole voting power and dispositive power with respect to
their shares of Common Stock, except to the extent that authority is shared by
spouses under applicable law, and (ii) beneficial ownership with respect to
their shares of Common Stock or Share Units.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OR SHARE UNITS(1) OUTSTANDING
---------------- ----------------- ------------
<S> <C> <C>
Dreman Value Management, L.L.C. ............................ 10,329,185(2)(13) 13.2%
100 Exchange Place
Jersey City, NJ 07302
Scudder Kemper Investments, Inc. ........................... 7,484,925(3)(13) 9.6%
345 Park Avenue
New York, NY 10154
Lazard Freres & Co.LLC...................................... 4,030,932(4) 5.2%
30 Rockefeller Plaza
New York, NY 10020
Robert F. DiRomualdo........................................ 1,873,799(5) 2.4%
Bruce A. Quinnell........................................... 512,159(6) *
Richard L. Flanagan......................................... 360,005(7) *
Philip M. Pfeffer........................................... 300,200(8)
George R. Mrkonic........................................... 348,063(9) *
Gregory P. Josefowicz....................................... 90,000
Peter R. Formanek........................................... 67,010(10) *
Larry Pollock............................................... 39,812(11) *
Victor L. Lund.............................................. 6,580 *
Edna Greene Medford......................................... 4,575
Beth M. Pritchard
Directors and Executive Officers as a Group................. 3,794,155(12) 4.9%
</TABLE>
- -------------------------
* Represents less than one percent.
(1) All figures set forth below represent shares of or the right to acquire
Common Stock, except that, of the figures shown for Mr. DiRomualdo 995,692
represent Share Units. Share Units represent a general, unfunded and
unsecured promise by the Company to deliver shares to Mr. DiRomualdo at a
later date in accordance with the Deferral Agreement between Mr. DiRomualdo
and the Company. Share Units do not have voting rights.
(2) Dreman Value Management L.L.C. has sole dispositive power with respect to
all of the shares, sole voting power with respect to 9,399,558 shares and
no shared dispositive or voting power.
(3) Scudder Kemper Investments Inc. has sole dispositive power with respect to
all of the shares, sole voting power with respect to 7,484,825 shares and
no shared voting or dispositive power.
(4) Lazard Freres & Co.LLC has sole dispositive power with respect to all of
the shares, sole voting power with respect to 3,184,840 shares and no
shared dispositive or voting power.
(5) Includes 995,692 Share Units, and 688,307 options that are exercisable
within 60 days.
15
<PAGE> 18
(6) Includes 107,743 options that are exercisable within 60 days, 20,000 shares
held by spouse and 6,144 shares held under the Borders Group, Inc., 401 (k)
Savings Plan.
(7) Includes 199,203 options that are exercisable within 60 days.
(8) Includes 200 shares of Common stock held by spouse. Mr. Pfeffer disclaims
beneficial ownership of the shares held by his spouse.
(9) Includes 179,032 options that are exercisable within 60 days, 5,563 shares
held under the Borders Group, Inc. 401(k) Savings Plan and 4,050 shares of
Common Stock held in custodial accounts for Mr. Mrkonic's children.
(10) Includes 10,000 options that are exercisable within 60 days.
(11) Includes 15,000 options that are exercisable within 60 days.
(12) Includes 1,376,427 options that are exercisable within 60 days.
(13) The information set forth in this table is based upon the reports filed
with the Securities and Exchange Commission as of the date of the printing
of this Proxy Statement. Scudder Kemper Investments, Inc. has advised the
Company orally that the shares that it has reported are also included in
the shares reported by Dreman Value Management, L.L.C.
SELECTION OF INDEPENDENT AUDITORS
PricewaterhouseCoopers, LLP has been selected by the Board of Directors of
the Company to serve as the Company's independent auditors for the 2000 fiscal
year. Representatives of PricewaterhouseCoopers are expected to be present at
the Annual Meeting with the opportunity to make a statement about the Company's
financial condition, if they desire to do so, and to respond to appropriate
questions.
ANNUAL REPORT
Copies of the Company's 1999 Annual Report to Stockholders, which includes
audited financial statements, are being mailed to stockholders with this Proxy
Statement. Additional copies are available without charge on request. Requests
should be addressed to Marilyn Horn, Investor Relations, Borders Group, Inc.,
100 Phoenix Drive, Ann Arbor, Michigan 48108-2202.
PROPOSALS OF STOCKHOLDERS
In accordance with Rule 14a-8 under the Securities Exchange Act of 1934,
any stockholder proposals intended to be presented at the 2001 Annual Meeting of
Stockholders must be received by the Company no later than December 26, 2000 in
order to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
Section 8 of Article II of the Company's By-Laws provides that, for
nominations or other business to be properly brought before any annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Company and such other business must be a proper
matter for stockholder action. For stockholder proposals to be presented at the
2001 Annual Meeting of Stockholders (other than stockholder proposals set forth
in the Company's proxy statement), a stockholder's notice must be delivered to
the Secretary of the Company at the principal executive offices of the Company
not later than February 23, 2001 or prior to January 24, 2001; provided,
however, that in the event that the date of the 2001 Annual Meeting is before
April 24, 2001 or after July 23, 2001, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the 120th day
prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made. A
public announcement of an adjournment of an annual meeting will not commence a
new time period for
16
<PAGE> 19
giving of a stockholder's notice as described above. Such stockholder's notice
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial owner
and (ii) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner.
Notwithstanding the rules set forth above, in the event that the number of
directors to be elected to the Board of Directors of the Company is increased
and there is no public announcement naming all the nominees for director or
specifying the size of the increased Board of Directors made by the Company at
least 100 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the Company
not later than the close of business on the 10th day following the day on which
such public announcement is first made by the Company.
The term "public announcement" means disclosure in a press release reported
by the Dow Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the Company with the Securities and
Exchange Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE COMPANY'S FISCAL
YEAR ENDED JANUARY 23, 2000 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO MARILYN
HORN, INVESTOR RELATIONS, BORDERS GROUP, INC., 100 PHOENIX DRIVE, ANN ARBOR,
MICHIGAN 48108-2202.
17
<PAGE> 20
APPENDIX A
BORDERS GROUP, INC.
ANNUAL INCENTIVE BONUS PLAN
1. Purposes.
The purposes of Borders Group, Inc. Annual Incentive Bonus Plan (the
"Plan") are to attract and retain highly-qualified executives by providing
appropriate performance-based short-term incentive awards, to align executive
and shareholder long-term interests by creating a direct link between executive
compensation and shareholder return, and to enable certain executives, through
the mandatory and optional share purchase features of the Management Stock
Purchase Plan, to develop and maintain a substantial stock ownership position in
the Company's Shares. An additional purpose of the Plan is to serve as a
qualified performance-based compensation program under Section 162(m) of the
Internal Revenue Code of 1986, as amended, in order to preserve the Company's
tax deduction for compensation paid under the Plan to Covered Employees.
2. Definitions.
The following terms, as used herein, shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Bonus" shall mean any annual incentive bonus award granted
pursuant to the Plan; the payment of any such award shall be contingent
upon the attainment of Performance Goals with respect to a Plan Year.
(c) "Change in Control" shall mean the occurrence of an event
described in Section 6(e) hereof.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean the Compensation Committee of the Board.
(f) "Company" shall mean Borders Group, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(g) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code (or any successor provision).
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Management Stock Purchase Plan" (or "MSPP") shall mean Borders
Group, Inc. Management Stock Purchase Plan, as amended from time to time.
(j) "MSPP Participant" shall mean an officer of the Company or one of
its Subsidiaries who is designated to participate in the MSPP during the
MSPP's plan year which runs concurrently with the relevant Plan Year of the
Plan.
(k) "Participant" shall mean an officer or other employee of the
Company or one of its Subsidiaries who is eligible to participate herein
pursuant to Section 3 of the Plan and for whom a target Bonus is
established with respect to the relevant Plan Year.
(l) "Performance Goal(s)" shall mean the criteria and objectives which
must be met during the Plan Year as a condition of the Participant's
receipt of payment with respect to a Bonus, as described in Section 5
hereof.
(m) "Plan" shall mean Borders Group, Inc. Annual Incentive Bonus Plan,
as amended from time to time.
(n) "Plan Year" shall mean the Company's fiscal year.
<PAGE> 21
(o) "Restricted Shares" shall mean the Shares in which a Bonus is
partially or wholly payable pursuant to Section 6(d) hereof; such
Restricted Shares are issuable pursuant to the Management Stock Purchase
Plan or the Stock Option Plan.
(p) "Shares" shall mean common shares, $.001 par value, of the
Company.
(q) "Stock Option Plan" shall mean the Borders Group, Inc. Stock
Option Plan, as amended from time to time.
(r) "Subsidiary" shall mean any subsidiary of the Company which is
designated by the Board or the Committee to have any one or more of its
employees participate in the Plan.
3. Eligibility.
All Company officers and such key employees of the Company and its
Subsidiaries as are designated by the Committee shall participate in the Plan.
In determining the persons to whom Bonuses shall be granted, the Committee shall
take into account such factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Plan.
4. No Shares Subject to the Plan.
No Shares of the Company shall be reserved for, or issued under, the Plan.
To the extent that annual bonuses are paid in Restricted Shares, such Restricted
Shares shall be issued under, and subject to the terms and conditions of, the
Management Stock Purchase Plan or the Stock Option Plan, as the case may be.
5. Performance Goals.
Performance Goals may be expressed in terms of (i) the Company's return on
equity, assets, capital or investment, (ii) pre-tax or after-tax profit levels
of the Company or the Subsidiaries or any combination thereof, (iii) expense
reduction levels, (iv) implementation of critical projects or processes,
(v) level of sales and/or (vi) changes in market price of the Shares. To the
extent applicable, any such Performance Goal shall be determined in accordance
with generally accepted accounting principles and reported upon by the Company's
independent accountants. Performance Goals shall include a threshold level of
performance below which no Bonus payment shall be made, levels of performance at
which specified percentages of the target Bonus shall be paid, and a maximum
level of performance above which no additional Bonus shall be paid. The
Performance Goals established by the Committee may be (but need not be)
different each Plan Year and different goals may be applicable to different
Participants.
6. Bonuses.
(a) In General. For each Plan Year, the Committee shall specify the
Performance Goals applicable to such Plan Year and the amount of the target
Bonus for each Participant with respect to such Plan Year. A Participant's
target Bonus for each Plan Year shall be expressed as either a dollar
amount or as a percentage of the salary midpoint for the Participant's
salary grade. Unless otherwise provided by the Committee in its discretion
in connection with terminations of employment, or except as set forth in
Section 6(e) hereof, payment of a Bonus for a particular Plan Year shall be
made only if all of the following conditions are satisfied: (i) the
Performance Goals with respect to such Plan Year are attained, (ii) the
Participant has satisfied any individual performance goals established for
such Participant by his or her supervisor (or by the Committee in
accordance with Section 162(m) of the Code in the case of any participant
who is a Covered Employee), and (iii) the Participant is employed by the
Company or one of its Subsidiaries on the date of payment of the Bonus (or,
alternatively, on the last day of the Plan Year, if the Committee shall
have substituted such alternative requirement for all Participants at the
time it established the Performance Goals for such Plan Year). The actual
amount of a Bonus payable under the Plan shall be determined as a
percentage of the Participant's target Bonus, which percentage shall vary
depending upon the
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<PAGE> 22
extent to which the Performance Goals have been attained and may be lesser
than, greater than, or equal to 100%. The Committee may, in its discretion,
reduce or eliminate the amount payable to any Participant (including a
Covered Employee), in each case based upon such factors as the Committee
may deem relevant, but shall not increase the amount payable to any Covered
Employee. With respect to the 1995 Plan Year, those employees of the
Company and its subsidiaries who are participants in the Kmart Corporation
Annual Incentive Bonus Plan for Kmart Corporation's 1995 fiscal year shall
be participants in Compensation and Incentives Committee with respect to
each such participant shall be the performance goals and target bonus for
the 1995 Plan Year hereunder with respect to such participant, and the
calculation of bonus amounts shall take into account the Company's entire
1995 fiscal year. Notwithstanding any other provision of the Plan, the
actual Bonus paid to any Participant in the Plan for any plan year shall
not exceed $900,000.
(b) Special Limitation on Certain Bonuses. Notwithstanding anything to
the contrary contained in this Section 6, the actual Bonus paid to the
Company's Chief Executive Officer under the Plan for any Plan Year may not
exceed three times the salary midpoint for the salary grade of the Chief
Executive Officer, as determined by the Committee prior to the beginning of
such Plan Year based on competitive data, including a survey of comparable
companies; and the Bonus for each other Covered Employee under the Plan may
not exceed two times the salary midpoint (as of the beginning of such Plan
Year) for such Covered Employee's salary grade, as so determined by the
Committee prior to the beginning of such Plan Year.
(c) Time of Payment. Unless otherwise determined by the Committee, or
except as provided in Section 6(e) hereof, all payments in respect of
Bonuses granted under this Section 6 shall be made within a reasonable
period after the end of the Plan Year. In the case of Participants who are
Covered Employees, unless otherwise determined by the Committee in
connection with terminations of employment and except as provided in
Section 6(e) hereof, such payments shall be made only after achievement of
the Performance Goals has been certified by the Committee.
(d) Form of Payment. Payment of each Participant's Bonus for any Plan
Year (other than an MSPP Participant's Bonus) shall be made in cash. Except
as provided in Section 6(e) hereof, payment of at least 20 percent of each
MSPP Participant's Bonus for any Plan Year (less applicable payroll
deductions, which shall not include Federal income tax withholding) shall
be made in Restricted Shares pursuant to, and subject to the terms and
conditions of, the Management Stock Purchase Plan, unless at least 20
percent of such Annual Bonus is being used to acquire Restricted Shares
pursuant to (and subject to the terms and conditions of) "Management Stock
Purchase Options" under the Stock Option Plan (as defined therein). At the
election of each MSPP Participant (made in accordance with the terms and
conditions of the Management Stock Purchase Plan), up to 100 percent of the
MSPP Participant's Bonus for any Plan Year (less applicable payroll
deductions, which shall not include Federal income tax withholding) shall
be paid in Restricted Shares pursuant to, and subject to the terms and
conditions of, the Management Stock Purchase Plan, to the extent that such
Annual Bonus is not being used to acquire Restricted Shares pursuant to
(and subject to the terms and conditions of) Management Stock Purchase
Options under the Stock Option Plan. The amount of the Bonus being paid in
Restricted Shares shall, subject to the final sentence of this paragraph,
be calculated as follows: (i) multiply the gross Bonus by the aggregate
percentage of the Bonus being paid in Restricted Shares, and (ii) subtract
applicable payroll deductions from the result. The number of Restricted
Shares to be paid shall be calculated in accordance with the Management
Stock Purchase Plan. Payment of the balance of the MSPP Participant's Bonus
for any Plan Year shall be made in cash. Payments of portions of any
Bonuses made in Restricted Shares pursuant to the Management Stock Purchase
Plan may be referred to therein as "purchases" of such Shares.
Notwithstanding the foregoing, all of the portion, if any, of the
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<PAGE> 23
Bonus of each Management Stock Purchase Plan Participant above his or her
"stretch" Bonus, shall be paid in Restricted Shares.
(e) Change in Control. Notwithstanding any other provision of the Plan
to the contrary, (i) if a "Change in Control" of the Company (as defined in
this Section 6(e)) shall occur following a Plan Year as to which the
Committee has determined the actual Bonuses to be paid (but such Bonuses
have not yet been paid), such Bonuses shall be paid immediately in cash,
(ii) if a Change in Control shall occur following a Plan Year as to which
the Committee has not yet determined the actual Bonuses to be paid, such
Bonuses shall be immediately determined and paid in cash, and (iii) if a
Change in Control shall occur during a Plan Year as to which target Bonuses
have been established (but the actual Bonuses to be paid have not yet been
determined), such Plan Year shall be deemed to have been completed, the
target levels of performance set forth under the respective Performance
Goals shall be deemed to have been attained, and a pro rata portion of the
Bonus so determined for each Participant for such partial Plan Year (based
on the number of full and partial months which have elapsed with respect to
such Plan Year) shall be paid immediately in cash to each Participant for
whom a target Bonus for such Plan Year was established. Notwithstanding any
other provision of the Plan to the contrary, in no event shall the initial
public offering of the Shares be treated as a Change in Control of the
Company for purposes of this Plan.
For purposes of this Section 6, a Change in Control of the Company shall
occur upon the first to occur of the following:
(i) the "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities representing more than 20% of the combined
voting power of the Company is acquired by any "person," as defined in
sections 13(d) and 14(d) of the Exchange Act (other than Kmart
Corporation, the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
Shares of the Company, or any "person" acquiring such securities in a
sale or transfer by Kmart Corporation in a transaction not involving a
public offering), or
(ii) the shareholders of the Company approve a definitive agreement
to merge or consolidate the Company with or into another corporation or
to sell or otherwise dispose of all or substantially all of its assets,
or adopt a plan of liquidation, or
(iii) during any period of three consecutive years beginning after
the completion of the initial public offering of the Shares, individuals
who at the beginning of such period were members of the Board cease for
any reason to constitute at least a majority thereof (unless the
election, or the nomination for election by the Company's shareholders,
of each new director was approved by a vote of at least a majority of
the directors then still in office who were directors at the beginning
of such period or whose election or nomination was previously so
approved).
7. Administration.
Prior to the completion of the initial public offering of the Shares, the
Plan shall be administered by the Board (which, during such period, shall have
all the powers given herein to the Committee). From and after the completion of
such offering, the Plan shall be administered by the Committee. The Committee
shall have the authority in its sole discretion, subject to and not inconsistent
with the express provisions of the Plan, to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the Plan
or necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Bonuses; to determine the persons to whom and
the time or times at which Bonuses shall be granted; to determine the terms,
conditions, restrictions and performance criteria relating to any Bonus; to make
adjustments in the Performance
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<PAGE> 24
Goals in response to changes in applicable laws, regulations, or accounting
principles; except as otherwise provided in Section 6(a) hereof, to adjust
compensation payable upon attainment of Performance Goals; to construe and
interpret the Plan and any Bonus; to prescribe, amend and rescind rules and
regulations relating to the Plan; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
The Committee shall consist of two or more persons each of whom is an
"outside director" within the meaning of Section 162(m) of the Code. The
Committee may appoint a chairperson and a secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. All determinations of the Committee shall be
made by a majority of its members either present in person or participating by
conference telephone at a meeting or by unanimous written consent. The Committee
may delegate to one or more of its members or to one or more agents such
administrative duties as it may deem advisable, and the Committee or any person
to whom it has delegated duties as aforesaid may employ one or more persons to
render advice with respect to any responsibility the Committee or such person
may have under the Plan. All decisions, determinations and interpretations of
the Committee shall be final and binding on all persons, including the Company,
the Participant (or any person claiming any rights under the Plan from or
through any Participant) and any shareholder.
No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Bonus
granted hereunder.
8. General Provisions.
(a) Compliance with Legal Requirements. The Plan and the granting of
Bonuses, and the other obligations of the Company under the Plan shall be
subject to all applicable federal and state laws, rules and regulations,
and to such approvals by any regulatory or governmental agency as may be
required.
(b) No Right To Continued Employment. Nothing in the Plan or in any
Bonus granted shall confer upon any Participant the right to continue in
the employ of the Company or any of its Subsidiaries or to be entitled to
any remuneration or benefits not set forth in the Plan or to interfere with
or limit in any way the right of the Company to terminate such
Participant's employment.
(c) Withholding Taxes. The Company or Subsidiary employing any
Participant shall deduct from all payments and distributions under the Plan
any taxes required to be withheld by federal, state or local governments.
(d) Amendment and Termination of the Plan. The Board may at any time
and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part; provided, however, that no amendment which requires stockholder
approval in order for the Plan to continue to comply with Code Section
162(m) shall be effective unless the same shall be approved by the
requisite vote of the shareholders of the Company. Additionally, the
Committee may make such amendments as it deems necessary to comply with
other applicable laws, rules and regulations. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Participant, without such Participant's consent, under any Bonus
theretofore granted under the Plan.
(e) Participant Rights. No Participant shall have any claim to be
granted any Bonus under the Plan, and there is no obligation for uniformity
of treatment for Participants.
(f) Unfunded Status of Bonuses. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments
which at any time are not yet made to a Participant pursuant to a Bonus,
nothing contained in the Plan or any Bonus shall give any such Participant
any rights that are greater than those of a general creditor of the
Company.
A-5
<PAGE> 25
(g) Governing Law. The Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of
the State of Delaware without giving effect to the choice of law principles
thereof, except to the extent that such law is preempted by federal law.
(h) Effective Date. The Plan shall take effect upon its adoption by
the Board, but the Plan (and any grants of Bonuses made prior to the
shareholder approval mentioned herein) shall be subject to the requisite
approval of the shareholders of the Company. In the absence of such
approval, such Bonuses shall be null and void.
(i) Interpretation. The Plan is designed and intended to comply with
Section 162(m) of the Code, to the extent applicable, and all provisions
hereof shall be construed in a manner to so comply.
(j) Term. The Plan shall remain in effect until terminated by the
Board, except that no Bonus may be paid to any Covered Employee with
respect to any Plan Year after fiscal 1999 unless and until the extension
of the term of the Plan beyond fiscal 1999 is approved by the shareholders
of the Company.
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<PAGE> 26
<TABLE>
<S><C>
__ |
[ X ] PLEASE MARK YOUR | | 5941
VOTES AS IN THIS | |_______
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BELOW. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE COMPANY'S NOMINEES TO SERVE AS DIRECTORS. As to any other business that may come before the Annual Meeting or
any adjournment thereof, this Proxy will be voted in the discretion of the Proxies.
- ----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" the election of the Company's nominees to serve as Directors and "FOR" the proposal
relating to the Company's Annual Incentive Plan.
- ----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1.Election of 2. Approval of an amendment to extend the term of the Company's [ ] [ ] [ ]
Directors. (See [ ] [ ] Annual Incentive Bonus Plan and to re-affirm the performance goals
reverse side) and maximum amounts payable under the Plan.
For, except vote withheld from the following nominee(s):
_________________________________
The undersigned hereby revokes all proxies given by the undersigned to vote at the
Annual Meeting or any adjournments thereof.
(Please sign exactly as name appears above. Joint owners should all sign. Executors,
administrators, trustees, etc. should so indicate when signing. If signer is a corporation,
sign full corporate name by duly authorized officer who adds his or her name and title.)
_________________________________________________________________________________________
_________________________________________________________________________________________
SIGNATURE(S) DATE
- ------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
TELEPHONE AND INTERNET VOTING
If you would prefer, you may vote your shares through the Internet or the telephone. This eliminates the need to
return the proxy card.
To vote your shares through the Internet or the telephone you must use the control number printed in the box
above, just below the perforation. The series of numbers that appear in the box above must be used to access
the system.
1. To vote over the Internet:
- Log on to the Internet and go to the website HTTP://WWW.EPROXYVOTE.COM/BGP
2. To vote over the telephone:
- On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683) 24 hours a day, 7 days a
week
Your Internet or telephone vote authorizes the named proxies in the same manner as if you marked, signed,
dated and returned the proxy card.
IF YOU CHOOSE TO VOTE YOUR SHARES THROUGH THE INTERNET OR THE TELEPHONE, THERE IS NO NEED FOR YOU TO MAIL
BACK YOUR PROXY CARD.
</TABLE>
<PAGE> 27
PROXY
BORDERS GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE MAY 24, 2000, ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Robert F. DiRomualdo, Gregory P. Josefowicz
and Thomas D. Carney, or any of them, with full power of substitution, as
Proxies, and hereby authorizes them to represent the undersigned and to vote all
shares of common stock of Borders Group, Inc. (the "Company"), that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of Borders
Group, Inc., to be held on May 24, 2000, or any adjournment, upon all matters
that may properly come before the meeting.
Your vote with respect to the following matters may be indicated on the reverse
side:
1. The election of eight directors. The Company's nominees are: 01) Robert F.
DiRomualdo, 02) Peter R. Formanek, 03) Gregory P. Josefowicz, 04) Victor L.
Lund, 05) Dr. Edna Greene Medford, 06) George R. Mrkonic, 07) Larry Pollock,
and 08) Beth M. Pritchard.
2. Approval of an amendment to extend the term of the Company's Annual Incentive
Bonus Plan and to re-affirm the performance goals and maximum amounts payable
under the Plan.
PLEASE DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
IF YOU DO NOT SIGN AND RETURN A PROXY, OR ATTEND THE MEETING AND VOTE BY
BALLOT, YOUR SHARES CANNOT BE VOTED.
----------------
SEE REVERSE SIDE
----------------
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/\ FOLD AND DETACH HERE /\
